SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 26, 1998
Commission file number 333-9763
ASC East, Inc.
(Formerly American Skiing Company)
(Exact name of registrant as specified in its charter)
Maine 7990
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
01-0503382
(I.R.S. Employer
Identification Number)
Sunday River Access Road
Bethel, Maine 04217
(207) 824-8100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Each Class which registered)
None None
Securities registered pursuant to Section 12(g) of the Act:
(Name of exchange on
Title of Each Class which registered)
None None
The registrant meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K and is therefor filing this Form with the reduced
disclosure format provided for therein.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of November 9, 1998, there was no established public trading market for the
shares of the Registrant's common stock and no shares of common stock were held
by non-affiliates of the Registrant.
As of November 9, 1998, 978,300 shares of the Registrant's common stock were
outstanding.
<PAGE>
Form 10-K Annual Report, for the year ended July 26, 1998
ASC East, Inc. and Consolidated Subsidiaries
Table of Contents
Part I Page
Item 1. Business. ...........................................................1
Item 2. Properties. ........................................................8
Item 3. Legal. .............................................................8
Item 4. Submission of Matters to a Vote of Security Holders. ..............9
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters. ..................................................9
Item 6. Selected Financial Data. ..........................................10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . ......................10
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ........14
Item 8. Financial Statements and Supplementary Data. ......................15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. ..................................16
Part III
Item 10. Directors and Executive Officers of the Registrant. ...............16
Item 11. Executive Compensation. ...........................................16
Item 12. Security Ownership of Certain Beneficial Owners and Management. ...16
Item 13. Certain Relationships and Related Transactions. ...................16
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. ..17
Signatures ..................................................................21
<PAGE>
PART I
Item 1
Business
The presentation in this Item has been reduced in scope pursuant to
General Instruction (I) of Form 10K.
The Company
The Company is a direct, wholly owned subsidiary of American Skiing
Company (the "Parent"), a publicly traded company (NYSE: "SKI") and the largest
operator of alpine resorts in the United States. The Company owns and operates
six ski resorts in the northeastern United States. The Company's resorts include
Sunday River and Sugarloaf in Maine; Attitash Bear Peak in New Hampshire; and
Killington, Mount Snow/Haystack and Sugarbush in Vermont. The Company's revenues
and earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA"), excluding the stock compensation charge, for its 1998
Fiscal year were $240.2 million and $53.4 million, respectively.
The Company's resorts include several of the top resorts in the United
States, including: (i) Killington, the fourth largest resort in the United
States with over 1.0 million skier visits in the 1997-98 ski season; (ii) three
of the four largest resorts in the Northeast (Killington, Sunday River and Mount
Snow/Haystack) in the 1997-98 ski season; and (iii) Sugarloaf, the number one
resort in the Northeast according to the September 1997 Snow Country magazine
survey.
In addition to operating alpine resorts, the Company develops
mountainside real estate which complements the expansion of its on-mountain
operations. The Company has created a unique interval ownership product, the
Grand Summit Hotel, in which individuals purchase quartershare interval
interests while the Company retains ownership of core hotel and commercial
properties. The initial sale of quartershare units typically generates a high
profit margin, and the Company derives a continuing revenue stream from
operating the hotel's retail, restaurant and conference facilities and from
renting quartershare interval interests when not in use by their owners. The
Company is developing alpine resort villages at prime locations within five of
its resorts owned by the Company or the Parent designed to fit that resort's
individual characteristics. The Company currently operates six Grand Summit
Hotels -- two hotels at Sunday River and one hotel each at Attitash, Mount Snow,
Sugarloaf and Killington. Two additional Grand Summit Hotels are under
construction at resorts owned by the Company's Parent, at The Canyons in Utah,
and Steamboat in Colorado. The Company also operates golf courses at its resorts
and conducts other off-season activities which accounted for approximately 13.9%
of the Company's resort revenues for fiscal 1998.
The Company's primary strength is its ability to improve resort
operations by integrating investments in on-mountain capital improvements with
the development of mountainside real estate. Since 1994, the Company has
increased skier visits by 10.7% in the aggregate for the three resorts that it
has owned for more than two seasons. In addition, the Company has increased its
market share of skier visits in the northeastern United States from
approximately 21.8% in the 1995-96 ski season to approximately 25.2% in the
1997-98 ski season (after giving pro forma effect to its acquisition of the
Killington/Pico, Mount Snow/Haystack and Sugarloaf ski resorts).
1
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Resorts
Killington.
Killington, located in central Vermont, is the largest ski resort in
the northeast and the fifth largest in the United States, with over 1.0 million
skier visits in 1997-98. Killington is a seven-mountain resort consisting of
approximately 1,200 acres with 205 trails serviced by 33 lifts. The resort has a
4,241-foot summit and a 3,150-foot vertical drop. The resort's base facilities
include eight full-service ski lodges, including one located at the top of
Killington Peak. In December 1996, the Company acquired the Pico Mountain ski
resort located adjacent to Killington and integrated the two resorts. Management
believes the size and diversity of skiable terrain at Killington make it
attractive to all levels of skiers and one of the most widely recognized of the
Company's resorts with regional, national and international clientele.
The on-mountain accommodations at Killington consist of approximately
5,100 beds, including 532 quartershare interests at the New Grand Summit Hotel.
The off-mountain bed base in the greater Sherburne, Vermont area is
approximately 12,000 beds. Killington also owns and operates 16 retail shops, 12
rental and repair shops, a travel and reservation agency and a cable television
station. At the base of Pico Mountain, the Company owns a well-developed retail
village and a health club. Killington is a year-round resort offering complete
golf amenities including an 18-hole championship golf course, a golf school, a
pro shop, and a driving range.
Since its acquisition in June 1996, the Company has invested $25.6
million in capital improvements to update Killington's snowmaking, trail and
lift systems, and to develop base facilities and real estate potential at the
base areas. Major improvements and enhancements to the resort completed since
June 1996 include (i) installation of two high-speed quad lifts, and upgrading
of two additional lifts to high-speed quads, (ii) installation of one
eight-passenger high-speed gondola to service the Peak Restaurant at the
Killington summit and to replace the old Killington Peak double chair, (iii)
construction of a new children's center and related base area improvements, and
(iv) a major water and sewer system expansion.
In December 1997, the Company completed a land exchange with the state
of Vermont whereby Killington acquired 1,050 acres of undeveloped land centrally
located in its principal base area. The Company's three-year capital program
includes the interconnection of lift and trail systems between the Killington
and Pico resorts. The interconnection of the two mountains is expected to result
in a 16% increase in lift capacity and an additional 110 acres (9%) of skiable
terrain.
Sunday River.
Sunday River, located in the western mountains of Maine and
approximately a three-hour drive from Boston, is one of New England's largest
ski resorts with over 550,000 skier visits in 1997-98. Extending over eight
interconnected mountain peaks, its facilities consist of approximately 654 acres
of skiable terrain and 126 trails serviced by 18 lifts. The resort has a
3,140-foot summit and a 2,340-foot vertical drop. The Company believes Sunday
River has one of the most modern lift systems in the Northeast. Sunday River has
four base lodges, one of which is located at the top of North Peak.
2
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The on-mountain accommodations at Sunday River consist of approximately
5,850 beds including 726 condominium units, 648 quartershare units at the Grand
Summit Resort Hotel and 580 quartershare units at the new Jordan Grand Resort
Hotel. The off-mountain bed base in greater Bethel, Maine totals approximately
2,000 beds. The resort owns and operates five ski shops, seven full-service
restaurants, four cafeteria-style restaurants and six bars.
Since 1981, the Company has continually invested in capital
improvements at Sunday River to expand and improve its on-mountain facilities
and in real estate development. Sunday River's 1998 capital program included:
(i) installation of a new high-speed quad-lift on Barker Mountain which replaces
an earlier lift, (ii) installation of 150 new tower snow guns to enhance
snowmaking, (iii) five new grooming vehicles, (iv) a new welcome center for
condo check-ins and ticket sales, and a new learn to ski/ride discovery center,
and (v) significant upgrades of facilities. A Robert Trent Jones, Jr.,
championship golf course is currently under construction for a planned 2001
opening. Management believes that Sunday River has significant growth potential
with over 325 acres of land at the base of the new Jordan Bowl area.
Additionally, there are over 4,000 acres of undeveloped land owned by the
Company and 3,000 acres for which the Company holds purchase options that are
suitable for development as skiable terrain.
Mount Snow/Haystack.
Mount Snow, located in Brattleboro, Vermont is the second largest ski
resort in the Northeast with over 600,000 skier visits in 1997-98.. A large
percentage of the skier base for Mount Snow derives from Massachusetts,
Connecticut and New York. The resort consists of two mountains (Mount Snow and
Haystack) separated by approximately three miles, which have been combined under
single management. Its facilities consist of 134 trails and approximately 763
acres of skiable terrain serviced by 26 lifts. The resort has a 3,580-foot
summit, a 1,700-foot vertical drop, five full-service base lodges.
Mount Snow's on-mountain bed base currently consists of 1,960 beds,
including 544 units at the resort's new Grand Summit Hotel. The off-mountain bed
base in the greater Dover, Vermont area has approximately 7,300 beds. The resort
owns and operates eight retail shops, four 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, eight golf schools
throughout the East Coast, a mountain bike school, a 92-room hotel and a
low-voltage local television station. Since its acquisition in June 1996, the
Company has invested approximately $15.0 million in capital improvements to the
resort, including the installation of two high-speed quad chairlifts.
3
<PAGE>
The Company is expanding Mount Snow's lodges to provide additional
space for guest services, food and beverage services, retail sales, and a
childrens' center. During the summer of 1998, a 20,000 square foot Discovery
Center was constructed to service new skiers and snowboarders. In addition, the
Company opened a new restaurant and over 10,000 square feet of retail space in
the Grand Summit Hotel.
Sugarloaf.
Sugarloaf is located in Carrabassett Valley, Maine and was ranked as
the number one overall ski resort in the East by the September 1997 Snow Country
magazine survey. Sugarloaf is a single mountain with approximately 1,400 acres
of terrain and 126 trails covering approximately 530 acres, of which 490 acres
have snowmaking coverage serviced by 14 lifts including a new high-speed quad
chair to service lower mountain terrain and an additional fixed grip-quad chair
accessing the snowfields. There are approximately 870 additional acres of
off-trail skiable terrain. The mountain has a 4,237-foot summit and a 2,820-foot
vertical drop. Sugarloaf offers one of the largest ski-in/ski-out base villages
in the Northeast, containing numerous restaurants, retail shops and an abundance
of lodging. Sugarloaf is widely recognized for its challenging terrain,
including its snowfields, which represent the only lift-serviced above-treeline
skiing in the Northeast. As a destination resort, Sugarloaf has a broad market,
including areas as distant as New York, New Jersey, Pennsylvania and Canada.
Sugarloaf operates a year-round conference center, a cross-country ski
facility and an 18-hole championship golf course designed by Robert Trent Jones,
Jr., which is rated by both Golf Digest and Golf magazines as one of the top 25
resort courses in the United States. Sugarloaf's slope-side ski village consists
of its base lodge, two hotels, banquet facilities for up to 800 people, retail
stores, a rental and repair shop, a sports and fitness club, 870 condominium
units and vacation homes, restaurants and an extensive recreational path
network.
Sugarbush.
Sugarbush, located in Vermont's Mad River Valley, features the three
highest mountain peaks of any single resort in the East. Extending over six
mountain peaks, its facilities consist of 432 acres of skiable terrain and 112
trails serviced by 18 lifts. The resort has a 4,135-foot summit and a 2,650-foot
vertical drop. The mountains are serviced by three base lodges and two summit
lodges.
4
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The on-mountain accommodations at Sugarbush consist of approximately
2,200 beds. The off-mountain bed base within the Mad River Valley totals
approximately 6,600 beds. The resort operates three ski shops, three
full-service restaurants and four cafeteria-style restaurants. The Company also
owns and operates the 46-unit Sugarbush Inn, manages approximately 200
condominium units, and owns and operates a championship golf course as well as a
sports center and a conference center.
Since the acquisition of Sugarbush by the Company in October 1995, the
Company has invested $23.7 million in capital improvements to expand and improve
its on-mountain facilities. The most recently completed improvements include
four high-speed quad chairlifts, a 44% increase in snowmaking capacity, the
creation of new glade skiing terrain, and numerous base area improvements.
Attitash Bear Peak.
Attitash Bear Peak, located in the Mt. Washington Valley, New
Hampshire, is one of New Hampshire's largest ski resorts. Covering two mountain
peaks, its facilities consist of 273 acres of skiable terrain and 60 trails
serviced by 13 lifts. The resort has a 2,350-foot summit and a 1,750-foot
vertical drop. The resort benefits from its location in the heart of New
Hampshire ski country and its proximity to the Town of North Conway and the Mt.
Washington Valley tourist area, and is widely recognized as a family-oriented
resort.
The on-mountain accommodations of Attitash Bear Peak consist of
approximately 2,000 beds. In 1997 the Grand Summit Hotel at Attitash was
completed. It consists of 143 rooms, 2 restaurants, a lounge, a health club,
outdoor heated year round pool and 9 conference rooms including a 5,600 square
foot ballroom. The off-mountain bed base in the Mt. Washington Valley area
totals approximately 16,000 beds. The resort operates three base lodges, four
ski shops, two full-service restaurants, three cafeteria-style restaurants and
two bars.
Since its acquisition in July 1994, the Company has invested
approximately $12.4 million in resort related capital improvements at Attitash
Bear Peak. The summer of 1998 capital program included the installation of a
high-speed quad lift on Attitash Mountain and the Attitash Adventure Center, a
20,000 square foot base building housing the Discovery Center for beginning
skiers and riders, enhanced space for all children's programs, adaptive programs
and snowboarders. The resort's three-year capital improvement program includes a
championship golf course, additional lift upgrades and further additions to the
summer operations.
5
<PAGE>
Resort Operations
The Company's resort revenues are derived from a wide variety of
sources including lift ticket sales, food and beverage, retail sales including
rental and repair, skier development, lodging and property management, golf,
other summer activities and miscellaneous revenue sources. Lift ticket sales
represent the single largest source of resort revenues and represented
approximately 44.1% of total resort revenues for fiscal 1998.
The following chart reflects the Company's sources of resort revenues
across certain revenue categories as well as the percentage of resort revenues
constituted by each category for the fiscal year ended July 26, 1998.
<TABLE>
<CAPTION>
Fiscal Year Ended July 26, 1998
Resort Revenues Percentage of
Revenue Category (in millions) Resort Revenues
- ---------------- ------------- ---------------
<S> <C> <C>
Lift Tickets . . . . . . . . . . . . . . . . . . . $ 79.2 44.1%
Food and Beverage . . . . . . . . . . . . . . . . 24.8 13.8%
Retail Sales . . . . . . . . . . . . . . . . . . 24.9 13.9%
Skier development . . . . . . . . . . . . . . . . 11.6 6.5%
Golf, other summer activities and miscellaneous . 15.4 8.6%
Lodging and property . . . . . . . . . . . . . . . 23.5 13.1%
--- -----
Total Resort Revenues . . . . . . . . . . . . $179.4 100.0%
</TABLE>
Real Estate Development
The Company has been developing alpine resort real estate for over
fifteen years as part of its integrated resort and real estate investment
strategy. Since 1983, the Company has sold over 1,600 units of residential real
estate at Sunday River (including condominiums, townhouses and quartershare
interval ownership interests). The three components of the Company's real estate
development strategy are (i) the Grand Summit quartershare hotel concept, (ii)
development of alpine resort villages, and (iii) resort-specific discrete
projects. The Company believes it has a significant real estate development
pipeline over the next 10 to 15 years.
6
<PAGE>
The Company's real estate development program generated $105 million in
purchase commitments in fiscal 1998, compared with $10.4 million in fiscal 1996
and $38.7 million in fiscal 1997. The Company opened three 200-room Grand Summit
Hotels at its New England resorts and commenced construction of three new hotels
at western resorts owned by the Parent on the strength of very high pre-sales.
The Company's strategy for real estate development calls for the
completion of at least 12 projects over the next 36 months. Four of these
projects are the new Grand Summit Hotels in New England, where the Company is
selling out the remaining inventory. More than 50% of the inventory in those
hotels is currently sold, with over $41 million in contracts established to
date.
The next component of the real estate development plan is completion of
three hotels currently under construction at The Canyons in Utah and Steamboat
in Colorado. The final western hotel under construction is the Company's
prototype condominium hotel at The Canyons called Sundial Lodge.
The remaining five projects include a Grand Summit Hotel at Heavenly,
located in the Park Avenue Redevelopment District in downtown South Lake Tahoe,
and condominium hotels based upon the Company's Sundial Lodge prototype to be
constructed at The Canyons, Heavenly, Steamboat and Sunday River.
These 12 projects will make up the first phase in Management's
comprehensive development strategy, which envisions the full development of five
alpine resort villages at Sunday River, Killington, Steamboat, The Canyons and
Heavenly. Each of these villages is currently in master planning and ranges in
size from approximately one million square feet of development at Heavenly to as
much as five million square feet of development at The Canyons over the next 10
years. Pricing strategy within each of these villages is carefully orchestrated
to build pricing momentum as development progresses. A key measure for this
development program is revenue per unit sold, which is expected to increase as
the villages gain critical mass. Each resort village reflects the Company's
carefully crafted plaza design concept, which creates an energy center at the
heart of each resort village.
7
<PAGE>
Item 2 Properties
The presentation in this Item has been reduced in scope pursuant to
General Instruction (I) of Form 10K.
The following table summarizes certain key statistics of the Company's
resorts:
<TABLE>
<CAPTION>
Skiable Vertical Snowmaking 1997-98*
Terrain Drop Total Coverage Ski Skier
Resort (Year Acquired) (acres) (feet) Trails Lifts (% of acres) Lodges Visits
(high-speed) (000s)
<S> <C> <C> <C> <C> <C> <C> <C>
Killington (1996) 1,200 3,150 205 33(6) 59.8% 8 1,077
Sunday River (1980) 654 2,340 126 18(4) 93.3 4 552
Mount Snow/Haystack (1996) 763 1,700 134 26(3) 66.0 5 602
Sugarloaf (1996) 1,400 2,820 126 14(2) 35.0 1 358
Sugarbush (1995) 432 2,650 112 18(4) 66.1 5 388
Attitash Bear Peak (1994) 273 1,750 60 11(1) 89.7 2 233
------------ -------- ------------ --------- ------------
Total 4,722 763 122(21) 25 3,210
</TABLE>
See the Item 1 Section entitled "Business-Resorts" for a more detailed
description of the Company's resorts.
Item 3
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 Company's subsidiaries which operate resorts have pending
claims and are regularly subject to suits with respect to personal injury claims
related principally to skiing activities at such resort. Each of these 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. The Company operates a captive insurance company authorized
under the laws of the State of Vermont, which provides liability and workers'
compensation coverage for its resorts located in Vermont.
8
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Item 4
Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5
Market for the Registrant's Common Stock and Related Security Holder Matters.
Market Information
There has been no established public trading market for shares of the
Company's common stock (the "Common Stock") and there can be no expectation that
such a market will develop and, therefore, holders of Common Stock may be unable
to resell shares of Common Stock due to the lack of a market. The Company does
not intend to register its Common Stock or list the Common Stock on any exchange
or on any automated dealer quotation system.
Recent Sales of Unregistered Securities
No equity securities were sold during fiscal 1998.
Holders
As of October 23, 1998, there was one holder of record of Common Stock.
Dividend Policy
The Company has not declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support its
capital improvement and growth strategies and does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including the Company's financial
condition, operating results, current and anticipated cash needs and plans for
capital improvements and expansion. The Indenture governing the Company's 12%
Senior Subordinated Note due 2002 contains certain restrictive covenants that,
among other things, limit the payment of dividends or the making of
distributions on equity interests of the Company.
9
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Item 6
Selected Financial Data
Omitted pursuant to the reduced disclosure format permitted under
General Instruction (I) of Form 10-K.
Item 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The presentation in this Item has been reduced in scope pursuant to
General Instruction (I) of Form 10-K.
