As filed with the Securities and Exchange Commission on August 8, 1996
Registration No. 33-___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERICAN SKIING COMPANY
AND OTHER REGISTRANTS
(SEE TABLE OF OTHER REGISTRANTS BELOW)
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER)
MAINE 7900 01-0503382
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
SUNDAY RIVER ACCESS ROAD
BETHEL, MAINE 04217
(207) 824-3000
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
THOMAS M. RICHARDSON
AMERICAN SKIING COMPANY
SUNDAY RIVER ACCESS ROAD
BETHEL, MAINE 04217
(207) 824-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
COPY TO:
CHRISTOPHER E. HOWARD, ESQ.
PIERCE ATWOOD
ONE MONUMENT SQUARE
PORTLAND, MAINE 04101
(207) 791-1100
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS
COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX:
<TABLE>
<CAPTION>
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------- ------------- -------------- ----------------- -------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE OFFERING PRICE FEE
PER UNIT(1) (2)
- -------------------------------------------------------- ------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
12% SERIES B SENIOR SUBORDINATED NOTES DUE 2006...... $120,000,000 97.165% $116,598,000 $40,206.21
- -------------------------------------------------------- ------------- -------------- ----------------- -------------
GUARANTEES OF THE 12% SERIES B SENIOR SUBORDINATED
NOTES DUE 2006....................................... $120,000,000 NONE (2) NONE (2) NONE (2)
- -------------------------------------------------------- ------------- -------------- ----------------- -------------
13 3/4% SERIES B SUBORDINATED DISCOUNT NOTES DUE 2007... $ 39,132,000 51.11% $20,000,365 $6,896.68
- -------------------------------------------------------- ------------- -------------- ----------------- -------------
GUARANTEES OF THE 13 3/4% SERIES B SUBORDINATED DISCOUNT
NOTES DUE 2007....................................... $ 39,132,000 NONE (2) NONE (2) NONE (2)
- -------------------------------------------------------- -------------- ----------------- -------------
TOTALS...................................... $136,598,365 $47,102.89
</TABLE>
(1) ESTIMATED SOLELY FOR THE PURPOSE OF COMPUTING THE REGISTRATION FEE
PURSUANT TO RULE 457.
(2) PURSUANT TO RULE 457(N) UNDER THE SECURITIES ACT OF 1933, NO SEPARATE FEE
IS PAYABLE FOR THE GUARANTEES.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
<TABLE>
<CAPTION>
Primary Standard Address, Including Zip Code
Industrial and Telephone Number Including
Jurisdiction of Classification IRS Employer Area Code, of Principal
Name of Corporation Incorporation Code Number Identification Number Executive Offices
------------------- -------------- ------------- --------------------- ---------------------------
<S> <C> <C> <C> <C>
Sunday River Skiway Corporation Maine 7900 01-0261489 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sunday River Ltd. Maine 6599 01-0456264 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Perfect Turn, Inc. Maine 7900 01-0458495 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
LBO Holding, Inc. Maine 7900 01-0488967 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sunday River Transportation, Inc. Maine 4000 01-0261489 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sugarbush Resort Holdings, Inc. Vermont 7900 03-0344431 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sugarbush Leasing Company Vermont 7900 03-0344432 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sugarbush Restaurants, Inc. Vermont 7900 03-0344820 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Cranmore, Inc. Maine 7900 02-0481418 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Mountain Wastewater Treatment, Inc. Vermont 4990 03-0313610 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
<PAGE>
LBO Hotel Co. Maine 6550 01-0508236 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
S-K-I Limited Delaware 7900 03-0294233 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Killington Ltd. Vermont 7900 03-0195484 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Mount Snow Ltd. Vermont 7900 03-0265116 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Waterville Valley Ski Area, Ltd. New Hampshire 7900 02-0475701 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Sugarloaf Mountain Corporation Maine 7900 01-0232195 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Killington Restaurants, Inc. Vermont 7900 03-0218459 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Dover Restaurants, Inc. Vermont 7900 03-0264550 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Resort Technologies, Inc. Vermont 5008 99-0046530 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Resort Software Services, Inc. Vermont 5008 03-0320098 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Mountainside Maine 6500 01-0288053 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
<PAGE>
Sugartech Maine 7900 01-0390763 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Deerfield Operating Company Vermont 7900 03-0332575 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
Pico Ski Area Management Company Vermont 8930 03-0322667 Sunday River Access Road
P.O. Box 450
Bethel, ME 04217
(207) 824-3000
</TABLE>
<PAGE>
AMERICAN SKIING COMPANY
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K AND RULE 404(a)
SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTIONS
<S> <C> <C>
1. FOREPART OF REGISTRATION STATEMENT AND OUTSIDE FRONT
COVER PAGE OF PROSPECTUS............................ FOREPART OF THE REGISTRATION STATEMENT; OUTSIDE FRONT
COVER PAGE
2. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF
PROSPECTUS.......................................... INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF
PROSPECTUS; AVAILABLE INFORMATION
3. RISK FACTORS, RATIO OF EARNINGS TO FIXED CHARGES AND
OTHER INFORMATION................................... SUMMARY; RISK FACTORS; SELECTED HISTORICAL FINANCIAL
DATA; PRO FORMA FINANCIAL DATA; CERTAIN FEDERAL INCOME
TAX CONSEQUENCES OF THE EXCHANGE OFFERS
4. TERMS OF THE TRANSACTION............................ SUMMARY; THE EXCHANGE OFFERS; DESCRIPTION OF SENIOR
SUBORDINATED NOTES; DESCRIPTION OF SUBORDINATED NOTES;
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK;
DESCRIPTION OF OTHER INDEBTEDNESS; CERTAIN FEDERAL
INCOME TAX CONSIDERATIONS; PLAN OF DISTRIBUTION
5. PRO FORMA FINANCIAL INFORMATION..................... PRO FORMA FINANCIAL DATA
6. MATERIAL CONTACTS WITH COMPANY BEING ACQUIRED....... NOT APPLICABLE
7. ADDITIONAL INFORMATION REQUIRED FOR REOFFERING BY
PERSONS AND PARTIES DEEMED TO BE UNDERWRITERS....... NOT APPLICABLE
8. INTERESTS OF NAMED EXPERTS AND COUNSEL.............. NOT APPLICABLE
9. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...................... INDEMNIFICATION
10. INFORMATION WITH RESPECT TO S-3 REGISTRANTS......... NOT APPLICABLE
11. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE... NOT APPLICABLE
12. INFORMATION WITH RESPECT TO S-2 OR S-3 REGISTRANTS.. NOT APPLICABLE
13. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE... NOT APPLICABLE
14. INFORMATION WITH RESPECT TO REGISTRANTS OTHER THAN
S-2 OR S-3 REGISTRANTS.............................. SUMMARY; RISK FACTORS; SELECTED HISTORICAL FINANCIAL
DATA; PRO FORMA FINANCIAL DATA; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS; INDUSTRY OVERVIEW; BUSINESS;
EXPERTS
15. INFORMATION WITH RESPECT TO S-3 COMPANIES........... NOT APPLICABLE
<PAGE>
16. INFORMATION WITH RESPECT TO S-2 OR S-3 COMPANIES.... NOT APPLICABLE
17. INFORMATION WITH RESPECT TO COMPANIES OTHER THAN S-2
OR S-3 COMPANIES.................................... NOT APPLICABLE
18. INFORMATION IF PROXIES, CONSENTS OR AUTHORIZATIONS
ARE TO BE SOLICITED................................. NOT APPLICABLE
19. INFORMATION IF PROXIES, CONSENTS OR AUTHORIZATIONS
ARE NOT TO BE SOLICITED OR IN AN EXCHANGE OFFER..... MANAGEMENT; THE EXCHANGE OFFERS
</TABLE>
<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 8, 1996
PROSPECTUS
, 1996
AMERICAN SKIING COMPANY
OFFER TO EXCHANGE ITS
12% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
(GUARANTEED BY SUBSTANTIALLY ALL OF ITS SUBSIDIARIES)
FOR ANY AND ALL OF ITS
12% SERIES A SENIOR SUBORDINATED NOTES DUE 2006
(GUARANTEED BY SUBSTANTIALLY ALL OF ITS SUBSIDIARIES)
OFFER TO EXCHANGE ITS
13 3/4% SERIES B SUBORDINATED DISCOUNT NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
(GUARANTEED BY SUBSTANTIALLY ALL OF ITS SUBSIDIARIES)
FOR ANY AND ALL OF ITS
13 3/4% SERIES A SUBORDINATED DISCOUNT NOTES DUE 2007
(GUARANTEED BY SUBSTANTIALLY ALL OF ITS SUBSIDIARIES)
Each Exchange Offer will expire at 12:00 midnight, New York Time, on
__________, 1996, unless such Exchange Offer is extended.
American Skiing Company, a Maine corporation (the "Company" or
"ASC"), hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus (as the same may be amended or supplemented from time to
time, the "Prospectus") and the accompanying Letter of Transmittal relating to
the Old Notes (as defined herein) (the "Notes Letter of Transmittal", which
together constitute the "Notes Exchange Offer"), to exchange up to
$120,000,000 aggregate principal amount of its 12% Series B Senior
Subordinated Notes due 2006 (the "New Notes"), which will have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement of which this Prospectus is a part, for a like
principal amount of its outstanding 12% Series A Senior Subordinated Notes due
2006 (the "Old Notes"), of which $120,000,000 aggregate principal amount are
outstanding. The terms of the New Notes are identical in all material respects
to the terms of the Old Notes except that (i) the New Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and will not be
entitled to registration rights and (ii) holders of New Notes will not be
entitled to liquidated damages for the Company's failure to register the Old
Notes or New Notes under the Registration Rights Agreement (as defined
herein). The New Notes will be issued under the same Indenture (as defined
herein) as the Old Notes, and the New Notes and the Old Notes will constitute
a single series of debt securities under the Indenture. In the event that the
Notes Exchange Offer is consummated, any Old Notes which remain outstanding
after consummation of the Notes Exchange Offer and the New Notes issued in the
Notes Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
principal amount of Notes (as defined herein) have taken certain actions or
exercised certain rights under the Indenture. The Old Notes and the New Notes
are sometimes referred to herein collectively as the "Notes."
(continued on next page)
THIS PROSPECTUS AND THE RELATED LETTERS OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD NOTES AND OLD SUBORDINATED NOTES (AS
DEFINED HEREIN) ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTERS OF
TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES OR OLD
SUBORDINATED NOTES PURSUANT TO THE EXCHANGE OFFERS.
----------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFERS AND AN INVESTMENT IN THE
NEW NOTES AND THE NEW SUBORDINATED NOTES (AS DEFINED HEREIN) OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
UNTIL ____________, 1996 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE
OFFERS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES AND THE NEW
SUBORDINATED NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFERS, MAY
BE REQUIRED TO DELIVER A PROSPECTUS.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
The Company also hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal relating to the Old Subordinated Notes (as defined herein) (the
"Subordinated Notes Letter of Transmittal", which together constitute the
"Subordinated Notes Exchange Offer"), to exchange up to $39,132,000 aggregate
principal amount of its 13 3/4% Series B Subordinated Discount Notes due 2007
(the "New Subordinated Notes"), which will have been registered under the
Securities Act, pursuant to a Registration Statement of which this Prospectus
is a part, for a like principal amount of its outstanding 13 3/4% Series A
Subordinated Discount Notes due 2007 (the "Old Subordinated Notes"), of which
$39,132,000 aggregate principal amount are outstanding. The terms of the New
Subordinated Notes are identical in all material respects to the terms of the
Old Subordinated Notes except that (i) the New Subordinated Notes will have
been registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act and will not
be entitled to registration rights and (ii) holders of New Subordinated Notes
will not be entitled to liquidated damages for the Company's failure to
register the Old Subordinated Notes or New Subordinated Notes under the
Subordinated Note Registration Rights Agreement (as defined herein). The New
Subordinated Notes will be issued under the same Subordinated Note Indenture
(as defined herein) as the Old Subordinated Notes, and the New Subordinated
Notes and the Old Subordinated Notes will constitute a single series of debt
securities under the Subordinated Note Indenture. In the event that the
Subordinated Notes Exchange Offer is consummated, any Old Subordinated Notes
which remain outstanding after consummation of the Subordinated Notes Exchange
Offer and the New Subordinated Notes issued in the Subordinated Notes Exchange
Offer will vote together as a single class for purposes of determining whether
holders of the requisite percentage in outstanding principal amount of
Subordinated Notes (as defined herein) have taken certain actions or exercised
certain rights under the Subordinated Note Indenture. The Old Subordinated
Notes and the New Subordinated Notes are sometimes referred to herein
collectively as the "Subordinated Notes." The Subordinated Notes Exchange
Offer and the Notes Exchange Offer are sometimes referred to herein
collectively as the "Exchange Offers." The New Notes (including the Subsidiary
Guarantees (as defined)) and the New Subordinated Notes (including the
Subordinated Note Subsidiary Guarantees (as defined)) are hereinafter
collectively referred to as the "Securities."
The Company will accept for exchange any and all Old Notes and any
and all Old Subordinated Notes validly tendered and not withdrawn prior to
12:00 midnight, New York City time, on _________, 1996, unless extended by the
Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes
or Old Subordinated Notes may be withdrawn at any time prior to the Expiration
Date. The Exchange Offers are subject to certain customary conditions. See
"The Exchange Offers - Terms of the Exchange Offers."
The New Notes and the New Subordinated Notes are being offered for
exchange in the Exchange Offers in order to satisfy certain obligations of the
Company under the Registration Rights Agreement (the "Registration Rights
Agreement") and the Subordinated Note Registration Rights Agreement ("the
"Subordinated Note Registration Rights Agreement"), each dated as of June 28,
1996 (collectively, the "Registration Rights Agreements") among the Company,
the Guarantors (as defined) and the Initial Purchasers (as defined herein) of
the Old Notes and Bear, Stearns & Co., Inc. ("Bear Stearns"), as initial
purchaser of the Old Subordinated Notes, respectively. The Company is making
the Exchange Offers in reliance on the position of the staff of the Division
of Corporation Finance of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offers, as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Company believes that New Notes and New
Subordinated Notes issued pursuant to the Exchange Offers in exchange for Old
Notes and Old Subordinated Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (holders of the Notes or
Subordinated Notes are each individually hereinafter referred to as a "Holder"
and collectively as the "Holders") (other than a Holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes and
New Subordinated Notes are acquired in the ordinary course of such Holder's
business and that such Holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Notes or New Subordinated Notes.
However, any Holder of Old Notes or Old Subordinated Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange
Offers for the purpose of distributing New Notes or the New Subordinated
Notes, or any broker-dealer who purchased Old Notes or Old Subordinated Notes
from the
ii
<PAGE>
Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A")
or any other available exemption under the Securities Act, (a) will not be
able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Notes or Old Subordinated Notes in the Exchange Offers and (c) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any sale or other transfer of such Old Notes or Old
Subordinated Notes unless such sale is made pursuant to an exemption from such
requirements. In addition, if any broker-dealer holds Old Notes or Old
Subordinated Notes acquired for its own account as a result of market-making
or other trading activities and exchanges such Old Notes for New Notes or
exchanges such Old Subordinated Notes for New Subordinated Notes, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes or New
Subordinated Notes. See "The Exchange Offers - Resales of New Notes and New
Subordinated Notes."
The New Notes will mature on July 15, 2006. Interest on the Notes
will accrue at the rate of 12% per annum and will be payable semi-annually in
arrears on January 15 and July 15 of each year, commencing January 15, 1997.
The New Notes will be redeemable at the option of the Company, in
whole or in part, at any time on and after July 15, 2001 at the redemption
prices set forth herein, plus accrued and unpaid interest to the applicable
redemption date. In addition, on or prior to July 15, 1999, the Company may
redeem up to 25% in aggregate principal amount of the New Notes at a
redemption price of 112% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date, with the net proceeds of one
or more Equity Offerings (as defined); provided that at least 75% in aggregate
principal amount of the New Notes originally issued under the Indenture
remains outstanding immediately after the occurrence of each such redemption.
Upon the occurrence of a Change of Control (as defined), the Company will be
required to make an offer to repurchase all or any part of each Holder's Notes
at an offer price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon to the date of repurchase.
See "Description of Senior Subordinated Notes."
The New Notes will be general unsecured obligations of the Company
(with the sole exception of the security provided under the Pledge and
Disbursement Agreement (as defined)), subordinated in right of payment to all
existing and future Senior Debt (as defined) of the Company, including all
borrowings of the Company under the Senior Credit Facility (as defined). The
New Notes will be jointly and severally guaranteed (the "Subsidiary
Guarantees") on an unsecured, senior subordinated basis by certain of the
Company's subsidiaries and certain subsidiaries created after the issuance of
the New Notes (the "Guarantors"). The Subsidiary Guarantees will be
subordinated in right of payment to all Senior Debt of the Guarantors. As of
April 28, 1996, after giving pro forma effect to the acquisition of S-K-I Ltd.
(including the financings thereof, the "Acquisition"), the aggregate amount of
outstanding Senior Debt of the Company would have been $51.0 million. The
Indenture will permit the Company and the Guarantors to incur additional
Senior Debt, subject to certain limitations. See "The Acquisition; Antitrust
Matters; Use of Proceeds," "Pro Forma Capitalization" and "Description of
Senior Subordinated Notes."
The New Subordinated Notes will mature on January 15, 2007. Interest
on the New Subordinated Notes will not accrue prior to July 15, 2001.
Thereafter, interest will accrue at the rate of 13 3/4 % per annum and will be
payable semi-annually in arrears in cash on January 15 and July 15 of each
year, commencing on January 15, 2002.
The New Subordinated Notes will be redeemable at the option of the
Company, in whole or in part, at any time on and after July 15, 2001 at the
redemption prices set forth herein, plus accrued and unpaid interest to the
applicable redemption date. In addition, on or prior to July 15, 1999, the
Company may redeem the New Subordinated Notes, in whole or in part, at a
redemption price of 113.75% of the Accreted Value (as defined) thereof, to the
redemption date, with the net proceeds of one or more Equity Offerings. Upon
the occurrence of a Change of Control, the Company will be required to make an
offer to purchase all or any part of each Holder's New Subordinated Notes at
an offer price in cash equal to 101% of the Accreted Value thereof (if prior
to July 15, 2001), or 101% of the principal amount thereof (if on or after
July 15, 2001), to the date of repurchase. See "Description of Subordinated
Notes."
The New Subordinated Notes will be general unsecured obligations of
the Company, subordinated in right of payment to all existing and future
Subordinated Note Senior Debt (as defined) of the Company, including all
iii
<PAGE>
borrowings of the Company under the Senior Credit Facility and all obligations
of the Company with respect to the New Notes and any Old Notes remaining
outstanding. The New Subordinated Notes will be jointly and severally
guaranteed (the "Subordinated Note Subsidiary Guarantees") on an unsecured,
subordinated basis by the Guarantors. The Subordinated Note Subsidiary
Guarantees will be subordinated in right of payment to all Subordinated Note
Senior Debt of the Guarantors. As of April 28, 1996, after giving pro forma
effect to the Acquisition, the aggregate amount of outstanding Subordinated
Note Senior Debt of the Company would have been approximately $167.6 million.
The Subordinated Note Indenture will permit the Company and the Guarantors to
incur additional Subordinated Note Senior Debt, subject to certain
limitations. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Pro
Forma Capitalization" and "Description of Subordinated Notes."
The Company does not intend to apply for listing of any of the
Securities on any national securities exchange or for inclusion of any of the
Securities in any automated quotation system.
The Company will not receive any proceeds from the Exchange Offers.
The Exchange Offers are not conditioned upon any minimum amount of Old Notes
or Old Subordinated Notes being tendered for exchange. In the event the
Company terminates an Exchange Offer and does not accept for exchange any Old
Notes or Old Subordinated Notes, as the case may be, the Company will promptly
return the Old Notes or the Old Subordinated Notes, as the case may be, to the
Holders thereof. There has not previously been any public market for the
Securities. Although Bear Stearns has informed the Company that it currently
intends to make a market in the New Notes and the New Subordinated Notes, it
is not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Securities or that the Old
Notes and the New Notes will trade as one class or that the Old Subordinated
Notes and the New Subordinated Notes will trade as one class. The Company does
not currently intend to apply for listing of the New Notes or the New
Subordinated Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System. See
"Risk Factors - Absence of Public Market." The Company has agreed to pay the
expenses of the Exchange Offers and to indemnify Participating Broker-Dealers
(as defined herein) against certain liabilities, including liabilities under
the Securities Act.
Any Old Notes and Old Subordinated Notes not tendered and accepted in
the Exchange Offers will remain outstanding and will be entitled to all the
same rights and will be subject to the same limitations applicable thereto
under the Indenture and the Subordinated Note Indenture, respectively (except
for those rights which terminate upon consummation of the Exchange Offers).
Following consummation of the Exchange Offers, the Holders of Old Notes and
Old Subordinated Notes will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such Holders (other than to certain Holders under certain
limited circumstances) to provide for registration under the Securities Act of
the Old Notes and Old Subordinated Notes held by them. To the extent that Old
Notes or Old Subordinated Notes are tendered and accepted in the Exchange
Offers, a Holder's ability to sell untendered Old Notes or Old Subordinated
Notes, as the case may be, could be adversely affected. See "Risk Factors -
Consequences of Failure to Exchange" and "The Exchange Offers - Certain
Consequences of a Failure to Exchange."
This Prospectus, together with the Notes Letter of Transmittal or the
Subordinated Notes Letter of Transmittal, as appropriate, is being sent to all
registered Holders of Old Notes and Old Subordinated Notes as of __________,
1996.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
(which term shall include any amendments thereto) on Form S-4 under the
Securities Act with respect to the securities offered by this Prospectus. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, to which reference is hereby made. Each
statement made in this Prospectus referring to a document filed as an exhibit
or schedule to the Registration Statement is not necessarily complete and is
qualified in its entirety by reference to the exhibit or schedule for a
complete statement of its terms and conditions. In addition, upon the
effectiveness of the Registration Statement filed with the Commission, the
Company will be subject to the informational requirements of the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company will file periodic reports and other information with
the Commission relating to its business, financial statements and other
matters. Any interested parties may inspect and/or copy the Registration
Statement, its schedules and exhibits, and the periodic reports and other
information filed in connection therewith, at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located
at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such materials can be obtained at prescribed rates by addressing written
requests for such copies to the Public Reference Section of the Commission at
its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The obligations of the Company under the Exchange Act
to file periodic reports and other information with the Commission may be
suspended, under certain circumstances, if the New Notes and the New
Subordinated Notes are each held of record by fewer than 300 holders at the
beginning of any fiscal year and the New Notes and the New Subordinated Notes
are not listed on a national securities exchange. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes or Subordinated Notes remain
outstanding it will furnish to the holders of the Notes and the Subordinated
Notes and file with the Commission (unless the Commission will not accept such
a filing) the financial information and management's discussion and analysis
of financial condition and results of operations that would be included in all
annual, quarterly and current reports that the Company is or would be required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act. In addition, for so long as any of the Old Notes or Old Subordinated
Notes remain outstanding, the Company has agreed to make available to any
prospective purchaser of the Old Notes or Old Subordinated Notes or beneficial
owner of the Old Notes or Old Subordinated Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION WITH RESPECT TO ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY OR AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
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SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial data,
including the financial statements and notes thereto, appearing elsewhere in
this Prospectus. Unless the context otherwise requires, when used
historically, the terms the "Company" or "ASC" refer to the combined
businesses of the ski resorts and related properties owned by Leslie B. Otten,
which were contributed to ASC simultaneously with the consummation of the
Acquisition, and when used in the present tense or prospectively, also include
the business of S-K-I Ltd. acquired in the Acquisition. The Company will
divest the Waterville Valley and Mt. Cranmore resorts pursuant to a consent
decree (the "Consent") into which the Company has entered with the United
States Department of Justice ("DOJ"). See "The Acquisition; Antitrust Matters;
Use of Proceeds" and "Pro Forma Financial Data." Unless otherwise specified,
all data contained herein includes the Waterville Valley and Mt. Cranmore
resorts. References herein to a fiscal year refer to the fiscal year ended or
ending on the last Sunday in July of such year with respect to the Company,
and on July 31 of such year with respect to S-K-I Ltd.
THE COMPANY
Giving effect to the Acquisition, ASC is the largest mountain resort
operator in North America, owning and operating eight ski resorts in the
northeastern United States. ASC's properties now include Killington, Mt.
Snow/Haystack and Sugarbush ski resorts in Vermont; Waterville Valley,
Attitash/Bear Peak and Mt. Cranmore ski resorts in New Hampshire; and Sunday
River and Sugarloaf/USA ski resorts in Maine. These resorts recorded over 3.3
million skier visits during the 1995/96 ski season, representing approximately
24% of total skier visits in the northeastern United States and approximately
6% of total skier visits nationally. ASC's ski resort properties offer
approximately 4,000 acres of skiable terrain (of which approximately 82% are
covered by snowmaking capability), 777 trails and 121 lifts. For the twelve
months ended April 28, 1996, after giving pro forma effect to the Acquisition,
ASC generated approximately $184.9 million in total revenues, $2.5 million in
net loss and $39.5 million in EBITDA (as defined herein), in each case
including the Waterville Valley and Mt. Cranmore resorts, which are to be
divested. Excluding Waterville Valley and Mt. Cranmore, ASC generated total
revenues of $169.2 million, $3.5 million in net loss and $36.4 million in
EBITDA over such period after giving pro forma effect to the Acquisition.
The Consent requires divestiture of the Waterville Valley and Mt.
Cranmore resorts. On a combined basis, these two resorts recorded
approximately 382,000 skier visits during the 1995-96 ski season (11.4% of
total 1995-96 skier visits for the Company, after giving pro forma effect to
the Acquisition) and, during the twelve-month period ended April 28, 1996,
generated approximately $15.7 million in total revenues, $1.0 million in net
income and $3.1 million in EBITDA (8.5%, 40.0% and 7.8%, respectively, of the
Company's revenues, net loss and EBITDA for such period after giving pro forma
effect to the Acquisition). The net assets to be divested of these two
resorts, as of April 28, 1996, aggregate approximately $15.2 million, or 5.7%
of total assets of the Company as of such date, after giving pro forma effect
to the Acquisition, and they represent on a combined basis approximately 445
acres of skiable terrain, 90 trails and 19 lifts. See "The Acquisition;
Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data."
The Company has experienced consistent growth since its inception in
1980 when it acquired the Sunday River ski resort. Skier visits at Sunday
River have grown from less than 50,000 in the 1980/81 ski season to
approximately 589,000 in the 1995/96 ski season. The Company acquired
Attitash/Bear Peak in fiscal 1994, and Sugarbush and Mt. Cranmore in fiscal
1995. Since their acquisition by the Company, skier visits have increased by
24% at Attitash/Bear Peak, 13% at Sugarbush and 32% at Mt. Cranmore. The
Company has successfully implemented its operating strategy at the acquired
resorts, and has realized significant increases in earnings and EBITDA for
each of these resorts following its acquisition.
The operations of S-K-I Ltd. ("SKI"), which were acquired by the
Company in the Acquisition on June 28, 1996, include Killington, a six
mountain resort which is the largest ski area in the Northeast; Mt.
Snow/Haystack, Waterville Valley and Sugarloaf/USA ski resorts, which benefit
from their proximity to New York (in the case of Mt. Snow/Haystack) and
Boston. These properties recorded a total of over 2.0 million skier visits
during the
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1995/96 ski season. Management of the Company believes that ASC will realize
growth in skier visits and profitability from (i) the implementation of the
Company's successful operating strategy at the SKI resorts and the continued
pursuit of that strategy at the Company's recently acquired resorts; (ii)
operational synergies and economies of scale available to the Company as a
result of the Acquisition; and (iii) coordinated marketing and promotion of
each of the Company's resorts in a single region. See "Business."
Management also believes that the Company is well positioned to
benefit from certain trends in the North American ski industry, including the
emergence of the "echo boom" generation (the children of the "baby boom"
generation), continued consolidation, growing interest in snowboarding, and
demand among families for vacation property ownership. As the cost of
infrastructure to maintain competitiveness in the ski industry has grown, the
number of U.S. ski areas has declined. There are currently 516 ski areas in
operation in the nation as compared to over 700 in 1986, while skier visits
have remained relatively stable over the same period. Management believes that
the Company, as the largest mountain resort operator in North America, will be
well positioned to continue its growth both internally and through
acquisitions. Management also believes that the ski industry is poised for
growth through increased participation in the sport, especially among the echo
boom generation who are reaching their teen years, the prime entry age for
skiing and snowboarding, over the next decade. The Company and other emerging
multiple resort operators are expected to focus more of their marketing
efforts on attracting new participants to the sport.
STRATEGY
The Company intends to pursue a strategic plan that mirrors the
formula successfully employed at Sunday River and its recently acquired
resorts.
o INVEST IN THE SKI EXPERIENCE. Management believes that the
most efficient way to increase resort visitation is to
provide the highest quality skiing available. The Company
intends to improve the infrastructure at each property,
emphasizing modernization and introducing at the SKI
properties the snowmaking and trail grooming practices
successfully developed at the Company's other ski areas. The
largest portion of the capital budget is targeted for
increasing lift capacity through the installation of high
capacity lifts, including those with high speed drives and
detachable chairs. The Company believes that modernizing
lifts appeals to skiers because it allows a resort to
transport larger numbers of skiers to the summit faster,
reducing time spent in lift lines and on lifts. By improving
snowmaking coverage, the Company will further reduce its
reliance on natural snowfall and increase skiers' confidence
that high quality conditions will be available
notwithstanding the weather. Trail grooming further enhances
the skiing experience by assuring a consistent surface under
changing weather conditions. Management believes that the
Company has developed a unique system for snowmaking and
grooming that produces a higher quality, longer lasting
trail surface than exists at most other ski areas.
o EMPHASIZE MARKETING. The Company's marketing program is
designed to attract both day skiers and vacationers.
Approximately 35 million people live within the Company's
day skiing market, which includes Boston and New York. With
the acquisition of SKI, the Company's marketing program will
become more focused on the population centers located in
Massachusetts, Connecticut, New York and New Jersey. The
Company's marketing program promotes each resort's unique
attributes and highlights the improvements made through the
capital program (e.g., new lifts, increased snowmaking). In
an effort to attract both new and existing skiers, the
Company intends to expand its "Perfect Turn" skier
development program, a proprietary ski instruction
methodology which guarantees that new skiers will learn to
ski in one day, and its "Edge Card" frequent skier program,
which rewards frequent skiers with free lift tickets. With
multiple resorts extending from southern Vermont to northern
Maine, ASC believes that its cross-marketing programs will
become even more effective in the future. In order to
develop future generations of visitors, younger skiers are
targeted through an emphasis on the Company's innovative
snowboarding facilities. Snowboarding represents one of the
fastest growing segments
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of the ski resort business. To draw families to its
resorts, the Company has highlighted the availability of
intermediate skiing terrain, which appeals to families
wishing to ski together.
o CONTROL MULTIPLE REVENUE SOURCES. The Company's revenues
are derived from a diverse group of operations. In addition
to lift ticket sales, which represented approximately 42% of
total revenues for the twelve months ended April 28, 1996,
the Company generates revenues from equipment rentals, ski
lessons, restaurant and retail sales, lodging services and
real estate sales. Management believes that controlling
multiple profit centers at its resorts enables the Company
to maintain consistent quality standards for all elements of
the guest experience while maximizing the revenues, net
income and EBITDA generated by the Company's fixed asset
base and marketing expenditures.
o PURSUE COST SAVING OPPORTUNITIES. Management believes that
a significant element of the success to date at Sunday
River, as well as at the recently acquired properties, is
management's focus on cost controls. The Company expects to
realize significant cost savings as it integrates the SKI
operations with those of the Company through the elimination
of certain redundant positions in the corporate staff and in
the accounting, marketing, and information systems areas and
reduces insurance expenses and costs associated with
shareholder services. The Company expects to generate
significant additional operating efficiencies and cost
savings in such areas as purchasing and marketing.
o SELECTIVELY DEVELOP MOUNTAINSIDE REAL ESTATE. Mountainside
real estate development permits the Company to generate
increased revenues and profitability through real estate
sales, while also increasing a resort's bed base and
amenities to attract more vacationing skiers, which is the
most profitable customer segment. Such development, which is
only pursued following significant pre-construction
marketing and sales, has proven to be highly profitable for
the Company. At Sunday River, the Company has developed and
sold over 700 condominiums and, most recently, developed a
quartershare condominium hotel known as the "Summit Hotel."
The Summit Hotel is a condominium in which the Company
retains ownership of the restaurants, commercial space,
conference facilities and infrastructure facilities.
Quartershare interests (13 weeks evenly divided over the
year) in the hotel suites are sold to individual owners as
residential condominiums. The Company operates the hotel and
provides optional management of the quartershare units for
individual owners. The Summit Hotel concept will be the
focus of the Company's real estate development activities,
with additional hotels planned for selected resort locations
over the next several years. The number and location of
projects will be based on market conditions at the time,
determined primarily by the results of pre-construction
marketing and sales programs.
o EXPAND OFF-SEASON ACTIVITIES. Each resort has developed
off-season activities in order to improve utilization of
facilities, retain quality employees and contribute to
coverage of fixed operating costs. Sugarloaf, Killington,
Mt. Snow and Sugarbush operate championship golf courses,
and all the resorts offer a variety of summer outdoor
recreational opportunities ranging from tennis and mountain
biking to off-site activities such as whitewater rafting,
canoeing, fishing and hiking in the surrounding mountains.
Each resort has also begun to sponsor cultural programs
during the summer that increase utilization of the existing
bed base and conference and convention facilities.
THE ACQUISITION AND THE DIVESTITURE
On February 13, 1996, the Company entered into an agreement (the
"Acquisition Agreement") to acquire SKI by merger resulting in a total
purchase price of approximately $104.6 million plus assumed debt of $32.8
million as of April 28, 1996 (consisting of long-term debt of $19.8 million,
current portion of long-term debt of $1.6 million, and subordinated debentures
of $11.4 million). The Acquisition was consummated on June 28, 1996, whereupon
S-K-I became a wholly-owned subsidiary of the Company. Simultaneously with the
closing of the Acquisition, Leslie B. Otten contributed all of the outstanding
capital stock of the corporations comprising Sunday
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River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore to the Company. The net
proceeds from the offerings of the Old Notes, the Old Subordinated Notes and
the Common Stock (as defined) (the "Offerings"), together with borrowings
under the Senior Credit Facility and available cash, were used to finance the
Acquisition, repay certain indebtedness of the Company and SKI, fund the
acquisition of the 49% interest in Sugarloaf not owned by SKI, fund a pledge
account to secure the payment of the first two interest payments on the Notes
(subject, in the case of the first such payment, to the subordination
provisions of the Notes) and pay certain expenses relating to the Acquisition.
See "The Acquisition; Antitrust Matters; Use of Proceeds."
In connection with the consummation of the Acquisition, the Company
and the Guarantors also entered into the following transactions:
(1) A revolving credit facility in a principal amount of up to
$65.0 million pursuant to the Senior Credit Facility. See
"Description of Other Indebtedness - The Senior Credit
Facility."
(2) Issuance of Old Notes in the aggregate principal amount of
$120.0 million. The Old Notes were initially purchased by Bear
Stearns and SPP Hambro & Co., LLC (together with Bear Stearns,
the "Initial Purchasers").
(3) Issuance of units (the "Units") consisting of Old Subordinated
Notes in the aggregate principal amount of $39,132,000 and
39,132 shares of common stock, par value $.01 per share, of the
Company (the "Common Stock" or the "Unit Shares") for
$20,000,365. The Units were initially purchased by Bear
Stearns.
The principal executive offices of the Company are located at Sunday River
Access Road, Bethel, Maine 04217, and its telephone number is (207) 824-3000.
THE NOTES EXCHANGE OFFER
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REGISTRATION RIGHTS AGREEMENT .......... On June 28, 1996, the Old Notes were sold by the Company to the Initial
Purchasers, which subsequently resold the Old Notes to qualified institutional
buyers and/or institutional accredited investors. In connection with the
issuance of the Old Notes, the Company, the Guarantors and the Initial
Purchasers entered into the Registration Rights Agreement which grants the
Holders of the Old Notes certain exchange and registration rights. This Notes
Exchange Offer is intended to satisfy the Company's obligations under the
Registration Rights Agreement. See "The Exchange Offers - Purpose and Effect
of the Exchange Offers."
THE NOTES EXCHANGE OFFER................ Up to $120,000,000 aggregate principal amount of New Notes are being
offered in exchange for a like aggregate principal amount of Old Notes.
Old Notes may be tendered for exchange in whole or in part in a principal
amount of $1,000 and integral multiples thereof. The terms of the New
Notes and the Old Notes are identical in all material respects. The
Company will issue the New Notes to Holders on the earliest practical date
following the Expiration Date. See "The Exchange Offers - Terms of the
Exchange Offers."
The Company is making the Notes Exchange Offer in reliance on the position of
the staff of the Division of Corporation Finance of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, the Company has not sought its own interpretive letter
and there can be no assurance that the staff of the Division of Corporation
Finance of the Commission would make a similar determination with respect to
the Notes Exchange Offer as it has in such
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interpretive letters to third parties. Based on interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Company believes that New Notes issued
pursuant to the Notes Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a Holder thereof (other than a
Holder who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Notes. However, any
Holder of Old Notes who is an "affiliate" of the Company or who intends to
participate in the Notes Exchange Offer for the purpose of distributing New
Notes, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (a) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Old Notes in the Notes Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale
is made pursuant to an exemption from such requirements. In addition, if any
broker-dealer holds Old Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Notes for New
Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes. See "The Exchange Offers Resales of New Notes and New Subordinated
Notes."
EXPIRATION DATE......................... 12:00 midnight, New York City time, on ____________, 1996, unless the Exchange
Offers are extended by the Company in its sole discretion, in which case the
term "Expiration Date" means the latest date and time to which the Exchange
Offers are extended. See "The Exchange Offers - Terms of the Exchange Offers -
Expiration Date; Extensions; Amendments."
CONDITIONS TO THE NOTES EXCHANGE
OFFER............................... The Notes Exchange Offer is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange Offers - Terms of the
Exchange Offers - Certain Conditions to the Exchange Offers."
PROCEDURES FOR TENDERING THE OLD
NOTES............................... For the Old Notes to be validly tendered pursuant to the Notes Exchange
Offer, (i) the Notes Letter of Transmittal, or a facsimile thereof,
properly completed, signed and dated in accordance with the instructions
contained herein and therein, and mailed or otherwise delivered, together
with any other required documentation, or an Agent's Message (as defined
herein) in connection with a book-entry transfer of Old Notes must be
received by, the Exchange Agent at the address set forth herein and either
(a) the Old Notes to be tendered must be received by the Exchange Agent at
such address or (b) such Old Notes must be transferred pursuant to the
procedures for book-entry transfer described herein and a confirmation of
such book-entry transfer must be received by the Exchange Agent, in each
case prior to the Expiration Date or (ii) the guaranteed delivery
procedures
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described herein must be complied with. Holders of Old Notes
registered in the name of a broker, dealer, commercial bank, trust company
or other nominee are urged to contact such person promptly if they wish to
tender Old Notes pursuant to the Notes Exchange Offer. See "The Exchange
Offers - Terms of the Exchange Offers - Procedures for Tendering Old Notes
and Old Subordinated Notes." Notes Letters of Transmittal and
certificates representing Old Notes should not be sent to the Company.
Such documents should only be sent to the Exchange Agent. Questions
regarding how to tender and requests for information should be directed to
the Exchange Agent. See "The Exchange Offers - Terms of the Exchange
Offers - Exchange Agent."
By executing the Notes Letter of Transmittal, each Holder will represent to
the Company that, among other things, (i) it is not an "affiliate" of the
Company, (ii) any New Notes to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Notes, and (iv) if such Holder is not a
broker-dealer, such Holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such new
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Notes Exchange Offer must acknowledge that it acquired the Old Notes
for its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated
Notes."
GUARANTEED DELIVERY PROCEDURES.......... Holders of Old Notes who wish to tender their Old Notes and whose Old
Notes are not immediately available or who cannot deliver their Old Notes,
the Notes Letter of Transmittal or any other documents required by the
Notes Letter of Transmittal to the Exchange Agent prior to the Expiration
Date or if the procedure for book-entry transfer cannot be completed
before such date, must tender their Old Notes according to the guaranteed
delivery procedures set forth under "The Exchange Offers - Terms of the
Exchange Offers - Procedures for Tendering Old Notes and Old Subordinated
Notes - Guaranteed Delivery."
WITHDRAWAL RIGHTS....................... Tenders may be withdrawn at any time prior to the Expiration Date by
delivering a written notice of withdrawal to the Exchange Agent in
conformity with certain procedures set forth under "The Exchange Offers -
Terms of the Exchange Offers - Withdrawal Rights."
ACCRUED INTEREST ON THE NEW NOTES
AND OLD NOTES....................... Each New Note will bear interest from its issuance date. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but excluding, the issuance date of the New Notes.
Such interest will be paid with the first interest payment on the New
Notes. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
ACCEPTANCE OF THE OLD NOTES AND
DELIVERY OF THE NEW NOTES........... The Company will accept for exchange any and all Old Notes which are
properly tendered in the Notes Exchange Offer prior to the Expiration
Date. The New Notes issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date following the Expiration Date.
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Any Old Notes not accepted for exchange for any reason will be returned to
the tendering Holder thereof as promptly as practicable after the
expiration or termination of the Notes Exchange Offer. See "The Exchange
Offers - Terms of the Exchange Offers."
RESALES OF NEW NOTES BY
PARTICIPATING BROKER-DEALERS........ Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in certain interpretive letters, the Company
believes that broker-dealers who acquired Old Notes for their own accounts
as a result of market-making activities or other trading activities
("Participating Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to resales of New Notes received upon exchange
of such Old Notes (other than Old Notes which represent an unsold
allotment from the original sale of the Old Notes), by delivering the
Prospectus prepared for the Exchange Offers, so long as it contains a
description of the plan of distribution with respect to the resale of such
New Notes. A Participating Broker-Dealer who intends to use the
Prospectus in connection with the resale of the New Notes received in
exchange for Old Notes pursuant to the Notes Exchange Offer must notify
the Company, or cause the Company to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. See "The
Exchange Offers - Resales of New Notes and New Subordinated Notes."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS...................... The Company believes that the exchange pursuant to the Notes Exchange
Offer will not be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Consequences of the Exchange Offers."
TRUSTEE; EXCHANGE AGENT................. United States Trust Company of New York is serving as Trustee in
connection with the Notes and as exchange agent (the "Exchange Agent") in
connection with the Notes Exchange Offer.
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TERMS OF THE NOTES
The Notes Exchange Offer applies to $120,000,000 aggregate principal
amount of Old Notes. The terms of the New Notes are identical in all material
respects to the terms of the Old Notes except that (i) the New Notes will have
been registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act and will not
be entitled to registration rights and (ii) Holders of New Notes will not be
entitled to liquidated damages for the Company's failure to register the Old
Notes or New Notes under the Registration Rights Agreement. The New Notes will
be issued under the same Indenture as the Old Notes, and the New Notes and the
Old Notes will constitute a single series of debt securities under the
Indenture. See "Description of Senior Subordinated Notes." The Old Notes and
the New Notes are hereinafter collectively referred to as the "Notes."
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MATURITY................................ July 15, 2006.
INTEREST RATE AND PAYMENT DATES......... The Notes bear interest at the rate of 12% per annum, payable
semi-annually in arrears on January 15 and July 15 of each year,
commencing on January 15, 1997.
SUBSIDIARY GUARANTEES................... The New Notes will be, and the Old Notes remaining outstanding after
the Notes Exchange Offer will continue to be, jointly and severally
guaranteed on an unsecured, senior subordinated basis by certain of
the Company's subsidiaries and certain subsidiaries created after the
issuance of the Notes.
RANKING................................. The Notes are general unsecured obligations of the Company (with the
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sole exception of the security provided under the Pledge and
Disbursement Agreement (as defined)), subordinated in right of payment
to all existing and future Senior Debt of the Company, including all
borrowings of the Company under the Senior Credit Facility. The
Subsidiary Guarantees will be subordinated in right of payment to all
Senior Debt of the Guarantors. As of April 28, 1996, after giving pro
forma effect to the Acquisition, the aggregate amount of outstanding
Senior Debt of the Company would have been $51.0 million. See "The
Acquisition; Antitrust Matters; Use of Proceeds," "Pro Forma
Capitalization" and "Description of Senior Subordinated Notes."
OPTIONAL REDEMPTION..................... The Notes are redeemable at the option of the Company, in whole or in
part, at any time on and after July 15, 2001 at the redemption prices
set forth herein, plus accrued and unpaid interest to the applicable
redemption date.
In addition, on or prior to July 15, 1999, the Company may redeem up to
25% in aggregate principal amount of the Notes at a redemption price of
112% of the principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date, with the net proceeds of one or more
Equity Offerings; provided that at least 75% in aggregate principal
amount of the Notes remains outstanding immediately after the occurrence
of each such redemption.
CHANGE OF CONTROL OFFER................. Upon the occurrence of a Change of Control, the Company will be
required, within 30 days following the date of the Change of Control,
to make an offer to repurchase all or any part of each Holder's Notes
at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of
purchase. See "Description of Senior Subordinated Notes -- Repurchase
at the Option of Holders -- Change of Control."
CERTAIN COVENANTS....................... The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness, pay dividends or make other
distributions, repurchase Equity Interests (as defined) or
subordinated indebtedness, create certain liens, enter into certain
transactions with affiliates, sell assets or enter into certain
mergers and consolidations.
USE OF PROCEEDS; INTEREST PAYMENT
PLEDGE ACCOUNT...................... The net proceeds from the sale of Old Notes, together with the net
proceeds from the sale of Units and borrowings under the Senior Credit
Facility and available cash, were used to finance the Acquisition,
repay certain indebtedness of the Company and SKI, fund the
acquisition of the 49% interest in Sugarloaf not owned by SKI and pay
certain expenses relating to the Acquisition. See "The Acquisition;
Antitrust Matters; Use of Proceeds" and "Pro Forma Capitalization." In
addition, approximately $15 million of the proceeds of the Offerings
(the "Pledged Funds") were deposited into the Pledge Account (as
defined). The Pledged Funds were invested in U.S. Treasury obligations
maturing immediately prior to the January 15, 1997 and July 15, 1997
interest payment dates applicable to the Notes. The Company will be
permitted to obtain release of the Pledged Funds only
8
<PAGE>
for the payment of interest on the Notes through July 15, 1997 (subject, in
the case of interest payable on January 15, 1997, to the subordination
provisions of the Notes). See "Description of Senior Subordinated Notes --
Interest Payment Pledge Account."
THE SUBORDINATED NOTES EXCHANGE OFFER
SUBORDINATED NOTES REGISTRATION
RIGHTS AGREEMENT.................... On June 28, 1996, the Old Subordinated Notes were sold by the Company
to Bear Stearns, which subsequently resold the Old Subordinated Notes
to qualified institutional buyers and/or institutional accredited
investors. In connection with the issuance of the Old Subordinated
Notes, the Company, the Guarantors and Bear Stearns entered into the
Subordinated Note Registration Rights Agreement which grants the
Holders of the Old Subordinated Notes certain exchange and
registration rights. This Subordinated Notes Exchange Offer is
intended to satisfy the Company's obligations under the Subordinated
Note Registration Rights Agreement. See "The Exchange Offers -
Purpose and Effect of the Exchange Offers."
THE SUBORDINATED NOTES EXCHANGE
OFFER............................... Up to $39,132,000 aggregate principal amount of New Subordinated Notes
are being offered in exchange for a like aggregate principal amount of
Old Subordinated Notes. Old Subordinated Notes may be tendered for
exchange in whole or in part in a principal amount of $1,000 and
integral multiplies thereof. The terms of the New Subordinated Notes
and the Old Subordinated Notes are identical in all material
respects. The Company will issue the New Subordinated Notes to
Holders on the earliest practicable date following the Expiration
Date. See "The Exchange Offers - Terms of the Exchange Offers."
The Company is making the Subordinated Notes Exchange Offer in reliance on the
position of the staff of the Division of Corporation Finance of the Commission
as set forth in certain interpretive letters addressed to third parties in
other transactions. However, the Company has not sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Subordinated Notes Exchange Offer as it has in such
interpretive letters to third parties. Based on interpretations by the staff
of the Division of Corporation Finance, and subject to the two immediately
following sentences, the Company believes that New Subordinated Notes issued
pursuant to the Subordinated Notes Exchange Offer in exchange for Old
Subordinated Notes may be offered for resale, resold and otherwise transferred
by a Holder thereof (other than a Holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that such New Subordinated Notes are acquired
in the ordinary course of such Holder's business and that such Holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Subordinated Notes. However, any Holder of Old Subordinated Notes who
is an "affiliate" of the Company or who intends to participate in the
Subordinated Notes Exchange Offer for the purpose of distributing
9
<PAGE>
New Subordinated Notes, or any broker-dealer who purchased Old Subordinated Notes
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be able to rely on the
interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Subordinated Notes in the
Subordinated Notes Exchange Offer and (c) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or other transfer of such Old Subordinated Notes unless such sale is
made pursuant to an exemption from such requirements. In addition, if any
broker-dealer holds Old Subordinated Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old
Subordinated Notes for New Subordinated Notes, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Subordinated Notes. See "The Exchange
Offers - Resales of New Notes and New Subordinated Notes."
EXPIRATION DATE......................... 12:00 midnight, New York City time, on _________, 1996, unless the
Exchange Offers are extended by the Company in its sole discretion, in
which case the term "Expiration Date" means the latest date and time
to which the Exchange Offers are extended. See "The Exchange Offers -
Terms of the Exchange Offers - Expiration Date; Extensions;
Amendments."
CONDITIONS TO THE SUBORDINATED NOTES
EXCHANGE OFFER...................... The Subordinated Notes Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See "The Exchange
Offers - Terms of the Exchange Offers - Certain Conditions to the
Exchange Offers."
PROCEDURES FOR TENDERING THE OLD
SUBORDINATED NOTES.................. For Old Subordinated Notes to be validly tendered pursuant to the
Subordinated Notes Exchange Offer, (i) the Subordinated Notes Letter
of Transmittal, or a facsimile thereof, properly completed, signed and
dated in accordance with the instructions contained herein and
therein, and mailed or otherwise delivered, together with any other
required documentation, or an Agent's Message (as defined herein) in
connection with a book-entry transfer of Old Subordinated Notes must
be received by the Exchange Agent, in each case prior to the
Expiration Date or (ii) the guaranteed delivery procedures described
herein must be complied with. Holders of Old Subordinated Notes
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact such person promptly if
they wish to tender Old Subordinated Notes pursuant to the
Subordinated Notes Exchange Offer. See "The Exchange Offers - Terms
of the Exchange Offers - Procedures for Tendering Old Notes and Old
Subordinated Notes." Subordinated Notes Letters of Transmittal and
certificates representing Old Subordinated Notes should not be sent to
the Company. Such documents should only be sent to the Exchange
Agent. Questions regarding how to tender and requests for information
should be directed to the Exchange Agent. See "The Exchange Offers -
Terms of the Exchange Offers - Exchange Agent."
10
<PAGE>
By executing the Subordinated Notes Letter of Transmittal, each Holder will
represent to the Company that, among other things, (i) it is not an
"affiliate" of the Company, (ii) any New Subordinated Notes to be received by
it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Subordinated Notes, and
(iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and
does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such New Subordinated Notes. Each broker-dealer that
receives New Subordinated Notes for its own account pursuant to the
Subordinated Notes Exchange Offer must acknowledge that it acquired the Old
Subordinated Notes for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Subordinated Notes. See "The Exchange Offers - Resales
of New Notes and New Subordinated Notes."
GUARANTEED DELIVERY PROCEDURES.......... Holders of Old Subordinated Notes who wish to tender their Old
Subordinated Notes and whose Old Subordinated Notes are not
immediately available or who cannot deliver their Old Subordinated
Notes, the Subordinated Notes Letter of Transmittal or any other
documents required by the Subordinated Notes Letter of Transmittal to
the Exchange Agent prior to the Expiration Date or if the procedure
for book-entry transfer cannot be completed before such date, must
tender their Old Notes according to the guaranteed delivery procedures
set forth under "The Exchange Offers - Terms of the Exchange Offers -
Procedures for Tendering Old Notes and Old Subordinated Notes -
Guaranteed Delivery."
WITHDRAWAL RIGHTS....................... Tenders may be withdrawn at any time prior to the Expiration Date by
delivering a written notice of withdrawal to the Exchange Agent in
conformity with certain procedures set forth under "The Exchange
Offers - Terms of the Exchange Offers - Withdrawal Rights."
ACCRUED INTEREST ON THE NEW
SUBORDINATED NOTES AND OLD
SUBORDINATED NOTES.................. Each New Subordinated Note will bear interest from its issuance date.
Holders of Old Subordinated Notes that are accepted for exchange will
receive, in cash, accrued interest thereon to, but excluding, the
issuance date of the New Subordinated Notes. Such interest will be
paid with the first interest payment on the New Subordinated Notes.
Interest on the Old Subordinated Notes accepted for exchange will
cease to accrue upon issuance of the New Subordinated Notes.
ACCEPTANCE OF THE OLD SUBORDINATED
NOTES AND DELIVERY OF THE NEW
SUBORDINATED NOTES.................. The Company will accept for exchange any and all Old Subordinated
Notes which are properly tendered in the Subordinated Notes Exchange
Offer prior to the Expiration Date. The New Subordinated Notes issued
pursuant to the Subordinated Notes Exchange Offer will be delivered on
the earliest practicable date following the Expiration Date. Any Old
Subordinated Notes not accepted for exchange for any reason will be
returned to the tendering Holder thereof as promptly as practicable
after the expiration or termination of the Subordinated
11
<PAGE>
Notes Exchange Offer. See "The Exchange Offers - Terms of the Exchange
Offers."
RESALES OF NEW SUBORDINATED NOTES
BY PARTICIPATING BROKER-DEALERS..... Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in certain interpretive letters,
the Company believes that broker-dealers who acquired Old Subordinated
Notes for their own accounts as a result of market-making activities
or other trading activities ("Participating Broker-Dealers") may
fulfill their prospectus delivery requirements with respect to resales
of New Subordinated Notes received upon exchange of such Old
Subordinated Notes (other than Old Subordinated Notes which represent
an unsold allotment from the original sale of the Old Subordinated
Notes), by delivering the Prospectus prepared for the Exchange Offers,
so long as it contains a description of the plan of distribution with
respect to the resale of such New Subordinated Notes. A Participating
Broker-Dealer who intends to use the Prospectus in connection with the
resale of the New Subordinated Notes received in exchange for Old
Subordinated Notes pursuant to the Subordinated Notes Exchange Offer
must notify the Company, or cause the Company to be notified, on or
prior to the Expiration Date, that it is a Participating
Broker-Dealer. See "The Exchange Offers - Resales of New Notes and
New Subordinated Notes.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS...................... The Company believes that the exchange pursuant to the Subordinated
Notes Exchange Offer will not be a taxable event for federal income
tax purposes. See "Certain Federal Income Tax Consequences of the
Exchange Offers."
TRUSTEE; EXCHANGE AGENT................. United States Trust Company of New York is serving as Trustee in
connection with the Subordinated Notes and as exchange agent (the
"Exchange Agent") in connection with the Subordinated Notes Exchange
Offer.
</TABLE>
TERMS OF THE SUBORDINATED NOTES
The Subordinated Notes Exchange Offer applies to $39,132,000
aggregate principal amount of Old Subordinated Notes. The terms of the New
Subordinated Notes are identical in all material respects to the terms of the
Old Subordinated Notes except that (i) the New Subordinated Notes will have
been registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act and will not
be entitled to registration rights and (ii) Holders of New Subordinated Notes
will not be entitled to liquidated damages for the Company's failure to
register the Old Subordinated Notes or New Subordinated Notes under the
Subordinated Note Registration Rights Agreement. The New Subordinated Notes
will be issued under the same Subordinated Note Indenture as the Old
Subordinated Notes, and the New Subordinated Notes and the Old Subordinated
Notes will constitute a single series of debt securities under the
Subordinated Note Indenture. See "Description of Subordinated Notes." The Old
Subordinated Notes and the New Subordinated Notes are hereinafter collectively
referred to as the "Subordinated Notes."
<TABLE>
<CAPTION>
<S> <C>
MATURITY................................ January 15, 2007
INTEREST RATE AND PAYMENT DATES......... Interest on the Subordinated Notes will not accrue prior to July 15,
2001. Thereafter, interest will accrue at the rate of 13 3/4 % per
annum and will be payable semi-annually in arrears in cash on January
15 and July 15 of each year, commencing on January 15, 2002.
12
<PAGE>
SUBSIDIARY GUARANTEES................... The New Subordinated Notes will be, and the Old Subordinated Notes
remaining outstanding after the Subordinated Notes Exchange Offer will
continue to be, jointly and severally guaranteed on an unsecured,
subordinated basis by certain of the Company's subsidiaries (after
giving effect to the search Contribution (as defined herein)) and
certain subsidiaries created after the issuance of the Subordinated
Notes.
RANKING................................. The Subordinated Notes are general unsecured obligations of the
Company, subordinated in right of payment to all existing and future
Subordinated Note Senior Debt of the Company, including all borrowings
of the Company under the Senior Credit Facility and all obligations of
the Company with respect to the Notes. The Subordinated Note
Subsidiary Guarantees are subordinated in right of payment to all
Subordinated Note Senior Debt of the Guarantors, including the
Guarantors' guarantees of the Notes. As of April 28, 1996, after
giving pro forma effect to the Acquisition, the aggregate amount of
Subordinated Note Senior Debt of the Company would have been $167.6
million. See "The Acquisition; Antitrust Matters; Use of Proceeds,"
"Pro Forma Capitalization" and "Description of Subordinated Notes."
OPTIONAL REDEMPTION..................... The Subordinated Notes are redeemable at the option of the Company, in
whole or in part, at any time on and after July 15, 2001 at the
redemption prices set forth herein, plus accrued and unpaid interest
to the applicable redemption date.
In addition, on or prior to July 15, 1999, the Company may redeem the
Subordinated Notes, in whole or in part, at a redemption price of 113.75% of
the Accreted Value thereof, with the net proceeds of one or more Equity
Offerings.
CHANGE OF CONTROL OFFER................. Upon the occurrence of a Change of Control, the Company will be
required to make an offer to purchase all or any part of each Holder's
Subordinated Notes at an offer price in cash equal to 101% of the
Accreted Value thereof (if prior to July 15, 2001), or 101% of the
principal amount thereof, plus accrued and unpaid interest thereon (if
on or after July 15, 2001), to the date of repurchase. See
"Description of Subordinated Notes -- Repurchase at the Option of
Holders -- Change of Control."
CERTAIN COVENANTS....................... The Subordinated Note Indenture contains certain covenants that, among
other things, limit the ability of the Company and its Restricted
Subsidiaries to incur additional indebtedness, pay dividends or make
other distributions, repurchase Equity Interests or subordinated
indebtedness, create certain liens, enter into certain transactions
with affiliates, sell assets or enter into certain mergers and
consolidations.
USE OF PROCEEDS......................... The net proceeds from the sale of Subordinated Notes, together with
the net proceeds from the sale of Notes and borrowings under the
Senior Credit Facility and available cash, were used to finance the
Acquisition, repay certain indebtedness of the Company and SKI, fund
the acquisition of the 49% interest in Sugarloaf not owned by SKI and
pay certain expenses relating to the Acquisition. See "The
Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma
Capitalization."
</TABLE>
13
<PAGE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that investors
should consider before exchanging Old Notes for New Notes or Old Subordinated
Notes for New Subordinated Notes in the Exchange Offers.
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The following unaudited summary pro forma combined financial data as of
April 28, 1996, for the year ended July 30, 1995 and for the nine and twelve
months ended April 28, 1996 (except Other Financial and Operating Data) are
derived from the historical financial data of the Company and SKI included
elsewhere in this Prospectus and give pro forma effect to the Acquisition and
the Offerings and the divestitures of the Waterville Valley and Mt. Cranmore
resorts, pursuant to the Consent as if they had occurred on April 28, 1996
with respect to the balance sheet data, and as of August 1, 1994 with respect
to the statement of income data. See "The Acquisition; Antitrust Matters; Use
of Proceeds" and "Pro Forma Financial Data." The Pro Forma Financial Data is
not intended to be indicative of either future results of operations or
results that might have been achieved had such Acquisition and the Offerings
and the divestitures of the Waterville Valley and Mt. Cranmore resorts
pursuant to the Consent actually occurred on the dates specified. See "Pro
Forma Financial Data." Management believes that the following presentation
will assist potential investors in evaluating the ability of the Company to
meet debt service requirements. In the opinion of the Company's management,
all adjustments necessary to present fairly such unaudited pro forma combined
financial data have been made based upon the terms and structure of the
Acquisition and the Offerings and the divestitures of the Waterville Valley
and Mt. Cranmore resorts pursuant to the Consent. The fourth fiscal quarters
for the Company and SKI ordinarily reflect a significant reduction in revenues
as compared to the second and third quarters, as well as a less significant
comparative expense reduction, ordinarily producing a loss for such quarter
and reduced full fiscal year levels of net income and EBITDA as compared to
the first nine months of the year. The unaudited summary pro forma combined
financial data should be read together with the Selected Historical Financial
Data and the financial statements and notes thereto included elsewhere in this
Prospectus. See "The Acquisition; Antitrust Matters; Use of Proceeds,"
"Selected Historical Financial Data," "Pro Forma Financial Data" and the
financial statements and notes thereto included elsewhere in this Prospectus.
15
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Twelve Months Ended
April 28, 1996 July 30, 1995 April 28, 1996
(in thousands, except per share data, per skier visit data and ratios)
PRO FORMA COMBINED STATEMENT OF INCOME DATA:
Revenues:
<S> <C> <C> <C>
Ski and lodging $148,788 $141,070 $158,424
Real estate 9,482 7,961 10,812
---------------- -------------- --------------
158,270 149,031 169,236
---------------- -------------- --------------
Operating Expenses:
Cost of operations 68,021 68,523 76,730
Real estate and payroll taxes 8,488 8,982 9,692
Utilities 10,998 11,205 11,715
Insurance 6,315 6,570 6,343
Selling, general and administrative 24,818 25,768 28,335
Depreciation and amortization 17,875 18,810 19,821
---------------- -------------- --------------
136,515 139,858 152,636
---------------- -------------- --------------
Operating income 21,755 9,173 16,600
Interest expense 16,735 21,250 21,736
---------------- -------------- --------------
Pretax income (loss) from operations 5,020 (12,077) (5,136)
Income taxes 2,329 (3,944) (1,619)
---------------- -------------- --------------
Net income (loss) $2,691 $(8,133) $(3,517)
================ ============== ==============
Net income (loss) per share(1) $2.75 $(8.31) $(3.60)
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(2) $39,630 $27,983 $36,421
EBITDA to interest expense 2.4x 1.3x 1.7x
EBITDA to cash interest expense(3) 2.8x 1.5x 2.0x
Ratio of earnings to fixed charges(4) 1.1x --
Skier visits (5) 2,957 2,648 2,966
Average revenue per skier visit $50.32 $53.27 $53.41
PRO FORMA COMBINED BALANCE SHEET DATA: AS OF
APRIL 28, 1996
Property and equipment, net $228,742
Total assets 286,979
Total debt 201,262
Stockholders' equity 29,897
- ---------------------------------
</TABLE>
(1) Pro forma net income (loss) per share was computed giving consideration
to the 978,300 common shares of the Company which were issued and
outstanding on the Closing Date.
(2) EBITDA represents earnings before interest expense, income tax
expense (benefit), depreciation and amortization expense. EBITDA is
presented because management believes it provides useful information
regarding a company's ability to incur and service debt. EBITDA
should not be considered in isolation or as a substitute for net
income or cash flows prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability
or liquidity.
(3) Cash interest expense excludes interest on the Subordinated Notes which
would not have been payable in cash during the periods presented.
(4) The ratio of combined earnings to combined fixed charges represents
the number of times combined fixed charges were covered by combined
pre-tax earnings before provision for interest expense. Fixed charges
consist of interest expense, capitalized interest, amortization of
debt issuance costs, and a portion of operating lease rental expense
deemed to be representative of the interest factor. Pro forma
earnings were insufficient to cover pro forma fixed charges by $8.4
million for the year ended July 30, 1995.
(5) Each skier visit represents one skier visiting one ski resort for one
day, including skiers using complimentary and season passes.
Calculation of skier visits requires an estimation of visits by
season pass holders. Although different ski resort operators may use
different methodologies for making such estimations, management
believes that any resulting differences in total skier visits are
immaterial.
16
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
THE COMPANY
The following summary historical financial data of the Company
(except Other Financial and Operating Data) (i) as of and for the fiscal year
ended July 30, 1995 have been derived from the financial statements of the
Company audited by Price Waterhouse LLP, independent accountants, (ii) as of
and for each of the four fiscal years ended July 31, 1994 have been derived
from the financial statements of the Company audited by Berry, Dunn, McNeil &
Parker, independent accountants, and (iii) as of and for the nine months ended
April 30, 1995 and April 28, 1996 have been derived from unaudited interim
financial statements of the Company which, in the opinion of management,
include all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the Company's financial position and
results of operations. The Company's fourth fiscal quarter ordinarily reflects
a significant reduction in revenues as compared to the second and third
quarters, as well as a less significant comparative expense reduction,
ordinarily producing a loss for such quarter and reduced full fiscal year
levels of net income and EBITDA as compared to the first nine months of the
year. The following information includes Mt. Cranmore, which the Company
acquired in June 1995 and will be divested. See "The Acquisition; Antitrust
Matters; Use of Proceeds" and "Pro Forma Financial Data." The following
information should be read in conjunction with the Unaudited "Pro Forma
Financial Data," "Selected Historical Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements of the Company and notes thereto included elsewhere
in this Prospectus.
17
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
Year Ended(1) Nine Months Ended
---------------------------------------------------- -------------------
July 28, July 26, July 25, July 30, July 30, April 30, April 28,
1991 1992 1993 1994 1995 1995 1996
---------- --------- ---------- --------- ------- -------- ---------
(in thousands, except per skier visit data and ratios)
STATEMENT OF INCOME DATA:
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Skiing and lodging.................... $17,295 $20,312 $23,645 $26,544 $46,794 $43,777 $57,283
Real estate sales..................... 632 304 6,103 6,682 7,953 6,623 9,482
---------- --------- ---------- --------- ------- ------- -------
Total revenues...................... 17,927 20,616 29,748 33,226 54,747 50,400 66,765
---------- --------- ---------- --------- ------- ------- -------
Operating expenses:
Cost of operations including wages,
maintenance and supplies............
6,542 7,936 10,045 11,505 21,730 18,419 24,047
Cost of real estate sold.............. 521 101 3,245 3,179 3,994 3,611 4,806
Real estate and payroll taxes......... 645 758 993 1,265 1,736 1,364 1,773
Utilities............................. 1,602 2,046 2,097 1,854 4,132 3,725 5,083
Insurance............................. 963 1,162 1,570 1,163 2,127 1,830 1,758
Selling, general and
administrative......................
2,419 3,010 4,718 5,940 9,394 8,509 10,383
Depreciation and amortization......... 1,459 1,790 1,984 2,421 3,910 3,640 5,615
---------- --------- ---------- --------- ------- ------- -------
14,151 16,803 24,652 27,327 47,023 41,098 53,465
---------- --------- ---------- --------- ------- ------- -------
Operating income......................... 3,776 3,813 5,096 5,899 7,724 9,302 13,300
Interest expense......................... 969 776 849 1,026 2,205 1,412 2,307
---------- --------- ---------- --------- ------- ------- -------
Income before income taxes............... 2,807 3,037 4,247 4,873 5,519 7,890 10,993
Provision for income taxes............... -- -- -- -- 400 938 1,004
---------- --------- ---------- --------- ------- ------- -------
Income before extraordinary gain from
insurance claim....................... 2,807 3,037 4,247 4,873 5,119 6,952 9,989
Extraordinary gain from insurance claim.. -- -- 1,592 -- -- -- --
---------- --------- ---------- --------- ------- ------- -------
Net income............................... $2,807 $3,037 $5,839 $4,873 $5,119 $6,952 $9,989
========== ========= ========== ========= ======= ======= =======
BALANCE SHEET DATA:
Property and equipment, net........... $24,640 $27,580 $30,363 $41,871 $62,213 $46,526 $80,005
Total assets.......................... 27,096 32,256 40,550 51,784 72,434 55,656 95,111
Total long term debt, excluding current
portion.............................
9,678 10,317 14,150 19,103 27,169 16,323 46,286
Stockholder's equity.................. 15,924 18,367 23,167 26,212 30,502 32,634 38,975
STATEMENT OF CASH FLOWS DATA:
Cash flows from operating activities.. $4,634 $3,864 $2,667 $5,438 $ 12,593 $13,411 $9,551
Cash flows from investing activities.. (3,095) (5,031) (4,432) (9,041) (13,843) (7,151) (22,232)
Cash flows from financing activities.. (1,543) 1,372 1,559 3,764 2,399 (5,874) 11,888
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(2)............................. $5,235 $5,603 $7,080 $8,320 $11,634 $12,942 $18,915
Capital expenditures.................. 3,107 5,037 5,182 7,798 12,024 7,151 22,232
EBITDA to interest expense............ 5.4x 7.2x 8.3x 8.1x 5.3x 9.2x 8.2x
Ratio of earnings to fixed charges(3). 3.4x 4.0x 4.4x 4.2x 2.9x 4.9x 4.4x
Skier visits(4)....................... 460 497 515 515 1,048 1,045 1,284
Average revenue per skier visit....... $37.60 $40.87 $45.91 $51.54 $44.65 $41.89 $44.61
</TABLE>
- -----------------------------
(1) The historical results of the Company reflect the acquisition of the
Attitash/Bear Peak ski resort in July 1994, the lease of the
Sugarbush ski resort beginning in October 1994, the acquisition of
Sugarbush in May 1995 and the acquisition of the Mt. Cranmore ski
resort in June 1995.
(2) EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization expense and extraordinary
gain. EBITDA is presented because management believes it provides
useful information regarding a company's ability to incur and service
debt. EBITDA should not be considered in isolation or as a substitute
for net income or cash flows prepared in accordance with generally
accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(3) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provision for
interest expense. Fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs, and a
portion of operating lease rental expense deemed to be representative
of the interest factor.
(4) Each skier visit represents one skier visiting one ski resort for one
day, including skiers using complimentary and season passes.
Calculation of skier visits requires an estimation of visits by
season pass holders. Although different ski resort operators may use
different methodologies for making such estimations, management
believes that any resulting differences in total skier visits are
immaterial.
18
<PAGE>
SKI
The following summary historical financial data of SKI (except other
financial and operating data) (i) as of and for each of the five fiscal years
ended July 31, 1995 have been derived from the financial statements of SKI
audited by Price Waterhouse LLP, independent accountants and (ii) as of and
for the nine months ended April 30, 1995 and April 28, 1996 have been derived
from unaudited interim financial statements of SKI which, in the opinion of
SKI management, include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of SKI's financial position and
results of operations. SKI's fourth fiscal quarter ordinarily reflects a
significant reduction in revenues as compared to the second and third
quarters, as well as a less significant comparative expense reduction,
ordinarily producing a loss for such quarter and reduced full fiscal year
levels of net income and EBITDA as compared to the first nine months of the
year. The following information includes Waterville Valley, which SKI acquired
in October 1994 and will be divested. See "The Acquisition; Antitrust Matters;
Use of Proceeds" and "Pro Forma Financial Data." The following information
should be read in conjunction with the Unaudited "Pro Forma Financial Data,"
"Selected Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
SKI and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended July 31, (1) Nine Months Ended
--------------------------------------------- --------------------
April 30,April 28,
1991 1992 1993 1994 1995 1995 1996
(in thousands, except per share data, per skier visit data and
ratios)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................................... $83,007 $89,014 $96,708 $98,907 $113,960 $106,682 $106,752
-------- -------- -------- -------- -------- -------- ---------
Operating expenses:
Cost of operations including wages,
maintenance and supplies.....................