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>
Fiscal Year Ended
--------------------------------------------
July 28, 1996 July 27, 1997 July 26, 1998
--------------------------------------------
<S> <C> <C> <C>
Revenues:
Resort ................................................ 86.5% 95.2% 74.7%
Real estate ........................................... 13.5 4.8 25.3
----- ----- -----
Total revenues ................................... 100.0 100.0 100.0
----- ----- -----
Operating expenses:
Resort .................................................. 56.9 62.6 49.5
Cost of real estate sold 8.0 3.9 17.7
Marketing, general and administrative ................... 15.4 14.9 10.6
Stock compensation charge . . . . . . . . . . . . . . . . -- -- 1.4
Depreciation and amortization ........................... 9.2 10.4 8.9
----- ----- -----
Total operating expenses ......................... 89.5 91.8 88.1
----- ----- -----
Income from operations ..................................... 10.5 8.2 11.9
Commitment fee ............................................. 2.0 -- --
Interest expense ........................................... 6.4 13.5 10.9
----- ----- -----
Income (loss) before provision for income taxes
and minority interest in loss of subsidiary ........... 2.1 (5.3) 1.0
Provision (benefit) for income taxes ....................... 5.3 (2.1) 0.4
----- ----- -----
Income (loss) before minority interest in loss of
subsidiary ............................................ (3.2) (3.2) 0.6
Minority interest in loss of subsidiary .................... 0.2 0.1 --
----- ----- -----
Net income (loss) from continuing operations................ (3.0)% (3.1)% 0.6%
----- ----- -----
Extraordinary expense 1.9%
----- ----- -----
Net income (loss) available to common shareholders (3.0)% (3.1)% (1.3)%
</TABLE>
10
<PAGE>
Year ended July 26, 1998 ("Fiscal 1998") versus Year Ended July 27,
1997 ("Fiscal 1997")
Resort revenues increased $12.6 million or 7.6% from $166.8 million to
$179.4 million. This increase is primarily attributable to skier days which
increased 6.1% from 3,026,000 to 3,210,000, as well as the opening of four new
retail locations, a new restaurant and three new hotels in fiscal 1998.
Real Estate revenues increased $52.3 million from $8.5 million to $60.8
million. This increase is attributable to the completion of the Company's new
Grand Summit Hotels at Killington, Mount Snow and Sunday River, and the closings
of quartershare unit sales in those projects.
Cost of resort operations increased $9.2 million or 8.4% from $109.7
million to $118.9 million. The increase is primarily attributable to increased
skier visits and new restaurants, retail outlets and hotels as outlined above.
Cost of real estate operations increased $35.6 million from $6.8
million to $42.4 million due to increased sales and also to non-capitalizable
costs associated with future projects currently under development.
Marketing, general and administrative costs decreased $0.7 million or
2.7% from $26.1 million in fiscal 1997 to $25.4 million in fiscal 1998. The
decrease is primarily attributable to the assumption of certain corporate,
marketing and administrative expenses by the Company's parent, American Skiing
Company, beginning in November, 1997.
In Fiscal 1998, the Company's Parent incurred a stock compensation
charge associated with the grant of non-qualified stock options to certain key
members of senior management. A portion of the Parent's stock compensation
charge ($3.3 million) was allocated to ASC East based on an approximation of the
actual time the management employees comprising the stock compensation charge
spent on ASC East-related activities during the year ended July 26, 1998.
Depreciation and amortization expense increased $3.1 million or 16.9%
from $18.3 million to $21.4 million, due primarily to capital expenditures made
in the summer of 1997.
Interest expense increased $2.6 million or 11.0% from $23.7 million to
$26.3 million, due primarily to increased levels of debt outstanding associated
with completed but unsold quartershare units and with increased levels of
capital expenditures.
The provision for income taxes increased by $4.6 million from a benefit
of $3.6 million to a provision of $1.0 million. This increase is attributable to
the increase in income before taxes which increased from a loss of $9.4 million
to income of $2.4 million.
The extraordinary loss recorded by the Company relates to early
retirement of the Company's revolving line of credit, subordinated notes and
indebtedness related to the acquisition of Sugarbush.
11
<PAGE>
Fiscal Year Ended July 27, 1997 Compared to Fiscal Year Ended July 28, 1996
("Fiscal 1996").
Resort revenues in fiscal 1997 were $166.8 million, an increase of
$103.3 million, or 162.8%, as compared to resort revenues of $63.5 million in
fiscal 1996. This increase was due primarily to the addition of the S-K-I
resorts in June 1996, which accounted for $106.6 million, which was offset by
$3.2 million attributable to a decrease in revenues due to the divestiture of
the Cranmore ski resort and an increase in resort revenues at the Company's
other resorts.
Revenues from real estate operations in fiscal 1997 were $8.5 million,
a decrease of $1.4 million, or 14.7%, as compared to revenues from real estate
operations of $9.9 million in fiscal 1996. This decrease was due primarily to
all quartershare units at the Summit Hotel at Sunday River being fully sold by
July 1996. The Company has completed construction of the Grand Summit Hotel at
the Attitash Bear Peak ski resort and began closing on quartershare unit sales
at that project on April 6, 1997. As of July 27, 1997 the Grand Summit at
Attitash Bear Peak had $5.0 million in quartershare unit sales.
Cost of resort operations in fiscal 1997 was $109.7 million, an
increase of $68.0 million, or 162.5%, as compared to cost of resort operations
of $41.8 million in fiscal 1996. This increase was due primarily to the addition
of the S-K-I resorts.
Cost of real estate operations in fiscal 1997 was $6.8 million, an
increase of $1.0 million, or 17.2%, as compared to cost of real estate
operations of $5.8 million in fiscal 1996. This increase was due to
pre-construction activities on the hotel projects that began construction in the
fourth quarter of the year ended July 27, 1997 and costs related to the sales of
quartershares at the Grand Summit at Attitash Bear Peak.
Marketing, general and administrative expenses in fiscal 1997 were
$26.1 million, an increase of $14.8 million, or 131.0%, as compared to
marketing, general and administrative expenses of $11.3 million in fiscal 1996.
This increase was due to the addition of the S-K-I resorts, which account for an
increase of $11.9 million. The remaining difference of $2.9 million is due to a
decrease in expense of $0.5 million due to the divestiture of the Cranmore ski
resort and an increase in expense of $3.4 million due to increased marketing
activity at the pre-merger resorts.
Depreciation and amortization expenses in fiscal 1997 were $18.3
million, an increase of $11.5 million, or 169.7%, as compared to depreciation
and amortization expenses of $6.8 million in fiscal 1996. This increase was due
primarily to the addition of the S-K-I resorts, which account for an increase of
$10.2 million. The remainder of the increase results from capital improvements
and the amortization of goodwill and prepaid loan fees that did not exist prior
to the acquisition of the S-K-I resorts.
Interest expense in fiscal 1997 was $23.7 million an increase of $19
million or 505% as compared to interest expense of $4.7 million in fiscal 1996.
This increase was due to increased indebtedness associated with the acquisition
of the S-K-I Resorts, and the Company's extensive capital programs during the
summer of 1996.
12
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act Of 1995
The above information includes forward-looking statements, the
realization of which may be impacted by the factors discussed below. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 (the "Act"). This report
contains forward looking statements that are subject to risks and uncertainties,
including, but not limited to, uncertainty as to future financial results,
substantial leverage of the Company, the capital intensive nature of development
of the Company's ski resorts; rapid and substantial growth that could place a
significant strain on the Company's management, employees and operations; demand
for and costs associated with real estate development; change in market
conditions affecting the interval ownership industry; regulation of marketing
and sales of the Company's quartershare interests; seasonality of resort
revenues; fluctuations in operating results; dependence on favorable weather
conditions; competition; regional and national economic conditions; laws and
regulations relating to the Company's land use, development, environmental
compliance and permitting obligations; renewal or extension terms of the
Company's leases and permits; the adequacy of water supply; and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. These risks could cause the Company's actual results for
fiscal year 1998 and beyond to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. The foregoing
list of factors should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior to the date
hereof or the effectiveness of said Act.
13
<PAGE>
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
The Company's market risk sensitive instruments do not subject the
Company to material market risk exposures, except for such risks related to
interest rate fluctuations. As of July 26, 1998 the Company has long term debt
and subordinated notes outstanding with a carrying value of $241 million and an
estimated fair value of $256 million.
The Company has entered into two interest rate protections agreements.
These agreements are in connection with the Company's Senior Credit Facility and
effectively swap variable interest rate borrowings to fixed rate borrowings. The
total amount of the Senior Credit Facility that is effected by this agreement is
$29.3 million. The rate for this portion of the Senior Credit Facility is fixed
at is 5.68% plus an incremental rate based on the Company's leverage and expires
November 17, 2005. Total borrowings under the Senior Credit Facility are $60.8
million, leaving $31.5 million at a variable rate and, depending on the
Company's leverage, the interest rate will be LIBOR plus 2.5% to 3.5%.
Fixed interest rate debt outstanding as of July 26, 1998, excluding the
Senior Credit Facility debt, was $179.9 million, carries an average interest
rate of 10.90% and matures as follows: $7.0 million in fiscal 1999, $7.3 million
in fiscal 2000, $30.3 million in fiscal 2001, $5.4 million in fiscal 2002, $2.6
million in fiscal 2003, and $127.2 million in fiscal 2004 and after.
The Company has also entered into two noncancelable interest rate swap
agreements. The notional amount of both agreements is $120 million. The first
swap agreement matures on July 15, 2001 and from this swap agreement the Company
receives interest at a rate of 12% per annum and pays interest at a variable
rate based on the notional amount of the swap agreement. The second swap
agreement expires July 15, 2006 and requires the Company pay interest at a rate
of 9% and receive interest at a variable rate based on the notional amount of
the swap agreement. The two variable portions of the swap agreements offset each
other until July 15, 2001. After that date, the Company will be paying interest
at a fixed rate of 9% and receiving interest at a variable rate. The variable
rate of interest the Company would receive is based on the six month LIBOR
which, as of November 9, 1998, was 5.19%.
14
<PAGE>
Item 8
Financial Statements
Selected Quarterly Operating Results
The following table presents certain unaudited quarterly financial
information of the Company for the eight quarters ended July 26, 1998. In the
opinion of the Company's management, this information has been prepared on the
same basis as the Consolidated Financial Statements appearing elsewhere in this
Form 10-K and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial results set forth herein.
Results of operations for any previous quarters are not necessarily indicative
of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
Oct. 27, Jan. 26, Apr. 27, Jul. 27, Oct. 26, Jan., 25, Apr. 28, Jul. 26,
1996 1997 1997 1997 1997 1998 1998 1998
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Resort ...................... $ 11,728 $59,418 $86,601 $ 9,071 $13,655 $70,849 $83,694 $11,184
Real estate ................. 1,569 1,740 2,674 2,485 810 7,890 39,990 12,092
------- ------- ------- -------- -------- ------- ------- --------
Total revenues .............. 13,297 61,158 89,275 11,556 14,465 78,739 123,684 23,276
------- ------- ------- -------- -------- ------- ------- --------
Operating expenses:
Cost of operations ........ 15,034 38,995 42,163 13,547 17,533 44,202 42,888 14,305
Cost of real estate sold .. 1,032 935 2,913 1,933 925 5,223 27,311 8,971
Marketing, general and
administrative .......... 4,792 7,709 9,097 4,528 6,540 7,256 5,965 5,639
Stock compensation charge .. -- -- -- -- 3,271 -- -- --
Depreciation and
amortization ............ 1,527 7,344 8,075 1,347 1,450 8,151 10,092 1,746
------- ------- ------- -------- -------- ------- ------- --------
Total operating expenses .... 22,385 54,983 62,248 21,355 29,719 64,832 86,256 30,661
------- ------- ------- -------- -------- ------- ------- --------
Income (loss) from operations $( 9,088) $ 6,175 $27,027 $ (9,799) ($15,254) $13,907 $37,428 ($7,385)
------- ------- ------- -------- -------- ------- ------- --------
</TABLE>
15
<PAGE>
Item 9
Changes in and Disagreements with Accountants over Accounting and
Financial Disclosures
None
PART III
Item 10
Directors and Executive Officers
Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.
Item 11
Executive Compensation
Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.
Item 12
Security Ownership of Certain Beneficial Owners and Management
Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.
Item 13
Certain Relationships and Related Transactions
Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.
16
<PAGE>
PART IV
Item 14
Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) Documents filed as part of this report: Page
1. Index to financial statements, financial statement
schedules, and supplementary data, filed as part of this report:
Report of Independent Accountants ................... F-1
Consolidated Balance Sheet ......................... F-2
Consolidated Statement of Operations ................ F-3
Consolidated Statement of Changes
in Shareholders' Equity .......................... F-4
Consolidated Statement of Cash Flows ................ F-5
Notes to Consolidated Financial Statements .......... F-7
2. Financial Statement Schedules
All other schedules are omitted because they are not
applicable or the required information is shown in the
consolidated financial statements or notes thereto.
3. Exhibits filed as part of this report: ............
Exhibit
No. Description
3.1 Articles of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-4, Registration No. 333-9763)
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-1, Registration No.
333-9763).
10.1 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, Proctor Bank and
BankBoston, N.A. (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-4, Registration No.
333-9763).
10.2 Loan and Security Agreement dated as of October 1, 1984, among the
State of Vermont (acting by and through the Vermont Industrial
Development Authority), Mount Snow, Ltd., Proctor Bank and BankBoston,
N.A. (incorporated by reference to Exhibit 10.17 to the Parent's
Registration Statement on Form S-1 Registration No. 333-33483).
10.3 Indenture dated October 24, 1990, between 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)
(incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-4, Registration No. 333-9763).
17
<PAGE>
10.4 Indenture dated as of June 28, 1996 among the Company, certain
Subsidiaries and United States Trust Company of New York, relating to
Series A and Series B 12% Senior Subordinated Notes Due 2006 (
incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-4, Registration No. 333-9763).
10.5 Form of Subordinated Debenture Due 2002 from L.B.O. Holding, Inc. to
former shareholders of Mt. Attitash Lift Corporation (incorporated by
reference to Exhibit 10.34 to the Company's Registration Statement on
Form S-4, Registration No. 333-9763).
10.6 Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift
Corporation, certain of its shareholders and L.B.O. Holding, Inc.
(incorporated by reference to Exhibit 10.35 to the Company's
Registration Statement on Form S-4, Registration No. 333-9763).
10.7 Stock Purchase Agreement dated August 17, 1994, between Sugarloaf
Mountain Corporation and S-K-I Ltd. (incorporated by reference to
Exhibit 10.36 to the Company's Registration Statement on Form S-4,
Registration No. 333-9763).
10.8 Acquisition 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.,
(incorporated by reference to Exhibit 10.38 to the Company's
Registration Statement on Form S-4, Registration No. 333-9763).
10.9 Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley,
Albert Penley and Sunday River Skiway Corporation (incorporated by
reference to Exhibit 10.40 to The Company's Registration Statement on
Form S-4, Registration No. 333-9763).
10.10 Lease/Option dated July 19, 1984, between John Blake and L.B.O.
Holding, Inc. (incorporated by reference to Exhibit 10.41 to The
Company's Registration Statement on Form S-4, Registration No.
333-9763).
10.11 Lease Agreement dated as of July 1, 1993, between Snowridge, Inc. and
Mountain Water Company (incorporated by reference to Exhibit 10.42 to
The Company's Registration Statement on Form S-4, Registration No.
333-9763).
10.12 Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and
Mountain Wastewater Treatment, Inc., (incorporated by reference to
Exhibit 10.43 to The Company's Registration Statement on Form S-4,
Registration No. 333-9763).
10.13 Lease dated November 10, 1960, between the State of Vermont and
Sherburne Corporation (predecessor to Killington, Ltd.) (incorporated
by reference to Exhibit 10.44 to The Company's Registration Statement
on Form S-4, Registration No. 333-9763).
18
<PAGE>
10.14 Lease Agreement dated as of June 21, 1994, between the Town of
Wilmington and Mount Snow, Ltd. (incorporated by reference to Exhibit
10.46 to The Company's Registration Statement on Form S-4,
Registration No. 333-9763).
10.15 Lease Agreement dated April 24, 1995, between Sargent, Inc. and Mount
Snow, Ltd. (incorporated by reference to Exhibit 10.47 to The
Company's Registration Statement on Form S-4, Registration No.
333-9763).
10.16 Agreement between Sugarloaf Mountain Corporation and the Inhabitants
of the Town of Carrabassett Valley, Maine, concerning the Sugarloaf
Golf Course dated June 3, 1987 (incorporated by reference to Exhibit
10.52 to The Company's Registration Statement on Form S-4,
Registration No. 333-9763).
10.17 Agreement dated July 26, 1995, among Bombardier Corporation,
Killington, Ltd., Mount Snow, Ltd., Waterville Valley Ski Area, Ltd.,
Bear Mountain, Ltd., and Sugarloaf Mountain Corporation (incorporated
by reference to Exhibit 10.55 to The Company's Registration Statement
on Form S-4, Registration No. 333-9763).
10.18 Purchase and Sale Agreement dated as of August 30, 1996, among
Waterville Valley Ski Area, Ltd., Cranmore, Inc., the Company and
Booth Creek Ski Acquisition Corp. (incorporated by reference to
Exhibit 10.61 to the Company's Registration Statement on Form S-4,
Registration No. 333-9763).
10.19 Purchase and Sale Agreement dated as of October 16, 1996, among
Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports Center,
LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith
Herbert, and Pico Ski Area Management Company (incorporated by
reference to Exhibit 10.62 to the Company's Registration Statement on
Form S-4, Registration No. 333-9763).
19
<PAGE>
10.20 Loan and Security Agreement dated as of August 1, 1997, among Grand
Summit Resort Properties, Inc., the lenders listed therein and Textron
Financial Corporation, as Administrative Agent for the lenders
(incorporated by reference to Exhibit 10.71 to the Parnet's
Registration Statement on Form S-1, Registration No. 333-33483).
10.21 $2,750,000 Subordinated Promissory Note dated November, 1996 by Booth
Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and
Mount Cranmore Ski Resort, Inc., to the Company (incorporated by
reference to Exhibit 10.72 to the Parent's Registration Statement on
Form S-1, Registration No. 333-33483).
10.22 Letter of Agreement dated August 27, 1996, among SKI Ltd and certain
shareholders of Sugarloaf Mountain Corporation (incorporated by
reference to Exhibit 10.63 to the Company's Registration Statement on
Form S-4, Registration No. 333-9763).
10.23 Amended and Restated Credit Agreement dated as of November 12, 1997,
among the Company, certain Subsidiaries as Borrowers and the Company,
ASC West and certain Subsidiaries as Guarantors, the Lenders party
thereto, BankBoston, N.A. as Agent for the Lenders and DLJ Capital
Funding, Inc. as Documentation Agent for the Lenders (incorporated by
reference to Exhibit 1 to the Parent's quarterly report on Form 10-Q/A
for the quarter ended October 26, 1997).
10.24 First Amendment to Amended and Restated Credit Agreement dated as of
July 20, 1998, among the Company, certain Subsidiaries as Borrowers
and the Company and certain Subsidiaries as Guarantors, the lenders
party thereto and BankBoston, N.A. as agent for the lenders.
10.25 ISDA Master Lease Agreement between BankBoston, N.A. and the Company
dated as of May 12, 1998.
10.26 Credit Support Annex to ISDA Master Agreement between BankBoston, N.A.
and the Company dated as of May 12, 1998.
10.27 Form of Master Lease Agreement dated as of various dates among
BancBoston Leasing, Inc. as Lessor and Heavenly Valley Limited
Partnership, Killington, Ltd., Mount Snow, Ltd., ASC Leasing, Inc.,
Steamboat Ski & Resort Corporation, and Sunday River Skiway Corp. as
Lessees.
10.28 Purchase and Development Agreement by and among the Parent, American
Skiing Company Resort Properties, Inc., and Marriott Ownership
Resorts, Inc., dated as of July 22, 1998.
11.1 Computation of earnings per share.
24.1 Power of Attorney
27.1 Financial Data Schedule.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this instrument to be signed on its behalf
by the undersigned, thereunto duly authorized, in the Town of Bethel, State of
Maine, on this 9th day of November 1998.
ASC East, Inc.
By: /s/ Leslie B. Otten
------------------------------
Leslie B. Otten
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Christopher E. Howard
------------------------------
Christopher E. Howard
Senior Vice President,
Chief Administrative Officer,
General Counsel, Clerk and
Chief Financial Officer,
(Principal Financial Officer)
By: /s/ Christopher D. Livak
------------------------------
Christopher D. Livak
Vice President-Accounting
(Principal Accounting Officer)
By: /s/ Christopher E. Howard,
attorney-in-fact
------------------------------
Gordon M. Gillies, Director
21
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of ASC East, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
ASC East, Inc. and its subsidiaries at July 27, 1997 and July 26, 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended July 26, 1998 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.
PricewaterhouseCoopers LLP
October 14, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
(in thousands, except share and per share amounts)
July 27, July 26,
1997 1998
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents .................................................. $ 2,634 $ 4,157
Restricted cash ............................................................ 2,812 1,769
Accounts receivable ........................................................ 3,801 7,138
Inventory .................................................................. 7,282 10,226
Prepaid expenses ........................................................... 1,579 1,705
Deferred financing costs ................................................... 1,338 875
Deferred income taxes ...................................................... 422 1,289
-------------- ---------------
Total current assets ..................................................... 19,868 27,159
Property and equipment, net .................................................. 242,617 296,756
Real estate developed for sale ............................................... 23,540 38,023
Goodwill ..................................................................... 10,664 19,702
Intangible assets ............................................................ - 2,050
Deferred financing costs ..................................................... 6,996 5,768
Long-term investments ........................................................ 3,507 2,202
Other assets ................................................................. 4,998 4,691
Due from affiliate ........................................................... 1,260 -
-------------- ---------------
Total assets ............................................................. $ 313,450 $ 396,351
-------------- ---------------
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt .......................................... $ 33,248 $ 27,645
Current portion of subordinated notes and debentures ....................... - 455
Accounts payable and other current liabilities ............................. 25,738 26,557
Deposits and deferred revenue .............................................. 4,379 3,574
Demand note, Principal Shareholder ......................................... 1,933 1,846
Due to affiliates .......................................................... - 17,132
-------------- ---------------
Total current liabilities ................................................ 65,298 77,209
Long-term debt, excluding current portion .................................. 46,833 85,045
Subordinated notes and debentures, excluding current portion ............... 149,749 127,497
Other long-term liabilities ................................................ 6,932 7,313
Deferred income taxes ...................................................... 28,514 26,873
-------------- ---------------
Total liabilities ........................................................ 297,326 323,937
Commitments, lease contingencies and contingent liabilities (Note 13)
Shareholders' Equity
Common stock, par value of $.01 per share; 1,000,000 shares authorized;
978,300 issued and outstanding ............................................. 10 10
Additional paid-in capital ................................................... 3,762 63,136
Retained earnings ............................................................ 12,352 9,268
-------------- ---------------
Total shareholders' equity ............................................... 16,124 72,414
-------------- ---------------
Total liabilities and shareholders' equity ............................... $ 313,450 $ 396,351
-------------- ---------------
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
(in thousands, except share and per share amounts)
Year Ended
----------------------------------------
July 28, July 27, July 26,
1996 1997 1998
<S> <C> <C> <C>
Net revenues:
Resort ...................................................... $ 63,489 $ 166,818 $ 179,382
Real estate ................................................. 9,933 8,468 60,782
------------ ------------ ------------
Total net revenues ....................................... 73,422 175,286 240,164
------------ ------------ ------------
Operating expenses:
Resort ...................................................... 41,799 109,739 118,928
Real estate ................................................. 5,844 6,813 42,430
Marketing, general and administrative ....................... 11,289 26,126 25,400
Stock compensation charge ................................... - - 3,271
Depreciation and amortization ............................... 6,783 18,293 21,439
------------ ------------ ------------
Total operating expenses ................................. 65,715 160,971 211,468
------------ ------------ ------------
Income from operations ......................................... 7,707 14,315 28,696
------------ ------------ ------------
Other expenses:
Commitment fee .............................................. 1,447 - -
Interest expense ............................................ 4,699 23,707 26,273
------------ ------------ ------------
Income (loss) before provision (benefit) for income
taxes and minority interest in loss of subsidiary ............ 1,561 (9,392) 2,423
Provision (benefit) for income taxes ........................... 3,906 (3,613) 1,043
Minority interest in loss of subsidiary ........................ (108) - -
------------ ------------ ------------
Income (loss) from continuing operations ....................... (2,237) (5,779) 1,380
------------ ------------ ------------
Extraordinary loss, net of income tax benefit of $2,854 ........ - - 4,464
------------ ------------ ------------
Net loss ....................................................... $ (2,237) $ (5,779) $ (3,084)
------------ ------------ ------------
Basic and diluted loss per share (Note 2):
Continuing operations ....................................... $ (2.37) $ (5.91) $ 1.41
Extraordinary loss .......................................... - - (4.56)
------------ ------------ ------------
Net loss .................................................... $ (2.37) $ (5.91) $ (3.15)
------------ ------------ ------------
Weighted average shares outstanding ............................ 942 978 978
------------ ------------ ------------
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Shareholders' Equity
(In thousands, except share amounts)
Additional
Common stock paid-in Retained
Shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1995 ...................... 116,737 $ 116 $ 1,660 $ 28,726 $ 30,502
Net loss ................................... - - - (2,237) (2,237)
Distributions to Principal Shareholder ..... - - - (8,358) (8,358)
Contributions .............................. - - 1,020 - 1,020
Conversion of affiliate company common stock
to common stock ........................ 822,431 (106) 106 - -
Issuance of shares of common stock ......... 39,132 - 976 - 976
----------------- ----------------- ----------------- ----------------- ---------
Balance at July 28, 1996 ...................... 978,300 10 3,762 18,131 21,903
Net loss ................................... - - - (5,779) (5,779)
----------------- ----------------- ----------------- ----------------- ---------
Balance at July 27, 1997 ...................... 978,300 10 3,762 12,352 16,124
Capital contributions from Parent .......... - - 59,374 - 59,374
Net loss ................................... - - - (3,084) (3,084)
----------------- ----------------- ----------------- ----------------- ---------
Balance at July 26, 1998 ...................... 978,300 $ 10 $ 63,136 $ 9,268 $ 72,414
----------------- ----------------- ----------------- ----------------- ---------
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
(In thousands)
Year Ended
---------------------------------------
July 28, July 27, July 26,
1996 1997 1998
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $ (2,237) $ (5,779) $ (3,084)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest in loss of subsidiary ........................ (108) - -
Depreciation and amortization 6,783 18,293 21,439
Amortization of discount on subordinated notes and debentures
and other liabilities ........................................ 435 3,300 1,520
Income tax expense on conversion of S corporation to C
corporation .................................................... 5,552 - -
Deferred income taxes .......................................... (1,940) (3,332) (1,954)
Stock compensation charge ...................................... - - 3,271
Extraordinary loss on write-off of deferred financing costs .... - - 2,232
Gain on sale of assets ......................................... - - (323)
Decrease (increase) in assets:
Restricted cash and investments held in escrow ............... - 12,587 1,043
Accounts receivable .......................................... 481 (1,343) (3,337)
Inventory .................................................... (373) (2,257) (2,944)
Prepaid expenses ............................................. (648) 1,792 (126)
Real estate developed for sale ............................... 2,523 (21,976) (14,483)
Other assets ................................................. (836) 528 110
Due to/from affiliate ........................................ - (1,260) 16,170
Increase (decrease) in liabilities:
Accounts payable and other current liabilities ............... (3,601) 6,794 819
Deposits and deferred revenue ................................ 944 838 (805)
Other long-term liabilities .................................. 490 (2,270) 381
----------- ----------- -----------
Net cash provided by operating activities ...................... 7,465 5,915 19,929
----------- ----------- -----------
Cash flows from investing activities:
Payments for purchases of businesses, net of cash acquired ........ (97,079) (5,359) -
Long-term investments ............................................. (450) 836 1,305
Capital expenditures .............................................. (25,054) (21,638) (64,152)
Proceeds from sale of property and equipment ...................... - 2,626 732
Cash payments on note receivable .................................. - 250 100
Proceeds from sale of businesses .................................. - 14,408 -
Other ............................................................. - (1,964) -
----------- ----------- -----------
Net cash used in investing activities .......................... $(122,583) $ (10,841) $ (62,015)
----------- ----------- -----------
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
(In thousands) (Continued)
Year Ended
----------------------------------------
July 28, July 27, July 26,
1996 1997 1998
<S> <C> <C> <C>
Cash flows from financing activities:
Net proceeds from (repayment of) Old Credit Facility ......... $ 40,301 $ 14,766 $ (59,623)
Net borrowings under New Credit Facility ..................... - - 30,332
Net repayment of line of credit .............................. (5,776) - -
Net repayment of revolving credit loan ....................... (17,101) - -
Proceeds from (repayment of) subordinated notes and
debentures, net of investments held in escrow ................ 121,126 - (23,223)
Deferred financing costs ..................................... (8,485) (470) (1,495)
Proceeds from (repayment of) long-term debt .................. (11,806) (6,654) 49,075
Payments on demand note, Principal Shareholder ............... - (3,267) (87)
Advances to Principal Shareholder ............................ (156) -
Distributions to Principal Shareholder ....................... (3,158) - -
Capital contributions......................................... 1,020 - 48,630
Issuance of shares of common stock ........................... 976 - -
------------ ------------ ------------
Net cash provided by financing activities ................. 116,941 4,375 43,609
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ...... 1,823 (551) 1,523
Cash and cash equivalents, beginning of year .................... 1,362 3,185 2,634
------------ ------------ ------------
Cash and cash equivalents, end of year .......................... $ 3,185 $ 2,634 $ 4,157
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid for interest ....................................... $ 2,408 $ 20,975 $ 6,686
Cash paid (refunded) for income taxes ........................ 15 (1,492) -
Supplemental schedule of noncash investing and financing activities:
Property acquired under capitalized leases ................... $ 435 $ 7,802 $ 3,309
Notes payable issued for purchase of assets .................. - - 6,418
Liabilities assumed associated with purchased companies ...... 58,497 1,626 -
Deferred tax liability associated with purchased companies ... 28,372 - -
Purchase price adjustments ................................... - 4,341 -
Purchase price adjustments related to deferred taxes ......... - 1,226
Note payable issued for distribution to Principal Shareholder 5,200 - -
Note receivable received for sale of resorts ................. - 2,750 -
Intangible asset assumed to purchase subsidiary .............. - - 1,883
</TABLE>
F-6
<PAGE>
Notes to Consolidated Financial Statements
1. Basis of Presentation
ASC East is organized as a holding company and operates through various
subsidiaries. ASC East and its subsidiaries (collectively, the
"Company") operate in two business segments, ski resorts and real
estate development. The Company is a wholly-owned subsidiary of
American Skiing Company (the "Parent"). ASC East operates the following
resorts: Sugarloaf and Sunday River in Maine, Attitash Bear Peak in New
Hampshire, and Killington, Mount Snow/Haystack and Sugarbush in
Vermont. The Company performs its real estate development through its
wholly-owned subsidiary, Grand Summit Resort Properties, Inc. ("GSRP").
The Company was originally formed on December 7, 1995, at which time
the entity operated under the name American Skiing Company. Prior to
June 28, 1996, the Company was a combined group of separate entities
which were wholly-owned by Les Otten (the "Principal Shareholder"). On
June 28, 1996, the Principal Shareholder exchanged all of the
outstanding shares of the combined group for 939,168 shares of the
Company's stock (the "Exchange"). Contemporaneously with the Exchange,
the Company purchased all the outstanding shares of common stock of
S-K-I Limited, Inc. ("S-K-I") for $18.00 per share. Upon the
acquisition of S-K-I, the companies from the combined group and the
S-K-I companies were formed into a consolidated entity. In conjunction
with the Exchange and the acquisition of S-K-I, the Company issued
39,132 shares of common stock, representing a 4% minority interest in
the Company, to an institutional investor in a private offering. The
fair market value of the common stock was $976,000 at the date of
issuance and was recorded as additional paid-in capital.
The Company's Parent was formed on June 17, 1997, when the Principal
Shareholder exchanged his 96% ownership interest in the Company for
100% of the common stock of the Parent. In conjunction with the
formation of the Parent, the Parent recorded the 4% minority interest
in the Company. On January 26, 1998, the Parent and the holders of the
minority interest in the Company entered into an agreement whereby the
Parent issued 615,022 shares of common stock in exchange for all shares
of the Company held by the minority shareholders. In connection with
the Parent's exchange of its common stock for the minority interest,
the Company recorded additional paid-in capital of $8.5 million,
representing the excess of the fair market value of the Parent's stock
exchanged on January 26, 1998 over the carrying value of the minority
interest.
The Company's Parent consummated an initial public offering (the
"Offering") on November 6, 1997. The Parent sold 14.75 million shares
of common stock in the Offering at a price of $18.00 per share.
2. Summary of Significant Accounting Principles
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of ASC East and its subsidiaries. All significant intercompany 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 last Sunday of July. The periods
for 1996, 1997 and 1998 consisted of fifty-two weeks.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a
remaining maturity of three months or less to be cash equivalents.
F-7
<PAGE>
2. Summary of Significant Accounting Principles (continued)
Restricted Cash
Restricted cash represents deposits that relate to pre-sales of real
estate developed for sale held in escrow and guest advance deposits for
lodging reservations. The cash will be available to the Company when
the real estate units are sold or the lodging services are provided.
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.
Property and Equipment
Property and equipment are carried at cost, net of accumulated
depreciation. Depreciation is calculated using the straight-line method
over the assets' estimated useful lives which range from 9 to 40 years
for buildings, 3 to 12 years for machinery and equipment, 10 to 50
years for leasehold improvements and 5 to 30 years for lifts, lift
lines and trails. Assets under capital leases are amortized over the
shorter of their useful lives or their respective lease lives. Due to
the seasonality of the Company's business, the Company records a full
year of depreciation relating to its operating assets over the second
and third quarters of its fiscal year.
Real Estate Developed for Sale
The Company capitalizes as real estate developed for sale the original
acquisition cost of land, direct construction and development costs,
property taxes, interest incurred on costs related to real estate under
development, and other related costs (engineering, surveying,
landscaping, etc.) until the property reaches its intended use. The
cost of sales for individual parcels of real estate or quartershare
units within a project is determined using the relative sales value
method. Selling costs are charged to expense in the period in which the
related revenue is recognized. Interest capitalized on real estate
development projects during fiscal years 1996, 1997, and 1998 totaled
$0, $473,000, and $2.4 million, respectively.
Intangible Assets
Intangible assets consist of goodwill and tradenames. The Company has
classified as goodwill the excess of fair value of the net assets
(including tax attributes) of companies acquired in purchase
transactions. Intangible assets are recorded net of accumulated
amortization in the accompanying consolidated balance sheet and are
amortized using the straight-line method over their estimated useful
lives as follows:
Goodwill 40 years
Tradenames 40 years
Deferred Financing Costs
Costs incurred in connection with the issuance of debt are included in
deferred financing costs, net of accumulated amortization. Amortization
is calculated using the straight-line method over the respective
original lives of the applicable issues. Amortization calculated using
the straight-line method is not materially different from amortization
that would have resulted from using the interest method.
F-8
<PAGE>
2. Summary of Significant Accounting Principles (continued)
Long-Term Investments
Long-term investments are comprised of U.S. Treasury Securities,
Obligations of U.S. Government corporations and agencies and corporate
bonds. It is management's intent to hold these securities until
maturity. These securities are carried at amortized cost, which
approximates quoted market values at July 27, 1997 and July 26, 1998.
Contractual maturities relating to these investments range from less
than one year to five years at July 26, 1998.
Long-Lived Assets
The Company evaluates potential impairment of long-lived assets and
long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). SFAS 121 establishes procedures for review of
recoverability and measurement of impairment if necessary, of
long-lived assets, goodwill, and certain identifiable intangibles held
and used by an entity. SFAS 121 requires that those assets be reviewed
for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS 121 also
requires that long-lived assets and certain identifiable intangibles to
be disposed of be reported at the lower of their carrying amount or
fair value less estimated selling costs. As of July 26, 1998,
management believes that there has not been any impairment of the
Company's long-lived assets, real estate developed for sale, goodwill
or other identifiable intangibles.
Revenue Recognition
Resort revenues include sales of lift tickets, tuition from ski
schools, golf course fees and other recreational activities, sales from
restaurants, bars and retail shops, and real estate rentals. Daily lift
ticket revenue is recognized on the day of purchase. Lift ticket season
pass revenue is recognized in equal amounts over the ski season, which
is the Company's second and third quarters of its fiscal year. The
Company's remaining revenue is generally recognized as the services are
performed. Real estate revenues are recognized under the full accrual
method when title has been transferred. Amounts received from pre-sales
of real estate are recorded as deposits and deferred revenue in the
accompanying consolidated balance sheet until the revenue is
recognized.
Interest
Interest is expensed as incurred except when it is capitalized in
conjunction with major capital additions and real estate developed for
sale. The amounts of interest capitalized are determined by applying
current interest rates to the funds required to finance the
construction. During 1996, 1997 and 1998, the Company incurred total
interest cost of $5.1 million, $24.3 million, and $28.9 million
respectively, of which $444,000, $575,000 and $2.6 million,
respectively, have been capitalized to property and equipment and real
estate developed for sale.
Employee Benefits
As of July 27, 1997, the Company maintained a number of profit sharing
and savings plans pursuant to Section 401(k) of the Internal Revenue
Code. In August 1997, the Parent established the ASC 401(k) Retirement
Plan pursuant to Section 401(k) of the Internal Revenue Code (the
"Plan") and subsequently rolled the previously existing plans into the
Plan. The Plan allows employees to defer up to 15% of their income and
provides for the matching of participant contributions at the Parent's
discretion. The Parent made no contributions to the profit sharing
plans for 1996, 1997 and 1998. Contributions to the savings plans for
1996 and 1997 totaled $87,000 and $301,000, respectively, while
contributions to the Plan for 1998 totaled $217,000.
F-9
<PAGE>
2. Summary of Significant Accounting Principles (continued)
Advertising Costs
Advertising costs are expensed the first time the advertising takes
place. At July 27, 1997 and July 26, 1998, advertising costs of
$384,000 and $153,000, respectively, were recorded in prepaid expenses
in the accompanying consolidated balance sheet. Advertising expense for
the years ended July 28, 1996, July 27, 1997 and July 26, 1998 was $5.7
million, $5.2 million and $5.8 million, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect amounts and disclosures reported in the
accompanying consolidated financial statements. Actual results could
differ from those estimates.
Seasonality
The occurrence of adverse weather conditions during key periods of the
ski season could adversely affect the Company's operating results. In
addition, the Company's revenues are highly seasonal in nature, with
the majority of its revenues historically being generated in the second
and third fiscal quarters, of which a significant portion is produced
in two key weeks - the Christmas and Presidents' Day vacation weeks.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). This pronouncement supersedes the previous
methodology for the calculation of earnings per share as promulgated
under APB Opinion No. 15. SFAS 128 requires presentation of "basic" and
"diluted" earnings per share. The Company adopted SFAS 128 in fiscal
1998 and all prior periods presented were retroactively restated. For
the years ended July 28, 1996, July 27, 1997 and July 26, 1998, basic
and diluted earnings per share are the same.
Fair Value of Financial Instruments
The recorded amounts for cash and cash equivalents, restricted cash,
accounts receivable and accounts payable and other current liabilities
approximate fair value due to the short-term nature of these financial
instruments. The fair value of amounts outstanding under the Company's
Senior Credit Facility and certain other debt instruments approximates
their recorded values in all material respects, as determined by
discounting future cash flows at current market interest rates as of
July 26, 1998. The fair value of the Company's Senior Subordinated
Notes has been estimated using quoted market values. The fair value of
the Company's other subordinated debentures have been estimated using
discounted cash flow analyses based on current borrowing rates for debt
with similar maturities and ratings.
F-10
<PAGE>
2. Summary of Significant Accounting Principles (continued)
The estimated fair values of the Senior Subordinated Notes and the
other subordinated debentures at July 26, 1998 are presented below (in
thousands):
Carrying Fair
amount value
12% Senior Subordinated Notes $ 117,002 $ 134,400
Other subordinated debentures $ 10,950 $ 8,667
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes, as set forth in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the
financial statement and tax bases of assets and liabilities, utilizing
currently enacted tax rates. The effect of any future change in tax
rates is recognized in the period in which the change occurs.