34,480 36,956 39,903 42,560 51,557 45,310 47,885
Other taxes.................................... 5,989 7,002 7,632 8,016 8,600 7,544 7,541
Utilities...................................... 5,580 6,172 6,655 6,045 8,071 7,624 7,465
Insurance...................................... 4,325 5,041 5,115 5,518 6,635 6,220 5,692
Selling, general and administrative expense... 13,666 14,048 16,872 15,298 19,495 16,377 17,061
Depreciation and amortization.................. 10,290 10,822 10,942 11,440 14,056 13,843 10,146
Loss on sale of Bear Mountain.................. -- -- -- -- -- -- 4,737
-------- -------- -------- -------- -------- -------- ---------
74,330 80,041 87,119 88,877 108,414 96,918 100,527
-------- -------- -------- -------- -------- -------- ---------
Operating income.................................. 8,677 8,973 9,589 10,030 5,546 9,764 6,225
Interest expense.................................. 2,940 2,471 2,228 2,214 3,819 3,018 2,561
-------- -------- -------- -------- -------- -------- ---------
Income before income taxes and minority interest.. 5,737 6,502 7,361 7,816 1,727 6,746 3,664
Income taxes...................................... 2,324 2,776 2,952 3,170 997 2,725 1,429
-------- -------- -------- -------- -------- -------- ---------
Income before minority interest................... 3,413 3,726 4,409 4,646 730 4,021 2,235
Minority interest in loss (income) of subsidiary.. -- -- -- -- 299 (193) (527)
-------- -------- -------- -------- -------- -------- ---------
Net income........................................ $3,413 $3,726 $4,409 $4,646 $1,029 $3,828 $1,708
======== ======== ======== ======== ======== ======== =========
BALANCE SHEET DATA:
Property and equipment, net.................... $83,154 $81,963 $82,288 $94,771 $121,775 $124,110 $93,728
Total assets................................... 90,288 93,531 99,182 106,790 136,721 138,730 118,454
Total long term debt, excluding current portion 27,315 26,677 28,119 29,167 50,190 46,677 31,222
Stockholders' equity........................... 45,972 49,190 53,047 57,186 57,562 60,337 58,563
STATEMENT OF CASH FLOWS DATA:
Cash flows from operating activities........... $14,061 $15,903 $13,474 $17,464 $14,948 $19,941 $19,089
Cash flows from investing activities........... (11,408) (9,287) (12,181) (23,108) (30,925) (33,502) 12,115
Cash flows from financing activities........... (2,754) (1,787) 968 848 16,063 12,183 (21,967)
OTHER FINANCIAL AND OPERATING DATA:
Net income per common and common equivalent $.60 $.65 $.77 $.81 $.18 $.66 $.30
share(2)
EBITDA(3)...................................... $18,967 $19,795 $20,531 $21,470 $19,602 $23,607 $16,371 (6)
Capital expenditures........................... 12,279 9,566 12,307 22,683 19,480 18,982 6,020
Ratio of earnings to fixed charges(4).......... 2.6x 3.0x 3.5x 3.6x 1.3x 2.6x 1.9x
Skier visits(5)................................ 1,679 1,783 1,863 1,854 2,113 2,104 2,055
Average revenue per skier visit................ $49.44 $49.92 $51.91 $53.35 $53.93 $50.70 $51.95
</TABLE>
- ----------------------------
(1) The historical results of SKI reflect the acquisitions of the
Sugarloaf (51% interest) and Waterville Valley ski resorts in August
1994 and October 1994, respectively, and the divestiture of the
majority of the ski resort and golf course assets of Bear Mountain in
October 1995.
(2) The computation of net income per common and common equivalent share
amounts are based on the weighted average of shares outstanding
during the year. Shares issuable upon the exercise of stock option
grants have not been included in the per share computation because
they would not have a material effect
19
<PAGE>
on earnings per share. The weighted average shares outstanding at the
respective balance sheet dates used in the computation of net income
per common and common equivalent share were 5,783,480 in 1995;
5,764,663 in 1994; 5,728,908 in 1993; 5,723,318 in 1992; 5,720,394 in
1991; 5,782,745 year to date April 30, 1995; and 5,788,592 year to
date April 28, 1996.
(3) EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization expense. EBITDA is presented
because management believes it provides useful information regarding
a company's ability to incur and service debt. EBITDA should not be
considered in isolation or as a substitute for net income or cash
flows prepared in accordance with generally accepted accounting
principles or as a measure of SKI's profitability or liquidity.
(4) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provision for
interest expense. Fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs, and a
portion of operating lease rental expense deemed to be representative
of the interest factor.
(5) Each skier visit represents one skier visiting one ski resort for one
day, including skiers using complimentary and season passes.
Calculation of skier visits requires an estimation of visits by
season pass holders. Although different ski resort operators may use
different methodologies for making such estimations, management
believes that any resulting differences in total skier visits are
immaterial.
(6) Includes loss of $4,737 realized in connection with the sale of Bear
Mountain.
20
<PAGE>
THE ACQUISITION; ANTITRUST MATTERS; USE OF PROCEEDS
The Acquisition. On February 13, 1996, LBO Resort Enterprises (the
predecessor of the Company), LBO Acquisition Co. ("Newco"), its wholly owned
subsidiary, and SKI entered into the Acquisition Agreement pursuant to which
the Company agreed to acquire SKI through the merger of Newco with and into
SKI, subject to the satisfaction or waiver of certain covenants and
conditions. The Acquisition was consummated on June 28, 1996. Concurrently
with the consummation of the Acquisition, Leslie B. Otten contributed to the
Company all of the outstanding stock of the corporations comprising Sunday
River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore (the "Contribution").
In the merger of Newco with and into SKI, each of the issued and
outstanding shares of common stock, par value $.10 per share, of SKI ("SKI
Common Stock"), excluding any shares held in SKI's treasury or owned by the
Company or any of its affiliates, were converted into the right to receive an
amount in cash equal to $18.00 (the "Purchase Price Per Share"). Pursuant to
the Acquisition Agreement, all outstanding stock options ("SKI Options")
granted by SKI prior to the date of the Acquisition Agreement automatically
became fully vested and the holders thereof became entitled to receive the
Purchase Price Per Share less the exercise price of such SKI Option and any
amount required by law to be withheld for taxes. The total cash purchase price
payable in the Acquisition for the SKI Common Stock and the SKI Options was
approximately $104.6 million ($109.3 million including certain transaction
expenses). In connection with the Acquisition, the Company assumed or
refinanced $32.8 million of debt as of April 28, 1996 (consisting of long-term
debt of $19.8 million, current portion of long-term debt of $1.6 million, and
subordinated debentures of $11.4 million).
In connection with the Acquisition, the Company repaid certain
indebtedness of the Company and SKI. The repaid indebtedness includes (i) all
outstanding indebtedness under SKI's credit agreement with the First National
Bank of Boston (the "SKI Credit Agreement"); (ii) all outstanding indebtedness
under SKI's existing credit agreement with Teachers' Insurance and Annuity
Association (the "TIAA Credit Agreement"); and (iii) all outstanding
indebtedness under the Company's existing credit agreement with the First
National Bank of Boston (the "ASC Credit Agreement"). On or before August 27,
1996, the Company will repay all outstanding indebtedness under Sugarloaf's
existing credit agreement with the First National Bank of Boston (the "SMC
Credit Agreement") and under Sugarloaf's existing term loan indebtedness to
the Town of Carrabassett Valley, Maine (the "Town Debt"), contemporaneously
with the consummation of the acquisition of the 49% minority interest in
Sugarloaf.
Prior to the Acquisition, Sunday River delivered to Mr. Otten a
demand note (the "Demand Note") in a principal amount equal to the total
amounts expected to become payable by Mr. Otten in 1996 and 1997 as income
taxes with respect to Sunday River's pre-Acquisition income as a Subchapter S
Corporation, estimated at $5.2 million as of April 28, 1996. This note is
unsecured and bears interest at 5.4% per annum, the applicable federal rate
in effect at the time of issuance.
Antitrust Matters
Federal. The Company has resolved antitrust concerns of the DOJ
raised by the Acquisition by entering into a consent decree. Specifically, the
Company has agreed to divest the assets constituting the Waterville Valley and
Mt. Cranmore resorts not later than December 1, 1996. The Consent (i) requires
the Company to use its best efforts to complete the divestitures as
expeditiously as possible, (ii) gives DOJ the ability, in its sole discretion,
to extend the time period for completing the divestitures by an additional
ninety days, and (iii) requires the Company to consent to the appointment of a
trustee to accomplish the divestitures at the best price then obtainable upon
a reasonable effort by the trustee in the event the divestitures have not been
completed within the allotted period. Until the divestitures are accomplished,
the consent decree requires the Company to take all steps necessary to assure
that the resorts will be maintained and operated as on-going, economically
viable resorts, including maintaining their usual and ordinary levels of
marketing personnel and marketing activity, and maintaining the resorts'
assets in operable condition based on normal maintenance, and prohibits the
Company from taking any action that would jeopardize the divestiture of the
resorts.
21
<PAGE>
No assurance can be given (i) that DOJ would extend the time limit
for completion of the divestitures if requested to do so or (ii) as to the
price or terms at which the divestitures will occur.
State. The Company has resolved antitrust concerns of the Maine
Attorney General raised by the Acquisition by entering into a consent decree.
The consent decree requires that: (i) the Company maintain the same level of
day lift ticket pricing discounts to Maine skiers as was in place during the
1995-96 season at the Sunday River and Sugarloaf resorts, which is expected to
be accomplished by determining the blended average yield for both resorts on
day tickets sold to Maine residents and to out-of-state residents, and
maintaining a ratio of Maine resident day ticket yield to nonresident ticket
yield at or below the ratio determined for the 1995-96 season, (ii) the gross
amount of discounts on junior and teen season passes sold to Maine residents
will not be reduced below the 1995-96 season level for a period of three
years, (iii) the Company establish procedures acceptable to the Maine Attorney
General adequate to track the ratios and gross youth season pass discounts for
each ski season and report those results to the Maine Attorney General at the
conclusion of each fiscal year, and (iv) should the Company fail to achieve
the required ratios in any season, it will take action necessary during the
following season so that the required ratio will have been achieved when the
two seasons are averaged. The Maine Attorney General has retained the right to
audit the Company's results and to retain independent accountants or other
experts in connection therewith at the Company's cost. The consent decree does
not limit the Company's ability to establish prices, pricing discounts, or
pricing or discount programs so long as the required ratios are satisfied. The
consent decree will be reviewed every three years to determine if any
modifications are necessary in light of then prevailing market conditions. The
pricing controls imposed under the consent decree are consistent with the
Company's current operations, and management believes that such controls will
not have an adverse impact upon the Company's operations or financial
condition.
Use of Proceeds. The Company will not receive any cash proceeds from
the Exchange Offers. In consideration for issuing the New Notes and the New
Subordinated Notes in exchange for Old Notes and Old Subordinated Notes,
respectively, as described in this Prospectus, the Company will receive Old
Notes and Old Subordinated Notes in like principal amount. The Old Notes and
Old Subordinated Notes surrendered in exchange for the New Notes and the New
Subordinated Notes will be retired and canceled. Accordingly, the issuance of
the New Notes and the New Subordinated Notes will not result in any change in
the indebtedness of the Company.
The Company applied the net proceeds of the Offerings, together with
borrowings under the Senior Credit Facility and available cash, which assuming
the Acquisition occurred at April 28, 1996 would approximate $31.4 million and
$17.1 million, respectively, to (i) fund the $104.6 million payable pursuant
to the Acquisition, (ii) repay existing indebtedness (including accrued
interest thereon) of the Company and of SKI, which assuming the Acquisition
occurred at April 28, 1996 would approximate $36.6 million and $17.2 million
(which includes long-term debt, including the current portion thereof, and
related accrued interest, associated with the TIAA Credit Agreement ($12.3
million), provide funding for the repayment of existing indebtedness of
Sugarloaf under the SMC Credit Agreement ($1.3 million) and Town Debt ($3.6
million)), respectively, (iii) and for the acquisition of the minority
interest in Sugarloaf not already owned by SKI (excluding certain outstanding
warrants to acquire Sugarloaf common stock), at a price equal to $2.0 million
in cash and earnings-based contingent purchase price of up to an additional $1
million, (iv) fund the Pledge Account with approximately $15 million to secure
the first two interest payments on the Notes, and (v) pay fees and expenses
associated with the Acquisition, the Offerings and the Senior Credit Facility
in the amount of $9.6 million. See "Pro Forma Capitalization." The following
table reflects the estimated sources and uses of funds in connection with the
Acquisition at April 28, 1996:
22
<PAGE>
(IN MILLIONS)
Sources:
Senior Subordinated Notes............................... $116.6
Units................................................... 20.0
Senior Credit Facility (1).............................. 31.4
Cash (2)................................................ 17.1
--------
Total................................................. $185.1
======
Uses:
SKI acquisition, outstanding shares and options......... $104.6
Acquisition of Sugarloaf minority interest
(cash portion)(3)....................................... 2.0
Pledge Account.......................................... 15.1
Repayment of existing indebtedness, including
accrued interest (4):
TIAA Credit Agreement................................. 12.3
ASC Credit Agreement.................................. 36.6
SMC Credit Agreement.................................. 1.3
Town Debt............................................. 3.6
Transaction and financing costs (5)..................... 9.6
---------
Total................................................. $185.1
======
- ------------------------
(1) Under the Senior Credit Facility, a total of $65.0 million is
available for borrowing by the Company, subject to compliance with
the terms thereof. See "Description of Other Indebtedness -- The
Senior Credit Facility."
(2) Includes a $5.1 million deposit paid to SKI under the Acquisition
Agreement in February 1996 (including accrued interest).
(3) Certain former stockholders of Sugarloaf hold warrants to acquire
approximately 15% of its outstanding Common Stock, on a fully diluted
basis, at a price of $.66 per share, or an aggregate exercise price
of approximately $737,000, at any time on or prior to June 30, 2002.
(4) The TIAA Credit Agreement matures in 2003 and bears interest at 8.12%
per annum. The ASC Credit Agreement matures in 2002 and bears
interest at a rate equal to LIBOR plus 2.50% per annum, with a
weighted average interest rate of 7.3% at April 28, 1996. The SMC
Credit Agreement consists of two facilities, one of which matures on
June 30, 1996 and bears interest at prime plus 2% per annum, and the
other of which matures in 1998 and bears interest at prime plus .5%
per annum. The Town Debt matures in 2013 and bears interest at a rate
of 7.96% per annum as of April 28, 1996.
(5) Represents the estimated fees and expenses related to the
Acquisition, the Offerings and the Senior Credit Facility.
23
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, the
following factors should be carefully considered by each Holder before
accepting the Notes Exchange Offer or the Subordinated Notes Exchange Offer,
although certain of the factors described below are equally applicable to the
Old Notes and the Old Subordinated Notes.
LEVERAGE AND DEBT SERVICE
The Company is highly leveraged. At April 28, 1996, after giving pro
forma effect to the Acquisition and the divestiture of the Waterville Valley
and Mt. Cranmore resorts, the Company's total indebtedness (including current
maturities) and stockholders' equity would have been $201.3 million and $29.9
million, respectively, and the Company would have had an additional $33.6
million available to be borrowed under the Senior Credit Facility. The Company
expects to borrow under the Senior Credit Facility in order to fund operating
losses incurred in the fourth quarter of fiscal 1996 and the first quarter of
fiscal 1997 (see "-- Dependence on Weather Conditions; Seasonality");
accordingly, borrowings under the Senior Credit Facility will increase from
the date of consummation of the Acquisition. For the nine months ended April
28, 1996, after giving pro forma effect to the Acquisition, the Company's
ratio of earnings to fixed charges would have been 1.1 to 1. As a result of
the loss incurred on a pro forma basis for the fiscal year ended July 30,
1995, earnings would have been insufficient to cover the indicated fixed
charges. Earnings would not have covered fixed charges by $8.4 million for
such period. However, such results for the two periods include non-cash
charges such as depreciation and amortization of $17.9 million and $18.8
million, respectively. The Company's ability to make scheduled payments of the
principal of, or interest on, or to refinance its indebtedness (including the
Notes and the Subordinated Notes) depends on its future performance, which to
a certain extent is subject to economic, financial, competitive and other
factors beyond its control.
The Company believes that its cash flow from operations following the
Acquisition, together with borrowings under the Senior Credit Facility, will
be adequate to meet its anticipated requirements for working capital, capital
expenditures, interest payments and scheduled principal payments over the next
several years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." There
can be no assurance, however, that the Company's business will continue to
generate cash flow at or above current levels. If the Company is unable to
generate sufficient cash flow from operations in the future to service its
debt and make necessary capital expenditures, or if its future earnings are
insufficient to make all required principal payments out of internally
generated funds, the Company may be required to refinance all or a portion of
its existing debt, sell assets or obtain additional financing. There can be no
assurance that any such refinancing or asset sales would be possible or that
any additional financing could be obtained on terms acceptable to the Company
or at all, particularly in view of the Company's high level of debt following
the Acquisition and the fact that substantially all of its assets (and those
of certain of its Subsidiaries) will be pledged to secure the borrowings under
the Senior Credit Facility and other secured obligations. See "Description of
Other Indebtedness -- The Senior Credit Facility."
The Company's high level of debt will have several important effects
on its future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, expansions and improvements and increasing the Company's
vulnerability to adverse general economic and industry conditions; (b) the
financial covenants and other restrictions contained in the Senior Credit
Facility, the Indenture and other agreements relating to the Company's
indebtedness require the Company to meet certain financial tests and restrict
its ability to borrow additional funds and to dispose of assets; and (c)
because of the Company's debt service requirements, funds available for
working capital, capital expenditures, acquisitions and general corporate
purposes may be limited. The Company's leveraged position may increase its
vulnerability to competitive pressures and the cyclicality of the skiing and
recreational industries. In addition, although management believes that
capital expenditures above maintenance levels can be deferred to address cash
flow or other constraints, such initiatives cannot be deferred for extended
periods without adverse effects on skier visits, revenues and profitability.
The Company's continued growth depends, in part, on its ability to maintain
and expand its facilities and to engage in successful real estate development
initiatives, and, therefore, to the extent it is unable to
24
<PAGE>
do so with internally generated cash, its inability to finance capital
expenditures through borrowed funds could have a material adverse effect on
the Company's future operations.
RESTRICTIONS UNDER DEBT AGREEMENTS
The Indenture and the Subordinated Note Indenture contain covenants
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to incur additional indebtedness, sell assets, or enter into
certain mergers and consolidations. In addition, the Senior Credit Facility
contains restrictive covenants which, generally, are more restrictive than
those contained in the Indenture and the Subordinated Note Indenture, and
prohibits the Company from prepaying its subordinated indebtedness (including
the Notes and the Subordinated Notes). The Senior Credit Facility also
requires the Company to maintain specified consolidated financial ratios and
satisfy certain consolidated financial tests. The Company's ability to meet
those financial ratios and financial tests can be affected by events beyond
its control, and there can be no assurance that the Company will meet those
ratios and tests. A breach of any of the covenants under the Senior Credit
Facility, the Indenture or the Subordinated Note Indenture could result in a
default under the Senior Credit Facility, the Indenture and/or the
Subordinated Note Indenture. If an event of default occurs under the Senior
Credit Facility, the lenders could elect to declare all amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable.
If the Company is unable to repay those amounts, the lenders could proceed
against the collateral granted to them to secure that indebtedness.
Substantially all the assets of the Company and certain of its Subsidiaries
have been pledged as security under the Senior Credit Facility. See
"Description of Senior Subordinated Notes," "Description of Subordinated
Notes" and "Description of Other Indebtedness -- The Senior Credit Facility."
SUBORDINATION OF THE NOTES AND THE SUBORDINATED NOTES
The payment of principal of, premium and interest on, and any other
amounts owing in respect of, the Notes is subordinated to the prior payment in
full of all existing and future Senior Debt of the Company, including
indebtedness under the Senior Credit Facility, and each Subsidiary Guarantee
is subordinated in right of payment to Senior Debt of the Guarantors. The
payment of principal of, premium and interest on, and any other amounts owing
in respect of, the Subordinated Notes is subordinated to the prior payment in
full of all existing and future Subordinated Note Senior Debt of the Company,
including indebtedness under the Senior Credit Facility and with respect to
the Notes, and each Subordinated Note Subsidiary Guarantee is subordinated in
right of payment to Subordinated Note Senior Debt of the Guarantors. As of
April 28, 1996, after giving pro forma effect to the Acquisition, the
aggregate outstanding amount of Senior Debt of the Company would have been
approximately $51.0 million and the aggregate outstanding amount of
Subordinated Note Senior Debt of the Company would have been approximately
$167.6 million. In addition, the Company would have had $33.6 million
available for borrowing under the Senior Credit Facility. The Indenture and
the Subordinated Note Indenture limit, but do not prohibit, the incurrence by
the Company and the Guarantors of additional indebtedness which is Senior Debt
or Subordinated Note Senior Debt, as the case may be. In the event of the
bankruptcy, liquidation, dissolution, reorganization or other winding up of
the Company, the assets of the Company will be available to pay obligations on
the Notes only after all Senior Debt has been paid in full in cash, and the
assets of the Company will be available to pay obligations on the Subordinated
Notes only after all Subordinated Note Senior Debt has been paid in full in
cash, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Notes or he Subordinated Notes. In addition, under certain
circumstances, the Company may not pay principal of, premium or interest on,
or any other amounts owing in respect of, the Notes or the Subordinated Notes,
or purchase, redeem or otherwise retire the Notes or the Subordinated Notes,
if a payment default or a non-payment default exists with respect to certain
Senior Debt or Subordinated Note Senior Debt, as the case may be, and, in the
case of a non-payment default, a payment blockage notice has been received by
the Trustee (as defined) or the Subordinated Note Trustee (as defined), as the
case may be. See "Description of Senior Subordinated Notes -- Subordination"
and "Description of Subordinated Notes --Subordination."
HOLDING COMPANY STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES
Virtually all of the Company's operating income will be generated by
its subsidiaries. As a result, the Company is dependent on the earnings and
cash flow of, and dividends and distributions or advances from, its
25
<PAGE>
subsidiaries to provide the funds necessary to meet its debt service
obligations, including the payment of principal of and interest on the Notes
and the Subordinated Notes. There can be no assurance that such subsidiaries
will generate sufficient cash flow to dividend, distribute or advance funds to
the Company. Should the Company fail to satisfy any payment obligation under
the Notes or the Subordinated Notes, the holders thereof would have a direct
claim therefor against the Guarantors pursuant to their Subsidiary Guarantees
or their Subordinated Note Subsidiary Guarantees, as applicable. However,
substantially all of the assets of the Guarantors have been pledged to secure
the obligations of the Company and such subsidiaries under the Senior Credit
Facility and other secured obligations. The Indenture and the Subordinated
Note Indenture limit, but do not prohibit, the ability of the Company and its
Restricted Subsidiaries to incur additional secured indebtedness. In the event
of a default under the Senior Credit Facility (or any other secured
indebtedness), the lenders thereunder would be entitled to a claim on the
assets securing such indebtedness which is prior to any claim of the holders
of the Notes (except to the extent provided under the Pledge and Disbursement
Agreement) or the Subordinated Notes. Accordingly, there may be insufficient
assets remaining after payment of prior secured claims (including claims of
lenders under the Senior Credit Facility) to pay amounts due on the Notes or
the Subordinated Notes. See "-- Leverage and Debt Service" and
"--Subordination of the Notes and the Subordinated Notes."
RISKS OF EXPANSION
An element of the Company's business strategy is the development of
new skiable terrain and the development, construction, operation and sale of
interval ownership and condominium real estate units, and other related
facilities at or near its ski resorts. See "Business -- Real Estate
Development." Such efforts will be dependent upon, among other things, receipt
of adequate financing on suitable terms and obtaining and maintaining the
requisite permits and licenses. There can be no assurance as to whether, when
or on what terms such financing, permits and licenses may be obtained. In
addition, such efforts entail risks associated with development and
construction activities, including cost overruns, shortages of materials or
skilled labor, labor disputes, unforeseen environmental or engineering
problems, work stoppages, and acts of God, any of which could delay
construction and result in a substantial increase in cost to the Company.
Because the real estate projects may be developed subject, in whole or in
part, to later sales of units or other interests, the Company may face
additional risks associated with marketing such units or interests after
incurring substantial out-of-pocket costs or indebtedness. See "Business --
Real Estate Development" and "Business -- Environmental Matters." The Company
may also grow through acquisitions; however, there can be no assurance that
attractive acquisition candidates will be identified, or that any such
acquisitions will be completed on terms acceptable to the Company, that
necessary financing will be available on suitable terms, if at all, or that
such acquisitions will be permitted under applicable antitrust laws. See "--
Leverage and Debt Service."
ABILITY TO ACHIEVE ANTICIPATED COST SAVINGS; INTEGRATION OF SKI
The Company faces risks associated with implementing its
post-Acquisition strategy and integrating the operations of SKI into the
operations of the Company. See "Business -- The Company -- Strategy."
Management of the Company has estimated that substantial cost savings can be
achieved as a result of integrating the operations of the Company and SKI. See
"Pro Forma Financial Data" and "Business -- The Company -- Strategy." The cost
savings estimates have been prepared solely by members of the management of
the Company based on information about SKI available to them, and have not
been independently reviewed. The estimates necessarily make numerous
assumptions as to future revenue levels and other operating results, the
availability of funds for capital expenditures and general industry and
business conditions and other matters, many of which are beyond the control of
the Company. Investors are cautioned that the actual cost savings realized by
the Company may vary considerably from the estimates contained herein and that
undue reliance should not be placed upon such estimates. There also can be no
assurance that unforeseen costs and expenses or other factors will not offset
the anticipated cost savings in whole or in part.
REGIONAL AND NATIONAL ECONOMIC CONDITIONS
The skiing industry is cyclical in nature, and is particularly
vulnerable to shifts in regional and national economic conditions. A
significant portion of the Company's customers reside in the New England
states.
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The economy in New England has been affected by substantial job losses
in the manufacturing sector and in the defense industry, and has experienced
other adverse economic trends. Although data indicate a stabilization of the
New England economy, there can be no assurance that improvement will occur or
that stagnation or declines in skier visits or real estate-related sales will
not occur. Skiing is a discretionary recreational activity entailing
relatively high costs of participation, and a worsening in the regional
economy, or deteriorating national economic conditions, could adversely impact
skier visits, and the Company's real estate and other revenues. Accordingly,
the Company's financial condition, particularly in light of its highly
leveraged condition, could be adversely affected by such a worsening in the
regional or national economy. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE ON WEATHER CONDITIONS; SEASONALITY
Although the Company's facilities include high quality snowmaking
equipment, its revenues and operating expenses continue to be heavily
influenced by weather conditions. Adverse weather conditions lead to increased
power and other operating costs associated with snowmaking, and can render
snowmaking wholly or partially ineffective in maintaining quality skiing
conditions. Moreover, it has been management's experience that, despite the
presence of high quality snow on the mountains, unfavorable weather conditions
in more highly populated areas can result in decreased skier visits. Prolonged
adverse weather conditions, or the occurrence of such conditions during key
periods of the ski season, can dramatically and adversely affect operating
results. In addition, the Company's revenues are highly seasonal in nature,
with the vast majority of its revenues historically being generated in the
second and third fiscal quarters, of which a significant portion (as well as
approximately 20% of annual skier days) is produced in two key weeks -- the
Christmas and Presidents' Day vacation weeks. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General." This
high degree of seasonality of revenues exacerbates the potential effect on
operating results of adverse weather and other developments of even moderate
or limited duration.
COMPETITION
The skiing industry is highly competitive and is characterized by
high fixed operating expenses and heavy dependence upon marginal revenues and
maintenance or improvement of skier visit levels. The Company's competitors
include other major ski resorts in the northeastern United States, as well as
in the western states, for its vacation business, and other ski areas in
Maine, New Hampshire, Vermont, Massachusetts and upstate New York for weekend
and day-skier traffic. The Company also competes with other non-ski-oriented
major resorts. See "Business --Competition." The Company believes that
competition for skiers focuses on snow conditions, size, quality and variety
of terrain, extent and quality of other facilities, quality of service,
location and accessibility, and price. While the Company regularly monitors
the activities of its principal competitors and modifies its marketing and
operational strategies and techniques as necessary, there can be no assurance
that its competitors will not be successful in capturing a material portion of
the Company's present or potential customer base. Some of the Company's
competitors have greater financial resources than the Company and could use
these resources to take steps which could adversely affect the Company's
competitive position. Such competitors may also be better positioned than the
Company to withstand downturns in the skiing industry, adverse weather
conditions, price and other forms of competition, and other negative
developments. In addition, many of the Company's competitors in the western
states have facilities offering more and longer trails with a greater variety
of terrain and, as perceived by some, superior natural snow conditions. See
"Business -- Competition."
RISK ASSOCIATED WITH LEASED PROPERTY AND PROPERTY USED PURSUANT TO PERMITS
Portions of the land underlying certain of the Company's ski resorts
are leased by the Company or used pursuant to permits or licenses from
governmental and private entities. If any such lease were to be terminated as
a result of a default by the lessee or holder thereunder, or if any such
permit or license were to be terminated as a result of a default by the user
thereunder or not renewed upon expiration or otherwise revoked prior to
expiration, the Company would lose possession of the land subject thereto and
any improvements thereon, perhaps making it impossible for the Company to
operate the affected resort. Certain leases under which the Company is the
tenant provide for renewal, but upon terms to be negotiated in the future.
Therefore, the obligations of the Company may
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increase upon any such renewal. Special use permits granted by the United
States Forest Service (the "USFS") are subject to termination if the federal
government determines that the land is needed for a "higher public purpose."
Such permits are granted subject to third party claims to the permitted land,
if any, and the USFS reserves the right to use and permit others to use the
permitted land so long as such use does not materially interfere with the
rights and privileges authorized by the permits. Additionally, the USFS may
impose additional conditions on the Company in connection with the
Acquisition. For a description of such leases, permits and licenses, see
"Business -- Properties." In addition, future expansion could subject the
leases, permits or licenses to additional review under the federal National
Environmental Policy Act ("NEPA") or other federal or state environmental
laws.
ENVIRONMENTAL AND LAND USE MATTERS
The Company is subject to a wide variety of federal, state, and local
laws, regulations and policies relating to land use and development and to the
use, storage, discharge, emission and disposal of hazardous materials. Failure
to comply with such laws could result in the imposition of severe penalties or
restrictions on operations including, without limitation, revocation of
government issued special use permits, where applicable, that could adversely
affect present and future operations, including both skiing and real estate
development. The Company and SKI have recently completed Phase I environmental
assessments at the properties owned or used by their respective subsidiaries.
The reports included suggestions relative to certain conditions and areas of
potential environmental concern. The reports did not, however, identify any
environmental conditions or noncompliance, the remediation or correction of
which management believes would have a material adverse impact on the business
or financial condition, results of operations and cash flows of the Company at
any of its resort areas. In addition, such laws, regulations and policies
could change in a manner that materially and adversely affects the Company's
ability to conduct its business as at present or to implement desired
expansions and improvements to its facilities. See "Business -- Environmental
Matters."
ADEQUACY OF WATER SUPPLY
The Company's operations are heavily dependent upon its continued
ability, under applicable laws, regulations, policies, permits, licenses, or
contractual arrangements, including leases, reservations in deeds, easements
and rights-of-way, to have access to adequate supplies of water with which to
make snow and service the other needs of its facilities, including, in certain
cases, the condominium developments at the properties and otherwise to conduct
its operations. There can be no assurance that new applications of existing
laws, regulations and policies, or changes in such laws, regulations and
policies will not occur in a manner that could have an adverse effect on the
Company, or that important permits, licenses or agreements will not be
canceled, non-renewed, or renewed on terms materially less favorable to the
Company. Additionally, the rights of the Company to use various water sources
on or about its properties may be also subject to the rights of other riparian
users and the public generally. See "Business -- Environmental Matters" and
"Business --Properties."
ANTITRUST
The Company has resolved antitrust concerns of DOJ raised by the
Acquisition by entering into a consent decree. Specifically, the Company has
agreed to divest the assets constituting the Waterville Valley and Mt.
Cranmore resorts not later than December 1, 1996. The Consent (i) requires the
Company to use its best efforts to complete the divestitures as expeditiously
as possible, (ii) gives DOJ the ability, in its sole discretion, to extend the
time period for completing the divestitures by an additional ninety days, and
(iii) requires the Company to consent to the appointment of a trustee to
accomplish the divestitures at the best price then obtainable upon a
reasonable effort by the trustee in event the divestitures have not been
completed within the allotted period. No assurance can be given regarding the
results of the sales, including the price to be received or the terms and
conditions of the sales. No assurance can be given that the Company will
complete the divestitures within the allotted time period or that the resorts
will not be subject to sale by a trustee.
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CONTROL OF THE COMPANY
Ninety-six percent (96%) of the Company's outstanding common stock is
held by Leslie B. Otten; therefore, Mr. Otten has the ability unilaterally to
control the affairs of the Company, subject only to such limitations as may be
imposed under the Senior Credit Facility, the Indenture, the Subordinated Note
Indenture or other existing or future contractual provisions.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the
performance and continued service of Mr. Otten, as well as several other key
management and operational personnel. The loss of the services of Mr. Otten or
of such other personnel could have a material adverse effect on the business
and operations of the Company. Neither Mr. Otten nor any other executive
officer is subject to an employment agreement with the Company or any of its
subsidiaries. See "Management."
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase (i) all of the outstanding Notes at 101% of the principal amount
thereof, plus accrued interest to the date of repurchase, and (ii) all of the
Subordinated Notes at 101% of the Accreted Value or principal amount, as
applicable, thereof, plus accrued interest to the date of repurchase. There
can be no assurance that the Company will have sufficient funds available or
will be permitted by its other debt agreements to repurchase the Notes and the
Subordinated Notes upon the occurrence of a Change of Control. In addition, a
Change of Control may cause a default under the Senior Credit Facility and
other Senior Debt or Subordinated Note Senior Debt of the Company, in which
case the subordination provisions of the Notes or the Subordinated Notes, as
the case may be, would require payment in full of all such Senior Debt or
Subordinated Note Senior Debt of the Company before repurchase of the Notes or
the Subordinated Notes, as the case may be. See "Description of Senior
Subordinated Notes -- Subordination," "Description of Senior Subordinated
Notes -- Repurchase at the Option of Holders -- Change of Control,"
"Description of Subordinated Notes --Subordination" and "Description of
Subordinated Notes -- Repurchase at the Option of Holders -- Change of
Control." The inability to repay Senior Debt or Subordinated Note Senior Debt
of the Company, if accelerated, and to repurchase all of the tendered Notes or
Subordinated Notes, would constitute an event of default under the Indenture
or the Subordinated Note Indenture, as the case may be.
FRAUDULENT CONVEYANCE RISKS
Various fraudulent conveyance laws have been enacted for the
protection of creditors and may be utilized by a court to subordinate or avoid
the Notes, any Subsidiary Guarantee, the Subordinated Notes or any
Subordinated Note Subsidiary Guarantee in favor of other existing or future
creditors of the Company or a Guarantor.
If a court in a lawsuit on behalf of any unpaid creditor of the
Company or a representative of the Company's creditors were to find that, at
the time the Company issued the Notes or the Subordinated Notes, the Company
(x) intended to hinder, delay or defraud any existing or future creditor or
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (y) did not receive fair
consideration or reasonably equivalent value for issuing such Notes or such
Subordinated Notes, as applicable, and the Company (i) was insolvent, (ii) was
rendered insolvent by reason of such distribution, (iii) was engaged or about
to engage in a business or transaction for which its remaining assets
constituted unreasonably small capital to carry on its business, or (iv)
intended to incur, or believed that it would incur, debts beyond its ability
to pay such debts as they matured, such court could void such Notes or such
Subordinated Notes, as applicable, and void such transactions. Alternatively,
in such event, claims of the holders of such Notes or such Subordinated Notes,
as applicable, could be subordinated to claims of the other creditors of the
Company.
The Company's obligations under the Notes and the Subordinated Notes
have been guaranteed by the Guarantors. To the extent that a court were to
find that (x) a Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee
was incurred by a Guarantor with intent to hinder, delay or defraud any
present or future creditor or the
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Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (y) such Guarantor
did not receive fair consideration or reasonably equivalent value for issuing
its Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee and such
Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of the
issuance of such Subsidiary Guarantee or Subordinated Note Subsidiary
Guarantee, (iii) was engaged or about to engage in a business or transaction
for which the remaining assets of such Guarantor constituted unreasonably
small capital to carry on its business, or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they
matured, the court could void or subordinate such Subsidiary Guarantee or
Subordinated Note Subsidiary Guarantee in favor of the Guarantor's creditors.
A legal challenge of a Subsidiary Guarantee or Subordinated Note Subsidiary
Guarantee on fraudulent conveyance grounds may, among other things, focus on
the benefits, if any, realized by the Guarantor as a result of the issuance by
the Company of the applicable Notes or Subordinated Notes.
To the extent any Subsidiary Guarantees or Subordinated Note
Subsidiary Guarantees were avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Notes or the Subordinated
Notes, as the case may be, would cease to have any claim in respect of such
Guarantor and would be creditors solely of the Company and any Guarantor whose
Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee was not avoided
or held unenforceable. In such event, the claims of the holders of the
applicable Notes or Subordinated Notes against the issuer of an invalid
Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee would be
subject to the prior payment of all liabilities and preferred stock claims of
such Guarantor. There can be no assurance that, after providing for all prior
claims and preferred stock interests, if any, there would be sufficient assets
to satisfy the claims of the holders of the applicable Notes relating to any
voided portions of any of the Subsidiary Guarantees or Subordinated Note
Subsidiary Guarantees.
Based upon financial and other information currently available to it,
management of the Company believes that the Notes, the Subsidiary Guarantees,
the Subordinated Notes and the Subordinated Note Subsidiary Guarantees have
been incurred for proper purposes and in good faith and that the Company and
each Guarantor (i) is solvent and will continue to be solvent after issuing
the Notes, the Subordinated Notes, its Subsidiary Guarantee or its
Subordinated Note Subsidiary Guarantee, as the case may be, (ii) has
sufficient capital for carrying on its business after such issuance, and (iii)
will be able to pay its debts as they mature. See "Management's Discussions
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
TAX CONSIDERATIONS
The Old Subordinated Notes were issued with significant original
issue discount, and the Old Notes were issued with original issue discount,
for federal income tax purposes, and the New Notes and the New Subordinated
Notes will have similar original issue discount upon consummation of the
Exchange Offers. Although interest will not accrue on the Subordinated Notes
prior to July 15, 2001, and there will be no periodic payments of cash
interest on the Subordinated Notes prior to January 15, 2002, original issue
discount (i.e., the difference between the stated redemption price at maturity
and the issue price of the Subordinated Notes) will accrue from the issue date
of the Subordinated Notes. Original issue discount equal to such difference in
the case of the Notes will accrue from the issue date of the Notes. Holders of
the Subordinated Notes or the Notes will be required to include such original
issue discount in gross income for federal income tax purposes over the term
of such obligations in advance of the receipt of the cash payments to which
the income is attributable. See "Certain Federal Income Tax Consequences."
In addition, the Subordinated Notes constitute "applicable high yield
discount obligations" for federal income tax purposes. As a result, the
Company's deduction of original issue discount on the Subordinated Notes will
be limited as follows: First, the "disqualified portion" of original issue
discount on the Subordinated Notes will not be deductible by the Company. In
general, the "disqualified portion" of original issue discount on the
Subordinated Notes equals the percentage of such original issue discount
obtained by dividing (a) the excess of the yield to maturity of the
Subordinated Notes over the sum of the applicable federal rate for the month
in which the Subordinated Notes are issued (6.92% for debt instruments issued
in June 1996) plus six percentage points by (b) the yield to maturity of the
Subordinated Notes. For purposes of the foregoing rules, the yield to maturity
of the Subordinated Notes will be determined based on the "issue price" of the
Subordinated Notes as determined for federal income tax purposes, which in
general is the portion of the issue price of the Units allocated to the
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Subordinated Notes. See "Certain Federal Income Tax Consequences -- Original
Issue Discount." Second, the remainder of the original issue discount on the
Subordinated Notes will not be deductible by the Company until paid.
If a bankruptcy case is commenced by or against the Company under the
U.S. Bankruptcy Code after the issuance of the Subordinated Notes and the
Notes, the claim of a holder of Subordinated Notes or Notes with respect to
the principal amount thereof may be limited to an amount equal to the sum of
(i) the initial offering price and (ii) that portion of the original issue
discount that is not deemed to constitute "unmatured interest" for purposes of
the U.S. Bankruptcy Code. Any original issue discount that was not amortized
as of such bankruptcy filing would constitute "unmatured interest."
See "Certain Federal Income Tax Considerations" for a more detailed
discussion of the federal income tax consequences to the holders regarding the
purchase, ownership and disposition of the Subordinated Notes and the Notes.
ABSENCE OF PUBLIC MARKET
The New Notes and the New Subordinated Notes are being offered
exclusively to holders of the Old Notes and the Old Subordinated Notes,
respectively. The Old Notes and the Old Subordinated Notes were issued to a
limited number of institutional investors on June 28, 1996. There is no
existing trading market for the Notes or the Subordinated Notes, and although
the Company has been advised that Bear Stearns currently intends to make a
market in the Notes and the Subordinated Notes, Bear Stearns is not obligated
to do so and may discontinue any such market making at any time without
notice. In addition, any market making activities in the Old Notes and the Old
Subordinated Notes may be limited during the pendency of the Exchange Offers.
There can be no assurance that an active trading market for the Notes or the
Subordinated Notes will develop, or, if it develops, that it will continue.
The Company does not intend to list the Notes or the Subordinated Notes on any
securities exchange or to seek approval for quotation of the Notes or the
Subordinated Notes through any automated quotation system. Future trading
prices for the Notes and the Subordinated Notes will depend on many factors,
including, among others, the Company's operating results, the market for
similar securities and changes in prevailing interest rates.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes or Old Subordinated Notes who do not exchange
for New Notes or New Subordinated Notes pursuant to the Exchange Offers will
continue to be subject to the restrictions on transfer of such Old Notes or
Old Subordinated Notes as set forth in the legend thereon as a consequence of
the issuance of the Old Notes or the Old Subordinated Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Notes and the Old Subordinated Notes may not be offered or
sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes or the Old Subordinated Notes under the
Securities Act. New Notes and New Subordinated Notes issued pursuant to the
Exchange Offers may be offered for resale, resold or otherwise transferred by
Holders thereof (other than any such holder which is an "affiliate" of the
Company or any Guarantor within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Notes or New
Subordinated Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate
in the distribution of such notes. Each broker-dealer that receives New Notes
or New Subordinated Notes for its own account pursuant to the Exchange Offers
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes or New Subordinated Notes. The Letter of Transmittal
states that, by so acknowledging and delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes or New Subordinated Notes received in exchange for Old Notes or Old
Subordinated Notes where such Old Notes or Old Subordinated Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180
days after the effective date of this Prospectus, it will
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make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution." However, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes and New
Subordinated Notes may not be offered or sold unless they have been registered
or qualified for sale in such jurisdictions or an exemption from registration
or qualification is available and is complied with. To the extent that Old
Notes or Old Subordinated Notes are tendered and accepted in the Exchange
Offers, the trading market for untendered and tendered but unaccepted Old
Notes and Old Subordinated Notes will be adversely affected.
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
On June 28, 1996 (the "Closing Date"), the Old Notes were sold by the
Company to the Initial Purchasers and the Old Subordinated Notes were sold by
the Company to Bear Stearns. The Initial Purchasers and Bear Stearns
subsequently resold the Old Notes and the Old Subordinated Notes,
respectively, to qualified institutional buyers and/or institutional
accredited investors. In connection with the issuance of the Old Notes and the
Old Subordinated Notes, the Company and the Guarantors entered into the
Registration Rights Agreements with the Initial Purchasers and Bear Stearns,
respectively. Pursuant to the Registration Rights Agreements, the Company
agreed (i) to file with the Commission a registration statement under the
Securities Act with respect to the Exchange Offers no later than 45 days
following the Closing Date, (ii) to use its best efforts to cause such
registration statement to become effective under the Securities Act at the
earliest practicable time, but in no event later than 150 days after the
Closing Date, and (iii) upon effectiveness of the Registration Statement, to
consummate the Exchange Offers within 30 business days. Copies of the
Registration Rights Agreements have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. The Registration Statement is
intended to satisfy the Company's obligations under the Registration Rights
Agreements.
As a result of the filing and the effectiveness of the Registration
Statement of which this Prospectus is a part, payment of certain liquidated
damages provided for in the Registration Rights Agreements will not occur.
Following the consummation of the Exchange Offers, Holders of Old Notes or Old
Subordinated Notes will not, in general, have any further registration rights
and the Old Notes or Old Subordinated Notes will continue to be subject to
certain restrictions on transfer except that certain Holders may have certain
registration rights in certain limited circumstances. See "- Certain
Consequences of a Failure to Exchange." Accordingly, the liquidity of the
market for the Old Notes or Old Subordinated Notes could be adversely
affected.
RESALES OF NEW NOTES AND NEW SUBORDINATED NOTES
The Company is making the Exchange Offers in reliance on the position
of the staff of the Division of Corporation Finance of the Commission as set
forth in certain interpretive letters addressed to third parties in other
transactions. However, the Company has not sought its own interpretive letter
and there can be no assurance that the staff of the Division of Corporation
Finance of the Commission would make a similar determination with respect to
the Exchange Offers as it has in such interpretive letters to third parties.
Based on these interpretations by the staff of the Division of Corporation
Finance, and subject to the two immediately following sentences, the Company
believes that New Notes issued pursuant to the Notes Exchange Offer in
exchange for Old Notes and New Subordinated Notes issued pursuant to the
Subordinated Notes Exchange Offer in exchange for Old Subordinated Notes may
be offered for resale, resold and otherwise transferred by a Holder thereof
(other than a Holder who is a broker-dealer) without further compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such New Notes and New Subordinated Notes are acquired in the
ordinary course of such Holder's business and that such Holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes or New Subordinated Notes. However, any Holder of Old Notes or
Old Subordinated Notes who is an "affiliate" of the Company or who intends to
participate in the Exchange Offers for the purpose of distributing New Notes
or the New Subordinated Notes, or any broker-dealer who purchased Old Notes or
Old Subordinated Notes from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender such Old Notes or Old
Subordinated Notes in the Exchange Offers, and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes or Old
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Subordinated Notes unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds Old
Notes or Old Subordinated Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Notes for New
Notes or exchanges such Old Subordinated Notes for New Subordinated Notes,
then such broker-dealer must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales of such New Notes or New
Subordinated Notes.
Each Holder of Old Notes who wishes to exchange Old Notes for New
Notes in the Notes Exchange Offer and each Holder of Old Subordinated Notes
who wishes to exchange Old Subordinated Notes for New Subordinated Notes in
the Subordinated Notes Exchange Offer will be required to represent that (i)
it is not an "affiliate" of the Company, (ii) any New Notes or New
Subordinated Notes to be received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Notes or New Subordinated Notes, and (iv) if such Holder is
not a broker-dealer, such Holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such
New Notes or New Subordinated Notes. Each broker-dealer that receives New
Notes or New Subordinated Notes for its own account pursuant to the Exchange
Offers must acknowledge that it acquired the Old Notes or Old Subordinated
Notes for its own account as the result of market-making activities or other
trading activities and must agree that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
New Notes or New Subordinated Notes. The Notes Letter of Transmittal and the
Subordinated Notes Letter of Transmittal state that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company believes
that broker-dealers who acquired Old Notes or Old Subordinated Notes for their
own accounts as a result of market-making activities or other trading
activities ("Participating Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to New Notes or New Subordinated Notes
received upon exchange of such Old Notes or Old Subordinated Notes, as the
case may be (other than Old Notes or Old Subordinated Notes which represent an
unsold allotment from the original sale of the Old Notes or Old Subordinated
Notes, as the case may be), with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Notes or New Subordinated Notes. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Notes or New Subordinated Notes received in
exchange for Old Notes or Old Subordinated Notes, as the case may be, where
such Old Notes or Old Subordinated Notes, as the case may be, were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreements, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such New
Notes or New Subordinated Notes for the lesser of (i) a period of 180 days
from the date on which the Registration Statement of which this Prospectus is
a part is declared effective or (ii) such period of time as such Participating
Broker-Dealer must comply with the prospectus delivery requirements of the Act
in order to resell such New Notes or New Subordinated Notes (subject to
extension under certain limited circumstances below). See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Notes or Old Subordinated Notes pursuant to the Exchange Offers will be deemed
to have agreed, by execution of the Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal, as the case may be, that, upon
receipt of advice from the Company of the existence of any fact or the
happening of any event that makes any statement of a material fact made in the
Registration Statement, this Prospectus, or any supplement or amendment
thereto, untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
herein or therein not misleading or of the occurrence of certain other events
specified in the Registration
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Rights Agreements, such Participating Broker-Dealer will suspend the sale of
New Notes or New Subordinated Notes pursuant to this Prospectus until the
Company has amended or supplemented this Prospectus to correct such untrue
statement or make the statements herein or therein not misleading and has
furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company has advised such Participating
Broker-Dealer in writing that the sale of the New Notes or New Subordinated
Notes may be resumed, as the case may be. If the Company gives such notice to
suspend the sale of New Notes or New Subordinated Notes, or if the Company
delays or suspends the effectiveness of the Registration Statement of which
this Prospectus is a part, under certain circumstances it shall extend the
period referred to above during which Participating Broker-Dealers are
entitled to use this Prospectus in connection with the resale of New Notes or
New Subordinated Notes by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Notes or New
Subordinated Notes or to and including the date on which the Company has given
the advice that the sale of New Notes or New Subordinated Notes may be resume,
as the case may be.
A Participating Broker-Dealer who intends to use the Prospectus in
connection with the resale of the New Notes or New Subordinated Notes pursuant
to the Exchange Offers must notify the Company, or cause the Company to be
notified, on or prior to the Expiration Date that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letters of Transmittal or may be delivered to the Exchange Agent at the
address set forth in the sections of this Prospectus entitled "- Terms of the
Exchange Offers -- Exchange Agent" and "Exchange Agent."
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE
The Old Notes or Old Subordinated Notes have not been registered
under the Securities Act or any state securities law and therefore may not be
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities laws, or pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with certain other conditions
and restrictions, including the Company's and the Trustee's rights in certain
cases to require the delivery of opinions of counsel, certifications and other
information prior to any such transfer. Old Notes or Old Subordinated Notes
which remain outstanding after consummation of the Exchange Offers will
continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offers, Holders of the Old Notes
or Old Subordinated Notes which remain outstanding will not be entitled to any
rights to have such Old Notes or Old Subordinated Notes registered under the
Securities Act or to any similar rights under the Registration Rights
Agreements (subject to certain limited exceptions, if applicable, which would
entitle certain holders in limited circumstances to shelf registration rights
with respect to the Old Notes or Old Subordinated Notes). The Company
currently does not intend to register under the Securities Act any Old Notes
or Old Subordinated Notes which remain outstanding after consummation of the
Exchange Offers (subject to such limited exceptions, if applicable).
To the extent that Old Notes or Old Subordinated Notes are tendered
and accepted in the Exchange Offers, a Holder's ability to sell untendered Old
Notes or untendered Old Subordinated Notes could be adversely affected. In
addition, to the extent that Old Notes or Old Subordinated Notes are tendered
and accepted in connection with the Exchange Offers, any trading market for
Old Notes or Old Subordinated Notes, as the case may be, which remain
outstanding after the Exchange Offers could be adversely affected.
The New Notes and any Old Notes which remain outstanding after
consummation of the Notes Exchange Offer will constitute a single series of
debt securities under the Indenture and, accordingly, will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding principal amount thereof have taken certain actions
or exercised certain rights under the Indenture. See "Description of Senior
Subordinated Notes."
The New Subordinated Notes and any Old Subordinated Notes which
remain outstanding after the consummation of the Subordinated Notes Exchange
Offer will constitute a single series of debt securities under the
Subordinated Note Indenture and, accordingly, will vote together as a single
class for purposes of determining
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whether holders of the requisite percentage in outstanding principal amount
thereof have taken certain actions or exercised certain rights under the
Subordinated Note Indenture. See "Description of Subordinated Notes."
The Registration Rights Agreements provide for liquidated damages in
the event that certain events relating to the registration of the New Notes or
New Subordinated Notes offered in the Exchange Offers does not occur within
specified time parameters. See "-- Purpose and Effect of the Exchange Offers."
Following consummation of the Exchange Offers, the Old Notes and the Old
Subordinated Notes will not be entitled to any liquidated damages thereon,
except in certain limited circumstances, if applicable. The New Notes and the
New Subordinated Notes will not be entitled to any such liquidated damages
thereon.
TERMS OF THE EXCHANGE OFFERS
General
The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Notes Letter
of Transmittal or Subordinated Notes Letter of Transmittal, as applicable, to
exchange up to $120,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes and up to $39,132,000 aggregate
principal amount of New Subordinated Notes for a like aggregate principal
amount of Old Subordinated Notes properly tendered on or prior to the
Expiration Date (as defined below) and not properly withdrawn in accordance
with the procedures described below. The Company will issue, promptly after
the Expiration Date, an aggregate principal amount of up to $120,000,000 of
New Notes in exchange for a like principal amount of outstanding Old Notes
tendered and accepted in connection with the Notes Exchange offer and an
aggregate principal amount of up to $39,132,000 of New Subordinated Notes in
exchange for a like principal amount of outstanding Old Subordinated Notes
tendered and accepted in connection with the Subordinated Notes Exchange
Offer. Holders may tender their Old Notes and Old Subordinated Notes in whole
or in part in a principal amount of $1,000 and integral multiples thereof.
The Exchange Offers are not conditioned upon any minimum principal
amount of Old Notes or Old Subordinated Notes being tendered. As of the date
of this Prospectus, $120,000,000 aggregate principal amount of the Old Notes
is outstanding and $39,132,000 aggregate principal amount of the Old
Subordinated Notes is outstanding. Solely for reasons of administration (and
for no other purpose), the Company has fixed the close of business on the date
of this Prospectus as the record date for the Exchange Offers for purposes of
determining the persons to whom this Prospectus and the Notes Letter of
Transmittal or the Subordinated Notes Letter of Transmittal will be mailed
initially. Only a registered Holder of the Old Notes (or such Holder's legal
representative or attorney-in-fact) as reflected on the records of the
registrar for the Notes may participate in the Notes Exchange Offer, and only
a registered Holder of the Old Subordinated Notes (or such Holder's legal
representative or attorney-in-fact) as reflected on the records of the
registrar for the Subordinated Notes may participate in the Subordinated Notes
Exchange Offer. There will be no fixed record date for determining registered
Holders of the Old Notes or Old Subordinated Notes entitled to participate in
the Exchange Offers.
Holders of Old Notes or Old Subordinated Notes do not have any
appraisal or dissenters' rights in connection with the Exchange Offers. Old
Notes and Old Subordinated Notes which are not tendered for exchange or are
tendered but not accepted in connection with the Exchange Offers will remain
outstanding and be entitled to the benefits of the Indenture and the
Subordinated Note Indenture, respectively, but will not, in general, be
entitled to any further registration rights under the Registration Rights
Agreements.
If any tendered Old Notes or Old Subordinated Notes are not accepted
for exchange because of an invalid tender, the occurrence of certain other
events set forth herein or otherwise, certificates for any such unaccepted Old
Notes or Old Subordinated Notes will be returned, without expense, to the
tendering Holder thereof promptly after the Expiration Date.
Holders who tender Old Notes or Old Subordinated Notes in connection
with the Exchange Offers will not be required to pay brokerage commissions or
fees or, subject to the instructions in the Notes Letter of Transmittal and
the Subordinated Notes Letter of Transmittal, transfer taxes with respect to
the exchange of Old Notes or Old
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Subordinated Notes in connection with the Exchange Offers. The Company will pay
all charges and expenses, other than certain applicable taxes described below,
in connection with the Exchange Offers. See "-- Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES
ANY RECOMMENDATION TO HOLDERS OF OLD NOTES OR OLD SUBORDINATED NOTES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
NOTES OR OLD SUBORDINATED NOTES PURSUANT TO THE EXCHANGE OFFERS. IN ADDITION,
NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD
NOTES OR OLD SUBORDINATED NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER
PURSUANT TO THE NOTES EXCHANGE OFFERS AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES OR OLD SUBORDINATED NOTES TO TENDER AFTER READING THIS PROSPECTUS AND
THE NOTES LETTER OF TRANSMITTAL OR THE SUBORDINATED NOTES LETTER OF
TRANSMITTAL, AS APPLICABLE, AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED
ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The term "Expiration Date" means 5:00 p.m., New York City time, on
____________, 1996, unless the Exchange Offers are extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offers are extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i)
to delay the acceptance of the Old Notes or Old Subordinated Notes for
exchange, (ii) to terminate the Exchange Offers (whether or not any Old Notes
or Old Subordinated Notes have theretofore been accepted for exchange) if the
Company determines, in its sole and absolute discretion, that any of the
events or conditions referred to under "-- Certain Conditions of the Exchange
Offers" have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offers and retain all Old Notes or Old
Subordinated Notes tendered pursuant to the Exchange Offers, subject, however,
to the right of Holders of Old Notes or Old Subordinated Notes to withdraw
their tendered Old Notes or Old Subordinated Notes as described under
"Withdrawal Rights," and (iv) to waive any condition or otherwise amend the
terms of the Exchange Offers in any respect. If either Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
or if the Company waives a material condition of either Exchange Offer, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders of the Old Notes
or Old Subordinated Notes, as applicable, and the Company will extend such
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination, or amendment
will be followed promptly by oral or written notice thereof to the Exchange
Agent and by making a public announcement thereof, and such announcement in
the case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
Acceptance for Exchange and Issuance of New Notes or New Subordinated
Notes
Upon the terms and subject to the conditions of the Exchange Offers,
the Company will exchange and will issue to the Exchange Agent, New Notes for
Old Notes, and New Subordinated Notes for Old Subordinated Notes, in each case
validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-- Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Notes in exchange for Old Notes or of
New Subordinated Notes in exchange for Old Subordinated Notes, tendered and
accepted for exchange pursuant to the Exchange Offers will be made only
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after timely receipt by the Exchange Agent of (i) Old Notes or Old
Subordinated Notes or a book-entry confirmation of a book-entry transfer of
Old Notes or Old Subordinated Notes into the Exchange Agent's account at The
Depository Trust Company ("DTC"), (ii) the Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal, as applicable (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and (iii) any other documents required by the Notes Letter of
Transmittal or Subordinated Notes Letter of Transmittal, as applicable.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes or Old Subordinated Notes into the Exchange
Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offers, the
Company will be deemed to have accepted for exchange, and thereby exchanged,
Old Notes or Old Subordinated Notes validly tendered and not withdrawn as, if
and when the Company gives oral or written notice to the Exchange Agent of the
Company's acceptance of such Old Notes or Old Subordinated Notes for exchange
pursuant to the Exchange Offers. The Exchange Agent will act as agent for the
Company for the purpose of receiving tenders of Old Notes or Old Subordinated
Notes, Notes Letters of Transmittal, Subordinated Notes Letters of Transmittal
and related documents, and as agent for tendering Holders for the purpose of
receiving Old Notes or Old Subordinated Notes, Notes Letters of Transmittal,
Subordinated Notes Letters of Transmittal and related documents, and
transmitting New Notes or New Subordinated Notes to validly tendering Holders.
Such exchange will be made promptly after the Expiration Date. If for any
reason whatsoever, acceptance for exchange or the exchange of any Old Notes or
Old Subordinated Notes tendered pursuant to the Exchange Offers is delayed
(whether before or after the Company's acceptance for exchange of Old Notes or
Old Subordinated Notes) or the Company extends the Exchange Offers or is
unable to accept for exchange or exchange Old Notes or Old Subordinated Notes
tendered pursuant to the Exchange Offers, then, without prejudice to the
Company's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Old Notes or Old Subordinated Notes and such Old Notes or Old
Subordinated Notes, as the case may be, may not be withdrawn except to the
extent tendering Holders are entitled to withdrawal rights as described under
"- Withdrawal Rights."
Pursuant to the Notes Letters of Transmittal and the Subordinated
Notes Letters of Transmittal, a Holder of Old Notes or Old Subordinated Notes,
respectively, will warrant and agree that it has full power and authority to
tender, exchange, sell, assign, and transfer Old Notes or Old Subordinated
Notes, that the Company will acquire good, marketable and unencumbered title
to the tendered Old Notes or Old Subordinated Notes, free and clear of all
liens, restrictions, charges, and encumbrances, and the Old Notes or Old
Subordinated Notes tendered for exchange are not subject to any adverse claims
or proxies. The Holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Notes or Old Subordinated Notes tendered
pursuant to the Exchange Offers.
Procedures for Tendering Old Notes or Old Subordinated Notes
Valid Tender. Except as set forth below, in order for Old Notes or
Old Subordinated Notes to be validly tendered pursuant to the Exchange Offers,
(i) a properly completed and duly executed Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal (or facsimile thereof), as
applicable, with any required signature guarantees, or an Agent's Message (as
defined herein) in connection with a book-entry transfer of Old Notes or Old
Subordinated Notes, and any other required documents, must be received by the
Exchange Agent at one of its addresses set forth under "- Exchange Agent," and
either (a) tendered Old Notes or Old Subordinated Notes must be received by
the Exchange Agent, or (b) such Old Notes or Old Subordinated Notes must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation must be received by the Exchange Agent, in each
case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with.
If less than all of the Old Notes or Old Subordinated Notes are
tendered, a tendering Holder should fill in the amount of the Old Notes or Old
Subordinated Notes being tendered in the appropriate box on the Notes Letter
of
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Transmittal or Subordinated Notes Letter of Transmittal. The entire amount
of Old Notes or Old Subordinated Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE NOTES LETTER OF
TRANSMITTAL OR SUBORDINATED NOTES LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO NOTES LETTER OF TRANSMITTAL OR SUBORDINATED NOTES LETTER OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
Book-Entry Transfer. The Exchange Agent will establish accounts with
respect to the Old Notes and Old Subordinated Notes at DTC for purposes of the
Exchange Offers promptly after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Notes or Old Subordinated Notes by
causing DTC to transfer such Old Notes or Old Subordinated Notes into the
Exchange Agent's applicable account at DTC in accordance with DTC's procedures
for transfers. However, although delivery of Old Notes or Old Subordinated
Notes may be effected through book-entry transfer into the Exchange Agent's
applicable account at DTC pursuant to the DTC's Automated Tender Offer Program
("ATOP") procedures, the Notes Letter of Transmittal or Subordinated Notes
Letter of Transmittal (or facsimile thereof), as applicable, properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under "- Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Agent's Message" means a message, transmitted by DTC to,
and received by, the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the participant in DTC tendering the Old Notes or Old Subordinated Notes
which are the subject of such book-entry confirmation, that such participation
has received and agrees to be bound by the terms of the Notes Letter of
Transmittal or Subordinated Notes Letter of Transmittal, as applicable, and
that the Company may enforce such agreement against such participant.
Signature Guarantees. Certificates for Old Notes or Old Subordinated
Notes need not be endorsed and signature guarantees on the Notes Letter of
Transmittal or Subordinated Notes Letter of Transmittal are unnecessary unless
(a) a certificate for the Old Notes or Old Subordinated Notes, as applicable,
is registered in a name other than that of the person surrendering the
certificate or (b) such registered Holder completes the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" in the Notes Letter
of Transmittal or Subordinated Notes Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Old Notes or Old Subordinated Notes must
be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Notes Letter of
Transmittal or Subordinated Notes Letter of Transmittal guaranteed by a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act, as an
"eligible guarantor institution," including (as such terms are defined
therein): (i) a bank, (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer, (iii) a credit union, (iv) a
national securities exchange, registered securities association or clearing
agency, or (v) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), unless surrendered on behalf
of such Eligible Institution.
Guaranteed Delivery. If a Holder desires to tender Old Notes or Old
Subordinated Notes pursuant to the Exchange Offers and the certificates for
Old Notes or Old Subordinated Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent on or before the
Expiration Date, or the procedures for book-entry transfer cannot be completed
on a timely basis, such Old Notes or Old Subordinated
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Notes may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the Notes
Letter of Transmittal or Subordinated Notes Letter of Transmittal, as
applicable, is received by the Exchange Agent, as provided below, on
or prior to the Expiration Date;
(iii) the certificates (or a book-entry confirmation)
representing all tendered Old Notes or Old Subordinated Notes, in
proper form for transfer, together with a properly completed and duly
executed Notes Letter of Transmittal or Subordinated Notes Letter of
Transmittal (or facsimile thereof) as applicable, with any required
signature guarantees, or an Agent's Message in connection with a
book-entry transfer of Old Notes or Old Subordinated Notes, and any
other documents required by the Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal, as applicable, are received
by the Exchange Agent within three business days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes
in exchange for Old Notes, or of New Subordinated Notes in exchange for Old
Subordinated Notes, tendered and accepted for exchange pursuant to the
Exchange Offers will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes or Old Subordinated Notes or of a book-entry
confirmation with respect to such Old Notes or Old Subordinated Notes and a
properly completed and duly executed Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal, as applicable. Accordingly, the
delivery of New Notes or New Subordinated Notes might not be made to all
tendering Holders at the same time, and will depend upon when Old Notes or Old
Subordinated Notes, as applicable, book-entry confirmations with respect to
Old Notes or Old Subordinated Notes, as applicable, and other required
documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes or Old
Subordinated Notes tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Holder and the
Company upon the terms and subject to the conditions of the Exchange Offers.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Notes or Old Subordinated Notes will be determined by the
Company, in its sole discretion, whose determination shall be final and
binding on all parties. The Company reserves the absolute right, in its sole
and absolute discretion, to reject any and all tenders determined by it not to
be in proper form or the acceptance of which, or exchange for, may, in the
view of counsel to the Company, be unlawful. The Company also reserves the
absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offers as set forth under "-- Certain Conditions to the Exchange
Offers" or any condition or irregularity in any tender of Old Notes or Old
Subordinated Notes of any particular Holder whether or not similar conditions
or irregularities are waived in the case of other Holders.
The Company's interpretation of the terms and conditions of the
Exchange Offers (including the Notes Letter of Transmittal, the Subordinated
Notes Letter of Transmittal and the instructions thereto) will be final and
binding. No tender of Old Notes or Old Subordinated Notes will be deemed to
have been validly made until all irregularities with respect to such tender
have been cured or waived. Neither the Company, any affiliates or assigns of
the Company, the Exchange Agent nor any other person shall be under any duty
to give any notification of any irregularities in tenders or incur any
liability for failure to give any such notification.
If any Notes Letter of Transmittal, Subordinated Notes Letter of
Transmittal, endorsement, bond power, power of attorney, or any other document
required by the Notes Letter of Transmittal or Subordinated Notes Letter of
Transmittal is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or
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other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company, proper
evidence satisfactory to the Company, in its sole discretion, of such person's
authority to so act must be submitted.
A beneficial owner of Old Notes or Old Subordinated Notes that are
held by or registered in the name of a broker, dealer, commercial bank, trust
company or other nominee or custodian is urged to contact such entity promptly
if such beneficial Holder wishes to participate in the applicable Exchange
Offer.
Withdrawal Rights
Except as otherwise provided herein, tenders of Old Notes or Old
Subordinated Notes may be withdrawn at any time on or prior to the Expiration
Date.
In order for a withdrawal to be effective a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth under "-
Exchange Agent" on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Notes or
Old Subordinated Notes to be withdrawn, the aggregate principal amount of the
Old Notes or Old Subordinated Notes to be withdrawn, and (if certificates for
such Old Notes or Old Subordinated Notes have been tendered) the name of the
registered Holder of the Old Notes or Old Subordinated Notes as set forth on
the Old Notes or Old Subordinated Notes, if different from that of the person
who tendered such Old Notes or Old Subordinated Notes. If Old Notes or Old
Subordinated Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Old Notes or Old
Subordinated Notes, the tendering Holder must submit the serial numbers shown
on the particular Old Notes or Old Subordinated Notes to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Notes or Old Subordinated Notes
tendered for the account of an Eligible Institution. If Old Notes or Old
Subordinated Notes have been tendered pursuant to the procedures for
book-entry transfer set forth in "-- Procedures for Tendering Old Notes or Old
Subordinated Notes," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Notes or Old
Subordinated Notes, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Notes or Old Subordinated Notes
may not be rescinded. Old Notes or Old Subordinated Notes properly withdrawn
will not be deemed validly tendered for purposes of the applicable Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under "--
Procedures for Tendering Old Notes or Old Subordinated Notes."
All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Notes or Old
Subordinated Notes which have been tendered but which are withdrawn will be
returned to the Holder thereof promptly after withdrawal.
Interest on the New Notes, Old Notes, New Subordinated Notes, and Old
Subordinated Notes.
Each New Note and each New Subordinated Note will bear interest from
its issuance date. Holders of Old Notes or Old Subordinated Notes that are
accepted for exchange will receive, in cash, accrued interest thereon to, but
excluding, the issuance date of the New Notes or New Subordinated Notes, as
applicable. Such interest will be paid with the first interest payment on the
New Notes or New Subordinated Notes, as applicable, Interest on the Old Notes
or Old Subordinated Notes accepted for exchange will cease to accrue upon
issuance of the New Notes or New Subordinated Notes, as applicable.
40
<PAGE>
Certain Conditions to the Exchange Offers
Notwithstanding any other provision of the Exchange Offers or any
extension of the Exchange Offers, the Company will not be required to accept
for exchange, or to exchange, any Old Notes for any New Notes or any Old
Subordinated Notes for any New Subordinated Notes and, as described below, may
terminate the Exchange Offers (whether or not any Old Notes or Old
Subordinated Notes have theretofore been accepted for exchange) or may waive
any conditions to or amend the Exchange Offers, if any of the following
conditions have occurred or exists or have not been satisfied.
(a) either of the Exchange Offers or the making of any
exchange by a Holder violates any applicable law or any applicable
interpretation of the staff of the Commission;
(b) any action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency or
body with respect to either of the Exchange Offers which, in the
Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with either of the Exchange Offers;
(c) any law, statute, rule, or regulation shall have been
adopted or enacted which, in the Company's judgment, would reasonably
be expected to impair the ability of the Company to proceed with
either of the Exchange Offers;
(d) a banking moratorium shall have been declared by United
States federal or Maine or New York state authorities which, in the
Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with either of the Exchange Offers;
(e) trading on the New York Stock Exchange or generally in
the United States over-the-counter market shall have been suspended
by order of the Commission or any other governmental authority which,
in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offers; or
(f) a stop order shall have been issued by the Commission or
any state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been initiated or,
to the knowledge of the Company, threatened for that purpose.
If the Company determines in its sole and absolute discretion that
any of the foregoing events or conditions has occurred or exists or has not
been satisfied, the Company may, subject to applicable law, terminate the
Exchange Offers (whether or not any Old Notes or Old Subordinated Notes have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offers in any respect. If such
waiver or amendment constitutes a material change to the Exchange Offers, the
Company will promptly disclose such waiver by means of a prospectus supplement
that will be distributed to the registered Holders of the Old Notes or Old
Subordinated Notes and the Company will extend the Exchange Offers to the
extent required by Rule 14e-1 under the Exchange Act.
41
<PAGE>
Exchange Agent
United States Trust Company of New York has been appointed as
Exchange Agent for the Exchange Offers. Delivery of the Notes Letter of
Transmittal, Subordinated Notes Letter of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Notes Letter of Transmittal or
Subordinated Notes Letter of Transmittal should be directed to the Exchange
Agent as follows:
BY MAIL:
(insured or registered recommended) BY OVERNIGHT EXPRESS:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276 Attention: Corporate Trust Services Window
Attention: Corporate Trust
BY HAND:
United States Trust Company of New York
111 Broadway/Lower Level
New York, New York 10005
Attention: Corporate Trust
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(800) 548-6565
FACSIMILE TRANSMISSION:
(for eligible institutions only)
(212) 420-6152
Delivery to other than one of the above addresses or facsimile
numbers will not constitute a valid delivery.
Fees and Expenses
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of Old Notes or Old
Subordinated Notes, and in handling or tendering for their customers.
Holders who tender their Old Notes or Old Subordinated Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes or New Subordinated Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Old Notes or Old Subordinated Notes tendered, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes or
Old Subordinated Notes in connection with the Exchange Offers, then the amount
of any such transfer taxes (whether imposed on the registered Holder or any
other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offers.
42
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of the Company as
of April 28, 1996, on an actual historical basis and as adjusted to give
effect to the Acquisition and Offerings and the divestitures of the Waterville
Valley and Mt. Cranmore resorts, pursuant to the Consent. The following
capitalization table should be read in conjunction with the unaudited "Pro
Forma Financial Data" and "Selected Historical Financial Data" included
elsewhere in this Prospectus.
APRIL 28, 1996
------------------------------------
COMBINED
ACTUAL PRO FORMA
------ ----------
(IN THOUSANDS)
Total Debt:
Senior Credit Facility (1)........ $ -- $ 31,426
Other senior indebtedness......... 47,670 19,574
Senior Subordinated Notes......... -- 116,600
Subordinated Discount Notes....... -- 19,000
Other subordinated indebtedness... 2,151 14,662
------------- --------------
Total debt.................... 49,821 201,262
------------- --------------
Stockholders' equity.................. $ 38,975 $ 29,897
------------- --------------
Total capitalization.......... $ 88,796 $ 231,159
============= ==============
- ------------------------
(1) Under the Senior Credit Facility, a total of $65.0 million is
available for borrowing by the Company, subject to compliance with
the terms thereof. See "Description of Other Indebtedness -- The
Senior Credit Facility" for a description of the terms of the Senior
Credit Facility.
43
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Pro Forma
Financial Data") is derived from the historical financial statements of the
Company and SKI, in each case included elsewhere in this Prospectus, and have
been prepared on a pro forma basis giving effect to the Acquisition and
Offerings and the divestitures of the Waterville Valley and Mt. Cranmore
resorts, pursuant to the Consent. The Pro Forma Financial Statements and
accompanying notes should be read in conjunction with the historical financial
statements and the notes thereto included elsewhere in this Prospectus.
The unaudited pro forma statement of income data for the year ended
July 30, 1995 and the nine and twelve month periods ended April 28, 1996 give
effect to the Acquisition and Offerings and the divestitures of the Waterville
Valley and Mt. Cranmore resorts, pursuant to the Consent as if they had
occurred on August 1, 1994. The unaudited pro forma balance sheet data as of
April 28, 1996 gives effect to the Acquisition and Offerings and the
divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to
the Consent as if they had occurred on such date. The Pro Forma Financial Data
is not intended to be indicative of either future results of operations or
results that might have been achieved had the Acquisition and Offerings and
the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant
to the Consent actually occurred on the dates specified. In the opinion of the
Company's management, all adjustments necessary to present fairly such
unaudited pro forma combined financial data have been made based upon the
terms and structure of the Acquisition and Offerings and the divestitures of
the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent. The
fourth fiscal quarter for the Company and SKI ordinarily reflects a
significant reduction in revenues as compared to the second and third
quarters, as well as a less significant comparative expense reduction,
ordinarily producing a loss for such quarter and reduced full fiscal year
levels of net income and EBITDA as compared to the first nine months of the
year. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Risk
Factors--Antitrust." Summary combined financial data with respect to these two
resorts are presented in Note (a) to "Pro Forma Financial Data."