As described in Note 10, certain of the Company's subsidiaries had
previously elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code of 1986, as amended, with income or loss and
credits passed through to the Principal Shareholder. Concurrent with
the acquisition of S-K-I, the subsidiaries' election to be treated as S
corporations terminated.
Reclassification
Certain amounts in the prior year financial statements and related
notes have been reclassified to conform with the fiscal 1998
presentation.
3. Business Acquisitions and Divestments
S-K-I Acquisition and Purchase of a Minority Interest
On June 28, 1996, the Company acquired all the outstanding shares of
common stock of S-K-I (the "S-K-I Acquisition") for approximately
$104.6 million, including direct costs and liabilities assumed
(excluding deferred taxes) of $58.5 million. The significant companies
purchased in the S-K-I Acquisition included SKI Insurance and the
Killington, Mount Snow/Haystack, Waterville Valley and Sugarloaf ski
resorts. Subsequent to the S-K-I Acquisition, all companies were
wholly-owned , except for Sugarloaf, which was 51% owned. The S-K-I
Acquisition was accounted for using the purchase method of accounting
and, accordingly, the results of operations subsequent to June 28, 1996
are included in the accompanying consolidated financial statements.
Amortization of goodwill charged to depreciation and amortization
amounted to $14,000, $217,000 and $274,000 for 1996, 1997 and 1998,
respectively. Accumulated amortization of goodwill amounted to $231,000
and $505,000 at July 27, 1997 and July 26, 1998, respectively.
Pursuant to a consent decree with the U.S. Department of Justice in
connection with the S-K-I Acquisition, the Company sold the assets
constituting the Mt. Cranmore and Waterville Valley resorts for $17.2
million on November 27, 1996.
F-11
<PAGE>
3. Business Acquisitions and Divestments (continued)
The following unaudited pro forma financial information presents the
consolidated results of operations as if the S-K-I Acquisition, the
divestitures of Mt. Cranmore and Waterville Valley, the purchase of the
remaining 49% minority interest of Sugarloaf, and the termination of
the S Corporation status of certain of the Company's wholly-owned
subsidiaries had occurred on July 31, 1995 (in thousands except per
share amounts):
Year ended
July 28, 1996
Revenues $ 171,666
--------------
Net loss $ (3,785)
--------------
Net loss per share $ (3.87)
--------------
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations
which actually would have resulted had the transactions occurred on the
date indicated.
Other Acquisitions
On August 30, 1996, the Company purchased the remaining 49% minority
interest in Sugarloaf, for $2.0 million in cash. In connection with the
purchase, the Company recorded a liability in the amount of $492,000 to
provide for contingent consideration that may be paid pursuant to the
purchase agreement. During 1998, the Company paid contingent
consideration of $331,000. The remaining balance of the liability at
July 26, 1998 of $161,000 is included in other long-term liabilities in
the accompanying consolidated balance sheet. In connection with the
purchase of Sugarloaf, the Company paid certain debt in advance of its
maturity and incurred a prepayment penalty of $600,000. The prepayment
penalty is recorded in interest expense in the accompanying
consolidated statement of operations for the year ended July 27, 1997.
In November 1996, the Company purchased the Pico Ski Resort for a total
purchase price of $5.0 million. The purchase price includes a cash
payment of $3.4 million and assumed liabilities of $1.6 million.
F-12
<PAGE>
4. Property and Equipment
Property and equipment consists of the following (in thousands):
July 27, July 26,
1997 1998
Buildings and grounds $ 69,635 $ 99,530
Machinery and equipment 61,218 55,435
Lifts and lift lines 60,769 103,064
Trails 11,667 11,952
Land improvements 18,096 14,972
-------------- ---------------
221,385 284,953
Less - accumulated depreciation and amortization 36,940 55,753
-------------- ---------------
184,445 229,200
Land 49,160 50,772
Construction-in-process 9,012 16,784
-------------- ---------------
Property and equipment, net $ 242,617 $ 296,756
-------------- ---------------
Property and equipment includes approximately $10.7 million and $17.7
million of machinery and equipment and lifts held under capital leases
at July 27, 1997 and July 26, 1998, respectively. At July 27, 1997 and
July 26, 1998, related accumulated amortization on property and
equipment under capital leases was approximately $2.3 million and $3.5
million, respectively. Amortization expense for property and equipment
under capital leases was approximately $493,000, $1.6 million and $1.9
million for 1996, 1997 and 1998, respectively. Total depreciation and
amortization expense relating to all property and equipment was $6.7
million, $16.6 million and $19.9 million for 1996, 1997 and 1998,
respectively.
5. Note Receivable
In connection with the sale of Mt. Cranmore and Waterville Valley in
November 1996, the Company received a promissory note in the amount of
$2.8 million. Interest on the note is charged at a rate of 12% per
annum and is payable semi-annually on December 31 and June 30. The note
is payable in annual installments ranging from $100,000 to $350,000
beginning in January 1997 through January 2003, with the remaining
balance to be paid in June 2004. The balance of the note at July 27,
1997 and July 26, 1998 was $2.5 million and $2.4 million, respectively,
and is included in other assets in the accompanying consolidated
balance sheet.
F-13
<PAGE>
6. Demand Note, Shareholder
In June 1996, prior to the S-K-I Acquisition, the Company delivered to
the Principal Shareholder a demand note in the principal amount of $5.2
million for the amount expected to become payable by the Principal
Shareholder in 1996 and 1997 for income taxes with respect to the
Company's income as an S corporation through the date of the S-K-I
Acquisition. The demand note is unsecured and bears interest at 5.4%
per annum, the applicable federal rate in effect at the time of
issuance. The amount in the accompanying consolidated balance sheet on
July 26, 1998 of $1.8 million will remain payable until all related
open tax years are closed.
7. Long-Term Debt
Long-term debt consists of (dollar amounts in thousands):
<TABLE>
<CAPTION>
July 27, July 26,
1997 1998
<S> <C> <C> <C>
Senior Credit Facility (Note 9) $ 55,067 $ 60,762
Real estate development note payable with a face value of $55,000. The note
bears interest at 10% per annum which is accrued monthly. Principal and interest
on the note are payable as real estate quartershares are sold. Any remaining
principal and accrued interest are due in January 2001. The note is
collateralized by substantially all real estate developed for sale of GSRP. - 31,411
Note payable with a face value of $2,250. The note bears interest at 9% per
annum which is payable monthly beginning January 1998 for a
15-year term. The principal is due in full in December 2012. - 2,250
Subordinated debentures issued with an original face value of $2,151. The
initial coupon rate is 6% per annum and is adjusted annually in accordance with
the agreement. Interest is payable annually in
May beginning in 1995. The debentures mature in April 2002. 1,777 1,844
Note payable with a face value of $1,600. Interest is payable monthly beginning
January 1998 for a 30-year term. The interest rate is 7% per annum for the first
10 years, 8.44% per annum for the second 10 years and 10.55% per annum for the
final 10 years. The principal is due in full in December 2027. - 1,600
Vermont Industrial Development Bonds, with interest rates that fluctuate between
4.03% and 4.50%. Principal is due in varying installments through 1999 and is
collateralized by certain machinery, equipment and real estate. 1,005 520
Note payable with a face value of $8,500 to finance the acquisition of land for
a hotel at the Attitash Bear Peak resort. The note bore interest at a rate of
9.5% per annum. The debt was paid in full in
fiscal 1998. 4,250 -
</TABLE>
F-14
<PAGE>
7. Long-Term Debt (continued)
<TABLE>
<CAPTION>
July 27, July 26,
1997 1998
<S> <C> <C>
Note payable with an original face value of $6,120 (a discount has been
reflected based on an imputed interest rate of 9.5%) and an interest rate of
6.25%. Interest was payable quarterly beginning in June 1995. A principal
payment of $620 was made in November 1995 and the remaining principal and
accrued interest outstanding were due in December 1999. The note was
collateralized by certain assets as defined in the loan agreement. In connection
with the prepayment of this debt, the Company recorded an extraordinary loss
before income tax benefit of $325 representing the unamortized original issue
discount. $ 5,128 $ -
Note payable in the amount of $2,311. The note bore interest at the greater of
9% or prime plus 1%, which was due in June of each year beginning in 1995.
Principal payments of $154 were due in June beginning in 1997 and the balance
was due in June 2003.
The Company paid this debt in full in fiscal 1998 prior to its maturity. 2,158 -
Note payable with face value of $1,000 to finance the purchase
of a retail store. The note does not accrue interest. The principal
is due as follows: $300 in August 1998; $200 in August 1999;
$200 in August 2000 and $300 in August 2001. - 1,000
Obligations under capital leases 7,840 11,542
Other notes payable 2,856 1,761
-------------- --------------
80,081 112,690
-------------- --------------
Less: current portion 33,248 27,645
-------------- --------------
Long-term debt, excluding current portion $46,833 $ 85,045
-------------- --------------
</TABLE>
F-15
<PAGE>
7. Long-Term Debt (continued)
The carrying values of the above debt instruments approximate their
respective fair values in all material respects, determined by
discounting future cash flows at current market interest rates as of
July 26, 1998.
The non-current portion of long-term debt matures as follows (in
thousands):
2000 ...................................................... $ 6,974
2001 ...................................................... 30,055
2002 ...................................................... 5,169
2003 ...................................................... 1,817
2004 and thereafter ....................................... 43,026
Interest related to capitalized leases .................... (1,656)
Debt discount ............................................. (340)
---------------
$ 85,045
---------------
At July 26, 1998, the Company had letters of credit outstanding
totaling $928,000.
8. Subordinated Notes and Debentures
On June 25, 1996, in connection with the S-K-I Acquisition, the Company
issued $120.0 million of 12% Senior Subordinated Notes (the "Notes"),
$39.1 million of 13.75% Subordinated Discount Notes (the "Subordinated
Notes") and 39,132 shares of its common stock in a private placement.
Pursuant to a registration rights agreement, the Company filed a
registration statement with respect to an offer to exchange the Notes
and Subordinated Notes for a new issue of notes of the Company
registered under the Securities Act of 1933, with identical terms. The
registration statement became effective in November 1996. The Notes and
Subordinated Notes are general unsecured obligations of the Company,
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 Notes and Subordinated Notes mature July
15, 2006 and January 15, 2007, respectively, and will be redeemable at
the option of the Company, in whole or in part, at any time after July
15, 2001. The Company incurred deferred financing costs totaling $7.9
million in connection with the issuance of the Notes and Subordinated
Notes which are recorded as deferred financing costs, net of
accumulated amortization, in the accompanying consolidated balance
sheet. Amortization expense included in the accompanying consolidated
statement of operations for the years ended July 28, 1996, July 27,
1997 and July 26, 1998 amounted to $58,000, $781,000 and $712,600,
respectively.
The Notes were issued with an original issue discount of $3.4 million.
Interest on the Notes is payable semi-annually on January 15 and July
15 of each year, commencing on January 15, 1997. Interest expense on
the Notes amounted to $1.1 million in 1996 and $14.6 million in both
1997 and 1998.
F-16
<PAGE>
8. Subordinated Notes and Debentures (continued)
Concurrently with the Parent's Offering, the Company solicited and
received the required consent from the holders of the Notes to amend
the Notes indenture to permit the consummation of the Offering without
requiring the Company to make a Change of Control Offer (as defined).
In connection with such consent solicitation, the Company paid a
customary consent payment to the consenting holders of the Notes.
The Company entered into two noncancelable interest rate swap
agreements (the "Swap Agreements") with BankBoston, N.A. ("BankBoston")
with an effective date of February 9, 1998 (the "Effective Date") to
manage the interest rate risk associated with the Notes. The notional
amount of both Swap Agreements of $120.0 million is equal to the face
value of the Notes. The first Swap Agreement matures on July 15, 2001,
the date on which the related Notes first become redeemable at the
option of the Company. The second Swap Agreement matures on July 15,
2006, the date on which the related Notes mature. From the Effective
Date through July 15, 2001, the Swap Agreements effectively reduce the
Company's cash outflow relating to the payment of interest on the Notes
from 12% to 9.01%, with the Company's payment of interest to BankBoston
at 9.01% of the notional amount and BankBoston's payment of interest to
the Company at 12% of the notional amount. The reduction in the net
cash outflow for interest had no impact on the accompanying
consolidated statement of operations as the net swap receipt from
BankBoston of $1.6 million for the period from the Effective Date
through July 26, 1998 is included in other long-term liabilities in the
accompanying consolidated balance sheet. The Company will accrue
interest expense on the cumulative net swap receipt over the period of
the first Swap Agreement. This other long-term liability, including
accrued interest thereon, will be amortized as a credit to interest
expense over the period from July 15, 2001 to July 15, 2006. Under the
second Swap Agreement, which will remain in effect for the period from
July 15, 2001 to July 15, 2006, the Company will make interest payments
to BankBoston at 9.01% of the notional amount while BankBoston will
make interest payments back to the Company at the LIBOR rate in effect
at that time. Depending on the LIBOR rate in effect during the second
Swap Agreement, the Company's interest rate exposure and its related
impact on interest expense and net cash outflow may increase or
decrease from the fixed rate under the Notes of 12%. The Company is
exposed to credit loss in the event of nonperformance by the other
party to the Swap Agreements; however, nonperformance is not
anticipated.
The Subordinated Notes were issued with an original issue discount of
$19.0 million. Under the terms of the indenture, interest on the
Subordinated Notes was not to accrue prior to July 15, 2001;
thereafter, interest was to accrue at the rate of 13.75% per annum and
was to be payable semi-annually on January 15 and July 15 of each year,
commencing on January 15, 2002. Interest expense on the Subordinated
Notes amounted to $206,000, $2.9 million and $1.4 million in 1996, 1997
and 1998, respectively. The shares of common stock issued with the
Subordinated Notes represented 4% of the Company's total common stock
outstanding and were valued at $976,000 as of June 28, 1996.
On January 26, 1998, the Parent and the holders of the 4% of the
outstanding shares of the Company entered into an agreement whereby the
Parent issued 615,022 shares of its common stock in exchange for all of
the Company 's common stock shares not owned by the Parent.
F-17
<PAGE>
8. Subordinated Notes and Debentures (continued)
A portion of the proceeds from the Senior Credit Facility (Note 9) were
used to redeem all of the outstanding Subordinated Notes. The indenture
relating to the Subordinated Notes provided for a redemption price
equal to 113.75% of the carrying value of the Subordinated Notes on the
redemption date. The Company recorded an extraordinary loss before any
benefit for income taxes of approximately $4.3 million related to the
prepayment of the Subordinated Notes and $1.0 million related to the
write-off of deferred financing costs. These extraordinary losses are
included in the accompanying consolidated statement of operations for
the year ended July 26, 1998.
Other subordinated debentures owed by the Company at July 26, 1998 are
due as follows (in thousands):
Interest Principal
Year Rate Amount
1999 6% $ 455
2000 6% 673
2001 8% 525
2002 8% 549
2003 8% 1,074
2004 8% 1,466
2010 8% 1,292
2012 6% 1,155
2013 6% 1,065
2015 6% 1,500
2016 6% 1,196
------------
$ 10,950
------------
9. Senior Credit Facility
In connection with the Parent's Offering, the Company entered into a
new credit facility (the "East Facility") with BankBoston on November
12, 1997 and repaid the indebtedness under the Company's then existing
credit facility (the "Old Credit Facility"). In connection with the
repayment of the Old Credit Facility, the Company wrote-off deferred
financing costs of $1.2 million and incurred prepayment penalties of
$433,000. These amounts are included in the total extraordinary loss in
the accompanying consolidated statement of operations. On November 13,
1997, BankBoston, as agent, syndicated the East Facility to a group of
participating lenders (the "Banks").
Under the terms of the East Facility, the Company is able to borrow up
to $65.0 million which consists of a six-year revolving credit facility
in the amount of $35.0 million and an eight-year term facility in the
amount of $30.0 million.
F-18
<PAGE>
9. Senior Credit Facility (continued)
The revolving facility is subject to an annual requirement to reduce
the outstanding debt to a balance of not more than $10.0 million for a
period of 30 days. The maximum availability under the revolving
facility will be reduced over the term of the East Facility by certain
prescribed amounts. The term facility amortizes at a rate of
approximately 1.0% of the principal amount for the first six years with
the remaining portion of the principal due in two substantially equal
installments in years seven and eight. Beginning July 1999, the East
Facility requires mandatory prepayment of 50% of excess cash flows
during any period in which the ratio of the Company's total senior debt
to earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") exceeds 3.50 to 1. In no event, however, will
such mandatory prepayments reduce the revolving facility commitment
below $35.0 million. The East Facility contains affirmative negative
and financial covenants including maintenance of debt to EBITDA,
minimum net worth, EBITDA to interest expense, and cash flow to debt
service financial ratios.
At July 26, 1998, the revolving portion of the East Facility had
outstanding borrowings of $28.0 million under LIBOR contracts which
bear interest at rates ranging from 8.09% to 8.48% per annum. At July
26, 1998, the East Facility had outstanding borrowings of $1.0 million
in Money Market accounts which bear interest at rates ranging from
8.06% to 8.47%. The balance of the borrowings outstanding at year end
of $537,000 bear interest at the greater of BankBoston's base rate or
the Federal Funds Rate plus 1% per annum. At July 26, 1998, the LIBOR,
Money Market and Base rates were 8.16%, 8.06% and 9.5%, respectively.
At July 26, 1998, the term portion of the East Facility had
outstanding borrowings of $30.0 million which bear interest at rates
ranging from 8.59% to 8.98%. Both the revolving and term portions of
the East Facility accrue interest daily and pay interest quarterly, in
arrears, commencing January 31, 1998. At July 26, 1998, interest
accrued for the East Facility was $1.2 million. The East Facility is
collateralized by substantially all the assets of the Company, except
for the assets of the real estate development subsidiary, which is not
a borrower under the East Facility.
In November 1997, the Company paid financing fees with respect to the
East Facility of 1.75% of the total commitment, or $1.3 million. The
Company has capitalized these fees and certain other debt related costs
and is amortizing them over the term of the East Facility. Total
unamortized financing fees relating to the East Facility recorded in
deferred financing costs in the accompanying consolidated balance sheet
were $1.3 million at July 26, 1998.