In addition to the cost reductions included in the pro forma data, management
expects to realize further annual cost reductions following the Acquisition.
These reductions will result largely from decreases in discretionary costs yet
to be incurred and, therefore, have not been reflected in the pro forma
adjustments.
44
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA
AS OF APRIL 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------
THE COMPANY SKI
----------- ---
<S> <C> <C>
Cash and short-term investments ...................... $ 569 $ 12,028
Restricted cash and short-term investments ........... 522 --
Accounts receivable, net ............................. 1,651 2,068
Inventory ............................................ 1,600 3,282
Prepaid expenses and notes receivable ................ 679 1,377
Property developed for resale ........................ 1,250 --
Deferred tax assets .................................. 125 --
Net assets held for sale ............................. -- --
--------- ---------
Total current assets ............................. 6,396 18,755
Property and equipment, net .......................... 80,005 93,728
Note receivable, affiliate ........................... 402 --
Long-term investment ................................. -- 3,589
Other assets ......................................... 8,044 2,382
Deferred tax assets .................................. 264 --
--------- ---------
Total assets ..................................... $ 95,111 $ 118,454
========= =========
Line of credit and current portion of long-term debt . $ 3,359 $ 1,567
Accounts payable & accrued expenses .................. 4,071 10,052
Accrued leasehold .................................... 529 --
Due to stockholder ................................... 176 --
Demand note, Stockholder ............................. -- --
Deposits and other unearned revenue .................. 1,063 1,045
Income taxes payable ................................. 652 1,257
--------- ---------
Total current liabilities ........................ 9,850 13,921
Deferred income taxes ................................ -- 7,238
Long-term debt, excluding current portion ............ 46,286 19,822
Subordinated notes and debentures .................... -- 11,400
Other long-term liabilities .......................... -- 5,107
Minority interest .................................... -- 2,403
--------- ---------
Total liabilities ................................ 56,136 59,891
Stockholders' equity ................................. 38,975 58,563
--------- ---------
Total liabilities and stockholders' equity .......... $ 95,111 $ 118,454
========= =========
</TABLE>
(THE FOLLOWING TABLE HAS BEEN RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------------------------------
CRANMORE WATERVILLE PRO FORMA COMBINED
DIVESTITURE(A) DIVESTITURE(A) ADJUSTMENTS PRO FORMA
-------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Cash and short-term investments ...................... -- -- $ (12,028) c,d,e,f $ 569
Restricted cash and short-term investments ........... -- -- 15,080 e 15,602
Accounts receivable, net ............................. -- -- -- 3,719
Inventory ............................................ -- -- -- 4,882
Prepaid expenses and notes receivable ................ -- -- -- 2,056
Property developed for resale ........................ -- -- -- 1,250
Deferred tax assets .................................. (27) -- 207 b 305
Net assets held for sale ............................. 4,455 10,746 -- 15,201
--------- --------- --------- ----------
Total current assets ............................. 4,428 10,746 3,259 43,584
Property and equipment, net .......................... (4,582) (11,093) 70,684 c,i 228,742
Note receivable, affiliate ........................... -- -- -- 402
Long-term investment ................................. -- -- -- 3,589
Other assets ......................................... -- -- (28) c,d,g 10,398
Deferred tax assets .................................. -- -- -- 264
--------- --------- --------- ----------
Total assets ..................................... $ (154) $ (347) $ 73,915 $ 286,979
========= ========= ========= ==========
Line of credit and current portion of long-term debt . $ (38) $ (23) $ 4,081 e,g,i $ 8,946
Accounts payable & accrued expenses .................. -- -- (562) e 13,561
Accrued leasehold .................................... -- -- -- 529
Due to stockholder ................................... -- -- -- 176
Demand note, Stockholder ............................. -- -- 5,200 b 5,200
Deposits and other unearned revenue .................. -- -- -- 2,108
Income taxes payable ................................. -- -- -- 1,909
--------- --------- --------- ----------
Total current liabilities ........................ (38) (23) 8,719 32,429
Deferred income taxes ................................ -- (163) 25,531 b,c 32,606
Long-term debt, excluding current portion ............ (116) (161) (25,891) e,i 39,940
Subordinated notes and debentures .................... -- -- 135,600 f 147,000
Other long-term liabilities .......................... -- -- -- 5,107
Minority interest .................................... -- -- (2,403) i --
--------- --------- --------- ----------
Total liabilities ................................ (154) (347) 141,556 257,082
Stockholders' equity ................................. -- -- (67,641) 29,897
--------- --------- --------- ----------
Total liabilities and stockholders' equity .......... $ (154) $ (347) $ 73,915 $ 286,979
========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
combined financial data.
45
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF ASC PRO FORMA ADJUSTMENTS -- BALANCE SHEET DATA
<TABLE>
<CAPTION>
BALANCE SHEET ACCOUNT NOTE ADJUSTMENT APRIL 28, 1996
(in thousands)
<S> <C> <C> <C>
Cash and short term investments f Proceeds from Notes $116,600
f Proceeds from Subordinated Notes and Common
Stock 20,000
c,d Acquisition purchase price to be paid (108,239)
d Financing costs to be paid (6,000)
e TIAA Credit Agreement and interest (12,325)
e Portion of proceeds transferred to Pledge
Account (15,080)
e Application of SKI cash and net proceeds of the
Offering against Senior Credit Facility (6,984)
------------
(12,028)
------------
Restricted cash and short term investments e Pledge Account 15,080
------------
Deferred tax assets b Conversion from S-Corp to C-Corp 207
------------
Property and equipment, net c Allocation of purchase price 71,087
i Purchase of Sugarloaf minority interest (403)
------------
70,684
------------
Other assets c Previously acquired SKI stock (828)
g Return of SKI deposit (5,000)
d Deferred financing costs 8,000
c,d Previously accrued financing and transaction
costs (2,200)
------------
(28)
------------
Effect on total assets $73,915
------------
Line of credit and current portion of long term e Retire existing Company line of credit $(2,345)
debt
e Proceeds from Senior Credit Facility 11,431
i Purchase Sugarloaf minority interest 2,000
g Return of SKI deposit and accrued interest (5,063)
e Application of SKI cash and net proceeds of the
Offering against Senior Credit Facility (6,984)
i Sugarloaf paydown of SMC Credit Agreement and
Town Debt 5,042
------------
4,081
------------
Accounts payable and accrued interest e Retire accrued interest associated with
existing facility (157)
e Retire accrued interest associated with TIAA
Credit Agreement (325)
e Retire accrued interest associated with SMC
Credit Agreement (34)
e Retire accrued interest associated with
existing Town Debt (46)
------------
(562)
------------
Demand note, Stockholder b Demand Note to Mr. Otten 5,200
------------
Deferred income taxes--long term b Conversion from S-Corp to C-Corp 5,148
c Deferred tax liability (purchase allocation) 20,383
------------
25,531
------------
Long-term debt, excluding current portion e TIAA Credit Agreement (12,000)
e Retire existing ASC Revolving Note (34,086)
e Proceeds from Senior Credit Facility 25,000
i Sugarloaf paydown of SMC Credit Agreement and
Town Debt (4,805)
------------
(25,891)
------------
Subordinated notes and debentures f Notes 116,600
f Subordinated Notes 19,000
------------
135,600
------------
Minority interest i Purchase of Sugarloaf minority interest (2,403)
------------
Effect on total liabilities $141,556
------------
Stockholders' equity b Issuance of Demand Note to Mr. Otten $(5,200)
f Common Stock 1,000
g Interest on SKI deposit 63
b Conversion of S-Corp to C-Corp (4,941)
c Elimination of SKI stockholders' equity (58,563)
------------
Effect on stockholders' equity $(67,641)
------------
$0
============
</TABLE>
46
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME DATA
FOR THE NINE-MONTH PERIOD ENDED APRIL 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------ ---------------------------------
BEAR MOUNTAIN CRANMORE
THE COMPANY SKI DIVESTITURE(M) DIVESTITURE(A)
------------------------------------ ---------------------------------
Revenues:
<S> <C> <C> <C> <C>
Ski and lodging...................... $57,283 $106,752 $(292) $(3,987)
Real estate.......................... 9,482 -- -- --
------------ ------------- ----------- --------------
66,765 106,752 (292) (3,987)
------------ ------------- ----------- --------------
Operating Expenses:
Cost of operations................... 28,853 47,885 (509) (1,549)
Real estate and payroll taxes........ 1,773 7,541 (247) (150)
Utilities............................ 5,083 7,465 (82) (511)
Insurance............................ 1,758 5,692 (205) (142)
Selling, general and administrative.. 10,383 17,061 (404) (701)
Depreciation and amortization........ 5,615 10,146 (34) (223)
Loss on sale of Bear Mountain........ -- 4,737 -- --
------------ ------------- ----------- --------------
53,465 100,527 (1,481) (3,276)
------------ ------------- ----------- --------------
Operating income (loss).................. 13,300 6,225 1,189 (711)
Interest expense......................... 2,307 2,561 -- (104)
------------ ------------- ----------- --------------
Pretax income (loss) from operations,
before minority interest................
10,993 3,664 1,189 (607)
Income taxes............................. 1,004 1,429 475 (243)
------------ ------------- ----------- --------------
Income (loss) before minority interest... 9,989 2,235 714 (364)
Minority interest in income of subsidiary -- (527) -- --
------------ ------------- ----------- --------------
Net income (loss)........................ $9,989 $1,708 $714 $(364)
============ ============= =========== ==============
Net income per share (o)................. -- -- -- --
</TABLE>
(THE FOLLOWING TABLE HAS BEEN RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------------------
WATERVILLE ASC OTHER COMBINED
DIVESTITURE(A) ADJUSTMENTS ADJUSTMENTS(N) PRO FORMA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Ski and lodging...................... $(10,968) $ -- $ -- $148,788
Real estate.......................... -- -- -- 9,482
------------- ----------- ----------- --------------
(10,968) -- -- 158,270
------------- ----------- ----------- --------------
Operating Expenses:
Cost of operations................... (5,074) (1,590) h 5 68,021
Real estate and payroll taxes........ (434) -- 5 8,488
Utilities............................ (957) -- -- 10,998
Insurance............................ (418) (376) h 6 6,315
Selling, general and administrative.. (1,521) -- -- 24,818
Depreciation and amortization........ (1,139) 3,510 c,d -- 17,875
Loss on sale of Bear Mountain........ -- -- (4,737) --
------------- ----------- ----------- --------------
(9,543) 1,544 (4,721) 136,515
------------- ----------- ----------- --------------
Operating income (loss).................. (1,425) (1,544) 4,721 21,755
Interest expense......................... (10) 12,283 b,e,f (302) 16,735
------------- ----------- ----------- --------------
Pretax income (loss) from operations,
before minority interest.................
(1,415) (13,827) 5,023 5,020
Income taxes............................. (552) (1,793) b,j 2,009 2,329
------------- ----------- ----------- --------------
Income (loss) before minority interest... (863) (12,034) 3,014 2,691
Minority interest in income of subsidiary -- 527 i -- --
------------- ----------- ----------- --------------
Net income (loss)........................ $(863) $(11,507) $3,014 $2,691
============= =========== =========== ==============
Net income per share (o)................. -- -- -- $2.75
</TABLE>
The accompanying notes are an integral
part of the unaudited pro forma combined financial data.
47
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME DATA
FOR THE YEAR ENDED JULY 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- ---------------------------------------
SUGARBUSH SUGARLOAF BEAR
THE COMPANY SKI ACQUISITION ACQUISITION MOUNTAIN
(K) (L) DIVESTITURE
(M)
--------------------------- ---------------------------------------
Revenues:
<S> <C> <C> <C> <C> <C>
Ski and lodging............. $46,794 $113,952 $1,229 $640 $(12,864)
Real estate................. 7,953 8 -- -- --
--------- --------- --------- --------- ---------
54,747 113,960 1,229 640 (12,864)
--------- --------- --------- --------- ---------
Cost of operations.......... 25,724 51,557 1,357 712 (5,016)
Real estate and payroll taxes 1,736 8,600 73 98 (1,096)
Utilities................... 4,132 8,071 152 42 (588)
Insurance................... 2,127 6,635 134 35 (1,455)
Selling, general and
administrative............. 9,394 19,495 447 67 (2,182)
Depreciation and amortization 3,910 14,056 -- 125 (2,779)
--------- --------- --------- --------- ---------
47,023 108,414 2,163 1,079 (13,116)
--------- --------- --------- --------- ---------
Operating Income (loss)......... 7,724 5,546 (934) (439) 252
Interest expense................ 2,205 3,819 77 49 --
--------- --------- --------- --------- ---------
Pretax income (loss) from
operations, before minority
interest....................... 5,519 1,727 (1,011) (488) 252
Income taxes.................... 400 997 (32) -- 103
--------- --------- --------- --------- ---------
Income (loss) before minority
interest....................... 5,119 730 (979) (488) 149
Minority interest in loss of
subsidiary...................... -- 299 -- 239 --
--------- --------- --------- --------- ---------
Net income (loss)............... $5,119 $1,029 $(979) $(249) $149
========= ========= ========= ========= =========
Net income (loss) per share (o). -- -- -- -- --
</TABLE>
(THE FOLLOWING TABLE HAS BEEN RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------------------------
OTHER
CRANMORE WATERVILLE ASC ADJUSTMENTS COMBINED
DIVESTITURE(A) DIVESTITURE(A) ADJUSTMENTS (N) PRO FORMA
--------------- -------------- ----------- -- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Ski and lodging............. $(36) $(8,660) $ -- $15 $141,070
Real estate................. -- -- -- -- 7,961
-------- -------- ---------- --------- -----------
(36) (8,660) -- 15 149,031
-------- -------- ---------- --------- -----------
Cost of operations.......... -- (4,049) (1,782) h 20 68,523
Real estate and payroll taxes -- (429) -- -- 8,982
Utilities................... -- (628) -- 24 11,205
Insurance................... -- (424) (500) h 18 6,570
Selling, general and
administrative............. (68) (1,385) -- -- 25,768
Depreciation and amortization (2) (772) 3,900 c,d 372 18,810
-------- -------- ---------- --------- -----------
(70) (7,687) 1,618 434 139,858
-------- -------- ---------- --------- -----------
Operating Income (loss)......... 34 (973) (1,618) (419) 9,173
Interest expense................ -- (7) 15,986 b,e,f (879) 21,250
-------- -------- ---------- --------- -----------
Pretax income (loss) from
operations, before minority
interest....................... 34 (966) (17,604) 460 (12,077)
Income taxes.................... 14 (398) (5,213) b,j 185 (3,944)
-------- -------- ---------- --------- -----------
Income (loss) before minority 20 (568) (12,391) 275 (8,133)
interest........................
Minority interest in loss of
subsidiary...................... -- -- (538) i -- --
-------- -------- ---------- --------- -----------
Net income (loss)............... $20 $(568) $ (12,929) $275 $(8,133)
======== ======== ========== ========= ===========
Net income (loss) per share (o). -- -- -- -- $(8.31)
</TABLE>
The accompanying notes are an integral
part of the unaudited pro forma combined financial data.
48
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME DATA
FOR THE TWELVE MONTH PERIOD ENDED APRIL 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- ---------------------------------
BEAR MOUNTAIN CRANMORE
THE COMPANY SKI DIVESTITURE(M) DIVESTITURE(A)
--------------------------------- ---------------------------------
Revenues:
<S> <C> <C> <C> <C>
Ski and lodging...................... $60,300 $114,030 $(301) $(4,023)
Real estate.......................... 10,812 -- -- --
------------ ------------- ------------- -------------
71,112 114,030 (301) (4,023)
------------ ------------- ------------- -------------
Cost of operations................... 32,547 54,132 (824) (1,549)
Real estate and payroll taxes........ 2,145 8,597 (410) (150)
Utilities............................ 5,490 7,912 (136) (511)
Insurance............................ 2,055 6,107 (749) (142)
Selling, general and administrative.. 11,268 20,179 (611) (769)
Depreciation and amortization........ 5,885 10,359 (28) (225)
Loss on sale of Bear Mountain........ -- 4,737 -- --
------------ ------------- ------------- -------------
59,390 112,023 (2,758) (3,346)
------------ ------------- ------------- -------------
Operating income (loss).................. 11,722 2,007 2,457 (677)
Interest expense......................... 3,100 3,362 -- (104)
------------ ------------- ------------- -------------
Pretax income (loss) from operations,
before minority interest................ 8,622 (1,355) 2,457 (573)
Income taxes............................. 466 (298) 995 (230)
------------ ------------- ------------- -------------
Income (loss) before minority interest... 8,156 (1,057) 1,462 (343)
Minority interest in income of subsidiary -- (35) -- --
------------ ------------- ------------- -------------
Net income (loss)........................ $8,156 $(1,092) $1,462 $(343)
============ ============= ============= =============
Net loss per share (o)................... -- -- -- --
</TABLE>
(THE FOLLOWING TABLE HAS BEEN RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------------
WATERVILLE ASC OTHER COMBINED
DIVESTITURE(A) ADJUSTMENTS ADJUSTMENTS(N) PRO FORMA
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Ski and lodging...................... $ -- $ -- $158,424
Real estate.......................... -- -- -- 10,812
------------- ----------- ------------- -------------
(11,582) -- -- 169,236
------------- ----------- ------------- -------------
Cost of operations................... (5,601) (1,982) h 7 76,730
Real estate and payroll taxes........ (495) -- 5 9,692
Utilities............................ (1,040) -- -- 11,715
Insurance............................ (436) (500) h 8 6,343
Selling, general and administrative.. (1,732) -- -- 28,335
Depreciation and amortization........ (1,140) 4,970 c,d -- 19,821
Loss on sale of Bear Mountain........ -- -- (4,737) --
------------- ----------- ------------- -------------
(10,444) 2,488 (4,717) 152,636
------------- ----------- ------------- -------------
Operating income (loss).................. (1,138) (2,488) 4,717 16,600
Interest expense......................... (13) 16,191 b,e,f (800) 21,736
------------- ----------- ------------- -------------
Pretax income (loss) from operations,
before minority interest................ (1,125) (18,679) 5,517 (5,136)
Income taxes............................. (435) (4,324) b,j 2,207 (1,619)
------------- ----------- ------------- -------------
Income (loss) before minority interest... (690) (14,355) 3,310 (3,517)
Minority interest in income of subsidiary -- 35 i -- --
------------- ----------- ------------- -------------
Net income (loss)........................ $(690) $(14,320) $3,310 $(3,517)
============= =========== ============= =============
Net loss per share (o)................... -- -- -- $(3.60)
</TABLE>
The accompanying notes are an integral
part of the unaudited pro forma combined financial data.
49
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF ASC PRO FORMA ADJUSTMENTS -- STATEMENTS OF INCOME DATA
<TABLE>
<CAPTION>
NINE MONTHS TWELVE
ENDED YEAR ENDED MONTHS ENDED
APRIL 28, JULY 30 APRIL 28,
INCOME STATEMENT ITEM NOTE ADJUSTMENT 1996 1995 1996
- --------------------- ---- ---------- ---------- ------------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Cost of operations h Staff reductions and elimination of
shareholder services $(1,590) $(1,782) $(1,982)
---------- --------- -----------
Insurance h Insurance reductions (376) (500) (500)
---------- --------- -----------
Depreciation and amortization c Depreciation on property and equipment 2,760 2,900 3,970
d Amortization of deferred financing costs 750 1,000 1,000
---------- --------- -----------
3,510 3,900 4,970
---------- --------- -----------
Interest expense b Interest on Mr. Otten Demand Note 211 281 281
f Notes and Subordinated Notes 13,414 17,492 17,812
e Other interest adjustments (1,342) (1,787) (1,902)
---------- --------- -----------
12,283 15,986 16,191
---------- --------- -----------
Income taxes b,j Tax effect of pro forma adjustments (5,249) (7,178) (7,367)
b,j Tax effect of S corporation income 3,456 1,965 3,043
---------- --------- -----------
(1,793) (5,213) (4,324)
---------- --------- -----------
Minority interest i Sugarloaf minority interest (527) 538 (35)
---------- --------- -----------
Effect on net income (loss) $(11,507) $(12,929) $(14,320)
========== ========= ===========
</TABLE>
50
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL DATA -- UNAUDITED
(a) The pro forma financial data above reflects the divestiture of the
Mt. Cranmore and Waterville Valley resorts, pursuant to the Consent.
As no actual sales have been consummated, the pro forma data gives no
effect to any related proceeds.
(b) Certain of the Company's operations were within corporations (the "S
Corporations") for which Mr. Otten was personally liable for income
taxes. The Company makes distributions to Mr. Otten to pay the income
taxes associated with these operations.
The Demand Note was issued by the S Corporations, bearing interest
at the applicable federal rate in effect at the time of issuance.
The S Corporations have been converted to C Corporations pursuant to
the Internal Revenue Code. As a result of this conversion, certain
tax attributes of the S Corporations attributable directly to Mr.
Otten have been transferred to the respective C Corporations. A pro
forma adjustment gives effect to such a conversion as of April 28,
1996.
(c) The Acquisition of SKI by ASC resulted in the assets of SKI being
written up to reflect the purchase price of the transaction. The
purchase price of SKI will be calculated as the sum of (i) cash paid
to the current SKI shareholders, (ii) the fair value of any
liabilities of SKI assumed, and (iii) the transaction costs incurred
by ASC. Under the purchase accounting method, the acquisition cost is
allocated to the assets and liabilities acquired based on their
relative fair values. Preliminary analyses have been performed in
order to identify and allocate the excess purchase price over book
value.
Pro forma adjustments have been made to depreciate these assets over
their estimated useful lives, based on a preliminary estimate of the
remaining useful lives of the underlying assets referred to above.
The actual depreciation charge recorded subsequent to the Acquisition
may differ when the final purchase price is computed as of the
closing date and an actual allocation of the purchase price to the
underlying assets acquired is completed. Only after the final
purchase price has been allocated and the estimated remaining useful
lives are determined by management will the actual depreciation
charge associated with the acquired assets of SKI become available.
The Company has not yet received the results of appraisals and other
valuation studies which are in process, nor has it made a final
determination of the useful lives of the assets acquired.
Accordingly, some portion of the excess of purchase cost over the
historical basis of the net assets acquired may ultimately be
allocated to specific tangible and intangible assets. The actual
allocation of purchase cost and the resulting effect on operating
income may differ significantly from the pro forma amounts included
herein.
The following table summarizes the resulting computation:
Shares outstanding at April 28, 1996*............ 5,736,882
Purchase price................................... $18.00
----------------
103,264,000
Cost of options**................................ 1,375,000
SKI shares previously acquired................... 828,000
Transaction costs................................ 3,800,000
----------------
Full fair value of SKI........................... $109,267,000
================
Purchase price allocation:
Historical cost basis of acquired net assets..... $58,563,000
Identified value of property and equipment
in excess of historic cost basis..... 71,087,000
Deferred income taxes............................ (20,383,000)
----------------
$109,267,000
================
51
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL DATA -- UNAUDITED
The purchase price allocation results in certain property and
equipment being stepped up from SKI's historical basis of $93,728,000
for book accounting purposes. These assets will not be stepped up to
fair value for tax purposes. A deferred tax liability of
$(20,383,000) has been established for the book/tax basis difference
of the fixed assets using the expected statutory rate. The majority
of the purchase price will be allocated to property and equipment
with estimated useful lives ranging from 8 to 24 years.
* Total shares outstanding at April 28, 1996, net of 54,000 shares
owned by the Company.
** Options on 183,925 shares, at $18.00 less respective strike
prices of options.
(d) The Company will incur various direct costs and professional fees in
connection with the issuance of Notes and the establishment of the
Senior Credit Facility which will be capitalized and amortized over
their lives. The accompanying pro forma income statement data
includes adjustments reflecting a preliminary estimate of the
amortization associated with these costs.
(e) The existing seasonal Line of Credit and the Revolving Note was
retired with the initial proceeds of the Senior Credit Facility.
Certain obligations of Sugarloaf (see item i below) will also be
refinanced. A 1/8th% fluctuation in interest rates would have an
approximate $39,250 annual impact on interest expense and an
approximate $23,470 impact on net income.
As a minimum of $25 million of the Senior Credit Facility will not
be due within one year, that amount has been classified as long-term
in the accompanying pro forma balance sheet data.
In addition to acquiring the shares and options of SKI pursuant to
the Acquisition Agreement, a portion of the proceeds was used to
retire SKI's TIAA Credit Agreement, along with any accrued interest.
It is further assumed that after the payment of any outstanding
transaction and financing fees the proceeds along with any cash
acquired from SKI will be used to reduce the Senior Credit Facility.
As explained in the "Description of Senior Subordinated Notes," an
investment was made on the Closing Date in the segregated Pledge
Account to secure the payment of the first year's interest on the
Notes which will approximate $15 million. Due to the nature of these
borrowings, the accompanying pro forma financial data does not
include either interest income on the Pledge Account or interest
expense on this incremental indebtedness.
(f) Gives effect to the issuance of the Notes and the Subordinated Notes,
at their issue prices, as well as related interest expense.
The Subordinated Notes were issued along with 39,132 shares of Common
Stock. The proceeds of $20 million will therefore be allocated to
each issue based on their relative fair values. Preliminary analyses
have been prepared to allocate the value between these securities.
Both the Notes and the Subordinated Notes will be issued with
original issue discount, therefore the effective interest exceeds the
stated interest rates.
Pro forma interest expense includes interest expense with respect to
the Subordinated Notes of $2,426,000, $2,863,000 and $3,166,000 for
the nine month period ended April 28, 1996, the year ended July 30,
1995 and the twelve month period ended April 28, 1996, respectively.
Interest expense relating to the Subordinated Notes would not have
been payable in cash during these periods.
52
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO THE PRO FORMA COMBINED FINANCIAL DATA -- UNAUDITED
(g) Pursuant to the Acquisition Agreement, the Company paid a $5 million
deposit to SKI which was refunded upon closing. A pro forma
adjustment has been made to reflect the return of these funds, along
with accrued interest thereon, and a corresponding reduction in the
Company's line of credit balance.
(h) Management has specifically identified certain costs which have been
eliminated in connection with the Acquisition. These costs are
primarily related to the salaries, fringe benefits, and associated
costs of the SKI corporate staff not retained after the Acquisition.
In addition, the costs associated with SKI's shareholder reporting,
exchange listing, corporate governance and shareholder relations have
been eliminated. The Company also realized insurance savings through
the termination of a SKI executive's key man life policy and the
restructuring of other policies.
(i) ASC will acquire the remaining 49% minority interest in Sugarloaf for
a $2 million cash payment following the Acquisition. Up to $1 million
additional purchase price may be paid pursuant to an earnings-based
formula over the period ending November 30, 2002. In connection with
this acquisition of the minority interest, ASC will pay off the SMC
Credit Agreement and the Town Debt.
(j) All adjustments to the unaudited Pro Forma Combined Statement of
Income Data have been tax-effected using the expected statutory rate.
As discussed in "Certain Federal Income Tax Considerations," a
portion of the interest on the Subordinated Notes is expected to be
permanently disqualified for purposes of income tax deductions. It is
expected that approximately 90% of the total interest will eventually
be deductible, but none until actually paid. Consideration of the
permanently disqualified portion has been given in the accompanying
pro forma data. In addition, an adjustment has been made to
tax-effect the earnings of the S-Corporations (see note (b) above).
(k) Reflects the results of operations of Sugarbush prior to its
acquisition by the Company in May 1995.
(l) Reflects the results of operations of Sugarloaf prior to its
acquisition by SKI in August 1994.
(m) Reflects the elimination of the results of operations of Bear
Mountain, a majority of the assets of which were sold by SKI in
October 1995.
(n) Other pro forma adjustments give effect to the acquisitions discussed
above in notes (k) and (l), as well as the SKI divestiture of Bear
Mountain discussed in note (m). The most significant adjustment
relates to the realized loss on the sale of Bear Mountain by SKI. The
effect of the cash outflows for the acquisitions and the proceeds of
the sale were considered in the pro forma interest adjustments. All
of the adjustments were tax effected at the applicable statutory
rate.
(o) Pro forma net income (loss) per share was computed giving
consideration to the 978,300 common shares of the Company issued and
outstanding on the Closing Date.
53
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
THE COMPANY
The following selected historical financial data of the Company
(except Other Financial and Operating Data) (i) as of and for the fiscal year
ended July 30, 1995 have been derived from the financial statements of the
Company audited by Price Waterhouse LLP, independent accountants, (ii) as of
and for each of the four fiscal years ended July 31, 1994 have been derived
from the financial statements of the Company audited by Berry, Dunn, McNeil &
Parker, independent accountants, and (iii) as of and for the nine months ended
April 30, 1995 and April 28, 1996 have been derived from unaudited interim
financial statements of the Company which, in the opinion of management,
include all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the Company's financial position and
results of operations. The Company's fourth fiscal quarter ordinarily reflects
a significant reduction in revenues as compared to the second and third
quarters, as well as a less significant comparative expense reduction,
ordinarily producing a loss for such quarter and reduced full fiscal year
levels of net income and EBITDA as compared to the first nine months of the
year. The following information includes Mt. Cranmore, which the Company
acquired in June 1995 and must sell pursuant to the Consent. See "The
Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial
Data." The following information should be read in conjunction with the
Unaudited "Pro Forma Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
the Company and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED (1) NINE MONTHS ENDED
-------------------------------------------------------------- -----------------
JULY 28, JULY 26, JULY 25, JULY 31, JULY 30, APRIL 30, APRIL 28,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SKIER VISIT DATA AND RATIOS)
STATEMENT OF INCOME DATA
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Skiing and lodging..... $17,295 $20,312 $23,645 $26,544 $46,794 $43,777 $57,283
Real estate sales...... 632 304 6,103 6,682 7,953 6,623 9,482
--------- --------- --------- ---------- ---------- --------- ---------
Total revenues....... 17,927 20,616 29,748 33,226 54,747 50,400 66,765
--------- --------- --------- ---------- ---------- --------- ---------
Operating expenses:
Cost of operations
including wages,
maintenance and supplies 6,542 7,936 10,045 11,505 21,730 18,419 24,047
Cost of real estate sold 521 101 3,245 3,179 3,994 3,611 4,806
Real estate and payroll
taxes................. 645 758 993 1,265 1,736 1,364 1,773
Utilities.............. 1,602 2,046 2,097 1,854 4,132 3,725 5,083
Insurance.............. 963 1,162 1,570 1,163 2,127 1,830 1,758
Selling, general and
administrative........ 2,419 3,010 4,718 5,940 9,394 8,509 10,383
Depreciation and
amortization.......... 1,459 1,790 1,984 2,421 3,910 3,640 5,615
--------- --------- --------- ---------- ---------- --------- ---------
14,151 16,803 24,652 27,327 47,023 41,098 53,465
--------- --------- --------- ---------- ---------- --------- ---------
Operating income......... 3,776 3,813 5,096 5,899 7,724 9,302 13,300
Interest expense......... 969 776 849 1,026 2,205 1,412 2,307
--------- --------- --------- ---------- ---------- --------- ---------
Income before income taxes 2,807 3,037 4,247 4,873 5,519 7,890 10,993
Provision for income taxes -- -- -- -- 400 938 1,004
--------- --------- --------- ---------- ---------- --------- ---------
Income before
extraordinary gain from
insurance claim......... 2,807 3,037 4,247 4,873 5,119 6,952 9,989
Extraordinary gain from
insurance claim......... -- -- 1,592 -- -- -- --
--------- --------- --------- ---------- ---------- --------- ---------
Net income............... $2,807 $3,037 $5,839 $4,873 $5,119 $6,952 $9,989
========= ========= ========= ========== ========== ========= =========
BALANCE SHEET DATA:
Property and equipment,
net................... $24,640 $27,580 $30,363 $41,871 $62,213 $46,526 $80,005
Total assets........... 27,096 32,256 40,550 51,784 72,434 55,656 95,111
Total long term debt,
excluding current
portion............... 9,678 10,317 14,150 19,103 27,169 16,323 46,286
Stockholder's equity... 15,924 18,367 23,167 26,212 30,502 32,634 38,975
STATEMENT OF CASH FLOWS
DATA:
Cash flows from operating
activities............ $4,634 $3,864 $2,667 $5,438 $12,593 $13,411 $9,551
Cash flows from investing
activities............ (3,095) (5,031) (4,432) (9,041) (13,843) (7,151) (22,232)
54
<PAGE>
Cash flows from financing
activities............ (1,543) 1,372 1,559 3,764 2,399 (5,874) 11,888
OTHER FINANCIAL AND
OPERATING DATA:
EBITDA(2).............. $5,235 $5,603 $7,080 $8,320 $11,634 $12,942 $18,915
Capital expenditures... 3,107 5,037 5,182 7,798 12,024 7,151 22,232
EBITDA to interest
expense............... 5.4x 7.2x 8.3x 8.1x 5.3x 9.2x 8.2x
Ratio of earnings to
fixed charges(3)...... 3.4x 4.0x 4.4x 4.2x 2.9x 4.9x 4.4x
Skier visits(4)........ 460 497 515 515 1,048 1,045 1,284
Average revenue per
skier visit........... $37.60 $40.87 $45.91 $51.54 $44.65 $41.89 $44.61
</TABLE>
(1) The historical results of the Company reflect the acquisition of the
Attitash/Bear Peak ski resort in July 1994, the lease of the
Sugarbush ski resort beginning in October 1994 and the acquisition of
Sugarbush in May 1995 and the acquisition of the Mt. Cranmore ski
resort in June 1995.
(2) EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization expense and extraordinary
gain. EBITDA is presented because management believes it provides
useful information regarding a company's ability to incur and service
debt. EBITDA should not be considered in isolation or as a substitute
for net income or cash flows prepared in accordance with generally
accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(3) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provision for
interest expense. Fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs, and a
portion of operating lease rental expense deemed to be representative
of the interest factor.
(4) Each skier visit represents one skier visiting one ski resort for one
day, including skiers using complimentary and season passes.
Calculation of skier visits requires an estimation of visits by
season pass holders. Although different ski resort operators may use
different methodologies for making such estimations, management
believes that any resulting differences in total skier visits are
immaterial.
55
<PAGE>
SKI
The following selected historical financial data of SKI (except Other
Financial and Operating Data) (i) as of and for each of the five fiscal years
ended July 31, 1995 have been derived from the financial statements of SKI
audited by Price Waterhouse LLP, independent accountants and (ii) as of and
for the nine months ended April 30, 1995 and April 28, 1996 have been derived
from unaudited interim financial statements of SKI which, in the opinion of
SKI management, include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of SKI's financial position and
results of operations. SKI's fourth fiscal quarter ordinarily reflects a
significant reduction in revenues as compared to the second and third
quarters, as well as a less significant comparative expense reduction,
ordinarily producing a loss for such quarter and reduced full fiscal year
levels of net income and EBITDA as compared to the first nine months of the
year. The following information includes Waterville Valley, which SKI acquired
in October 1994 and the Company must sell pursuant to the Consent. See "The
Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial
Data." The following information should be read in conjunction with the
Unaudited "Pro Forma Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
SKI and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended July 31,(1) -------------------
------------------------------------------------------------ April 30 April 28
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA, PER SKIER VISIT DATA AND RATIOS)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $83,007 $89,014 $96,708 $98,907 $113,960 $106,682 $106,752
--------- --------- --------- ---------- ---------- --------- ---------
Operating expenses:
Cost of operations
including wages,
maintenance and supplies. 34,480 36,956 39,903 42,560 51,557 45,310 47,885
Other taxes............... 5,989 7,002 7,632 8,016 8,600 7,544 7,541
Utilities................. 5,580 6,172 6,655 6,045 8,071 7,624 7,465
Insurance................. 4,325 5,041 5,115 5,518 6,635 6,220 5,692
Selling, general and
administrative expense.. 13,666 14,048 16,872 15,298 19,495 16,377 17,061
Depreciation and
amortization............. 10,290 10,822 10,942 11,440 14,056 13,843 10,146
Loss on sale of Bear
Mountain................. -- -- -- -- -- -- 4,737
--------- --------- --------- ---------- ---------- --------- ---------
74,330 80,041 87,119 88,877 108,414 96,918 100,527
--------- --------- --------- ---------- ---------- --------- ---------
Operating income............ 8,677 8,973 9,589 10,030 5,546 9,764 6,225
Interest expense............ 2,940 2,471 2,228 2,214 3,819 3,018 2,561
--------- --------- --------- ---------- ---------- --------- ---------
Income before income taxes
and minority interest...... 5,737 6,502 7,361 7,816 1,727 6,746 3,664
Income taxes................ 2,324 2,776 2,952 3,170 997 2,725 1,429
--------- --------- --------- ---------- ---------- --------- ---------
Income before minority
interest................... 3,413 3,726 4,409 4,646 730 4,021 2,235
Minority interest in income
(loss) on subsidiary....... -- -- -- -- 299 (193) (527)
--------- --------- --------- ---------- ---------- --------- ---------
Net income.................. $3,413 $3,726 $4,409 $4,646 $1,029 $3,828 $1,708
========= ========= ========= ========== ========== ========= =========
BALANCE SHEET DATA:
Property and equipment, net $83,154 $81,963 $82,288 $94,771 $121,775 $124,110 $93,728
Total assets.............. 90,288 93,531 99,182 106,790 136,721 138,730 118,454
Total long term debt,
excluding current portion 27,315 26,677 28,119 29,167 50,190 46,677 31,222
Stockholders' equity...... 45,972 49,190 53,047 57,186 57,562 60,337 58,563
STATEMENT OF CASH FLOWS DATA:
Cash flows from operations $14,061 $15,903 $13,474 $17,464 $14,948 $19,941 $19,089
Cash flows from investing
activities............... (11,408) (9,287) (12,181) (23,108) (30,925) (33,502) 12,115
Cash flows from financing
activities............... (2,754) (1,787) 968 848 16,063 12,183 (21,967)
OTHER FINANCIAL AND
OPERATING DATA:
Net income per common and
common equivalent
share(2)................. $.60 $.65 $.77 $.81 $.18 $.66 $.30
EBITDA(3)................. $18,967 $19,795 $20,531 $21,470 $19,602 $23,607 $16,371 (6)
Capital expenditures...... 12,279 9,566 12,307 22,683 19,480 18,982 6,020
Ratio of earnings to fixed
charges (4).............. 2.6x 3.0x 3.5x 3.6x 1.3x 2.6x 1.9x
Skier visits (5).......... 1,679 1,783 1,863 1,854 2,113 2,104 2,055
Average revenue per skier
visit................... $49.44 $49.92 $51.91 $53.35 $53.93 $50.70 $51.95
</TABLE>
(1) The historical results of SKI reflect the acquisitions of the
Sugarloaf and Waterville Valley ski resorts in August 1994 and
October 1994, respectively, and the divestiture of the majority of
the ski resort and golf course assets of Bear Mountain in October
1995.
56
<PAGE>
(2) The computation of net income per common and common equivalent share
amounts are based on the weighted average of shares outstanding
during the year. Shares issuable upon the exercise of stock option
grants have not been included in the per share computation because
they would not have a material effect on earnings per share. The
weighted average shares outstanding at the respective balance sheet
dates used in the computation of net income per common and common
equivalent share were 5,783,480 in 1995; 5,764,663 in 1994; 5,728,908
in 1993; 5,723,318 in 1992; 5,720,394 in 1991; 5,782,745 year to date
April 30, 1995; and 5,788,592 year to date April 28, 1996.
(3) EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization expense. EBITDA is presented
because management believes it provides useful information regarding
a company's ability to incur and service debt. EBITDA should not be
considered in isolation or as a substitute for net income or cash
flows prepared in accordance with generally accepted accounting
principles or as a measure of SKI's profitability or liquidity.
(4) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provision for
interest expense. Fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs, and a
portion of operating lease rental expense deemed to be representative
of the interest factor.
(5) Each skier visit represents one skier visiting one ski resort for one
day, including skiers using complimentary and season passes.
Calculation of skier visits requires an estimation of visits by
season pass holders. Although different ski resort operators may use
different methodologies for making such estimations, management
believes that any resulting differences in total skier visits are
immaterial.
(6) Includes loss of $4,737 realized in connection with the sale of Bear
Mountain.
57
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion and analysis below relates to (i) the historical
financial statements and results of operations of the Company, (ii) the
historical financial statements and results of operations of SKI, and (iii)
the liquidity and capital resources of the Company after giving effect to the
consummation of the Acquisition. The following discussion should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this Prospectus.
The Company has, over the past several years, undertaken the
implementation of a strategy to differentiate its resorts from its competition
by enhancing the quality and scope of on-mountain facilities and services,
including improved lifts, trail design, snowmaking, grooming and base
facilities, and to market these facilities and services aggressively, while
maintaining ownership of all revenue sources connected with the resorts,
including retail sales, food and beverage concessions, lodging and real estate
development. This strategy has been coupled, in the last two years, with
growth through acquisitions, reflected in the acquisitions of Attitash/Bear
Peak resort in July 1994, Sugarbush resort in May 1995 and Mt. Cranmore resort
in June 1995 and subsequent capital expenditures at those three resorts. See
"Business -- The Company." These efforts have resulted in growth both in
revenues and profitability. See "Selected Historical Financial Data -- The
Company."
Over the past five years, SKI has experienced relatively stable
revenues from its core historical operations (Killington and Mt. Snow), and
has augmented its revenues through the acquisitions in 1994 of Waterville
Valley and Haystack resorts and a majority interest in Sugarloaf. Management
believes it can more aggressively manage the SKI properties, including
implementing the capital expansions and improvements that management believes
are essential to revenue and profit growth. See "Business -- SKI Limited" and
"Business -- The Company -- Strategy." Based on the historical success of the
Company's strategic plan, management believes that the application of that
strategy to SKI, and the continuation of the strategy with its existing
resorts, will result in improvement in revenues and profitability on a
combined basis.
Management believes that approximately $2.5 million of annual cost
savings are achievable following the Acquisition, resulting from management
consolidations, reduction in insurance expense, elimination of redundant
marketing expenses and elimination of shareholder service costs and related
expenses. See "Pro Forma Financial Data." Further savings may be attainable,
in management's opinion, from centralized purchasing of other key inputs,
including electricity, fuel, food and retail inventory, and from consolidation
of marketing functions and the combined entity's enhanced buying power and
desirability as a strategic marketing partner. See "Business -- The Company
- --Strategy" and "Business -- Marketing." However, such estimates and
expectations are inherently uncertain and are based on numerous assumptions
which may not materialize, and there can be no assurance that such
improvements in operating results and cost savings will in fact be realized.
See "Risk Factors -- Ability to Achieve Anticipated Cost Savings; Integration
of SKI."
Historically, both the Company and SKI have generated the vast
majority of their revenues in the second and third quarters of their
respective fiscal years, of which a significant portion is produced in two key
weeks -- the Christmas and Presidents' Day vacation weeks (during which
approximately 20% of annual skier visits are generated). The fourth fiscal
quarter ordinarily reflects a significant reduction in revenues as compared to
the second and third quarters, as well as a less significant comparative
expense reduction, ordinarily producing a loss for such quarter and reduced
levels of net income and EBITDA for the full fiscal year as compared to the
first nine month period. During the fourth and first fiscal quarters, the
Company and SKI experience substantial reductions in utility expense, due to
the absence of snowmaking and lift operation, while making significant
expenditures for off-season maintenance, expansion and capital improvement
activities in preparation for the ensuing ski season.
Both the Company and SKI have consummated several significant
acquisitions and SKI recently concluded the sale of one of its resorts. See
"Selected Historical Financial Data," "Business -- Existing Operations" and
"Business -- SKI Limited." In several instances, the operating results of the
two entities reflect the impact of these
58
<PAGE>
transactions, and are therefore less meaningfully comparable to operating
results for the prior or subsequent periods. In addition, operating results for
the Company reflect no income tax expense for Sunday River as a consequence of
its status as a Subchapter S corporation. Such expense will be incurred and
reflected in future periods due to the conversion of Sunday River to a
Subchapter C corporation in connection with the Acquisition. See "The
Acquisition; Antitrust Matters; Use of Proceeds" and Notes to Financial
Statements of the Company.
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth, for the periods indicated, certain
operating data of the Company as a percentage of revenues.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------------------------------ ------------------------------
JULY 25, 1993 JULY 31, 1994 JULY 30, 1995 APRIL 30, 1995 APRIL 28, 1996
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues
Ski and lodging............... 79.5 % 79.9 % 85.5 % 86.9 % 85.8 %
Real estate................... 20.5 20.1 14.5 13.1 14.2
---------- --------- --------- ---------- ----------
100.0 100.0 100.0 100.0 100.0
---------- --------- --------- ---------- ----------
Expenses
Cost of operations including
wages, maintenance and
supplies.................... 33.8 34.6 39.7 36.5 36.0
Cost of real estate sold...... 10.9 9.6 7.3 7.2 7.2
Real estate and payroll taxes. 3.3 3.8 3.2 2.7 2.7
Utilities..................... 7.0 5.5 7.5 7.4 7.6
Insurance..................... 5.3 3.5 3.9 3.6 2.6
Selling, general, and
administrative.............. 15.9 17.9 17.2 16.9 15.6
Depreciation and amortization. 6.7 7.3 7.1 7.2 8.4
---------- --------- --------- ---------- ----------
82.9 82.2 85.9 81.5 80.1
---------- --------- --------- ---------- ----------
Operating income.............. 17.1 17.8 14.1 18.5 19.9
Interest expense.............. 2.8 3.1 4.0 2.8 3.5
---------- --------- --------- ---------- ----------
Income before income taxes.... 14.3 14.7 10.1 15.7 16.4
Provision for income taxes.... 0.0 0.0 0.7 1.9 1.5
---------- --------- --------- ---------- ----------
Income before extraordinary
gain from insurance claim... 14.3 14.7 9.4 13.8 14.9
Extraordinary gain from
insurance claim............. 5.3 0.0 0.0 0.0 0.0
---------- --------- --------- ---------- ----------
Net income.................... 9.6 % 14.7 % 9.4 % 13.8 % 14.9 %
==========- =========-- =========- ========== ==========-
</TABLE>
THE NINE MONTHS ENDED APRIL 28, 1996 COMPARED TO THE NINE MONTHS ENDED APRIL
30, 1995.
Ski and lodging revenues increased by $13.5 million, or 31%, in the
nine months ended April 28, 1996 (the "1996 Nine Months") compared to the nine
months ended April 30, 1995 (the "1995 Nine Months"). This increase was due to
(i) $4.0 million attributable to the acquisition of Mt. Cranmore in June 1995,
(ii) an increase of approximately 19,000 skier visits, or approximately 10%,
at Attitash/Bear Peak, (iii) an increase of approximately 42,000 skier visits,
or approximately 13%, at Sugarbush, (iv) an increase in lift ticket prices,
resulting in an increase in revenues per skier visit from $41.89 in the 1995
Nine Months to $44.61 in the 1996 Nine Months, and (vi) an approximate 10%
increase in season pass revenues, primarily due to the addition of a
multi-resort season pass.
Real estate revenues increased by $2.9 million, or 43%, in the 1996
Nine Months compared to the 1995 Nine Months. This increase was due to
increased sales of quartershare units at the Summit Hotel at Sunday River and
the sale of 16 additional townhouse units at Sunday River in the 1996 Nine
Months compared to the 1995 Nine Months, as well as higher average sales
prices.
Cost of operations increased by $5.6 million, or 31%, in the 1996
Nine Months compared to the 1995 Nine Months. This increase was due to (i)
$1.5 million attributable to the acquisition of Mt. Cranmore, (ii) incremental
costs resulting from the increased skier visits and (iii) operating costs
resulting from the increased snowmaking and lift capacity and skiable terrain
that resulted from the $22.2 million of capital expenditures during the 1996
Nine Months.
59
<PAGE>
Cost of real estate sold increased by $1.2 million, or 33%, in the
1996 Nine Months compared to the 1996 Nine Months due to the increased real
estate sales volume.
Real estate and payroll taxes increased by $0.4 million, or 30%, in
the 1996 Nine Months compared to the 1995 Nine Months primarily due to real
estate and personal property taxes relating to the acquisition of Mt. Cranmore
and Sugarbush.
Utility expense increased by $1.4 million, or 36%, in the 1996 Nine
Months compared to the 1995 Nine Months as a result of the acquisition of Mt.
Cranmore and increased snowmaking capacity at the Company's resorts, including
a 300% increase in snowmaking capacity at Sugarbush.
Insurance expense decreased by $72,000, or 4%, in the 1996 Nine
Months compared to the 1995 Nine Months due to the consolidation of the
Company's resorts under a single insurance policy.
Selling, general and administrative expense increased by $1.9
million, or 22%, in the 1996 Nine Months compared to the 1995 Nine Months due
to (i) approximately $0.7 million attributable to the acquisition of Mt.
Cranmore, (ii) an extensive marketing campaign following the significant
improvements made at Sugarbush and (iii) expenses resulting from the
acquisition of Mt. Cranmore and Sugarbush.
Interest expense increased by $0.9 million, or 63%, in the 1996 Nine
Months compared to the 1995 Nine Months due to increased borrowings to support
the Company's capital program and the acquisitions of Mt. Cranmore and
Sugarbush.
Depreciation and amortization increased by $2.0 million, or 54%, due
to depreciation resulting from the $24 million capital program completed prior
to the 1995/96 ski season and the acquisitions of Mt. Cranmore and Sugarbush.
Income tax expense increased $66,000, or 7%, in the 1996 Nine Months
compared to the 1995 Nine Months. The majority of the increase in the
Company's income before provision for income taxes was attributable to Sunday
River, which is a Subchapter S corporation and therefore not subject to income
taxes.
FISCAL 1995 COMPARED TO FISCAL 1994.
Ski and lodging revenues increased by $20.3 million, or 76%, in
fiscal 1995 compared to fiscal 1994 primarily due to the acquisitions of
Attitash/Bear Peak and Sugarbush. An increase in skier visits at Sunday River
of approximately 20,000, or 4%, as well as an increase in realized revenue per
skier visit, also contributed to this increase.
Real estate revenues increased by $1.3 million, or 19%, in fiscal
1995 compared to fiscal 1994 due to the construction and sale of townhouse
units at Sunday River and continued sales of quartershare units at the Summit
Hotel at Sunday River.
Cost of operations increased by $10.2 million, or 89%, in fiscal 1995
compared to fiscal 1994 due to the acquisitions of Attitash/Bear Peak and
Sugarbush.
Cost of real estate sold increased by $0.8 million, or 26%, in fiscal
1995 compared to fiscal 1994 due to the increased real estate sales volume.
Real estate and payroll taxes increased by $0.5 million, or 37%, in
fiscal 1995 compared to fiscal 1994 primarily due to the acquisitions of
Attitash/Bear Peak and Sugarbush.
Utility expense increased by $2.3 million, or 123%, in fiscal 1995
compared to fiscal 1994 primarily due to the acquisitions of Attitash/Bear
Peak and Sugarbush.
60
<PAGE>
Insurance expense increased by $1.0 million, or 83%, due to the
acquisitions of Attitash/Bear Peak and Sugarbush.
Selling, general and administrative expense increased by $3.5
million, or 58%, in fiscal 1995 compared to fiscal 1994 due to the
acquisitions of Attitash/Bear Peak and Sugarbush.
Interest expense increased by $1.2 million, or 115% in fiscal 1995
compared to fiscal 1994 due to increased borrowing to finance the acquisitions
of Attitash/Bear Peak and Sugarbush and the Company's capital program, as well
as higher average interest rates.
Depreciation and amortization increased by $1.5 million, or 62%, due
to depreciation resulting from the acquisitions of Attitash/Bear Peak and
Sugarbush and the Company's capital program.
Provision for income taxes increased by $0.4 million in fiscal 1995
compared to fiscal 1994 due to income taxes due at Sugarbush.
FISCAL 1994 COMPARED TO FISCAL 1993.
Ski and lodging revenues increased by $2.9 million, or 12% in fiscal
1994 compared to fiscal 1993, primarily due to lodging revenues attributable
to the opening of the South Wing at the Summit Hotel at Sunday River during
fiscal 1994, as well as a 5% increase in average lift ticket prices.
Real estate revenues increased $0.6 million, or 9%, in fiscal 1994
compared to fiscal 1993 due to increased sales and sale prices of quartershare
units at the Summit Hotel at Sunday River.
Cost of operations increased by $1.5 million, or 15% in fiscal 1994
compared to fiscal 1993 due to the expansion of lodging management operations
at the Summit Hotel in connection with the opening of the South Wing and the
commencement of operations of Sunday River's Silver Bullet Express train
service, as well as increased costs of retail and food and concession
inventory.
Real estate and payroll taxes increased by $0.3 million, or 27%, in
fiscal 1994 compared to fiscal 1993 due to real estate taxes attributable to
unsold quartershare units at the Summit Hotel and tax expense attributable to
the opening of the South Wing at the Summit Hotel and the commencement of
train service at Sunday River.
Utility expense decreased by $0.2 million, or 12%, in fiscal 1994
compared to fiscal 1993 due to a new power contract with Central Maine Power
as a result of a new, more efficient compressor facility.
Insurance expense decreased by $0.4 million, or 26%, in fiscal 1994
compared to fiscal 1993, due to the conversion of the Company's workers'
compensation insurance to a self-insured program.
Selling, general and administrative expense increased by $1.2
million, or 26%, in fiscal 1994 compared to fiscal 1993 due primarily to an
18% increase in marketing expenses to try to offset the unseasonably warm
weather, as well as additional management expenses in connection with
investigating potential acquisitions.
Interest expense increased by $0.2 million, or 21%, in fiscal 1994
compared to fiscal 1993 due primarily to increased average interest rates.
Depreciation and amortization expense increased by $0.4 million, or
22%, due to improvements made as part of the Company's capital program.
In fiscal 1993, the Company recorded an extraordinary gain of $1.6
million as a result of insurance proceeds following a fire at Sunday River's
compressor building.
61
<PAGE>
RESULTS OF OPERATIONS OF SKI
The following table sets forth, for the periods indicated, certain
operating data of SKI as a percentage of revenues.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, NINE MONTHS ENDED APRIL 30,
--------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue......................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
---------- --------- --------- --------- ----------
Expenses
Cost of operations including
wages, maintenance and
supplies.................... 41.3 43.0 45.3 42.5 44.9
Other taxes................... 7.9 8.1 7.5 7.1 7.1
Utilities..................... 6.9 6.1 7.1 7.1 7.0
Insurance..................... 5.3 5.6 5.8 5.8 5.3
Selling, general and
administrative expenses..... 17.4 15.5 17.1 15.4 16.0
Depreciation and amortization. 11.3 11.6 12.3 13.0 9.5
Loss on sale of Bear Mountain. 0.0 0.0 0.0 0.0 4.4
---------- --------- --------- --------- ----------
90.1 89.9 95.1 90.9 94.2
---------- --------- --------- --------- ----------
Operating income.................. 9.9 10.1 4.9 9.1 5.8
Interest expense.................. 2.3 2.2 3.4 2.8 2.4
---------- --------- --------- --------- ----------
Income before income taxes and
minority interest............... 7.6 7.9 1.5 6.3 3.4
Income taxes...................... 3.0 3.2 0.9 2.5 1.3
---------- --------- --------- --------- ----------
Income before minority interest... 4.6 4.7 0.6 3.8 2.1
Minority interest................. 0.0 0.0 0.3 (0.2) (0.5)
---------- --------- --------- --------- ----------
Net income........................ 4.6 % 4.7 % 0.9 % 3.6 % 1.6 %
========== ========= ========= ========= ==========
</TABLE>
The following comparative discussions with respect to SKI have been
taken from periodic reports filed by SKI with the Securities and Exchange
Commission.
NINE MONTHS ENDED APRIL 28, 1996 COMPARED WITH NINE MONTHS ENDED APRIL 30, 1995
Revenues of $106,752,000 for fiscal 1996 approximated the comparable
fiscal 1995 period. After considering the reduction from the sale of Bear
Mountain, revenue increased 13% reflecting an overall increase in skier visits
resulting in improved revenues from most operational areas including tickets,
restaurants and bars, retail, rental, repair and ski school at all of SKI's
ski areas.
Cost of operations increased to $47,885,000 in fiscal 1996, from
$45,310,000 in the comparable fiscal 1995 period. After considering the
reduction resulting from the sale of Bear Mountain, cost of operations
increased 17% in support of increased revenues. Additionally, in fiscal 1996,
the Company entered into operating leases for its fleet of snow-grooming
vehicles which resulted in incremental lease expense. In turn, SKI's
depreciation expense was reduced as a result of having disposed of a majority
of its former fleet of owned vehicles in July 1995.
Other taxes of $7,541,000 were approximately equal to the comparable
fiscal 1995 period. After considering the reduction resulting from the sale of
Bear Mountain, other taxes increased 10% primarily due to increases in sales
and meals and rooms tax resulting from higher revenues.
Selling, general and administrative expenses increased to $17,061,000
in fiscal 1996 from $16,377,000 in fiscal 1995. After considering the
reduction resulting from the sale of Bear Mountain, selling, general and
administrative expense increased 17% primarily due to the higher costs of the
"Peaks of Excitement" marketing program which was introduced in fiscal 1996.
Additionally, SKI incurred certain expenditures for financial advisory and
legal services relating to the impending acquisition by ASC.
Interest decreased 15% due to reduction of debt levels principally
relating to the sale of Bear Mountain assets.
62
<PAGE>
Depreciation and amortization expense decreased to $10,146,000 in
fiscal 1996, from $13,843,000 in fiscal 1995. The reduction is principally
attributable to the sale
of Bear Mountain assets.
YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994
Revenues on a consolidated basis increased 15% to $113,960,000 in
fiscal 1995 over fiscal 1994. Real estate sales revenue for 1995 was $8,000
compared to zero in 1994. The additions of Waterville Valley Ski Area and
Sugarloaf Mountain Corporation were the primary cause of increased revenues on
a consolidated basis.
Cost of operations increased 21% over 1994 due to increased
operational costs related to the acquisitions of Waterville Valley and
Sugarloaf ski areas.
Other taxes increased 7% in 1995 due to the acquisitions of
Waterville Valley and Sugarloaf ski areas.
Utilities expense increased 34% in 1995 primarily due to the
acquisitions of Waterville Valley and Sugarloaf ski areas. Both Killington and
Mount Snow had slight increases over 1994 while Bear Mountain enjoyed a 23%
decrease due to their abundance of early season natural snow.
Insurance expense increased 20% in 1995 primarily due to the
acquisitions of Waterville Valley and Sugarloaf ski areas. Both Killington and
Mount Snow had decreases in their insurance expense while Bear Mountain had an
increase of 28%.
Selling, general and administrative expense increased 27% in 1995
primarily due to the acquisitions of Waterville Valley and Sugarloaf ski
areas. Killington and Mount Snow had slight decreases while Bear Mountain
increased by 28%.
Interest expense increased by 72% in 1995 due primarily to the
acquisition of Waterville Valley and Sugarloaf ski areas as well as the
construction of the Killington Skyeship.
Depreciation expense increased by 23% due primarily to the
acquisitions of Waterville Valley and Sugarloaf ski areas. Killington and
Mount Snow had slight increases in depreciation while Bear Mountain had a
slight decrease.
There was a significant increase in SKI's tax rate percentage in
fiscal 1995 for two reasons. First, since SKI owns 51% of Sugarloaf, it does
not file a consolidated tax return which includes Sugarloaf. SKI will reflect
the tax benefit of Sugarloaf's loss only at such time as Sugarloaf actually
earns a profit. Second, life insurance premiums are not deductible for tax
purposes; and although the amounts of the premiums are relatively small, their
effect on tax rates increases in a low profit year. Despite the high tax rate
for book purposes, all of the taxes were deferred taxes and, therefore, did
not affect cash flow.
Net income decreased 78% in 1995 primarily due to poor market
response both in the northeast as well as California.
YEAR ENDED JULY 31, 1994 COMPARED TO YEAR ENDED JULY 31, 1993
Revenues on a consolidated basis increased 2% to $98,907,000 in 1994
over 1993. There were no real estate sales revenues for 1994, which compared
to $1,858,000 in 1993. Stronger all around operational revenue allowed for the
increased revenues offsetting the 1993 real estate sale in the face of
virtually equal skier day totals in 1994 and 1993. The average lift ticket
price increased 6%.
Cost of operations increased 7% over 1993 due to increased
operational costs related to the increase in revenues.
63
<PAGE>
Other taxes increased 5% in 1994 due primarily to increases in
payroll taxes and sales taxes incurred on increased revenues.
Utilities expense decreased 9% due primarily to the abundant
snowfalls allowing a reduction in snowmaking requirements.
Insurance expense increased 8% over 1993, principally due to the
favorable impact from the close-out of certain general liability years in
1993.
Selling, general and administrative expense decreased 9% in 1994 due
primarily to a bonus declared in 1993.
Net income increased 5% to $4,646,000 from $4,409,000 in 1993 due to
increased revenues and improved expense control. The margin on net revenue
increased to 4.70% in 1994 from 4.56% in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund capital
expenditures, service indebtedness and support seasonal working capital
requirements. The Company's primary sources of liquidity will be cash flow
from operations and borrowings under the Senior Credit Facility (under which
approximately $31.4 million was drawn in connection with the Acquisition and
$33.6 million will remain available for future borrowing, subject to
compliance by the Company with the provisions thereof, if the Acquisition had
occurred on April 28, 1996), as well as additional borrowings as permitted
under the Senior Credit Facility, the Indenture and the Subordinated Note
Indenture. See "Risk Factors -- Leverage and Debt Service," "Risk Factors
- --Restrictions Under Debt Agreements," "Description of Senior Subordinated
Notes," "Description of Subordinated Notes" and "Description of Other
Indebtedness -- The Senior Credit Facility." The Company intends to use
borrowings under the Senior Credit Facility to meet seasonal fluctuations in
working capital requirements, primarily related to off-season operations and
maintenance activities in the Company's first and fourth fiscal quarters, to
fund capital expenditures for lifts, trail work, grooming equipment and other
on-mountain equipment and facilities and to build retail and other inventories
prior to the start of the skiing season.
The Company's capital expenditures for the year ended July 30, 1995
and the nine months ended April 28, 1996 were $12.0 million and $22.2 million,
respectively. SKI's capital expenditures for the year ended July 31, 1995 and
the nine months ended April 28, 1996 were $19.5 million and $6.0 million,
respectively. Management anticipates that total capital expenditures for the
last fiscal quarter of 1996 and the first quarter of fiscal 1997 will be
approximately $18 million. See "Business -- The Company -- Strategy."
Management plans to fund these capital expenditures from available cash,
vendor financing to the extent permitted under the Senior Credit Facility, the
Indenture and the Subordinated Note Indenture, and borrowings under the Senior
Credit Facility. Capital expenditures during the second and third quarters of
1997 are expected to be insignificant because most capital improvements are
completed prior to the commencement of the ski season.
Management expects capital expenditures to total approximately $50
million over the next three years, approximately 70% of which is targeted to
be spent upgrading SKI properties. However, this budget will be reviewed
annually and revised upward or downward to reflect the previous winter's
operating results and available liquidity. Management believes that the
minimum maintenance capital expenditure requirement for the Company will be
approximately $7 million per year including the Mt. Cranmore and Waterville
Valley resorts the Company has agreed to divest.
Management also plans to undertake hotel and condominium development
and construction activities in fiscal 1996 and 1997 at Attitash and Sugarbush
(see "Business -- Real Estate Development"), incurring total estimated costs
of $24-30 million. It is expected, however, that these activities will be
conducted through special purpose subsidiaries with limited guarantees of
associated indebtedness being provided by the Company, to the extent permitted
by the Senior Credit Facility, the Indenture and the Subordinated Note
Indenture. Liquidity will
64
<PAGE>
also be affected by the debt service requirements associated with such
borrowings, as well as any required equity investments by the Company in such
entities.
Management believes that there is a considerable degree of
flexibility in the timing (and, to a lesser degree, the scope) of its capital
expenditure program, and even greater flexibility as to its real estate
development objectives. While the 1996-97 capital expenditure program
described above is regarded by management as important, both as to timing and
scope, discretionary capital spending above maintenance levels can be
deferred, in some instances for substantial periods of time, in order to
address cash flow or other constraints. With respect to the Company's proposed
real estate development program, management believes that such efforts will
enhance ski revenues and will contribute independently to earnings, as has
been the case historically at Sunday River. Nonetheless, existing lodging
facilities in the vicinity of each resort are believed to be adequate to
support current skier volumes, and a deferral or curtailment of these
development efforts is not regarded by management as likely to adversely
affect skier visits and ski revenues or profitability. Pursuant to the
Consent, the Company has agreed to divest itself of the Mt. Cranmore and
Waterville Valley resorts. The overall impact on the Company's liquidity from
the loss of the cash flow associated with these resorts measured against the
proceeds from the sale of such resorts cannot be quantified at this time. See
"The Acquisition; Antitrust Matters; Use of Proceeds"; "Risk
Factors--Antitrust" and Note (a) to "Pro Forma Financial Data."
The Company's liquidity also will be affected by the substantial
indebtedness it incurred in connection with the financing of the Acquisition,
including the indebtedness evidenced by the Notes and the Senior Credit
Facility. Such indebtedness will significantly increase the Company's cash
requirements for debt service and will impose various restrictions on
additional indebtedness, capital expenditures, creation of liens, sales of
assets, permitted investments and mergers or other business reorganizations.
See "Description of Senior Subordinated Notes," "Description of Subordinated
Notes" and "Description of Other Indebtedness -- The Senior Credit Facility."
In addition, upon the occurrence of a Change of Control, the Company may be
required to repurchase the Notes and the Subordinated Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest. The occurrence of
a change of control may also constitute a default under the Senior Credit
Facility. See "Risk Factors -- Leverage and Debt Service," "Risk Factors --
Restrictions Under Debt Agreements," "Description of Senior Subordinated Notes
- -- Repurchase at the Option of Holders -- Change of Control" "Description of
Senior Subordinated Notes -- Certain Covenants," "Description of Subordinated
Notes -- Repurchase at the Option of Holders -- Change of Control,"
"Description of Subordinated Notes - Certain Covenants" and "Description of
Other Indebtedness -- The Senior Credit Facility."
On a pro forma basis, the Company's ratio of earnings to fixed
charges was 1.1 to 1 for the nine months ended April 28, 1996; as a result of
the loss incurred on a pro forma basis for the fiscal year ended July 30,
1995, earnings did not cover fixed charges by $8.4 million for such period.
However, such results for the two periods include non-cash charges for
depreciation and amortization of $17.9 million and $18.8 million,
respectively.
Management believes that the Company's cash flow from operations,
combined with borrowings available under the Senior Credit Facility and
additional borrowings to the extent permitted under the Senior Credit
Facility, the Indenture and the Subordinated Note Indenture, will be
sufficient to enable the Company to meet all of its cash operating
requirements for the foreseeable future.
The business of the Company is highly seasonal, with the vast
majority of its annual revenues historically being generated in the second and
third fiscal quarters, of which a significant portion being produced in two
key weeks -- the Christmas and Presidents' Day vacation weeks, during which
approximately 20% of annual skier visits are realized. Operating losses can be
expected in the first and fourth fiscal quarters, and results of operations in
the first quarter of the year typically will not be sufficient to cover fixed
charges. See "Risk Factors -- Dependence on Weather Conditions; Seasonality."
65
<PAGE>
INDUSTRY OVERVIEW
The U.S. ski market is a fragmented industry, with 516 ski areas in
operation during the 1995-96 season. Over the past 15 years, participation in
the sport of skiing has remained relatively stable, averaging approximately 50
million skier visits nationally. No single ski area accounted for more than
approximately 3% of 1994-95 skier visits. The market is characterized by both
regional and national competition.
NATIONAL SKI AREAS ASSOCIATION
REGIONS AND SKIER VISITS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEASON NORTHEAST SOUTHEAST MIDWEST ROCKY MTN PACIFIC WEST TOTAL
- ------ --------- --------- ------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
1991/92 12,252 4,425 6,535 17,687 9,936 50,835
1992/93 13,217 4,660 6,978 18,602 10,575 54,032
1993/94 13,718 5,808 7,364 17,503 10,244 54,637
1994/95 11,265 4,746 6,907 18,412 11,346 52,676
1995/96* 13,830 5,274 7,144 18,007 8,861 53,116
</TABLE>
Northeast: CT, MA, ME, NH, NY, VT, RI
Midwest: IA, IL, IN, MI, MN, MO, ND, NE, OH, SD, WI
Pacific West: AK, AZ, CA, NV, OR, WA
Southeast: AL, GA, KY, MD, NC, NJ, PA, TN, VA, WV
Rocky Mountain: CO, ID, MT, NM, UT, WY
Source: 1994/95 KOTTKE NATIONAL END OF SEASON SURVEY
*Preliminarily reported by Kottke National End of Season Survey 1995/96
The ski industry is presently experiencing a period of consolidation
and attrition, which is reflected in a significant decline in the total number
of areas over the last ten years. Management believes that the driving forces
behind both consolidation and attrition are the need to gain access to capital
to maintain state-of-the-art facilities and the need to retain professional
management, and the inability of numerous resorts to keep pace with the
competition with respect to one or both of these market forces. The trend
among leading resorts is toward investing in improving technology and
infrastructure so as to deliver a more consistent, high quality product.
The NSAA defines the Northeast ski resort market as encompassing the
New England states and New York, although the Company believes its market
extends as far as the Mid-Atlantic states and southeastern Canada. The
Northeast market has averaged approximately 12 million annual skier visits
over the last fifteen years. Within the Northeast region, skiers can choose
from among over 50 major resorts. The region's major resorts are concentrated
in the mountainous areas of New England and eastern New York, with the bulk of
skiers coming from the population centers located in eastern Massachusetts,
southern New Hampshire, Connecticut, eastern New York, New Jersey and the
Philadelphia area. Data collected at Sunday River indicate that approximately
43% of its weekend skiers reside in Massachusetts. Similar data collected at
Killington and Mt. Snow indicate that approximately 23% and 35% of their
weekend skiers, respectively, reside in New York, with high concentrations
from Massachusetts, Connecticut, New Jersey and Vermont.
The Northeast ski market consists of essentially two segments: day
skiing and vacationers. The day skiing market is comprised of skiers who live
within a four hour driving radius of a particular resort. Day skiers may stay
for one to two days in a single trip. Approximately 35 million people live
within the Company's day skiing market, which includes the New York and Boston
metropolitan areas. The vacation market is a national market for destination
resorts. While the Northeast does not draw significant numbers of vacationing
skiers from the Western regions of the country, it competes with the Rocky
Mountain and Pacific Northwest areas for Eastern vacationing skiers. Over the
last several years, the Company has begun to compete in certain international
markets, with the U.K. market historically producing the highest levels of
international skier visits.
66
<PAGE>
Management believes that certain demographic trends and trends in the
U.S. ski industry will be favorable for the Company's business outlook. The
"echo boom" generation is of prime age for introduction to skiing and
snowboarding. The trend toward consolidation is expected to permit larger,
multiple resort companies to concentrate more of their marketing efforts on
attracting new participants to the sport. Improved snowmaking technology and
grooming techniques assure visitors better quality and more consistent
conditions. High speed chair lifts also increase the quality of the experience
by permitting more skiing during a resort visit. As an active family sport,
skiing benefits from the social trends toward family vacationing and health
consciousness. Finally, management believes its success with the first Summit
Hotel program is directly related to the desire for affordable vacation
property ownership among a growing population of skiers.
BUSINESS
THE COMPANY
GENERAL. ASC is the largest mountain resort operator in North
America, owning and operating eight ski resorts in the northeastern United
States, including seven of the largest resorts measured by annual skier
visits, elevation, vertical drop and skiable terrain. ASC's properties include
Killington, Mt. Snow/Haystack and Sugarbush ski resorts in Vermont; Waterville
Valley, Attitash/Bear Peak and Mt. Cranmore ski resorts in New Hampshire; and
Sunday River and Sugarloaf/USA ski resorts in Maine. These resorts recorded
over 3.3 million skier visits during the 1995/96 ski season, representing
approximately 24% of total skier visits in the northeastern United States and
approximately 6% of skier visits nationally. ASC's ski resort properties offer
approximately 4,000 acres of skiable terrain (of which approximately 82% are
covered by snowmaking capability), 777 trails and 121 lifts. ASC generated
approximately $184.9 million in revenues and approximately $2.5 million and
$39.5 million in net loss and EBITDA, respectively, for the twelve months
ended April 28, 1996, on a pro forma basis reflecting the Acquisition and
including the Waterville Valley and Mt. Cranmore resorts, which are to be
divested. Excluding Waterville Valley and Mt. Cranmore, such total revenues
were $169.2 million, and ASC generated $3.5 million in net loss and $36.4
million in EBITDA over such period after giving pro forma effect to the
Acquisition.
The Consent requires divestiture of the Waterville Valley and Mt.
Cranmore resorts not later than December 1, 1996, subject to a 90 day
extension at the discretion of DOJ. On a combined basis, these two resorts
recorded approximately 382,000 skier visits during the 1995-96 ski season
(11.4% of total 1995-96 skier visits for the Company, after giving pro forma
effect to the Acquisition) and, during the twelve-month period ended April 28,
1996, generated approximately $15.7 million in total revenues, $1.0 million in
net income and $3.1 million in EBITDA (8.5%, 40.0% and 7.8%, respectively, of
the Company's revenues, net loss and EBITDA for such period after giving pro
forma effect to the Acquisition). The net assets to be divested of these two
resorts, as of April 28, 1996, aggregate approximately $15.2 million, or 5.7%
of total assets of the Company, as of such date, after giving pro forma effect
to the Acquisition, and they represent on a combined basis approximately 445
acres of skiable terrain, 90 trails and 19 lifts. See "The Acquisition;
Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data."