F-19
<PAGE>
10. Guarantors of Debt
The 12% Senior Subordinated Notes due 2006 are fully and
unconditionally guaranteed by the Company and all of its subsidiaries
with the exception of Ski Insurance, Killington West, Ltd., Mountain
Water Company, Uplands Water Company, and Club Sugarbush, Inc., (the
non-guarantors). The guarantor subsidiaries are wholly-owned
subsidiaries of the Company and the guarantees are full,
unconditional, and joint and several. Certain 1997 data has been
reclassified to conform with the fiscal 1998 presentation. The
guarantor information for the years ended July 26, 1998 and July 27,
1997, is as follows:
Statement of Operations for the year ended July 26, 1998 (in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non- Elimination Consolidated
Subsidiaries Guarantor Entries ASC East
Subsidiaries
<S> <C> <C> <C> <C> <C>
Net revenues:
Resort .......................................... $ 2,771 $ 176,455 $ 1,777 $ (1,621) $ 179,382
Real estate ..................................... - 60,782 - - 60,782
------------- --------------- -------------- -------------- ----------------
Total net revenues ........................... 2,771 237,237 1,777 (1,621) 240,164
------------- --------------- -------------- -------------- ----------------
Operating expenses:
Resort .......................................... 717 119,010 822 (1,621) 118,928
Real estate ..................................... - 42,430 - - 42,430
Marketing, general and administrative ........... 3,138 22,230 32 - 25,400
Stock compensation charge ....................... 3,271 - - - 3,271
Depreciation and amortization ................... 1,463 19,916 60 - 21,439
------------- --------------- -------------- -------------- ----------------
Total operating expenses ..................... 8,589 203,586 914 (1,621) 211,468
------------- --------------- -------------- -------------- ----------------
Income (loss) from operations ...................... (5,818) 33,651 863 - 28,696
------------- --------------- -------------- -------------- ----------------
Other expenses:
Commitment fee .................................. - - - - -
Interest expense ................................ 16,971 9,320 (18) - 26,273
------------- --------------- -------------- -------------- ----------------
Income (loss) before provision (benefit) for income
taxes and minority interest in loss of subsidiary (22,789) 24,331 881 - 2,423
Provision (benefit) for income taxes ............... (6,662) 7,239 466 - 1,043
Minority interest in loss of subsidiary ............ - - - - -
------------- --------------- -------------- -------------- ----------------
Income (loss) from continuing operations ........... (16,127) 17,092 415 - 1,380
------------- --------------- -------------- -------------- ----------------
Extraordinary loss, net of income tax benefit ...... 4,266 198 - - 4,464
------------- --------------- -------------- -------------- ----------------
Net loss ......................................... $ (20,393) $ 16,894 $ 415 $ - $ (3,084)
------------ --------------- -------------- -------------- ----------------
</TABLE>
F-20
<PAGE>
Balance Sheet at July 26, 1998
(in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non Guarantor Elimination Consolidated
Subsidiaries Subsidiaries Entries ASC East
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents ........................... $ 179 $ 2,994 $ 984 $ - $ 4,157
Restricted cash ..................................... - 1,745 24 - 1,769
Accounts receivable ................................. 689 10,526 1,690 (5,767) 7,138
Inventory ........................................... 1,562 8,664 - - 10,226
Prepaid expenses .................................... - 1,705 - - 1,705
Deferred financing costs ............................ 875 - - - 875
Deferred income taxes ............................... - 1,289 - - 1,289
Investment in subsidiaries .......................... 146,252 117,698 - (263,950) -
-------------- -------------- ------------- ------------- --------------
Total current assets .............................. 149,557 144,621 2,698 (269,717) 27,159
Property and equipment, net ........................... 50 295,994 712 - 296,756
Real estate developed for sale ........................ - 38,023 - - 38,023
Goodwill .............................................. 17,513 2,189 - - 19,702
Intangible assets ..................................... - 2,050 - - 2,050
Deferred financing costs .............................. 5,768 - - - 5,768
Long-term investments ................................. - - 2,202 - 2,202
Other assets .......................................... - 4,691 - - 4,691
Due from affiliate .................................... - - - - -
-------------- -------------- ------------- ------------- --------------
Total assets ...................................... $ 172,888 $ 487,568 $ $ (269,717) $ 396,351
5,612
-------------- -------------- ------------- ------------- --------------
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt ................... $ 21,062 $ 8,546 $ - $ (1,963) $ 27,645
Current portion of subordinated notes and debentures - 455 - - 455
Accounts payable and other current liabilities ...... 1,502 25,800 515 (1,260) 26,557
Deposits and deferred revenue ....................... 521 3,039 14 - 3,574
Demand note, Principal Shareholder .................. - 1,846 - - 1,846
Due to affiliates ................................... (55,540) 72,779 (107) - 17,132
-------------- -------------- ------------- ------------- --------------
Total current liabilities ......................... (32,455) 112,465 422 (3,223) 77,209
Long-term debt, excluding current portion ........... 39,700 47,841 48 (2,544) 85,045
Subordinated notes and debentures, excluding current
portion ............................................. 117,002 10,495 - - 127,497
Other long-term liabilities ......................... 1,715 2,366 3,232 - 7,313
Deferred income taxes ............................... (8,187) 35,615 (555) - 26,873
-------------- -------------- ------------- ------------- --------------
Total liabilities ................................. 117,775 208,782 3,147 (5,767) 323,937
Shareholders' Equity
Common stock, par value of $.01 per share;
1,000,000 shares authorized; 978,300 issued and
outstanding ......................................... 10 181 2 (183) 10
Additional paid-in capital ............................ 63,136 228,158 1,651 (229,809) 63,136
Retained earnings ..................................... (8,033) 50,447 812 (33,958) 9,268
-------------- -------------- ------------- ------------- --------------
Total shareholders' equity ........................ 55,113 278,786 2,465 (263,950) 72,414
-------------- -------------- ------------- ------------- --------------
Total liabilities and shareholders' equity ........ $ 172,888 $ 487,568 $ 5,612 $ (269,717) $ 396,351
-------------- -------------- ------------- ------------- --------------
</TABLE>
F-21
<PAGE>
Statement of Cash Flows for the year ended July 26, 1998
(in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non- Guarantor Elimination Consolidated
Subsidiaries Subsidiaries Entries ASC East
<S> <C> <C> <C> <C> <C>
Net loss ................................................... $ (20,393) $ 16,893 $ 416 $ - $ (3,084)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ........................... 1,463 19,916 60 - 21,439
Amortization of discount on subordinated notes and
debentures and other liabilities ........................ 1,425 95 - - 1,520
Deferred income taxes ................................... 430 (2,503) 119 - (1,954)
Stock compensation charge ............................... 3,271 - - - 3,271
Extraordinary loss on write-off of deferred financing
costs ................................................... 2,232 - - - 2,232
Gain on sale of assets .................................. - (323) - - (323)
Decrease (increase) in assets:
Restricted cash and investments held in escrow ........ - 1,060 (17) - 1,043
Accounts receivable ................................... (548) (6,692) (604) 4,507 (3,337)
Inventory ............................................. (1,278) (1,666) - - (2,944)
Prepaid expenses ...................................... 365 (491) - - (126)
Real estate developed for sale ........................ - (14,483) - - (14,483)
Other assets .......................................... 250 (140) - - 110
Due to/from affiliate ................................. (3,461) 19,772 (141) - 16,170
Increase (decrease) in liabilities:
Accounts payable and other current liabilities ........ (687) 1,373 133 - 819
Deposits and deferred revenue ......................... (16) (788) (1) - (805)
Other long-term liabilities ........................... 1,223 126 (968) - 381
----------- ------------- -------------- ------------ --------------
Net cash provided by operating activities ............... (15,724) 32,149 (1,003) 4,507 19,929
----------- ------------- -------------- ------------ --------------
Long-term investments ...................................... - - 1,305 - 1,305
Capital expenditures ....................................... 1,278 (60,923) - (4,507) (64,152)
Proceeds from sale of property and equipment ............... - 569 163 - 732
Cash payments on note receivable ........................... - 100 - - 100
----------- ------------- -------------- ------------ --------------
Net cash used in investing activities ................... 1,278 (60,254) 1,468 (4,507) (62,015)
----------- ------------- -------------- ------------ --------------
Net proceeds from (repayment of) Old Credit Facility ....... (59,623) - - - (59,623)
Net borrowings under New Credit Facility ................... 30,332 - - - 30,332
Proceeds from (repayment of) subordinated notes and
debentures, net of investments held in escrow .............. (23,223) - - - (23,223)
Deferred financing costs ................................... (1,495) - - - (1,495)
Proceeds from (repayment of) long-term debt ................ 34,986 14,107 (18) - 49,075
Payments on demand note, Principal Shareholder ............. - (87) - - (87)
Capital contribution ....................................... 33,630 15,000 - - 48,630
----------- ------------- -------------- ------------ --------------
Net cash provided by financing activities ............... 14,607 29,020 (18) - 43,609
----------- ------------- -------------- ------------ --------------
Net increase (decrease) in cash and cash equivalents .... 161 915 447 - 1,523
Cash and cash equivalents, beginning of year 18 2,079 537 - 2,634
----------- ------------- -------------- ------------ --------------
Cash and cash equivalents, end of year $ 179 $ 2,994 $ 984 $ - $ 4,157
----------- ------------- -------------- ------------ --------------
</TABLE>
F-22
<PAGE>
Statement of Operations for the year ended July 27, 1997
(in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non- Eliminating Consolidated
Subsidiaries Guarantor Entries ASC East
Subsidiaries
<S> <C> <C> <C> <C> <C>
Net revenues:
Resort $ 644 $ 165,328 $ 2,514 $ (1,668) $ 166,818
Real Estate - 8,468 - - 8,468
--------------- --------------- ------------- -------------- --------------
Total net revenues 644 173,796 2,514 (1,668) 175,286
--------------- --------------- ------------- -------------- --------------
Operating expenses:
Resort 618 108,496 2,293 (1,668) 109,739
Real estate - 6,813 - - 6,813
Marketing, general and administrative 5,740 20,260 126 - 26,126
Depreciation and amortization 1,359 16,915 19 - 18,293
--------------- --------------- ------------- -------------- --------------
Total operating expenses 7,717 152,484 2,438 (1,668) 160,971
--------------- --------------- ------------- -------------- --------------
Income (loss) from operations (7,073) 21,312 76 - 14,315
--------------- --------------- ------------- -------------- --------------
Other expenses:
Commitment fee - - - - -
Interest expense 15,790 10,324 (2,407) - 23,707
--------------- --------------- ------------- -------------- --------------
Income (loss) before provision (benefit) for income
taxes and minority interest in loss of subsidiary (22,863) 10,988 2,483 - (9,392)
Provision (benefit) for income taxes (8,850) 4,282 955 - (3,613)
Minority interest in loss of subsidiary - - - - -
--------------- --------------- ------------- -------------- --------------
Net loss $ (14,013) $ 6,706 $ 1,528 $ - $ (5,779)
---------------- --------------- ------------- --------------- --------------
</TABLE>
F-23
<PAGE>
Balance Sheet at July 27, 1997
(in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non Eliminating Consolidated
Subsidiaries Guarantor Entries ASC East
Subsidiaries
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 18 $ 2,079 $ 537 $ - $ 2,634
Restricted cash - 2,805 7 - 2,812
Accounts receivable 141 3,570 1,041 (951) 3,801
Inventory 284 6,998 - - 7,282
Prepaid expenses 366 1,169 44 - 1,579
Deferred financing costs 1,338 - - - 1,338
Deferred tax assets - 422 - - 422
Investment in subsidiaries 120,118 138,800 - (258,918) -
------------- ------------- ------------- ------------- --------------
Total current assets 122,265 155,843 1,629 (259,869) 19,868
Property and equipment, net 1,328 240,501 788 - 242,617
Real estate developed for sale - 23,540 - - 23,540
Goodwill 10,664 - - - 10,664
Intangible assets - - - - -
Deferred financing costs 6,996 - - - 6,996
Long-term investments - - 3,507 - 3,507
Other assets 349 4,649 - - 4,998
Due from affiliate 54,928 77,669 30,935 (162,272) 1,260
------------- ------------- ------------- ------------- --------------
Total assets $ 196,530 $502,202 $ 36,859 $(422,141) $ 313,450
============= ============= ============= ============= ==============
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 25,067 $ 9,019 $ 113 $ (951) $ 33,248
Accounts payable and other current liabilities 2,198 23,208 340 (8) 25,738
Deposits and deferred revenue 537 3,810 32 - 4,379
Demand note, Principal Shareholder - 1,933 - - 1,933
Due to affiliates 250 162,109 (87) (162,272) -
------------- ------------- ------------- ------------- --------------
Total current liabilities 28,052 200,079 398 (163,231) 65,298
Long-term debt, excluding current portion 30,000 16,767 66 - 46,833
Subordinated notes and debentures, excluding current 138,799 10,950 - - 149,749
portion
Other long-term liabilities 492 2,241 4,199 - 6,932
Deferred income taxes (8,703) 37,119 98 - 28,514
------------- ------------- ------------- ------------- --------------
Total liabilities 188,640 267,156 4,761 (163,231) 297,326
Shareholders' Equity
Common stock, par value of $.01 per share;
1,000,000 shares authorized; 978,300 issued and 10 181 2 (183) 10
outstanding
Additional paid-in capital 3,762 209,876 30,383 (240,259) 3,762
Retained earnings 4,118 24,989 1,713 (18,468) 12,352
------------- ------------- ------------- ------------- --------------
Total shareholders' equity 7,890 235,046 32,098 (258,910) 16,124
------------- ------------- ------------- ------------- --------------
Total liabilities and shareholders' equity $ 196,530 $ 502,202 $ 36,859 $ (422,141) $ 313,450
============= ============= ============= ============= ==============
</TABLE>
F-24
<PAGE>
Statement of Cash Flows for the year ended July 27, 1997
(in thousands)
<TABLE>
<CAPTION>
ASC East Guarantor Non- Eliminating Consolidated
Subsidiaries Guarantor Entries ASC East
Subsidiaries
<S> <C> <C> <C> <C> <C>
Net loss $(14,013) $ 6,706 $ 1,528 $ - $ (5,779)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 1,359 16,915 19 - 18,293
Amortization of discount on subordinated notes and
debentures and other liabilities 2,957 343 - - 3,300
Deferred income taxes (8,850) 4,499 1,019 - (3,332)
Decrease (increase) in assets:
Restricted cash and investments held in escrow 14,497 (1,903) (7) - 12,587
Accounts receivable (141) (1,167) (986) 951 (1,343)
Inventory (284) (1,988) 15 - (2,257)
Prepaid expenses (366) 2,720 (562) - 1,792
Real estate developed for sale - (21,976) - - (21,976)
Other assets (349) 270 607 - 528
Investment in subsidiaries - 411 (411) - -
Due to/from affiliate (6,657) 7,805 (2,408) - (1,260)
Increase (decrease) in liabilities: -
Accounts payable and other current liabilities 399 7,392 (46) (951) 6,794
Deposits and deferred revenue 537 1,055 (754) - 838
Other long-term liabilities - (1,709) (561) - (2,270)
------------ ------------ ------------ ------------- -------------
Net cash provided by operating activities (10,911) 19,373 (2,547) - 5,915
------------ ------------ ------------ ------------- -------------
Payments for purchase of business (2,000) (3,359) - - (5,359)
Long-term investments - - 836 - 836
Capital expenditures (1,367) (20,272) 1 - (21,638)
Proceeds from sale of property and equipment - 2,301 325 - 2,626
Cash payments on note receivable - 250 - - 250
Proceeds from sale of business - 14,408 - - 14,408
Other - (1,964) - - (1,964)
------------ ------------ ------------ ------------- -------------
Net cash used in investing activities (3,367) (8,636) 1,162 - (10,841)
------------ ------------ ------------ ------------- -------------
Net proceeds from senior credit facility 14,766 - - - 14,766
Deferred financing costs (470) - - - (470)
Proceeds from long-term debt - 4,692 636 - 5,328
Payments of long-term debt - (11,962) (20) - (11,982)
Payments on demand note, Principal Shareholder - (3,267) - - (3,267)
------------ ------------ ------------ ------------- -------------
Net cash provided by financing activities 14,296 (10,537) 616 - 4,375
------------ ------------ ------------ ------------- -------------
Net increase (decrease) in cash and cash equivalents 18 200 (769) - (551)
Cash and cash equivalents, beginning of year - 1,879 1,306 - 3,185
------------ ------------ ------------ ------------- -------------
Cash and cash equivalents, end of year $ 18 $ 2,079 $ 537 $ - $ 2,634
------------ ------------ ------------ ------------- -------------
</TABLE>
F-25
<PAGE>
The guarantor-related information for the year ended July 28, 1996
represents Non-Guarantor information as the Non-Guarantors were
inconsequential. The guarantor information for the year ended July 28,
1996 is as follows:
Non-Guarantor
As of
July 28, 1996
-------------
Current assets $1,380,000
Non-current assets 7,200,000
---------
Total Assets $8,580,000
=========
Current liabilities $1,226,000
Non-current liabilities 4,847,000
---------
Total liabilities $6,073,000
=========
Non-Guarantor
For the Year Ended
July 28, 1996
----------------
Revenues 280,000
Cost of Sales 147,000
---------
Operating Income $ 133,000
Net Income $ 67,300
=========
The summarized information shown above for the Non-Guarantors as of
July 28, 1996 and for the year then ended gives effect to the
acquisition of the Non-Guarantors of S-K-I, which were acquired by the
Company on June 28, 1996.
F-26
<PAGE>
11. Income Taxes
Prior to the formation of the Company's Parent in May of 1997, ASC East
and its subsidiaries filed separate income tax returns. Effective for
the year ended July 27, 1997, the Company joined in the filing of
consolidated federal and state tax returns with the Parent and its
subsidiaries. Income tax expense or benefit for the year is determined
for each subsidiary of the Parent as if it had filed a separate federal
and state income tax return. An amount payable to, or receivable from,
the Parent is determined based on the tax expense or tax benefit
determined in each subsidiary's separate income tax return calculation.
The Company had a net amount due from the Parent of $0 and $1.2 million
at July 27, 1997 and July 26, 1998, respectively, related to tax losses
generated by ASC East and its subsidiaries and used to increase the
taxable loss of the Parent and its subsidiaries. The amount due at July
26, 1998 is included in due to affiliates in the accompanying
consolidated balance sheet.
Prior to June 28, 1996, certain companies that comprised the Company
(the "S Corporations") had 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 the period July 31, 1995 to June 26, 1996. For
federal and state income tax purposes, taxable income, losses, and tax
credits were passed through to the Principal Shareholder, who was
individually responsible for reporting his share of such items. The
Company distributed to the Principal Shareholder amounts sufficient to
pay his personal income taxes based on the S Corporations' earnings.
In conjunction with the S-K-I Acquisition, the S Corporations changed
from S Corporation status to C Corporation status (the "Conversion").
As a result, the income or loss of the former S Corporations subsequent
to June 28, 1996 will be subject to corporate income tax. The income
tax provisions described below include the income taxes related to the
former S Corporations since June 29, 1996. At the time of the
Conversion, a net deferred tax liability of $5.6 million was recorded
through the income tax provision. This deferred tax liability was
primarily comprised of the tax effect of the cumulative book and tax
basis differences of property and equipment at the time of the
Conversion.
Deferred income taxes reflect the tax impact of temporary differences
between the amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws and regulations.
Under SFAS 109, the benefit associated with future deductible temporary
differences and operating loss or credit carryforwards is recognized if
it is more likely than not that a benefit will be realized. Deferred
tax expense (benefit) represents the change in the net deferred tax
asset or liability balance.
F-27
<PAGE>
11. Income Taxes (continued)
The provision (benefit) for income taxes charged to continuing
operations was as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
-------------------------------------------
July 28, July 27, July 26,
1996 1997 1998
Current tax provision
<S> <C> <C> <C>
Federal ............................................ $ - $ - $ -
State .............................................. - - -
------------- ------------- -------------
- - -
------------- ------------- -------------
Deferred tax provision (benefit)
Federal ............................................ (1,330) (2,815) 1,131
State .............................................. (316) (798) (88)
------------- ------------- -------------
(1,646) (3,613) 1,043
------------- ------------- -------------
Change in tax status from S Corporation
to C Corporation .................................... 5,552 - -
------------- ------------- -------------
Total provision (benefit) ............................. $ 3,906 $ (3,613) $ 1,043
------------- ------------- -------------
</TABLE>
F-28
<PAGE>
11. Income Taxes (continued)
Deferred tax liabilities (assets) are comprised of the following at
July 27, 1997 and July 26, 1998 (in thousands):
<TABLE>
<CAPTION>
July 27, July 26,
1997 1998
<S> <C> <C>
Property and equipment basis differential ....................... $ 40,040 $ 40,855
Other ........................................................... 907 890
--------------- ---------------
Gross deferred tax liabilities .................................. 40,947 41,745
--------------- ---------------
Tax loss and credit carryforwards ............................... (16,766) (13,514)
Capitalized cost ................................................ (543) (935)
Stock compensation charge ....................................... - 1,149
Original issue discount on Subordinated Notes ................... (1,212) -
Reserves and accruals ........................................... (1,361) (1,377)
Other ........................................................... (228) (1,274)
--------------- ---------------
Gross deferred tax assets ....................................... (20,110) (18,244)
Valuation allowance ............................................. 7,255 2,083
--------------- ---------------
$ 28,092 $ 25,584
--------------- ---------------
</TABLE>
The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory income
tax rate of 35% to income (loss) before provision (benefit) for income
taxes and minority interest in loss of subsidiary as a result of the
following differences (in thousands):
<TABLE>
<CAPTION>
Year ended
----------------------------------------
July 28, July 27, July 26,
1996 1997 1998
<S> <C> <C> <C>
Income tax provision (benefit) at the statutory U.S. tax rates .. $ 546 $ (3,271) $ 848
Increase (decrease) in rates resulting from:
Change in tax status from S Corporation to C Corporation ..... 5,552 - -
Income from S Corporations not taxable for corporate
income tax purposes ........................................ (2,371) - -
State taxes, net ............................................. - (798) (88)
Change in valuation allowance ................................ - 71 -
Stock compensation charge .................................... - - 238
Nondeductible items .......................................... 41 243 307
Other ........................................................ 138 142 (262)
------------ ------------ ------------
Income tax provision (benefit) at the effective tax rates ....... $ 3,906 $ (3,613) $ 1,043
------------ ------------ ------------
</TABLE>
F-29
<PAGE>
11. Income Taxes (continued)
At July 26, 1998, the Company has federal net operating loss ("NOL")
carryforwards of approximately $28.5 million which expire in varying
amounts through the year 2013. Internal Revenue Code Section 382 limits
the amount of net operating loss carryforwards incurred before a change
in ownership, as defined, that can be used annually against income
generated after the change in ownership. As a result of the Parent's
Offering in November 1997, the Company experienced a change in
ownership. The Parent's consolidated tax group's overall annual
limitation under Section 382 is approximately $15.0 million. In
addition, certain subsidiaries have separate pre-change losses which
are subject to lower annual limitations as a result of previous changes
in ownership. Subsequent changes in ownership could further affect the
limitations in future years.
In addition to the limitations under Section 382, approximately $11.4
million of the federal NOL carryovers are from the separate return
years, as defined in the regulations of the Internal Revenue Code, of
certain subsidiaries (or sub-groups), and may only be used to offset
each subsidiary's (or sub-group) contribution to consolidated taxable
income in future years.
A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Management believes that the valuation allowance of $2.1 million at
July 26, 1998 is appropriate because, due to the change of ownership
and resulting annual limitations, the Company will not be able to use
all the potential tax benefits from existing NOLs and investment tax
credits as of July 26, 1998.
The Parent, as the common agent for the consolidated group, has elected
to treat a substantial portion of the loss carryforwards acquired in
the acquisition of Sugarloaf as expiring immediately prior to its
purchase of Sugarloaf. Due to the limitations on loss carryforwards
discussed above, the Company did not expect to utilize any of the tax
benefits associated with these loss carryforwards and a full valuation
allowance was established. In computing the deferred tax liabilities
(assets) as of July 26, 1998, both the asset related to the loss
carryforward and the corresponding valuation allowance have been
eliminated. The election was made to avoid a reduction in the tax basis
of Sugarloaf's stock when the loss carryforwards expire.
12. Related Party Transactions
In fiscal 1998, the Company's Parent incurred certain common expenses
that were allocable to ASC East, including stock compensation,
marketing, management information systems and other overhead related
costs. The total allocation of these costs charged to the Company of
$4.3 million for the year ended July 26, 1998 is included in the stock
compensation charge and marketing, general and administrative
components in the accompanying statement of operations. The allocation
of the stock compensation charge is based on management's analysis of
the actual time spent by such employees on ASC East-related activities
during the period. The marketing, management information systems and
other overhead related cost were allocated to the Company based on the
estimate of amounts benefiting ASC East. It is management's opinion
that the methods used to allocate the stock compensation charge and
other common costs are reasonable.
The Principal Shareholder's wife is employed by the Company as director
of retail purchasing and is actively involved in the Company's retail
sales activities. During fiscal 1996, 1997 and 1998, the Principal
Shareholder's wife received total compensation of $55,000, $52,000 and
$52,000, respectively. During the first quarter of fiscal 1998, the
Parent granted the Principal Shareholder's wife fully vested options to
purchase up to 20,060 shares of Common Stock at a price of $2.00 per
share.
Western Maine Leasing Co., a corporation wholly-owned by the Principal
Shareholder, leases heavy equipment to the Company under short-term
leases. In fiscal 1996, 1997 and 1998, payments under such leases
totaled $37,000, $24,000 and $17,000, respectively.
F-30
<PAGE>
12. Related Party Transactions (continued)
The Company provides lodging management services for Ski Dorm, Inc.
("Ski Dorm"), a corporation owned by the Principal Shareholder and his
mother, which owns a ski dorm located near the Sunday River resort.
During fiscal 1996, 1997 and 1998, payments by Ski Dorm to the Company
totaled $90,000, $258,000 and $2,000, respectively. In addition, Ski
Dorm issued to the Company a promissory note in 1995 with a principal
amount of $265,000, of which $250,000 was outstanding at July 26, 1998.
This note is secured by a mortgage on real estate and related
improvements owned by Ski Dorm. Interest on the note is charged at the
prime rate plus 1 1/2% and principal and any accrued interest are due
in December 1999.
13. Commitments, Lease Contingencies and Contingent Liabilities
The Company leases certain land and facilities used in the operations
of its resorts under several operating lease arrangements. These lease
arrangements expire at various times from the year 2010 through the
year 2060. Lease payments are generally based on a percentage of
revenues. Total rent expense under these operating leases as recorded
in resort operating expenses in the accompanying consolidated statement
of operations for 1996, 1997 and 1998 was $744,000, $2.2 million and
$933,000, respectively.
Significant portions of the land underlying certain of the Company's
ski resorts are leased or subleased by the Company or used pursuant to
renewable permits or licenses. If any such lease, sublease, permit or
license were to be terminated or not renewed upon expiration, or
renewed on terms materially less favorable to the Company, the
Company's ability to possess and use the land subject thereto and any
improvements thereon would be adversely affected, perhaps making it
impossible for the Company to operate the affected resort. A
substantial portion of the land constituting skiable terrain at
Attitash Bear Peak, Sugarbush and Mount Snow/Haystack is located on
federal land that is used under the terms of the permits with the
United States Forest Service (the "Forest Service"). Generally, under
the terms of such permits, the Forest Service has the right to review
and comment on the location, design and construction of improvements in
the permit area and on many operational matters. The permits can be
terminated or modified by the Forest Service to serve the public
interest. A termination or modification of any of the Company's permits
could have a material adverse effect on the results of operations of
the Company. The Company does not anticipate any limitations,
modifications, or non-renewals which would adversely affect the
Company's operations.
In addition to the leases described above, the Company is committed
under several operating and capital leases for various facilities,
machinery and equipment. Rent expense under all operating leases was
$994,000, $4.2 million and $4.6 million for the years ended 1996, 1997
and 1998, respectively.
F-31
<PAGE>
13. Commitments, Lease Contingencies and Contingent Liabilities (continued)
Future minimum lease payments for lease obligations at July 26, 1998
are as follows (in thousands):
Capital Operating
leases leases
1999 $ 3,652 $ 9,484
2000 3,523 8,783
2001 2,998 3,170
2002 2,239 882
2003 and thereafter 1,679 2,214
-------------- --------------
Total payments 14,091 $ 24,533
--------------
Less interest 2,549
--------------
Present value of net minimum payments 11,542
Less current portion 4,516
--------------
Long-term obligations $ 7,026
--------------
In the fourth quarter of fiscal 1998, the Company and its Parent began
construction on two hotel projects at The Canyons and one at
Steamboat. Total construction costs under these three projects are
estimated to be $190.0 million. Two of these hotel projects are being
financed through a $145.0 million construction loan facility with TFC
Textron and a $30.0 million bridge financing arrangement (See Note
18). The Company expects to finance substantially all of the third
hotel project through an additional construction loan facility with
the balance financed under a bridge loan arrangement. The Company
anticipates repaying the bridge loans with the proceeds from an $85.0
million subordinated debt, private placement financing arrangement
("Private Placement Financing") which the Company is currently
pursuing. In the event the Company is unable to obtain the Private
Placement Financing, the Company will seek alternative financing or
reduce its future real estate development, and will be required to
refinance the bridge loans.
On July 22, 1998, the Company and its Parent entered into an agreement
with Marriott Ownership Resorts, Inc. ("Marriott") for the future sale
of land parcels at the Company's Killington, Sunday River, The
Canyons, Steamboat and Heavenly resorts (the "Marriott Agreement").
Under the Marriott Agreement, Marriott intends to develop luxury
vacation ownership properties at each of the five aforementioned
properties. In accordance with the Marriott Agreement, the Company has
granted to Marriott certain development and marketing rights at the
related resorts. In return, the Company will receive proceeds for the
sale of the land parcels and will receive a percentage of the Marriott
sales of the luxury vacation ownership properties. The land parcels to
be sold had not been identified as of July 26, 1998. Prior to year
end, the Company received a cash deposit of $1.6 million from Marriott
relating to the future land sales. The deposit is recorded as deposits
and deferred revenue in the accompanying consolidated balance sheet at
July 26, 1998.
Certain claims, suits and complaints associated with the ordinary
course of business are pending or may arise against the Company,
including all of its direct and indirect subsidiaries. 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 and cash flows of the Company if disposed of
unfavorably.
F-32
<PAGE>
15. Business Segment Information
The Company currently operates in two business segments, Resorts and
Real Estate. Data by segment is as follows:
<TABLE>
<CAPTION>
Year ended
July 28, July 27, July 26,
1996 1997 1998
<S> <C> <C> <C>
Net revenues:
Resorts ............................... $ 63,489 $ 166,818 $ 179,382
Real estate ........................... 9,933 8,468 60,782
-------------- -------------- -------------
$ 73,422 $ 175,286 $ 240,164
-------------- -------------- -------------
Income from operations:
Resorts ............................... $ 3,680 $ 19,642 $ 16,051
Real estate ........................... 4,089 1,655 18,352
Corporate ............................. (62) (6,982) (5,707)
-------------- -------------- -------------
$ 7,707 $ 14,315 $ 28,696
-------------- -------------- -------------
Depreciation and amortization:
Resorts ............................... $ 6,678 $ 16,973 $ 19,561
Real estate ........................... - - 385
Corporate ............................. 105 1,320 1,493
-------------- -------------- -------------
$ 6,783 $ 18,293 $ 21,439
-------------- -------------- -------------
Capital expenditures:
Resorts ............................... $ 25,054 $ 21,638 $ 64,152
Real estate ........................... 3,321 28,789 56,913
-------------- -------------- -------------
$ 28,375 $ 50,427 $ 121,065
-------------- -------------- -------------
Identifiable assets:
Resorts ............................... $ 262,623 $ 273,081
Real estate ........................... 30,249 96,908
Corporate ............................. 20,156 25,073
-------------- -------------
$ 313,028 $ 395,062
-------------- -------------
</TABLE>
F-33
<PAGE>
16. Quarterly Financial Information (Unaudited)
<TABLE>
Following is a summary of unaudited quarterly information (amounts in
thousands, except per share amounts):
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
Year ended July 27, 1997:
<S> <C> <C> <C> <C>
Net sales $ 13,297 $ 61,158 $ 89,275 $ 11,556
Income (loss) from operations ...................... (9,088) 6,175 27,027 (9,799)
Income (loss) from continuing operations ........... (10,293) 383 13,079 (8,948)
Net income (loss) .................................. (10,293) 383 13,079 (8,948)
Basic and diluted earnings (loss) per share:
Net income (loss) ............................... (10.52) 0.39 (9.15)
13.37
Year ended July 26, 1998:
Net sales .......................................... 14,465 78,739 123,684 23,276
Income (loss) from operations ...................... (15,254) 13,907 37,428 (7,385)
Extraordinary loss, net of income tax benefits ..... - 4,464 - -
Income (loss) from continuing operations ........... (13,528) 4,497 19,313 (8,902)
Net income (loss) .................................. (13,528) 33 19,313 (8,902)
Basic and diluted earnings (loss) per share:
Continuing operations ............................ (13.83) 4.59 19.75 (9.10)
Extraordinary loss ............................... - (4.56) - -
Net income (loss) ................................ (13.83) 0.03 19.75 (9.10)
</TABLE>
F-34
<PAGE>
17. Subsequent Event (Unaudited)
Real Estate Development Financing
On September 25, 1998, Grand Summit Resort Properties ("GSRP") entered
into a $145 million construction loan facility with TFC Textron (the
"Textron Facility). The Textron Facility bears interest at the rate of
prime plus 1.5% per annum, payable monthly in arrears, subject to a
9.25% floor, and matures on September 24, 2002. The principal is
payable based on 80% of the net proceeds from the sales of GSRP
quartershare units at the time of each closing. The Textron Facility is
secured by mortgages against the project sites and is subject to
customary covenants, representations and warranties for this type of
construction facility.
On September 30, 1998, the Company entered into a $30 million credit
arrangement with BankBoston and Morgan Stanley Capital Funding (the
"Bridge Financing"). The Bridge Financing bears interest at a rate of
14% per annum, payable monthly in arrears and matures on December 4,
1998. The Bridge Financing is collateralized by security interests in,
and mortgages on, substantially all assets financed under the credit
arrangement. Management expects to repay the Bridge Financing with the
proceeds from an $85 million subordinated debt private placement
financing arrangement, which the Company is currently pursuing.
F-34
<PAGE>
Exhibit 10.36
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 20, 1998
Among
ASC EAST, INC.
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER, LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION, INC.
L.B.O. HOLDING, INC.
SUGARBUSH RESORT HOLDINGS, INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I, LTD.
KILLINGTON, LTD.
MOUNT SNOW, LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORTS TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
as Borrowers,
AMERICAN SKIING COMPANY,
as Guarantor,
THE LENDERS PARTY HERETO,
BANKBOSTON, N.A.,
as Agent for the Lenders
and
DLJ CAPITAL FUNDING, INC.
as Documentation Agent for the Lenders
<PAGE>
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT is
entered into as of July 20, 1998 by and among ASC East, Inc., a Maine
corporation ("ASC East"), SUNDAY RIVER SKIWAY CORPORATION, a Maine corporation,
SUNDAY RIVER, LTD., a Maine corporation, PERFECT TURN, INC., a Maine
corporation, SUNDAY RIVER TRANSPORTATION, INC., a Maine corporation, L.B.O.
HOLDING, INC., a Maine corporation, SUGARBUSH RESORT HOLDINGS, INC., a Vermont
corporation , SUGARBUSH LEASING COMPANY, a Vermont corporation, SUGARBUSH
RESTAURANTS, INC., a Vermont corporation, MOUNTAIN WASTEWATER TREATMENT, INC., a
Vermont corporation, S-K-I, LTD., a Delaware corporation ("S-K-I"), KILLINGTON,
LTD., a Vermont corporation ("Killington"), MOUNT SNOW, LTD., a Vermont
corporation, PICO SKI AREA MANAGEMENT COMPANY, a Vermont corporation, RESORTS
SOFTWARE SERVICES, INC., a Vermont corporation, KILLINGTON RESTAURANTS, INC., a
Vermont corporation, RESORTS TECHNOLOGIES, INC., a Vermont corporation, DOVER
RESTAURANTS, INC., a Vermont corporation, SUGARLOAF MOUNTAIN CORPORATION, a
Maine corporation, MOUNTAINSIDE, a Maine corporation and SUGARTECH, a Maine
corporation (each a "Borrowers" and collectively, the "Borrowers"), AMERICAN
SKIING COMPANY, a Maine corporation ("American Ski"), the lenders from time to
time party hereto (the "Lenders"), BANKBOSTON, N.A., a national banking
association, as Agent for the lenders from time to time party hereto (the
"Agent") and DLJ CAPITAL FUNDING, INC., as Documentation Agent for the lenders
from time to time party hereto (the "Documentation Agent") under the Credit
Agreement referred to below.
Recitals
The Borrowers, American Ski, the Lenders, the Documentation Agent and
the Agent are parties to a Credit Agreement dated as of November 12, 1997 (as
amended, the "Credit Agreement"). The Borrowers and American Ski desire to amend
the Credit Agreement in various respects, including amending the definition of
Maximum Revolving Credit Amount to decrease the amount available by $10,000,000.
The Agent, the Documentation Agent and the Lenders are willing to amend the
Credit Agreement on the terms and conditions set forth herein. All capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 4, American Ski, the Borrowers, the Lenders,
the Documentation Agent and the Agent hereby agree as follows:
Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby
amended by deleting the definition of Maximum Revolving Credit Amount in its
entirety and substituting therefor the following:
<PAGE>
5
"Maximum Revolving Credit Amount" shall mean as of any date of
determination, the lesser of (a) the applicable amount set forth below
(as each such amount may be reduced from time to time pursuant to the
mandatory reduction requirements of Section 4.1(c)):
Closing Date through May 30, 1999 $35,000,000
May 31, 1999 through May 30, 2000 34,850,000
May 31, 2000 through May 30, 2001 34,350,000
May 31, 2001 through May 30, 2002 32,600,000
May 31, 2002 through May 30, 2003 30,450,000
May 31, 2003 through May 30, 2004 28,250,000
or (b) the amount to which the Maximum Revolving Credit Amount may have
been reduced pursuant to Section 2.12; provided that if the obligation
of the Lenders to make further Loans is terminated upon the occurrence
of an Event of Default, the Maximum Revolving Credit Amount as of any
date of determination thereafter shall be deemed to be $0.
Section 2. Events of Default. Section 10.1 of the Credit Agreement is
hereby amended by deleting paragraph (e) clause (ii) in its entirety and
substituting therefor the following:
(ii) shall fail to observe or perform its covenants, agreements and
obligations under any other material lease or other agreement by which
it is bound, including the $25,000,000 leasing facility with BankBoston
Leasing, Inc., dated as of July 20, 1998.
Section 3. Interest Rate Protection Agreements. In addition to the
permitted Indebtedness under Section 9.1(k), the Agent, the Documentation Agent,
the Lenders, American Ski and the Borrowers hereby acknowledge that ASC East has
entered into Interest Rate Protection Agreements with BankBoston, N.A., on the
$120,000,000 Senior Subordinated Notes, effective as of ASC East's second
quarter end in 1998, and the Agent and the Lenders hereby consent to such
transaction.
Section 4. Effectiveness; Conditions to Effectiveness. This First
Amendment to Amended and Restated Credit Agreement shall become effective as of
July 20, 1998 upon execution hereof by the Borrowers, the Lenders, the
Documentation Agent and the Agent and satisfaction of the following conditions:
(a) Officers' Certificate. The Borrowers and American Ski
shall have delivered to the Agent an Officers' Certificate in the form
of Exhibit A hereto.
(b) Execution of the First Amendment to Credit Agreement.
Execution of the First Amendment to Credit Agreement among the American
Ski - West Borrowers, the Agent, the Documentation Agent and the
Lenders party thereto simultaneously herewith and the compliance by the
American Ski - West Borrowers with all agreements contained in the
First Amendment to Credit Agreement, including satisfaction of all
conditions precedent to effectiveness thereunder.
Section 5. Representations and Warranties; No Default. American Ski and
the Borrowers, jointly and severally, hereby confirm to the Agent and the
Lenders, the representations and warranties of American Ski and the Borrowers
set forth in Article 5 of the Credit Agreement (as amended hereby) as of the
date hereof, as if set forth herein in full. American Ski and the Borrowers
hereby certify that, after giving effect to this First Amendment to Credit
Agreement, no Default exists under the Credit Agreement (unless stated to relate
solely to an earlier date, in which case they were true and correct as of such
earlier date).
Section 6. Miscellaneous. The Borrowers agree to pay on demand all the
Agent's reasonable expenses in preparing, executing and delivering this First
Amendment to Amended and Restated Credit Agreement, and all related instruments
and documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar
LLP. All references to the Credit Agreement in the Credit Agreement, the other
Lender Agreements or any other document shall be deemed to refer to the Credit
Agreement as amended hereby. This First Amendment to Credit Agreement shall be a
Lender Agreement and shall be governed by and construed and enforced under the
laws of The Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, American Ski, the Borrowers, the Lenders, the
Documentation Agent, and the Agent have caused this First Amendment to Amended
and Restated Credit Agreement to be executed by their duly authorized officers
as of the date first set forth above.
ASC EAST, INC.
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER, LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION, INC.
L.B.O. HOLDING, INC.
SUGARBUSH RESORT HOLDINGS, INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I, LTD.
KILLINGTON, LTD.
MOUNT SNOW, LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORTS TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
By:/s/ Thomas M. Richardson
----------------------------
Name: Thomas M. Richardson
Title:CFO and Senior Vice President
AMERICAN SKIING COMPANY, as Guarantor
By:/s/ Thomas M. Richardson
---------------------------
Name: Thomas M. Richardson
Title:CFO and Senior Vice President
<PAGE>
BANKBOSTON, N.A., as Agent
By: /s/ Carlton F. Williams
----------------------------
Name: Carlton F. Williams
Title: Director
DLJ CAPITAL FUNDING, INC., as Documentation Agent
By: /s/ illegible
-----------------------------
Name:
Title:
BANKBOSTON, N.A.