The Company has experienced consistent growth since its inception in
1980 when it acquired the Sunday River ski resort. Skier visits at Sunday
River have increased from under 50,000 in the 1980/81 ski season to
approximately 589,000 for the 1995/96 ski season. The Company acquired
Attitash/Bear Peak in fiscal 1994, and Sugarbush and Mt. Cranmore in fiscal
1995. Since their acquisition by the Company, skier visits have increased by
24% at Attitash/Bear Peak, 13% at Sugarbush and 32% at Mt. Cranmore.
Management believes that ASC will realize growth in skier visits and
profitability from (i) implementation at the SKI resorts of the Company's
successful operating strategy and the continued pursuit of that strategy at
the Company's recently acquired resorts, (ii) operational synergies and
economies of scale available to the Company as a result of the Acquisition,
and (iii) coordinated marketing and promotion of eight resorts spanning a
single region.
Management also believes that the Company is well positioned to
benefit from certain trends in the North American ski industry, including the
emergence of the echo boom generation, continued consolidation, growing
interest in snowboarding, and demand among families for vacation property
ownership. As the cost of infrastructure to maintain competitiveness in the
ski industry has grown, the number of U.S. ski areas has declined. There are
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currently 516 ski areas in operation in the nation as compared to over 700 in
1986, while skier visits have remained relatively stable over the same period.
Management believes that the Company, as the largest ski resort operator in
the U.S., is well positioned to continue its growth both internally and
through acquisitions. Management also believes that the ski industry is poised
for growth through increased participation in the sport, especially among the
echo boom generation who will be reaching their teen years, the prime entry
age for skiing, over the next decade. The Company and other emerging multiple
resort operators are expected to focus more of their marketing efforts on
attracting new participants to the sport.
RESORT PROPERTIES. The Company's multiple properties extend from
southern Vermont to central Maine, enabling the Company to market its wide
variety of skiing terrain and resort characteristics to residents of the
northeastern U.S., including the New York and Boston metropolitan population
centers. Management believes that the number and diversity of its resorts and
their accessibility to these customer bases will increase the effectiveness of
its marketing program and the likelihood of bringing new visitors to its
resorts. Management intends to capitalize on this anticipated phenomenon by
aggressively cross-marketing and inducing visitors, including those seeking
varied resort experiences, to travel to its other resorts. See "-- Marketing."
The following table summarizes certain key statistics of each of the Company's
properties.
<TABLE>
<CAPTION>
AMERICAN SKIING COMPANY
RESORT OVERVIEW
- --------------------------------------------------------------------------------------------------------------------
RESORT SKIABLE VERTICAL TRAILS LIFTS SNOWMAKING GROOMERS LODGES 1994-95 1995-96
TERRAIN DROP COVERAGE SKIER VISITS SKIER VISITS
(ACRES) (000S) (000S)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Killington 918 3,150 165 1 Gondola 60% 29 7 826 905
Sherburne, 2 Detachable
Vermont 15 Fixed Grip
2 Surface
- --------------------------------------------------------------------------------------------------------------------
Sunday River 640 2,300 120 3 Detachable 92% 11 4 535 589
Newry, Maine 12 Fixed Grip
1 Surface
- --------------------------------------------------------------------------------------------------------------------
Mount Snow/ 751 1,700 130 1 Detachable 84% 13 6 461 553
Haystack Dover, 20 Fixed Grip
Vermont 3 Surface
- --------------------------------------------------------------------------------------------------------------------
Sugarloaf 515 2,820 116 1 Gondola 92% 11 1 312 349
Carrabassett 1 Detachable
Valley, Maine 11 Fixed Grip
1 Surface
- --------------------------------------------------------------------------------------------------------------------
Sugarbush 413 2,600 111 4 Detachable 74% 9 5 331 373
Warren, Vermont 4 Surface
10 Fixed Grip
- --------------------------------------------------------------------------------------------------------------------
Attitash/ Bear 214 1,750 45 1 Detachable 100% 5 2 182 201
Peak Bartlett, 7 Fixed Grip
New Hampshire 2 Surface
- --------------------------------------------------------------------------------------------------------------------
Subtotal-- 3,451 -- 687 2 Gondola 80% 78 25 2,647 2,970
Retained resorts 12 Detachable
75 Fixed Grip
13 Surface
- --------------------------------------------------------------------------------------------------------------------
Waterville 255 2,020 54 1 Detachable 96% 6 3 207 257
Valley 8 Fixed Grip
Waterville 4 Surface
Valley, New
Hampshire
- --------------------------------------------------------------------------------------------------------------------
Mt. Cranmore 190 1,167 36 1 Detachable 100% 3 2 95 125
North Conway, 4 Fixed Grip
New Hampshire 1 Surface
- --------------------------------------------------------------------------------------------------------------------
Subtotal - 445 -- 90 2 Detachable 98% 9 5 302 382
Resorts to be 12 Fixed Grip
divested 5 Surface
- --------------------------------------------------------------------------------------------------------------------
Total 3,896 -- 777 2 Gondola 82% 87 30 2,949 3,352
14 Detachable
87 Fixed Grip
18 Surface
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
STRATEGY. The Company intends to pursue a strategic plan that mirrors
the formula successfully employed at Sunday River and its recently acquired
resorts.
Invest in Ski Experience. Management believes that the most efficient
way to increase resort visitation is to provide the highest quality skiing
available. The Company intends to continuously improve the infrastructure at
each resort, emphasizing modernization and introducing at the SKI resorts the
snowmaking and grooming successfully implemented at the Company's other ski
areas. Management expects to invest approximately $50 million in improvements
in lifts, snowmaking, grooming and trail design over the next three years, of
which approximately 70% is designated for the SKI resorts.
Up to half of the Company's three year capital improvement budget is
for investment in lifts, with a substantial portion of that amount to be used
to replace outmoded equipment at Killington and Mt. Snow. Investment in lifts
achieves two goals. First, it provides increased carrying capacity, which is
critical to attracting and retaining skiers by reducing or eliminating lift
lines and reducing time spent on lifts. Second, lifts are the most visible
form of improvement to the skiing public and are one of the Company's
centerpieces in promoting new experiences at its resorts.
Approximately 25% of the three year capital budget will be invested
in snowmaking improvements during fiscal 1997 through 1999, targeting over 90%
coverage at all of the Company's resorts. Expanded snowmaking reduces the
Company's reliance on natural snowfall and increases skiers' confidence that
high quality conditions will be available notwithstanding weather conditions.
The expansion in water capacity and the improvements in snowmaking equipment
at each of the Company's recently acquired resorts are indicative of its
strategic commitment to delivering the highest quality skiing experience.
Further expansion will be subject to the Company's ability under applicable
laws, regulations, policies or contractual arrangements to have access to
adequate supplies of water. See "Business--Environmental Matters." Since their
acquisition by the Company, the Company has increased snowmaking capacity
(measured in gallons per minute) by approximately 300% at Sugarbush, 100% at
Attitash/Bear Peak, and 20% at Mt. Cranmore. As with the planned lift
improvements, approximately 70% of the anticipated snowmaking investment will
be dedicated to upgrading the SKI resorts.
Grooming is also an essential element in producing a quality skiing
surface. Management intends to upgrade surface quality principally through
implementation of its unique grooming system at all its resorts. This slow
grind process, in which grooming equipment works at half the normal speed and
tilling the snow at twice the normal depths, improves the consistency of the
snow. This grooming technique takes longer and is, therefore, more expensive;
however, the Company believes the cost is justified by increased skier
satisfaction.
Management also plans to modernize the trail configuration at the SKI
resorts by eliminating cross over trails and ensuring a higher quality skiing
experience. This is particularly true at the older Killington and Mt. Snow
resorts where trail design is more outdated. Approximately $2 million in trail
improvements are included in the three year capital program. The Company has
also identified several opportunities to expand certain of the trail systems
at different resorts. Development of additional skiable terrain will be
conditioned upon market demand, availability of funds and permitting. See
"Business -- Existing Operations" and "Business -- SKI Limited" for a
discussion of expansion possibilities.
The final portion of the on-mountain capital program is an
anticipated $6.5 million investment in new and improved base facilities. These
improvements will focus on providing additional space for skier development,
children's programs and other family oriented activities and services.
Emphasize Marketing. The Company's marketing program is designed to
attract both day skiers and vacationers. Approximately 35 million people live
within the Company's day skiing markets, which include the Boston and New York
metropolitan areas. With the acquisition of SKI, the Company's marketing
program will become even more focused on the population centers located in
Massachusetts, Connecticut, New York and New Jersey. The Company employs a
two-tiered marketing program in which each resort develops a resort-specific
marketing plan, and assists in the development of an integrated corporate
marketing program. The individual
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<PAGE>
marketing program for each resort focuses on the unique characteristics of
that area and the demographics of its skier base. The corporate marketing
program focuses on establishing a corporate identity and expanding the
Company's market, both by building the image of New England skiing and by
seeking to attract new participants to the sport. Corporate marketing includes
specific programs, such as the successful "Perfect Turn" proprietary skier
instructional and development program. Increased loyalty among day and
overnight skiers is promoted through multi- resort affinity programs like the
"Edge Card," which provides free lift tickets to frequent skiers.
The Company plans to expand upon its existing marketing efforts by
focusing on three distinct age groups in order to develop new skiers. The
first targeted segment is the emerging echo boom generation, the children of
the baby boom generation who are reaching the age at which recreational
preferences begin to form. The Company will employ a high-energy multimedia
approach tailored to this age group, emphasizing the fun and excitement of
skiing and snowboarding. The second demographic segment to be pursued through
marketing is the maturing baby boom generation, which is beginning to generate
higher levels disposable income. The third segment is the "X" generation.
Management believes this age group (15-32) will respond favorably to the high
energy levels of skiing and snowboarding.
The Acquisition provides the Company with expanded marketing
opportunities and efficiencies. With resorts reaching from southern Vermont to
northern Maine, the Company believes that it is able to reach a wider
population, due to its resorts' proximity to Northeastern population centers,
and to cross-market its other resorts to visitors at each resort, capitalizing
on skiers' interest in experiencing a diversity of skiing terrain and resort
accommodations. See "Business -- Marketing."
Control Multiple Revenue Sources. The Company controls multiple
revenue sources at each resort, diversifying its income base and maximizing
return from each property. For the nine months ended April 28, 1996, lift
ticket revenues constituted approximately 51% of the Company's total ski and
lodging revenues, with the balance produced by lodging, retail, food and
beverage and other operations. The Company operates its own chain of resort
retail ski shops under the name "Crisports," which provide ski rentals and
repairs, and a complete line of ski equipment, clothing and accessories.
Retail operations accounted for approximately 8% of ski and lodging revenues
for the nine months ended April 28, 1996. Management expects to expand
marketing of Company-specific private label clothing and accessories lines and
increasingly controlling the production of its private label products, thus
reducing its cost of goods sold. During that period, other important revenue
sources included food and beverage, which accounted for approximately 11% of
ski and lodging revenues; skier development, which accounted for approximately
6% of ski and lodging revenues; and summer activities, which contributed
approximately 2% of such revenues. Management continuously seeks to maximize
contribution by reducing the costs associated with each source and identifying
and exploiting opportunities to grow these enterprises.
Pursue Cost Savings Opportunities. Management has identified
approximately $2.5 million of net annual cost savings it believes are
achievable following the Acquisition (see "Pro Forma Financial Data"),
resulting from management consolidations, reductions in insurance expense,
elimination of redundant marketing expense and elimination of shareholder
service costs and related expenses. Several areas have been identified by the
Company as providing the opportunity for additional cost savings including
centralized purchasing of electricity, fuel, and food and retail inventory,
and the combined entity's enhanced buying power and desirability as a
strategic marketing partner.
The anticipated savings are based on estimates and assumptions made
by the Company that are inherently uncertain, though considered reasonable by
the Company, and are subject to significant business, economic and competitive
uncertainties and contingencies, all of which are difficult to predict and
many of which are beyond the control of management. There can be no assurance
that such savings will be achieved. See "Risk Factors -- Ability to Achieve
Anticipated Cost Savings; Integration of SKI."
Selectively Develop Mountainside Real Estate. In addition to more
conventional slopeside condominium projects, the Company has developed a
prototype year-round destination slopeside hotel. The hotel is a condominium
in which the Company retains ownership of the core hotel properties consisting
of restaurants, commercial space, conference facilities and infrastructure
facilities. Quartershare interests (13 weeks evenly divided
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<PAGE>
over the year) in the hotel suites are sold to individual owners as
residential condominiums. The Company operates the hotel and provides optional
management of the quartershare units for individual owners. The first of these
hotels, called the "Summit Hotel," was successfully developed in two phases at
Sunday River in 1992 and 1993. The project is fully sold, and has generated
substantial profits for the Company.
The Summit Hotel concept is expected to be the prototype for the
Company's future real estate development activities, with additional hotels
planned for selected resort locations over the next several years. The number,
timing, and location of projects will be driven by demand, as determined
through an extensive pre-construction marketing and sales program. Current
plans provide for the development of one hotel at each resort, except
Sugarloaf, during fiscal years 1997 through 2000. Initial cost is expected to
be in the range of $12 to $15 million per hotel. In addition, subject to
demand, management believes that an additional wing could be added to each
hotel approximately two years after the initial construction at a cost of
approximately $5-$6 million per hotel.
Expand Off-Season Activities. Each resort has developed off-season
activities in order to improve utilization of facilities, retain quality
employees and contribute to coverage of fixed operating costs. Sugarloaf,
Killington, Mt. Snow and Sugarbush operate championship golf courses, with the
Sugarloaf course, designed by Robert Trent Jones, recently being rated one of
the top 25 courses in the country by Golf Digest magazine and Golf magazine.
All the resorts offer a variety of other summer outdoor recreational
opportunities ranging from tennis and mountain biking to off-site activities
such as whitewater rafting, canoeing, fishing and hiking in the surrounding
mountains. Each resort has also begun to sponsor cultural programs during the
summer. All of these facilities and activities are intended to draw off-season
visitors to the resorts' conference and convention facilities.
EXISTING OPERATIONS
The formation of the businesses comprising the Company began when
Leslie B. Otten, ASC's chairman and chief executive officer, acquired Sunday
River in fiscal 1981. During the 1980/81 ski season, Sunday River generated
fewer than 50,000 annual skier visits. In contrast, the Company generated
approximately 589,000 skier visits at Sunday River in the 1995/96 season,
ranking second in New England only to Killington. Sunday River has achieved
steady increases in skier visits by making significant expansions and
improvements to trails, lifts, snowmaking, grooming and base lodge facilities
and through aggressive marketing. Sunday River has enhanced profits through
strict cost controls, and by maintaining control over multiple revenue sources
at the resort. In order to provide a bed base to support the higher levels of
skier visits and to generate additional cash flow to fund capital
improvements, in the mid-1980s Sunday River began a program of limited
condominium development. In 1992 and 1993, the Company constructed the Summit
Hotel, its prototype quartershare hotel at the base of the mountain.
The Company recognized an opportunity to replicate Sunday River's
success at other ski resorts, and in 1994 and 1995 acquired the Attitash/Bear
Peak, Mt. Cranmore and Sugarbush resorts. Implementing the strategy
successfully developed at Sunday River, the Company has invested, since the
respective date of acquisition by the Company, approximately $26 million in
capital expenditures at these properties.
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<PAGE>
The capital improvements at those resorts are reflected in the
following table:
<TABLE>
<CAPTION>
NEW GROOMING NEW
RESORT NEW SNOWMAKING NEW LIFTS MACHINES TRAILS NEW BASE FACILITIES
------ -------------- --------- ------------ --------- -------------------
<S> <C> <C> <C> <C> <C>
Attitash/Bear 80 million gallon 1 high speed detachable 2 5 trails Bear Peak Base Lodge
Peak snowmaking pond quad w/40 acres
Sugarbush 63 million gallon 7 lifts, including 4 high 6 1 Addition to Gate House
snowmaking pond; new speed detachable quads Base Lodge; Renovation to
550-gun snowmaking system Valley House Base Lodge
Mt. Cranmore New stream intake & 1 high speed detachable -- 4 New ski shop; Improved
variable pumping capacity quad 1 improved lift summit restaurant
</TABLE>
Supported by aggressive marketing programs and better overall market
conditions for the 1995/96 season, skier visits grew from pre-acquisition
levels.
<TABLE>
<CAPTION>
SKIER VISITS
------------------------------------------------------------------------
% INCREASE
RESORT PRE-ACQUISITION FIRST YEAR SECOND YEAR SINCE ACQUISITION
------ --------------- ---------- ----------- -----------------
<S> <C> <C> <C> <C>
Attitash/Bear Peak......................... 162,602 182,449 201,458 24%
Mt. Cranmore............................... 95,000 125,143 N.A. 32%
Sugarbush*................................. 330,922 373,200 N.A. 13%
</TABLE>
________________________
*Managed by the Company beginning November, 1994 and acquired May, 1995.
SUNDAY RIVER. Extending over eight interconnected mountain peaks,
Sunday River's facilities consist of 640 acres of skiable terrain and 120
trails. The resort has a 3,100 foot summit and a 2,300 foot vertical drop. Its
eight mountains are serviced by 16 lifts, including three high-speed
detachable quad lifts, five fixed grip quad lifts, seven triple or double
lifts and one surface lift. The mountains are serviced by four base lodges,
including one located at the top of North Peak. The resort's on-mountain bed
base consists of more than 700 condominium units, the Summit Hotel's 230
quartershare units, and two other hotels providing housing for 5,400 skiers on
slope. The off-mountain bed base in greater Bethel, Maine totals 1,500 beds.
The resort's transportation network includes the Silver Bullet Express ski
train, which provides rail service between Portland, Maine, and Bethel, Maine.
The resort operates five ski shops, four full-service restaurants, four
cafeteria-style restaurants, and four bars. The Company also owns and operates
a 67 unit hotel, and manages the Summit Hotel as well as 704 condominium
units.
Sunday River has focused on producing high quality skiing conditions
through emphasizing the quality and coverage of its snowmaking system, its
unique grooming techniques, attention to trail design and lift capacity.
Sunday River has one of the most modern lift systems in the Northeast,
featuring 16 chairlifts with the most quads of any Eastern ski area. Sunday
River is widely recognized for its dedication to producing new and different
terrain on a regular basis, thus offering skiers a new and different
experience each season.
Management believes that Sunday River has significant growth
potential. Over 300 acres of land at the base of the new Jordan Bowl area are
earmarked for development of base facilities and a second Summit Hotel. There
are approximately 10,000 acres of undeveloped land, either owned by the
Company or under option, suitable for development as skiable terrain. The
resort's capital improvement program provides for up to approximately $10
million in improvements to on-mountain facilities over fiscal years 1997
through 2001.
SUGARBUSH RESORT. Extending over six mountain peaks, Sugarbush's
facilities consist of 413 acres of skiable terrain and 111 trails. The resort
has a 4,135 foot summit and a 2,600 foot vertical drop. Its six mountains are
serviced by 18 lifts, including four high-speed detachable quad lifts, two
fixed grip quad lifts, seven triple or double lifts and three surface lifts.
The mountains are serviced by five base lodges and two summit lodges. The
resort's bed base consists of approximately 1,900 beds on-mountain and another
2,200 beds within the greater Warren, Vermont area. The resort operates three
ski shops, four full-service restaurants, four cafeteria-style restaurants,
and four bars. The Company also owns and operates the 46 unit Sugarbush Inn,
manages approximately
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200 condominium units and owns and operates a championship golf course as well
as a sports center and a conference center.
Sugarbush features the three highest mountain peaks of any single
resort in the East (Mount Ellen at 4,135 feet, Lincoln Peak at 3,975 feet and
Nancy Hanks at 3,812 feet). Its terrain is extremely diverse, featuring steep
expert slopes, both narrow and wide, numerous long intermediate cruising
trails, significant novice terrain as well as separate teaching and learning
areas. The resort offers picturesque base facilities at both its north and
south peaks. Following its acquisition by the Company in 1994, the Company
invested $16 million in a major capital improvement program that included four
high speed quad chairlifts, a 300% increase in snowmaking capacity and base
area improvements.
Management believes Sugarbush also has substantial growth potential.
The Company has identified approximately 250 to 300 acres of its terrain for
development as additional intermediate terrain. Future demands will require
additional pipeline connections, which are included in the over $8 million in
planned capital improvements to the resort's on-mountain facilities over
fiscal years 1997 through 2001.
ATTITASH/BEAR PEAK. Covering two mountain peaks, Attitash/Bear Peak
facilities consist of 214 acres of skiable terrain and 45 trails. The resort
has a 2,350 foot summit and a 1,750 foot vertical drop. Its two mountains are
serviced by ten lifts, including one high-speed detachable quad lift, one
fixed grip quad lift, four triple or double lifts and two surface lifts. The
mountains are serviced by two base lodges. The resort has limited on-mountain
bed base; however, it maintains 3,200 beds in its reservation system and draws
from the 16,000 bed Mt. Washington Valley area. The resort operates two ski
shops, two full-service restaurants, three cafeteria-style restaurants, and
two bars.
Attitash has been fully developed for some time. Bear Peak is a new
area still under development by the Company. The most recent improvements
include a new full scale base lodge and high speed quad. The resort is widely
recognized as a family-oriented resort presenting a relaxed atmosphere and
manageable size believed to be attractive to many families vacationing in the
Mt. Washington Valley. Due to its location in the Mt. Washington Valley
tourist area, it has developed a significant number of year-round activities
including an alpine water slide, horseback riding and features several top
level equestrian events.
Management expects to continue to develop terrain at its new Bear
Peak area. A Summit Hotel is scheduled to commence construction at the resort
in the next twelve months. Final zoning and financing are in the final stages
of approval. The resort's capital improvement program will provide for over $7
million in improvements to on-mountain facilities over fiscal years 1997
through 2001.
MT. CRANMORE. Mt. Cranmore's facilities consist of 190 acres of
skiable terrain, with 36 trails. The resort has a 1,714 foot summit and a
1,167 foot vertical drop. It is serviced by six lifts, including one
high-speed detachable quad lift, four triple or double lifts and one surface
lift. The mountain is serviced by two base lodges and a gourmet restaurant at
the summit. The resort has no on-mountain bed base but is located near the
center of Mt. Washington Valley's 16,000 bed base. The resort operates one ski
shop, one rental shop, two full-service restaurants, two cafeteria-style
restaurants, and one bar. The Company also manages 30 condominium units.
Mt. Cranmore is one of the oldest continuously operated ski areas in
the United States. Located within walking distance of the North Conway
shopping district, the mountain offers a unique combination of quality skiing
and immediate access to one of New England's largest retail and restaurant
centers. Although Mt. Cranmore is the Company's smallest mountain, its
location and amenities make it a unique and very attractive skiing
alternative.
The Company owns 800 acres and holds deeded rights to develop
approximately 700 additional acres, at its sole discretion that are
appropriately zoned for development as skiable terrain.
The Company has entered into the Consent with DOJ, which requires the
sale of Mt. Cranmore.
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<PAGE>
SKI LIMITED
SKI's operations consist of the Killington, Mt. Snow/Haystack,
Waterville Valley and Sugarloaf ski resorts. SKI acquired Mt. Snow in 1977 and
Haystack, Waterville Valley and its initial 51% interest in Sugarloaf in 1994,
and the balance of the outstanding Sugarloaf stock in August, 1996. SKI's
resorts comprise 2,439 acres of skiable terrain (of which approximately 77.6%
are covered by snowmaking equipment), 465 trails, and 70 lifts, of which seven
are high-speed detachable quads or gondolas. The Company believes that since
the late 1980s, SKI's resorts have been characterized by a lack of significant
capital investment, resulting in stagnant or declining skier visits, revenues,
net income and EBITDA. Nonetheless, the resorts remain some of the finest in
the Northeast, and the lack of capital investment over the last half decade
presents a unique opportunity for the Company to maximize the value and
earnings potential of those resorts through strategic capital investment and
rigorous management techniques instituted at the Company's other recently
acquired facilities.
KILLINGTON RESORT. Killington is a six-mountain resort, with a 4,241
foot summit and a 3,150 foot vertical drop. Killington's ski terrain is
comprised of 918 acres with 165 trails and 20 lifts consisting of one gondola,
seven quad lifts, ten triple or double lifts and two surface lifts. The
resort's base facilities include seven full-service base lodges, including one
located at the top of Killington Peak. Killington also owns and operates eight
retail shops, six rental and repair shops, a travel and reservation agency, an
87-room motor lodge in Killington Village and a low-voltage television
station. There is lodging capacity of 3,300 beds at the base of the mountains
and approximately 12,000 beds in the greater Sherburne area. Killington is a
year-round resort, offering complete golf amenities including an 18-hole golf
course, a golf school, a pro shop and a driving range, as well as a tennis
school.
Killington is the largest ski resort in the Northeast. Its size and
diversity of skiing terrain make it attractive to all segments of the market.
The Killington access road is a highly developed retail, lodging and
restaurant center known for its retail shopping, fine dining and night life.
Surveys indicate that Killington is the most widely recognized of the
Company's resorts.
Management believes Killington's facilities can be enhanced through
updating its snowmaking trail and lift systems and developing the real estate
potential at its base area. The Company plans major on-mountain capital
improvements over fiscal years 1997 through 2001. Management believes the
Killington base area presents superior potential for development of a Summit
Hotel. Although water supplies are adequate for current operations, management
is negotiating to acquire the additional water supplies needed to accommodate
the Company's snowmaking expansion plan. No assurances can be given regarding
the results of those negotiations.
MOUNT SNOW/HAYSTACK RESORT. Mount Snow/Haystack resort covers two
mountain peaks and has a 3,580 foot summit and a 1,700 foot vertical drop. The
facilities consist of 130 trails and 751 acres of skiable terrain, serviced by
24 lifts. On-mountain facilities include six full-service base lodges, several
retail shops, six rental and repair shops, a pro shop, a country club and a
nightclub. Mount Snow also headquarters the Company-owned "Original Golf
School," and operates an 18-hole golf course, golf schools in Vermont, Ocean
City, Maryland and Crystal River, Florida, a mountain bike school, a 92-room
hotel, and a low-voltage television station. Its bed base consists of 890
on-mountain beds and 7,821 beds in the greater Dover area.
Mount Snow is the southernmost of the Company's resorts. Located in
the Brattleboro, Vermont area, it is a convenient day drive from both New York
City and Boston. A large percentage of Mount Snow's skier base derives from
Massachusetts, Connecticut and New York. The resort consists of two separate
mountains, separated by approximately six miles, which have been combined
under single management. Together, the two mountains are serviced by one of
the Northeast's most extensive lift systems.
Management believes Mt. Snow's development potential includes
reconfiguration of lifts and trails to increase the mountains' carrying
capacity and interconnecting the Mt. Snow and Haystack areas. Additional
property rights and permitting will be required in order to establish that
connection, and no assurance can be given that this objective can be achieved.
A petition is pending before the Vermont Water Resources Board to reclassify a
section of a stream running between the Haystack area and the Mt. Snow area.
This reclassification has the potential to restrict or prevent construction
activities to connect the two areas. No assurance can be given regarding the
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outcome of this proceeding. The current capital program provides for
substantial expenditures to improve outdated facilities and reconfigure and
expand portions of the lift system over the next five years. The Mt. Snow base
area has been identified by management as a potential site for construction of
a Summit Hotel project. Management considers water supplies to be adequate to
meet existing needs. Optimal snowmaking and future development will require
additional water sources. The Company has identified potential additional
sources of water believed to be adequate for Mt. Snow's anticipated needs;
however, there can be no assurance that the requisite permits can be obtained.
SUGARLOAF RESORT. Sugarloaf is a single mountain with 1,400 acres of
terrain, 14 lifts and 116 trails covering 515 acres. There are approximately
895 acres of off-trail skiing terrain. The mountain has a 4,237 foot summit
and a 2,820 foot vertical drop. Sugarloaf operates a year-round conference
center and nordic ski facility. It leases, on a long term basis from the Town
of Carrabassett Valley, an 18-hole golf course designed by Robert Trent Jones,
Jr., which is ranked by Golf Digest and Golf magazine as one of the top 25
courses in the United States. The Original Golf School, which was developed at
Mount Snow, was expanded during fiscal year 1995 to include Sugarloaf.
Sugarloaf's slopeside ski village consists of its base lodge, two hotels,
banquet facilities for 800 people, retail, rental and repair shops, a sports
and fitness club, 900 condominium units, rental homes, shops, restaurants and
an extensive recreational path network.
Sugarloaf is located in Carrabassett Valley, Maine. Its remote
location has driven its development as a self-contained destination resort.
The resort offers one of the largest ski-in/ski-out base villages in the
Northeast, containing numerous restaurants, retail shops and an abundance of
lodging. Aside from its base development, Sugarloaf is widely recognized for
its challenging terrain, including its snowfields, which represent the only
lift-serviced above treeline skiing in the Northeast. Sugarloaf is a
destination resort for many Maine skiers. Although it draws from areas as
distant as New York, New Jersey and Pennsylvania, a significant segment of its
skiers are Maine-based.
WATERVILLE VALLEY. Waterville Valley's facilities consist of two
mountain peaks with 255 acres of terrain, including a separate 31 acre
snowboard mountain, a 4,004 foot summit and 2,020 foot vertical drop, 54
trails and 13 lifts. Waterville operates a planned ski community with three
lodges, a retail shop, a rental shop, and a repair shop. The resort has a
year-round Base Camp Adventure Center offering mountain bikers, cross country
skiers and hikers access to 60 miles of trails in the White Mountain National
Forest. Other resort amenities include an ice skating arena, golf course,
tennis center, sports and fitness center, and horseback riding. Waterville
Valley's Conference Center has 17,000 square feet of meeting space and
provides meeting and banquet facilities for up to 1,000.
Waterville Valley has long been recognized as one of the largest ski
resorts in New Hampshire. Its location immediately adjacent to Interstate 93
(a major north-south thoroughfare for skiers) makes it one of the most
accessible of the Company's resorts. The area is adjacent to a picturesque New
England village which contains most of the area's dining, shopping and
entertainment. The village square and resort are serviced by a shuttle, and
offer an integrated vacation experience characterized by both challenging
skiing at one of New Hampshire's largest resorts and an immediately available
off-mountain New England village offering some of the finest amenities in the
area.
Management believes the resort's proximity to the Boston market is a
major underdeveloped asset, and that the resort has the potential to develop a
larger day skiing base from that market through improved on-mountain
facilities and aggressively marketing in the Boston metropolitan area.
The Company has entered into the Consent with DOJ, which requires the
sale of Waterville Valley.
MARKETING
STAFF. The Company maintains a full-time marketing staff of 117
persons. Each resort has its own marketing director who reports to the
Company's vice president of marketing. The staff at each mountain is
responsible for development of a resort-specific marketing plan, as well as
participating in combining all of the resorts' marketing programs into an
overall marketing program designed to develop a corporate branded identity.
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Management regularly sponsors marketing seminars and planning sessions
designed to maximize the staff's professionalism and effectiveness.
STRATEGY. The Company has established a dedicated group within its
corporate marketing department, whose objective is to increase participation
in the sport by promoting the fun and excitement of skiing and snowboarding.
The group is developing an innovative ad campaign targeted to potential skiers
and snowboarders in three broad customer profiles. The first two demographics
are the emerging echo boom generation, and the "X" generation. Over the next
five to ten years, management believes these generations of over 114 million
younger Americans are going to be of the prime age for making what often
become life-long recreational choices. The Company's marketing initiative is a
high energy music and video ad campaign that is coupled with national and
regional strategic advertising alliances intended to introduce skiing and
snowboarding specifically to these generations by creating an image for skiing
and snowboarding that is up-to-date and consistent with the generational mood,
style and attitude. The third demographic is an older group (beginning in the
early 30s) that is just beginning to earn sufficient disposable income that
enables more expensive recreational pursuits. A similar marketing campaign
focusing on the fun and excitement of skiing has been developed for this
market segment, as well, using images most closely aligned with its
demographic profile.
The Company's resorts are located within manageable drive times from
major Eastern metropolitan areas. The Company plans to highlight its close
proximity to these population centers through its marketing program.
The individual resort marketing programs are divided between those
for the properties that attract a broader spectrum of skiers and snowboarders
and those that appeal to more focused groups. The larger resorts market to all
visitor segments, whether defined by skiing ability, affluence, marital status
or family size, with each resort marketing its unique attributes. Killington
is recognized for its size and diversity; Sunday River emphasizes its snow
conditions, lift capacity and consistently new terrain; Mount Snow will
promote its proximity to metropolitan New York and Boston; Sugarloaf is known
as a destination resort with superior lodging, a relaxed rural Maine image and
big mountain skiing; and Sugarbush promotes its classic, challenging terrain
combined with its substantial new investment in lifts and snowmaking.
Attitash/Bear Peak has distinct market appeal; located in the heart of the Mt.
Washington Valley, Attitash/Bear Peak draws from its 16,000 bed lodging base
and provides a family orientation, leveraging proximity to the North Conway
retail and restaurant district, a prime location for families with non-skiers.
PROGRAMS. The Company is subject to impulse consumer decisions to
visit other resorts and ski areas. The Company has designed and implemented a
series of initiatives to create a loyal customer base and increase the number
of seasonal visits. Chief among these has been:
o Aggressive marketing of the corporate message.
o Customer affinity programs.
o School, group and business affiliations.
o Innovative skier development and services program.
o Strategic marketing alliances.
o Data based marketing programs.
Aggressive marketing of the corporate message. The Company
consistently focuses marketing messages on snow quality, terrain, on-mountain
facilities and excitement. Beginning with midsummer mailings and continuing
through seasonal TV and radio advertisements, this message enables the resorts
to build a branded image relationship with consumers. An example of the
Company's branded image is the "skycam," a unique marketing program that
places real-time aerial views of resorts on selected television stations in
the market to graphically
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depict quality skiing conditions to potential skiers in the target population
centers where weather conditions may not be suggestive of skiing.
Customer affinity programs. The Company is a leader in the
development of "frequent skier" programs. These programs allow skiers to earn
points through the purchase of lift tickets which can be exchanged for free
lift tickets. The Company will introduce an enhanced affinity program that
allows skiers to earn points at all Company resorts. The Company has developed
a number of season pass programs allowing individuals, families, seniors and
students to purchase passes that provide unlimited access during designated
time periods.
School, group and business affiliations. The Company will maintain a
full time staff at each resort dedicated to developing special school, group
and business affiliations. The school programs bring thousands of students to
the resorts during five week-long programs in January and early February.
These programs have proved to be an effective way of building name recognition
and brand loyalty among the school-age populations. Surveys suggest that many
of these students return to the resort with their families. Ski groups have
emerged as the fastest and most profitable way of increasing midweek business.
The group sales department provides year-round support to group leaders
through the Unites States and Canada. Through an extensive Spring and Fall
touring program, the resorts recruit new groups and potential group leaders.
The group sales office provides technical support to potential group leaders
and helps them develop and support their groups. The Company is developing the
European group market by forming contacts with the major group vendors in
England. Business affiliations are developed and maintained through corporate
tickets programs, whereby participating businesses are given an opportunity to
provide their employees with incentive-based pricing.
Innovative skier development and services programs. Management
believes that the Company has been a leader in the development of skier
development and services. The Guaranteed Learn to Ski program was one of the
first skier development programs to guarantee that a customer would learn to
ski in one day. The success of this program led to the development of "Perfect
Turn," which management believes is the first combined skier development and
marketing program in the industry. Perfect Turn ski professionals receive
specialized training in coaching, communication and skiing. The program uses
ski pros to build relationships between improved skiing technique, special
resort programs and fun. Perfect Turn is currently licensed to five resorts in
the United States and Canada. Management believes that it is the only skier
educational program in the industry to be licensed to other resorts. In the
1995/1996 season, the program began to develop special hard goods marketing
programs designed to allow customers to test ride skis and snowboards with
professionals, purchase their equipment from a professional and receive
ongoing product and technical support through Perfect Turn. This program will
be expanded to all of the Company's resorts.
Strategic marketing alliances. Management expects to establish
advertising sponsorships with several key sponsors, whereby a sponsor in a
given product category is designated as the official provider of that product
category for the Company's resorts. The Company has been approached by
numerous high quality sponsors, and has entered into shared promotional
advertising with Jeep/Eagle and Coca Cola, among others. Industries under
active consideration for such sponsorships include automobile, sport utility
vehicle, soft drink, juice drink, credit card, financial services, fuel
dealers, communications, hair care, fast food, cereal manufacturers and film
companies.
Data based marketing programs. The Company maintains a well-developed
data base of frequent skiers and lodging consumers. The Company has expanded
its management systems for the specific purpose of developing new consumer
profiles. Through the use of this technology, management believes that the
marketing departments have been able to substantially increase the
effectiveness of the Company's marketing programs. The Company has seen
immediate cost savings and increased profits through the use of targeted
"smart mailings," which are designed to provide the right consumer with the
right vacation package offer at the right time.
REAL ESTATE DEVELOPMENT
STRATEGY. The Company views selective real estate development as a
natural outgrowth of the on-mountain development of its resorts. Management
believes that there is tremendous opportunity for synergy between real estate
development and the ski experience. Development of real estate provides a
three-fold benefit to the ski
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resorts. First, successful real estate development generates profits that have
been historically reinvested in resort infrastructure. Second, signature
properties like the Summit Hotel at Sunday River create an image for the
resort that both attracts skiers to the area and provides a valuable marketing
opportunity. Finally, real estate development enhances the bed base at the
mountain, thereby contributing directly to maintaining, and increasing, skier
days.
The Company has traditionally taken a conservative approach toward
real estate development and expects to continue this conservative philosophy.
Throughout the 1980s and early 1990s, management required substantial levels
of pre-construction sales before commencing construction of any of its
projects, whether traditional condominiums or its Summit Hotel interval
ownership project at Sunday River, providing a test of the market's appetite
for the proposed product, while reducing risk to the Company and facilitating
development financing.
HISTORY. The Company's real estate development efforts to date have
focused on Sunday River, and have consisted of the construction of
condominiums and the Summit Hotel. Development at the Company's recently
acquired resorts is now in the planning and permitting stages.
Between 1992 and 1993, Sunday River successfully developed the Summit
Hotel, a prototype year-round destination slopeside hotel. The hotel is a
condominium consisting of six types of space: real estate, commercial,
conference facilities, owners' amenities, infrastructure facilities and common
space. Sunday River retains ownership of the core commercial and restaurant
space, conference facilities and infrastructure facilities. The real estate
space consists of the individual hotel condominiums, which are sold in
quartershare interests. A quartershare interest is an interval ownership
concept providing an owner with the right to use the unit for 13 weeks evenly
divided over the year. There are six basic room designs that combine to create
over 21 different condominium possibilities. The units can be configured to
the desires of each purchaser.
Quartershare owners participate in the Resort Condominium
International ("RCI") exchange program, through which owners can exchange
their right to use a Summit quartershare for interval stays at RCI properties
located at resorts around the world. Sunday River operates the hotel and
provides optional management of the quartershare units for individual owners
through a management agreement with Sunday River under which its ski and
lodging operations receive up to 45% of the rental revenues.
There are eight conference facilities of varying sizes ranging from
relatively small 500-square foot function rooms to a 5,900 square foot
ballroom. Owner amenities consist of membership in the Gold Crown Club, which
provides a range of exclusive goods and services to quartershare owners, as
well as private owner lounges, a full-size swimming pool, tennis courts and
private locker rooms and changing facilities.
MARKETING. Management uses a unique marketing program in which the
hotel is sold in five phases. Each phase relates to a specific level of hotel
development and targets a specific level of sales. Inventory of units is
controlled and released on an incremental basis over the first four phases.
The sales effort targets middle income buyers, with quartershare interests
historically being offered at prices ranging from $25,000 to $45,000. Annual
common area maintenance charges are approximately $1,500 per quartershare.
Management believes that the presence of large numbers of potential buyers at
the resort within targeted income categories has allowed the quartershare
development to sell with relatively low marketing costs. Management believes
that this marketing program can be successfully implemented in connection with
real estate development activities at the Company's other resorts.
FUTURE DEVELOPMENT. The Company is considering developing hotels at
its other resorts using the Summit Hotel prototype, based upon its assessment
of the market demand. Initial cost is expected to be in the range of $12 to
$15 million per hotel. In addition, management believes that an additional
wing could be added to each hotel, subject to market demand, approximately two
years after the initial construction at a cost of approximately $5-$6 million
per hotel.
The Company is proceeding in the permitting and planning stages for a
hotel at the Attitash/Bear Peak resort. All necessary permits and approvals
have been received, and a commitment for construction financing has been
obtained. Ground breaking on the Attitash/Bear Peak location is anticipated to
occur in August 1996. Summit
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Hotels are in various stages of planning at several other resorts. At
Sugarbush, the project is in the pre-construction marketing and sales stage
while permits and all land rights are being finalized. Permits are in place
for the development of a hotel at the base of Mt. Cranmore. Local approvals
have been secured for the new Jordan Bowl Hotel at Sunday River, with final
state approvals expected by management during summer 1996. Locations for
Summit Hotel projects have been identified at Killington and Mt. Snow resorts.
Each of those locations is on property currently owned by the resort. The
permit process for hotel facilities and at the base of Mt. Snow is underway.
The Company will evaluate whether and when to begin each project based upon
market demand. Management believes that the lack of recent real estate
development at Killington, Mt. Snow and Sugarbush makes those locations
particularly attractive markets for Summit Hotel-type projects.
Management intends to limit development risk by implementing
pre-construction sales programs at each location prior to commencement of
construction. The financing for each project is expected to be arranged on a
project-by-project basis only after pre-construction sales targets are
achieved.
Other than with respect to Attitash/Bear Peak, the Company has no
agreements, arrangements or understandings with respect to financing the
development of any of the real estate projects discussed herein. Any future
development would be subject to, among other things, the Company's ability to
obtain the necessary financing and all necessary permits and approvals. No
assurance can be given that the Company will develop successfully any
additional properties or, if completed, any such properties will be
successful.
Sunday River is also engaged in the construction of a limited number
of townhouse condominium projects. During 1996-1998, the Company's objective
is to sell eight condominiums each year at Sunday River. Each condominium is
planned to be offered for approximately $225,000.
MOUNTAIN OPERATIONS
Mountain operations consist of four basic components--snowmaking,
grooming, lift operation and base operations. Each of these segments of
mountain operations is described in summary fashion below.
SNOWMAKING. Management believes that the Company operates some of the
world's largest snowmaking facilities. The Company intends to introduce to
each of its resorts the snowmaking process refined at its Sunday River resort
over the past 20 years. The Company has designed, engineered and produces its
own snowmaking guns, which it believes adds substantially to the quality of
snow made at Sunday River. Through its engineering department, the Company has
developed a snowmaking system that combines hardware developed by the Company
with a computer control system that monitors weather conditions throughout the
resort's eight mountains and automatically programs the pressure and water
volume necessary in order to produce consistent, high quality snow. Management
believes the snow produced at Sunday River is consistently dry and looks and
skis like lightly packed natural snow and is qualitatively different from snow
produced at other resorts.
GROOMING. In addition to producing high quality snow, the Company
emphasizes careful grooming in order to maintain a high quality skiing
surface. The Company's modern fleet of groomers located at each of its
facilities employ a unique "slow tilling" grooming technique in which grooming
equipment operates at one-half the normal speed, increasing the depth to which
the snow is groomed and thereby replicating the feel of natural snowfall and
extending the useful life of the manufactured snow.
LIFT OPERATION. Each of the Company's resorts employs qualified,
well-trained engineers and lift operators to maintain the Company's extensive,
modern lift systems. Under the direction of the Company's Senior Vice
President of Mountain Operations, the Company's substantial investment in
lifts is continually protected by on-ongoing maintenance programs and careful
operation.
BASE OPERATIONS. Under the control of the Director of Base
Operations, all of the Company's retail, food and beverage, rental and skier
development area operations are administered on a coordinated basis. The
Company's philosophy is to provide consistently high-quality service to its
customers, while enabling each resort to exercise its own creativity in
developing and administering base facilities in a fashion that best suits its
needs and its customers'
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desires. Its business objectives with respect to these facilities are to
retain full control over them, to impose rigorous cost controls and to
creatively and aggressively seek to enhance revenues.
COMPETITION
The Company faces strong competition from ski areas operating in the
Northeast (which consists of Maine, New Hampshire, Vermont, Massachusetts,
Connecticut and New York) competing for day and vacationing skiers,
destination ski resorts competing on a national basis for vacationing skier
visits, and non-ski related leisure and recreation destination resorts.
On a regional basis, the Company's major markets are the major
population centers in the Northeast, particularly eastern Massachusetts,
northern Connecticut, New York and northern New Jersey. For example, skier
origin data collected at Sunday River indicates that approximately 43% of its
weekend skiers reside in Massachusetts. Similar data collected at Killington
and Mt. Snow indicate that approximately 23% and 35% of their weekend skiers,
respectively, reside in New York, with high concentrations from Massachusetts,
Connecticut, New Jersey and Vermont, as well.
In order to cover the high fixed costs of operation associated with
the ski industry, the Company must maintain its regional skier base. The
Company's ability to price product is directly impacted by the variety of
acceptable alternatives presented to skiers in the Northeast region. The most
significant competitors are resorts that have established a niche market or
loyal clientele, such as mountains recognized as family-friendly resorts.
Also, many resorts have made significant capital improvements, keeping them on
the edge of the sport's technology and positioning them as keen competitors.
Many of the Company's competitors have exhibited both the desire and ability
to make on-mountain capital improvements and to develop real estate, thus
sustaining competitive pressure in the region. Although many smaller areas
offer fewer amenities and less diversity of terrain, often they are
competitively priced and draw from nearby population centers, which form a
part of the Company's market as well.
On a national basis, the Company's resorts compete with
well-capitalized, professionally managed resorts offering a variety of
amenities. The Company, as well as other nationally-recognized resorts, will
be competing on a broader scale for recreational and leisure dollars. These
resorts offer a variety of activities and amenities including luxury
accommodations, gourmet restaurants, extensive retail shops, spas, skating
rinks and a variety of non-skiing activities. For example, many Western
resorts are making major investments in non-alpine activities such as
snowmobile trails, horseback riding, skating and retail and performing arts
centers. Although Eastern skiing draws few skiers from Western regions, the
Company competes with Western resorts to attract and retain Mid-Western,
Mid-Atlantic and Northeast skiers. The Company also competes with large,
well-capitalized Canadian resorts for the over seven million annual Eastern
Canadian skier visits.
EMPLOYEES AND LABOR RELATIONS
The Company employs approximately 7,000 employees at peak season and
approximately 2,000 persons full time. None of the Company's employees are
covered by any collective bargaining agreements. The Company believes it has
good relations with its employees.
ENVIRONMENTAL MATTERS
The Company's resorts are subject to a wide variety of federal, state
and local laws and regulations relating to land use, water resources, sewage
disposal, and the use, storage, discharge, emission and disposal of wastes,
and other environmental matters. While management believes that the Company's
resorts are presently in material compliance with all land use and
environmental laws, failure to comply with such laws could result in the
imposition of severe penalties or restrictions on operations by government
agencies or courts that could adversely affect operations. The Company has
recently completed Phase I environmental assessments at all eight resort
properties. The reports identified areas of potential environmental concern,
including the need to upgrade existing underground storage tanks at several
facilities and to remediate potential petroleum releases. The reports did not
identify any environmental conditions or non-compliance at any of the resorts,
the remediation or correction of
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which management believes would have a material adverse impact on the business
or financial condition of the Company or results of operations or cash flows.
The Killington resort has been identified by the U.S. Environmental Protection
Agency ("EPA") as a potentially responsible party at two sites pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund"). Killington has entered into a settlement agreement with EPA
at one of the sites, the Solvents Recovery Service of New England Superfund
site in Southington, Connecticut. Killington recently rejected an offer to
enter into a de minimis settlement with EPA for the other site, the PSC
Resources Superfund site in Palmer, Massachusetts. The Company believes that
its liability for these sites, individually and in the aggregate, will not
have a material adverse effect on the business or financial condition of the
Company or its results of operations or cash flows.
The Company believes it has all permits, licenses and approvals from
governmental authorities material to the operation of the resorts as currently
configured. The Company has not received any notice of material non-compliance
with permits, licenses or approvals necessary for the operation of its
properties.
The capital programs at the resorts will require permits and
approvals from certain federal, state and local authorities. The Company's
operations are heavily dependent upon its continued ability, under applicable
laws, regulations, policies, permits, licenses or contractual arrangements, to
have access to adequate supplies of water with which to make snow and service
the other needs of its facilities, and otherwise to conduct its operations.
There can be no assurance that new applications of existing laws, regulations
and policies, or changes in such laws, regulations and policies will not occur
in a manner that could have such an effect, or that important permits,
licenses or agreements will not be canceled, non-renewed, or renewed on terms
materially less favorable to the Company. Major expansions of any one or more
resorts could require the filing of an environmental impact statement with the
U.S. Forest Service under NEPA if it is determined that the expansion has a
significant impact upon the environment. Although the Company has consistently
been successful in implementing its capital expansion plans, no assurance can
be given that necessary permits and approvals will be obtained. A petition is
pending before the Vermont Water Resources Board to reclassify a section of a
stream running between the Haystack area and the Mt. Snow area. This
reclassification has the potential to restrict or prevent construction
activities to connect the two areas. No assurance can be given regarding the
outcome of this proceeding.
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
arising in the ordinary course of its business. The Company does not believe
that it is involved in any litigation that will, individually or in the
aggregate, have a material adverse effect on its financial condition or
results of operations or cash flows.
Each of the resort operating companies have pending and are regularly
subject to suit with respect to personal injury claims related principally to
skiing activities at each resort. Each of the operating companies maintains
liability insurance that the Company considers adequate to insure claims
related to usual and customary risks associated with the operation of a ski
resort. SKI operates a captive insurance company authorized under the laws of
the State of Vermont which provides liability and workers' compensation
coverage for the SKI resorts located in Vermont. The Company has received
confirmation from an internationally recognized actuarial firm that the
insurance company's reserves are adequate to cover losses and loss adjustment
expenses associated with all claims made through April 30, 1996.
PROPERTIES
The Company's operations are wholly dependent upon its ownership or
control over the real estate constituting each resort. The following
summarizes non-owned real estate critical to operations at each resort.
Management believes each of the following leases, permits or agreements is in
full force and effect and that the Company is entitled to the benefit of such
agreements.
Sunday River leases 1,500 acres, which constitute a substantial
portion of its current skiable terrain, under a 50 year lease terminating on
October 14, 2030. The lease renews automatically thereafter on a year-to-year
basis unless terminated by either the lessor or lessee.
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The Sugarbush Resort has a license to use 1,915 acres of United
States Forest Service land pursuant to a special use permit dated May 17,
1995. The permit has a 40 year term expiring April 30, 2035.
Mt. Snow leases 1,315 acres which constitute a substantial portion of
its skiable terrain. Of this total, approximately 900 acres is occupied by Mt.
Snow pursuant to a special use permit granted by the United States Forest
Service dated November 29, 1989. The permit has a 40 year term expiring
December 31, 2029.
Mt. Snow also leases 252 acres which constitute a portion of its
skiable terrain from the Town of Wilmington, Vermont. The lease expires
November 15, 2030. There are no renewal options. In addition, Mt. Snow leases
approximately 200 acres from Sargent Inc. pursuant to a lease expiring March
31, 2025. The lease can be renewed for an additional 30 year term. Mt. Snow
also has the option to purchase the leased property and a right of first
refusal in the event Sargent Inc. receives a bona fide offer for the leased
property.
Attitash/Bear Peak uses 279 acres of its skiable terrain pursuant to
a special use permit from the United States Forest Service dated July 19,
1994. The permit has a 40 year term expiring June 19, 2034. In addition,
Attitash/Bear Peak leases its parking facilities under a lease expiring
December 31, 2003. Attitash/Bear Peak has the option to purchase this leased
property at any time during the lease term. The lease contains no renewal
provisions.
Killington leases 2,500 acres from the State of Vermont. A
substantial portion of that property constitutes skiable terrain. The lease is
for an initial 10 year term commencing in 1960 and contains nine 10-year
renewal options. Killington exercised the renewal option in 1970, 1980 and
1990. Assuming continued exercise of Killington's renewal options, the lease
will ultimately expire in the year 2060. The lease is subject to a buy-out
option retained by the State of Vermont. At the conclusion of each 10 year
term (or extended term), the state has the option to buy out the lease for an
amount equal to Killington's adjusted capital outlay plus 10% of the gross
receipts from the operation for the preceding three years. "Adjusted Capital
Outlay" means total capital expenditures made by the tenant from 1956 to the
date of exercise of the option, depreciated at 1% per annum, except that
certain non-operable assets depreciate at 2% per annum. This buy-out option
will next become exercisable in the year 2000. If exercised today, the
exercise price would be approximately $72 million. Although the Company has
not had direct confirmation from Vermont state officials, it has no reason to
believe that the State intends to exercise the option in 2000.
The Sugarloaf resort leases the Sugarloaf Golf Course from the Town
of Carrabassett Valley, Maine pursuant to a lease dated June 3, 1987. The
lease term expires December, 2003. Sugarloaf has an option to renew the lease
for an additional 20 year term. In addition, Sugarloaf has an option to
purchase the leased property at any time on or prior to June 3, 1997 at a
purchase price equal to approximately $1.4 million, plus accrued and unpaid
interest at the rate of 8% per year from 1984 (the commencement of Sugarloaf's
original lease), plus the capital construction costs of any club house
constructed on the premises, less all lease payments made to the Town, for a
total estimated price of $2.7 million. Management has made no determination
regarding exercising the option or extending the lease.
Waterville Valley uses approximately 790 acres, which constitute a
major portion of its skiable terrain, pursuant to a Special Use Permit granted
by the United States Forest Service. The special use permit expires October
31, 2034.
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MANAGEMENT
The following table sets forth information with respect to the
current director and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Leslie B. Otten........... 47 Sole Director, President and Chief Executive Officer
Burton R. Mills........... 42 Senior Vice President of Mountain Operations
Thomas M. Richardson...... 42 Vice President of Finance
G. Christopher Brink...... 42 Vice President of Marketing and Sales
Allen Wilson.............. 43 President (Sugarbush)
Philip T. Gravink......... 60 President (Attitash/Mt. Cranmore)
Jolan F. Ippolito......... 49 Vice President of Corporate Affairs (Sunday River)
</TABLE>
LESLIE B. OTTEN, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER.
Mr. Otten joined Sherburne Corporation, then the parent company of Sunday
River, Killington and Mount Snow, in 1970. Mr. Otten joined Sunday River in
1972 as Assistant General Manager and became General Manager of Sunday River
in 1974. In 1980, Mr. Otten purchased Sherburne's 90% interest in Sunday River
and acquired the remaining 10% interest from the minority shareholders in 1989.
He has been the sole director, President and Chief Executive Officer of the
Company (or its predecessor) since 1980. Mr. Otten owns 96% of the outstanding
stock of the Company. Mr. Otten is a director of the Portland Museum of Art, a
director of the Maine Chamber and Alliance, a director of Maine Handicap
Skiing, a trustee of Gould Academy and a director of Project Opportunity.
BURTON R. MILLS, SENIOR VICE PRESIDENT OF MOUNTAIN OPERATIONS.
Mr. Mills has spent his entire 22 year career with the Company (or its
predecessor), serving in his present capacities since 1993. Prior thereto, he
served as Vice President of Mountain Operations.
THOMAS M. RICHARDSON, VICE PRESIDENT OF FINANCE. Mr. Richardson joined
the Company in the spring of 1993, and has served in his present capacity
since then. Prior to joining the Company, from 1992 to 1993, he worked at Loon
Mountain Recreation Corporation as treasurer and director of food, beverage
and tickets. Prior thereto, Mr. Richardson worked at SKI from 1983 to 1992 as
an internal auditor, accounting manager and division controller.
G. CHRISTOPHER BRINK, VICE PRESIDENT OF MARKETING AND SALES. Mr. Brink
has been with the Company in his present capacity since 1993. Prior to joining
the Company, Mr. Brink served as Vice President for group sales and conference
sales and Vice President of Marketing at Stratton Corp., Stratton, Vermont.
ALLEN WILSON, PRESIDENT (SUGARBUSH). Mr. Wilson has served as President
(Sugarbush) since 1994. Prior to assuming that position, he served in various
capacities for SKI, including Vice President and Controller of Killington
(1992-94) and as Chief Financial Officer of Bear Mountain, Ltd. (1988-92).
PHILIP T. GRAVINK, PRESIDENT (ATTITASH/MT. CRANMORE). Mr. Gravink joined
the company at the time Attitash was acquired in July of 1994, continuing in
the same position he had held for the Mount Attitash Lift Corporation. Prior
to joining Mount Attitash Lift Corporation in 1992, he served as Interim
Director of skiing for the State of New Hampshire, overseeing the Cannon and
Mount Sunapee ski resorts. Prior to that he was President and Chief Executive
Officer of Loon Mountain Recreation Corporation for 14 years.
JOLAN F. IPPOLITO, VICE PRESIDENT OF CORPORATE AFFAIRS OF SUNDAY RIVER.
Ms. Ippolito joined Sunday River in January of 1982, serving in her current
position since 1993. Ms. Ippolito held various positions at the resort prior
thereto.
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EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for the fiscal
year ended July 30, 1995 of the Company's President and Chief Executive
Officer and its other executive officers who received salary and bonuses in
excess of $100,000 for the fiscal year ended July 30, 1995 from the Company.
None of the Company's officers is subject to an employment agreement with the
Company.
1995 SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- ------ -----
Leslie B. Otten,
President and Chief Executive Officer........... $108,000 $4,000
Burton R. Mills,
Senior Vice President of Mountain Operations.... 155,000 6,000
G. Christopher Brink,
Vice President of Marketing and Sales........... 120,000 5,000
Allen Wilson,
President (Sugarbush)........................... 113,000 --
Philip T. Gravink,
President (Attitash/Mt. Cranmore)............... 101,000 --
The Company expects to increase Mr. Otten's compensation to a salary
of up to $350,000 and an annual performance-based bonus.
The Company intends to develop and implement, following the
Acquisition, an incentive-based compensation plan for selected executive
officers and key employees providing both EBITDA-based annual bonuses and
equity-based longer term incentives.
REPORT ON EXECUTIVE COMPENSATION
The Company does not have a compensation committee. Historically, all
decisions with respect to the compensation of the Company's executive officers
have been made by Mr. Otten, in his capacity as the sole stockholder, sole
director and chief executive officer of each of the entities comprising the
Company. Decisions with respect to executive compensation have been made on
the basis of available information with respect to the compensation of
individuals having comparable responsibilities at other major skiing and
resort businesses, the recent performance and financial condition of the
Company and the performance of the individual executive officers. Mr. Otten's
compensation as described above has not, historically, been determined on the
basis of such criteria, principally due to the fact that, as the Company's
sole stockholder, he was entitled to receive, and has received, dividends in
respect of his holdings of Common Stock based on the year-to-year
profitability of the Company that more directly reflect its performance and
financial condition. In the future, however, due to restrictions on the
payment of dividends by the Company, contained in the Indenture, the
Subordinated Note Indenture and the Senior Credit Facility, it is anticipated
that Mr. Otten's compensation will be determined in a manner similar to that
described above with respect to the Company's other executive officers.
LESLIE B. OTTEN
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COMMON STOCK OWNERSHIP
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Ownership Percent of Class
- ------------------ ---------------------------- ------------------------ ------------------
<S> <C> <C> <C>
Common Stock Leslie B. Otten 939,168 shares direct 96.0%
c/o American Skiing Company ownership
Sunday River Access Road
Bethel, Maine 04217
</TABLE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
In June, 1996, Sunday River issued to Mr. Otten a demand note
obligating Sunday River to pay to Mr. Otten a total of $5.2 million, which
amount equals the total amounts expected to become payable during 1996 and
1997 by Mr. Otten as income taxes with respect to Sunday River's
pre-Acquisition income as a Subchapter S corporation.
Christine Otten, Mr. Otten's spouse, is employed by the Company as
its director of retail buying, and is principally responsible for its retail
sales activities. During the fiscal years 1993, 1994 and 1995, Ms. Otten
received total compensation of $49,160, $54,575 and $53,584, respectively.
Western Maine Leasing Co., a corporation wholly owned by Mr. Otten,
presently leases items of heavy equipment to Sunday River under short-term
leases on terms believed by management to be comparable to those that could be
obtained by Sunday River from unaffiliated lessors of such equipment. In
fiscal 1993, 1994 and 1995, payments under such leases totaled $54,000,
$43,000 and $34,000, respectively.
The Company provides lodging management services for Ski Dorm, Inc.,
a corporation owned by Mr. Otten and his mother which owns a ski dorm located
near the Sunday River resort, on terms believed by management to be comparable
to those that would be offered by the Company to unaffiliated entities. In
fiscal 1993, 1994 and 1995, payments by Ski Dorm, Inc. to Sunday River totaled
$61,000, $93,000 and $83,000, respectively.
DESCRIPTION OF SENIOR SUBORDINATED NOTES
GENERAL
The Old Notes were issued and the New Notes are to be issued pursuant
to the Indenture between the Company and U.S. Trust Company of New York, as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to
all such terms, and holders of Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture and the forms of the
certificates evidencing the Old Notes and the New Notes, including the
definitions therein of certain terms used below, which documents have been
filed as exhibits to the Registration Statement and are incorporated herein by
reference. The definitions of certain terms used in the following summary are
set forth below under "-- Certain Definitions."
All of the Company's Subsidiaries are Restricted Subsidiaries, other
than LBO Development Company, Ski Insurance Company, Mountain Water Company
and Killington West Ltd., each of which is an Unrestricted Subsidiary. Under
certain circumstances, the Company will be able to designate additional
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set
forth in the Indenture.
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<PAGE>
The Old Notes and the New Notes will constitute a single series of
debt securities under the Indenture. If the Notes Exchange Offer is
consummated, holders of the Old Notes who do not exchange their Old Notes for
New Notes will vote together with the holders of the New Notes for all
relevant purposes under the Indenture. In that regard, the Indenture requires
that certain actions by holders thereunder (including acceleration following
an Event of Default) must be taken, and certain rights must be exercised, by
specified minimum percentages of the aggregate principal amount of the
outstanding Notes. In determining whether holders of the requisite percentage
in principal amount have given any notice, consent or waiver or taken any
other action permitted under the Indenture, any Old Notes which remain
outstanding after the Notes Exchange Offer will be aggregated with the New
Notes and the holders of the Old Notes and New Notes will vote together as a
single class for all such purposes. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Notes
shall be deemed to mean, at any time after the Notes Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old Notes
and New Notes then outstanding.
The terms of the New Note are identical in all material respects to
the terms of the Old Notes except that (i) the New Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and will not be
entitled to registration rights and (ii) Holders of New Notes will not be
entitled to liquidated damages for the Company's failure to register the Old
Notes or New Notes under the Registration Rights Agreement, Holders of Old
Notes should review the information set forth under "The Exchange Offers --
Certain Consequences of a Failure to Exchange."
The New Notes and the Old Notes are sometimes referred to as,
collectively, the "Notes" and, individually, a "Note."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $120.0
million and will mature on July 15, 2006. Interest on the Notes will accrue at
the rate of 12% per annum and will be payable semi-annually in arrears on
January 15 and July 15 of each year, commencing on January 15, 1997, to
Holders of record on the immediately preceding January 1 and July 1. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal of and premium, interest and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and Liquidated Damages may be made by check mailed to the Holders of
the Notes at their respective addresses set forth in the register of Holders
of Notes; provided that all payments with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company,
the Company's office or agency will be the office of the Trustee maintained
for such purpose. The Old Notes were, and the New Notes are to be issued in
denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, interest and Liquidated
Damages, if any, on, and all other Obligations with respect to the Notes
(other than the making of the interest payment payable on July 15, 1997 from
the Pledge Account) will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full in cash of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution of cash, securities or other property to
creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, in an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities, the
holders of Senior Debt of the Company will be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified
in the applicable Senior Debt) before the Holders of Notes will be entitled to
receive any payment with respect to the Notes (except for the interest payment
payable on July 15, 1997 from the Pledge Account), and until all Obligations
with respect to Senior Debt of the Company are paid in full in cash, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of such Senior Debt (except that Holders of Notes may receive the
interest payment payable on July 15, 1997 from the Pledge Account, securities
that are subordinated at least to the same extent as the Notes to Senior Debt
and any securities issued in exchange for Senior Debt and payments made from
the trust described under "-- Legal Defeasance and Covenant Defeasance").
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<PAGE>
The Company also may not make any payment upon or in respect of the
Notes (except such interest payment such subordinated securities or from the
trust described under "-- Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment of the principal of or premium or interest on Senior
Debt of the Company occurs and is continuing or (ii) any other default occurs
and is continuing with respect to Designated Senior Debt of the Company that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default
(a "Payment Blockage Notice") from the Senior Agent. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of such Senior Debt has been accelerated. No new
period of payment blockage may be commenced unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
The Indenture further requires that the Company promptly notify
holders of Senior Debt of the Company if payment of the Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of Notes may recover less
ratably than creditors of the Company who are holders of Senior Debt. As of
April 28, 1996, after giving pro forma effect to the Acquisition, the amount
of outstanding Senior Debt of the Company would have been approximately $51.0
million. The Indenture limits the amount of additional Indebtedness, including
Senior Debt, that the Company and its Restricted Subsidiaries can incur. See
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock."
INTEREST PAYMENT PLEDGE ACCOUNT
The Indenture provides that the Company's obligations under the Notes
to pay interest on January 15, 1997 and July 15, 1997 will be secured by funds
held by the Collateral Agent under the Pledge and Disbursement Agreement,
subject, in the case of the interest payment payable on January 15, 1997, to
the subordination provisions of the Notes. See "-- Subordination."
Approximately $15 million, an amount sufficient to pay interest on the Notes
through July 15, 1997, has been deposited in the Pledge Account, and has been
invested in U.S. Treasury obligations maturing immediately prior to January
15, 1997 and July 15, 1997, pending disbursement. Following the July 15, 1997
interest payment on the Notes, any amounts remaining in the Pledge Account
will be released to the Company and will thereafter remain subject to the
applicable provisions of the Indenture.
Subject to the foregoing, the Pledge and Disbursement Agreement
provides for the grant by the Company to the Collateral Agent of a first
priority security interest in the Pledge Account for the benefit of the
Holders of the Notes to secure the payment of interest due with respect to the
Notes on or prior to July 15, 1997. In addition to the subordination
provisions applicable to the interest payment payable on January 15, 1997, the
ability of Holders of Notes to realize upon any such funds or securities may
be subject to certain bankruptcy law limitations in the event of a bankruptcy
of the Company. Under the terms of the Indenture, the proceeds of the Pledge
Account will be applied, first, to amounts owing to the Trustee in respect of
fees and expenses of the Trustee and, second, to the Obligations under the
Notes and the Indenture, subject to the subordination provisions described
above.
87
<PAGE>
SUBSIDIARY GUARANTEES
The Company's payment Obligations under the Notes have been jointly
and severally guaranteed (the "Subsidiary Guarantees") by the Guarantors. The
Obligations of each Guarantor under its Subsidiary Guarantee are subordinated
in right of payment to all Senior Debt of such Guarantor pursuant to
subordination provisions substantially similar to those described above under
"-- Subordination."
The Indenture provides that no Guarantor may consolidate with or
merge with or into (whether or not such Guarantor is the surviving Person)
another corporation, Person or entity, whether or not affiliated with such
Guarantor, unless (i) subject to the provisions of the following paragraph,
the Person formed by or surviving any such consolidation or merger (if other
than such Guarantor) assumes all of the Obligations of such Guarantor,
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the
transaction; and (iv) the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described below under the caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock"; provided, however, that this provision shall not prohibit
any merger or consolidation among the Company or one or more wholly owned
Guarantors.
The Indenture provides that, in the event of a sale or other
disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor, such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Guarantor) will be released and relieved of any Obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "-- Repurchase at Option of Holders -- Asset Sales." In
addition, the Indenture provides that, in the event the Board of Directors
designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor
will be released and relieved of any Obligations under its Subsidiary
Guarantee; provided that such designation is conducted in accordance with the
applicable provisions of the Indenture.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to July
15, 2001. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on July 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2001.................................... 106.250%
2002.................................... 104.688
2003.................................... 103.125
2004.................................... 101.563
2005 and thereafter..................... 100.000
Notwithstanding the foregoing, on or prior to July 15, 1999, the
Company may redeem up to 25% in aggregate principal amount of the Notes at a
redemption price of 112% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption
date, with the net proceeds of one or more Equity Offerings; provided that at
least 75% in aggregate principal amount of the Notes originally issued under
the Indenture remains outstanding immediately after the occurrence of each
such redemption; and
88
<PAGE>
provided, further, that notice of each such redemption shall have been given
within 30 days after the date of the closing of such Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes
to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest ceases to accrue on Notes or portions of
them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at an offer price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date of repurchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction that constitutes the Change of
Control and offering to repurchase Notes pursuant to the procedures required
by the Indenture and described in such notice; provided that, prior to
complying with the provisions of this covenant, but in any event within 90
days following a Change of Control, the Company will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes as a result of a Change of
Control.
On the Change of Control Payment date, the Company will, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder
of Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
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The occurrence of a Change of Control could result in a default under
the Senior Credit Facility or other Senior Debt of the Company. In addition,
the Senior Credit Facility or other Senior Debt could restrict the Company's
ability to repurchase Notes upon a Change of Control. In the event a Change of
Control occurs at a time when the Company is prohibited from repurchasing
Notes, the Company could seek the consent of its lenders to the repurchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from repurchasing Notes. In
such case, the Company's failure to make a Change of Control Offer or to
repurchase Notes tendered in a Change of Control Offer would constitute an
Event of Default under the Indenture, which could, in turn, constitute a
default under the Senior Credit Facility or other Senior Debt. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes. See "-- Subordination." Finally,
the Company's ability to repurchase Notes upon a Change of Control may be
limited by the Company's then existing financial resources.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
ASSET SALES
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash; provided that (x) the amount of (a) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary
from further liability and (b) any notes or other obligations received by the
Company or such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received) shall be deemed to be cash for purposes
of this provision and (y) Asset Sales pursuant to the DOJ Divestiture shall
not be subject to the 75% minimum cash requirement specified in clause (ii) of
this paragraph, but such Asset Sales shall otherwise continue to be subject to
this covenant and any cash proceeds resulting from the subsequent disposition
of such non-cash consideration shall be subject to the provisions of this
covenant.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds
(a) to permanently reduce Senior Debt of the Company or such Restricted
Subsidiary (and to correspondingly reduce commitments with respect thereto) or
(b) to the making of capital expenditures or the acquisition of long-term
assets in the same line of business as the Company or any Restricted
Subsidiary was engaged immediately prior to such Asset Sale. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
Senior Debt or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales in excess of
$1.0 million in any fiscal year that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company will be required to make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds
for general corporate purposes (subject to the restrictions of the Indenture).
If the aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the
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Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall
be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to any
direct or indirect holder of the Company's Equity Interests in its capacity as
such, other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company or dividends or distributions payable
to the Company or any Wholly Owned Restricted Subsidiary of the Company that
is a Guarantor; (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any Subsidiary or other Affiliate of
the Company, other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (iii)
make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value, prior to a scheduled mandatory sinking fund
payment date or final maturity date, any Indebtedness that is subordinated to
the Notes; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after
giving effect to such Restricted Payment, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the covenant described below under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries on or after the date of the Indenture, is less than the
sum of (i) $5.0 million, plus (ii) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from
July 29, 1996 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (iii)
100% of the aggregate net cash proceeds received by the Company as
capital contributions or from the issue or sale since the date of the
Indenture of Equity Interests of the Company or of debt securities of
the Company that have been converted into such Equity Interests
(other than Equity Interests (or convertible debt securities) sold to
a Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus
(iv) to the extent that any Restricted Investment is sold for cash or
otherwise liquidated or repaid for cash, 100% of the net cash
proceeds thereof (less the cost of disposition) (but only to the
extent not included in subclause (ii) of this clause (c)); plus (v)
to the extent that any Unrestricted Subsidiary is designated to be a
Restricted Subsidiary, the fair market value (as determined in good
faith by the Board of Directors) of the Company's Investment in such
Subsidiary at the time of such designation (but only to the extent
not included in subclause (ii) of this clause (c)); provided,
however, that in the case of (1) the declaration or payment of any
dividend or the making of any other payment or distribution on
account of the Company's Common Stock or to any direct or indirect
holder of the Company's Common Stock in its capacity as such or (2)
the purchase, redemption or other acquisition or retirement for value
of any Common Stock of the Company, (A) the Company may not include
the $5.0 million set forth in subclause (i) of this clause (c) and
may only include 25% of its Consolidated Net Income for purposes of
subclause (ii) of this clause (c) in calculating the amount available
pursuant to this clause (c) for the making of any such Restricted
Payment if, after giving effect to such Restricted Payment, the
Company's Leverage Ratio would exceed 70% and (B) Consolidated Net
Income for purposes of this
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clause (c) shall exclude the first $5.0 million of Consolidated Net
Income of the Company reported from July 29, 1996.
The foregoing provisions will not prohibit (i) the payment of any
dividend or other distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indenture; (ii) the redemption, repurchase, retirement
or other acquisition of any Equity Interests of the Company in exchange for,
or out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) of the preceding
paragraph; (iii) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Debt or the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c) of the preceding paragraph; (iv)
Investments in Real Estate Subsidiaries in an amount not to exceed $10.0
million plus, to the extent that any such Investment is sold for cash or
otherwise liquidated or repaid for cash, the net cash proceeds thereof (less
the cost of disposition); provided that the amount of any such net cash
proceeds shall be excluded from clause (c) of the preceding paragraph; (v) the
acquisition of Equity Interests in Sugarloaf Mountain Corporation within six
months after the consummation of the Acquisition; (vi) contributions of real
estate not used in or essential to ski operations to Real Estate Subsidiaries
for Permitted Real Estate Projects; (vii) conveyance of real estate not used
in or essential to ski operations to Unrestricted Subsidiaries with an
aggregate book value not in excess of $2.0 million; (viii) Guarantees of
Indebtedness of Real Estate Subsidiaries to the extent that such Guarantees
are permitted to be incurred by the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;" (ix) payments of
principal of and interest on the Demand Note; (x) Investments received by the
Company and its Restricted Subsidiaries as non-cash consideration from Asset
Sales to the extent permitted by the covenant described under the caption "--
Repurchase at the Option of Holders -- Asset Sales"; and (xi) the repurchase
of Subordinated Notes pursuant to a Subordinated Note Change of Control Offer
(as defined).
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value (as determined in good faith by the Board of
Directors) of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may not (i) transfer any property or assets that are a material
part of the ski operations of the Company and its Restricted Subsidiaries to
an Unrestricted Subsidiary or (ii) designate as an Unrestricted Subsidiary any
Restricted Subsidiary of the Company that holds any property or assets that
are a material part of the ski operations of the Company and its Restricted
Subsidiaries.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and will not permit any of its
Restricted Subsidiaries to issue any preferred stock; provided, however, that,
so long as no Default or Event of Default has occurred and is continuing, the
Company and its Restricted Subsidiaries that are Guarantors may incur
Indebtedness (including Acquired Debt), and its Restricted Subsidiaries that
are Guarantors may issue preferred stock, if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal quarterly financial statements are available immediately preceding
the date on which such additional Indebtedness is incurred or such additional
preferred stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred or the
additional preferred stock had been issued at the beginning of such
four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness pursuant to the Bank Credit Agreements
in an amount not to exceed the greater of (a) $65.0 million and (b)
1.5 times the Company's Consolidated Cash Flow for the most recently
ended four full fiscal quarters for which internal quarterly
financial statements are available immediately preceding the date on
which such Indebtedness is incurred, less, in either case, the
aggregate amount of all permanent reductions thereto pursuant to the
covenant described under "-- Repurchase at the Option of Holders --
Asset Sales";
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes, the Subsidiary Guarantees, the
Indenture, the Subordinated Notes, the Subordinated Note Subsidiary
Guarantees and the Subordinated Note Indenture;
(iv) the incurrence of intercompany Indebtedness between or
among the Company and any of its Wholly Owned Restricted Subsidiaries
(other than Real Estate Subsidiaries); provided that any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company, or any sale or
other transfer of any such Indebtedness to a Person that is neither
the Company nor a Wholly Owned Restricted Subsidiary of the Company,
shall be deemed to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of purchase money Indebtedness to finance the purchase
of property or assets to be used in the ski operations of the Company
and its Restricted Subsidiaries or a related business in an aggregate
amount at any one time outstanding not to exceed the lesser of (a)
the purchase price of such property or assets and (b) $15.0 million;
(vi) the incurrence by the Company and its Restricted
Subsidiaries of Guarantees of Indebtedness of Real Estate
Subsidiaries in an amount not to exceed $15.0 million at any one time
outstanding in connection with Permitted Real Estate Projects,
provided that the total purchase price for the hotel, condominium,
interval ownership or other units comprising the development to be
constructed, in whole or in part, with the proceeds of the
Indebtedness so guaranteed, that have been contracted for sale
(evidenced by executed purchase agreements and security deposits from
credit-approved purchasers), equals at least 35% of the estimated
total cost of construction (as determined in good faith by the Board
of Directors) of the Permitted Real Estate Projects (except for the
development of the Summit Hotel at the Attitash resort, for which
such total purchase price must equal at least 25% of the estimated
total cost of construction (as determined in good faith by the Board
of Directors));
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness that was permitted by the Indenture to
be incurred;
(viii) the incurrence by Real Estate Subsidiaries of
Non-Recourse Real Estate Debt, provided that if any such Indebtedness
ceases to be Non-Recourse Real Estate Debt of a Real Estate
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company that is not a
Real Estate Subsidiary;
(ix) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company; and
(x) the incurrence by the Company and its Restricted
Subsidiaries of additional Indebtedness in an amount not to exceed
$25.0 million at any one time outstanding, provided that such
Indebtedness is expressly subordinated in right of payment to the
Notes at least to the same extent as the Notes are subordinated in
right of payment to Senior Debt of the Company.
LIENS
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of: (a) Existing Indebtedness as in effect on the date of
the Indenture; (b) applicable law; (c) any instrument governing Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired; (d) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices; (e) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired; (f) any instrument governing Non-Recourse Real Estate
Indebtedness of a Real Estate Subsidiary, which encumbrance or restriction is
not applicable to any Person or the properties or assets of any Person other
than such Real Estate Subsidiary or the property or assets of such Real Estate
Subsidiary; (g Senior Debt of the Company and Indebtedness of Guarantors,
provided that such Indebtedness was permitted to be incurred pursuant to the
Indenture; and (h) Permitted Liens.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving entity), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity, unless (i)
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the Company is the surviving entity or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and the Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii)immediately after such transaction, no Default or Event of Default exists;
and (iv) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) will,
at the time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $0.5 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of
the Board of Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the Company of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing; provided that (1)
any employment agreement or arrangement in existence on the date of the
Indenture or entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business and consistent with the past practice of
the Company or such Restricted Subsidiary, (2) transactions between or among
the Company and its Restricted Subsidiaries and (3) Restricted Payments and
Permitted Investments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments," in each case, shall
not be deemed Affiliate Transactions.
INDEPENDENT BOARD OF DIRECTORS
The Indenture provides that at least one member of the Board of
Directors of the Company shall be a disinterested director. The Indenture
further provides that the Company shall use its best efforts to have a
disinterested member of the Board of Directors by July 31, 1996.
LIMITATION ON OTHER SENIOR SUBORDINATED DEBT
The Indenture provides that neither the Company nor any Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that, in accordance with the terms of the instrument pursuant
to which it was created, is subordinate or junior in right of payment to any
Senior Debt of the Company or such Guarantor, as the case may be, and senior
in any respect in right of payment to the Notes or such Guarantor's Subsidiary
Guarantee.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture, then such newly acquired or created Subsidiary shall execute a
Subsidiary Guarantee and deliver an opinion of counsel in accordance with the
terms of the Indenture; provided, that this covenant shall not apply to any
Subsidiary that has been properly designated as an Unrestricted Subsidiary in
accordance with the Indenture for so long as it continues to constitute an
Unrestricted Subsidiary.
PAYMENTS FOR CONSENT
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to
be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its Restricted Subsidiaries and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company has agreed that, for so long as any Notes
remain outstanding, it will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium or
Liquidated Damages, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the captions "-- Change of
Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company for
30 days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) a continuing default under any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (a)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million and either (a) any creditor
commences enforcement proceedings upon any such judgment or (b) such judgments
are not paid, discharged or stayed for a
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period of 60 das; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant
Subsidiary of the Company or any group of Restricted Subsidiaries of the
Company that, taken together, would constitute a Significant Subsidiary of the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs prior to July 15, 2001 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to such date, then
the premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of the principal of or premium, interest or Liquidated
Damages on the Notes.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required, upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any Obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or
by reason of, such Obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws
and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on the Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default
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or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, without reinvestment, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of and premium,
interest and Liquidated Damages, if any, on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (a) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default r
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company shall have
delivered to the Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders of Notes
over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Note selected for redemption. Also, the Company is not required
to transfer or exchange any Note for a period of 15 days before a selection of
Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture or the
Notes
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may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Notes held by a non-consenting Holder): (i)
reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest or
Liquidated Damages on any Note, (iv) waive a Default or Event of Default in
the payment of principal of or premium, interest or Liquidated Damages on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium,
interest or Liquidated Damages on the Notes, (vii) waive a redemption payment
with respect to any Note (other than a payment required by one of the
covenants described above under the caption "-- Repurchase at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 of the
Indenture (which relate to subordination) requires the consent of the Holders
of at least 75% in aggregate principal amount of the Notes then outstanding if
such amendment would adversely affect the rights of Holders of the Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or
the Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes were initially
issued in the form of one Global Note (the "Global Note"). The Global Note was
deposited on the date of the closing of the sale of the Old Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note
Holder").
Notes that are issued as described below under "-- Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such
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Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary ownership of the Notes evidenced by the Global Note will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Notes
evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Notes evidenced by the Global Note. Beneficial owners of
Notes evidenced by the Global Note will not be considered the owners or
Holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records of the Depositary or for
maintaining, supervising or reviewing any records of the Depositary relating
to the Notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial
interest in the Global Note may, upon request to the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such person
or persons (or the nominee of any thereof). All such certificated Notes would
be subject to the legend requirements described herein under "Notice to
Investors." In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and
the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related
Notes.
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Neither the Company nor the Trustee will be liable for any delay by
the Global Note Holder or the Depositary in identifying the beneficial owners
of Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes
represented by the Global Note (including principal, premium, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Certificated Securities, the Company will make all payments of principal,
premium, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address. The Notes represented by the Global Note are expected to
be eligible to trade in the Depositary's Same-Day Funds Settlement System, and
any permitted secondary market trading activity in such Notes will, therefore,
be required by the Depositary to be settled in immediately available funds.
The Company expect that secondary trading in the Certificated Securities will
also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any rights, property or assets (including, without limitation,
by way of a sale and leaseback), other than sales of inventory, sales of
obsolete or unused equipment and sales by Real Estate Subsidiaries of hotel,
condominium, interval ownership or other units, in each case, in the ordinary
course of business consistent with past practices (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under the caption
"-- Change of Control" and/or the provisions described above under the caption
"-- Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant), and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, (iii) issuances of Equity
Interests by Sugarloaf pursuant to warrants outstanding on the date of the
Indenture, and (iv) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Restricted Payments" will not be deemed
to be Asset Sales.
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"Bank Credit Agreements" means (i) the Senior Credit Facility, (ii)
any other credit, loan, reimbursement or other similar agreement among the
Company, any Subsidiary and any bank, insurance company, finance company or
other institutional lender, (iii) each instrument pursuant to which
Obligations under any of the agreements described in clause (i) or (ii) above
are amended, deferred, extended, renewed, replaced, refunded or refinanced, in
whole or in part, and (iv) each instrument now or hereafter evidencing,
governing, guarantying or securing any Indebtedness under any agreements
described in clause (i), (ii) or (iii) above, in each case, as modified,
amended, restated or supplemented from time to time.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within one year after the date
of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the Permitted Holders, (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that the
Permitted Holders cease to be the "beneficial owners" (as such term is defined
in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of an aggregate of at
least 51% of the common stock of the Company and at least 51% of the voting
power of the Capital Stock of the Company, (iv) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), other than the Permitted Holders, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, of more than 35% of the common
stock of the Company or more than 35% of the voting power of the Capital Stock
of the Company and (v) the first day on which more than one-third of the
members of the board of directors of the Company are not Continuing Directors.
"Collateral Agent" means U.S. Trust Company of New York, as
Collateral Agent for the benefit of Holders of Notes under the Pledge and
Disbursement Agreement, or any successor thereto appointed pursuant to such
Agreement.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, to
the extent deducted in computing Consolidated Net Income, (i) an amount equal
to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, (ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, (iii) consolidated interest
expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not
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capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (iv) depreciation
and amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) of such Person and its Restricted Subsidiaries for such period, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization of, a Restricted Subsidiary
of the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of Real
Estate Subsidiaries or of any Person that is not a Restricted Subsidiary or
that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the referent Person or a Wholly Owned Restricted Subsidiary thereof (other
than a Real Estate Subsidiary), (ii) the Net Income of any Restricted
Subsidiary that is not a Guarantor shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded and
(iv) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common equity holders of
such Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred equity (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends or other
distributions unless such dividends or other distributions may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred equity, less (a) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (b) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted
Subsidiaries (except, in each case, Permitted Investments), and (c) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the board of directors of the Company who (i) was a member of the
board of directors on the date of the Indenture or (ii) was nominated for
election to the board of directors with the approval of at least two-thirds of
the Continuing Directors who were members of the board of directors at the
time of such nomination or election.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Demand Note" means the promissory note of Sunday River Skiway
Corporation payable to Leslie B. Otten in the original principal amount of
$5.2 million, as in effect on the date of the Indenture.
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"Designated Senior Debt" of any Person means such Person's
Obligations under the Bank Credit Agreements and any other Senior Debt of such
Person permitted to be incurred by such Person under the terms of the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the board of directors of such Person as "Designated Senior
Debt" by notice to the Trustee from both such Person and the Senior Agent.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"DOJ Divestiture" means the divestiture of the Waterville Valley and
Mount Cranmore resorts, whether effected by way of sale, lease, conveyance or
other disposition of any rights, property or assets, or by way of a sale of
the Capital Stock of Waterville Valley Ski Area, Ltd. or Cranmore, Inc., or a
merger, consolidation or other reorganization, effected in compliance with the
United States Department of Justice consent decree applicable thereto.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private sale of common stock of
the Company that results in net proceeds of at least $25.0 million to the
Company.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date of the Indenture, until such
amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations) and (ii) the consolidated interest expense of
such Person and its Restricted Subsidiaries that was capitalized during such
period and (iii) any interest expense on Indebtedness of another Person to the
extent that such Indebtedness is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one
of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments or other
distributions (and non-cash dividend payments in the case of a Person that is
a Restricted Subsidiary) on any series of preferred equity of such Person,
times (b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees
or redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee
or redemption of Indebtedness, or such issuance or redemption of preferred
stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be
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deemed to have occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to Real Estate Subsidiaries, Unrestricted Subsidiaries,
discontinued operations (as determined in accordance with GAAP) and operations
or businesses disposed of prior to the Calculation Date shall be excluded, and
(iii) the Fixed Charges attributable to Real Estate Subsidiaries, Unrestricted
Subsidiaries, discontinued operations (as determined in accordance with GAAP)
and operations or businesses disposed of prior o the Calculation Date shall be
excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries (other than Real Estate Subsidiaries) following the
Calculation Date and, in the case of Real Estate Subsidiaries, only to the
extent that the obligations giving rise to such Fixed Charges consist of
Non-Recourse Real Estate Debt.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means each of (i) Sunday River Skiway Corporation,
Sunday River Ltd., Perfect Turn Inc., LBO Holding, Inc., Sunday River
Transportation, Inc., Sugarbush Resort Holdings, Inc., Sugarbush Leasing
Company, Sugarbush Restaurants, Inc., Cranmore, Inc., S-K-I Limited,
Killington Ltd., Mount Snow Ltd., Waterville Valley Ski Area, Ltd., Sugarloaf
Mountain Corporation, Killington Restaurants, Inc., Dover Restaurants, Inc.,
Resort Technologies, Inc., Pico Ski Area Management Company, Mountain
Wastewater Treatment, Inc., Deerfield Operating Company and Resort Software
Services, Inc. and (ii) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest and currency rate swap
agreements, interest rate cap agreements and interest rate collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest or currency exchange rates.
"Indebtedness" means, with respect to any Person, without
duplication, (i) any indebtedness of such Person, whether or not contingent,
in respect of borrowed money or evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement agreements in
respect thereof) or banker's acceptances or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (ii) all indebtedness of others secured by a
Lien on any asset of such Person (whether or not such indebtedness is assumed
by such Person), (iii) Disqualified Stock of such Person, (iv) preferred stock
of any Restricted Subsidiary of such Person (other than Preferred Stock held
by such Person or any of its Wholly Owned Restricted Subsidiaries) and (v) to
the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons in the forms of direct or indirect loans
(including guarantees of Indebtedness or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company
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or any of its Restricted Subsidiaries for consideration consisting of common
equity securities of the Company shall not be deemed to be an Investment.
"Leverage Ratio" means, as of any date of determination, the ratio of
(i) the total indebtedness of the Company as shown on the Company's most
recent balance sheet, as adjusted to give effect to any repayment or
incurrence of indebtedness subsequent to the balance sheet date through such
date of determination, to (ii) the sum of (a) the total indebtedness of the
Company, calculated pursuant to clause (i), plus (b) total stockholders'
equity of the Company as shown on the Company's most recent balance sheet, as
adjusted to give effect to any capital contributions or issuances of Equity
Interests of the Company, any dividends or other distributions with respect to
any Equity Interests of the Company, or any repurchase or redemption of Equity
Interests of the Company, subsequent to the balance sheet date through such
date of determination.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person for such period, determined in accordance
with GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), any
relocation expenses incurred as a result thereof, any taxes paid or payable by
the Company or any of its Restricted Subsidiaries as a result thereof (after
taking into account any available tax credits or deductions and any tax
sharing arrangements) and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"Non-Recourse Real Estate Debt" means Indebtedness (i) as to which
neither the Company nor any of its Restricted Subsidiaries, other than Real
Estate Subsidiaries, (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness), (b)
is directly or indirectly liable (as a guarantor or otherwise) or (c)
constitutes the lender, (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against a
Real Estate Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or any of its Restricted
Subsidiaries, other than Real Estate Subsidiaries, to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity and (iii) as to which the lenders have
been
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notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries, other than Real
Estate Subsidiaries, except, in each case, to the extent permitted by the
covenant described under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock."
"Obligations" means, with respect to any instrument or agreement, any
and all principal, interest (including post petition interest), penalties,
premiums, fees (including without limitation, to the extent provided for in
such instrument or agreement, fees and expenses of counsel), indemnifications,
reimbursements, damages and other charges, obligations and liabilities
existing from time to time under such instrument or agreement, whether direct
or indirect, joint or several, actual, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, including any obligations or
liabilities to repay, redeem, repurchase, retire, acquire or defease any
Indebtedness under such instrument or agreement, or any obligation to
establish a sinking fund for any such purpose.
"Permitted Holders" means Leslie B. Otten (or, in the event of his
incompetence or death, his estate and his and his estate's heirs, executor,
administrator, committee or other representative (collectively, "Heirs")) and
any Person in which Leslie B. Otten and his Heirs, directly or indirectly,
have an 80% controlling interest.
"Permitted Investments" means (i) any Investment in the Company or in
a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (ii)
any Investment in Cash Equivalents; (iii) any Investment by the Company or any
of its Restricted Subsidiaries in a Person if, as a result of such Investment,
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company
and a Guarantor or (b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company that is a Guarantor; (iv) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales;" and (v)
Guarantees of Indebtedness permitted to be made pursuant to clause (vi) of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
"Permitted Liens" means (i) Liens securing Senior Debt of the Company
and its Restricted Subsidiaries; (ii) Liens securing Indebtedness that is pari
passu in right of payment with the Notes, provided that the Notes are equally
and ratably secured, (iii) Liens in favor of the Company or any of its
Restricted Subsidiaries; (iv) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any of its
Restricted Subsidiaries, provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or any such Restricted Subsidiary; (v) Liens on property existing at
the time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (vi) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(vii) Liens to secure Indebtedness permitted by clause (v) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;
(viii) Liens existing on the date of the Indenture; (ix) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens incurred in the ordinary course of business of
the Company or any of its Restricted Subsidiaries with respect to obligations
that do not exceed $2.0 million at any one time outstanding and that (a) are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or any such Restricted Subsidiary; (xi) Liens on assets of Real
Estate Subsidiaries securing Non-Recourse Real Estate Debt; and (xii) Liens on
the Pledge Account in favor of the Collateral Agent.
"Permitted Real Estate Project" means a project relating to one or
more of the purposes for which Real Estate Subsidiaries may be formed.
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"Permitted Refinancing Debt" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
other Indebtedness of the Company or any such Restricted Subsidiary; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date no earlier than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date no earlier than the final maturity date
of, and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred only by the
Company or the Restricted Subsidiary that is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Pledge Account" means the Pledge Account held by the Collateral
Agent for the benefit of Holders of Notes for the initial deposit of U.S.
Treasury obligations maturing immediately prior to the January 15, 1997 and
the July 15, 1997 interest payment dates under the Notes acquired with
approximately $15 million of borrowings under the Senior Credit Facility and
net proceeds from the Note Offering which have been pledged by the Company to
secure such interest payments under the Pledge and Disbursement Agreement.
"Pledge and Disbursement Agreement" means the Pledge and Disbursement
Agreement, dated as of the date of the Indenture, by and between the
Collateral Agent and the Company, governing the establishment and maintenance
of, and disbursement from, the Pledge Account.
"Real Estate Subsidiary" means a Restricted Subsidiary of the Company
that was formed for the purpose of developing, constructing and marketing
hotel, condominium, interval ownership and other residential real estate
projects, together with commercial and other space functionally related or
complementary thereto, and that is designated by the Board of Directors as a
Real Estate Subsidiary.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such
Person that is not an Unrestricted Subsidiary.
"Senior Agent" means (i) until all Indebtedness under the Bank Credit
Agreements is paid in full, the agent (or the institution performing similar
functions) under the Bank Credit Agreement under which the greatest aggregate
principal amount of Indebtedness is outstanding and (ii) if all Indebtedness
under the Bank Credit Agreements has been paid in full, the Person (or
representative thereof) holding the greatest amount of Senior Debt.
"Senior Debt" of any Person means and includes all principal of,
premium and interest on and other Obligations with respect to (i) the Bank
Credit Agreements and (ii) any other Indebtedness of such Person (other than
as otherwise provided in this definition), whether outstanding on the date of
issuance of the Notes or thereafter incurred; provided, however, that Senior
Debt shall not include (a) any Indebtedness which by the terms of the
instrument creating or evidencing the same is subordinated or junior in right
of payment to any other Senior Debt in any respect or (b) that portion of any
Indebtedness incurred in violation of the Indenture. Notwithstanding the
foregoing, Senior Debt shall not include (1) Indebtedness evidenced by the
Notes, (2) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code is without
recourse to such Person, (3) any liability for foreign, federal, state, local
or other taxes owed or owing by such Person, (4) Indebtedness of such Person
to the extent such liability constitutes Indebtedness to a Subsidiary or any
other Affiliate of such Person or any of such Affiliate's subsidiaries, (5)
Indebtedness for the purchase of goods or materials in the ordinary course of
business except purchase-money Indebtedness secured by a security interest in
or
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Lien upon the goods or materials purchased or (6) Indebtedness owed by such
Person for compensation to employees or for services.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Act, as such Regulation is in effect on the
date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Unrestricted Subsidiary" means any Subsidiary (i) that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary (i) has no
Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement,
contract, arrangement or understanding with the Company or any of its
Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, (iii) is a Person with respect
to which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results (except, in
the case of Ski Insurance Company, for the indirect obligation to maintain
adequate reserves and capital as required by the State of Vermont), (iv) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries and (v)
has at least one disinterested member of its board of directors. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Restricted Payments." If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company
shall be in default of such covenant). The Board of Directors may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) no
Default or Event of Default would be in existence following such designation;
and, provided, further, that such Subsidiary shall execute a Subsidiary
Guarantee and deliver an opinion of counsel in accordance with the terms of
the Indenture.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person and the Wholly Owned Restricted
Subsidiaries of such Person.
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DESCRIPTION OF SUBORDINATED NOTES
GENERAL
The Old Subordinated Notes were issued and the New Subordinated Notes
are to be issued pursuant to the Subordinated Note Indenture between the
Company and U.S. Trust Company of New York, as trustee (the "Subordinated Note
Trustee"). The terms of the Subordinated Notes include those stated in the
Subordinated Note Indenture and those made part of the Subordinated Note
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Subordinated Notes are subject to all such terms, and
holders of Subordinated Notes are referred to the Subordinated Note Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Subordinated Note Indenture does not purport to be
complete and is qualified in its entirety by reference to the Subordinated
Note Indenture and the forms of the certificates evidencing the Old
Subordinated Notes and the New Subordinated Notes, including the definitions
therein of certain terms used below, which documents have been filed as
exhibits to the Registration Statement and are incorporated herein by
reference. The definitions of certain terms used in the following summary are
set forth below under "-- Certain Definitions."
All of the Company's Subsidiaries are Restricted Subsidiaries, other
than LBO Development Company, Ski Insurance Company and Killington West Ltd.,
each of which is an Unrestricted Subsidiary. Under certain circumstances, the
Company will be able to designate additional current or future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Subordinated Note
Indenture.
The Old Subordinated Notes and the New Subordinated Notes will
constitute a single series of debt securities under the Subordinated Note
Indenture. If the Subordinated Notes Exchange Offer is consummated, holders of
the Old Subordinated Notes who do not exchange their Old Subordinated Notes
for New Subordinated Notes will vote together with the holders of the New
Subordinated Notes for all relevant purposes under the Subordinated Note
Indenture. In that regard, the Subordinated Note Indenture requires that
certain actions by holders thereunder (including acceleration following an
Event of Default) must be taken, and certain rights must be exercised, by
specified minimum percentages of the aggregate principal amount of the
outstanding Subordinated Notes. In determining whether holders of the
requisite percentage in principal amount have given any notice, consent or
waiver or taken any other action permitted under the Indenture, any Old
Subordinated Notes which remain outstanding after the Subordinated Notes
Exchange Offer will be aggregated with the New Subordinated Notes and the
holders of Old Subordinated Notes and New Subordinated Notes will vote
together as single class for all such purposes. Accordingly, all references
herein to specified percentages in aggregate principal amount of the
outstanding Subordinated Notes shall be deemed to mean, at any time after the
Subordinated Notes Exchange Offer is consummated, such percentage in aggregate
principal amount of the Old Subordinated Notes and New Subordinated Notes then
outstanding.
The terms of the New Subordinated Notes are identical in all material
respects to the terms of the Old Subordinated Notes except that (i) the New
Subordinated Notes will have been registered under the Securities Act and thus
will not bear restrictive legends restricting their transfer pursuant to the
Securities Act and will not be entitled to registration rights and (ii)
Holders of New Subordinated Notes will not be entitled to liquidated damages
for the Company's failure to register the Old Subordinated Notes or New
Subordinated Notes under the Subordinated Notes Registration Rights Agreement.
Holders of Old Subordinated Notes should review the information set forth
under "The Exchange Offers - Certain Consequences of a Failure to Exchange."
The New Subordinated Notes and the Old Subordinated Notes are
sometimes referred to as, collectively, the "Subordinated Notes" and,
individually, a "Subordinated Note."
PRINCIPAL, MATURITY AND INTEREST
The Subordinated Notes were issued in a principal amount sufficient
to generate approximately $20.0 million of gross proceeds to the Company and
will mature on January 15, 2007. Interest on the Subordinated Notes
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will not accrue prior to July 15, 2001. Thereafter, interest will accrue at
the rate of 13 3/4 % per annum and will be payable semi-annually in arrears in
cash on January 15 and July 15 of each year, commencing on January 15, 2002,
to holders of record on the immediately preceding January 1 and July 1.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from July 15, 2001. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal of and premium, interest and Liquidated Damages, if any, on
the Subordinated Notes will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and Liquidated Damages may be made by check mailed to the Holders of
the Subordinated Notes at their respective addresses set forth in the register
of Holders of Subordinated Notes; provided that all payments with respect to
Subordinated Notes the Holders of which have given wire transfer instructions
to the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency will be
the office of the Subordinated Note Trustee maintained for such purpose. The
Old Subordinated Notes were, and the New Subordinated Notes are to be, issued
in denominations of $1,000 principal amount and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, interest and Liquidated
Damages, if any, on, and all other Obligations with respect to the
Subordinated Notes will be subordinated in right of payment, as set forth in
the Subordinated Note Indenture, to the prior payment in full in cash of all
Subordinated Note Senior Debt of the Company (including, without limitation,
the Company's obligations with respect to the Senior Credit Facility and the
Notes), whether outstanding on the date of the Subordinated Note Indenture or
thereafter incurred.
Upon any distribution of cash, securities or other property to
creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, in an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities, the
holders of Subordinated Note Senior Debt of the Company will be entitled to
receive payment in full in cash of all Obligations due in respect of such
Subordinated Note Senior Debt (including interest after the commencement of
any such proceeding at the rate specified in the applicable Subordinated Note
Senior Debt) before the Holders of Subordinated Notes will be entitled to
receive any payment with respect to the Subordinated Notes, and until all
Obligations with respect to Subordinated Note Senior Debt of the Company are
paid in full in cash, any distribution to which the Holders of Subordinated
Notes would be entitled shall be made to the holders of such Subordinated Note
Senior Debt (except that Holders of Subordinated Notes may receive securities
that are subordinated at least to the same extent as the Subordinated Notes to
Subordinated Note Senior Debt and any securities issued in exchange for
Subordinated Note Senior Debt and payments made from the trust described under
"-- Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Subordinated Notes (except in such subordinated securities or from the trust
described under "-- Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment of the principal of or premium or interest on
Subordinated Note Senior Debt of the Company occurs and is continuing or (ii)
any other default occurs and is continuing with respect to Designated
Subordinated Note Senior Debt of the Company that permits holders of the
Designated Subordinated Note Senior Debt as to which such default relates to
accelerate its maturity and the Subordinated Note Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Subordinated Note Senior
Agent. Payments on the Subordinated Notes may and shall be resumed (a) in the
case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of such Subordinated Note Senior Debt has been accelerated. No new period of
payment blockage may be commenced unless and until 360 days have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Subordinated Note Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
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The Subordinated Note Indenture further requires that the Company
promptly notify holders of Subordinated Note Senior Debt of the Company if
payment of the Subordinated Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of Subordinated Notes may
recover less ratably than creditors of the Company who are holders of
Subordinated Note Senior Debt. As of April 28, 1996, after giving pro forma
effect to the Acquisition, the amount of outstanding Subordinated Note Senior
Debt of the Company would have been approximately $167.6 million. The
Subordinated Note Indenture limits the amount of additional Indebtedness,
including Subordinated Note Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment Obligations under the Subordinated Notes have
been jointly and severally guaranteed (the "Subordinated Note Subsidiary
Guarantees") by the Guarantors. The Obligations of each Guarantor under its
Subordinated Note Subsidiary Guarantee are subordinated in right of payment to
all Subordinated Note Senior Debt of such Guarantor pursuant to subordination
provisions substantially similar to those described above under
"--Subordination."
The Subordinated Note Indenture provides that no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity, whether or not
affiliated with such Guarantor, unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation
or merger (if other than such Guarantor) assumes all of the Obligations of
such Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Subordinated Note Trustee, under the
Subordinated Notes and the Subordinated Note Indenture; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists;
(iii) such Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately after
giving effect to such transaction) equal to or greater than the Consolidated
Net Worth of such Guarantor immediately preceding the transaction; and (iv)
the Company would be permitted by virtue of the Company's pro forma Fixed
Charge Coverage Ratio, immediately after giving effect to such transaction, to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock";
provided, however, that this provision shall not prohibit any merger or
consolidation among the Company or one or more wholly owned Guarantors.
The Subordinated Note Indenture provides that, in the event of a sale
or other disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor, such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Guarantor) will be released and relieved of any Obligations under its
Subordinated Note Subsidiary Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of the Subordinated Note Indenture. See "-- Repurchase at Option of
Holders -- Asset Sales." In addition, the Subordinated Note Indenture provides
that, in the event the Board of Directors designates a Guarantor to be an
Unrestricted Subsidiary, then such Guarantor will be released and relieved of
any Obligations under its Subordinated Note Subsidiary Guarantee; provided
that such designation is conducted in accordance with the applicable
provisions of the Indenture.
OPTIONAL REDEMPTION
The Subordinated Notes are not redeemable at the Company's option
prior to July 15, 2001. Thereafter, the Subordinated Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on July 15 of the
years indicated below:
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YEAR PERCENTAGE
- ---- ----------
2001.............................. 106.875%
2002.............................. 105.156
2003.............................. 103.438
2004.............................. 101.719
2005 and thereafter............... 100.000
Notwithstanding the foregoing, on or prior to July 15, 1999, the
Company may redeem the Subordinated Notes, in whole or in part, at a
redemption price of 113.75% of the Accreted Value thereof, plus accrued and
unpaid Liquidated Damages, if any, thereon to the redemption date, with the
net proceeds of one or more Equity Offerings; provided that notice of each
such redemption shall have been given within 30 days after the date of the
closing of such Equity Offering.
SELECTION AND NOTICE
If less than all of the Subordinated Notes are to be redeemed at any
time, selection of Subordinated Notes for redemption will be made by the
Subordinated Note Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Subordinated Notes are
listed, or, if the Subordinated Notes are not so listed, on a pro rata basis,
by lot or by such method as the Subordinated Note Trustee shall deem fair and
appropriate; provided that no Subordinated Notes of $1,000 principal amount or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Subordinated Notes to be redeemed at its registered address. If
any Subordinated Note is to be redeemed in part only, the notice of redemption
that relates to such Subordinated Note shall state the portion of the
principal amount thereof to be redeemed. A new Subordinated Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of
the Holder thereof upon cancellation of the original Subordinated Note. On and
after the redemption date, interest ceases to accrue on Subordinated Notes or
portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Subordinated Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, the Company will be
required to make an offer (a "Subordinated Note Change of Control Offer") to
repurchase all or any part (equal to $1,000 principal amount or an integral
multiple thereof) of each Holder's Subordinated Notes at an offer price in
cash equal to 101% of the Accreted Value thereof, plus accrued and unpaid
Liquidated Damages, if any, thereon (if prior to July 15, 2001), or 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon (if on or after July 15, 2001), to the
date of repurchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company will mail a notice to each Holder
describing the transaction that constitutes the Change of Control and offering
to repurchase Subordinated Notes pursuant to the procedures required by the
Subordinated Note Indenture and described in such notice; provided that, prior
to complying with the provisions of this covenant, but in any event within 90
days following a Change of Control, the Company will either repay all
outstanding Subordinated Note Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Subordinated Note Senior Debt
to permit the repurchase of Subordinated Notes required by this covenant. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Subordinated Notes as a result of a Change of Control.
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On the Change of Control Payment date, the Company will, to the
extent lawful, (i) accept for payment all Subordinated Notes or portions
thereof properly tendered pursuant to the Subordinated Note Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Subordinated Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Subordinated Note
Trustee the Subordinated Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Subordinated Notes or
portions thereof being purchased by the Company. The Paying Agent will
promptly mail to each Holder of Subordinated Notes so tendered the Change of
Control Payment for such Subordinated Notes, and the Subordinated Note Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Subordinated Note equal in principal amount to any
unpurchased portion of the Subordinated Notes surrendered, if any; provided
that each such new Subordinated Note will be in a principal amount of $1,000
or an integral multiple thereof. The Company will publicly announce the
results of the Subordinated Note Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Subordinated Note Indenture does not contain provisions that permit the
Holders of the Subordinated Notes to require that the Company repurchase or
redeem the Subordinated Notes in the event of a takeover, recapitalization or
similar transaction.
The occurrence of a Change of Control could result in a default under
the Senior Credit Facility or other Subordinated Note Senior Debt of the
Company. In addition, the Senior Credit Facility or other Subordinated Note
Senior Debt could restrict the Company's ability to repurchase Subordinated
Notes upon a Change of Control. In the event a Change of Control occurs at a
time when the Company is prohibited from repurchasing Subordinated Notes, the
Company could seek the consent of its lenders to the repurchase of
Subordinated Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from repurchasing Subordinated
Notes. In such case, the Company's failure to make a Subordinated Note Change
of Control Offer or to repurchase Subordinated Notes tendered in a
Subordinated Note Change of Control Offer would constitute an Event of Default
under the Subordinated Note Indenture, which could, in turn, constitute a
default under the Senior Credit Facility or other Subordinated Note Senior
Debt. In such circumstances, the subordination provisions in the Subordinated
Note Indenture would likely restrict payments to the Holders of Subordinated
Notes. See "--Subordination." Finally, upon a Change of Control, the Company
will be obligated to offer to repurchase the Notes, and the Company's ability
to repurchase Subordinated Notes upon a Change of Control may be limited by
the Company's then existing financial resources.
The Company will not be required to make a Subordinated Note Change
of Control Offer upon a Change of Control if a third party makes the
Subordinated Note Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Subordinated
Note Indenture applicable to a Subordinated Note Change of Control Offer made
by the Company and purchases all Subordinated Notes validly tendered and not
withdrawn under such Subordinated Note Change of Control Offer.
Asset Sales
The Subordinated Note Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, engage in an Asset
Sale unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Subordinated Note Trustee)
of the assets or Equity Interests issued or sold or otherwise disposed of and
(ii) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; provided that (x) the
amount of (a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Subordinated Notes) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further liability and
(b) any notes or other obligations received by the Company or such Restricted
Subsidiary from such transferee that are immediately converted by the Company
or such Restricted Subsidiary into cash (to the extent of the cash
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received) shall be deemed to be cash for purposes of this provision and (y)
Asset Sales pursuant to the DOJ Divestiture shall not be subject to the 75%
minimum cash requirement specified in clause (ii) of this paragraph, but such
Asset Sales shall otherwise continue to be subject to this covenant and any
cash proceeds resulting from the subsequent disposition of such non-cash
consideration shall be subject to the provisions of this covenant.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds
(a) to permanently reduce Subordinated Note Senior Debt of the Company or such
Restricted Subsidiary (and to correspondingly reduce commitments with respect
thereto) or (b) to the making of capital expenditures or the acquisition of
long-term assets in the same line of business as the Company or any Restricted
Subsidiary was engaged immediately prior to such Asset Sale. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
Subordinated Note Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Subordinated Note Indenture. Any Net
Proceeds from Asset Sales in excess of $1.0 million in any fiscal year that
are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Subordinated Note Excess Proceeds."
When the aggregate amount of Subordinated Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of
Subordinated Notes (a "Subordinated Note Asset Sale Offer") to purchase the
maximum principal amount of Subordinated Notes that may be purchased out of
the Subordinated Note Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the Accreted Value thereof, plus accrued and unpaid
Liquidated Damages, if any, thereon (if prior to July 15, 2001), or 100% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon (if on or after July 15, 2001), to the date of
purchase, in accordance with the procedures set forth in the Subordinated Note
Indenture. To the extent that the aggregate amount of Subordinated Notes
tendered pursuant to a Subordinated Note Asset Sale Offer is less than the
Subordinated Note Excess Proceeds, the Company may use any remaining
Subordinated Note Excess Proceeds for general corporate purposes (subject to
the restrictions of the Subordinated Note Indenture). If the aggregate
principal amount of Subordinated Notes surrendered by Holders thereof exceeds
the amount of Subordinated Note Excess Proceeds, the Subordinated Note Trustee
shall select the Subordinated Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Subordinated Note Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Subordinated Note Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, (i) declare or pay any dividend or make any other payment or
distribution on account of the Company's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company) or to any direct or indirect holder of the Company's
Equity Interests in its capacity as such, other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any Wholly
Owned Restricted Subsidiary of the Company that is a Guarantor; (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any Subsidiary or other Affiliate of the Company, other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company that is a Guarantor; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value, prior to a scheduled mandatory sinking fund payment date or final
maturity date, any Indebtedness that is subordinated to the Subordinated
Notes; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after
giving effect to such Restricted Payment, to incur at least $1.00 of
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additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the covenant described below under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries on or after the date of the Subordinated Note Indenture,
is less than the sum of (i) $5.0 million, plus (ii) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from July 29, 1996 to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (iii) 100% of the aggregate net cash
proceeds received by the Company as capital contributions or from the
issue or sale since the date of the Subordinated Note Indenture of
Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus
(iv) to the extent that any Restricted Investment is sold for cash or
otherwise liquidated or repaid for cash, 100% of the net cash
proceeds thereof (less the cost of disposition) (but only to the
extent not included in subclause (ii) of this clause (c)); plus (v)
to the extent that any Unrestricted Subsidiary is designated to be a
Restricted Subsidiary, the fair market value (as determined in good
faith by the Board of Directors) of the Company's Investment in such
Subsidiary at the time of such designation (but only to the extent
not included in subclause (ii) of this clause (c)); provided,
however, that in the case of (1) the declaration or payment of any
dividend or the making of any other payment or distribution on
account of the Company's Common Stock or to any direct or indirect
holder of the Company's Common Stock in its capacity as such or (2)
the purchase, redemption or other acquisition or retirement for value
of any Common Stock of the Company, (A) the Company may not include
the $5.0 million set forth in subclause (i) of this clause (c) and
may only include 25% of its Consolidated Net Income for purposes of
subclause (ii) of this clause (c) in calculating the amount available
pursuant to this clause (c) for the making of any such Restricted
Payment if, after giving effect to such Restricted Payment, the
Company's Leverage Ratio would exceed 70% and (B) Consolidated Net
Income for purposes of this clause (c) shall exclude the first $5.0
million of Consolidated Net Income of the Company reported from July
29, 1996.
The foregoing provisions will not prohibit (i) the payment of any
dividend or other distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Subordinated Note Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) of the preceding paragraph; (iii) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Debt or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) of the preceding
paragraph; (iv) Investments in Real Estate Subsidiaries in an amount not to
exceed $10.0 million plus, to the extent that any such Investment is sold for
cash or otherwise liquidated or repaid for cash, the net cash proceeds thereof
(less the cost of disposition); provided that the amount of any such net cash
proceeds shall be excluded from clause (c) of the preceding paragraph; (v) the
acquisition of Equity Interests in Sugarloaf Mountain Corporation within the
six months following the consummation of the Acquisition; (vi) contributions
of real estate not used in or essential to ski operations to Real Estate
Subsidiaries for Permitted Real Estate Projects; (vii) conveyance of real
estate not used in or essential to ski operations to Unrestricted Subsidiaries
with an aggregate book value not in excess of $2.0 million; (viii) Guarantees
of Indebtedness of Real Estate Subsidiaries to the extent that such Guarantees
are permitted to be incurred by the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock;" (ix) payments of
principal of and interest on the Demand Note; and (x) Investments received by
the Company and its Restricted Subsidiaries as non-cash consideration from
Asset Sales to the extent permitted by the covenant described under the
caption "-- Repurchase at the Option of Holders -- Asset Sales."
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The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value (as determined in good faith by the Board of
Directors) of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Subordinated Note Trustee)
on the date of the Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
the Restricted Payment. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Subordinated Note Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, which calculations may be based upon the
Company's latest available financial statements.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may not (i) transfer any property or assets that are a material
part of the ski operations of the Company and its Restricted Subsidiaries to
an Unrestricted Subsidiary or (ii) designate as an Unrestricted Subsidiary any
Restricted Subsidiary of the Company that holds any property or assets that
are a material part of the ski operations of the Company and its Restricted
Subsidiaries.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Subordinated Note Indenture provides that the Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and will not permit any
of its Restricted Subsidiaries to issue any preferred stock; provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, the Company and its Restricted Subsidiaries that are Guarantors
may incur Indebtedness (including Acquired Debt), and its Restricted
Subsidiaries that are Guarantors may issue preferred stock, if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal quarterly financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such additional preferred stock is issued would have been at least
2.0 to 1, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred or the additional preferred stock had been issued at the beginning of
such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness pursuant to the Bank Credit Agreements
in an amount not to exceed the greater of (a) $65.0 million and (b)
1.5 times the Company's Consolidated Cash Flow for the most recently
ended four full fiscal quarters for which internal quarterly
financial statements are available immediately preceding the date on
which such Indebtedness is incurred, less, in either case, the
aggregate amount of all permanent reductions thereto pursuant to the
covenant described under "-- Repurchase at the Option of Holders --
Asset Sales";
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
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(iii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes, the Subsidiary Guarantees, the
Indenture, the Subordinated Notes, the Subordinated Note Subsidiary
Guarantees and the Subordinated Note Indenture;
(iv) the incurrence of intercompany Indebtedness between or
among the Company and any of its Wholly Owned Restricted Subsidiaries
(other than Real Estate Subsidiaries); provided that any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company, or any sale or
other transfer of any such Indebtedness to a Person that is neither
the Company nor a Wholly Owned Restricted Subsidiary of the Company,
shall be deemed to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of purchase money Indebtedness to finance the purchase
of property or assets to be used in the ski operations of the Company
and its Restricted Subsidiaries or a related business in an aggregate
amount at any one time outstanding not to exceed the lesser of (a)
the purchase price of such property or assets and (b) $15.0 million;
(vi) the incurrence by the Company and its Restricted
Subsidiaries of Guarantees of Indebtedness of Real Estate
Subsidiaries in an amount not to exceed $15.0 million at any one time
outstanding in connection with Permitted Real Estate Projects,
provided that the total purchase price for the hotel, condominium,
interval ownership or other units comprising the development to be
constructed, in whole or in part, with the proceeds of the
Indebtedness so guaranteed, that have been contracted for sale
(evidenced by executed purchase agreements and security deposits from
credit-approved purchasers), equals at least 35% of the estimated
total cost of construction (as determined in good faith by the Board
of Directors) of the Permitted Real Estate Projects (except for the
development of the Summit Hotel at the Attitash resort, for which
such total purchase price must equal at least 25% of the estimated
total cost of construction (as determined in good faith by the Board
of Directors));
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness that was permitted by the Subordinated
Note Indenture to be incurred;
(viii) the incurrence by Real Estate Subsidiaries of
Non-Recourse Real Estate Debt, provided that if any such Indebtedness
ceases to be Non-Recourse Real Estate Debt of a Real Estate
Subsidiary, such event shall be deemed to constitute an incurrence of
Subordinated Note Indebtedness by a Restricted Subsidiary of the
Company that is not a Real Estate Subsidiary;
(ix) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company; and
(x) the incurrence by the Company and its Restricted
Subsidiaries of additional Indebtedness in an amount not to exceed
$25.0 million at any one time outstanding, provided that such
Indebtedness is expressly subordinated in right of payment to the
Notes at least to the same extent as the Notes are subordinated in
right of payment to Senior Debt of the Company.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Subordinated Note Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of
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its Restricted Subsidiaries, (ii) make loans or advances to the Company or any
of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of: (a) Existing
Indebtedness as in effect on the date of the Subordinated Note Indenture; (b)
applicable law; (c) any instrument governing Indebtedness or Capital Stock of
a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; (d) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices; (e) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired; (f) any
instrument governing Non-Recourse Real Estate Indebtedness of a Real Estate
Subsidiary, which encumbrance or restriction is not applicable to any Person
or the properties or assets of any Person other than such Real Estate
Subsidiary or the property or asset of such Real Estate Subsidiary; (g)
Subordinated Note Senior Debt of the Company and Indebtedness of Guarantors,
provided that such Indebtedness was permitted to be incurred pursuant to the
Subordinated Note Indenture; and (h) Permitted Liens.
Merger, Consolidation, or Sale of Assets
The Subordinated Note Indenture provides that the Company may not
consolidate or merge with or into (whether or not the Company is the surviving
entity), or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity, unless (i) the Company
is the surviving entity or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Subordinated Notes and the Subordinated
Note Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Subordinated Note Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; and (iv) except in the
case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after
the transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant t the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Subordinated Note Indenture provides the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction with an unrelated Person and (ii) the Company delivers to the
Subordinated Note Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $0.5 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Company of such Affiliate Transaction from a
financial point of view issued by an accounting,
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appraisal or investment banking firm of national standing; provided that (1)
any employment agreement or arrangement in existence on the date of the
Indenture or entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business and consistent with the past practice of
the Company or such Restricted Subsidiary, (2) transactions between or among
the Company and its Restricted Subsidiaries and (3) Restricted Payments and
Permitted Investments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments," in each case, shall
not be deemed Affiliate Transactions.
Independent Board of Directors
The Subordinated Note Indenture provides that at least one member of
the Board of Directors of the Company shall be a disinterested director. The
Subordinated Note Indenture further provides that the Company shall use its
best efforts to have a disinterested member of the Board of Directors by July
31, 1996.
Additional Subsidiary Guarantees
The Subordinated Note Indenture provides that if the Company or any
of its Restricted Subsidiaries shall acquire or create another Subsidiary
after the date of the Subordinated Note Indenture, then such newly acquired or
created Subsidiary shall execute a Subordinated Note Subsidiary Guarantee and
deliver an opinion of counsel in accordance with the terms of the Indenture;
provided, that this covenant shall not apply to any Subsidiary that has been
properly designated as an Unrestricted Subsidiary in accordance with the
Subordinated Note Indenture for so long as it continues to constitute an
Unrestricted Subsidiary.
Payments for Consent
The Subordinated Note Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Subordinated Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Subordinated Note Indenture or the Subordinated Notes unless
such consideration is offered to be paid or is paid to all Holders of the
Subordinated Notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Reports
The Subordinated Note Indenture provides that, whether or not
required by the rules and regulations of the Commission, so long as any
Subordinated Notes are outstanding, the Company will furnish to the Holders of
Subordinated Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations
of the Company and its Restricted Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Subordinated Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Subordinated Note Indenture provides that each of the following
constitutes an Event of Default: (i) default for 30 days in the payment when
due of interest on the Subordinated Notes (whether or not prohibited by the
subordination provisions of the Subordinated Note Indenture); (ii) default in
payment when due of the principal of
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or premium or Liquidated Damages, if any, on the Subordinated Notes (whether
or not prohibited by the subordination provisions of the Subordinated Note
Indenture); (iii) failure by the Company to comply with the provisions
described under the captions "-- Change of Control," "-- Asset Sales," "--
Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of
Preferred Stock"; (iv) failure by the Company for 30 days after notice to
comply with any of its other agreements in the Subordinated Note Indenture or
the Subordinated Notes; (v) a continuing default under any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (a)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million and either (a) any creditor
commences enforcement proceedings upon any such judgment or (b) such judgments
are not paid, discharged or stayed for a period of 60 days; and (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Subordinated
Notes Trustee or the Holders of at least 25% in principal amount of the then
outstanding Subordinated Notes may declare all the Subordinated Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, any Significant Subsidiary of the Company or any group
of Restricted Subsidiaries of the Company that, taken together, would
constitute a Significant Subsidiary of the Company, all outstanding
Subordinated Notes will become due and payable without further action or
notice. Holders of the Subordinated Notes may not enforce the Subordinated
Notes Indenture or the Subordinated Notes except as provided in the
Subordinated Note Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Subordinated Notes may
direct the Subordinated Note Trustee in its exercise of any trust or power.
The Subordinated Notes Trustee may withhold from Holders of the Subordinated
Notes notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the
Subordinated Notes pursuant to the optional redemption provisions of the
Subordinated Notes Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the
acceleration of the Subordinated Notes. If an Event of Default occurs prior to
July 15, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Subordinated Notes prior to such date, then
the premium specified in the Subordinated Notes Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Subordinated Notes.
The Holders of a majority in aggregate principal amount of the
Subordinated Notes then outstanding by notice to the Subordinated Note Trustee
may on behalf of the Holders of all of the Subordinated Notes waive any
existing Default or Event of Default and its consequences under the
Subordinated Note Indenture except a continuing Default or Event of Default in
the payment of the principal of or premium, interest or Liquidated Damages on
the Subordinated Notes.
The Company is required to deliver to the Subordinated Note Trustee
annually a statement regarding compliance with the Subordinated Note
Indenture, and the Company is required, upon becoming aware of any Default or
Event of Default, to deliver to the Subordinated Note Trustee a statement
specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any Obligations of the Company
under the Subordinated Notes or the Subordinated Note Indenture or for any
claim based on, in respect of, or by reason of, such Obligations or their
creation. Each Holder of Subordinated Notes by accepting a Subordinated Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Subordinated Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Subordinated Notes
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Subordinated Notes to receive payments in respect of the principal of and
premium, interest and Liquidated Damages, if any, on the Subordinated Notes
when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to the Subordinated Notes concerning
issuing temporary Subordinated Notes, registration of Subordinated Notes,
mutilated, destroyed, lost or stolen Subordinated Notes and the maintenance of
an office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Subordinated
Note Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Subordinated Note Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Subordinated Note Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Subordinated Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Subordinated Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Subordinated Note Trustee,
in trust, for the benefit of the Holders of the Subordinated Notes, cash in
U.S. dollars, non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of and premium, interest and Liquidated Damages, if any, on the
outstanding Subordinated Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Subordinated Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Subordinated Note Trustee an opinion of counsel in the United
States reasonably acceptable to the Subordinated Note Trustee confirming that
(a) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (b) since the date of the Subordinated
Note Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Subordinated Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Subordinated Note
Trustee an opinion of counsel in the United States reasonably acceptable to
the Subordinated Note Trustee confirming that the Holders of the outstanding
Subordinated Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject t
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the Subordinated Note Indenture) to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound; (vi) the Company shall have delivered to the
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Subordinated Note Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company shall have
delivered to the Subordinated Note Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders of Subordinated Notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company shall have delivered to the
Subordinated Note Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Subordinated Notes in accordance
with the Subordinated Note Indenture. The Registrar and the Subordinated Note
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to
pay any taxes and fees required by law or permitted by the Subordinated Note
Indenture. The Company is not required to transfer or exchange any
Subordinated Note selected for redemption. Also, the Company is not required
to transfer or exchange any Subordinated Note for a period of 15 days before a
selection of Subordinated Notes to be redeemed.
The registered Holder of a Subordinated Note will be treated as the
owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
Subordinated Note Indenture or the Subordinated Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Subordinated Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Subordinated Notes), and any existing
default or compliance with any provision of the Subordinated Note Indenture or
the Subordinated Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Subordinated Notes
(including consents obtained in connection with a tender offer or exchange
offer for Subordinated Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Subordinated Notes held by a non-consenting
Holder): (i) reduce the principal amount of Subordinated Notes whose Holders
must consent to an amendment, supplement or waiver, (ii) reduce the principal
of or change the fixed maturity of any Subordinated Note or alter the
provisions with respect to the redemption of the Subordinated Notes (other
than provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest or Liquidated Damages on any Subordinated
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, interest or Liquidated Damages on the Subordinated Notes (except a
rescission of acceleration of the Subordinated Notes by the Holders of at
least a majority in aggregate principal amount of the Subordinated Notes and a
waiver of the payment default that resulted from such acceleration), (v) make
any Subordinated Note payable in money other than that stated in the
Subordinated Notes, (vi) make any change in the provisions of the Subordinated
Note Indenture relating to waivers of past Defaults or the rights of Holders
of Subordinated Notes to receive payments of principal of or premium, interest
or Liquidated Damages on the Subordinated Notes, (vii) waive a redemption
payment with respect to any Subordinated Note (other than a payment required
by one of the covenants described above under the caption "--Repurchase at the
Option of Holders") or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendment to the provisions of Article 10
of the Subordinated Note Indenture (which relate to subordination) requires
the consent of the Holders of at least 75% in aggregate principal amount of
the Subordinated Notes then outstanding if such amendment would adversely
affect the rights of Holders of the Subordinated Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Subordinated Notes, the Company and the Subordinated Note Trustee may amend or
supplement the Subordinated Note Indenture or the Subordinated Notes to cure
any ambiguity, defect or inconsistency, to provide for uncertificated
Subordinated Notes in addition to or in place of certificated Subordinated
Notes, to provide for the assumption of the Company's obligations to
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Holders of Subordinated Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of Subordinated Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements
of the Commission in order to effect or maintain the qualification of the
Subordinated Note Indenture under the Trust Indenture Act.
CONCERNING THE SUBORDINATED NOTE TRUSTEE
The Subordinated Note Indenture contains certain limitations on the
rights of the Subordinated Note Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The Subordinated Note Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Subordinated Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the
Subordinated Note Trustee, subject to certain exceptions. The Subordinated
Note Indenture provides that in case an Event of Default shall occur (which
shall not be cured), the Subordinated Note Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Subordinated Note
Trustee will be under no obligation to exercise any of its rights or powers
under the Subordinated Note Indenture at the request of any Holder of
Subordinated Notes, unless such Holder shall have offered to the Subordinated
Note Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Subordinated Notes
were initially issued in the form of one Global Subordinated Note (the "Global
Subordinated Note"). The Global Subordinated Note was deposited on the date of
the closing of the sale of the Old Subordinated Notes (the "Closing Date")
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Subordinated Note Holder").
Subordinated Notes that are issued as described below under
"--Certificated Securities" will be issued in the form of registered
definitive certificates (the "Certificated Securities"). Upon the transfer of
Certificated Securities, such Certificated Securities may, unless the Global
Subordinated Note has previously been exchanged for Certificated Securities,
be exchanged for an interest in the Global Subordinated Note representing the
principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including Bear Stearns), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's
system is also available to other entities such as banks, brokers, dealers and
trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depositary only through the Depositary's Participants or the
Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary ownership of the Subordinated Notes evidenced by the Global
Subordinated Note will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect
to the interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants. Prospective
purchasers are advised that the laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Subordinated Notes evidenced by the
Global Subordinated Note will be limited to such extent.
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So long as the Global Subordinated Note Holder is the registered
owner of any Subordinated Notes, the Global Subordinated Note Holder will be
considered the sole Holder under the Subordinated Note Indenture of any
Subordinated Notes evidenced by the Global Subordinated Note. Beneficial
owners of Subordinated Notes evidenced by the Global Subordinated Note will
not be considered the owners or Holders thereof under the Subordinated Note
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Subordinated Note Trustee
thereunder. Neither the Company nor the Subordinated Note Trustee will have
any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of the
Depositary relating to the Subordinated Notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any Subordinated Notes registered in the name
of the Global Subordinated Note Holder on the applicable record date will be
payable by the Subordinated Note Trustee to or at the direction of the Global
Subordinated Note Holder in its capacity as the registered Holder under the
Subordinated Note Indenture. Under the terms of the Subordinated Note
Indenture, the Company and the Subordinated Note Trustee may treat the persons
in whose names Subordinated Notes, including the Global Subordinated Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Subordinated Note Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of Subordinated Notes. The Company believes, however, that
it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Subordinated Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial
interest in the Global Note may, upon request to the Subordinated Note
Trustee, exchange such beneficial interest for Subordinated Notes in the form
of Certificated Securities. Upon any such issuance, the Subordinated Note
Trustee is required to register such Certificated Securities in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). All such certificated Subordinated Notes would be subject to
the legend requirements described herein under "Notice to Investors." In
addition, if (i) the Company notifies the Subordinated Note Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and
the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Subordinated Note Trustee in writing
that it elects to cause the issuance of Subordinated Notes in the form of
Certificated Securities under the Subordinated Note Indenture, then, upon
surrender by the Global Subordinated Note Holder of its Global Subordinated
Note, Subordinated Notes in such form will be issued to each person that the
Global Subordinated Note Holder and the Depositary identify as being the
beneficial owner of the related Subordinated Notes.
Neither the Company nor the Subordinated Note Trustee will be liable
for any delay by the Global Subordinated Note Holder or the Depositary in
identifying the beneficial owners of Subordinated Notes and the Company and
the Subordinated Note Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Global Subordinated Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Subordinated Note Indenture requires that payments in respect of
the Subordinated Notes represented by the Global Subordinated Note (including
principal, premium, interest and Liquidated Damages, if any) be made by wire
transfer of immediately available funds to the accounts specified by the
Global Subordinated Note Holder. With respect to Certificated Securities, the
Company will make all payments of principal, premium, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Subordinated
Notes represented by the Global Subordinated Note are expected to be eligible
to trade in the
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Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Subordinated Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. The
Company expect that secondary trading in the Certificated Securities will also
be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Subordinated
Note Indenture. Reference is made to the Subordinated Note Indenture for a
full disclosure of all such terms. Capitalized terms not defined below have
the respective meanings assigned to them under "Description of Senior
Subordinated Notes -- Certain Definitions."
"Accreted Value" means, as of any date of determination, the sum of
(a) the initial offering price of each Unit and (b) the portion of the excess
of the principal amount of each Subordinated Note over such initial offering
price which shall have been accreted thereon through such date of
determination, such amount to be so accreted daily on a semi-annual bond
equivalent basis on January 15 and July 15 of each year, at the rate of
13 3/4% per annum.
"Designated Subordinated Note Senior Debt" means (i) Subordinated
Note Senior Debt incurred under the Bank Credit Agreements and (ii) any other
Subordinated Note Senior Debt designated by the Company as "Designated
Subordinated Note Senior Debt" as permitted under the Bank Credit Agreement by
written notice to the Trustee signed by both the Company and the Subordinated
Note Senior Agent.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Subordinated Notes mature.
"Permitted Refinancing Debt" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
other Indebtedness of the Company or any such Restricted Subsidiary; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date no earlier than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Subordinated Notes, such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and is subordinated in right of payment to, the Subordinated
Notes on terms at least as favorable to the Holders of Subordinated Notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred only by the Company or the Restricted Subsidiary that
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Subordinated Note Senior Agent" means (i) until all Indebtedness
under the Bank Credit Agreements is paid in full, the agent (or the
institution performing similar functions) under the Bank Credit Agreement
under which the greatest aggregate principal amount of Indebtedness is
outstanding and (ii) if all Indebtedness under the Bank Credit Agreements has
been paid in full, the Person (or representative thereof) holding the greatest
amount of Subordinated Note Senior Debt.
"Subordinated Note Senior Debt" of any Person means and includes all
principal of, premium and interest on and other Obligations with respect to
(i) the Bank Credit Agreements, (ii) the Notes and (iii) any other
Indebtedness of the Company (other than as otherwise provided in this
definition), whether outstanding on the date of issuance of the Subordinated
Notes or thereafter incurred; provided, however, that Subordinated Note Senior
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Debt shall not include (a) any Indebtedness which by the terms of the
instrument creating or evidencing the same is pari passu with or subordinated
or junior in right of payment to the Subordinated Notes or the Subordinated
Note Subsidiary Guarantees or (b) that portion of any Indebtedness incurred in
violation of the Subordinated Note Indenture. Notwithstanding the foregoing,
Subordinated Note Senior Debt shall not include (1) Indebtedness evidenced by
the Subordinated Notes, (2) Indebtedness which when incurred and without
respect to any election under Section 1111(b) of the United States Bankruptcy
Code is without recourse to such Person, (3) any liability for foreign,
federal, state, local or other taxes owed or owing by such Person, (4)
Indebtedness of such Person to the extent such liability constitutes
Indebtedness to a Subsidiary or any other Affiliate of such Person or any of
such Affiliate's subsidiaries, (5) Indebtedness for the purchase of goods or
materials in the ordinary course of business except purchase-money
Indebtedness secured by a security interest in or Lien upon the goods or
materials purchased or (6) Indebtedness owed by such Person for compensation
to employees or for services.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock of which 978,300 shares of Common Stock are
outstanding, 939,168 shares of which are owned by Leslie B. Otten and 39,132
shares of which are owned by purchasers of the Units. The holders of Common
Stock are entitled to one vote per share on all matters to be voted upon by
the shareholders. The holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available for that purpose. In the event of a
liquidation, dissolution or winding up of the Company, the holders of the
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities. The Common Stock has no preemptive or conversion
rights or other subscription rights. All outstanding shares of Common Stock
are fully paid and nonassessable. Neither the Articles of Incorporation nor
the Bylaws of the Company provide for cumulative voting in the election of
directors. The Articles of Incorporation and the Bylaws of the Company may be
amended by the vote of the holders of a majority of the outstanding Common
Stock.
DESCRIPTION OF OTHER INDEBTEDNESS
In addition to the Notes and the Subordinated Notes, the Company and
its subsidiaries, after giving effect to the Acquisition and Offerings and the
divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to
the Consent, at April 28, 1996 will have outstanding indebtedness totaling
approximately $65.7 million. See "Pro Forma Capitalization." This indebtedness
includes (i) $31.4 million in borrowings under the Senior Credit Facility
(under which approximately $33.6 million is available for future borrowing),
(ii) an estimated $15.8 million of pre-existing indebtedness of SKI and its
subsidiaries, and (iii) $13.2 million of pre-existing indebtedness of the
Company. See Note 3 to Consolidated Financial Statements of SKI and Note 8 to
Financial Statements of the Company. In addition to such senior indebtedness,
Sunday River has outstanding a demand note in an original principal amount of
$5.2 million payable to Mr. Otten. This obligation is more fully described
under "Management -- Certain Transactions with Management."
THE SENIOR CREDIT FACILITY
The following is a summary of the Senior Credit Facility, which does
not purport to be complete and is qualified in its entirety by reference to
such Senior Credit Facility, which document has been filed as an exhibit to
the Registration Statement and is incorporated hereby by reference.
On the closing of the Acquisition, the Company entered into the
Senior Credit Facility with financial institutions for whom Fleet National
Bank ("Fleet") is acting as agent. The Senior Credit Facility provides for a
$65.0 million revolving credit facility (which includes a $3.5 million
sub-facility for letters of credit) under which approximately $31.4 million
would have been drawn in connection with the Acquisition had it occurred on
April 28, 1996.
The initial advances under the Senior Credit Facility, proceeds from
the issuance of the Notes and available cash were used to pay the cash
purchase price payable in the Acquisition, to retire existing indebtedness of
the Company and SKI, to acquire the minority interest in Sugarloaf, to fund
the Pledge Account and to pay fees and
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expenses in connection with the Acquisition. See "The Acquisition; Antitrust
Matters; Use of Proceeds." Subsequent advances may be applied to fund capital
expenditures and the Company's seasonal working capital needs. Amounts
available for borrowing under the Senior Credit Facility will incrementally
decline to $50.0 million over the period ending July 1, 2000. The Senior
Credit Facility will mature on or about December 31, 2001.
The Company's obligations under the Senior Credit Facility are
guaranteed by the Guarantors, and substantially all of the assets of the
Guarantors have been pledged to secure such guarantee obligations.
Borrowings under the Senior Credit Facility will bear interest at a
rate equal to Fleet's LIBOR Rate (as defined) plus a margin of 1.5% to 2.5%
per annum (dependent upon the Company's Applicable Leverage Ratio) or Fleet's
Base Rate (as defined) plus a margin of up to 1.5% per annum (dependent upon
the Company's Applicable Leverage Ratio (as defined)), in each case as
selected by the Company. Applicable interest rates will be increased by 2.0%
per annum during the continuance of any specified event of default under the
Senior Credit Facility. In addition to customary fronting and other fees, the
Company will pay a commitment fee of 0.5% per annum on unused availability
under the Senior Credit Facility.
The Company is required to pay down the amounts outstanding under the
Revolving Credit Facility each year, commencing in 1997, for a 45-day period
which must include March 31, to an amount declining from $25 million in 1997
to $10 million in 2000 and 2001. The Company also may make optional
prepayments, in full or in part, on the Senior Credit Facility, upon up to
three business days' notice.
The obligation of the lenders under the Senior Credit Facility to
advance funds is subject to the satisfaction of certain conditions customary
in agreements of this type. In addition, the Company is subject to certain
customary affirmative and negative covenants contained in the Senior Credit
Facility, including, without limitation, covenants that restrict, subject to
specified exceptions, (i) incurrence of additional indebtedness and other
obligations; (ii) a merger or consolidation with any other person (other than
pursuant to the Acquisition Agreement); (iii) asset sales; (iv) granting of
liens to secure any other indebtedness (including the Notes); (v) prepayment
or modification of the terms of other indebtedness (including the Notes); (vi)
engaging in transactions with affiliates; (vii) giving a negative pledge in
favor of any person other than the lenders; (viii) engaging in sale and
leaseback transactions; (ix) amending leases, licenses and similar agreements
or instruments; (x) investing funds of the Company; and (xi) making capital
expenditures. Many of these covenants are more restrictive than those in favor
of holders of the Notes as described herein and as set forth in the Indenture
and those in favor of holders of Subordinated Notes as described herein and as
set forth in the Subordinated Note Indenture. In addition, the Senior Credit
Facility requires that the Company adhere to certain specified financial
covenants, including minimum interest and fixed charge coverage ratios,
maximum leverage ratio, minimum net worth levels and ceilings tied to the
Company's Leverage Ratio (as defined) on real estate investments and real
estate financing guarantees, expenditures on ski resort acquisitions and
capital expenditures.
The Senior Credit Facility also provides for customary events of
default. Occurrence of any of such events of default could result in
acceleration of the Company's obligations under the Senior Credit Facility and
foreclosure on the collateral securing such obligations, with material adverse
results to holders of the Notes. See "Risk Factors--Subordination of the Notes
and the Subordinated Notes."
The Senior Credit Facility provides for the DOJ Divestiture by
requiring that all or a specified portion of the cash proceeds of the sale,
including cash realized from any non-cash consideration received from the
sale, be applied to permanently reduce the availability under the Senior
Credit Facility. In the event the proceeds from the sale do not total an
amount specified in the Senior Credit Facility, Mr. Otten will be required to
contribute up to a specified amount of cash equity to the Company to be
applied to reduce the amounts outstanding and available under the Senior
Credit Facility.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material federal income
tax considerations relevant to the purchase, ownership and disposition of the
Notes and the Subordinated Notes (collectively, the "Offered Notes") by
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holders acquiring Offered Notes on original issue for cash, but does not
purport to be a complete analysis of all potential tax effects. The discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions all in effect as of the date hereof, all
of which are subject to change at any time, and any such change may be applied
retroactively in a manner that could adversely affect a holder of the Offered
Notes. The discussion does not address all of the federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities,
foreign corporations, nonresident alien individuals and persons holding the
Offered Notes as part of a "straddle," "hedge" or "conversion transaction."
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed. The discussion deals only with Offered Notes held as "capital
assets" within the meaning of section 1221 of the Code.
The Company has not sought and will not seek any rulings from the IRS
with respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the Offered Notes or
that any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
REGARD TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR
PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN
OR OTHER TAX LAWS.
STATED INTEREST ON THE OFFERED NOTES
Stated interest on the Notes will be taxable to a holder as ordinary
interest income at the time it accrues or is received in accordance with the
holder's method of accounting for federal income tax purposes. As discussed
below, stated interest on the Subordinated Notes will be treated as original
issue discount and will be included in income as such.
ORIGINAL ISSUE DISCOUNT
The Offered Notes will be issued with original issue discount for
federal income tax purposes. A holder generally is required to include
original issue discount, if any, in gross income as it accrues, regardless of
the holder's method of accounting for federal income tax purposes.
Accordingly, each holder will be required to include amounts in gross income
in advance of the receipt of the cash to which such income is attributable.
The amount of original issue discount with respect to each Offered
Note is equal to the excess of the "stated redemption price at maturity" of
such Offered Note over the "issue price" of the Offered Note. The stated
redemption price at maturity of each Offered Note will include all cash
payments required to be made thereunder until maturity, other than payments of
"qualified stated interest," which is defined generally as interest that is
unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually at a single fixed rate. Because there will be no
periodic payments of cash interest on the Subordinated Notes prior to January
15, 2002, none of the interest paid on the Subordinated Notes will constitute
qualified stated interest. The issue price of a Note will be equal to the
first price at which a substantial amount of Notes is sold to the public for
money (excluding sales to underwriters, placement agents or wholesalers,
etc.). The issue price of a Subordinated Note will be equal to that portion of
the issue price of the Unit of which such Subordinated Note is a part that is
allocable to the Subordinated Note as described in the next paragraph.
Accordingly, each Subordinated Note will be issued subject to a substantial
amount of original issue discount.
Because the original purchasers of the Subordinated Notes also
acquired Unit Shares, each Subordinated Note is likely to be treated for
federal income tax purposes as having been issued as part of an "investment
unit" consisting of the Subordinated Note and associated Unit Share. The issue
price of an investment unit consisting of the Subordinated Note and associated
Unit Share will be the first price at which a substantial amount of Units are
sold to the public for money (excluding sales to underwriters, placement
agents or wholesalers, etc.). The "issue
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price" of an investment unit is allocated between its component parts based on
their relative fair market values. The Company will allocate the issue price
of the Units between the Subordinated Notes and the Unit Shares in accordance
with their relative fair market values on the issue date; that allocation is
not, however, binding on the IRS. A holder of a Unit must use the Company's
allocation unless the holder discloses on its federal income tax return that
it plans to use an allocation that is inconsistent with the issuer's
allocation.
Taxation of Original Issue Discount
Each holder of an Offered Note will be required to include in gross
income an amount equal to the sum of the "daily portions" of the original
issue discount of the Offered Note for all days during each taxable year in
which the holder holds the Offered Note. The daily portions of original issue
discount will be determined on a constant interest rate basis by allocating to
each day during the taxable year in which the holder holds the Offered Note a
pro rata portion of the original issue discount thereon that is attributable
to the "accrual period" in which such day is included. The amount of the
original issue discount attributable to each full accrual period will be the
product of the "adjusted issue price" of the Offered Note at the beginning of
such accrual period and the "yield to maturity" of the Offered Note (adjusted
to reflect the length of the accrual period), less the amount of any qualified
stated interest allocable to the accrual period. The adjusted issue price of
an Offered Note at the beginning of an accrual period is the original issue
price of the Offered Note plus the aggregate amount of original issue discount
that has accrued in all prior accrual periods, less any cash payments on the
Offered Note on or before the first day of such accrual period (other than
payments of qualified stated interest). The yield to maturity is the discount
rate that, when used in computing the present value of all principal and
interest payments to be made on the Offered Note, produces an amount equal to
its issue price.
The accrual period generally is the six-month period ending on the
day in each calendar year corresponding to the day before the maturity date of
the Offered Note or the date six months before such date. The initial accrual
period of an Offered Note is the short period beginning on the issue date and
ending on the day before the first day of the first full accrual period. The
amount of original issue discount attributable to an initial short accrual
period may be computed under any reasonable method.
Sale or Retirement of an Offered Note
In general, a holder of an Offered Note will recognize gain or loss
upon the sale, retirement or other taxable disposition of such Offered Note in
an amount equal to the difference between (a) the amount of cash and the fair
market value of property received in exchange therefor (except to the extent
attributable to the payment of accrued interest or original issue discount,
which generally will be taxable to a holder as ordinary income) and (b) the
holder's adjusted tax basis in such Offered Note.
A holder's tax basis in an Offered Note generally will be equal to
the price paid for such Offered Note, increased by the amount of original
issue discount included in gross income prior to the date of disposition, and
decreased by the amount of any payments on such Offered Note (other than
payments of qualified stated interest) prior to disposition.
Any gain or loss recognized on the sale, retirement, or other taxable
disposition of an Offered Note generally will be capital gain or loss. Such
capital gain or loss generally will be long-term capital gain or loss if the
Offered Note had been held for more than one year.