By: /s/ Carlton F. Williams
----------------------------
Name: Carlton F. Williams
Title: Director
DLJ CAPITAL FUNDING, INC.
By: /s/ illegible
-----------------------------
Name:
Title:
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By: /s/ illegible
--------------------------------
Name:
Title:
<PAGE>
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Daniel G. Admans
---------------------------------
Name: Daniel G. Adams
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION d/b/a COLORADO NATIONAL
BANK
By: /s/ William J. Sullivan
----------------------------------
Name: William J. Sullivan
Title: Vice President
FIRST SECURITY BANK, N.A.
By: Dick Van Klaveren
--------------------------------
Name:Dick Van Klaveren
Title: Vice President
FLOATING RATE PORTFOLIO
By: INVESCO SENIOR SECURED MANAGEMENT, INC.,
As Attorney in Fact
By: /s/ Anne McCarthy
--------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:/s/ John M. Johnson
--------------------------
Name: John M. Johnson
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:/s/ John M. Johnson
--------------------------
Name: John M. Johnson
Title: Authorized Signatory
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By: Jeffrey M. Maillet
--------------------------
Name: Jeffrey M. Maillet
Title: Senior Vice President & Director
<PAGE>
EATON VANCE SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By: Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
CAPTIVA II FINANCE, LTD.
By:/s/ illegible
--------------------------
Name:
Title:
HOWARD BANK
By:/s/ illegible
--------------------------
Name:
Title:
STANFIELD CAPITAL PARTNERS
By:/s/ illegible
--------------------------
Name:
Title:
KZH-PAMCO CORPORATION
By:/s/ illegible
--------------------------
Name:
Title:
PAM CAPITAL FUNDING, L.P.
By: Highland Capital Management L.P., as
Collateral Manager
By:/s/ illegible
--------------------------
Name:
Title:
CYPRESSTREE INVESTMENT PARTNERS I, LTD.
By: Cypress Tree Investment Management Company, Inc., as
Portfolio Manager
By:/s/ illegible
--------------------------
Name:
Title:
KZH Holding Corporation III
By:/s/ illegible
--------------------------
Name:
Title:
(Multicurrency-Cross Border)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of May 12,1998
BankBoston, N.A. and American Skiing Company
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:-
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified. in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of Each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that
party ("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid by
X to Y under this Section 2(d) promptly upon the earlier of
determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure
that the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will
equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that
it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a
Change in Tax Law.
(ii) Liability. If:-
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction or
withholding in respect of which X would not be required to pay an additional
amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X, then. except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such liability
(including any related liability for interest, but including any related
liability for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) The date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until The
termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the laws of
the jurisdiction of its Organization or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorize such execution, delivery and
performance;
(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) - upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the legal or
commercial position of the party in receipt of such demand), with any such form
or document to be accurate and completed in a manner reasonably satisfactory to
such other party and to be executed and to be delivered with any reasonably
required certification, n each case by The date specified in the Schedule or
such Confirmation or, if none is specified, as soon as reasonably practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if. such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) The party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party
in this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material resect when made or repeated or
deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf)-,
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger);
(2) becomes insolvent or is unable to pay its debts or fails or admits
in writing its inability generally to pay its debts as they become
due;
(3) makes a general assignment, arrangement or composition with or for
the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation,
and, in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results in a
judgment of insolvency or bankruptcy or the entry of an order for
relief or the making of an order for its winding-up or liquidation or
(E) is not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof;
(5) has a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or
merger);
(6) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or
other similar official for it or for all or substantially all its
assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration or
other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect to
any of the events specified in clauses (1) to (7) (inclusive); or
(9) takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:-
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:-
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will,
or there is a substantial likelihood that it will, on the next
succeeding Scheduled Payment Date (1) be required to pay to the other
party an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
required to be deducted or withheld for or on account of a Tax (except
in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no
additional amount is required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
(B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on The
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If Credit Event Upon Merger is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event'
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in The Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, borrower,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to A void Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and There is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section
6(b)(iv), use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to transfer
within 20 days after it gives notice under Section 6(b)(i) all its
rights and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give notice to
the other party to that effect within such 20 day period, whereupon the other
party may effect such a transfer within 30 days after the notice is given under
Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to and
conditional upon the prior written consent of the other party, which consent
will not be withheld if such other party's policies in effect at such time would
permit it to enter into transactions with the transferees on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to each agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party, either party
in the case of an Illegality, the Burdened Party in the case of a Tax
Event Upon Merger, any Affected Party in the case of a Tax Event or an
Additional Termination Event if there is more than one Affected Party,
or the party which is not The Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only
one Affected Party may, by not more Than 20 days notice to the other
party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:-
(1) First Method and Market Quotation if the First Method and Market
Quotation apply the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect
of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-Defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If The First Method and Loss apply, the
Defaulting Party will pay to The Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) The
sum of the Settlement Amount (determined by the Non-defaulting Party)
in respect of the Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to The Non-defaulting
Party less (B) the Termination Currency Equivalent of the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting Party;
if it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:-
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the bigger Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B)if Loss applies, each party will determine its Loss in respect
of this Agreement (or, if fewer than all the Transactions are
being terminated, in respect of all Terminated Transactions) and
an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will I pay it to X; if it is a
negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in, a reasonable manner
and in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of The Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and The rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes The entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under This Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and Each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or, the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organization of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answer back is
received;
(iii) if sent by facsimile transmission (on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received, unless the date of that delivery (or attempted
delivery) or that receipt, as applicable, is not a Local Business Day or
that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business Day, in which
case that communication shall be deemed given and effective on the first
following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of The Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use, all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:-
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1 % per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except so as to avoid duplication, if Section 6(e)(i)(1) or (3) or
6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from. Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a Transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was. absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in ,good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at t he time in deciding whether to offer or to
make an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organized, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such-party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for Each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these Transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in Each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if Each party is so obliged, it
shall be the average of The Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
BankBoston, N.A. American Skiing Company
................................ .....................................
(Name of Party) (Name of Party)
/s/ Robert G. Scott /s/ Thomas M. Richardson
By: .......................... By: ..................................
Name: Robert G. Scott Name: Thomas Richardson
Title: Managing Director Title: Chief Financial Officer
Date: Date: August 1, 1998
Approval (for BankBoston, N.A. intemal purposes only):
(Multicurrency - Cross Border)
SCHEDULE
to the
ISDA Master Agreement
dated as of May 12,1998
between
BANKBOSTON, N.A.
("Party A")
and
AMERICAN SKIING COMPANY
("Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a) (vii): Not Applicable
Section 5(b)(iv): Not Applicable
and in relation to Party B for the purpose of:
Section 5(a)(v): All Affiliates
Section 5(a)(vi): All Affiliates
Section 5(a) (vii): All Affiliates
Section 5(b)(iv): All Affiliates
(b) "Specified Transaction" will have the meaning specified in Section 14.
(c) The "Cross Default" provisions of Section 5(a)(vi) will not apply to Party A
and will apply to Party B, subject to the following proviso being inserted at
the end thereof:
";provided, however, that notwithstanding the foregoing, an Event of Default
shall not occur under either (1) or (2) above, if (a) the event or condition
referred to in (1) or the failure to pay referred to in (2) is a failure to pay
caused by an error or omission of an administrative or operational nature, (b)
funds were available to such party to enable it to make the relevant payment
when due, and (c) such relevant payment is made within three Local Business Days
following receipt of written notice from an interested party of such failure to
pay".
If such provisions apply:
"Specified Indebtedness" will have the meaning specified in Section 14.
"Threshold Amount" shall mean, with respect to Party B, USD 100,000.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to
Party A and will apply to Party B.
The "Automatic Early Termination" provisions of Section 6(a) will not apply to
Party A and will not apply to Party B, provided, however, that where the Event
of Default specified in Sections 5 (a)(vii)(1), (3), (4), (5), (6) or, to the
extent analogous thereto, (8) is governed by a system of law which does not
permit termination to take place after the occurrence of the relevant Event of
Default, the Automatic Early Termination provisions of Section 6(a) will apply
to the relevant party. If Automatic Early Termination of the Agreement does
occur as a result of this provision, the Defaulting Party shall fully indemnify
the Non-Defaulting Party on demand against all expense, loss, damage or
liability that the Non-Defaulting Party may incur in respect of the Agreement
and each transaction as a consequence of movements in interest, currency,
exchange or other relevant rates or prices between the Business Day on which
such Automatic Early Termination occurs and the Business Day on which the
Non-Defaulting Party first becomes aware that the Agreement has been terminated
pursuant to this provision. The Non-Defaulting Party may for this purpose
convert any such expense, loss, damage or hability to the Termination Currency.
Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "Termination Currency" means U.S. dollars.
(h) Additional Termination Event will not apply.
Part 2. Tax Representations.
(a) Payer Representations. For the purpose of Section 3(e), Party A and Party B
will make the following representation:
It is not required by any applicable law, as modified by the practice of any
relevant governmental revenue authority of any Relevant jurisdiction to make any
deduction or withholding for or on account of any tax from any payment (other
than interest under Sections 2(e), 6(d)(ii) or 6(e) of this Agreement) to be
made by it to the other party under this Agreement. In making this
representation, it may rely on:-
(i) the accuracy of any representation made by the other party pursuant
to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii); and
(iii) the satisfaction of the agreement of the other party contained in
Section 4(d) provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other
party does not deliver a form or document under Section 4 (a) (iii) by
reason of material prejudice to its legal or commercial position.
(b) Payee Representations. For the purpose of Section 3(f) of this Agreement,
Party A and Party B make the representations specified below, if any:
(i) Party A represents that it is a national banking association
organized under the laws of the United States of America.
(ii) Party B represents that it is a corporation organized under the
laws of the State of Maine.
Part 3. Agreement to Deliver Documents.
<TABLE>
<CAPTION>
For the purposes of Section 4(a) of the Agreement the other documents to be
delivered are:
<S> <C> <C> <C>
Party required to deliver Form/Document/ Date by which to be Covered by Section 3(d)
document Certificate delivered Representation
Party A, Party B and any Evidence of the authority, Upon execution of this Yes.
Credit Support Provider incumbency and specimen Agreement, any Credit
signature of each person Support Document and, upon
executing this Agreement, request, any Confirmation.
any Credit Support Document
and any Confirmation on its
behalf.
Party B and any Credit A legal opinion in form and Upon execution of this No.
Support Provider of Party B. substance acceptable to Agreement.
Party A.
Party A. A copy of BankBoston Promptly upon request by Yes.
Corporation's most recent Party B.
annual report containing
consolidated year end
financial statements
certified by independent
public accountants.
Party B. A copy of Party B's most Promptly upon request by Yes.
recent annual report Party A.
containing year end
financial statements
certified by independent
public accountants.
Party B. A copy of Party B's Promptly upon request by Yes.
quarterly financial Party A.
statements.
</TABLE>
Part 4. Miscellaneous.
(a) Address for Notices. For the purpose of Section 12(a) of this
Agreement:
I. Address for notices to Party A:
For Confirmations/Settlements/Collateral Transfers/Resets:
(i) acting through its Boston Head Office
Address: BankBoston, N.A. 100 Federal Street Boston, MA 02110
Attn: Senior Manager, Derivatives Operations, 01-13-08
Tel No: (617) 434-7221
Fax No: (617) 434-4284
For all notices or communications given in respect of Section 5, 6, 7, 11 or 13
of this Agreement:
Address: BankBoston, N.A. 100 Federal Street Boston, MA 02110
Attn: Managing Director, Derivatives, 01-13-08
Tel No: (617) 434-7529
Fax No: (617) 434-1149 or 639-9342
with a copy to:
BankBoston, N.A.
Attn: General Counsel
100 Federal Street, 01-25-01
Boston, MA 02110
Tel No: (617) 434-2870
Fax No: (617) 434-6525
II. Address for notices or communications to Party B:
Address: American Skiing Company Sunday River Road P.O. Box 450
Bethel, Maine 04217
Attention: Thomas M. Richardson, Sr. VP
Tel No: 207-824-5160
Fax No: 207-824-5158
(b) Process Agent. For the purpose of Section 13(c) of this Agreement:
Party A Appoints as its Process Agent:
BankBoston International 590 Madison Avenue, 22nd Floor New York, NY 10022
with a copy to:
BankBoston, N.A.
100 Federal Street, 01-25-01
Boston, MA 02110
Attn: General Counsel
Party B appoints as its Process Agent:.
Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement: Party
A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. In relation to Party B, Credit Support Document
means the Credit Support Annex attached hereto.
(g) Credit Support Provider. Credit Support Provider means (x) in relation to
Party A, not applicable, and (y) in relation to Party B.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without reference to choice
of law doctrine.
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement
will not apply to any Transactions under this Agreement.
(J) "Affiliate" will have the meaning specified in Section 14. Part 5. Other
Provisions. (a) Set-Off.
Any amount (the "Early Termination Amount") payable to one party (the
Payee) by the other party (the Payer) under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in
the case where a Termination Event under Section 5(b)(iv) has occurred,
will, at the option of the party ("X") other than the Defaulting Party
or the Affected Party (and without prior notice to the Defaulting Party
or the Affected Party), be reduced by its set-off against any amount(s)
(the "Other Agreement Amount") payable (whether at such time or in the
future or upon the occurrence of a contingency) by the Payee to the
Payer (irrespective of the currency, place of payment or booking office
of the obligation) under any other agreement(s) between the Payee and
the Payer or instrument(s) or undertaking(s) issued or executed by one
party to, or in favor of, the other party (and the Other Agreement
Amount will be discharged promptly and in all respects to the extent it
is so set-off X will give notice to the other party of any set-off
effected under this Section 5(a).
For this purpose, either the Early Termination Amount or the Other Agreement
Amount (or the relevant portion of such amounts) may be converted by X into the
currency in which the other is denominated at the rate of exchange at which such
party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained.
Nothing in the Section 5(a) shall be effective to create a charge or other
security interest. This Section 5 (a) shall be without prejudice and in addition
to any right of set-off, combination of accounts, lien or other right to which
any party is at any time otherwise entitled (whether by operation of law,
contract or otherwise).
(b) Definitions.
(i) This Agreement, each Confirmation and each Transaction are subject
to the 1991 ISDA Definitions (as published by the International Swaps
and Derivatives Association, Inc.) as amended, supplemented or restated
from time to time (the "Definitions"), and will be governed in all
respects by the provisions set forth in the Definitions. The Definitions
are incorporated by reference in, and shall be deemed to be part of,
this Agreement and each Confirmation, as if set forth in full in this
Agreement or in each such Confirmation. In the event of any
inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail. In the event of any
inconsistency between the provisions of any Confirmation and this
Agreement, such Confirmation will prevail for the purpose of the
relevant Transaction.
(ii) With effect from and including the date of this Agreement (A) any
reference to a "Swap Transaction" in the Definitions is deemed to be a
reference to a "Transaction" for the purpose of interpreting this
Agreement or any Confirmation and (B) any reference to a "Transaction"
in this Agreement or any Confirmation is deemed to be a reference to a
"Swap Transaction" for the purpose of interpreting the Definitions.
(c) Procedures for Entering into Confirmations.
With respect to each Transaction entered into pursuant hereto, Party A
shall, on or promptly after the Trade Date thereof, send Party B a
Confirmation confirming such Transaction, and Party B shall promptly
thereafter confirm the accuracy of, or request the correction of, such
Confirmation.
Where a Transaction is confirmed by means of (i) an exchange of electronic
messages on an electronic messaging system, (ii) another form of document or
(iii) other confirming evidence exchanged between the parties confirming such
Transaction, such messages, document or evidence will constitute a Confirmation
for the purposes of this Agreement even where not so specified therein.
(d) Additional Party B Event of Default.
It shall constitute an additional Event of Default under Section 5(a)
of this Agreement in respect of which Party B shall be the Defaulting Party upon
the failure by Party B to observe, perform and fulfill each and every covenant,
term and provision applicable to it in that certain Amended and Restated Credit
Agreement, dated as of November 12, 1997, as amended and/or restated from time
to time, by and among the various parties listed therein as Borrowers; Party B
as Guarantor; the Lenders party thereto; Party A as Agent for the Lenders; and
DLJ Capital Funding, Inc. as Documentation Agent for the Lenders (the "Credit
Agreement"), provided that in the event that the Credit Agreement terminates
prior to the performance in full by Party B of all of its duties and obligations
under this Agreement, the covenants, terms and provisions of the Credit
Agreement applicable to Party B which were in effect as of the date of such
termination, other than those requiring payments in respect of amounts owed
under the Credit Agreement, shall remain in full force and effect for purposes
of this Agreement as though until such time as all of Party B's duties and
obligations under this Agreement are fully performed.
The aforementioned covenants, terms, and provisions of the Credit Agreement are
hereby incorporated into this Agreement by reference as if fully set forth
herein.
(e) Accuracy of Specified Information.
Section 3(d) of this Agreement is hereby amended by adding in the third
line thereof, after the word "respect" and before the period, the words
"or, in the case of audited or unaudited financial statements or balance
sheets, a fair presentation of the financial condition of the relevant
person".
(f) Additional Representations.
For purposes of Section 3 of this Agreement, the following shall be added
immediately following paragraph (f) thereof:
"(g) This Agreement and each Transaction constitutes a "swap agreement"
within the meaning of Commodity Futures Trading Commission ("CFTC")
Regulations Section 35.1(b)(1).
(h) It is an "eligible swap participant" within the meaning of CFTC
Regulations Section 35.1 (b) (2).
(i) Neither this Agreement nor any Transaction is one of a fungible
class of agreements that are standardized as to their material economic
terms, within the meaning of CFTC Regulations Section 35.2(b).
j) The creditworthiness of the other party was or will be a material
consideration in entering into or determining the terms of this
Agreement and each Transaction, including pricing, cost or credit
enhancement terms of the Agreement or Transaction, within the meaning
of CFTC Regulations Section 35.2(c).
(k) It has entered into this Agreement (including each Transaction
evidenced hereby) in conjunction with its line of business (including
financial intermediation services) or the financing of its business.
(l) It engages, will engage and holds itself out as engaging in
"financial contracts", as defined in Regulation EE of the Federal
Reserve Board, as a counterparty on both sides of one or more
"financial markets" (as defined in such regulation) and it fulfills at
least one of the quantitative tests contained in such regulation.
(m) Relationship Between Parties. Each party will be deemed to
represent to the other party on the date on which it enters into a
Transaction that (absent a written agreement between the parties that
expressly imposes affirmative obligations to the contrary for the
Transaction):
(i) Non-Reliance. It is acting for its own account, and it has
made its own independent decisions to enter into that Transaction and
as to whether that Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such advisors as it has
deemed necessary. It is not relying on any communication (written or
oral) of the other party as investment advice or as a recommendation to
enter into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that Transaction. It has not received from the other party any
assurance or guarantee as to the expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of assessing
the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of that Transaction. It is also capable of
assuming, and assumes, the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a
fiduciary for or as an advisor to it in respect of that Transaction.
(g) Recording.
Each party hereto consents to the monitoring or recording, at any time
and from time to time, by the other party of any and all communications
between officers or employees of the parties, waives any further notice
of such monitoring or recording, and agrees to notify its officers and
employees of such monitoring or recording.
(h) Escrow.
(i) If the parties are each required to make payments pursuant to
Section 2(a) on the same day in respect of a Transaction but the
payments are to be made in different currencies, the party that
receives the payment due to it first shall hold an amount equal to the
payment it received in trust (with the right to commingle that amount
with its general funds) for the benefit of the other party until that
other party receives the corresponding payment due to it.
If, by reason of the time difference between the cities in which
payments are to be made, it is not possible for simultaneous payments to be made
on any date on which both parties are required to make payments hereunder,
either party may at its option and in its sole discretion notify the other party
that payments on that date are to be made in escrow. In this case deposit of the
payment due earlier on that day shall be made by 2:00 p.m. (local time at the
place for the earlier payment) on that date with an escrow agent selected by the
party giving the notice, accompanied by irrevocable payment instructions (i) to
release the deposited payment to the intended recipient upon receipt by the
escrow agent of the required deposit of the corresponding payment from the other
party on the same date accompanied by irrevocable payment instructions to the
same effect, or (ii) if the required deposit of the corresponding payment is not
made on that same date, to return the payment deposited by the party that paid
it into escrow. The party that elects to have payments made in escrow shall pay
the costs of the escrow arrangements and shall cause those arrangements to
provide that the intended recipient of the payment due to be deposited first
shall be entitled to interest on that deposited payment for each day in the
period of its deposit at the rate offered by the escrow agent.