Holders should be aware that the resale of an Offered Note may be
affected by the "market discount" rules of the Code under which a subsequent
purchaser of an Offered Note acquiring the Offered Note at a market discount
generally would be required to include as ordinary income a portion of the
gain realized upon the disposition or retirement of such Offered Note to the
extent of the market discount that has accrued while the debt instrument was
held by such subsequent purchaser.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of an Offered Note may be subject to backup withholding at a
rate of 31% with respect to interest and original issue discount on and gross
proceeds upon sale or retirement of an Offered Note unless such holder (i) is
a corporation or other exempt recipient and, when required, demonstrates that
fact, or (ii) provides, when required, a correct taxpayer identification
number, certifies that backup withholding is not in effect and otherwise
complies with applicable requirements of the backup withholding rules. Backup
withholding is not an additional tax; any amounts so withheld are creditable
against the holder's federal income tax, provided the required information is
provided to the IRS.
The Company is required to furnish certain information to the IRS,
and will furnish annually to record holders of Offered Notes, information with
respect to interest and original issue discount accruing during the calendar
year. That information will be based upon the adjusted issue price of the
Offered Note as if the holder were the original holder of the Offered Note.
Holders who purchase Offered Notes for an amount other than the adjusted issue
price and/or on a date other than the end of an accrual period will be
required to determine for themselves the amount of original issue discount, if
any, they are required to include in gross income for federal income tax
purposes.
DEDUCTIBILITY OF ORIGINAL ISSUE DISCOUNT
The deduction by the Company in respect of original issue discount
accrued with respect to the Subordinated Notes will be limited in part and
deferred in part because the Subordinated Notes will be "applicable high yield
discount obligations." The Subordinated Notes are applicable high yield
discount obligations because, among other things, the yield to maturity of the
Subordinated Notes exceeds the sum of the applicable federal long-term rate (a
rate published by the IRS each month for application during the following
calendar month) in effect at the time of issuance of the Subordinated Notes
(the "AFR") plus five percentage points. Accordingly, (i) if the yield to
maturity of the Subordinated Notes exceeds the sum of the AFR plus six
percentage points (such excess referred to below as the "Disqualified Yield"),
the deduction for interest (including original issue discount) accrued on the
Subordinated Notes will be permanently disallowed to the extent such interest
or original issue discount is attributable to the Disqualified Yield, and such
interest (including original issue discount) will be treated as dividends to
corporate holders of the Subordinated Notes for purposes of the dividends-
received deduction (to the extent that such amounts would have been treated as
dividends had they been distributions made by the Company with respect to its
stock) and (ii) the remainder of the original issue discount on the
Subordinated Notes will not be deductible by the Company until paid.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS
In the opinion of Pierce Atwood, counsel to the Company ("Counsel"),
the following sets forth the material anticipated federal income tax
consequences of the Exchange Offers. The following summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
final, temporary and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. Holders should note that Counsel's opinion is not binding on
the Internal Revenue Service (the "Service") and there can be no assurance
that the Service will take a similar view with respect to the tax-consequences
described below. No ruling has been or will be requested by the Company from
the Service on any tax matters relating to the New Notes or the New
Subordinated Notes. This summary is not intended to be applicable to all
categories of investors, some of which, such as dealers in securities, banks,
insurance companies, tax-exempt organizations and foreign persons, may be
subject to special rules. ALL HOLDERS OF NOTES AND/OR SUBORDINATED NOTES ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR NEW NOTES AND/OR OLD
SUBORDINATED NOTES FOR NEW SUBORDINATED NOTES.
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The exchange of the New Notes for the Old Notes and the exchange of
the New Subordinated Notes for the Old Subordinated Notes pursuant to the
Exchange Offers should not be taxable to the respective Holders thereof for
federal income tax purposes.
For a summary of the material anticipated federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Subordinated Notes, see "Certain Federal Income Tax Considerations."
PLAN OF DISTRIBUTION
Each broker-deal that receives New Notes or New Subordinated Notes
for its own account in connection with either of the Exchange Offers must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes or New Subordinated Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by Participating
Broker-Dealers during the period referred to below in connection with resales
of New Notes or New Subordinated Notes received in exchange for Old Notes or
Old Subordinated Notes, as applicable, if such Old Notes or Old Subordinated
Notes were acquired by such Participating Broker-Dealers for their own
accounts as a result of market-making activities or other trading activities.
The Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such New Notes or New Subordinated Notes for the
lesser of (i) a period of 180 days from the date on which the Registration
Statement of which this Prospectus is a part is declared effective or (ii)
such period of time as such Participating Broker-Dealers must comply with the
prospectus delivery requirements of the Securities Act in order to resell such
New Notes or New Subordinated Notes received in exchange for Old Notes or Old
Subordinated Notes acquired for their own accounts as a result of such
market-making or other trading activities (subject to extension under certain
limited exceptions described herein). See "The Exchange Offers - Resales of New
Notes and New Subordinated Notes."
The Company will not receive any cash proceeds from the issuance of
the New Notes and New Subordinated Notes offered hereby. New Notes and New
Subordinated Notes received by broker-dealers for their own accounts in
connection with either of the Exchange Offers may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or New
Subordinated Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Notes or New Subordinated Notes. Any broker-dealer
that resells New Notes or New Subordinated Notes that were received by it for
its own account in connection with either of the Exchange Offers and any
broker or dealer that participates in a distribution of such New Notes or New
Subordinated Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of New Noes or New
Subordinated Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities
Act. Each of the Notes Letter of Transmittal and the Subordinated Notes Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The legality under state law of the New Notes and the New
Subordinated Notes (if and when issued) will be passed upon for the Company by
Pierce Atwood, Portland, Maine. The legality of the Guarantees being issued in
connection with the Exchange Offers will be passed upon for the Guarantors as
follows: as to matters of Maine law and Delaware law, by Pierce Atwood,
Portland, Maine; as to matters of New Hampshire law, by Wadleigh, Starr,
Peters, Dunn & Chiesa, and as to matters of Vermont law, by Reiber, Kenlan,
Schwiebert, Hall & Facey.
EXPERTS
The combined balance sheet of the Company as of July 30, 1995 and the
combined statements of income, stockholder's equity and cash flows of the
Company for the year ended July 30, 1995 included herein have been so
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included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined balance sheet of the Company as of July 31, 1994 and the
combined statements of income, stockholder's equity and cash flows of the
Company for the years ended July 25, 1993 and July 31, 1994 included herein
have been so included in reliance on the report of Berry, Dunn, McNeil &
Parker, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated balance sheet of SKI as of July 31, 1994 and 1995,
and the consolidated statements of income, stockholders' equity and cash flows
of SKI for each of the three years in the period ended July 31, 1995 included
herein have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The consolidated statements of operations, stockholder's equity and
cash flows of Sugarbush Resort Corporation for the period from June 1, 1994
through May 15, 1995 and for the years ended May 31, 1994 and 1993 included
herein have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
As of September 1, 1995, the Company and its independent accountants,
Berry, Dunn, McNeil & Parker, mutually agreed that the engagement of such
accounting firm would be terminated, based on their shared views as to the
Company's rapidly expanding needs for accounting, tax and related services.
Such firm's reports on the Company's financial statements for the two years
preceding such decision did not contain any adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles. During the two fiscal years of the Company immediately
preceding such decision and during the subsequent interim period prior to such
decision, there were no disagreements with such firm on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. Price Waterhouse LLP was engaged as the Company's
independent accountants on September 1, 1995.
INDEMNIFICATION
The Company is a Maine corporation. Section 719 of the Maine Business
Corporation Act (13-A M.R.S.A. Section 101, et seq.) authorizes the
indemnification by a Maine corporation of any person who is a party or is
threatened to be made a party to any action, suit or proceeding by reason of
that person's status as a director, officer, employee or agent of the
corporation; provided that no such indemnification may be provided for any
person if he or she shall have been finally adjudicated (i) not to have acted
honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the corporation or its shareholders, or (ii)
in any criminal proceeding, to have had reasonable cause to believe his or her
conduct was unlawful. In the case of actions brought by or on behalf of the
corporation, indemnification may only be provided if the court determines that
such person is fairly and reasonably entitled to the requested
indemnification. Indemnification must be provided to the extent that a
director, officer, employee or agent has been successful, on the merits or
otherwise, in defense of an action of the type described in the second
sentence of this paragraph.
The Bylaws of the Company provide that it shall indemnify any person
who is made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he or she is or was a director or
officer of the Company, and may indemnify any employee or agent of the Company
in such circumstances, against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or her in connection with such action, suit or proceeding. No indemnification
may be provided for any person who shall have been finally adjudicated not to
have acted honestly or in the reasonable belief that his or her action was in
or not opposed to the best interests of the Company or who had reasonable
cause to believe that his or her conduct was unlawful. Indemnification must be
provided to any director, officer, employee or agent of the Company to the
extent such person has been successful, on the merits or otherwise, in defense
of any action or claim described above. Any indemnification under this
provision of the Bylaws, unless required under the Bylaws or ordered by a
court, can be made only as authorized in each specific case upon a
determination by a majority of
133
<PAGE>
disinterested directors or by independent legal counsel or by the shareholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
OTHER MATTERS
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus. If given or
made, such information or representation may not be relied upon as having been
authorized by the Company. The Company is not aware of any jurisdiction in
which the making of the Exchange Offers is not in compliance with applicable
law. If the Company becomes aware of any jurisdiction in which the making of
the Exchange Offers would not be in compliance with applicable law, the
Company will make a good faith effort to comply with such law. If, after such
good faith effort, the Company cannot comply with any such law, the Notes
Exchange Offer or the Subordinated Notes Exchange Offer, as applicable, will
not be made to (nor will tenders be accepted from or on behalf of) holders of
the Old Notes or Old Subordinated Notes, as applicable, residing in such
jurisdictions. Neither the delivery of this Prospectus nor any distribution of
securities hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any time subsequent not the
date hereof or that there has been no change in the information set forth
herein or in the affairs of the Company since the date hereof.
EXCHANGE AGENT
Holders of Old Notes or Old Subordinated Notes who qualify to
participate in the Exchange Offers and who wish to accept the applicable
Exchange Offer should either (a) request their broker, dealer, commercial
bank, trust company or nominee to effect the transaction for them or (b)
complete and sign the applicable Letter of Transmittal, having their
signatures guaranteed if required by the applicable Letter of Transmittal, and
forward such Letter of Transmittal together with such Old Notes or Old
Subordinated Notes, as the case may be, and all other documents required by
the applicable Letter of Transmittal to the Exchange Agent at the following
address:
BY MAIL:
(insured or registered recommended) BY OVERNIGHT EXPRESS:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276 Attention: Corporate Trust Services Window
Attention: Corporate Trust
BY HAND:
United States Trust Company of New York
111 Broadway/Lower Level
New York, New York 10005
Attention: Corporate Trust
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(800) 548-6565
FACSIMILE TRANSMISSION:
(for eligible institutions only)
(212) 420-6152
134
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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135
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
AMERICAN SKIING COMPANY
<S> <C>
Report of Independent Accountants -- July 30, 1995 and for the year then ended..................... F-2
Report of Independent Accountants -- July 31, 1994 and for the two years then ended................ F-3
Combined Balance Sheet -- July 31, 1994 and July 30, 1995 and April 28, 1996
(unaudited) and Pro Forma........................................................................ F-4
Combined Statement of Income -- For the years ended July 25, 1993, July 31, 1994 and
July 30, 1995, and the nine months ended April 30, 1995 and April 28, 1996 (unaudited)........... F-5
Combined Statement of Stockholder's Equity -- For the three years ended July 30, 1995,
and the nine months ended April 28, 1996 (unaudited)............................................. F-6
Combined Statement of Cash Flows -- For the years ended July 25, 1993, July 31, 1994
and July 30, 1995, and the nine months ended April 30, 1995 and April 28, 1996 (unaudited)....... F-7
Notes to Combined Financial Statements............................................................. F-8
S-K-I LTD.
Report of Independent Accountants.................................................................. F-21
Consolidated Balance Sheet -- July 31, 1994 and 1995............................................... F-22
Consolidated Statement of Income -- For the years ended July 31, 1993, 1994, and 1995.............. F-23
Consolidated Statement of Changes in Stockholders' Equity --
For the three years ended July 31, 1995,........................................................... F-24
Consolidated Statement of Cash Flows -- For the years ended July 31, 1993, 1994, and 1995.......... F-25
Notes to Consolidated Financial Statements......................................................... F-26
Condensed Balance Sheets........................................................................... F-34
Condensed Statements of Income..................................................................... F-35
Statements of Cash Flows........................................................................... F-36
Consolidated Balance Sheet -- April 28, 1996 (unaudited)........................................... F-38
Consolidated Statement of Income -- For the nine months ended April 30, 1995
and April 28, 1996 (unaudited)..................................................................... F-39
Consolidated Statement of Cash Flows -- For the nine months ended April 30, 1995
and April 28, 1996 (unaudited)..................................................................... F-40
Notes to (Unaudited) Condensed Consolidated Financial Statements................................... F-41
SUGARBUSH RESORT CORPORATION
Report of Independent Accountants.................................................................. F-44
Consolidated Statement of Income - For the two years ended May 31, 1994
and the period from June 1, 1994 through May 15, 1995.............................................. F-45
Consolidated Statement of Stockholder's Equity..................................................... F-46
Consolidated Statement of Cash Flows - For the two years ended May 31, 1994
and the period from June 1, 1994 through May 15, 1995.............................................. F-47
Notes to Consolidated Financial Statements......................................................... F-48
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Stockholder of American Skiing Company
In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of American
Skiing Company at July 30, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, MA
December 22, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Stockholder of American Skiing Company
We have audited the accompanying combined balance sheet of American Skiing
Company as of July 31, 1994 and the related combined statements of income,
stockholder's equity and cash flows for the two years in the period then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of American Skiing
Company as of July 31, 1994 and the results of its operations and its cash
flows for the two years in the period then ended in conformity with generally
accepted accounting principles.
BERRY, DUNN, McNEIL & PARKER
Portland, Maine
December 22, 1995
F-3
<PAGE>
AMERICAN SKIING COMPANY
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
JULY 31, JULY 30, APRIL 28, APRIL 28,
1994 1995 1996 1996
-------- ------- ----------- -----------
(UNAUDITED) (NOTE 2,
UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash.................................................. $213,000 $1,362,000 $569,000 $569,000
Restricted cash....................................... 91,000 309,000 522,000 522,000
Accounts receivable................................... 630,000 1,314,000 1,651,000 1,651,000
Inventory............................................. 505,000 1,381,000 1,600,000 1,600,000
Prepaid expenses...................................... 246,000 570,000 679,000 679,000
Property developed for resale......................... 7,231,000 3,854,000 1,250,000 1,250,000
Deferred tax assets................................... 26,000 95,000 125,000 332,000
------------ ------------ ------------ --------------
Total current assets................................ 8,942,000 8,885,000 6,396,000 6,603,000
Property and equipment, net............................. 41,871,000 62,213,000 80,005,000 80,005,000
Other assets............................................ 81,000 -- 8,044,000 8,044,000
Note receivable, affiliate.............................. 360,000 387,000 402,000 402,000
Deferred tax assets..................................... 530,000 949,000 264,000 264,000
------------ ------------ ------------ --------------
Total assets........................................ $51,784,000 $72,434,000 $95,111,000 $95,318,000
============ ============ ============ ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Line of credit and current portion of long-term debt.. $3,621,000 $7,887,000 $3,359,000 $3,359,000
Accounts payable and accrued expenses................. 1,857,000 4,010,000 4,071,000 4,071,000
Accrued leasehold..................................... 486,000 490,000 529,000 529,000
Other liabilities..................................... -- 1,350,000 -- --
Due to stockholder.................................... 231,000 186,000 176,000 176,000
Deposits and deferred revenue......................... 274,000 537,000 1,063,000 1,063,000
Income taxes payable.................................. -- 303,000 652,000 652,000
Demand note, stockholder.............................. -- -- -- 5,200,000
------------ ------------ ------------ --------------
Total current liabilities........................... 6,469,000 14,763,000 9,850,000 15,050,000
Deferred income taxes................................... -- -- -- 5,148,000
Long-term debt, excluding current portion.............. 19,103,000 27,169,000 46,286,000 46,286,000
------------ ------------ ------------ --------------
Total liabilities................................... 25,572,000 41,932,000 56,136,000 66,484,000
STOCKHOLDER'S EQUITY
Common stock............................................ 116,000 116,000 116,000 116,000
Additional paid-in capital.............................. 1,635,000 1,660,000 2,230,000 2,230,000
Retained earnings....................................... 24,461,000 28,726,000 36,629,000 26,488,000
------------ ------------ ------------ --------------
Total stockholder's equity.......................... 26,212,000 30,502,000 38,975,000 28,834,000
------------ ------------ ------------ --------------
Total liabilities and stockholder's equity........ $51,784,000 $72,434,000 $95,111,000 $95,318,000
============ ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SKIING COMPANY
COMBINED STATEMENT OF INCOME
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- --------------------------------
JULY 25, JULY 31, JULY 30, APRIL 30, APRIL 28,
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Ski and lodging............... $23,645,000 $26,544,000 46,794,000 $43,777,000 $57,283,000
Real estate................... 6,103,000 6,682,000 7,953,000 6,623,000 9,482,000
---------------- ------------- --------------- --------------- ---------------
29,748,000 33,226,000 54,747,000 50,400,000 66,765,000
---------------- ------------- --------------- --------------- ---------------
Expenses:
Cost of operations including
wages, maintenance and
supplies.................... 10,045,000 11,505,000 21,730,000 18,419,000 24,047,000
Cost of real estate sold...... 3,245,000 3,179,000 3,994,000 3,611,000 4,806,000
Real estate and payroll taxes. 993,000 1,265,000 1,736,000 1,364,000 1,773,000
Utilities..................... 2,097,000 1,854,000 4,132,000 3,725,000 5,083,000
Insurance..................... 1,570,000 1,163,000 2,127,000 1,830,000 1,758,000
Selling, general and
administrative.............. 4,718,000 5,940,000 9,394,000 8,509,000 10,383,000
Interest...................... 849,000 1,026,000 2,205,000 1,412,000 2,307,000
Depreciation and amortization 1,984,000 2,421,000 3,910,000 3,640,000 5,615,000
---------------- ------------- --------------- --------------- ---------------
25,501,000 28,353,000 49,228,000 42,510,000 55,772,000
---------------- ------------- --------------- --------------- ---------------
Income before income taxes.... 4,247,000 4,873,000 5,519,000 7,890,000 10,993,000
Provision for income taxes.. -- -- 400,000 938,000 1,004,000
----------------- ------------ --------------- --------------- ---------------
Income before extraordinary
gain from insurance claim..... 4,247,000 4,873,000 5,119,000 6,952,000 9,989,000
Extraordinary gain from
insurance claim............... 1,592,000 -- -- -- --
----------------- ------------ --------------- --------------- ---------------
Net income.................... $5,839,000 $4,873,000 $5,119,000 $6,952,000 $9,989,000
================= ============ =============== =============== ===============
Pro forma information
(unaudited, Note 2):
Net income as reported...... $5,119,000 $6,952,000 $9,989,000
--------------- --------------- ---------------
Interest expense............ 281,000 211,000 211,000
--------------- --------------- ---------------
Provision for income taxes.. 1,852,000 2,293,000 3,371,000
--------------- --------------- ---------------
Pro forma net income........ $2,986,000 $4,448,000 $6,407,000
=============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SKIING COMPANY
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
ADDITIONAL RETAINED
COMMON STOCK PAID-IN CAPITAL EARNINGS TOTAL
------------ --------------- -------- -----
<S> <C> <C> <C> <C>
Balance at July 26, 1992 $116,000 $ -- $18,236,000 $18,352,000
Net income............................. -- -- 5,839,000 5,839,000
Distributions to stockholder........... -- -- (1,759,000) (1,759,000)
Contributions.......................... -- 722,000 -- 722,000
---------------- ---------------- ---------------- ----------------
Balance at July 25, 1993 116,000 722,000 22,316,000 23,154,000
Net income............................. -- -- 4,873,000 4,873,000
Distributions to stockholder........... -- -- (2,728,000) (2,728,000)
Contributions.......................... -- 913,000 -- 913,000
---------------- ---------------- ---------------- ----------------
Balance at July 31, 1994 116,000 1,635,000 24,461,000 26,212,000
Net income............................. -- -- 5,119,000 5,119,000
Distributions to stockholder........... -- -- (854,000) (854,000)
Contributions.......................... -- 25,000 -- 25,000
---------------- ---------------- ---------------- ----------------
Balance at July 30, 1995 116,000 1,660,000 28,726,000 30,502,000
Net income (unaudited)................. -- -- 9,989,000 9,989,000
Distributions to stockholder
(unaudited)........................... -- -- (2,086,000) (2,086,000)
Contributions (unaudited).............. -- 570,000 -- 570,000
---------------- ---------------- ---------------- ----------------
Balance at April 28, 1996 (unaudited) $116,000 $2,230,000 $36,629,000 $38,975,000
================ ================ ================ ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SKIING COMPANY
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------------
JULY 25, JULY 31, JULY 30, APRIL 30, APRIL 28,
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 5,839,000 $ 4,873,000 $ 5,119,000 $ 6,952,000 $ 9,989,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 2,118,000 2,543,000 3,910,000 3,640,000 5,615,000
Gain on insurance claim....................... (1,592,000) -- -- -- --
Loss on disposal of fixed assets.............. 28,000 -- -- -- --
Deferred income taxes......................... -- -- (488,000) -- 655,000
Decrease (increase) in assets:
Accounts receivable......................... (55,000) (202,000) (684,000) (928,000) (337,000)
Inventory................................... (75,000) (226,000) (876,000) (660,000) (219,000)
Prepaid expenses............................ (98,000) 65,000 (324,000) (154,000) (109,000)
Properties developed for resale............. (4,490,000) (662,000) 3,377,000 2,766,000 2,604,000
Note receivable and other assets............ 30,000 2,000 54,000 54,000 (8,059,000)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses....... 1,215,000 (847,000) 2,157,000 552,000 100,000
Other liabilities........................... -- -- -- -- (1,350,000)
Deposits and deferred revenue............... (253,000) (108,000) 45,000 251,000 313,000
Income taxes payable........................ -- -- 303,000 938,000 349,000
----------- ----------- ------------ ----------- -----------
Net cash provided by operating
activities.................................. 2,667,000 5,438,000 12,593,000 13,411,000 9,551,000
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchases of businesses,
net of cash acquired........................ -- (3,060,000) (1,819,000) -- --
Proceeds from insurance settlement............ 750,000 1,817,000 -- -- --
Capital expenditures.......................... (5,182,000) (7,798,000) (12,024,000) (7,151,000) (22,232,000)
----------- ----------- ------------ ----------- ------------
Net cash used by investing activities........ (4,432,000) (9,041,000) (13,843,000) (7,151,000) (22,232,000)
----------- ----------- ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments of) line of credit 337,000 (6,961,000) 2,820,000 (2,225,000) (4,395,000)
Net proceeds from (payments of) revolving -- 15,915,000 1,150,000 (2,472,000) 16,985,000
credit loan.................................
Proceeds from long-term debt.................. 2,525,000 671,000 84,000 84,000 2,316,000
Payments of long-term debt.................... (204,000) (3,758,000) (765,000) (684,000) (1,439,000)
Payments to former stockholder................ (62,000) (57,000) (61,000) (45,000) (63,000)
Distributions to Stockholder.................. (1,037,000) (2,277,000) (854,000) (557,000) (2,086,000)
Capital contribution from Stockholder......... -- 231,000 25,000 25,000 570,000
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities.................................. 1,559,000 3,764,000 2,399,000 (5,874,000) 11,888,000
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash............. (206,000) 161,000 1,149,000 386,000 (793,000)
Cash, beginning of year......................... 258,000 52,000 213,000 213,000 1,362,000
----------- ----------- ----------- ----------- -----------
Cash, end of year............................... $ 52,000 $ 213,000 $ 1,362,000 $ 599,000 $ 569,000
=========== =========== =========== =========== ===========
Cash paid for interest.......................... $ 1,006,000 $ 1,192,000 $ 1,056,000 $ 1,577,000 $ 2,443,000
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Property purchased under capitalized leases... $ 388,000 $ 646,000 $ 1,050,000 $ 1,050,000 $ 1,011,000
Liabilities assumed associated with
purchased companies......................... $ -- $ 2,616,000 $ 9,254,000 $ -- $ --
Land contributed by the stockholder........... $ 722,000 $ 682,000 $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-7
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
American Skiing Company (the "Company") is a group of companies whose
primary function is to develop and operate ski areas. Each of the
companies in this group is wholly owned by the same individual (the
"Stockholder"). The Company operates predominantly in a single industry
segment, which is the development and operation of ski areas. American
Skiing Company provides ski recreation and related services to skiers, a
single customer group. As of July 30, 1995 the group includes the
following companies:
* SUNDAY RIVER SKIWAY CORPORATION ("SRSC", a Maine Subchapter S
corporation), operates the Sunday River Ski Resort in Newry, Maine.
SRSC also engages in real estate development at the ski resort as a
means of establishing the necessary lodging amenities required in a
destination resort, as well as to generate supplemental income.
* SUNDAY RIVER LTD. ("SRL", a Maine Subchapter S corporation), operates
the Summit Hotel at Sunday River.
* PERFECT TURN, INC. ("PT", a Maine Subchapter S corporation), operates
the skier development programs at each of the LBO Resort Enterprises
ski resorts and franchises the program to other non-affiliated
resorts.
* SUNDAY RIVER TRANSPORTATION CO. ("SRTC", a Maine Subchapter S
corporation), operates the Silver Bullet train.
* SUGARBUSH RESORT HOLDINGS, INC. ("SRHI", a Vermont C corporation),
operates the ski resort, golf course and inn at the Sugarbush Resort
in Warren, Vermont.
* CLUB SUGARBUSH, INC. ("CS", a Vermont C corporation), operates a
health club at the Sugarbush Resort. CS is a wholly owned subsidiary
of SRHI.
* SUGARBUSH LEASING COMPANY (a Vermont C corporation), is an inactive
wholly owned subsidiary of SRHI.
* SUGARBUSH RESTAURANTS, INC. (a Vermont C corporation), owns various
operating licenses for Sugarbush operations and is a wholly owned
subsidiary of SRHI.
* MOUNTAIN WATER CO. ("MWC", a Vermont C corporation), operates a water
utility at the Sugarbush Resort. MWC is a wholly owned subsidiary of
SRHI.
* MOUNTAIN WASTE WATER CO. ("MWWC", a Vermont C corporation), operates
a sewage treatment plant at the Sugarbush Resort. MWWC is a wholly
owned subsidiary of SRHI.
* LBO HOLDING, INC. ("LBO", a Maine C corporation) operates the
Attitash/Bear Peak Ski Resort in Bartlett, New Hampshire.
* CRANMORE, INC. ("Cranmore", a Maine C corporation) operates the Mt.
Cranmore Ski Resort in North Conway, New Hampshire. Cranmore is a
wholly owned subsidiary of LBO.
2. UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma balance sheet at April 28, 1996 reflects the
historical consolidated balance sheet of American Skiing Company, adjusted
for the following effects of the assumed termination of the S corporation
status of SRSC, SRL, PT, and SRTC (the "S corporations"):
F-8
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
2. UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED)
(A) The cumulative effect of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", which consists of deferred
income taxes resulting from the change from S corporation status to C
corporation status; and
(B) The assumed distribution of a $5,200,000 demand note to the
Stockholder, representing a portion of S corporation retained
earnings earned through April 28, 1996 and not previously
distributed. The note will bear interest at the Applicable Federal
Rate, which currently approximates 5.4% annually. The pro forma
balance sheet does not give effect to distributions that may be paid
from earnings generated subsequent to April 28, 1996.
The following provides a summary reconciliation of the effects of the pro
forma adjustments to retained earnings of the Company at April 28, 1996:
Balance at April 28, 1996......................... $36,629,000
Pro forma income tax provision.................... (4,941,000)
Pro forma stockholder distribution................ (5,200,000)
-------------
Pro forma balance at April 28, 1996............... $26,488,000
=============
The pro forma income tax provision consists of the following:
NINE MONTHS ENDED
------------------------------------
JULY 30, 1995 APRIL 30, 1995 APRIL 28, 1996
------------- -------------- --------------
Current:
Federal............ $826,000 $1,974,000 $2,277,000
State.............. 231,000 319,000 637,000
--------------- --------------- ----------------
1,057,000 2,293,000 2,914,000
--------------- --------------- ----------------
Deferred:
Federal............ 682,000 -- 392,000
State.............. 113,000 -- 65,000
--------------- --------------- ----------------
795,000 -- 457,000
--------------- --------------- ----------------
$1,852,000 $2,293,000 $3,371,000
=============== =============== ================
The reconciliations of pro forma income taxes computed at the federal
statutory income tax rate to the pro forma income taxes reported in the
combined statements of income are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------
JULY 30, APRIL 30, APRIL 28,
1995 1995 1996
---- ---- ----
<S> C> <C> <C>
Income tax provision at the statutory rate..... $1,581,000 $2,032,000 $2,885,000
State taxes, net............................... 265,000 255,000 480,000
Non-deductible items........................... 6,000 6,000 6,000
---------- ---------- ----------
Income tax provision at the effective tax rate. $1,852,000 $2,293,000 $3,371,000
========== ========== ==========
</TABLE>
The following presents the pro forma deferred tax (assets) and liabilities
of the Company assuming that SRSC, SRL, PT, and SRTC ceased to be treated
as S corporations on April 28, 1996.
F-9
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
2. UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED)
Property, plant and equipment basis differential....... $7,326,000
Other.................................................. 266,000
-----------
Gross deferred tax liabilities......................... 7,592,000
-----------
Net operating losses................................... (1,235,000)
Capital leases......................................... (682,000)
Tax credit carryforwards............................... (525,000)
Inventory.............................................. (365,000)
Other.................................................. (233,000)
-----------
Gross deferred tax assets.............................. (3,040,000)
-----------
$4,552,000
===========
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed in preparing these combined
financial statements are presented below.
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
American Skiing Company (see Note 1 - Basis of Presentation). All
significant intergroup accounts and transactions have been eliminated.
FISCAL YEAR
The Company's fiscal year is a fifty-two week or fifty-three week period
ending on the Sunday nearest the end of July. The periods for 1993, 1994
and 1995 consisted of fifty-two, fifty-three and fifty-two weeks,
respectively.
INTERIM FINANCIAL STATEMENTS
The interim financial statements included herein are unaudited. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such financial
statements have been included. The interim financial results of operations
are not necessarily indicative of the results to be expected for a fiscal
year.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation. These reclassifications
have no effect on net income for 1993 and 1994.
RESTRICTED CASH
Restricted cash represents amounts held in escrow for the buyers of
properties developed for resale. The cash will be available to the Company
when the properties are sold.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist primarily of retail goods, food and beverage products
and mountain operating supplies.
F-10
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated by the
straight-line method over the assets' estimated useful lives which
generally range from 9 to 40 years for buildings, 3 to 12 years for
machinery and equipment and 10 to 50 years for leasehold improvements,
lifts, lift lines and trails. Assets under capital lease are depreciated
over the shorter of their useful lives or the respective lease life.
REVENUE RECOGNITION
The Company recognizes revenue at the point of service, except for real
property sales (Note 5). Revenue includes sales of lift tickets, tuition
from ski schools, sales from restaurants, bars and retail shops, and real
estate rentals and sales of real property.
INTEREST
Interest is expensed as incurred except when it is capitalized in
conjunction with major capital additions and development of properties
for resale. The amounts of interest capitalized are determined by
applying current interest rates to the funds required to finance the
construction.
EMPLOYEE BENEFITS
SRSC has a profit sharing plan pursuant to Section 401(k) of the Internal
Revenue Code, whereby participants may contribute a percentage of
compensation. SRSC will match ten percent of participant contributions up
to one percent of participant compensation and may also make
profit-sharing contributions to the plan at the discretion of the Board
of Directors. LBO temporarily assumed a defined contribution plan of the
former Mt. Attitash Lift Corporation. Subsequent to July 31, 1995 the
plan was terminated. Former employees were paid out and existing employee
benefits were rolled into a separate savings plan pursuant to Section
401(k) of the Internal Revenue Code which the employees of SRHI were
already able to participate in. Pursuant to this plan, which LBO and SRHI
employees are now both eligible to participate in, the employer will
match twenty-five percent of employee contributions up to 4% of annual
salary. The plans' 1993, 1994 and 1995 contribution expenses of $16,000,
$16,000 and $107,000 are included in "cost of operations including wages,
maintenance, and supplies."
ADVERTISING COSTS
Advertising costs are expensed the first time the advertising takes
place. The amount charged to advertising expense for the years ended July
25, 1993, July 31, 1994, and July 30, 1995 was $530,000, $1,042,000 and
$4,518,000, respectively.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the financial statements. Actual
results could differ from those estimates.
EARNINGS PER SHARE
Earnings per share has not been presented for the Company as all of the
Company's outstanding common stock is owned by the same individual.
F-11
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of", was recently issued and its adoption is required for fiscal
years beginning after December 15, 1995. SFAS No. 121 mandates specific
methodologies to be used for identifying and measuring the impairment of
long-lived assets. Adoption of SFAS No. 121 is not expected to materially
impact the Company's financial statements.
4. BUSINESS DEVELOPMENTS AND ACQUISITIONS
In June of 1994, LBO Holding, Inc. acquired substantially all of the
outstanding common stock of Mt. Attitash Lift Corporation. Subsequent to
this transaction, LBO merged Mt. Attitash Lift Corporation into itself,
resulting in LBO's assumption of all of the assets and liabilities at the
ski resort known as Attitash Bear Peak. The purchase price of the stock
was approximately $6,139,000, including direct costs of the acquisition.
In May of 1995, Sugarbush Resort Holding, Inc. acquired the operating
assets of the Sugarbush Resort from its former owner, Claneil Enterprises
Incorporated (Claneil). In connection with this transaction, SRHI also
acquired the issued and outstanding shares of stock of MWC, MWWC and CS.
The purchase price of the assets acquired and liabilities assumed was
approximately $8,670,000, including direct costs of the acquisition. From
November of 1994 through the closing date, SRHI operated the resort and
the related supporting functions pursuant to an operating lease with the
seller. In connection with the SRHI acquisition, Sugarbush Land Corp. (an
affiliate of American Skiing Company) acquired certain developmental land
parcels adjacent to the resort from Claneil for $2,973,000. No
development or sales of these parcels have occurred.
On June 30, 1995, LBO acquired the assets of Mt. Cranmore from Cranmore
Country Corp. (a wholly owned subsidiary of BayBank (a Massachusetts
Trust Company)). The purchase price of the assets acquired and
liabilities assumed was approximately $2,403,000, including direct costs
of the acquisition. The purchase price included an amount of $1,350,000
which was not paid as of July 30, 1995, and is included in other
liabilities in the accompanying financial statements.
Each acquisition was accounted for using the purchase accounting method,
and in each case virtually all of the purchase price was allocated to
property and equipment. The combined financial statements contained
herein reflect the operations of each acquired business subsequent to its
respective acquisition date.
The following unaudited pro forma summary presents the combined results
of operations as if the acquisitions of Sugarbush Resort Holdings, Inc.,
Mt. Cranmore and Mt. Attitash Lift Corporation occurred on July 26, 1993.
YEAR ENDED
--------------------------------
JULY 31, JULY 30,
1994 1995
---- ----
Revenues.............................. $56,177,000 $58,527,000
Expenses.............................. 53,036,000 55,900,000
---------- ----------
Net income............................ $3,141,000 $2,627,000
========== ==========
The following unaudited pro forma summary gives effect to the acquisition
of Sugarbush Resort Holdings, Inc., Mt. Cranmore, and Mt. Attitash Lift
Corporation, and the termination of the S corporation status of the S
corporations (Note 2):
F-12
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
4. BUSINESS DEVELOPMENTS AND ACQUISITIONS (CONTINUED)
YEAR ENDED
JULY 30, 1995
----------------
Revenues............................................ $58,527,000
-----------
Expenses............................................ 57,752,000
-----------
Net income.......................................... $775,000
-----------
The pro forma financial information is not intended to be indicative of
the results of operations that actually would have occurred had the
transactions taken place at the beginning of the years presented or of
future results of operations.
5. REAL ESTATE OPERATIONS
Incidental to its ski operations, the Company engages in various real
estate activities including rental services and the development of
property for resale. During development, real estate taxes, insurance,
interest, planning and permitting costs are capitalized. Such costs were
determined based upon an allocation methodology and are relieved on a
specific identification methodology as sales occur. Profit is recognized
from the sale of such property at the time of closing, when the Company
has no ongoing involvement in the specific property sold. The carrying
value of the property developed for resale is reduced to net realizable
value, if the asset carrying value is determined not to be recoverable
through expected undiscounted future cash flows.
Properties developed for resale consist of the following:
JULY 31, JULY 30,
1994 1995
---- ----
Summit hotel units............................. $5,949,000 $2,848,000
Other condominiums............................. 1,282,000 1,006,000
----------- -----------
$7,231,000 $3,854,000
=========== ===========
6. PROPERTY AND EQUIPMENT
The following reflects the combination of both owned property and
equipment as well as such assets acquired pursuant to capital leases.
JULY 31, 1994 JULY 30, 1995
------------- -------------
Buildings and grounds..................... $13,014,000 $16,904,000
Machinery and equipment................... 15,526,000 21,749,000
Lifts and lift lines...................... 11,954,000 16,858,000
Trails.................................... 4,177,000 7,441,000
Land improvements......................... 725,000 2,427,000
------------- --------------
45,396,000 65,379,000
Less -- accumulated depreciation
and amortization........................ 12,102,000 14,756,000
------------- --------------
33,294,000 50,623,000
Land...................................... 5,751,000 6,729,000
Construction-in-process................... 2,826,000 4,861,000
------------- --------------
Net property and equipment................ $41,871,000 $62,213,000
============= ==============
Property and equipment include approximately $1,372,000 and $2,422,000 of
machinery and equipment held under capital leases at July 31, 1994 and
July 30, 1995, respectively. Related accumulated amortization at July 31,
1994 and July 30, 1995 on property and equipment under capital leases was
approximately $193,000 and $599,000, respectively. Amortization expense
for property and equipment under capital leases was
F-13
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
6. PROPERTY AND EQUIPMENT (CONTINUED)
approximately $59,000, $82,000, and $406,000 for 1993, 1994 and 1995,
respectively. Depreciation expense was $1,984,000, $2,421,000 and
$3,805,000 for 1993, 1994 and 1995, respectively.
7. NOTE RECEIVABLE, AFFILIATE
The note receivable in the amount of $250,000 is from Ski Dorms, Inc., a
company which is principally owned by the Stockholder of the Company, and
is secured by a mortgage on land and building. Interest is charged at the
bank's prime rate plus 1-1/2% and principal and any unpaid interest are
due in December, 1999. Accrued interest receivable on this note at July
31, 1994 and July 30, 1995 was $110,000 and $137,000, respectively.
8. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JULY 31, 1994 JULY 30, 1995
------------- -------------
<S> <C> <C>
SUNDAY RIVER SKIWAY CORPORATION
Note payable to bank with interest at bank's
base rate plus 1/2%, 7.75% and 9.25% at July
31, 1994 and July 30, 1995, respectively; the
loan is a revolving credit loan with a
maximum amount available of $17,250,000;
maximum amounts available decline by an
annual amount of $2,437,500 beginning March 1,
1997 until July 31, 2001, at which time
the balance will be due in full;
collateralized by a first mortgage on all
corporate assets, including the assets of
affiliates who are borrowers on this note
(Note 12); assignment of all land leases; and
assignment of the $4,000,000 life insurance
policy on the life of the $15,951,000 $17,101,000
Stockholder....................................
LBO HOLDING, INC.
Subordinated debentures issued to the former
shareholders in Mt. Attitash Lift Corporation
by LBO, with an original face value of
$2,151,000 (a discount has been reflected
based on the Group's incremental borrowing
rate at the time). The initial coupon rate is
6% per annum, to be adjusted annually based
on the revenues of LBO, as defined in the
agreement. Interest is payable annually on
May 1st, beginning in 1995. LBO may prepay
the outstanding principal balance from time
to time. Any prepayment prior to April 30,
1999 is subject to a discount, as described
in the agreement. Holders of the debentures
have certain redemption rights prior to May 1
of each year,subject to limitation and 1,599,000 1,636,000
discount as described in the agreement.........
Coupons redeemable for single day ski passes
at Attitash and Sunday River issued to former
shareholders of Mt. Attitash Lift Corporation
by LBO, with a face value of $777,000 (a
discount has been reflected based upon the
coupons' cash equivalent basis at the date of
issuance). The coupons expire at various dates, 583,000 567,000
beginning July 31, 1996 through July 31, 2001..
F-14
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
8. LONG-TERM DEBT (CONTINUED)
SUGARBUSH RESORT HOLDINGS, INC.
Promissory note payable to Snowridge, Inc.
by SRHI, with a face value of $6,120,000 (a
discount has been reflected based on an
imputed interest rate of 9.5%) and an interest
rate of 6.25%. Interest is payable quarterly
beginning June 30, 1995. A principal payment
of $620,000 is due November 1, 1995 and the
remaining principal and all accrued interest
outstanding are due on December 31, 1999. The
note is collateralized by certain assets (as
defined in the loan agreement) of -- 5,482,000
Sugarbush.....................................
Promissory note in the amount of $2,311,000
issued to LHC Corporation (an affiliate of
Snowridge, Inc.) by MWWC, which is secured by
the stock of MWC and MWWC as well as letters
of credit in the amount of $100,000. The note
bears interest at 9% or prime plus 1%, which
is due June 1 of each year beginning in 1995.
Principal payments of $154,000 are due each
June 1, beginning in 1997, with the balance -- 2,311,000
due on June 1, 2003.........................
A bank mortgage payable to Chittenden Bank by
MWC in the amount of $135,000. Principal and
interest at 6.25% are payable monthly, and
the final payment is due in the year 2000.
The loan is collateralized by equipment ..... -- 105,000
A bank mortgage payable to the Howard Bank by
SRHI in the amount of $96,000. Principal and
adjustable rate interest are payable monthly
for thirty years, with the balance due in
December of 2024. The loan is collateralized
by a residential condominium in Warren, -- 83,000
Vermont..... ................................
OTHER
Obligations under capital lease............ 960,000 1,431,000
Other notes payable........................ 446,000 336,000
----------- -----------
19,539,000 29,052,000
Less: current portion...................... 436,000 1,883,000
----------- -----------
Long-term debt, excluding current portion.. $19,103,000 $27,169,000
=========== ===========
</TABLE>
The non-current portion of long-term debt matures as follows:
1997........................................... $3,332,000
1998........................................... 2,926,000
1999........................................... 2,732,000
2000........................................... 8,161,000
2001 and thereafter............................ 11,231,000
Interest related to capitalized leases......... (103,000)
Debt discount.................................. (1,110,000)
$27,169,000
===========
During 1993, 1994 and 1995, American Skiing Company incurred total interest
cost of $1,007,000, $1,208,000 and $2,429,000, respectively, of which
$158,000, $182,000 and $224,000, respectively, has been capitalized to
property and equipment and properties held for sale.
F-15
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
8. LONG-TERM DEBT (CONTINUED)
At July 30, 1995, SRSC had letters of credit outstanding totaling
$400,000. SRHI had letters of credit outstanding totaling $100,000, while
LBO had letters of credit outstanding totaling approximately $1,379,000,
all of which were issued in connection with the Sugarbush and Cranmore
acquisitions, respectively.
9. LINE OF CREDIT
SRSC has a line of credit payable to bank with interest at the bank's
base rate which has a maximum amount available of $10,000,000. At July
31, 1994 and July 30, 1995, $3,185,000 and $6,004,000 was outstanding
associated with this arrangement. At July 31, 1994 and July 30, 1995, the
interest rate was 7.25% and 8.75%, respectively. Annual renewal of the
agreement is required on the termination date at which time the loan is
payable in full. This line of credit is collateralized by a second
mortgage on all corporate assets, including the assets of affiliates who
are borrowers on this note (Note 12), assignment of all land leases, and
assignment of a $4,000,000 life insurance policy on the life of the
Stockholder. The outstanding balance on the line of credit is required to
be reduced to $3,000,000 or less for a period of thirty consecutive days,
which include April 15.
10. COMBINED STOCKHOLDER'S EQUITY
The Company's combined stockholder's equity at July 31, 1994 may be
summarized as follows:
<TABLE>
<CAPTION>
SHARES ADDITIONAL
AUTHORIZED/ CAPITAL PAID IN RETAINED STOCKHOLDER'S
OUTSTANDING STOCK CAPITAL EARNINGS EQUITY
----------- ----- ------- -------- ------
> <C> <C> <C> C> <C>
Sunday River Skiway Corp........... 250,000/ $116,000 -- $24,111,000 $24,227,000
115,434
Sunday River Ltd................... 2,000/ -- 1,404,000 413,000 1,817,000
1
Perfect Turn, Inc.................. 2,000/ -- -- (47,000) (47,000)
1
Sunday River Trans. Co............. 2,000/ -- 231,000 (16,000) 215,000
1
LBO Holding, Inc................... 10,000/ -- -- -- --
1,000
-------- ---------- ----------- -----------
$116,000 $1,635,000 $24,461,000 $26,212,000
======== ========== =========== ===========
</TABLE>
F-16
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
10. COMBINED STOCKHOLDER'S EQUITY (CONTINUED)
The Company's combined stockholder's equity at July 30, 1995 may be
summarized as follows:
<TABLE>
<CAPTION>
SHARES ADDITIONAL
AUTHORIZED/ CAPITAL PAID IN RETAINED STOCKHOLDER'S
OUTSTANDING STOCK CAPITAL EARNINGS EQUITY
----------- ----- ------- -------- ------
<S> <C> <C> <C> <C <C>
Sunday River Skiway Corp...... 250,000/ $116,000 $ -- $27,750,000 $27,866,000
115,434
Sunday River Ltd.............. 2,000/ -- 1,404,000 1,009,000 2,413,000
1
Perfect Turn, Inc............. 2,000/ -- -- (55,000) (55,000)
1
Sunday River Trans. Co........ 2,000/ -- 231,000 (302,000) (71,000)
1
LBO Holding, Inc.............. 10,000/ -- -- (112,000) (112,000)
1,000
Sugarbush Resort.............. 10,000/
Holdings, Inc............ 100 -- 25,000 436,000 461,000
-------- ---------- ----------- -----------
$116,000 $1,660,000 $28,726,000 $30,502,000
======== ========== =========== ===========
</TABLE>
11. INCOME TAXES
The provision for income taxes charged to continuing operations was as
follows:
YEAR ENDED
----------------------------------
JULY 25, JULY 31, JULY 30,
1993 1994 1995
---- ---- ----
Current tax expense
Federal..................... $ -- $ -- $248,000
State....................... -- -- 55,000
--------- --------- -----------
-- -- 303,000
Deferred tax expense
Federal..................... -- -- 77,000
--------- --------- -----------
State....................... 20,000
-----------
-- -- 97,000
--------- --------- -----------
Total provision................. $ -- $ -- $400,000
========= ========= ===========
Deferred tax liabilities (assets) are comprised of the following at July
31, 1994 and July 30, 1995:
JULY 31, JULY 30,
1994 1995
---- ----
Property, plant and equipment basis differential. $ 881,000 $ 623,000
Other............................................ 6,000 23,000
----------- -----------
Gross deferred tax liabilities................... 887,000 646,000
----------- -----------
Net operating losses............................. (1,197,000) (1,358,000)
Tax credit carryforwards......................... (214,000) (214,000)
Other............................................ (32,000) (118,000)
----------- -----------
Gross deferred tax assets........................ (1,443,000) (1,690,000)
----------- -----------
$ (556,000) $(1,044,000)
=========== ===========
F-17
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
11. INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax
rate of 35% to pretax income from continuing operations as a result of
the following differences:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
JULY 25, JULY 31, JULY 30,
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Income tax provision at the statutory U.S. tax rates $1,486,000 $1,706,000 $1,932,000
Increase (decrease) in rates resulting from:
No tax on earnings of S corporations................ (1,486,000) (1,706,000) (1,679,000)
State taxes, net.................................... -- -- 115,000
Nondeductible items................................. -- -- 32,000
Other............................................... -- -- --
----------- ----------- -------------
Income tax provision at the effective tax rates..... $ -- $ -- $ 400,000
=========== =========== =============
</TABLE>
In assessing the value of the deferred tax assets at July 31, 1994 and
July 30, 1995, management has analyzed the Company's forecast for future
taxable earnings (and losses) and other relevant factors and concluded
that recoverability of the net deferred tax assets of $556,000 and
$1,044,000 at July 31, 1994 and July 30, 1995, respectively, is more
likely than not.
Certain companies comprising the American Skiing Company (SRSC, SRL, PT
and SRTC) have elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code of 1986, as amended. Accordingly, no income
tax provision or liability has been made for these companies for any of
the years ended July 25, 1993, July 31, 1994 and July 30, 1995. For
federal and state income tax purposes, taxable income, losses and tax
credits are passed through to the Stockholder, who is individually
responsible for reporting his share of such items. The Company intends to
distribute to the Stockholder amounts sufficient to pay his personal
income taxes based on the S corporations' current earnings.
At July 31, 1994 and July 30, 1995, LBO had net operating loss
carryforwards of approximately $3,320,000 and $3,747,000 for federal
income tax purposes and approximately $778,000 and $1,028,000 for state
income tax purposes. The net operating loss carryforwards expire in
varying amounts through the year 2009. In addition, LBO had $214,000 of
investment tax credit carryforwards which expire through the year 2000.
Ownership changes, as defined by the Internal Revenue Code, resulting
from the acquisition by LBO of Mt. Attitash Lift Corporation, limit the
amount of net operating loss carryforwards and investment tax credit
carryforwards that can be utilized to offset future taxable income or tax
liabilities. Subsequent changes in ownership could further affect the
limitation in future years.
12. RELATED PARTY TRANSACTIONS
Under SRSC's bank loan agreements, all of the companies comprising the
American Skiing Company are liable for the amounts due and the loans are
collateralized by virtually all of their assets. The following companies
are considered borrowers on note agreements: Sunday River Skiway
Corporation; Sunday River Ltd.; LBO Holding, Inc.; Perfect Turn, Inc.;
and Sugarbush Resort Holdings, Inc.
Sunday River Skiway Corporation has guaranteed amounts outstanding under
subordinated debentures due in 2002 that were issued by LBO Holding,
Inc., as part of the acquisition of Mt. Attitash Lift Corporation.
Payments under the guarantee are subordinated to all secured indebtedness
of SRSC to any bank, thrift institution or other institutional lender.
F-18
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
12. RELATED PARTY TRANSACTIONS (CONTINUED)
American Skiing Company collects receipts and advances amounts on behalf
of its affiliates within and outside of the combined group during its
normal operations.
During 1993, 1994 and 1995, SRSC paid Western Maine Leasing, Inc., (a
Maine corporation owned by the Stockholder) $54,000, $43,000 and $34,000
for the use of construction equipment.
13. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES
SRSC leases substantially all of the land presently used for skiing
terrain at Sunday River under a lease expiring in 2030. Charges to
operations for this lease were $459,000, $486,000 and $490,000 in 1993,
1994 and 1995, respectively. Lease payments are computed as a percentage
of gross profits from property sales and as a percentage of other
revenues.
LBO Holding, Inc. leases 264.5 acres of the approximately 600 acres it
uses to operate the Attitash Bear Peak Ski Resort area from the U. S.
Forest Service. A Term Special Use Permit covering 44.5 acres expires in
2010 and may be renewed by mutual agreement. A revocable permit, covering
approximately 220 acres, is terminable at any time at the discretion of
the U.S. Forest Service. LBO does not feel this permit will be revoked in
the near future. The leases call for annual rental payments based on a
percentage of gross revenue. Total rent expense under these operating
leases was $20,000 in 1995.
LBO also leases a water slide for use under an operating lease during the
summer months at Attitash Bear Peak. The rental payment, a percentage of
gross receipts, was $51,000 in 1995.
SRHI leases approximately 262 of the approximately 413 skiable acres it
uses to operate the Sugarbush Ski Resort area from the U.S. Forest
Service. The Special Use Permit expires in 2035 and may be renewed by
mutual agreement. Annual rental payments are based on a percentage of
gross revenue. Total rent expense under this lease was $58,000 in 1995.
Charges for these leases and permits are included in cost of operations.
In addition to the leases described above, the companies comprising
American Skiing Company are committed under several operating and capital
leases for various equipment. Rent expense under all operating leases was
$630,000, $803,000 and $1,007,000 for the years ended 1993, 1994 and
1995, respectively.
Future minimum lease payments for lease obligations at July 30, 1995 are
as follows:
CAPITAL OPERATING
LEASES LEASES
---------- ---------
1996.................................. $617,000 $128,000
1997.................................. 548,000 128,000
1998.................................. 311,000 73,000
1999.................................. 117,000 17,000
2000.................................. 45,000 --
---------- ---------
Total payments..................... 1,638,000 $346,000
=========
Less interest......................... 207,000
----------
Present value of net minimum payments. 1,431,000
Less current portion.................. 512,000
----------
Long-term obligations................. $919,000
==========
F-19
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
13. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES (CONTINUED)
Certain claims, suits and complaints associated with the ordinary course
of business are pending or may arise against the companies comprising
American Skiing Company. In the opinion of management, all matters are
adequately covered by insurance or, if not covered, are without merit or
are of such kind, or involve such amounts as would not have a material
effect on the financial position, results of operations or cash flows of
the combined group if disposed of unfavorably.
14. GAIN FROM INSURANCE CLAIM
In February 1993, the Company experienced a fire which destroyed
compressors and other snowmaking equipment at Sunday River Skiway
Corporation with a net book value of $975,000. These assets were insured
for replacement cost which amounted to $2,567,000. The difference between
the insurance proceeds and the net book value of the destroyed equipment
was recorded as an extraordinary gain during 1993 of $1,592,000.
15. SUBSEQUENT EVENT
On October 24, 1995, American Skiing Company entered into a new $6
million Seasonal Line of Credit and $35 million Revolving Note. The
initial proceeds of these new credit facilities retired the existing line
of credit and revolving note. The initial commitment fee for the new
revolver is $128,000 and for the line of credit is $23,000. The revolver
has scheduled paydowns beginning in April of 1996 when $2 million is due,
while the line of credit is due on the first anniversary of the
agreement. In addition, the line of credit is required to be reduced to
$0 for a period of thirty days beginning after March 31. Each arrangement
accrues interest at one of the various interest rate options available to
the borrower. The facility contains a number of covenants,
representations and events of default typical of a credit facility of
this size and nature, including financial covenants related to the level
and nature of total debt outstanding. The debt is collateralized by a
first mortgage on virtually all of the corporate assets of American
Skiing Company, with the exception of certain "non-skiing" assets of
SRHI, assignment of various land leases and assignment of $7.5 million in
life insurance policies on the life of the Stockholder.
In connection with the Merger (see Note 16), certain subordinated notes
were issued which are fully and unconditionally guaranteed by each of the
companies within the group comprising the Company.
16. SUBSEQUENT EVENTS (UNAUDITED)
On June 28, 1996, the Company consummated a transaction (the "Merger")
with S-K-I Limited ("S-K-I") in which the Company purchased all of the
approximately 6,000,000 shares of outstanding S-K-I common stock for
$18.00 per share. In conjunction with the Merger, the Company was
returned the $5,000,000 deposit it had placed in an escrow account
according to certain provisions of the Merger. The deposit is included in
other assets on the unaudited combined balance sheet as of April 28,
1996.
The Company has entered into a consent decree with the U.S. Department of
Justice in which the Company has agreed to divest the assets constituting
the Waterville Valley (a S-K-I subsidiary) and Mt. Cranmore resorts. The
divestitures are expected to be consummated no later than December 1,
1996. The unaudited carrying value of the Mt. Cranmore resort assets to
be divested included in the accompanying unaudited combined balance sheet
as of April 28, 1996, is approximately $4.6 million and the unaudited net
income for the nine months ended April 28, 1996, of the Mt. Cranmore
resort included in the accompanying unaudited combined statement of
income for the nine months ended April 28, 1996, is approximately
$364,000.
F-20
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors of S-K-I Ltd.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in stockholders' equity
and of cash flows present fairly, in all material respects, the financial
position of S-K-I Ltd. and its subsidiaries at July 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended July 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Hartford, Connecticut
August 31, 1995
F-21
<PAGE>
S-K-I LTD.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments
(at cost, which approximates market value)............................ $2,704,302 $2,790,645
Accounts receivable, net (Note 1)......................................... 1,423,430 2,677,434
Notes receivable.......................................................... 371,739 244,775
Inventories............................................................... 3,472,492 3,955,722
Prepaid expenses.......................................................... 1,456,222 1,360,460
-------------- --------------
TOTAL CURRENT ASSETS.................................................. 9,428,185 11,029,036
-------------- --------------
Property and equipment, at cost:
Buildings and grounds..................................................... 32,730,561 41,557,838
Machinery and equipment................................................... 71,690,813 73,123,058
Leasehold improvements.................................................... 39,066,623 48,082,570
Lifts, liftlines and trails on corporate property......................... 16,162,939 33,787,212
-------------- --------------
159,650,936 196,550,678
Less--accumulated depreciation and amortization............................... 86,638,454 89,929,914
-------------- --------------
73,012,482 106,620,764
Construction in progress...................................................... 8,996,570 1,684,442
Land and development costs.................................................... 12,762,352 13,469,642
-------------- --------------
NET PROPERTY AND EQUIPMENT............................................ 94,771,404 121,774,848
-------------- --------------
Long-term investments (Note 1)................................................ 464,663 1,628,477
Other assets (Note 1)......................................................... 2,125,756 2,289,152
-------------- --------------
TOTAL ASSETS.......................................................... $106,790,008 $136,721,513
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and subordinated debentures
(Note 3).............................................................. $955,746 $3,858,184
Accounts payable.......................................................... 1,741,131 1,617,621
Income taxes payable (Note 5)............................................. 257,684 272,252
Accrued lease payments--Vermont (Note 4).................................. 1,171,865 1,039,366
Accrued wages, profit sharing and incentive compensation (Note 8)......... 464,907 529,874
Deposits and other unearned revenue....................................... 695,328 1,706,017
Other accrued expenses (Note 1)........................................... 4,184,664 5,157,743
-------------- --------------
TOTAL CURRENT LIABILITIES............................................. 9,471,325 14,181,057
Long-term debt (Note 3)....................................................... 17,766,857 38,790,032
Subordinated debentures (Note 3).............................................. 11,400,000 11,400,000
Deferred income taxes (Note 5)................................................ 7,478,492 8,479,956
Other long-term liabilities (Note 1).......................................... 3,487,042 4,432,027
Minority interest............................................................. -- 1,876,188
-------------- --------------
TOTAL LIABILITIES..................................................... 49,603,716 79,159,260
-------------- --------------
Commitments (Notes 3 and 4)
Stockholders' equity (Notes 3, 6 and 7):
Common stock $.10 par value (12,500,000 shares authorized,
5,785,932 shares in 1995, 5,781,432 shares in 1994)................... 578,144 578,594
Paid-in capital............................................................... 6,577,440 6,617,551
Retained earnings............................................................. 50,030,708 50,366,108
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY............................................ 57,186,292 57,562,253
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $106,790,008 $136,721,513
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
S-K-I LTD
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
------------------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues (Note 1):
Resort services............................................. $60,441,799 $62,532,813 $74,252,723
Sale of goods............................................... 19,832,479 21,008,869 23,648,797
Rental and other income..................................... 16,434,113 15,365,537 16,058,192
-------------- -------------- --------------
96,708,391 98,907,219 113,959,712
-------------- -------------- --------------
Expenses:
Cost of operations including wages, maintenance and supplies:
Resort services......................................... 21,070,994 22,483,982 29,611,497
Sale of goods........................................... 11,658,737 12,729,442 15,146,037
Rental and other expense................................ 7,173,101 7,346,163 6,799,809
Other taxes............................................. 7,632,343 8,015,487 8,599,706
Utilities............................................... 6,655,016 6,044,889 8,070,911
Insurance............................................... 5,115,333 5,518,243 6,634,837
Selling, general and administrative expenses............ 16,871,496 15,298,138 19,494,655
Interest................................................ 2,228,385 2,214,309 3,818,893
Depreciation and amortization (Note 1).................. 10,941,869 11,440,122 14,055,796
-------------- -------------- --------------
89,347,274 91,090,775 112,232,141
-------------- -------------- --------------
Income before income taxes and minority interest............ 7,361,117 7,816,444 1,727,571
Income taxes (Note 5)....................................... 2,952,310 3,169,956 997,123
-------------- -------------- --------------
Net income before minority interest......................... 4,408,807 4,646,488 730,448
-------------- -------------- --------------
Minority interest in loss of subsidiary..................... -- -- 298,949
-------------- -------------- --------------
Net Income.................................................. $4,408,807 $4,646,488 $1,029,397
============== ============== ==============
Net income per common and common equivalent
share: 5,783,480 in 1995, 5,764,663 in 1994,
5,728,908 in 1993 (Note 6).............................. $0.77 $0.81 $0.18
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER OF PAID-IN RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
------ --------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1992........................ 5,724,856 $572,486 $6,433,263 $42,183,973 $49,189,722
Common stock options exercised.............. 6,251 625 20,751 21,376
Net income.................................. 4,408,807 4,408,807
Dividends ($.10 per share).................. (573,015) (573,015)
----------- ----------- ----------- ----------- -----------
BALANCE AT JULY 31, 1993........................ 5,731,107 573,111 6,454,014 46,019,765 53,046,890
Common stock options exercised.............. 50,325 5,033 123,426 128,459
Net income.................................. 4,646,488 4,646,488
Dividends ($.11 per share).................. (635,545) (635,545)
----------- ----------- ----------- ----------- -----------
BALANCE AT JULY 31, 1994........................ 5,781,432 578,144 6,577,440 50,030,708 57,186,292
Common stock options exercised.............. 4,500 450 40,111 40,561
Net income.................................. 1,029,397 1,029,397
Dividends ($.12 per share).................. (693,997) (693,997)
----------- ----------- ----------- ----------- -----------
BALANCE AT JULY 31, 1995........................ 5,785,932 $578,594 $6,617,551 $50,366,108 $57,562,253
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 4,408,807 $ 4,646,488 $ 1,029,397
Non-cash items included in net income:
Depreciation and amortization ........................................ 10,941,869 11,440,122 14,055,796
Deferred income taxes ................................................ 613,451 154,084 1,001,464
Minority interest in net income of subsidiary ........................ -- -- (298,949)
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES BEFORE CHANGES IN
ASSETS AND LIABILITIES ............................................... 15,964,127 16,240,694 15,787,708
------------ ------------ ------------
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ........................... 398,318 (429,547) (1,027,240)
Decrease (increase) in notes receivable .............................. (9,458) 363,442 126,964
(Increase) in inventories ............................................ (154,437) (214,208) (33,885)
Decrease (increase) in non-current note receivable ................... (1,847,480) 303,976 3,615
Decrease (increase) in prepaid expenses .............................. (537,397) (543,475) 573,785
(Decrease) increase in accounts payable .............................. (1,191,930) 974,380 (776,700)
Increase (decrease) in income taxes payable .......................... (124,032) (63,132) 10,238
(Decrease) increase in accrued lease payments-Vermont ................ 120,378 49,837 (132,499)
Increase (decrease) in accrued wages, profit sharing and
incentive compensation ............................................. 517,897 (608,404) 64,967
Increase (decrease) in deposits and other unearned
revenue ............................................................ (118,908) 186,707 264,499
(Decrease) increase in other accrued expenses ........................ 585,544 761,857 (858,029)
Increase (decrease) in other long-term liabilities.................... (128,174) 441,669 944,985
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................... 13,474,448 17,463,796 14,948,408
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment .................................. (12,306,683) (22,682,582) (19,479,985)
Net book value of property and equipment sold ........................ 79,036 178,177 2,377,685
Purchase of long-term investments .................................... -- (464,663) (1,163,814)
Business acquired less cash on hand from business acquired ........... -- -- (12,552,020)
Other, net ........................................................... 47,136 (138,772) (106,561)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ................................... (12,180,511) (23,107,840) (30,924,695)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- and
subordinated debentures ............................................ 12,123,500 -- 592,804
Net proceeds from revolving credit agreement ......................... -- 2,000,000 15,500,000
Reductions in long-term debt and subordinated
debentures ......................................................... (10,807,391) (952,052) (2,279,178)
Increase in current portion of long-term debt and
subordinated debentures ............................................ 77,391 129,451 2,902,438
Proceeds from issuance of common stock ............................... 21,376 128,459 40,563
Payment of dividends ................................................. (573,015) (635,545) (693,997)
Other ................................................................ 125,910 177,648 --
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............................... 967,771 847,961 16,062,630
------------ ------------ ------------
Net increase (decrease) in cash and
short-term investments ............................................. 2,261,708 (4,796,083) 86,343
Cash and short-term investments at beginning of year .................... 5,238,677 7,500,385 2,704,302
------------ ------------ ------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR .......................... $ 7,500,385 $ 2,704,302 $ 2,790,645
============ ============ ============
Interest paid ........................................................... $ 2,443,456 $ 2,124,392 $ 3,096,486
Taxes paid, net of refunds .............................................. $ 2,438,100 $ 3,636,581 $ 1,060,150
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated statements include the accounts of S-K-I Ltd. and
its subsidiaries, the most significant of which include Killington Ltd., Mount
Snow Ltd., Bear Mountain Ltd., Waterville Valley Ski Area Ltd., Sugarloaf
Mountain Corporation and Ski Insurance Company, collectively referred to as
S-K-I. All subsidiaries are wholly-owned, except for Sugarloaf Mountain
Corporation which is 51% owned. Sugarloaf's results since acquisition are
consolidated in the accompanying financial statements.
All significant intercompany transactions have been eliminated in
consolidation.
In the consolidated statement of income, revenues from the sale of
lift tickets, ski schools, repair shops, golf and tennis fees have been
included under the heading of Resort services. Revenues from the sale from
restaurants, bars, retail shops and personal property have been included under
the heading Sale of goods. Revenues from ski, locker and real estate rentals,
as well as sales of real property have been included under the heading of
Rental and other income. Related costs, including property costs, are included
in the respective Cost of operations categories.
For financial reporting purposes, S-K-I provides for depreciation and
amortization of property, equipment and capital leases by the straight-line
method over estimated useful lives of the assets which generally range from 10
to 30 years for buildings, 3 to 20 years for machinery and equipment and 3 to
50 years for leasehold improvements, lifts, liftlines and trails. Accelerated
cost recovery and accelerated depreciation methods are used for tax purposes.
Management's intentions are to hold marketable securities, consisting
of U.S. Government and Agency obligations and corporate obligations, until
maturity, which does not exceed three years. These securities are carried at
net amortized cost, which approximates quoted market values at July 31, 1995
and 1994.
As part of its cash management policy, S-K-I invests cash in excess
of immediate requirements in highly liquid short-term investments having
original maturities of three months or less. Such investments are intended to
minimize exposure to principal fluctuation.
Profit on the sales of real estate are recognized in accordance with
Financial Accounting Standards Board Statement of Financial Accounting
Standards ("SFAS") No. 66 "Accounting for the Sales of Real Estate". Revenues
recognized amounted to $8,000, $-0-, and $1,857,954, in 1995, 1994, and 1993,
respectively. Included in other assets at July 31, 1995 is a note receivable
of $1,531,298, relating to a sale of real estate. The note bears interest at
the prime rate plus 1.875%, payable in monthly installments through year 2007.
The maturities are as follows:
1996.............................................. $ 10,141
1997.............................................. 11,300
1998.............................................. 12,592
1999.............................................. 14,033
2000.............................................. 15,636
2001 and thereafter............................... 1,467,596
---------
$1,531,298
Inventories are valued at the lower of cost (first-in, first-out
method) or market.
Allowances for doubtful accounts of $1,402 and $38,702 have been
applied as a reduction of current accounts receivable at July 31, 1994 and
1995, respectively.
Provision is made for the estimated costs under the deductible
portion of S-K-I's insurance policies, primarily general liability and
workers' compensation. The balance of such reserves at July 31, 1994 and 1995
were $4,707,558 and $5,765,878, respectively. Of such amounts, $3,487,042 and
$4,454,728 are included in other long-term liabilities at July 31, 1994 and
1995, respectively, with the remaining balance included in other accrued
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expenses. In fiscal 1993, S-K-I formed a wholly-owned Vermont captive
insurance company, Ski Insurance Company, to manage a portion of its insurance
costs.
Advertising costs are expensed the first time the advertising takes
place. The total amount charged to advertising expense for the year ended July
31, 1995, 1994 and 1993 was $9,249,984, $7,809,332 and $7,607,704,
respectively.
Bear Mountain Ltd.'s costs in excess of values assigned to the
underlying net assets, net of amortization, totaled $233,774 and $99,255 at
July 31, 1995 and 1994, respectively, and are being amortized over 20 years.
The 1995 and 1994 amortization totaled $19,481 and $7,635, respectively. The
accumulated amortization at July 31, 1995 and 1994 totaled $320,279 and
$300,798, respectively.
NOTE 2--BUSINESS DEVELOPMENT
In August 1994, the company acquired 51% of the outstanding shares of
Sugarloaf Mountain Corporation ("Sugarloaf"), a ski resort in Western Maine.
Also, additional cash consideration is due, not to exceed $1,500,000, if
certain profit objectives are achieved during the two years following
acquisition. No such amounts were paid relating to fiscal 1995.
The shareholders of Sugarloaf shall have the option to require S-K-I
to purchase their shares during the month of November in the years 1997
through 2002 in return for a cash payment, the amount of which is computed by
applying a formula to Sugarloaf Mountain Corporation's earnings per share over
the previous three year period. S-K-I has the option to purchase the minority
shares of Sugarloaf based upon the same exchange formula during the month of
November in any year beginning in 1999, subject to a minimum value of
$2,000,000 less 49% of any decline in the book value of Sugarloaf between the
purchase date and the date of acquisition.
The acquisition has been accounted for using the purchase method of
accounting. The fair value of the assets acquired was approximately
$13,597,000 and the fair value of liabilities was $9,425,000. There is no
recourse to S-K-I for the Sugarloaf liabilities. The amounts in minority
interest at July 31, 1995 represent the 49% ownership of Sugarloaf's
outstanding capital stock held by the minority shareholders.
In October 1994, the company acquired the ski-related assets only of
the Waterville Valley Ski Area ("Waterville") for approximately $10,038,000.
The acquisition was accounted for using the purchase method of accounting. The
results of operations of Waterville are included in the company's consolidated
financial statements since acquisition.
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisitions of Sugarloaf and Waterville
occurred at the beginning of the years presented:
1994 1995
---- ----
Revenues..................................... $126,797,000 $114,554,000
Net income................................... 4,279,000 782,000
Net income per common and common
equivalent share........................... $ .74 $ .14
The pro forma financial information does not purport to be indicative
of the results of operations that would have occurred had the transaction
taken place at the beginning of the periods presented or of future results of
operations.
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES
LONG-TERM DEBT AT JULY 31, 1995 AND 1994 SUMMARY:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Company, excluding Sugarloaf:
Revolving Credit Agreement $2,000,000 $17,500,000
Teachers Insurance and Annuity Association of America, 8.12% senior
promissory notes due in varying installments through January 14, 2003... 12,000,000 12,000,000
Vermont Industrial Development Bonds, fluctuating interest rates,
1995--3.89% to 4.66%; 1994--3.13% to 3.73%; due in varying
installments through 1999, secured by certain machinery and equipment
and real estate......................................................... 3,265,000 2,695,000
Deferred obligation in connection with acquisition of Bear Mountain Ltd.,
interest of 5%, due in 1995............................................. 1,000,000 1,000,000
Obligation under capital lease............................................ 103,789 310,346
Other..................................................................... 7,314 180,356
-------------- --------------
18,376,103 33,685,702
-------------- --------------
Sugarloaf (non-recourse to the Company):
Town of Carrabassett Valley, Maine, note, $3,700,000, due in varying
installments through 2013, interest rates ranging from 4.5% to 8.5%,
secured by Sugarloaf's property, plant and equipment................... -- 3,610,000
Sugarloaf Revolving Credit Agreement, $2,000,000, annual reduction of
$200,000 beginning March 1995, due March 1998, interest at lender's
base rate plus .5% (9.25% at July 31, 1995), secured by Sugarloaf's
property, plant and equipment.......................................... -- 1,800,000
Sugarloaf Line of Credit, $2,000,000 due May 1996, interest at lender's
base rate plus 2% (10.75% at July 31, 1995), secured by Sugarloaf's
property, plant and equipment.......................................... -- 1,338,482
Sugarloaf Subordinated Notes, due July 1997, interest at 7.25%............ -- 584,934
Obligation under capital lease............................................ -- 549,989
Other..................................................................... -- 1,079,109
-------------- --------------
-- 8,962,514
-------------- --------------
Total ....................................................................... 18,376,103 42,648,216
Less: current portion......................................................... 609,246 3,858,184
-------------- --------------
$17,766,857 $38,790,032
-------------- --------------
</TABLE>
The non-current portion of long-term debt matures as follows:
1997................................. $ 1,968,908
1998................................. 4,591,625
1999................................. 3,484,751
2000................................. 5,637,317
2001 and thereafter.................. 23,107,431
--------------
$ 38,790,032
S-K-I maintains an unsecured revolving credit loan which allows S-K-I
to borrow funds up to the amount of the commitment. At July 31, 1995, the
revolving credit loan amount available was $30,600,000 with $17,500,000
outstanding. The loan commitment is scheduled to be reduced annually by
$3,400,000 on March 31 of each consecutive year through March 31, 2000 with a
final reduction of $13,600,000 on March 30, 2001. Under the terms of the
revolving credit agreement, S-K-I may request that the interest rate, subject
to certain limitations, be at the adjusted prime rate or at an applicable
margin above the Eurodollar rate. The Eurodollar applicable margin was 1 1/4 %
at July 31, 1995. The applicable margin varies between 3/4 % to 1 1/4 % based
on specific financial ratios on the previous July 31. The Agreement requires
S-K-I to pay a commitment fee of 3/8 % of the average daily unused portion of
the loan. Commitment fees assessed on unused portions of the revolving credit
loan were approximately $38,000, $63,000, and $48,000 in 1995, 1994, and 1993,
respectively.
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED)
The following table summarizes the financial data relating to the
revolving credit loan agreement for 1995 and 1994:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Weighted average annual interest rate................. 4.61% 6.93%
Average amount outstanding during the year............ $2,224,038 $16,274,038
Highest balance outstanding........................... $13,500,000 $24,750,000
Amount available at year end.......................... $14,000,000 $13,100,000
</TABLE>
In addition to the unsecured revolving credit loan agreement, S-K-I
maintained an unsecured short-term line of credit. Such line of credit allows
for borrowings of up to $12,000,000 and expires January 15, 1996. Under the
terms of the agreement S-K-I may request that the interest rate, subject to
certain limitations, be at the adjusted prime rate or at an applicable margin
above the Eurodollar rate. The Eurodollar applicable margin was 1 1/4 % at
July 31, 1995. The applicable margin varies between 3/4 % to 1 1/4 % based on
specific financial ratios on the previous July 31. During 1995, S-K-I borrowed
a maximum of $9,250,000 under this line of credit and did not borrow against
the line of credit during 1994. At July 31, 1995 and 1994, there were no
borrowings under the credit line.
Additionally, at July 31, 1995, S-K-I had outstanding a $1,000,000
letter of credit relating to Ski Insurance, expiring December 3, 1995. The
letter of credit fee on this line was $6,250 for the year ended July 31, 1995.
Subordinated debentures of $11,400,000 at July 31, 1995 are due as
follows:
YEAR INTEREST AMOUNT
- ----- -------- -------
1997......................................... 6% $450,000
1999......................................... 6% 455,000
2000......................................... 6% 672,500
2001......................................... 8% 525,000
2002......................................... 8% 549,000
2003......................................... 8% 1,074,000
2004......................................... 8% 1,466,500
2010......................................... 8% 1,292,000
2012......................................... 6% 1,155,000
2013......................................... 6% 1,065,000
2015......................................... 6% 1,500,000
2016......................................... 6% 1,196,000
---------
$11,400,000
The company's long-term debt and subordinated debenture agreements
require that the company satisfy various covenants including financial ratios,
limitations on payment of dividends and repurchase of stock. Included in other
accrued expenses is $687,414 and $703,656 of accrued interest at July 31, 1995
and 1994, respectively.
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED)
CAPITAL LEASES
The company leases certain machinery and equipment under long-term
capital leases. Obligations under machinery and equipment capital leases are
due as follows:
1996................................................... $407,000
1997................................................... 308,000
1998................................................... 246,000
1999................................................... 16,000
--------------
977,000
Less: amounts representing interest.................... 117,000
--------------
$860,000
At July 31, 1995, the gross amount of machinery and equipment under
capital leases and related accumulated amortization was $1,409,000 and
$486,000, respectively.
NOTE 4--OPERATING LEASES AND PERMITS
Killington Ltd. leases from the State of Vermont certain portions of
land and facilities it uses known as the Killington section of the Calvin
Coolidge State Forest. The leases together with extensions run to the year
2060. All installations affixed to the land become the property of the State.
Mount Snow Ltd., Bear Mountain Ltd. and Waterville Valley operate
certain portions of the skiing terrain under special use permits granted by
the U.S. Forest Service.
Amounts payable under these leases and permits are measured in terms
of percentages of revenues from certain activities. Charges for these leases
and permits are included in cost of operations.
In addition to the leases described above, the company was committed
under operating leases for certain machinery and equipment which expire at
various dates through 2018. Total rent expense under operating leases for
1995, 1994 and 1993 was $2,775,912, $2,526,991, and $2,485,435, respectively.
Minimum lease payments under non-cancelable operating leases are as
follows:
1996............................................... $3,433,832
1997............................................... 3,314,063
1998............................................... 3,004,033
1999............................................... 2,948,224
Beyond 2000........................................ 1,889,827
---------
Total minimum obligations.......................... $14,589,979
===========
NOTE 5--INCOME TAXES
In 1994 the company adopted, effective August 1, 1993, Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the liability method for recording differences in financial and
taxable income.
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES (CONTINUED)
Income taxes consist of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................. $1,803,884 $2,347,943 $(1,210)
State................................................... 534,975 667,929 (3,131)
-------------- -------------- --------------
2,338,859 3,015,872 (4,341)
-------------- -------------- --------------
Deferred.................................................... 613,451 154,084 1,001,464
-------------- -------------- --------------
Total provision for income taxes............................ $2,952,310 $3,169,956 $997,123
============== ============== ==============
</TABLE>
Differences between S-K-I's effective income tax rate and the
statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 34.0% 34.0% 34.0%
State income taxes net of federal tax benefit............... 4.8 5.6 5.7
Sugarloaf loss with no benefit.............................. --- --- 12.0
Life insurance premiums..................................... --- --- 4.0
Other....................................................... 1.3 0.9 2.0
Effective rate.............................................. 40.1% 40.5% 57.7%
===== ===== =====
</TABLE>
At July 31, 1995, Bear Mountain Ltd. had net operating loss
carryforwards for federal income tax purposes of approximately $1,439,000,
which expire in the years 2000 through 2002. At July 31, 1995, Bear Mountain
Ltd. had net operating loss carryforwards for California income tax purposes
of approximately $1,214,000 which expire in the years 1996 through 1999. As of
July 31, 1995, Bear Mountain Ltd. had investment tax credit carryforwards of
approximately $225,000 which expire in the years 1997 through 2000. The
federal tax loss and tax credit carryforwards relate to the operations of Bear
Mountain Ltd. prior to the acquisition by S-K-I and can only be realized
against future taxable income from the operations of Bear Mountain Ltd. The
tax effect of these carryforwards and credits, when realized, will be
recognized as an adjustment of the purchase cost.
At July 31, 1995, Sugarloaf had net operating loss carryforwards for
federal and Maine income tax purposes of approximately $17,426,000, which
expire in the years 1999 through 2010. As of July 31, 1995, Sugarloaf had
investment tax credit carryforwards of approximately $209,000, which expire in
the years 1997 through 2000. Approximately $16,442,000 of the federal and
Maine net operating loss carryforwards and all of the investment tax credit
carryforwards relate to the operation of Sugarloaf prior to the S-K-I
acquisition. Such carryforwards can only be realized against future taxable
income from the operations of Sugarloaf and will be limited as a result of
certain ownership changes pursuant to Section 382 of the Internal Revenue
Code.
At July 31, 1995, the company had additional federal net operating
loss carryforwards of approximately $527,000 and additional state net
operating loss carryforwards of $1,010,000 which expire in the year 2010.
As of July 31, 1995, the company's gross deferred tax assets and
liabilities were comprised of the following:
Gross deferred tax assets:
Accrued liabilities and reserves............................. $1,495,000
Operating loss carryforwards................................. 7,638,000
Alternative minimum and investment tax credits............... 860,000
----------
$9,993,000
==========
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES (CONTINUED)
Gross deferred tax liabilities:
Depreciation...................................... $10,516,000
Installment sales................................. 659,000
--------------
$11,175,000
===============
At July 31, 1995, a valuation allowance of $7,298,000 has been
recorded which relates primarily to Sugarloaf's net operating loss and tax
credit carryforwards for which a tax benefit is not likely to be received. The
net change in the valuation allowance for deferred tax assets was an increase
of $7,056,000, primarily attributable to Sugarloaf net operating loss
carryforwards. Current and non-current deferred tax assets and liabilities
within the same tax jurisdiction are offset for presentation in the
consolidated balance sheet.
NOTE 6 -- EARNINGS PER SHARE
The computation of net income per common and common equivalent share
amounts are based on the weighted average of shares outstanding during the
year. Shares issuable upon the exercise of stock option grants (Note 7) have
not been included in the per share computation because they would not have a
material effect on earnings per share.
NOTE 7--STOCK OPTIONS
The company's 1988 Stock Option Plan for officers and key employees
authorized the granting of a maximum of 168,750 shares of common stock
options. On November 18, 1994, the stockholders approved an additional 100,000
shares to be optioned. The Plan permits the grant of incentive stock options
(as defined in the Internal Revenue Code) and nonstatutory stock options. In
the case of an incentive stock option, the per share option price cannot be
less than the fair market value on the date on which the option is granted.
There is no such requirement in the case of a nonstatutory stock option.
The options become exercisable ratably over a 3-year period and
expire in April 1997, October 1999, July 2000, April 2002, July 2002, March
2004, October 2004, and January 2005.
<TABLE>
<CAPTION>
1988 PLAN SHARES EXERCISE PRICE PER OPTION
- --------- ------ -------------------------
<S> <C> <C>
Outstanding at July 31, 1992................................ 154,417 $8.625 to $10.45
Exercised................................................... 1,042 $8.625
Canceled or expired......................................... 10,625 $8.625 to $9.50
Outstanding at July 31, 1993................................ 142,750 $8.625 to $10.45
Granted..................................................... 2,500 $12.00
Exercised................................................... 4,950 $8.625 to $9.50
Canceled or expired......................................... 10,000 $8.625
Outstanding at July 31, 1994................................ 130,300 $8.625 to $12.00
Granted..................................................... 48,250 $11.8125 to $15.25
Exercised................................................... 4,500 $8.625 to $9.50
Canceled or expired......................................... 2,500 $9.50
Outstanding at July 31, 1995................................ 171,550 $8.625 to $15.25
Exercisable at July 31, 1995................................ 138,550 $8.625 to $15.25
</TABLE>
The company's 1982 Incentive Stock Option Plan authorized the
granting to key employees of similar options to purchase a maximum of 187,500
shares of common stock. The options granted in 1992 become exercisable ratably
over a 3-year period and expire in April 2002 and July 2002.
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
1982 PLAN SHARES EXERCISE PRICE PER OPTION
- --------- ------ -------------------------
<S> <C> <C>
Outstanding at July 31, 1992................................ 80,625 $1.89 to $9.50
Exercised................................................... 5,209 $1.89 to $9.50
Canceled or expired......................................... 1,000 $8.625 to $9.50
Outstanding at July 31, 1993................................ 74,416 $1.89 to $9.50
Exercised................................................... 45,375 $1.89
Canceled or expired......................................... 6,166 $9.50
Outstanding at July 31, 1994 and 1995....................... 22,875 $9.50
Exercisable at July 31, 1995................................ 22,875 $9.50
</TABLE>
NOTE 8--EMPLOYEE BENEFIT PLANS
S-K-I has a trusteed noncontributory profit sharing retirement plan
covering substantially all of its full-time employees. There have been no
contributions made to the Plan and charged to income for 1995, 1994, and 1993.
S-K-I has a savings plan under Section 401(k) of the Internal Revenue
Code. The plan allows all full-time employees to defer up to 15% of their
income up to $9,240 on a pretax basis. The company made a matching
contribution of 15% on the first $1,500 deferred by each participating
employee in 1995 and 1994. In addition, S-K-I made a one time fully vested
contribution to each eligible participant as of February 1, 1995. The cost of
this contribution was $294,300.
Effective July 31, 1995, the profit-sharing portion of the S-K-I Ltd.
retirement plan was merged into the S-K-I Ltd. 401(k) savings plan. The name
of the newly merged plan is changed to the S-K-I Ltd. 401(k) Retirement Plan.
NOTE 9--BUSINESS OPERATIONS
S-K-I operates predominantly in a single industry segment--the
development and operation of ski areas. S-K-I provides ski recreation and
related services to skiers, a single customer group.
NOTE 10--SUBSEQUENT EVENT
On June 28, 1996, the company consummated a transaction with American
Skiing Company ("ASC") in which ASC purchased all of the approximately
6,000,000 shares of outstanding S-K-I common stock for $18,00 per share. In
connection with the Merger, ASC issued certain subordinated notes which are
fully and unconditionally guaranteed by S-K-I and all of its subsidiaries with
the exception of Ski Insurance Company and Killington West, Ltd. After the year
ended July 31, 1995, Killington West, Ltd. was established to hold the assets of
Bear Mountain which were not part of the sale on October 23, 1995. (see
Note 11).
The following is summarized condensed consolidating financial
information for S-K-I, segregating the non-guarantor subsidiary (Ski Insurance
Company) from S-K-I and the guarantor subsidiaries. The guarantor subsidiaries
are, with the exception of Sugarloaf Mountain Corporation, Sugartech and
Mountainside, wholly-owned subsidiaries of S-K-I and the guarantees are full,
unconditional, and joint and several. Separate financial statements of the
guarantor subsidiaries are not presented because management believes that these
financial statements would not be material to investors.
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENT (CONTINUED)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1994
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments......... $1,757,716 $946,586 $2,704,302
Accounts and notes receivable, net...... 1,795,169 1,795,169
Prepaid expenses........................ 1,456,222 1,456,222
Other current assets.................... 1,916,598 1,809,342 $(253,448) 3,472,492
--------------- ---------------- --------------- ---------------
Total current assets.................. $6,925,705 2,755,928 (253,448) 9,428,185
--------------- ---------------- --------------- ---------------
Property and equipment, at cost............ 181,409,858 181,409,858
Less-accumulated depreciation
and amortization...................... 86,638,454 86,638,454
--------------- ---------------- --------------- ---------------
Net property and equipment................. 94,771,404 -- -- 94,771,404
--------------- ---------------- --------------- ---------------
Long-term investments...................... -- 464,663 464,663
Other assets............................... 1,830,480 295,276 2,125,756
--------------- ---------------- --------------- ---------------
Total assets............................ $103,527,589 $3,515,867 $(253,448) $106,790,008
=============== ================ =============== ===============
Liabilities and Stockholders' Equity
Accounts payable........................... $1,741,131 $1,741,131
Other current liabilities.................. 7,730,194 7,730,194
Long-term debt and subordinated
debentures.............................. 29,166,857 29,166,857
Other long-term liabilities................ 7,938,559 $3,280,423 (253,448) 10,965,534
Stockholders' equity....................... 56,950,848 235,444 57,186,292
--------------- ---------------- --------------- ---------------
Total Liabilities and
Stockholders' Equity.................. $103,527,589 $3,515,867 $(253,448) $106,790,008
=============== ================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1995
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments......... $478,636 $2,312,009 $2,790,645
Accounts and notes receivable, net...... 2,922,209 2,922,209
Prepaid expenses........................ 1,360,460 1,360,460
Other current assets.................... 3,205,783 943,804 $(193,865) 3,955,722
--------------- ---------------- --------------- ---------------
Total current assets.................. 7,967,088 3,255,813 (193,865) 11,029,036
--------------- ---------------- --------------- ---------------
Property and equipment, at cost............ 211,704,762 211,704,762
Less-accumulated depreciation
and amortization...................... 89,929,914 89,929,914
--------------- ---------------- --------------- ---------------
Net property and equipment................. 121,774,848 -- -- 121,774,848
--------------- ---------------- --------------- ---------------
Long-term investments...................... 199,906 1,428,571 1,628,477
Other assets............................... 1,755,687 533,465 2,289,152
--------------- ---------------- --------------- ---------------
Total assets............................ $131,697,529 $5,217,849 $(193,865) $136,721,513
=============== ================ =============== ===============
Liabilities and Stockholders' Equity
Accounts payable........................... $1,617,621 $1,617,621
Other current liabilities.................. 12,563,436 12,563,436
Long-term debt and subordinated
debentures.............................. 50,190,032 50,190,032
Other long-term liabilities................ 8,247,049 $4,858,799 $(193,865) 12,911,983
Minority Interest.......................... 1,876,188 1,876,188
Stockholders' equity....................... 57,203,203 359,050 57,562,253
--------------- ---------------- --------------- ---------------
Total Liabilities and
Stockholders' Equity.................. $131,697,529 $5,217,849 $(193,865) $136,721,513
=============== ================ =============== ===============
</TABLE>
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENT (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1993
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues................................... $96,676,035 $1,282,356 $(1,250,000) $96,708,391
--------------- ---------------- --------------- ---------------
Cost of operations including wages,........
maintenance and supplies.............. 39,902,832 1,250,000 (1,250,000) 39,902,832
Other operating costs...................... 19,402,692 19,402,692
Selling, general and administrative
expenses.............................. 16,819,732 51,764 16,871,496
Interest................................... 2,228,385 2,228,385
Depreciation and amortization.............. 10,941,869 10,941,869
--------------- ---------------- --------------- ---------------
89,295,510 1,301,764 (1,250,000) 89,347,274
--------------- ---------------- --------------- ---------------
Income taxes............................... 2,952,310 (6,598) 6,598 2,952,310
--------------- ---------------- --------------- ---------------
Net income (loss).......................... $4,428,215 $(12,810) $(6,598) $4,408,807
=============== ================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1994
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues................................... $98,815,763 $2,432,081 $(2,340,625) $98,907,219
--------------- ---------------- --------------- ---------------
Cost of operations including wages,........
maintenance and supplies.............. 42,559,587 1,990,885 (1,990,885) 42,559,587
Other operating costs...................... 19,578,619 19,578,619
Selling, general and administrative
expenses.............................. 15,219,441 78,697 15,298,138
Interest................................... 2,214,309 2,214,309
Depreciation and amortization.............. 11,440,122 $11,440,122
--------------- ---------------- --------------- ---------------
91,012,078 2,069,582 (1,990,885) 91,090,775
--------------- ---------------- --------------- ---------------
Income taxes............................... 3,169,956 115,245 (115,245) 3,169,956
--------------- ---------------- --------------- ---------------
Net income (loss).......................... $4,633,729 $247,254 $(234,495) $4,646,488
=============== ================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1995
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues................................... $113,748,085 $2,643,807 $(2,432,180) $113,959,712
--------------- ---------------- --------------- ---------------
Cost of operations including wages,........
maintenance and supplies.............. 51,557,343 2,268,193 (2,268,193) 51,557,343
Other operating costs...................... 23,305,454 23,305,454
Selling, general and administrative
expenses.............................. 19,330,668 163,987 19,494,655
Interest................................... 3,818,893 3,818,893
Depreciation and amortization.............. 14,055,796 14,055,796
--------------- ---------------- --------------- ---------------
112,068,154 2,432,180 (2,268,193) 112,232,141
--------------- ---------------- --------------- ---------------
Income taxes............................... 997,123 88,021 (88,021) 997,123
Minority interest in loss of subsidiary.... 298,929 298,929
--------------- ---------------- --------------- ---------------
Net income (loss).......................... $981,737 $123,606 $(75,966) $1,029,377
=============== ================ =============== ===============
</TABLE>
F-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENT (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1993
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $13,460,683 $1,445,229 $(1,431,464) $13,474,448
--------------- ---------------- --------------- ---------------
Cash flows from investing activities
Purchase of property and equipment.... (12,306,683) (12,306,683)
Other items........................... 1,444,879 (1,318,707) 126,172)
--------------- ---------------- --------------- ---------------
Net cash used in investing
activities.......................... (10,861,804) (1,318,707) -- (12,180,511)
--------------- ---------------- --------------- ---------------
Cash flows from financing activities
Proceeds from issuance of long-term
debt and subordinated debentures.... 12,123,500 12,123,500
Reductions in long-term debt and
subordinated debentures............. (10,807,391) (10,807,391)
Other items........................... (359,838) 11,500 (348,338)
--------------- ---------------- --------------- ---------------
Net cash provided by
financing activities.............. 956,271 11,500 -- 967,771
--------------- ---------------- --------------- ---------------
Net increase in cash and short-term
investments.............................. 3,555,150 138,022 (1,431,464) 2,261,708
Cash and short-term investments at
beginning of year........................ 5,238,677 -- -- 5,238,677
--------------- ---------------- --------------- ---------------
Cash and short-term investments
at end of year........................ $8,793,827 $138,022 $(1,431,464) $7,500,385
=============== ================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1994
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $17,383,908 $1,733,524 $(1,653,636) $17,463,796
--------------- ---------------- --------------- ---------------
Cash flows from investing activities
Purchase of property and equipment.... (22,682,582) (22,682,582)
Other items........................... 489,202 (914,460) (425,258)
--------------- ---------------- ---------------
Net cash used in investing
activities.......................... (22,193,380) (914,460) -- (23,107,840)
--------------- ---------------- --------------- ---------------
Cash flows from financing activities
Net proceeds from revolving
credit agreement.................... 2,000,000 2,000,000
Other items........................... (1,141,539) (10,500) -- (1,152,039)
--------------- ---------------- --------------- ---------------
Net cash provided by
financing activities.............. 858,461 (10,500) -- 847,961
--------------- ---------------- --------------- ---------------
Net increase in cash and short-term
investments.............................. (3,951,011) 808,564 (1,653,636) (4,796,083)
Cash and short-term investments at
beginning of year........................ 7,362,363 138,022 7,500,385
--------------- ---------------- --------------- ---------------
Cash and short-term investments
at end of year........................ $3,411,352 $946,586 $(1,653,636) $2,704,302
=============== ================ =============== ===============
</TABLE>
F-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--SUBSEQUENT EVENT (CONTINUED)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1995
------------------------------------------------------------------------
GUARANTOR PARENT
AND NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARY ENTRIES TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $14,872,923 $1,493,348 $(1,417,863) $14,948,408
--------------- ---------------- --------------- ---------------
Cash flows from investing activities
Purchase of property and equipment.... (19,479,985) (19,479,985)
Net book value of property and
equipment sold........................ 2,377,685 2,377,685
Business acquired less cash on hand
from business acquired................ (12,552,020) (12,552,020)
Other items........................... (1,142,450) (127,925) (1,270,375)
--------------- ---------------- --------------- ---------------
Net cash used in investing
activities.......................... (30,796,770) (127,925) -- (30,924,695)
--------------- ---------------- --------------- ---------------
Cash flows from financing activities
Net proceeds from revolving
credit agreement.................... 15,500,000 15,500,000
Reductions in long-term debt and
subordinated debentures............. (2,279,178) (2,279,178)
Increase in current portion of
long-term debt and subordinated
debentures.......................... 2,902,438 2,902,438
Other items........................... (60,630) (60,630)
--------------- ---------------- --------------- ---------------
Net cash provided by
financing activities.............. 16,062,630 -- -- 16,062,630
--------------- ---------------- --------------- ---------------
Net increase in cash and short-term
investments.............................. 138,783 1,365,423 (1,417,863) 86,343
Cash and short-term investments at
beginning of year........................ 1,757,716 946,586 2,704,302
--------------- ---------------- --------------- ---------------
Cash and short-term investments
at end of year........................ $1,896,499 $2,312,009 (1,417,863) $2,790,645
=============== ================ =============== ===============
</TABLE>
NOTE 11--SUBSEQUENT EVENTS
On October 23, 1995 the Company sold a majority of the ski resort
related and golf course assets of Bear Mountain to Fibreboard Corporation for
approximately
$20,370,000.
F-37
<PAGE>
S-K-I LTD.
CONSOLIDATED BALANCE SHEET
APRIL 28, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and short-term investments (at cost, which approximates market value)................. $12,027,556
Accounts receivable........................................................................ 2,068,022
Notes receivable........................................................................... 242,128
Inventories................................................................................ 3,281,908
Prepaid expenses........................................................................... 1,134,816
--------------
TOTAL CURRENT ASSETS................................................................... 18,754,430
--------------
Property and equipment, at cost:
Buildings and grounds 36,335,433
Machinery and equipment.................................................................... 60,313,773
Leasehold improvements..................................................................... 39,794,570
Lifts/liftlines and trails on corporate property........................................... 32,085,284
--------------
168,529,060
Less--accumulated depreciation and amortization................................................ 83,933,510
--------------
84,595,550
Construction in progress....................................................................... 772,749
Land and development costs..................................................................... 8,359,837
--------------
NET PROPERTY AND EQUIPMENT............................................................. 93,728,136
--------------
Long-term investments.......................................................................... 3,588,798
Other assets................................................................................... 2,382,298
--------------
TOTAL ASSETS........................................................................... $118,453,662
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...................................................... $1,566,927
Accounts payable....................................................................... 1,714,241
Income tax payable (Note 3)............................................................ 1,256,500
Accrued lease payments--Vermont........................................................ 1,108,254
Accrued wages.......................................................................... 717,329
Deposits and other unearned revenue.................................................... 1,044,614
Other accrued expenses (Note 7)........................................................ 6,512,619
--------------
TOTAL CURRENT LIABILITIES.............................................................. 13,920,484
--------------
Long-term debt................................................................................. 19,821,979
Subordinated debentures........................................................................ 11,400,000
Deferred income taxes (Note 3)................................................................. 7,238,102
Other long-term liabilities (Note 7)........................................................... 5,107,358
Minority interest in consolidated subsidiary................................................... 2,402,716
--------------
TOTAL LIABILITIES...................................................................... 59,890,639
--------------
Stockholders' equity:
Common stock............................................................................... 579,087
Paid-in capital............................................................................ 6,661,895
Retained earnings.......................................................................... 51,322,041
--------------
TOTAL STOCKHOLDERS' EQUITY............................................................. 58,563,023
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................. $118,453,662
==============
</TABLE>
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
F-38
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
APRIL 30, APRIL 28,
1995 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues...................................................................... $106,681,987 $106,751,742
-------------- --------------
Expenses:
Cost of operations including wages, maintenance and supplies.............. 45,309,840 47,885,150
Other taxes............................................................... 7,544,162 7,540,537
Utilities................................................................. 7,623,646 7,465,058
Insurance................................................................. 6,220,257 5,692,399
Selling, general and administrative expenses.............................. 16,376,818 17,060,771
Interest.................................................................. 3,017,626 2,561,289
Depreciation and amortization (Note 3).................................... 13,842,977 10,146,199
Loss on sale of Bear Mountain (Note 2).................................... -- 4,736,646
-------------- --------------
Total expenses....................................................... 99,935,326 103,088,049
-------------- --------------
Income before provision for income taxes...................................... 6,746,661 3,663,693
Provision for income taxes (Note 3)........................................... 2,724,258 1,428,840
-------------- --------------
Net income before minority interest........................................... 4,022,403 2,234,853
Minority interest in net income of consolidated subsidiary.................... (193,486) (526,528)
-------------- --------------
Net income.................................................................... $3,828,917 $1,708,325
============== ==============
Net income per common share (Note 5).......................................... $.66 $.30
============== ==============
Retained earnings, beginning of period........................................ $50,030,708 $50,366,108
Add: net income............................................................... 3,828,917 1,708,325
Less: Dividends paid on common stock (Note 9)................................. 693,997 752,392
-------------- --------------
Retained earnings, end of period.............................................. $53,165,628 $51,322,041
============== ==============
</TABLE>
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
F-39
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------------
APRIL 30, APRIL 28,
1995 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $3,828,917 $1,708,325
Non-cash items included in net income:
Loss on disposition of net assets of Bear Mountain Ltd. (Note 2)..... -- 4,736,646
Minority interest in net income of subsidiary............................. 193,486 526,528
Depreciation and amortization............................................. 13,539,407 10,146,199
Deferred income taxes..................................................... -- (1,241,854)
-------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES
IN ASSETS AND LIABILITIES................................................. 17,561,810 15,875,844
-------------- --------------
Changes in assets and liabilities:
Decrease (increase) in accounts receivable................................ (724,565) 579,712
Decrease in notes receivable.............................................. 127,323 2,647
Decrease (increase) in inventories........................................ (540,996) 99,611
Decrease in prepaid expenses.............................................. 402,399 107,643
Increase (decrease) in accounts payable................................... (256,947) 96,620
Increase in income taxes payable.......................................... 2,517,977 984,248
Increase (decrease) in accrued lease payments-Vermont..................... (144,963) 68,888
Increase in accrued wages, profit sharing and incentive compensation...... 151,435 187,455
(Decrease) in deposits and other unearned revenue......................... (383,618) (544,347)
Increase in other accrued expenses........................................ 296,736 954,876
Increase in other long-term liabilities................................... 934,010 675,332
-------------- --------------
CASH FLOW PROVIDED BY OPERATING ACTIVITIES AFTER
CHANGES IN ASSETS AND LIABILITIES......................................... 19,940,601 19,088,529
-------------- --------------
Cash flows from investing activities:
Additions to property and equipment....................................... (18,981,721) (6,019,657)
Net book value of property and equipment sold............................. 41,067 86,899
Purchase of long-term investments......................................... (1,778,704) (1,960,321)
Proceeds from disposition of net assets of Bear Mountain Ltd. (Note 2).... -- 20,000,247
Businesses acquired less cash on hand from businesses acquired............ (12,552,020) --
Other, net................................................................ (230,632) 8,079
-------------- --------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES.......................... (33,502,010) 12,115,247
-------------- --------------
Cash flows from financing activities:
Net (reductions) proceeds in revolving credit agreement................... 12,250,000 (17,500,000)
Reductions in long-term debt.............................................. (1,949,327) (1,468,050)
(Decrease) increase in current portion of long-term debt.................. 2,560,405 (2,291,258)
Proceeds from issuance of common stock.................................... 16,172 44,837
Payment of dividends...................................................... (693,997) (752,392)
-------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES........................... 12,183,253 (21,966,863)
-------------- --------------
Net increase (decrease) in cash and short-term investments.................... (1,378,156) 9,236,913
Cash and short-term investments at beginning of year.......................... 2,704,302 2,790,645
-------------- --------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.............................. $1,326,146 $12,027,558
============== ==============
Interest paid................................................................. $2,229,834 $1,998,601
Income taxes paid, net of refunds............................................. $281,350 $1,686,523
</TABLE>
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
F-40
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position as of April 28, 1996, the results of operations
for the nine months ended April 28, 1996 and April 30, 1995 and cash flows for
the nine months ended April 28, 1996 and April 30, 1995. All such adjustments
are of a normal recurring nature with the exception of the sale of the
majority of Bear Mountain assets. The unaudited condensed consolidated
financial statements should be read in conjunction with the following notes
and the consolidated financial statements in the 1995 Annual Report to the
Securities and Exchange Commission on Form 10-K.
2. BEAR MOUNTAIN SALE
On October 23, 1995 the Company sold a majority of the ski resort related
and golf course assets of Bear Mountain to Fibreboard Corporation for
approximately $20,370,000. The transaction had the following non-cash impact
on the balance sheet:
Increase in current assets........................... $234,000
Decrease in property and equipment, net.............. (23,833,000)
Decrease in other assets, net........................ (269,000)
Increase in current liabilities...................... 400,000
3. INCOME TAXES
The provision for taxes on income is based on a projected annual
effective tax rate. The Company has reflected an effective tax rate through
the third quarter of approximately 39%.
Deferred income taxes include the cumulative reduction in current taxes
payable resulting principally from the excess of depreciation reported for tax
purposes over that reported for financial purposes. The reduction in the April
28, 1996 deferred income tax liability from July 31, 1995 is primarily
attributable to the October 1995 sale of Bear Mountain and other book-tax
differences, principally accelerated depreciation.
4. SEASONAL BUSINESS
Results for interim periods are not indicative of results to be expected
for the year, due to the seasonal nature of the business (skiing resorts).
5. NET INCOME PER COMMON SHARE
Net income per common share figures are based on the average shares
outstanding during year to date Fiscal 1996 of 5,788,592 (5,782,745 year to
date Fiscal 1995). Shares issuable upon the exercise of stock options grants
have not been included in the per share computation because they would not
have a material effect on earnings per share.
6. STOCK OPTIONS
The 1988 Stock Option Plan authorized 168,750 shares of common stock to be
optioned. On November 18, 1994 the stockholders approved an additional
100,000 shares. For the nine months ended April 28, 1996, 4,950 shares
were exercised and 5,550 shares were forfeited.
The 1982 Incentive Stock Option Plan authorized 187,500 shares of common
stock to be optioned. No shares were granted, exercised or forfeited
under this plan during Fiscal 1996.
F-41
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
7. GENERAL LIABILITY
Provision is made for the estimated costs under the deductible portion of
S-K-I's general liability insurance policies. The balance of such reserves at
April 28, 1996 was $5,594,666. Of such amount, $4,795,428 is included in other
long-term liabilities, with the remaining balance included in other accrued
expenses.
8. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company does not provide health care and life insurance benefits for
retired employees who reach normal retirement age. The adoption of SFAS No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
has no effect on the Company's financial position or results of operations.
9. DIVIDEND PAID
During November 1995, the Board of Directors declared a $.13 per share
dividend on Common Stock payable to stockholders of record on December 8,
1995. The dividend was paid on January 17, 1996.
10. AGREEMENT AND PLAN OF MERGER
S-K-I Ltd. announced that it has received, through its investment
financial advisor Schroder Wertheim & Co., an offer by LBO Resort Enterprises
of Newry, Maine, to purchase all of the approximately 6,000,000 shares of
outstanding stock of S-K-I Ltd. for $18.00 per share. The S-K-I Ltd. Board of
Directors has approved a definitive merger agreement with LBO Resort
Enterprises. A meeting of S-K-I Ltd. shareholders will be held on June 10,
1996 to consider the offer as recommended by the S-K-I Ltd. Board of
Directors. The total value of the offer for the equity approximates
$107,000,000. The transaction is subject to, among other things, shareholder
and regulatory approvals.
11. NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
The standard identifies indicators to determine whether an impairment of
long-lived assets has been incurred and provides guidance in determining the
amount of the impairment. The Company will adopt SFAS No. 121 in Fiscal 1997.
The Company expects that there will not be a material impact to the Company's
financial position or results of operations as a result of adopting this
standard.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for
Stock-Based Compensation". The Company does not intend to adopt the new
compensation expense provisions of FAS 123 but will adopt the disclosure
provisions in Fiscal 1997.
12. SUBSEQUENT EVENTS (UNAUDITED)
On June 28, 1996, the Company consummated a transaction with American
Skiing Company in which the Company sold all of its approximately 6,000,000
shares of outstanding common stock for $18.00 per share.
American Skiing Company has entered into a consent decree with the U.S.
Department of Justice in which American Skiing Company has agreed to divest
the assets constituting the Waterville Valley ski resort. The divestiture is
expected to be consummated no later than December 1, 1996. The unaudited
carrying value of the Waterville Valley ski resort assets to be divested
included in the accompanying S-K-I unaudited consolidated balance sheet as of
April 28, 1996, is approximately $11.1 million and the unaudited net income
for the nine months
F-42
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
ended April 28, 1996 of the Waterville Valley ski resort included in the
accompanying S-K-I unaudited consolidated statement of income for the nine
months ended April 28, 1996, is approximately $863,000.
F-43
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Sugarbush Resort Corporation
In our opinion, the accompanying consolidated statements of operations, of
stockholder's equity and of cash flows present fairly, in all material
respects, the results of Sugarbush Resort Corporation's operations and its
cash flows for the period from June 1, 1994 through May 15, 1995 and for
the years ended May 31, 1994 and 1993 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, MA
June 11, 1996
F-44
<PAGE>
SUGARBUSH RESORT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD FROM JUNE 1, 1994 ---------------------------------------
THROUGH MAY 15, MAY 31, MAY 31,
1995 1994 1993
------------- ------------- --------------
<S> <C> <C> <C>
REVENUES:
Ski related.................... $ 82,000 $ 8,688,000 $ 7,685,000
Property management and lodging 1,779,000 4,524,000 4,180,000
Utility fees and services...... 265,000 751,000 783,000
Other.......................... 412,000 942,000 870,000
--------------- --------------- ------------------
Total revenues................. 2,538,000 14,905,000 13,518,000
--------------- --------------- ------------------
EXPENSES:
Cost of operations including
wages, maintenance and
supplies.................... 2,015,000 10,210,000 8,956,000
Selling, general and
administrative.............. 2,550,000 5,635,000 6,121,000
Interest....................... 128,000 356,000 281,000
Depreciation................... 822,000 764,000 522,000
--------------- ------------------ ------------------
Total expenses................. 5,515,000 16,965,000 15,880,000
--------------- ------------------ ------------------
Net loss......................... $ (2,997,000) $ (2,060,000) $ (2,362,000)
================ ================== =================
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-45
<PAGE>
SUGARBUSH RESORT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance May 31, 1992...... 100 $ -- $ 60,000,000 $ (56,635,000) $ 3,365,000
Advances from Parent...... 3,350,000 3,350,000
Net loss for the year
ended May 31, 1993....... (2,362,000) (2,362,000)
----------- ---------------- ---------------- ---------------- ----------------
Balance May 31, 1993...... 100 -- 63,350,000 (58,997,000) 4,353,000
Advances from Parent...... 4,050,000 4,050,000
Net loss for the year
ended May 31, 1994....... (2,060,000) (2,060,000)
----------- ---------------- ---------------- ---------------- ----------------
Balance May 31, 1994...... 100 -- 67,400,000 (61,057,000) 6,343,000
Advances from Parent...... 2,025,000 2,025,000
Net loss for the
period May 15, 1995...... (2,977,000) (2,977,000)
----------- ---------------- ---------------- ---------------- ----------------
Balance May 15, 1995...... 100 $ -- $ 69,425,000 $ (64,034,000) $ 5,391,000
=========== =============== -=============== -=============== -===============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-46
<PAGE>
SUGARBUSH RESORT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 1, 1994
THROUGH MAY 15, MAY 31, MAY 31,
1995 1994 1993
--------------- ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (2,977,000) $ (2,060,000) $ (2,362,000)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization............................. 844,000 816,000 723,000
Gain on disposal of assets, net........................... -- (8,000) (71,000)
(Increase) decrease in accounts receivable................ 713,000 (45,000) 26,000
(Increase) decrease in inventory.......................... 152,000 (14,000) (23,000)
(Increase) decrease in prepaid expenses................... 901,000 (167,000) 418,000
Increase (decrease) in accounts payable and accrued
expenses................................................ (961,900) 101,000 (526,000)
Increase (decrease) in deferred income.................... (174,000) 45,000 54,000
---------------- ----------------- ---------------
Net cash used in operating activities..................... (1,502,900) (1,332,000) (1,761,000)
---------------- ----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (893,000) (3,265,000) (1,555,000)
Proceeds from disposal of assets.......................... -- 101,000 139,000
Purchase of other assets.................................. -- (18,000) --
---------------- ------------------ --------------
Net cash used in investing activities..................... (893,000) (3,182,000) (1,416,000)
---------------- ------------------ --------------
CASH PROVIDED BY FINANCING ACTIVITIES:
Increase in notes payable and long-term debt.............. -- 754,000 --
Repayment of long-term debt............................... (17,100) (365,000) (245,000)
Advances from parent...................................... 2,025,000 4,050,000 3,350,000
---------------- ----------------- ---------------
Net cash provided by financing activities................. 2,007,900 4,439,000 3,105,000
---------------- ----------------- ---------------
Net decrease in cash........................................ (388,000) (75,000) (72,000)
Cash at beginning of year................................... 388,000 463,000 535,000
---------------- ----------------- ---------------
Cash at end of year......................................... $ -- $ 388,000 $ 463,000
=============== ================ ================
Cash paid for interest amounted to $139,100, $300,000 and $289,000 in 1995, 1994 and 1993, respectively.
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-47
<PAGE>
SUGARBUSH RESORT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Sugarbush Resort Corporation (a Delaware corporation) and its
wholly-owned subsidiaries, Snowridge, Inc., Sugar Ridge, Inc., The
Sugarbush Inn Corporation, and their respective subsidiaries, all of
which are Vermont corporations (collectively referred to as the
"Company"). The Company was a wholly owned subsidiary of Claneil
Enterprises, Inc. (the "Parent"). The Company operates predominantly in a
single industry segment, which is the development and operation of the
Sugarbush Ski Resort in Warren, Vermont providing ski recreation and
related services to skiers, a single customer group. All significant
intercompany balances and transactions have been eliminated.
FISCAL YEAR
The accompanying consolidated financial statements are presented based on
the Company's fiscal year ended May 31, which differs from the Company's
tax year-end of February 28.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated by the
straight-line method over the assets' estimated useful lives which
generally range from 9 to 40 years for buildings, 3 to 12 years for
machinery and equipment and 10 to 50 years for leasehold improvements,
lifts, lift lines and trails. Expenditures for maintenance and repairs
are expensed as incurred. Depreciation expense for 1995, 1994 and 1993
amounted to $822,000, $764,000 and $522,000, respectively.
INTANGIBLE ASSETS
Intangible assets relate to organizational fees and are amortized by the
straight-line method over sixty months. Amortization expense related to
these assets was approximately $22,000, $52,000 and $201,000 during 1995,
1994 and 1993, respectively.
REVENUE RECOGNITION
The Company recognizes revenue at the point of service, except for
brokerage commissions which are recognized as income upon the
consummation of the sale. Revenue includes sales of lift tickets, tuition
from ski schools, sales from restaurants, bars and retail shops, real
estate rentals and sales of real property.
INTEREST
Interest is expensed as incurred except when it is capitalized in
conjunction with major capital additions. The amount of interest
capitalized is determined by applying current interest rates to the funds
required to finance the construction.
EMPLOYEE BENEFITS
The Company participates in a savings plan (the "Plan") administered by
an affiliate. To qualify for the Plan, employees must work for one year
and have attained the age of twenty-one. Company contributions to the
Plan are based on employee contributions and compensation. The Company
contributed $17,200, $34,000 and $31,000 for 1995, 1994 and 1993,
respectively.
ADVERTISING COSTS
Advertising costs are expensed the first time the advertising takes place.
The amount charged to advertising expense during 1995, 1994, and 1993 was
$656,000, $1,019,000 and $520,000, respectively.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the financial statements. Actual
results could differ from those estimates.
F-48
<PAGE>
SUGARBUSH RESORT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The operations of the Company were included in the consolidated income tax
return of its ultimate parent (Claneil Enterprises, Inc.). It is the
parent's policy not to allocate income tax amounts to the Company.
Accordingly, no provision or benefit for income taxes has been recorded
in the accompanying consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," was recently issued and its
adoption is required for fiscal years beginning after December 15, 1995.
SFAS No. 121 mandates specific methodologies to be used for identifying
and measuring the impairment of long-lived assets. Adoption of SFAS No.
121 is not expected to materially impact the Company's consolidated
financial statements.
2. RELATED PARTY TRANSACTIONS
The Company received cash advances in the form of contributions of
capital of $2,025,000, $4,050,000 and $3,350,000 during 1995, 1994 and
1993, respectively, from its Parent to meet its operating and capital
needs. Such advances are non-interest bearing.
3. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES
The Company leases air compression, automotive and other equipment and
certain office facilities under operating leases with terms ranging from
less than one year to five years. Future minimum lease payments for lease
obligations at May 15, 1995 are as follows:
1996 $ 163,000
1997 123,000
1998 74,000
1999 29,000
-------------
$ 389,000
Total rent expense for all operating leases was $82,700, $263,000 and
$173,000 during 1995, 1994 and 1993, respectively.
Certain portions of the skiing terrain are operated under a ten year
Special Use Permit granted by the U.S. Forest Service which expires in
1998. Annual rental payments are based on a percentage of gross revenue
from certain activities. Total rent expense under this permit was
$10,000, $66,000 and $48,000 during 1995, 1994 and 1993, respectively.
The Company maintains employment agreements with three officers. The
employment agreements contain change in control provisions that would
entitle each of the officers to receive an amount equal to their annual
salary if there is a change in control of the Company as defined in the
agreement. In addition, there is a termination provision which provides
for one times the annual salary if an officer is terminated without
cause. During 1993, the Company paid $150,000 upon termination of
employment of two such officers.
During fiscal year 1994, litigation against the Company relating to
respective parties rights on utility improvements resulted in charges to
operations of $703,000, which includes legal fees, payments to customers
and interest.
F-49
<PAGE>
SUGARBUSH RESORT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES (CONTINUED)
The Company is a co-defendant in a $3 million civil suit alleging
violations of the anti-trust and trademark laws of the United States, and
Vermont statutory and common law. Management believes the allegations are
without merit and that the outcome of this matter will not have a
material effect on its financial position, results of operations or cash
flows.
Certain claims, suits and complaints associated with the ordinary course
of business are pending or may arise against the companies comprising
Sugarbush Resort Corporation. In the opinion of management, all matters
are adequately covered by insurance or, if not covered, are without merit
or are of such kind, or involve such amounts as would not have a material
effect on the financial position, results of operations or cash flows of
the Company if disposed of unfavorably.
4. SUBSEQUENT EVENT
On May 16, 1995, the Company's Parent sold substantially all of the
assets of the Company. Effective October 15, 1994 through May 15, 1995,
the buyer of the Company operated the ski resort under a lease agreement
with the Company's ultimate parent. The accompanying financial statements
do not reflect any adjustments that might arise as a result of this
transaction.
F-50
<PAGE>
- ------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THE EXCHANGE OFFERS ARE NOT BEING MADE
TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD
NOTES OR OLD SUBORDINATED NOTES IN ANY JURISDICTION IN WHICH THE RELEVANT
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
PAGE
Summary 1
The Acquisition; Antitrust Matters; Use of Proceeds 21
Risk Factors 24
The Exchange Offers 32
Pro Forma Capitalization 43
Pro Forma Financial Data 44
Selected Historical Financial Data 54
Management's Discussion and Analysis of Financial
Condition and Results of Operations 58
Industry Overview 66
Business 67
Management 83
Description of Senior Subordinated Notes 85
Description of Subordinated Notes 110
Description of the Company's Capital Stock 127
Description of Other Indebtedness 127
Certain Federal Income Tax Considerations 128
Certain Federal Income Tax Consequences of the
Exchange Offers 131
Plan of Distribution 132
Legal Matters 132
Experts 132
Indemnification 133
Other Matters 134
Exchange Agent 134
Index to Financial Statements F-1
- -------------------------------------------------------------------------------
AMERICAN SKIING COMPANY
OFFER TO EXCHANGE ITS 12% SERIES B SERIES B
SUBORDINATED NOTES DUE 2006 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT (GUARANTEED BY
SUBSTANTIALLY ALL OF ITS SUBSIDIARIES) FOR ANY AND ALL OF ITS
12% SERIES A SUBORDINATED NOTES DUE 2006
(GUARANTEED BY SUBSTANTIALY ALL OF ITS SUBSIDIARIES)
OFFER TO EXCHANGE ITS 13 % SERIES B SUBORDINATED
DISCOUNT NOTES DUE 2007 WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT (GUARANTEED BY SUBSTANTIALLY
ALL OF ITS SUBSIDIARIES) FOR ANY AND ALL OF ITS 13 % SERIES
A SUBORDINATED DISCOUNT NOTES DUE 2007 (GUARANTEED
BY SUBSTANTIALLY ALL OF ITS SUBSIDIARIES)
--------------------------------
PROSPECTUS
---------------------------------
--------------, 1996
- ------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Company is a Maine corporation. Section 719 of the Maine Business
Corporation Act (13-A M.R.S.A. ss. 101, et seq.) authorizes the
indemnification by a Maine corporation of any person who is a party or is
threatened to be made a party to any action, suit or proceeding by reason of
that person's status as a director, officer, employee or agent of the
corporation; provided that no such indemnification may be provided for any
person if he or she shall have been finally adjudicated (i) not to have acted
honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the corporation or its shareholders, or (ii)
in any criminal proceeding, to have had reasonable cause to believe his or her
conduct was unlawful. In the case of actions brought by or on behalf of the
corporation, indemnification may only be provided if the court determines that
such person is fairly and reasonably entitled to the requested
indemnification. Indemnification must be provided to the extent that a
director, officer, employee or agent has been successful, on the merits or
otherwise, in defense of an action of the type described in the second
sentence of this paragraph.
The Bylaws of the Company provide that it shall indemnify any person
who is made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he or she is or was a director or
officer of the Company, and may indemnify any employee or agent of the Company
in such circumstances, against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or her in connection with such action, suit or proceeding. No indemnification
may be provided for any person who shall have been finally adjudicated not to
have acted honestly or in the reasonable belief that his or her action was in
or not opposed to the best interests of the Company or who had reasonable
cause to believe that his or her conduct was unlawful. Indemnification must be
provided to any director, officer, employee or agent of the Company to the
extent such person has been successful, on the merits or otherwise, in defense
of any action or claim described above. Any indemnification under this
provision of the Bylaws, unless required under the Bylaws or ordered by a
court, can be made only as authorized in each specific case upon a
determination by a majority of disinterested directors or by independent legal
counsel or by the shareholders that such indemnification is appropriate under
the standard set forth in the preceding sentence.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1(1) Agreement and Plan of Merger, dated as of February 13, 1996,
by and among LBO Resort Enterprises (the predecessor of the
Company), LBO Acquisition Co. and S-K-I Limited
3.1(1)(CE) Articles of Incorporation of the Company
3.2(1)(CE) Bylaws of the Company
3.3(1)(CE) Articles of Incorporation of Sunday River Skiway Corporation
3.4(1)(CE) Bylaws of Sunday River Skiway Corporation
3.5(1)(CE) Articles of Incorporation of Sunday River Ltd.
3.6(1)(CE) Bylaws of Sunday River Ltd.
3.7(1)(CE) Articles of Incorporation of Perfect Turn, Inc.
3.8(1)(CE) Bylaws of Perfect Turn, Inc.
3.9(1)(CE) Articles of Incorporation of LBO Holding, Inc.
3.10(1)(CE) Bylaws of LBO Holding, Inc.
3.11(1)(CE) Articles of Incorporation of Sunday River Transportation, Inc.
3.12(1)(CE) Bylaws of Sunday River Transportation, Inc.
3.13(1)(CE) Articles of Incorporation of Sugarbush Resort Holdings, Inc.
3.14(1)(CE) Bylaws of Sugarbush Resort Holdings, Inc.
3.15(1)(CE) Articles of Incorporation of Sugarbush Leasing Company
3.16(1)(CE) Bylaws of Sugarbush Leasing Company
3.17(1)(CE) Articles of Incorporation of Sugarbush Restaurants, Inc.
3.18(1)(CE) Bylaws of Sugarbush Restaurants, Inc.
3.19(1)(CE) Articles of Incorporation of Cranmore, Inc.
3.20(1)(CE) Bylaws of Cranmore, Inc.
3.21(1)(CE) Certificate of Incorporation of S-K-I Ltd.
3.22(1)(CE) Bylaws of S-K-I Ltd.
3.23(1)(CE) Articles of Association of Killington Ltd.
3.24(1)(CE) Bylaws of Killington Ltd.
3.25(1)(CE) Articles of Association of Mount Snow Ltd.
3.26(1)(CE) Bylaws of Mount Snow Ltd.
3.27(1)(CE) Articles of Incorporation of Waterville Valley Ski Area, Ltd.
3.28(1)(CE) Bylaws of Waterville Valley Ski Area, Ltd.
3.29(1)(CE) Articles of Incorporation of Sugarloaf Mountain Corporation
3.30(1)(CE) Bylaws of Sugarloaf Mountain Corporation
3.31(1)(CE) Articles of Association of Killington Restaurants, Inc.
3.32(1)(CE) Bylaws of Killington Restaurants, Inc.
3.33(1)(CE) Articles of Association of Dover Restaurants, Inc.
3.34(1)(CE) Bylaws of Dover Restaurants, Inc.
3.35(1)(CE) Articles of Association of Resort Technologies, Inc.
3.36(1)(CE) Bylaws of Resort Technologies, Inc.
3.37(1)(CE) Articles of Association of Resort Software Services, Inc.
3.38(1)(CE) Bylaws of Resort Software Services, Inc.
3.39(1)(CE) Articles of Incorporatoin of LBO Hotel Co.
3.40(1)(CE) Bylaws of LBO Hotel Co.
3.41(1)(CE) Articles of Association of Mountain Wastewater Treatment, Inc.
3.42(1)(CE) Bylaws of Mountain Wastewater Treatment, Inc.
3.43(1)(CE) Articles of Incorporation of Mountainside
3.44(1)(CE) Bylaws of Mountainside
3.45(1)(CE) Articles of Incorporation Sugartech
3.46(1)(CE) Bylaws of Sugartech
II-2
<PAGE>
3.47(1)(CE) Articles of Incorporation of Deerfield Operating Company
3.48(1)(CE) Bylaws of Deerfield Operating Company
3.49(1)(CE) Articles of Association of Pico Ski Area Management Company
3.50(1)(CE) Bylaws of Pico Ski Area Management Company
4.1(1)(CE) Indenture among the Company, the Guarantors and United States
Trust Company of New York, relating to the Old Notes and the
New Notes, dated as of June 28, 1996.
4.2(1)(CE) Indenture among the Company, the Guarantors and United
States Trust Company of New York, relating to the Old
Subordinated Notes and the New Subordinated Notes, dated as
of June 28, 1996.
4.3(1)(CE) Registration Rights Agreement dated June 28, 1996 among the
Company, the Guarantors and the Initial Purchasers.
4.4(1)(CE) Purchase Agreement dated June 25, 1996 among the Company,
certain of the Guarantors and the Initial Purchasers.
4.5(1)(CE) Registration Rights Agreement dated June 28, 1996 among the
Company, the Guarantors and Bear Stearns.
4.6(1)(CE) Pledge and Disbursement Agreement, dated as of June 28,
1996, by and among the Company, the Guarantors and United
States Trust Company of New York, as collateral agent.
4.7(1)(CE) Shareholders' Agreement dated June 28, 1996, among Leslie B.
Otten, the Company and Bear Stearns
5.1(2)(CE) Opinion of Pierce Atwood, including consent
5.2(2)(CE) Opinion of Reiber, Kenlan, Schwiebert, Hall & Facey,
including consent
5.3(2)(CE) Opinion of Wadleigh, Starr, Peters, Dunn & Chiesa, including
consent
8.1(2)(CE) Opinion of Pierce Atwood with regard to federal income tax
consequences of the Exchange Offers.
10.1(1)(P) Credit Agreement dated as of June 28, 1996, among the
Company, its Subsidiaries, parties thereto and Fleet.
10.2(1)(P) Security Agreement dated June 28, 1996, among the Company,
its Subsidiaries, parties thereto and Fleet.
10.3(1)(P) Revolving Credit Notes dated June 28, 1996, issued by the
Company and certain Subsidiaries to Fleet in the aggregate
principal amount of $65,000,000.
10.4(1)(P) Swing Line Note dated June 28, 1996, issued by the Company
and certain Subsidiaries to Fleet in the aggregate principal
amount of $5,000,000.
10.5(1)(P) Fee and Leasehold Mortgage, Assignment of Leases and Rents
and Security Agreement, each dated as of June 28, 1996, by
and between each of Sunday River Skiway Corporation, Sunday
River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush
Resort Holdings, Inc., Mountain Water Company, Mountain
Wastewater Treatment, Inc., Killington, Ltd., Mount Snow
Ltd. and Waterville Valley Ski Area Ltd. and Fleet.
II-3
<PAGE>
10.6(1)(P) Collateral Assignments of Leases and Rents, each dated as of
June 28, 1996, by and between each of Sunday River Skiway
Corporation, Sunday River, Ltd., LBO Holding, Inc.,
Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain
Water Company, Mountain Wastewater Treatment, Inc.,
Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski
Area Ltd. and Fleet.
10.7(1)(P) Assignment in Trust, dated as of June 28, 1996, between
Waterville Valley Ski Area, Ltd. and Fleet
10.8(1)(P) Assignment in Trust, dated as of June 28, 1996, between LBO
Holding, Inc. and Fleet.
10.9(1)(P) Assignment of Agreements, Permits and Contracts, among the
Company, certain Subsidiaries and Fleet
10.10(1)(P) Assignment of Trademarks and Service Marks (U.S.), dated
June 28, 1996, among the Company, certain Subsidiaries and
Fleet.
10.11(1)(P) Hazardous Materials Indemnification Agreement, dated June
28, 1996, among the Company, certain Subsidiaries and Fleet.
10.12(1)(P) Guaranty Agreement dated June 28, 1996, by LBO Hotel Co., in
favor of Fleet.
10.13(1)(P) Guaranty Agreement dated June 28, 1996, by Sugarloaf
Mountain Corporation in favor of Fleet.
10.14(1)(P) Intercreditor Agreement dated as of June 20, 1996, among the
Company, certain Subsidiaries, Doppelmayr USA, Inc. and
Fleet.
10.15(1)(P) Intercreditor Agreement, dated as of June 28, 1996, among
the Company, certain Subsidiaries, Snowridge, Inc. (for
itself and as agent for Innacq Corporation) and Fleet.
10.16(1)(P) Loan and Security Agreement, dated as of October 1, 1984,
among the State of Vermont, acting by and through the
Vermont Industrial Development Authority, Sherburne
Corporation (predecessor to Killington, Ltd.), Proctor Bank
and The First National Bank of Boston
10.17(1)(P) Loan and Security Agreement, dated as of October 1, 1984,
among the State of Vermont, acting by and through the
Vermont Industrial Development Authority, Mt. Snow, Proctor
Bank and The First National Bank of Boston
10.18(1)(P) Form of Subordinated Note, dated as of June 30, 1992, from
Sugarloaf Mountain Corporation to certain note holders
10.19(1)(P) Indenture, dated October 24, 1990, among Killington, Ltd.
and The Howard Bank, as trustee (representative of indentures
with respect to similar indebtedness aggregating approximately
$2,995,000 in original principal amount and maturing at
various times from 2015 to 2016)
10.20(1)(P) Indenture, dated September 25, 1986, among Killington, Ltd.
and The Howard Bank, as trustee (representative of indentures
with respect to similar indebtedness aggregating approximately
$10,873,500 in original principal amount and maturing at
various times from 1977 to 2013)
10.21(1)(P) Restated Concession Agreement, dated April 30, 1992, between
Sugarloaf Mountain Corporation and Boston Concessions Group,
Inc., together with Amendment thereto, Loan Agreement, and
$150,000 Promissory Notes, each dated July 31, 1995
10.22(1)(P) $500,000 Note, dated August 27, 1993, from Sugarloaf
Mountain Corporation and Warren Cook to Fleet Bank of Maine
10.23(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 7, 1995, by and between Doppelmayr USA, Inc., and
Sunday River Skiway Corporation
II-4
<PAGE>
10.24(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Holdings, Inc. (Gate House Chair)
10.25(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 26, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Holdings, Inc.
10.26(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Resort Holdings, Inc. (Sugar Bravo Lift)
10.27(1)(P) Lift Relocation Agreement, dated September 4, 1995, by and
between Doppelmayr USA, Inc., and Sugarbush Resort Holdings,
Inc. (North Link Chair)
10.28(1)(P) Lift Relocation Agreement, dated September 4, 1995, by and
between Doppelmayr USA, Inc., and Sugarbush Resort Holdings,
Inc. (North Ridge Chair)
10.29(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Resort Holdings, Inc.
(Green Mountain Chair)
10.30(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 14, 1995, by and between Doppelmayr USA, Inc., and LBO
Holding, Inc., d/b/a Attitash/Bear Peak.
10.31(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 14, 1995, by and between Doppelmayr USA, Inc., and LBO
Holding, Inc., d/b/a Cranmore, Inc.
10.32(1)(P) $2,311,838 Promissory Note from Mountain Wastewater
Treatment, Inc. to LHC Corporation dated May 16, 1995.
10.33(1)(P) $6,120,000 Promissory Note, Senior Mortgage, and Junior
Mortgage from Sugarbush Resort Holdings, Inc. to Snowridge,
Inc. and Sugarbush, Inc. dated May 16, 1995
10.34(1)(P) Form of Subordinated Debenture due 2002 from LBO Holding,
Inc. to former shareholders of Mt. Attitash Lift Corporation
10.35(1)(P) Purchase and Sale Agreement, dated April 13, 1994, among Mt.
Attitash Lift Corporation and LBO Holding, Inc. for purchase
of Attitash/Bear Peak Ski Resort
10.36(1)(P) Stock Purchase Agreement, dated August 16, 1994, for
purchase of 51% interest in Sugarloaf Ski Resort, among
Sugarloaf Mountain Corporation and S-K-I, Ltd.
10.37(1)(P) Purchase and Sale Agreement, dated August 30, 1994, among
Waterville Company, Inc., and S-K-I, Ltd. for purchase of
Waterville Valley Ski Resort
10.38(1)(P) Purchase and Sale Agreement, dated May 16, 1995, among
Sugarbush Resort Holdings, Inc., Sugarbush Resort
Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush
Inn Corporation and Bev Ridge, Inc. for purchase of
Sugarbush Ski Resort
10.39(1)(P) Purchase and Sale Agreement among Cranmore Country Corp. and
Sunday River Skiway Corporation for purchase of Cranmore Ski
Resort
10.40(1)(P) Lease, dated October 15, 1980, among H. Donald Penley,
Joseph Penley, Albert Penley and Sunday River Skiway
Corporation
10.41(1)(P) Lease, dated July 19, 1984, between John Blake and LBO
Holding, Inc.
II-5
<PAGE>
10.42(1)(P) Lease, dated July 1, 1993, between Snowridge, Inc. and
Mountain Water Company
10.43(1)(P) Lease, dated March 1, 1988, between Snowridge, Inc. and
Mountain Wastewater Treatment, Inc.
10.44(1)(P) Lease, dated November 10, 1960, between the State of Vermont
and Sherburne Corporation (predecessor to Killington, Ltd.)
10.45(1)(P) Lease, dated February 20, 1990, between Pico Pond Associates
and Killington, Ltd.
10.46(1)(P) Lease, dated June 21, 1994, between the Town of Wilmington
and Mt. Snow, Ltd.
10.47(1)(P) Lease, dated April 24, 1995, between Sargent, Inc. and Mt.
Snow, Ltd.
10.48(1)(P) United States Forest Service Special Use Permit No. 4040/01
issued November 29, 1989, to Mt. Snow, Ltd.
10.49(1)(P) United States Forest Service Special Use Permit No. 4059/01
issued July 19, 1994, to LBO Holding, Inc.
10.50(1)(P) United States Forest Service Special Use Permit No. 4002/01
issued October 31, 1994, to Waterville Valley Ski Area, Ltd.
10.51(1)(P) United States Forest Service Special Use Permit No. 4041
issued May 15, 1995, to Sugarbush Resort Holdings, Inc.
10.52(1)(P) Lease, dated September 10, 1984, between the Inhabitants of
the Town of Carrabassett Valley and Mountain Greenery
10.53(1)(P) Turnkey Sales Agreement, dated June 5, 1992, between POMA of
America and Killington, Ltd.
10.54(1)(P) Agreement, between S-K-I, Ltd., and Henry B. Lunde
10.55(1)(P) Agreement, dated July 26, 1995, between Bombardier
Corporation, Killington, Ltd., Mt. Snow, Ltd., Waterville
Valley Ski Area, Ltd., Bear Mountain, Ltd., and Sugarloaf
Mountain Corporation
10.56(1)(P) Agreement, dated June 3, 1996, between the Company and
Eastern Resorts Company, LLC
10.57(1)(P) Warren Cook Employment Agreement
10.58(1)(P) Partnership Agreement, dated March 1993 relating to
Sugarloaf Land Partners I
10.59(1)(P) Partnership Agreement, dated March 1993 relating to
Sugarloaf Land Partners II
12.1(1)(CE) Statement re Computation of Ratio of Earnings to Fixed Charges
16.1(1)(CE) Letter from Berry, Dunn, McNeil & Parker re change in
certifying accountants
21.1(1)(CE) Subsidiaries of the Company
II-6
<PAGE>
23.1(1)(CE) Consent of Price Waterhouse LLP
23.2(1)(CE) Consent of Berry, Dunn, McNeil & Parker
23.3(2)(CE) Consents of Pierce Atwood (included in Exhibits 5.1 and 8.1)
23.4(2)(CE) Consent of Reiber, Kenlan, Schwiebert, Hall & Facey
(included in Exhibit 5.2)
23.5(2)(CE) Consent of Wadleigh, Starr, Peters, Dunn & Chiesa
(included in Exhibit 5.3)
24.1(1)(CE) Powers of Attorney (see pages II-9 through II-34 of this
Registration Statement)
25.1(CE) Statement of Eligibility of United States Trust Company of
New York, as trustee under the Indenture filed as Exhibit
4.1, on Form T-1 (filed under separate
cover).
25.2(CE) Statement of Eligibility of United States Trust Company of
New York, as trustee under the Indenture filed as Exhibit
4.2, on Form T-1 (filed under separate cover).
99.1(2) Form of Notes Letter of Transmittal to be used in connection
with the Notes Exchange Offer.
99.2(2) Form of Subordinated Notes Letter of Transmittal to be used in
connection with the Subordinated Notes Exchange Offer.
99.3(2) Notice of Guaranteed Delivery regarding Old Notes
99.4(2) Notice of Guaranteed Delivery regarding Old Subordinated Notes
- ---------------------------------------
(1) Filed herewith
(2) To be filed by amendment
II-7
<PAGE>
Item 22. Undertakings
The undersigned registrants hereby undertake with respect to the
securities offered by them:
1. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted as to
directors, officers and controlling persons of any Registrant pursuant to the
provisions described in Item 20 or otherwise, the Registrants have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore unenforceable. In the
event a claim for indemnification against such liabilities (other than the
payment by any Registrant of expenses incurred or paid by a director, officer
or controlling person of such Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, such
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
2. The Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
3. The undersigned Registrants hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-8
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
AMERICAN SKIING COMPANY, a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-9
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUNDAY RIVER SKIWAY CORPORATION,
a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-10
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUNDAY RIVER LTD., a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-11
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
PERFECT TURN INC., a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-12
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
LBO HOLDING, INC., a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-13
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUNDAY RIVER TRANSPORTATION, INC.,
a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-14
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUGARBUSH RESORT HOLDINGS, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
/s/ Roger Amidon Director August 7, 1996
- -------------------------- -
Roger Amidon
/s/ Allen Wilson Director August 7, 1996
- -------------------------- -
Allen Wilson
II-15
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUGARBUSH LEASING COMANY,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-16
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUGARBUSH RESTAURANTS, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-17
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
CRANMORE, INC., a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-18
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
S-K-I LIMITED, a Delaware corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-19
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
KILLINGTON LTD., a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-20
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
MOUNT SNOW LTD., a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-21
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
WATERVILLE VALLEY SKI AREA, LTD.,
a New Hampshire corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-22
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUGARLOAF MOUNTAIN CORPORATION,
a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
/s/ Burton Mills Director August 7, 1996
- --------------------------
Burton Mills
/s/ Christopher Brink Director August 7, 1996
- --------------------------
Christopher Brink
- -------------------------- Director August _, 1996
Warren C. Cook
II-23
<PAGE>
- -------------------------- Director August ____, 1996
William Haggett
- -------------------------- Director August ____, 1996
Joseph O'Donnell
II-24
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
KILLINGTON RESTAURANTS, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
/s/ Roger Amidon Director August 7, 1996
- --------------------------
Roger Amidon
/s/ Allen Wilson Director August 7, 1996
- --------------------------
Allen Wilson
II-25
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
DOVER RESTAURANTS, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
/s/ Roger Amidon Director August 7, 1996
- --------------------------
Roger Amidon
/s/ Allen Wilson Director August 7, 1996
- --------------------------
Allen Wilson
II-26
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
RESORT TECHNOLOGIES, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-27
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
PICO SKI AREA MANAGEMENT COMPANY,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-28
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
MOUNTAIN WASTEWATER TREATMENT, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-29
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
DEERFIELD OPERATING COMPANY,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-30
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
RESORT SOFTWARE SERVICES, INC.,
a Vermont corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B. Otten Director, Chief Executive Officer August 7, 1996
- -------------------------- and President
Leslie B. Otten
/s/ Thomas M. Richardson Chief Financial Officer and August 7, 1996
- -------------------------- Treasurer (Principal Financial
Thomas M. Richardson and Accounting Officer)
II-31
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
LBO HOTEL CO., a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B.Otten Director, Chief Executive Officer, August 7, 1996
- -------------------------- President, Chief Financial
Leslie B. Otten Officer and Treasurer (Principal
Financial and Accounting Officer)
II-32
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
MOUNTAINSIDE, a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B.Otten Director, Chief Executive Officer, August 7, 1996
- -------------------------- President, Chief Financial
Leslie B. Otten Officer and Treasurer (Principal
Financial and Accounting Officer)
II-33
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears
below hereby appoints Leslie B. Otten and Thomas M. Richardson, and each of
them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine on the 7th day of August, 1996.
SUGARTECH, a Maine corporation
By:/s/ Leslie B. Otten
---------------------------------
Leslie B. Otten
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leslie B.Otten Director, Chief Executive Officer, August 7, 1996
- -------------------------- President, Chief Financial
Leslie B. Otten Officer and Treasurer (Principal
Financial and Accounting Officer)
II-34
Registration No. 33-______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
AMERICAN SKIING COMPANY
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1(1) Agreement and Plan of Merger, dated as of February 13, 1996,
by and among LBO Resort Enterprises (the predecessor of the
Company), LBO Acquisition Co. and S-K-I Limited
3.1(1)(CE) Articles of Incorporation of the Company
3.2(1)(CE) Bylaws of the Company
3.3(1)(CE) Articles of Incorporation of Sunday River Skiway Corporation
3.4(1)(CE) Bylaws of Sunday River Skiway Corporation
3.5(1)(CE) Articles of Incorporation of Sunday River Ltd.
3.6(1)(CE) Bylaws of Sunday River Ltd.
3.7(1)(CE) Articles of Incorporation of Perfect Turn, Inc.
3.8(1)(CE) Bylaws of Perfect Turn, Inc.
3.9(1)(CE) Articles of Incorporation of LBO Holding, Inc.
3.10(1)(CE) Bylaws of LBO Holding, Inc.
3.11(1)(CE) Articles of Incorporation of Sunday River Transportation, Inc.
3.12(1)(CE) Bylaws of Sunday River Transportation, Inc.
3.13(1)(CE) Articles of Incorporation of Sugarbush Resort Holdings, Inc.
3.14(1)(CE) Bylaws of Sugarbush Resort Holdings, Inc.
3.15(1)(CE) Articles of Incorporation of Sugarbush Leasing Company
3.16(1)(CE) Bylaws of Sugarbush Leasing Company
3.17(1)(CE) Articles of Incorporation of Sugarbush Restaurants, Inc.
3.18(1)(CE) Bylaws of Sugarbush Restaurants, Inc.
3.19(1)(CE) Articles of Incorporation of Cranmore, Inc.
3.20(1)(CE) Bylaws of Cranmore, Inc.
3.21(1)(CE) Certificate of Incorporation of S-K-I Ltd.
3.22(1)(CE) Bylaws of S-K-I Ltd.
3.23(1)(CE) Articles of Association of Killington Ltd.
3.24(1)(CE) Bylaws of Killington Ltd.
3.25(1)(CE) Articles of Association of Mount Snow Ltd.
3.26(1)(CE) Bylaws of Mount Snow Ltd.
3.27(1)(CE) Articles of Incorporation of Waterville Valley Ski Area, Ltd.
3.28(1)(CE) Bylaws of Waterville Valley Ski Area, Ltd.
3.29(1)(CE) Articles of Incorporation of Sugarloaf Mountain Corporation
3.30(1)(CE) Bylaws of Sugarloaf Mountain Corporation
3.31(1)(CE) Articles of Association of Killington Restaurants, Inc.
3.32(1)(CE) Bylaws of Killington Restaurants, Inc.
3.33(1)(CE) Articles of Association of Dover Restaurants, Inc.
3.34(1)(CE) Bylaws of Dover Restaurants, Inc.
3.35(1)(CE) Articles of Association of Resort Technologies, Inc.
3.36(1)(CE) Bylaws of Resort Technologies, Inc.
3.37(1)(CE) Articles of Association of Resort Software Services, Inc.
3.38(1)(CE) Bylaws of Resort Software Services, Inc.
3.39(1)(CE) Articles of Incorporatoin of LBO Hotel Co.
3.40(1)(CE) Bylaws of LBO Hotel Co.
3.41(1)(CE) Articles of Association of Mountain Wastewater Treatment, Inc.
3.42(1)(CE) Bylaws of Mountain Wastewater Treatment, Inc.
3.43(1)(CE) Articles of Incorporation of Mountainside
3.44(1)(CE) Bylaws of Mountainside
3.45(1)(CE) Articles of Incorporation Sugartech
3.46(1)(CE) Bylaws of Sugartech
3.47(1)(CE) Articles of Incorporation Deerfield Operating Company
3.48(1)(CE) Bylaws of Deerfield Operating Company
3.49(1)(CE) Articles of Association Pico Ski Area Management Company
3.50(1)(CE) Bylaws of Pico Ski Area Management Company
<PAGE>
4.1(1)(CE) Indenture among the Company, the Guarantors and United States
Trust Company of New York, relating to the Old Notes and the
New Notes, dated as of June 28, 1996.
4.2(1)(CE) Indenture among the Company, the Guarantors and United States
Trust Company of New York, relating to the Old Subordinated
Notes and the New Subordinated Notes, dated as of June 28,
1996.
4.3(1)(CE) Registration Rights Agreement dated June 28, 1996 among the
Company, the Guarantors and the Initial Purchasers.
4.4(1)(CE) Purchase Agreement dated June 25, 1996 among the Company,
certain of the Guarantors and the Initial Purchasers.
4.5(1)(CE) Registration Rights Agreement dated June 28, 1996 among the
Company, the Guarantors and Bear Stearns.
4.6(1)(CE) Pledge and Disbursement Agreement, dated as of June 28, 1996,
by and among the Company, the Guarantors and United States
Trust Company of New York, as collateral agent.
4.7(1)(CE) Shareholders' Agreement dated June 28, 1996, among Leslie B.
Otten, the Company and Bear Stearns
5.1(2)(CE) Opinion of Pierce Atwood, including consent
5.2(2)(CE) Opinion of Reiber, Kenlan, Schwiebert, Hall & Facey,
including consent
5.3(2)(CE) Opinion of Wadleigh, Starr, Peters, Dunn & Chiesa, including
consent
8.1(2)(CE) Opinion of Pierce Atwood with regard to federal income tax
consequences of the Exchange Offers.
10.1(1)(P) Credit Agreement dated as of June 28, 1996, among the
Company, its Subsidiaries, parties thereto and Fleet.
10.2(1)(P) Security Agreement dated June 28, 1996, among the Company,
its Subsidiaries, parties thereto and Fleet.
10.3(1)(P) Revolving Credit Notes dated June 28, 1996, issued by the
Company and certain Subsidiaries to Fleet in the aggregate
principal amount of $65,000,000.
10.4(1)(P) Swing Line Note dated June 28, 1996, issued by the Company
and certain Subsidiaries to Fleet in the aggregate principal
amount of $5,000,000.
10.5(1)(P) Fee and Leasehold Mortgage, Assignment of Leases and Rents
and Security Agreement, each dated as of June 28, 1996, by
and between each of Sunday River Skiway Corporation, Sunday
River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush
Resort Holdings, Inc., Mountain Water Company, Mountain
Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd.
and Waterville Valley Ski Area Ltd. and Fleet.
10.6(1)(P) Collateral Assignments of Leases and Rents, each dated as of
June 28, 1996, by and between each of Sunday River Skiway
Corporation, Sunday River, Ltd., LBO Holding, Inc., Cranmore,
Inc., Sugarbush Resort Holdings, Inc., Mountain Water
Company, Mountain Wastewater
<PAGE>
Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and
Waterville Valley Ski Area Ltd. and Fleet.
10.7(1)(P) Assignment in Trust, dated as of June 28, 1996, between
Waterville Valley Ski Area, Ltd. and Fleet
10.8(1)(P) Assignment in Trust, dated as of June 28, 1996, between LBO
Holding, Inc. and Fleet.
10.9(1)(P) Assignment of Agreements, Permits and Contracts, among the
Company, certain Subsidiaries and Fleet
10.10(1)(P) Assignment of Trademarks and Service Marks (U.S.), dated June
28, 1996, among the Company, certain Subsidiaries and Fleet.
10.11(1)(P) Hazardous Materials Indemnification Agreement, dated June 28,
1996, among the Company, certain Subsidiaries and Fleet.
10.12(1)(P) Guaranty Agreement dated June 28, 1996, by LBO Hotel Co., in
favor of Fleet.
10.13(1)(P) Guaranty Agreement dated June 28, 1996, by Sugarloaf Mountain
Corporation in favor of Fleet.
10.14(1)(P) Intercreditor Agreement dated as of June 20, 1996, among the
Company, certain Subsidiaries, Doppelmayr USA, Inc. and
Fleet.
10.15(1)(P) Intercreditor Agreement, dated as of June 28, 1996, among the
Company, certain Subsidiaries, Snowridge, Inc. (for itself
and as agent for Innacq Corporation) and Fleet.
10.16(1)(P) Loan and Security Agreement, dated as of October 1, 1984,
among the State of Vermont, acting by and through the Vermont
Industrial Development Authority, Sherburne Corporation
(predecessor to Killington, Ltd.), Proctor Bank and The First
National Bank of Boston
10.17(1)(P) Loan and Security Agreement, dated as of October 1, 1984,
among the State of Vermont, acting by and through the Vermont
Industrial Development Authority, Mt. Snow, Proctor Bank and
The First National Bank of Boston
10.18(1)(P) Form of Subordinated Note, dated as of June 30, 1992, from
Sugarloaf Mountain Corporation to certain note holders
10.19(1)(P) Indenture, dated October 24, 1990, among Killington, Ltd. and
The Howard Bank, as trustee (representative of indentures
with respect to similar indebtedness aggregating approximately
$2,995,000 in original principal amount and maturing at
various times from 2015 to 2016)
10.20(1)(P) Indenture, dated September 25, 1986, among Killington, Ltd.
and The Howard Bank, as trustee (representative of indentures
with respect to similar indebtedness aggregating approximately
$10,873,500 in original principal amount and maturing at
various times from 1977 to 2013)
10.21(1)(P) Restated Concession Agreement, dated April 30, 1992, between
Sugarloaf Mountain Corporation and Boston Concessions Group,
Inc., together with Amendment thereto, Loan Agreement, and
$150,000 Promissory Notes, each dated July 31, 1995
10.22(1)(P) $500,000 Note, dated August 27, 1993, from Sugarloaf Mountain
Corporation and Warren Cook to Fleet Bank of Maine
10.23(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 7, 1995, by and between Doppelmayr USA, Inc., and Sunday
River Skiway Corporation
10.24(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Holdings, Inc. (Gate House Chair)
<PAGE>
10.25(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 26, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Holdings, Inc.
10.26(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Resort Holdings, Inc. (Sugar Bravo Lift)
10.27(1)(P) Lift Relocation Agreement, dated September 4, 1995, by and
between Doppelmayr USA, Inc., and Sugarbush Resort Holdings,
Inc. (North Link Chair)
10.28(1)(P) Lift Relocation Agreement, dated September 4, 1995, by and
between Doppelmayr USA, Inc., and Sugarbush Resort Holdings,
Inc. (North Ridge Chair)
10.29(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
September 4, 1995, by and between Doppelmayr USA, Inc., and
Sugarbush Resort Holdings, Inc. (Green Mountain Chair)
10.30(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 14, 1995, by and between Doppelmayr USA, Inc., and LBO
Holding, Inc., d/b/a Attitash/Bear Peak.
10.31(1)(P) Doppelmayr Ski Lift Supply and Installation Agreement, dated
July 14, 1995, by and between Doppelmayr USA, Inc., and LBO
Holding, Inc., d/b/a Cranmore, Inc.
10.32(1)(P) $2,311,838 Promissory Note from Mountain Wastewater
Treatment, Inc. to LHC Corporation dated May 16, 1995.
10.33(1)(P) $6,120,000 Promissory Note, Senior Mortgage, and Junior
Mortgage from Sugarbush Resort Holdings, Inc. to Snowridge,
Inc. and Sugarbush, Inc. dated May 16, 1995
10.34(1)(P) Form of Subordinated Debenture due 2002 from LBO Holding,
Inc. to former shareholders of Mt. Attitash Lift Corporation
10.35(1)(P) Purchase and Sale Agreement, dated April 13, 1994, among Mt.
Attitash Lift Corporation and LBO Holding, Inc. for purchase
of Attitash/Bear Peak Ski Resort
10.36(1)(P) Stock Purchase Agreement, dated August 16, 1994, for purchase
of 51% interest in Sugarloaf Ski Resort, among Sugarloaf
Mountain Corporation and S-K-I, Ltd.
10.37(1)(P) Purchase and Sale Agreement, dated August 30, 1994, among
Waterville Company, Inc., and S-K-I, Ltd. for purchase of
Waterville Valley Ski Resort
10.38(1)(P) Purchase and Sale Agreement, dated May 16, 1995, among
Sugarbush Resort Holdings, Inc., Sugarbush Resort
Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush
Inn Corporation and Bev Ridge, Inc. for purchase of Sugarbush
Ski Resort
10.39(1)(P) Purchase and Sale Agreement among Cranmore Country Corp. and
Sunday River Skiway Corporation for purchase of Cranmore Ski
Resort
10.40(1)(P) Lease, dated October 15, 1980, among H. Donald Penley, Joseph
Penley, Albert Penley and Sunday River Skiway Corporation
10.41(1)(P) Lease, dated July 19, 1984, between John Blake and LBO
Holding, Inc.
10.42(1)(P) Lease, dated July 1, 1993, between Snowridge, Inc. and
Mountain Water Company
<PAGE>
10.43(1)(P) Lease, dated March 1, 1988, between Snowridge, Inc. and
Mountain Wastewater Treatment, Inc.
10.44(1)(P) Lease, dated November 10, 1960, between the State of Vermont
and Sherburne Corporation (predecessor to Killington, Ltd.)
10.45(1)(P) Lease, dated February 20, 1990, between Pico Pond Associates
and Killington, Ltd.
10.46(1)(P) Lease, dated June 21, 1994, between the Town of Wilmington
and Mt. Snow, Ltd.
10.47(1)(P) Lease, dated April 24, 1995, between Sargent, Inc. and Mt.
Snow, Ltd.
10.48(1)(P) United States Forest Service Special Use Permit No. 4040/01
issued November 29, 1989, to Mt. Snow, Ltd.
10.49(1)(P) United States Forest Service Special Use Permit No. 4059/01
issued July 19, 1994, to LBO Holding, Inc.
10.50(1)(P) United States Forest Service Special Use Permit No. 4002/01
issued October 31, 1994, to Waterville Valley Ski Area, Ltd.
10.51(1)(P) United States Forest Service Special Use Permit No. 4041
issued May 15, 1995, to Sugarbush Resort Holdings, Inc.
10.52(1)(P) Lease, dated September 10, 1984, between the Inhabitants of
the Town of Carrabassett Valley and Mountain Greenery
10.53(1)(P) Turnkey Sales Agreement, dated June 5, 1992, between POMA of
America and Killington, Ltd.
10.54(1)(P) Agreement, between S-K-I, Ltd., and Henry B. Lunde
10.55(1)(P) Agreement, dated July 26, 1995, between Bombardier
Corporation, Killington, Ltd., Mt. Snow, Ltd., Waterville
Valley Ski Area, Ltd., Bear Mountain, Ltd., and Sugarloaf
Mountain Corporation
10.56(1)(P) Agreement, dated June 3, 1996, between the Company and
Eastern Resorts Company, LLC
10.57(1)(P) Warren Cook Employment Agreement
10.58(1)(P) Partnership Agreement, dated March 1993 relating to Sugarloaf
Land Partners I
10.59(1)(P) Partnership Agreement, dated March 1993 relating to Sugarloaf
Land Partners II
12.1(P) Statement re Computation of Ratio of Earnings to Fixed
Charges
16.1(1)(CE) Letter from Berry, Dunn, McNeil & Parker re change in
certifying accountants
21.1(1)(CE) Subsidiaries of the Company
23.1(1)(CE) Consent of Price Waterhouse LLP
23.2(1)(CE) Consent of Berry, Dunn, McNeil & Parker
23.3(2)(CE) Consents of Pierce Atwood (included in Exhibits 5.1 and 8.1)
<PAGE>
23.4(2)(CE) Consent of Reiber, Kenlan, Schwiebert, Hall & Facey (included
in Exhibit 5.2)
23.5(2)(CE) Consent of Wadleigh, Starr, Peters, Dunn & Chiesa (included
in Exhibit 5.3)
24.1(1)(CE) Powers of Attorney (see pages II-__ through II-__ of this
Registration Statement)
25.1(CE) Statement of Eligibility of United States Trust Company of
New York, as trustee under the Indenture filed as Exhibit
4.1, on Form T-1 (filed under separate cover).
25.2(CE) Statement of Eligibility of United States Trust Company of
New York, as trustee under the Indenture filed as Exhibit
4.2, on Form T-1 (filed under separate cover).
99.1(2) Form of Notes Letter of Transmittal to be used in connection
with the Notes Exchange Offer.
99.2(2) Form of Subordinated Notes Letter of Transmittal to be used
in connection with the Subordinated Notes Exchange Offer.
99.3(2) Notice of Guaranteed Delivery regarding Old Notes
99.4(2) Notice of Guaranteed Delivery regarding Old Subordinated
Notes
- ---------------------------------------
(1) Filed herewith
(2) To be filed by amendment
AGREEMENT and PLAN OF MERGER
among
S-K-I LIMITED
and
LBO RESORT ENTERPRISES
and
LBO ACQUISITION CO.
Dated as of February 13, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME................ 1
1.1. The Merger.................................................... 1
1.2. Closing....................................................... 2
1.3. Effective Time................................................ 2
ARTICLE II CERTIFICATE OF INCORPORATION; BY-LAWS; OFFICERS AND
DIRECTORS OF THE SURVIVING COPORATION...................... 2
2.1. The Articles of Incorporation................................. 2
2.2. The By-Laws................................................... 2
2.3. Officers and Directors........................................ 2
ARTICLE III CONVERSION OR CANCELLATION OF SHARES IN THE MERGER......... 3
3.1. Conversion or Cancellation of Shares.......................... 3
3.2. Payment for Shares............................................ 4
3.3. Dissenters' Rights............................................ 5
3.4. Transfer of Shares After the Effective Time................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES..................... 6
4.1. Representations and Warranties of the Company................. 6
4.2. Representations and Warranties of Purchaser and Merger Sub.... 14
ARTICLE V COVENANTS.......................................... 16
5.1. Interim Operations of the Company............................. 16
5.2. Acquisition Proposals......................................... 17
5.3. Meeting of the Company's Shareholders......................... 18
5.4. Filings; Other Action......................................... 19
5.5. Access........................................................ 19
5.6. Notification of Certain Matters............................... 19
5.7. Publicity..................................................... 20
5.8. Takeover Statute.............................................. 21
5.9. Ski Facility Privileges....................................... 21
5.10. D&O Indemnification and Insurance............................. 21
ARTICLE VI CONDITIONS......................................... 22
6.1. Conditions to Obligations of Purchaser and Merger Sub......... 22
6.2. Conditions to Obligations of the Company...................... 23
ARTICLE VII EARNEST MONEY DEPOSIT AND TERMINATION.............. 24
7.1. Deposit....................................................... 24
7.2. Disposition of Deposit........................................ 24
7.3. Termination by Mutual Consent................................. 25
7.4. Termination by either Purchaser or the Company................ 25
7.5. Termination by Purchaser...................................... 25
7.6. Termination by the Company.................................... 25
7.7. Effect of Termination and Abandonment......................... 26
ARTICLE VIII DEFINITIONS........................................ 27
ARTICLE IX MISCELLANEOUS AND GENERAL.......................... 32
9.1. Fees and Expenses............................................. 32
9.2. Modification or Amendment..................................... 32
9.3. Waiver of Conditions.......................................... 33
9.4. Counterparts.................................................. 33
9.5. Governing Law; Forum.......................................... 33
9.6. Notices....................................................... 33
9.7. Entire Agreement.............................................. 34
9.8. Obligation of Purchaser....................................... 34
9.9. Captions...................................................... 35
9.10. Nonsurvival of Representations and Warranties................. 35
9.11. Severability.................................................. 35
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of February 13, 1996, is among S-K-I Limited, a Delaware corporation with a
principal place of business in West Lebanon, New Hampshire (the "Company"),
LBO Resort Enterprises, a Maine corporation with a principal place of business
in Newry, Maine ("Purchaser"), and LBO Acquisition Co., a Delaware corporation
and a wholly-owned subsidiary of Purchaser ("Merger Sub" and, together with
the Company, the "Constituent Corporations").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the
Company each have determined that it is in the best interests of their
respective shareholders to consummate, and have approved, the business
combination transaction provided for herein whereby Purchaser acquires the
Company by merging Merger Sub into the Company and the Company becoming a
wholly-owned subsidiary of Purchaser, all upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Company, Purchaser and Merger Sub desire to
make certain representations, warranties, covenants and agreements in
connection with this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
I.1. THE MERGER
Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3) Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease (the "Merger"). The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law ("DGCL").
<PAGE>
I.2. CLOSING
The closing of the Merger (the "Closing") shall take place
(i) at the offices of Pierce, Atwood, Scribner, Allen, Smith & Lancaster at
10:00 a.m. on the later of (a) one hundred and twenty (120) days after the
date of this Agreement or (b) the third business day following the day on
which the last to be fulfilled or waived of the conditions set forth in
Article VI hereof shall be fulfilled or waived in accordance with this
Agreement or (ii) at such other place and time and/or on such other date as
the Company and Purchaser may agree.
I.3. EFFECTIVE TIME
As soon as practicable following the Closing, and provided
that this Agreement has not been terminated or abandoned pursuant to Article
VII hereof, the Company, the Purchaser, and Merger Sub shall cause a
Certificate of Merger (the "Delaware Certificate of Merger") to be executed
and filed with the Secretary of State of Delaware as provided in Section 251
of the DGCL. The Merger shall become effective (the "Effective Time") on the
date on which the Delaware Certificate of Merger has been duly filed with the
Secretary of State of Delaware.
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS;
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
II.1. THE ARTICLES OF INCORPORATION
The Certificate of Incorporation (the "Certificate") of the
Company in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and shall remain in effect as such
until duly amended in accordance with the terms thereof and the DGCL.
II.2. THE BY-LAWS
The By-Laws of the Company in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation and shall remain in effect
as such until duly amended in accordance with the terms thereof and the DGCL.
II.3. OFFICERS AND DIRECTORS
The directors and officers of Merger Sub at the Effective
Time shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-Laws and the DGCL.
2
<PAGE>
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
III.1. CONVERSION OR CANCELLATION OF SHARES
The manner of converting or canceling shares of the Company
and Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each share of the Common Stock of
the Company, par value $.10 per share (the "Common Stock" or "Shares"), issued
and outstanding immediately prior to the Effective Time (other than Shares
owned by Purchaser, Merger Sub or any other subsidiary or affiliate of
Purchaser (collectively, the "Purchaser Companies") or Shares which are held
by shareholders ("Dissenting Shareholders") exercising appraisal rights
pursuant to Section 262 of the DGCL or Shares which are held in the Company's
treasury at the Effective Time) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive, without interest, an amount in cash equal to $18.00 (the "Merger
Consideration"). All such Shares, by virtue of the Merger and without any
action on the part of the holders thereof, shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease to have any
rights with respect to such Shares, except the right to receive the Merger
Consideration for such Shares upon the surrender of such certificate in
accordance with Section 3.2 or the right, if any, to receive payment from the
Surviving Corporation of the "fair value" of such Shares as determined in
accordance with Section 262 of the DGCL.
(b) At the Effective Time, each share of Common Stock, $.01
par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of Merger Sub or the holders of such shares, be converted into one share
of common stock of the Surviving Corporation.
(c) Immediately prior to the Effective Time, each option or
right to acquire Shares under the Company's 1982 Incentive Stock Option Plan,
the Company's 1988 Stock Option Plan and any other stock option or stock
entitlement plan operated by the Company which is, at the Effective Time,
fully vested and exercisable in accordance with the governing instruments of
such plan, shall, without any action on the part of the holder thereof be
converted into the right to receive an amount in cash (the "Option Amount"),
if any, equal to the product of (x) the Merger Consideration minus the current
option, acquisition or base price per share of such option or right and (y)
the number of Shares subject to such option or right, payable to the holder
thereof without interest thereon, at the Effective Time of the Merger and such
option or right will be cancelled and retired and shall cease to exist;
provided that the Company shall be entitled to withhold, in accordance with
applicable tax law, from any such cash payment any amounts required to be
withheld under applicable tax law. Notwithstanding anything to the contrary
3
<PAGE>
herein, if it is determined that compliance with any of the foregoing may
cause any individual subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") to become subject to the profit recovery
provisions thereof, any such option or right held by such individual shall, if
such individual so agrees, subject to the proviso to this sentence, be
cancelled or converted, as the case may be, at the Effective Time or at such
later time as may be necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive from the Company or
the Surviving Corporation an amount in cash in respect thereof equal to the
Option Amount; provided that the parties hereto will cooperate so as to
attempt to achieve the intent of the foregoing without giving rise to such
profit recovery. If and to the extent required by the terms of the plans
governing such options or rights or pursuant to the terms of any option or
right granted thereunder, the Company shall use all reasonable efforts to
obtain the consent of each holder of outstanding stock options or rights to
the foregoing treatment of such stock options or rights and to take any other
action reasonably necessary to effectuate the foregoing provisions. The
Company shall take all reasonably necessary action to provide that the Stock
Plans (as hereinafter defined) shall be terminated as of the Effective Time.
(d) At the Effective Time, each Share issued and outstanding
at the Effective Time and owned by any of the Purchaser Companies, and each
Share issued and held in the Company's treasury at the Effective Time, shall,
by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be cancelled and retired without
payment of any consideration therefor and shall cease to exist.
III.2. PAYMENT FOR SHARES
At Closing, immediately prior to the filing of the
Certificate of Merger with the Delaware Secretary of State, Purchaser shall
make available or cause to be made available to the Paying Agent appointed by
Purchaser with the Company's prior written approval (the "Paying Agent")
amounts which, together with the Deposit and any earnings thereon, will be
sufficient in the aggregate to provide all funds necessary for the Paying
Agent to make payments pursuant to Sections 3.1(a) and 3.1(c) hereof to
holders of Shares issued and outstanding immediately prior to the Effective
Time and to persons entitled to receive Option Amounts, as the case may be.
Promptly after the Effective Time, the Surviving Corporation shall cause to be
mailed to each person who was, at the Effective Time, a holder of record
(other than any of the Purchaser Companies) of issued and outstanding Shares a
form (mutually agreed to in writing by Purchaser and the Company) of letter of
transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented any
of such Shares in exchange for payment therefor. Upon surrender to the Paying
Agent of such certificates, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, the
Surviving Corporation shall promptly cause to be paid to the persons entitled
thereto a check in the amount to which such persons are entitled, after giving
effect to any withholdings required under Section 3406 of the Code. No
interest will be paid or will accrue on the amount payable upon the surrender
of any such certificate. If payment is to be made to a person other than the
registered holder of the certificate surrendered, it shall be a condition of
such payment that the certificate so surrendered shall be properly endorsed or
4
<PAGE>
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the certificate
surrendered or establish to the satisfaction of the Surviving Corporation or
the Paying Agent that such tax has been paid or is not applicable. One hundred
and eighty days following the Effective Time, the Surviving Corporation shall
be entitled to cause the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) made available to the Paying Agent
which have not been disbursed to holders of certificates formerly representing
Shares outstanding on the Effective Time or to persons entitled to receive
Option Amounts, as applicable, and thereafter such holders and persons shall
be entitled to look to the Surviving Corporation only as general creditors
thereof with respect to the cash payable upon due surrender of their
certificates or Options. Notwithstanding the foregoing, neither the Paying
Agent nor any party hereto shall be liable to any holder of certificates
formerly representing Shares or to persons entitled to receive Option Amounts,
as applicable, for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. The Surviving
Corporation shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of cash for Shares and Options and
Purchaser shall reimburse the Surviving Corporation for such charges and
expenses. Except as provided above, Purchaser shall pay or cause to be paid or
reimbursed any transfer or other similar tax or governmental charge (including
any stock transfer, sales, real property transfer or real property gains tax)
imposed in connection with, or as a result of the Merger, or the transfer of
Shares or payment of Option Amounts pursuant thereto, including any such tax
or governmental charge that is imposed on a shareholder of the Company;
provided, however, that Purchaser shall not be required to pay or cause to be
paid or reimbursed any capital gains or other income or similar tax imposed on
any recipient of the Merger Consideration.
III.3. DISSENTERS' RIGHTS
If any Dissenting Shareholder shall be entitled to be paid
the "fair value" of his or her Shares, as provided in Section 262 of the DGCL,
the Company shall give Purchaser prompt notice thereof (and shall also give
Purchaser prompt notice of any withdrawals of such demands) and Purchaser
shall have the right to direct all negotiations and proceedings with respect
to any such demands. Neither the Company nor the Surviving Corporation shall,
except with the prior written consent of Purchaser, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. If any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the Shares held by such
Dissenting Shareholder shall thereupon be treated as though such Shares had
been converted into the right to receive the Merger Consideration pursuant to
Section 3.1.
III.4. TRANSFER OF SHARES AFTER THE EFFECTIVE TIME
No transfers of Shares shall be made on the stock transfer
books of the Surviving Corporation at or after the Effective Time.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
IV.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and
Merger Sub that:
(a) Corporate Organization and Good Standing. Part 4.1(a) of
the Disclosure Schedule contains a full, complete and accurate list of all
Affiliates (provided that officers and directors need not be listed) of the
Company, including for each corporate Affiliate (collectively called the
"Company Subsidiaries" and individually called a "Company Subsidiary") its
name, jurisdiction of incorporation, jurisdictions in which it is qualified to
do business and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each of the Company and the Company
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except where the absence of such qualification would not
have a Company Material Adverse Effect. Each of the Company and the Company
Subsidiaries has the requisite corporate power and authority to carry on its
respective businesses as they are now being conducted and to own or use the
properties and assets it purports to own or use.
(b) Authorized Capital. The authorized capital stock of the
Company consists of 12,500,000 shares of Common Stock, par value $0.10 per
share, of which 5,790,882 shares were outstanding and held in treasury as of
January 28, 1996. Since January 28, 1996 no shares have been issued other than
pursuant to exercises of options described below. All of the outstanding
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. The Company has no Shares reserved for issuance, except that
185,925 shares of Common Stock are reserved for issuance pursuant to options
granted under the 1982 Incentive Stock Option Plan and the 1988 Stock Option
Plan (collectively, the "Stock Plans"). Options granted under the Stock Plans
with respect to not more than 185,925 shares of Common Stock will, as of the
Effective Time, be fully vested and exercisable in accordance with the terms
of the governing instruments of the Stock Plans. Each of the outstanding
shares of capital stock of each of the Company Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned, either
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances, except as shown on Part
4.1(b) of the Disclosure Schedule. Except as set forth above, there are no
shares of capital stock of the Company authorized, issued or outstanding and
except as set forth above and as set forth in the Certificate of Incorporation
of the Company, there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible or exchangeable
securities or other agreements or commitments of any character of the Company
or any of the Company Subsidiaries relating to the issuance of, or any
securities convertible into or exchangeable for, the
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issued or unissued capital stock, voting or other securities of the Company or
any of the Company Subsidiaries. Except as set forth in Part 4.1(b) of the
Disclosure Schedule, there are no outstanding obligations of the Company or
any Company Subsidiaries to repurchase, redeem or otherwise acquire any
capital stock or other securities of the Company or any of the Company
Subsidiaries, or to provide funds to, or make any investment in (in the form
of a loan, capital contribution or otherwise), any other person. Except as set
forth in Part 4.1(b) of the Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries has authorized or outstanding any bonds,
debentures, notes or other indebtedness the holders of which have the right to
vote (or convertible or exchangeable into or exercisable for securities having
the right to vote) with the shareholders of the Company or any of its
subsidiaries on any matter. Except as set forth in Part 4.1(b) of the
Disclosure Schedule, after the Effective Time the Surviving Corporation will
have no obligation to issue, transfer or sell any Shares or common stock of
the Surviving Corporation pursuant to any Plan (as defined in Section 4.1(h)).
(c) Corporate Authority. Subject only to approval of this
Agreement by the affirmative vote of a majority of the voting power of the
outstanding shares of the Common Stock (voting as a class), the Company has
the requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
(d) Governmental Filings; No Violations. (i) Other than the
filings provided for in Section 1.3 hereof, as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), Environmental Laws and the Exchange Act (collectively, the "Regulatory
Filings"), except as set forth in Part 4.1(d) of the Disclosure Schedule, no
notices, reports or other filings are required to be made by any Acquired
Company with, nor are any Consents required to be obtained by any Acquired
Company from, any Person (including any Governmental Body) in connection with
the execution and delivery of this Agreement by the Company and the
consummation or performance by the Company of the Contemplated Transactions,
other than such notices, reports, filings or consents the failure of which to
be made or obtained would not have a Company Material Adverse Effect.
(ii) Except as set forth in Part 4.1(d) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of any Acquired
Company, or (B) any resolution adopted by the board of directors or
the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge
any of the Contemplated
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Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company, or
any of the assets owned or used by any Acquired Company, may be
subject except such as would not have a Company Material Adverse
Effect;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify,
any Governmental Authorization that is held by any Acquired Company
or that otherwise relates to the business of, or any of the assets
owned or used by, any Acquired Company except such as would not have
a Company Material Adverse Effect;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable
Contract except such as would not have a Company Material Adverse
Effect; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by any
Acquired Company except such as would not have a Company Material
Adverse Effect.
(e) Company Reports; Financial Statements; Company Records.
(i) Each registration statement, schedule, report, proxy statement or
information statement prepared by it and filed with the SEC since January 1,
1993 (collectively, the "Company Reports"), including any earlier SEC filings
by the Company incorporated therein by reference, as of their respective
dates, did not, and any Company Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
the Company and its subsidiaries as of its date and each of the consolidated
statements of income, shareholders' equity and cash flows and of changes in
financial position included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and changes in financial
position, as the case may be, of the Company and its subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which will not be material in amount or
effect and any lack of related notes and schedules), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. The Company
Reports comply in all material respects with applicable accounting
requirements and with all published rules and regulations of the SEC. The
consolidated balance sheet and statements of income, shareholders equity and
cash flows and changes in financial position most recently reflected in the
Company Reports are hereby referred to as the "Financial
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Statements." Other than the Company Reports, the Company has not filed any
other definitive reports or statements with the SEC since the Company's
quarterly report on Form 10-Q for the quarter ended October 29, 1995 and its
current report on Form 8-K dated November 7, 1995.
(ii) The consolidated balance sheet of the Company and its
subsidiaries as of January 28, 1996, a copy of which has been furnished to
Purchaser and is set forth in Section 4.1(e) of the Disclosure Schedule,
fairly presents the consolidated financial position of the Company and its
subsidiaries as of its date, subject only to such deviations or inaccuracies
as do not constitute or result in a Company Material Adverse Effect, and has
been prepared in accordance with the Company's internal audit controls and
accounting standards.
(iii) The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which shall be
delivered to Buyer, are complete and correct in all material respects and have
been maintained in accordance with sound business practices and the applicable
requirements of Section 13(b)(2) of the Exchange Act, including the
maintenance of an adequate system of internal controls. The minute books of
the Acquired Companies contain records, accurate and complete, in all material
respects, of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of
Directors of the Acquired Companies, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books other than the minutes of
the meeting at which this Agreement was approved and a meeting held on January
9, 1996 and the meetings of the boards of directors of several Subsidiaries of
the Company held during January, 1996, and those minutes will be prepared and
included in the minute book on a timely basis. At the Closing, all of those
books and records will be in the possession of the Acquired Companies.
(f) Title to Properties; Encumbrances. All properties and
assets owned or purported to be owned by the Acquired Companies are free and
clear of all Encumbrances and are not, in the case of real property, subject
to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature ("Limitations") except, with
respect to all such properties and assets, Encumbrances and Limitations which
do not impair the operations at the ski area with which the property is
associated, and zoning laws and other land use restrictions that do not impair
the operations at the ski area with which the property is associated, other
than in either such case, such impairments as do not, individually or in the
aggregate, constitute or result in a Company Material Adverse Effect.
(g) Taxes. Each of the Company and the Company Subsidiaries
has filed all material tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, and all tax returns and reports are complete
and accurate in all respects, except to the extent that such failures to file,
have extensions granted that remain in effect or be complete and accurate in
all respects, as applicable, individually or in the aggregate, would not have
a Company Material Adverse Effect. The Company and each of the Company
Subsidiaries has paid (or the Company has paid on its behalf) all taxes shown
as due on such tax returns and reports. Except as set forth in Schedule
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4.1(g), the most recent financial statements contained in the Company Reports
reflect an adequate reserve for all taxes payable by the Company and the
Company Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements, and no deficiencies for any
taxes have been proposed, asserted or assessed against the Company or any
Company Subsidiary that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
No requests for waivers of the time to assess any taxes against the Company or
any Company Subsidiary have been granted or are pending, except for requests
with respect to such taxes that have been adequately reserved for in the most
recent financial statements contained in the Company Reports, or, to the
extent not adequately reserved, the assessment of which would not,
individually or in the aggregate, have a Company Material Adverse Effect. As
used in this Section 4.1(g), "taxes" shall include all Federal, state, local
and foreign income, franchise, property, sales, use, excise and other taxes,
including obligations for withholding taxes from payments due or made to any
other person and any interest, penalties or additions to tax.
(h) Employee Benefits. Except as described in the Company
Reports or as would not have a Company Material Adverse Effect or as reported
in Part 4.1(h) of the Disclosure Schedule, (i) all employee benefit plans or
programs maintained for the benefit of the current or former employees or
directors of the Company or any Company Subsidiary that are sponsored,
maintained or contributed to by the Company or any Company Subsidiary, or with
respect to which the Company or any Company Subsidiary has any liability
(each, a "Plan"), including, without limitation, any such Plan that is an
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), are in compliance with all applicable
requirements of law, including ERISA and the Code, (ii) neither the Company
nor any Company Subsidiary has, as of the date hereof, any liabilities or
obligations with respect to any such employee benefit plans or programs,
whether accrued or contingent, nor to the Knowledge of the executive officers
of the Company are any such liabilities or obligations expected to be
incurred, and (iii) the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any benefit
plan, policy, arrangement or agreement or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee except for the
options referred to in Section 4.1(b). The only severance agreements or
severance policies applicable to the Company or its Subsidiaries are the
agreements and policies listed in Part 4.1(h) of the Disclosure Schedule.
(i) Compliance. (i) Neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is
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bound or affected, in each case except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company and its Subsidiaries have obtained all
licenses, permits and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their
business as now conducted, where the failure to obtain any such item or to
take any such action would have, individually or in the aggregate, a Company
Material Adverse Effect.
(j) Litigation and Liabilities. Except as disclosed in the
Company Reports filed with the SEC prior to the date hereof or as set forth in
Part 4.1(j) of the Company Disclosure Schedule there are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the Knowledge of the officers of the Company,
threatened against the Company or any of its subsidiaries or (ii) obligations
or liabilities, whether or not accrued, contingent or otherwise, including,
without limitation, those relating to matters involving any Environmental Law
(as defined in Section 4.1(o)), or any other facts or circumstances of which
the management of the Company is aware that is reasonably likely to result in
any claims against or obligations or liabilities of the Company or any of its
subsidiaries, that, alone or in the aggregate, would have a Company Material
Adverse Effect.
(k) Absence of Certain Changes. Except as disclosed in the
Company Reports filed with the SEC prior to the date hereof or as set forth in
Part 4.1 of the Disclosure Schedule, since December 31, 1994, the Company and
its subsidiaries have conducted their respective businesses only in, and have
not engaged in any transaction other than according to, the ordinary and usual
course of such businesses (except for such departures from the ordinary and
usual course of such businesses which, individually or in the aggregate, would
not have a Company Material Adverse Effect) and there has not been (i) any
Company Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to the capital
stock of the Company, other than regular annual cash dividends of $0.12 per
Share in January 1995 and $0.13 per share in January 1996; or (iii) any change
by the Company in accounting principles or practices, except as required by
generally accepted accounting principles. Since October 29, 1995, except as
provided for herein, as disclosed in the Company Reports filed with the SEC
prior to the date hereof or as set forth in Part 4.1(k) of the Disclosure
Schedule, and other than in the ordinary course or as required by law or to
maintain the tax-qualified status of any Plan, there has not been any material
increase in the compensation payable or which could become payable by the
Company and its subsidiaries to their officers or key employees, or any
amendment of any Plans which would result in any such increase.
(l) Intellectual Property. Except as disclosed in the
Company Reports filed with the SEC prior to the date hereof and except as
would not have a Company Material Adverse Effect, the Company owns, or is
licensed to use, all patents, trademarks, tradenames, service marks,
copyrights and any applications therefor, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are used or proposed to be used in the business
of the Company and its subsidiaries as currently conducted or proposed to be
conducted and all such granted and issued patents, registered
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trademarks and copyrights held by the Company or any subsidiary of the Company
are valid, enforceable and subsisting.
(m) Labor Matters. Except as would not have a Company
Material Adverse Effect, (i) to the best of the Company's Knowledge the
business of the Acquired Companies is operating and has been operated in
compliance with applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation the Immigration Reform and Control Act ("IRCA"), the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN Act"), and the
Americans with Disabilities Act ("ADA") and such applicable laws respecting
employment discrimination, equal employment opportunity, affirmative action,
employee privacy, wrongful or unlawful termination, workers' compensation,
occupational safety and health requirements, labor-management relations and
unemployment insurance, (ii) there is neither pending nor threatened against
the Company or any of the Company Subsidiaries any labor strike or work
stoppage, or any other labor dispute or grievance; and (iii) except for the
contracts, agreements and other arrangements listed in Part 4.1(m) of the
Disclosure Schedule, neither the Company nor any of the Company Subsidiaries
is a party to or otherwise bound by any contract or other agreement with any
labor union or association representing any Employee.
(n) Insurance. (i) All material insurance policies
maintained by the Company provide coverage for the operations of the Company
and its subsidiaries in amounts and covering such risks as the Company
believes is necessary to conduct its business. Neither the Company nor any of
its subsidiaries has received formal notice that any such policy is invalid or
unenforceable.
(ii) Except for such matters as, individually or in the
aggregate, would not have a Company Material Adverse Effect, all insurance
plans or programs operated by or for the benefit of any of the Acquired
Companies, including insurance programs, policies or plans offered or provided
by Ski Insurance Company (A) comply with all applicable laws, (B) have in
force excess or reinsurance contracts related thereto which are, to the
Knowledge of the Company based upon the advice of insurance consultants
retained by the Company for such purposes, customary for comparable risks,
including both specific and aggregate stop loss insurance, and (C) maintain
reserves for such programs or plans which are, to the Knowledge of the
Company, based upon the actuarial opinions provided to the Company in
connection with the operation of such programs, policies or plans, adequate to
fund ultimate losses, including both incurred losses and incurred but not
reported losses.
(o) Environmental Matters. Except as disclosed in the
Company Reports filed with the SEC prior to the date hereof and except as set
forth in Part 4.1(o) of the Disclosure Schedule and except for such matters
that, alone or in the aggregate, would not have a Company Material Adverse
Effect, (i) the Company and its subsidiaries are in compliance with and have
no liabilities under applicable Environmental Laws; (ii) the properties
presently owned or operated by the Company or its subsidiaries (including,
without limitation, soil, groundwater or surface water on or under the
properties, and buildings thereon) (the "Properties") do not contain any
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Hazardous Substance (as defined herein) in quantities or concentrations
exceeding any trigger level for reporting, any applicable remediation
standard, action level or written enforcement policy under any applicable
Environmental Law, do not, and, during the ownership or operation of the
Properties by the Company, have not, contained any underground storage tanks,
or any electrical equipment containing polychlorinated biphenyls, and do not
have any asbestos present (and, during the ownership or operation of the
Properties by the Company, have not had any asbestos removed therefrom); (iii)
the properties formerly owned or operated by the Company or its subsidiaries
(including, without limitation, soil, groundwater or surface water on or under
the properties, and buildings thereon) (the "Former Properties"), during the
period of ownership or operation of such Former Properties by the Company or
any of its Subsidiaries, did not, as a result of the action or omission of the
Company or any of its subsidiaries, contain any Hazardous Substance in
concentrations exceeding any applicable trigger level for reporting, any
remediation standard, action level or written enforcement policy under
applicable Environmental Law, did not contain any underground storage tanks or
any electrical equipment containing polychlorinated biphenyls and did not have
any asbestos present; (iv) neither the Company nor any of its subsidiaries has
received any formal notices, demand letters or request for information from
any Governmental Entity or any third party that the Company may be in
violation of, or liable under, any Environmental Law and none of the Company,
its subsidiaries or the Properties are subject to any court order,
administrative order or decree arising under any Environmental Law; and (v) no
Hazardous Substance has been disposed of, transferred, released or transported
by the Company or any of its subsidiaries from any of the Properties or Former
Properties during the time such Property or Former Property was owned or
operated by the Company or one of its subsidiaries, other than as would not be
expected to result in liability and was allowed under applicable Environmental
Law at the time the disposal, transfer, release or transportation occurred and
other than lawfully disposed at commercial or municipal disposal sites that
are not presently listed on the CERCLA National Priorities List or any
equivalent state list.
"Environmental Law" means (i) any Federal, state or local
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any Governmental Entity,
relating to (x) the protection, preservation or restoration of the
Environment, or to human health and safety or to the use and enjoyment of
private property or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as
amended and as now in effect. "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic or
radioactive, or otherwise regulated for its potential adverse effect on the
environment or human health or safety, under any Environmental Law, whether by
type or by quantity, including any substance containing any such substance as
a component.
(p) Relationships with Related Persons. Except as disclosed
in the Company Reports or on Part 4.1(p) of the Disclosure Schedule, no
Related Person of any Acquired Company has, or since January 1, 1993 has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies'
businesses. Except as disclosed in the Company Reports or on Part 4.1(p) of
the
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Disclosure Schedule, no Related Person of any Acquired Company is the
owner of, or since January 1, 1993 has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a
Person that has had material business dealings or a material financial
interest in any transaction with any Acquired Company. Except as disclosed in
the Company Reports or on Part 4.1(p) of the Disclosure Schedule, no Related
Person of any Acquired Company is a party to any Contract with, or has any
claim or right against, any Acquired Company.
(q) Brokers or Finders. The Company and its agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement, except for approximately $1,775,000 in fees plus expenses
payable upon consummation of the Merger to Schroder Wertheim & Co.,
Incorporated pursuant to an agreement.
(r) Takeover Statutes and Provisions. The Board has taken
and will take all appropriate and necessary action such that the provisions of
Section 203 of the DGCL will not apply to the Merger pursuant to this
Agreement. To the Company's Knowledge no other "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation, or comparable provision of the Company's Organizational Documents
or those of any of its Subsidiaries is applicable to the Company or the Merger
pursuant to this Agreement.
IV.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER
SUB
Purchaser and Merger Sub represent and warrant to the
Company that:
(a) Corporate Organization and Qualification. Each of
Purchaser and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification. All of the issued and outstanding
capital stock of Merger Sub is directly or indirectly owned by Purchaser, free
and clear of any liens, mortgages, pledges, charges, claims, security
interests or encumbrances.
(b) Corporate Authority. Purchaser and Merger Sub each has
the requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
Contemplated Transactions. This Agreement is a valid and binding agreement of
Purchaser and Merger Sub enforceable against Purchaser and Merger Sub in
accordance with its terms.
(c) Governmental Filings: No Violations. (i) Other than the
Regulatory Filings, no notices, reports or other filings are required to be
made by Purchaser and Merger Sub with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Purchaser and
Merger Sub from, any Governmental Entity in connection with the execution and
delivery of this Agreement by Purchaser and Merger Sub and the consummation of
the
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transactions contemplated hereby by Purchaser and Merger Sub, the failure
to make or obtain any or all of which would have a material adverse effect on
the ability of Purchaser or Merger Sub to consummate the transactions
contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by
Purchaser and Merger Sub does not, and the consummation of the transactions
contemplated hereby will not, constitute or result in (A) a breach or
violation of, or a default under, the Articles of Incorporation or By-Laws of
Purchaser or Merger Sub, (B) a breach or violation of, a default under, the
acceleration of or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time) pursuant to, any provision of any Contract of Purchaser or Merger Sub or
any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or nongovernmental permit or license to which Purchaser or Merger
Sub is subject or (C) any change in the rights or obligations of any party
under any Contract to which Purchaser or Merger Sub is a party or is subject.
(d) Funds. Provided all other conditions hereunder to
Purchaser's obligations to close are satisfied, Purchaser will tender at
Closing, and shall make available to Merger Sub, as and when required to be
tendered, the funds necessary to consummate the Merger in accordance with the
terms hereof and to satisfy or refinance any obligations relating to any
outstanding indebtedness of the Company the maturity of which may come due as
a result of the Company entering into this Agreement or the consummation of
the Merger. Purchaser has delivered to the Company true and correct copies of
signed commitment letters received by Purchaser with respect to the debt
financing required for the consummation of the transactions contemplated
hereby. Purchaser's liquid assets will be as of Closing adequate to provide
the balance of the funds required for the consummation of the transactions
contemplated hereby. After giving effect to the financing and other
transactions effected at the Closing, none of the Acquired Companies shall be
Insolvent, and the consolidated stockholders equity of the Purchaser, the
Company and the Company's Subsidiaries shall not be less than $25,000,000.
"Insolvent" shall mean (i) having assets with a present fair saleable value
less than the total value of its liabilities, (ii) not having the ability to
pay its debts and liabilities as they become due, or (iii) having an
unreasonably small amount of capital.
(e) Bankers fees. Neither Purchaser nor Merger Sub have
engaged or otherwise employed any investment banker, broker, finder or
intermediary, who might be entitled to any fee or commission payable by the
Company in connection with the transactions contemplated hereby.
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ARTICLE V
COVENANTS
V.1. INTERIM OPERATIONS OF THE COMPANY
The Company covenants and agrees that, prior to the
Effective Time (unless Purchaser shall otherwise agree in writing and except
as otherwise contemplated by this Agreement):
(a) the business of the Acquired Companies shall be
conducted only in the Ordinary Course of Business and, to the extent
consistent therewith, each of the Acquired Companies shall use its Best
Efforts to preserve its business organization and goodwill intact, keep
available the services of its officers and employees as a group, maintain its
assets and maintain its existing relations with customers, suppliers,
distributors, employees and others having business relationships with it;
(b) except as set forth in Part 5.1(b) of the Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries shall (i)
issue, sell, pledge, dispose of or encumber (or agree to issue, pledge,
dispose of or encumber) any additional shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or
any Company Subsidiaries or any other property or assets other than, in the
case of the Company, shares of Common Stock issuable pursuant to options
outstanding on the date hereof under the Stock Plans; (ii) adopt or propose
any amendment or change of their respective Certificates or By-Laws; (iii)
split, combine or reclassify the outstanding Shares; or (iv) declare, set
aside or pay any dividend payable in cash, stock or property with respect to
the Shares; (v) transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of or encumber any material assets or incur or modify any material
indebtedness or other liability or issue any debt securities or securities
convertible into or exchangeable for debt securities or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any Person, in each case other than in the Ordinary Course of
Business and in a manner consistent with past practice; (vi) acquire directly
or indirectly by redemption or otherwise any shares of the capital stock of
the Company; (vii) authorize or make capital expenditures in excess of
$250,000 individually or $1,000,000 in the aggregate; (viii) make any
acquisition of material assets (other than in the Ordinary Course of Business)
or investment in the stock of any other Person except for mutual funds in the
Ordinary Course of Business; or (ix) merge or consolidate with any other
Person;
(c) except as set forth in Part 5.1(c) of the Disclosure
Schedule, other than in the Ordinary Course of Business or pursuant to
obligations imposed by collective bargaining agreements, neither the Company
nor any of the Company Subsidiaries shall increase the compensation payable or
to become payable to its executive officers or employees, enter into any
contract or other binding commitment in respect of any such increase or grant
any severance or
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termination pay (other than pursuant to a Plan or policy existing as of the
date hereof) to, or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any Company
Subsidiaries, and neither the Company nor any of the Company Subsidiaries
shall establish, adopt, enter into, make any new grants or awards under or
amend, any collective bargaining agreement or Plan, except as required by
applicable law, including any obligation to engage in good faith collective
bargaining, to maintain tax-qualified status or as may be required by any Plan
existing as of the date hereof;
(d) except as set forth in Part 5.1(d) of the Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries shall settle
or compromise any material claims or litigation or, except in the Ordinary
Course of Business, modify, amend or terminate any of its material Contracts
or waive, release or assign any material rights or claims, or make any
payment, direct or indirect, of any material liability of the Company or any
Company Subsidiaries before the same becomes due and payable in accordance
with its terms;
(e) neither the Company nor any of the Company Subsidiaries
shall take any action, other than reasonable and usual actions in the Ordinary
Course of Business with respect to accounting policies or procedures
(including tax accounting policies and procedures) and except as may be
required by the SEC or the Financial Accounting Standards Board;
(f) neither the Company nor any of the Company Subsidiaries
shall make any material tax election or permit any material insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Purchaser, except in the Ordinary Course of
Business; and
(g) neither the Company nor any of the Company Subsidiaries
shall authorize or enter into an agreement to do any of the foregoing.
V.2. ACQUISITION PROPOSALS
The Company agrees that neither the Company nor any of the
Company Subsidiaries shall, and the Company shall direct and use all
reasonable efforts to cause the respective officers and directors of the
Acquired Companies and the employees, agents and representatives of the
Company (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of the Company Subsidiaries) not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal
or offer to shareholders of the Company) with respect to a reorganization,
merger, consolidation or similar transaction, or any purchase of (a) all or
any significant portion of the assets of the Company or any of the Company
Subsidiaries, (b) 5% or more of the outstanding shares of the Common Stock of
the Company or (c) any shares of the outstanding capital stock of the Company
Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or, except to the extent legally required for the
discharge by the Company's Board of Directors of its fiduciary duties as
advised by outside counsel to the Company, engage in any negotiations
concerning, or provide any confidential
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information or data to, or have any discussions with, any person relating to
an Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal or enter into any agreement or
understanding with any other person or entity with the intent to effect any
Acquisition Proposal. The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Company
shall use all reasonable efforts to take all necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 5.2. To the extent consistent with the
fiduciary responsibilities of Company officers and directors, the Company
shall promptly notify Purchaser if any such inquiries or proposals are
received by, any such information is requested from or any such negotiations
or discussions are sought to be initiated or continued with the Company. To
the extent consistent with the fiduciary responsibilities of Company officers
and directors, the Company shall promptly inform Purchaser of all terms and
conditions of any such Acquisition Proposal and shall promptly furnish
Purchaser with copies of any written Acquisition Proposal. Nothing contained
in this Section 5.2 shall prohibit the Company or its Board of Directors from
taking and disclosing to the Company's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act or from making such disclosure to the Company's
stockholders which, as advised by outside counsel to the Company, is required
under applicable law.
V.3. MEETING OF THE COMPANY'S SHAREHOLDERS
The Company shall take, consistent with applicable law and
its Certificate and By-Laws, all action necessary to duly call, give notice
of, convene and hold a meeting of holders of Shares as promptly as practicable
following the execution and delivery hereof, to consider and vote upon the
approval of this Agreement and the Merger. Subject to fiduciary requirements
of applicable law, the Board of Directors of the Company shall recommend such
approvals and the Company shall take all lawful action to solicit such
approvals. The Company's proxy or information statement with respect to such
meeting of shareholders (the "Proxy Statement"), at the date thereof and at
the date of such meeting, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing
shall not apply to the extent that any such untrue statement of a material
fact or omission to state a material fact was made by the Company in reliance
upon and in conformity with written information concerning the Purchaser
furnished to the Company by Purchaser specifically for use in the Proxy
Statement. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement shall be made by the Company, without
consultation with Purchaser and its counsel. Purchaser shall provide all
relevant information required for the Proxy Statement. None of the written
information concerning the Purchaser furnished to the Company by Purchaser
specifically for use in the Proxy Statement, at the date thereof and at the
date of the stockholders' meeting, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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V.4. FILINGS; OTHER ACTION
Subject to the terms and conditions herein provided, the
Company and Purchaser (a) shall promptly make their respective filings and
thereafter make any other required submissions under the HSR Act, other
Regulatory Filings and those necessary to satisfy any Legal Requirement with
respect to the Merger and consummation of the Contemplated Transactions; and
(b) shall use their Best Efforts promptly to take, or cause to be taken by
each Acquired Company, its agents and employees all other action and do, or
cause to be done, all other things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
Contemplated Transactions, including cooperating with the Purchaser in
obtaining all necessary consents and approvals, and taking any actions
required to cause early termination of any applicable HSR Act waiting period.
V.5. ACCESS
Upon reasonable notice, the Company shall (and shall cause
each of the Company Subsidiaries to) afford any and all authorized
representatives identified by the Purchaser as such and representatives of
Purchaser's lenders authorized by Purchaser ("Representatives") access, during
normal business hours throughout the period prior to the Effective Time, to
its employees, properties, books, Contracts and records and, during such
period, the Company shall (and shall cause each of its subsidiaries to)
furnish promptly to Purchaser, as the case may be, all information concerning
its business, properties and personnel as Purchaser, or its Representatives
may reasonably request; provided that no investigation pursuant to this
Section 5.5 shall affect or be deemed to modify any representation or warranty
made by the Company. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or such
person as may be designated by any such officer. Upon any termination of this
Agreement, Purchaser shall collect and deliver to the Company all documents
obtained by it or any of its respective Representatives then in their
possession and any copies thereof. All information obtained by Purchaser and
its Representatives pursuant to this Section 5.5 shall be treated as
non-public, proprietary information and shall not be disseminated, disclosed
or used for any purpose other than evaluation of the Contemplated
Transactions. Disclosure and access hereunder shall be limited to the extent
required by any applicable law.
V.6. NOTIFICATION OF CERTAIN MATTERS
(a) The Company shall, as promptly as practicable,
notify Purchaser of:
(i) any formal notice of any default or event that, with
notice or lapse of time or both, would become a default, received by
the Company or any of the Company Subsidiaries subsequent to the date
of this Agreement and prior to the Effective Time, under any Contract
material to the Acquired Companies, taken as a whole, to which any of
the Acquired Companies is a party or is subject;
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(ii) any formal notice of (A) any alleged or actual material
violation of an Environmental Law or (B) any other state of affairs
or event that, with the lapse of time, is reasonably likely to become
a material violation of Environmental Law; and
(iii) any Company Material Adverse Effect, or the occurrence
of any event which would result in any such Effect, or any breach of
any representation, warranty, covenant or agreement contained herein.
(b) Each of the Company and Purchaser shall promptly notify
the other party of:
(i) any notice or other communication from any third party
alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Body in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its Knowledge threatened
against, relating to or involving or otherwise affecting the Company
or any Company Subsidiaries which relate to the consummation of the
transactions contemplated by this Agreement.
V.7. PUBLICITY
(a) The parties shall attempt in good faith to agree upon
the text of a press release announcing the execution of this Agreement.
Thereafter the Company and Purchaser shall, to the extent reasonably
practicable, consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby and prior to making any filings with any Governmental
Entity or with any national securities exchange with respect thereto.
(b) The Company agrees that between the date hereof and the
Closing, it shall instruct appropriate personnel to cooperate fully with
Purchaser in discussing and developing joint marketing and joint operational
programs for all ski areas to be owned by the Surviving Corporation, such
programs to be implemented on a post-closing basis.
(c) While the Agreement is in effect neither Purchaser nor
any of its affiliates will hire any officer or employee of the Company or any
Company Subsidiary.
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V.8. TAKEOVER STATUTE
If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the Merger contemplated by this Agreement, the Company and the
members of the Board of Directors of the Company shall grant such approvals
and take such actions as are reasonably necessary so that the Merger may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or
regulation on the Merger.
V.9. SKI FACILITY PRIVILEGES. All perpetual or transferable
ski passes and lift tickets issued at or prior to the date hereof by any of
the ski facilities owned, operated or maintained by the Company or any of its
subsidiaries (each, a "Ski Facility"), shall remain in full force and effect
in accordance with the terms thereof and the holders thereof shall be entitled
to all the rights and privileges provided therein.
The directors of the Company (determined as of the Effective
Time) and their dependents shall continue to receive, for 5 years,
complimentary ski passes and food, beverage and retail discounts and
privileges relating to the Company's facilities in existence on the date
hereof in accordance with past policy and practice of the Company, its
subsidiaries or their Ski Facilities, as described in Part 5.9 of the
Disclosure Schedule.
V.10. D&O INDEMNIFICATION AND INSURANCE. (i) From the
Effective Time through the later of (i) the sixth anniversary of the date on
which the Effective Time occurs and (ii) the expiration of any statute of
limitations applicable to any claim, action, suit, proceeding or investigation
referred to below, the Surviving Corporation shall indemnify and hold harmless
each present or former director and officer of the Company or any of its
Subsidiaries, determined as of the Effective Time (the "Indemnified Parties"),
against any claims, losses, liabilities, damages, judgments, fines, fees,
costs or expenses, including without limitation attorneys' fees and
disbursements (collectively, "Costs"), incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time (including, without
limitation, the Merger, the preparation, filing and, as applicable, mailing of
the proxy statement, and the other transactions and actions contemplated by
this Agreement), whether asserted or claimed prior to, at or after the
Effective Time, to the extent that the Company or such subsidiary would have
been permitted, under applicable law and the Articles or Certificate of
Incorporation or By-Laws of the Company or such subsidiary in effect on the
date hereof, to indemnify such Person (and the Surviving Corporation shall
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification). The Surviving Corporation shall be
entitled to assume the defense of the proceedings giving rise to any claim for
indemnification hereunder, and the reasonable cooperation and assistance of
the indemnified parties in such defense, shall be a condition to the Surviving
Corporation's obligations hereunder. No settlement or other
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disposition of any such claim shall be entered into without the Surviving
Corporation's consent which shall not be unreasonably withheld.
(ii) The Company shall maintain, at no expense to the
beneficiaries, directors' and officers' liability insurance ("D&O Insurance")
for the Indemnified Parties with respect to matters occurring at or prior to
the Effective Time, issued by a carrier or carriers assigned a claims-paying
ability rating by A.M. Best & Co. of "A (Excellent)" or higher, providing at
least the same coverage as the directors' and officers' insurance policy
currently maintained by the Company and containing terms and conditions which
are no less advantageous to the beneficiaries, for a period of at least six
years from the Effective Time. In the event any claim is made against present
or former directors, officers or employees of the Company that is covered or
potentially covered by insurance, Surviving Corporation shall do nothing that
would forfeit, jeopardize, restrict or limit the insurance coverage available
for that claim until the final disposition of that claim.
(iii) Notwithstanding anything herein to the contrary, if
any claim, action, suit, proceeding or investigation (whether arising before,
at or after the Effective Time) is made against any present or former director
or officer of the Company, on or prior to the sixth anniversary of the
Effective Time, the provisions of this Section shall continue in effect until
the final disposition of such claim, action, suit, proceeding or
investigation.
ARTICLE VI
CONDITIONS
VI.1. CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER SUB
The respective obligations of Purchaser and Merger Sub to
consummate the Merger are subject to the fulfillment of each of the following
conditions, any or all of which may be waived in whole or in part by Purchaser
or Merger Sub, as the case may be, to the extent permitted by applicable law:
(a) Shareholder Approval. This Agreement and the Merger
shall have been duly approved by the affirmative vote of a majority of the
voting power of the outstanding shares of Common Stock (voting as a class) in
accordance with applicable law and the Certificate and By-Laws of the Company,
if required by applicable law;
(b) Dissenters' Rights. Dissenting Shareholders shall not
have taken the actions required to exercise appraisal rights pursuant to
Section 262 of the DGCL with respect to any more than 10% of the outstanding
Shares;
(c) Order. No court or other Governmental Body shall have,
after the date hereof, enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree,
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injunction or other order (whether temporary, preliminary or permanent) which
is in effect and (i) unconditionally prohibits consummation of the
Contemplated Transaction, provided Purchaser shall have used all Best Efforts
to obtain the requisite clearances (ii) imposes material restrictions on the
consummation of the Contemplated Transaction or (iii) imposes material
restrictions on the business operations of Purchaser, Merger Sub or the
Company as a result of the Contemplated Transaction, either prior to or
subsequent to the Merger, excluding only, in the case of clauses (ii) and
(iii) hereof, any such restrictions imposed under the HSR Act or any other
federal or state antitrust laws or regulations (or, in the case of Vermont,
its consumer protection laws and regulations) (collectively, "Antitrust
Laws"); and
(d) Accuracy of Representations. All of Company's
representations and warranties in this Agreement (considered collectively),
and each of these representations and warranties (considered individually),
(i) must have been true, correct and accurate in all respects as of the date
of this Agreement except for such inaccuracies as do not, individually or in
the aggregate, cause or constitute a Company Material Adverse Effect, and (ii)
must be true, correct and accurate in all respects as of the Closing Date as
if made on the Closing Date, without giving effect to any supplement to the
Disclosure Schedule, except for such inaccuracies as do not, individually or
in the aggregate, cause or constitute a Company Material Adverse Effect.
(e) Sellers' Performance. All of the covenants and
obligations that the Company is required to perform or to comply with pursuant
to this Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually), must have
been duly performed and complied with in all material respects.
(f) Consents. (i) Other than any Consents to be obtained
pursuant to Antitrust Laws (as to which Section 6.1(c) shall apply), each of
the Consents required in connection with the Regulatory Filings identified in
Section 4.1(d) and in Part 4.1(d) of the Disclosure Schedule must have been
obtained, must be in full force and effect and be subject to only such
conditions or modifications as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(ii) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(g) No Adverse Change. Since the date hereof there has
occurred no event, transaction or occurrence resulting in a Company Material
Adverse Effect.
VI.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the Merger are
subject to the fulfillment of each of the following conditions, any or all of
which may be waived in whole or in part by the Company to the extent permitted
by applicable law:
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(a) Shareholder Approval. This Agreement and the Merger
shall have been duly approved by the affirmative vote of a majority of the
voting power of the outstanding shares of the Common Stock (voting together as
a class) in accordance with applicable law and the Certificate and By-Laws of
the Company, if required by applicable law;
(b) Purchaser Performance and Obligations. The Purchaser and
Merger Sub shall have performed and complied in all material respects with all
agreements and obligations required by this Agreement to be performed or
complied with by them on or prior to the Effective Time, and shall have
provided to Company reasonable assurance of availability of financing
necessary to fund the Contemplated Transaction; and
(c) Order. No court or other Governmental Body of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof.
ARTICLE VII
EARNEST MONEY DEPOSIT AND TERMINATION
VII.1. DEPOSIT
Upon execution and delivery of this Agreement by all parties
hereto, Purchaser shall place on deposit with the Paying Agent the sum of Five
Million Dollars ($5,000,000), said sum to be held in escrow pending Closing
under the terms and conditions hereinafter set forth and in the Escrow
Agreement dated February 13, 1996 (the "Deposit").
VII.2. DISPOSITION OF DEPOSIT
The Deposit shall be held and applied by the Paying Agent as
follows:
(a) Termination Pursuant to Section 7.3, 7.4, 7.5 or 7.6(b).
In the event this Agreement is terminated pursuant to any of Section 7.3, 7.4,
7.5 or 7.6(b) hereof, then the Deposit, together with all earnings thereon,
shall be immediately refunded in full to Purchaser.
(b) Termination Pursuant to Section 7.6(a). In the event
this Agreement is terminated pursuant to Section 7.6(a) hereof, then the
Deposit, together with all earnings thereon, shall be paid to the Company as
liquidated damages and as the Company's, its shareholders' and directors' sole
and exclusive remedy for Purchaser's breach or failure to perform and the
Company shall have no other rights, remedies or claims of any nature
whatsoever against the Purchaser or Merger Sub for, or with respect to such
breach, default or failure to perform, whether in contract or based upon any
other legal theory.
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VII.3. TERMINATION BY MUTUAL CONSENT
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by holders of Shares, by the mutual consent of Purchaser and the
Company, by action of their respective Boards of Directors.
VII.4. TERMINATION BY EITHER PURCHASER OR THE COMPANY
This Agreement may be terminated and the Merger may be
abandoned by action of the Board of Directors of either Purchaser or the
Company if (a) the Merger shall not have been consummated by June 30, 1996
(provided that the Company shall have the option to extend such date for an
additional 30 days) whether or not such date is before or after the approval
by holders of Shares, provided that the right to terminate this Agreement
under this Section 7.4 shall not be available until September 30, 1996 (and
then only with respect to any further performance obligations hereunder (other
than any obligations hereunder to pay or refund any amounts, which shall not
be affected by such termination)) to any party whose failure to fulfill any
obligation under this Agreement has been the cause of such failure to
consummate, (b) any Governmental Body or court of competent jurisdiction has,
other than pursuant to any applicable Antitrust Laws, issued an Order or
injunction permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger, which injunction has become final and
nonappealable or (c) the approval of shareholders required by Section 6.1(a)
shall not have been obtained at a meeting duly convened therefor.
VII.5. TERMINATION BY PURCHASER
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the consummation of the Merger, by action of
the Board of Directors of Purchaser, if (a) the Company shall have breached or
failed to perform any of its obligations, covenants or agreements under this
Agreement or any representation or warranty of the Company set forth in this
Agreement shall have been untrue or incorrect when made or thereafter shall
become untrue or incorrect, provided that there shall not arise any right to
terminate this Agreement unless any such breach, failure to perform or untrue
or incorrect representation or warranty, either individually or in the
aggregate, causes or constitutes a Company Material Adverse Effect, (b) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Purchaser or Merger Sub its approval or recommendation of this
Agreement or the Merger, (c) the Board of Directors of the Company, upon
request by Purchaser, shall fail to reaffirm any such approval or
recommendation, or shall have resolved to do any of the foregoing referred to
in clause (b) or (c) hereof.
VII.6. TERMINATION BY THE COMPANY
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the consummation of the Merger by action of the
Board of Directors of the Company, if
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(a) Purchaser or Merger Sub Breach. Purchaser or Merger Sub
shall have breached or failed to perform in any material respect any of their
obligations, covenants or agreements under this Agreement or any
representation or warranty of Purchaser or Merger Sub set forth in this
Agreement shall have been untrue or incorrect in any material respect when
made or thereafter shall become untrue or incorrect in any material respect,
except where such breach, failure to perform or lack of truthfulness or
correctness has been caused by or results from a breach by the Company of any
of its obligations under this Agreement; or
(b) Alternative Acquisition Proposal. The Company receives
an offer with respect to an Acquisition Proposal and the Board of Directors of
the Company, in the exercise of its fiduciary duties as advised by outside
counsel to the Company, determines to recommend such Acquisition Proposal to
the Company's stockholders; provided that the Company (i) shall to the extent
consistent with its Board's fiduciary obligations notify Purchaser and Merger
Sub and shall provide a reasonably detailed summary of the terms thereof
within 24 hours of receipt of such Acquisition Proposal, and (ii) shall notify
Purchaser and Merger Sub promptly of its intention to recommend such
Acquisition Proposal to the Company's shareholders.
VII.7. EFFECT OF TERMINATION AND ABANDONMENT
(a) In the event of termination of this Agreement and
abandonment of the Merger pursuant to this Article VII, no party hereto (or
any of its directors or officers) shall have any liability or further
obligation to any other party to this Agreement, except as provided in Section
7.2, 7.7(b) below and Section 9.1.
(b) If this Agreement is terminated pursuant to Section
7.5(a), 7.5(b), or 7.6(b), then the Company shall pay to the Purchaser upon
demand a fee equal to three percent (3%) of the total Merger Consideration
offered to be paid by Purchaser hereunder (the "Termination Fee"), payable in
same day funds; provided, however, that in the case of a termination under
Section 7.5(a) which is not the result of a willful breach by the Company of
any provision of this Agreement, the Company shall instead pay to Purchaser
upon demand in same day funds the lesser of the Termination Fee or the
Purchaser's actual documented out-of-pocket expenses incurred in connection
with this Agreement and the Contemplated Transaction, whether or not such
expenses have been paid by the Purchaser.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Acquired Companies"--the Company and all Company
Subsidiaries, collectively.
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"Affiliate or Affiliates"--Any Person that is controlled by,
controls or is under common control with another Person. Control means
effective ability to manage the affairs of that Person whether through voting
stock or other ownership interests or by agreement.
"Agreement"--as defined in the Recitals of this Agreement.
"Applicable Contract"--any Contract (a) under which any
Acquired Company has or may acquire any rights, (b) under which any Acquired
Company has or may become subject to any obligation or liability, or (c) by
which any Acquired Company or any of the assets owned or used by it is bound.
"Best Efforts"--subject to the next sentence below, the
efforts that a prudent Person desirous of achieving a result would use in
similar circumstances to ensure that such result is achieved as expeditiously
as possible; an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would
result in a materially adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions. Notwithstanding the foregoing,
for purposes of Section 6.1(c)(i) as it relates to obtaining clearances under
Antitrust Laws, Best Efforts shall require Purchaser to take, or offer to
take, all steps legally available to Purchaser and its controlling
stockholder.
"Certificate"--as defined in Section 2.1.
"Closing"--as defined in Section 1.2.
"Closing Date"--the date and time as of which the Closing
actually takes place.
"Code"--The Internal Revenue Code of 1986, as amended.
"Common Stock"--as defined in Section 3.1.
"Company"--as defined in the Recitals of this Agreement.
"Company Material Adverse Effect"--
(a) in the case of any change in the condition or
circumstances of the Company or any of its subsidiaries, any change (or
occurrence or condition reasonably likely to produce a change) in the
financial condition, properties, business, operations, results of operations
or prospects which is materially adverse to the Company and its subsidiaries,
taken as a whole.
(b) in the case of the inaccuracy of any statement or item
of information pertaining to the Company or any of its subsidiaries as of a
given point in time, any deviation or disparity that is (or is reasonably
likely to become) materially adverse to the financial condition,
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properties, business, operations, results of operations or prospects of the
Company and its subsidiaries, taken as a whole.
(c) provided, however, that any such changes resulting from
the operation of the Acquired Companies' businesses (excluding changes
resulting from actions taken outside the Ordinary Course of Business and
actions which are in violation of the terms and provisions of this Agreement)
between January 28, 1996 and Closing shall not constitute a Company Material
Adverse Effect. Any change, inaccuracy, deviation or disparity resulting from
facts, circumstances, conditions, transactions or occurrences occurring or in
existence prior to January 28, 1996 and which would constitute a Company
Material Adverse Effect but for the preceding proviso, which does not evidence
or manifest itself in a material adverse fashion or to materially adverse
degree until after January 28, 1996 will constitute a Company Material Adverse
Effect.
"Company Reports"--as defined in Section 4.1(e).
"Company Subsidiary" or "Company Subsidiaries"--as defined
in Section 4.1(a).
"Consent"--any approval, permit, consent, ratification,
registration, waiver, or other authorization (including any Governmental
Authorization).
"Constituent Corporations"--as defined in Recitals of this
Agreement.
"Contemplated Transactions"--
(a) the merger as described in Section 1.1; and
(b) the performance by all parties of their respective
covenants and obligations under this Agreement.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Deposit"--as defined in Section 7.1.
"DGCL"--as defined in Section 1.1.
"Disclosure Schedule"--the disclosure schedule delivered by
the Company to Purchaser concurrently with the execution and delivery of this
Agreement.
"Dissenting Shareholders"--as defined in Section 3.1(a).
"Effective Time"--as defined in Section 1.3.
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"Encumbrance"--any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Exchange Act"-- as defined in Section 3.1(c).
"Governmental Authorization"--any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"Hazardous Substance"--as defined in Section 4.1(o).
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"Intellectual Property Assets" --as defined in Section 4.1(l).
"Knowledge"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is
actually aware of such fact or other matter.
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A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, officer, partner, executor, or trustee of such Person
(or in any similar capacity) has, or at any time had, Knowledge of such fact
or other matter.
"Legal Requirement"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Merger Sub"--as defined in the Recitals of this Agreement.
"Merger"--as defined in Section 1.1.
"Merger Consideration"--as defined in Section 3.1(a).
"Order"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Option Amount"--as defined in Section 3.1.(c)
"Ordinary Course of Business"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if
such action is consistent with the past practices of such Person and is taken
in the ordinary course of the normal day-to-day operations of such Person and
is not required to be approved by such Person's Board of Directors.
"Organizational Documents"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (c) the
limited partnership agreement and the certificate of limited partnership of a
limited partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"Paying Agent"--as defined in Section 3.2.
"Person"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"Plan"--as defined in Section 4.1(h).
"Purchaser"--as defined in the Recitals of this Agreement.
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"Regulatory Filings"--as defined in Section 4.1(d).
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse and
former spouses, (iii) any other natural person who is related to the
individual or the individual's spouse within the second degree, and (iv) any
other natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
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"Representative"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SEC"-- Securities and Exchange Commission.
"Shares"--as defined in Section 3.1(a) of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"Surviving Corporation"--as defined in Section 1.1.
ARTICLE IX
MISCELLANEOUS AND GENERAL
IX.1. FEES AND EXPENSES
Except as provided in Section 7.2(b) and 7.7(b) hereof, all
fees and expenses incurred in connection with the Merger, this Agreement and
the Contemplated Transaction shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
IX.2. MODIFICATION OR AMENDMENT
Subject to the applicable provisions of the DGCL, at any
time prior to the Effective Time, the parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties.
IX.3. WAIVER OF CONDITIONS
The conditions to each of the parties' obligations to
consummate the Merger are for the sole benefit of such party and may be waived
by such party in whole or in part to the extent permitted by applicable law.
IX.4. COUNTERPARTS
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For the convenience of the parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
IX.5. GOVERNING LAW; FORUM
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
IX.6. NOTICES
Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid,
(a) If to Purchaser or Merger Sub, addressed to Purchaser at:
LBO Resort Enterprises
PO Box 450
Bethel, ME 14217-0450
Att: Mr. Thomas Richardson
Telephone: (207) 824-3000
Telecopier: (207) 824-0192
With a copy to:
Pierce, Atwood, et. al.
One Monument Square
Portland, ME 04101
Att: Christopher E. Howard
Telephone: (207) 773-6411
Telecopier: (207) 773-3419
(b) If to the Company, addressed to the Company at:
S-K-I Ltd.
Airport Executive Plaza #5
West Lebanon, NH 03784
Att: Mr. Martel D. Wilson, Jr.
Telephone: (603) 298-5583
Telecopier: (603) 298-5686
With a copy to:
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Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Att: Mr. James A. FitzPatrick, Jr.
Telephone: (212) 259-6220
Telecopier: (212) 259-6333
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
IX.7. ENTIRE AGREEMENT
This Agreement (including any exhibits or Annexes hereto)
(i) constitutes the entire agreement, and supersedes all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter hereof and thereof
and (ii) shall not be assignable by operation of law or otherwise and is not
intended to create any obligations to, or rights in respect of, any persons
other than the parties hereto except as set forth in Sections 4.2(d), 5.9,
5.10 and 9.1; provided, however, that Purchaser may designate, by written
notice to the Company, another wholly-owned direct or indirect subsidiary to
be a Constituent Corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
subsidiary except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as
of the date of such designation.
IX.8. OBLIGATION OF PURCHASER
Whenever this Agreement requires Merger Sub to take any
action, such requirement shall be deemed to include an undertaking on the part
of Purchaser to cause Merger Sub to take such action.
IX.9. CAPTIONS
The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
IX.10. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or termination of this Agreement, except for Section 4.2(d).
IX.11. SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
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terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
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IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto on the
date first hereinabove written.
S-K-I LIMITED
By:---------------------------------
Its Chief Executive Officer
LBO RESORT ENTERPRISES
By:---------------------------------
Its President
LBO ACQUISITION CO.
By:---------------------------------
Its President