(i) Negative Interest Rates.
(i) Floating Amounts. "Swap Transaction" means, for the purposes of
this provision concerning Negative Interest Rates, a rate exchange or
swap transaction, including transactions involving a single currency or
two or more currencies. Party A and Party B agree that, if with respect
to a Calculation Period for a Swap Transaction
either party is obligated to pay a Floating Amount that is a negative
number (either due to a quoted negative Floating Rate or by operation
of a Spread that is subtracted from the Floating Rate), the Floating
Amount with respect to that party for that Calculation Period will be
deemed to be zero, and the other party will pay to that party the
absolute value of the negative Floating Amount as calculated, in
addition to any amounts otherwise owed by the other party for that
Calculation Period with respect to that Swap Transaction, on the
Payment Date that the Floating Amount would have been due if it had
been a positive number. Any amounts paid by the other party with
respect to the absolute value of a negative Floating Amount will be
paid to such account as the receiving party may designate (unless such
other party gives timely notice of a reasonable objection to such
designation) in the currency in which that Floating Amount would have
been paid if it had been a positive number (and without regard to the
currency in which the other party is otherwise obligated to make
payments).
(ii) Compounding. Party A and Party B agree that, if with respect to
one or more Compounding Periods for a Swap Transaction where
"Compounding" or "Flat Compounding" is specified to be applicable, the
Compounding Period Amount, the Basic Compounding Period Amount or the
Additional Compounding Period Amount is a negative number (either due
to a quoted negative Floating Rate or by operation of a Spread that is
subtracted from the Floating Rate), then the Floating Amount for the
Calculation Period in which that Compounding Period or those
Compounding Periods occur will be either the sum of all the Compounding
Period Amounts or the sum of all the Basic Compounding Period Amounts
and all the Additional Compounding Period Amounts in that Calculation
Period (whether positive or negative). If such sum is positive, then
the Floating Rate Payer with respect to the Floating Amount so
calculated will pay that Floating Amount to the other party. If such
sum is negative, the Floating Amount with respect to the party that
would be obligated to pay that Floating Amount will be deemed to be
zero, and the other party will pay to that party the absolute value of
the negative Floating Amount as calculated, such payment to be made in
accordance with (i) above.
Part 6. EMU; Continuity of Contract.
(a) The parties confirm that, except as provided in subsection (b) below,
the occurrence or non-occurrence of an event associated with economic
and monetary union in the European Community will not have the effect
of altering any term of, or discharging or excusing performance under,
this Agreement or any Transaction, give a party the right unilaterally
to alter or terminate this Agreement or any Transaction or, in and of
itself, give rise to an Event of Default, Termination Event or
otherwise be the basis for the effective designation of an Early
Termination Date.
"An event associated with economic and monetary union in the European
community" includes, without limitation, each (and any combination) of
the following:
(i) the introduction of, changeover to or operation of a single or
unified European currency (whether known as the euro or otherwise);
(ii) the fixing of conversion rates between a member state's currency and
the new currency or between the currencies of member states;
(iii) the substitution of that new currency for the ECU as the unit of
account of the European Community;
(iv) the introduction of that new currency as lawful currency in a member
state;
(v) the withdrawal from legal tender of any currency that, before the
introduction of the new currency, as lawful currency in one of the member
states; or
(vi) the disappearance or replacement of a relevant rate option or other
price source for the ECU or the national currency of any member state, or
the failure of the agreed sponsor (or a successor sponsor) to publish or
display a relevant rate, index, price, page or screen.
(b) Any agreement between the parties that amends or overrides the
provisions of this Section in respect of any Transaction will be
effective if it is in writing and expressly refers to this Section or
to European monetary union or to an event associated with economic and
monetary union in the European Community and would otherwise be
effective in accordance with Section 9(b).
IN WITNESS WHEREOF, the parties have executed this Schedule as of the
date specified on the first page hereof.
BANKBOSTON, N.A. AMERICAN SKIING COMPANY
By: /s/ Robert G. Scott By: /s/ Thomas M. Richardson
-------------------- ------------------------
Name: Robert G. Scott Name: Thomas Richardson
Title: Managing Director Title: Chief Financial Officer
Approval (for BankBoston, N.A. internal purposes only):
(Bilateral Form) (ISDA Agreements Subject to New York Law Only)
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA Master Agreement
..........................................................
May 12,1998
dated as of ...........................
between
BankBoston, N.A. and American Skiing Company
("Party A") ("Party B")
This Annex supplements, form part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to each party.
Accordingly, the parties agree as follows:-
Paragraph I. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all References in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that Support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount Subject to Paragraphs 4 and 5, upon a demand made by the
secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's will Transfer Amount,
then the Pledgor will Transfer to the Secured Party Eligible Credit Support
having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified
in Paragraph 13, the "Delivery Amount applicable to the Pledgor for any
Valuation Date will equal the amount by which:
(i) the Credit Support Amount exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party.
(b) Return Amount Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"Return Amount' applicable to the Secured Party for any Valuation Date will
equal the amont by which:
(i) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party exceeds
(ii) the Credit Support Amount.
"Credit Support Amount" means, unless otherwise Specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and
Substitutions
(a) Conditions Precedent Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified
Condition has occurred and is continuing with respect to the other
party, and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an
Event of Default or Specified Condition with respect to the other
party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit supply, or posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close of business on the second Local Business Day
thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
(d) Substitutions
(i) Unless otherwise specified in Paragraph 13, upon notice to the
Secured Party specifying the items of Posted Credit Support to be
exchanged, the Pledgor may, on any Local Business Day, Transfer to the
secured Party substitute Eligible Credit Support (the "Substitute Credit
Support"); and
(ii) subject to Paragraph 4(a), the secured Party will Transfer to the
Pledgor the items of Posted Credit Support specified by the Pledgor in
its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support, unless
otherwise specified in Paragraph 13 (the "Substitution Date"); provided
that the Secured Party will only be obligated to Transfer Posted Credit
Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit
Support.
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (1) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (.U) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day
following (X) the date that the demand is made under Paragraph 3 in the case of
(1) above Or (Y) the date of Transfer in the case of (II) above, (3) the parties
will consult with each other in an attempt to resolve the dispute and (4) if
they fail to Resolve the dispute by the Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return
Amount, unless otherwise Specified in Paragraph 13, the Valuation Agent
will recalculate the Exposure and the Value as of the Recalculation
Date by:
(A) utilizing any calculations of Exposure for the
Transactions (or Swap Transactions) that the parties have
agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or Swap
Transactions) in dispute by seeking four actual quotations at
mid-market from Reference Market-makers for purposes of
calculating Market Quotation, and taking the arithmetic
average of those obtained; provided that if four quotations
are not available for a particular Transaction (or Swap
Transaction), then fewer than four quotations may be used for
that Transaction (or Swap Transaction); and if no quotations
are available for a particular Transaction (or Swap
Transaction), then the Valuation Agent's original calculations
will be used for that Transaction (or Swap Transaction); and
(C) utilizing the procedures specified in. Paragraph 13 for
Calculating the Value, if disputed, of Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, the Valuation Agent
will recalculate the Value as of the date of Transfer pursuant to)
Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care Posted Collateral Without limiting the Secured Parties rights
under Paragraph 6(c), the Secured Party will exercise reasonable care
to assure the safe custody of all Posted Collateral to the extent
required by applicable law, and in any event the secured Party will be
deemed to have exercised reasonable care if it exercises at least the
same degree of care as it would exercise with respect to its own
property. Except as specified in the preceding sentence, the Secured
Party will have no duty with respect to Posted Collateral, including,
without limitation, any duty to collect any Distributions, or enforce
or preserve any rights pertaining thereto.
(b) Eligibility to Hold Posted Collateral; Custodians.
(i) General Subject to the satisfaction of any conditions specified in
Paragraph 13 for holding Posted Collateral, the Secured Party will be
entitled to hold Posted Collateral or to appoint an agent (a
"Custodian") to hold Posted Collateral for the Secured Party. Upon
notice by the Secured Party to the Pledgor of the appointment of a
Custodian, the Pledgor's obligations to make any Transfer will be
discharged by making the Transfer to that Custodian. The holding of
Posted Collateral by a Custodian will be deemed to be the holding of
that Posted Collateral by the Secured Party for which the Custodian is
acting.
(ii) Failure to Satisfy Conditions. If the Secured Party or its
Custodian fails to satisfy any conditions for holding Posted
Collateral, then upon a demand made by the Pledgor, the Secured party
will, not later than five Local Business Days after the demand,
Transfer or cause its Custodian to Transfer all Posted Collateral held
by it to a Custodian that satisfies those conditions or to the Secured
Party if it satisfies those conditions.
(iii) Liability. The Secured Party will be liable for the acts or
omissions of its Custodian to the extent that the Secured Party would
be liable hereunder for its own acts or omissions.
(c) Use of Posted Collateral Unless otherwise specified in Paragraph 13 and
without limiting the rights and obligations of the parties under Paragraphs 3,
4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with Respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption
by the Pledgor, and
(ii) register any Posted Collateral in the name of the Secured Party,
its Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
(d) Distributions and Interest Amount,
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on 2 Local Business Day,
it will Transfer to the Pledgor not later than the following Local
Business Day any Distributions it receives or is deemed to receive to
the extent that a Delivery Amount would not be created or increased by
that Transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed to be a Valuation Date for this purpose).
(iii) Interest amount Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be Retained by the
Secured Party), the Secured Party will Transfer to the Pledgor at the
times specified in Paragraph 13 the Interest Amount to the extent that
a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will
be deemed to be a Valuation Date for this purpose). The Interest Amount
or portion thereof not Transferred pursuant to this Paragraph will
constitute Posted Collateral in the form of Cash and will be subject to
the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will
exist with respect to a party if.
(i) that party fails (or fails to cause its Custodian) to make, when
due, any Transfer of Eligible Collateral, Posted Collateral or the
Interest amount, as applicable, required to be made by it and that
failure continues for two Local Business Days after notice of that
failure is given to that party;
(ii) that party fails to comply with any Restriction or prohibition
specified in this Annex with respect to any of the rights specified in
Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
iii) that party fails to comply with or perform any agreement or obligation
other than those specified in Paragraphs 7(i) and 7(ii) and that failure
continues for 30 days after notice of that failure is given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has and is
continuing or (2) an Early Termination Date has occurred or been
designated as the result of an Event of Default or Specified Condition
with respect to the Pledgor, then, unless the Pledgor has paid in full
all of its Obligations that are then due, the Secured Party may exercise
one or more of the following rights and remedies:
(i) all rights and remedies available to a secured party under
applicable law with respect to Posted Collateral held by the Secured
Party;
(ii) any other rights and remedies available to the Secured Party under
the terms of Other Posted Support, if any-,
(iii) the right to Set-off any amounts payable by the Pledgor with
respect to any Obligations against any Posted collateral or the Cash
equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral);
and
(iv) the right to liquidate any Posted Collateral held by the Secured
Party through one or more public or private sales or other dispositions
with such notice, if any, as may be required under applicable law, free
from any claim or right of any nature whatsoever of the Pledgor,
including any equity or right of redemption by the Pledgor (with the
Secured Party having the right to purchase any or all of the Posted
Collateral to be sold) and to apply the proceeds (or the Cash
equivalent thereto from the liquidation of the Posted Collateral to any
amounts payable by the Pledgor with respect to any Obligations in that
order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior notice
of any sale of that Posted Collateral by the Secured Party, except any notice
that is Required under applicable law and cannot be waived.
(b) Pledgor's Rights and Remedies if at any time an Early Termination Date has
occurred or been designated as the result of an Event of Default or Specified
Condition with respect to the Secured Party, then (except in the case of an
Early Termination Date relating to less than all Transaction (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a
pledgor under applicable law with respect to Posted Collateral held by
the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available
to the Pledgor under the terms of Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all
Posted Collateral and the Interest Amount to the Pledgor, and
(iv) to the extent that Posted Collateral or the Interest Amount is not
so Transferred pursuant to (iii) above, the Pledgor may-.
(A) Set-off any amounts payable by the Pledgor with respect to any
Obligations against any Posted Collateral or the Cash equivalent of any Posted
Collateral held by the Secured Party (or any obligation of the secured Party to
Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A)
above, withhold payment of any remaining amounts payable by the Pledgor with
respect to any Obligations, up to the Value of any remaining Posted Collateral
held by the Secured Party, until that Posted Collateral is Transferred to the
Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the
Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and g(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the
Pledgor with Respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
Paragraph 9. Representations
Each party represents to the other party (which representations will be deemed
to be repeated as of each date on, which it, as the Pledgor, Transfers Eligible
Collateral) that:
(i) it has the power to grant a security interest in and lien on any
Eligible Collateral it Transfers as the Pledgor and has taken all necessary
actions to authorize the granting of that security interest will lien;
(ii) it is the sole owner of or otherwise has the right to transfer all
Eligible Collateral it Transfers to the secured Party hereunder, free and clear
of any security interest, lien, encumbrance or other restrictions other than the
security interest and lien granted under Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured Party
under the term of this Annex, the Secured Party will have a valid and perfected
first priority security interest therein (assuming that any central clearing
corporation or any third-party financial intermediary or other entity not within
the control of the Pledgor involved in the Transfer of that Eligible Collateral
gives the notices and takes the action Required of it under applicable law for
perfection of that interest); and
(iv) the performance by it of its obligations under this Annex will not
result in the creation of any security interest, lien or other encumbrance on
any Posted Collateral other than the security interest and lien granted under
Paragraph 2.
Paragraph 10. Expenses
(a) General Except as otherwise provided in Paragraphs 10(b) and 10(c), each
party will pay its own costs and expenses in connection with performing
its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection
herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes,
assessments or charges of any nature that are imposed with respect to Posted
Credit Support held by the secured Party becoming aware of the same, regardless
of whether any portion of that Posted Credit Support is subsequently disposed of
under Paragraph 6(c), except for those taxes, assessments and charges that
result from the exercise of the Secured Party's Rights under Paragraph 6(c).
(c) Liquidation/Application of Posted Credit Support All reasonable costs
and expenses incurred by or on behalf of the Secured Party or the
Pledgor in connection with the liquidation and/or application of any
Posted Credit Support under Paragraph 8 will be payable, on demand
and pursuant to the Expenses Section of this Agreement, by the
Defaulting Party or, if there is no Defaulting Party, equally by the
parties.
Paragraph 11. Miscellaneous
(a) Default Interest. A Secured Party that fails to make, when due, any Transfer
of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor
(to the extent permitted under applicable law) an amount equal to interest at
the Default Rate multiplied by the Value of the items of property that were
required to be Transferred, from (and including) the date that Posted Collateral
or interest Amount was required to be Transferred to (but excluding) the date of
Transfer of that Posted Collateral or Interest Amount. This interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
(b) Further Assurances. Promptly following a demand made by a party, the other
party will execute, deliver, file and record any financing statement, specific
assignment or other document and take any other action that may be necessary or
desirable and reasonably requested by that party to create, preserve, perfect or
validate any security interest or lien granted under Paragraph 2, to enable that
party to exercise or enforce its rights under this Annex with respect to Posted
Credit Support or an Interest Amount or to effect or document a release of a
security interest on Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured
Party of, and defend any suit, action, proceeding or lien that involves Posted
Credit Support Transferred by the Pledgor or that could adversely affect the
security interest and lien granted by it under Paragraph 2, unless that suit,
action, proceeding or lien results from the exercise of the Secured Party's
rights under Paragraph 6(c).
(d) Good Faith and Commercally.Reasonable Manner. Performance of all obligations
under this Annex, including, but not limited to, all calculations, valuations
and determinations made by either party, will be made in good faith and in a
commercially reasonable manner.
(e) Demands and Notices. All demands and notices made by a party under this
Annex will be made as specified in the Notices Section of this Agreement, except
as otherwise provided in Paragraph 13.
(f) Specifications of Certain Matters. Anything referred to in this Annex as
being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
Paragraph 12. Definitions
As used in this Annex,-
"Cash' means the lawful currency of the United States of America.
"Credit Support Amount, has the meaning specified in Paragraph 3. "Custodian"
has the meaning specified in
Paragraphs 6(b)(i) and 13.
"Delivery Amount' has the meaning specified in Paragraph 3(a),
"Disputing,Party" has the meaning specified in Paragraph 5.
"Distributions' means with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, Regardless of whether the Secured Party has
disposed of that Posted Collateral under paragraph 6(c). Distributions will
not include any item of property acquired by the Secured Party upon any
disposition or liquidation of Posted Collateral or, with Respect to any Posted
Collateral in the form of Cash, any distributions on that collateral, unless
otherwise specified herein.
"Eligible Collateral" means, with respect to a party, the items. if any,
specified as such for that party in Paragraph 13.
'Eligible Credit Support means Eligible Collateral and Other Eligible Support.
"Exposure " means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(c)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation).
'Independent Amount' means, with respect to a party, the amount specified as
such for that party in Paragraph 13; if no amount is specified, zero.
'Interest Amount" means, with respect to an Interest Period, the aggregate sum
of the Amounts of interest calculated for each day in that interest period on
the principal amount of Posted Collateral in the form of Cash held by the
secured Party on that day, determined by the secured Party for each such day as
follows:
(x) the amount of that Cash on that; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"Interest Period' means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
'Interest -Rate' means the rate specified in Paragraph 13.
"Local Business Day,', unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
"Minimum Transfer Amount" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"Notification Time' has the meaning specified in Paragraph 13.
"Obligations" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"Other Eligible Support" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Other Posted Support 'means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
'Pledgor' means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
'Posted Collateral" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been transferred to or
received by the Secured Party under this Annex and not Transferred to the
Pledgor pursuant to Paragraph 3(b), 4(d)(E) or 6(d)(i) or released by the
Secured party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.
"Posted Credit Support" means Posted Collateral and Other Posted Support.
"Recalculation Date" means the Valuation Date that gives rise to the dispute
under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs
under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
"Resolution Time" has the meaning specified in Paragraph 13.
'Return Amount" has the meaning specified in Paragraph 3(b).
'Secured Party' means either party, when that Party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) bolds
or is deemed to hold Posted Credit Support
'Specified Condition' means, with respect to a party, any event specified as
such for that party in Paragraph 13. "Substitute Credit Support" has the meaning
specified in Paragraph 4(d)(i).
"Substitution Date has the meaning Specified in Paragraph 4(d)(ii).
"Threshold" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
'Transfer' means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire into one or more bank
accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid OT delivered by
book-entry, payment or delivery in appropriate physical form to the recipient or
its account accompanied by any duly executed instruments of transfer,
assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered by bookentry, the
giving of written instructions to the relevant depository institution or other
entity specified by the recipient, together with a written copy thereof to the
recipient sufficient if complied with to result in a legally effective transfer
of the relevant interest to the recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as specified
in Paragraph 13.
"Valuation Agent" has the meaning specified in Paragraph 13.
"Valuation Date" means each date specified in or otherwise determined pursuant
to Paragraph 13. "Valulation Percentage means, for any item of Eligible
Collateral, the percentage specified in Paragraph 13.
"Valuation Time" has the meaning specified in Paragraph 13.
"Value means for any Valuation Date or other date for which Value is calculated
and subject to Paragraph 5 in the case of a dispute, with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the
applicable Valuation Percentage, if any;
(ii) Posted Collateral that consists of items that are not specified as Eligible
Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in Paragraph
13.
Paragraph 13 to the ISDA Credit Support Annex
BankBoston, N.A. and American Skiing Company
("Party A") ("Party B")
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used
in this Annex means all present and future obligations under this
Agreement or any other contractual arrangement between the Pledgorand
the Secured Party or between the Pledgor and any Affiliate of the
Secured Party.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount and Credit Support Amount.
(A) "Delivery Amount" has the meaning specified in Paragraph 3(a).
(B) "Return Amount" has the meaning specified in Paragraph 3(b).
(C) "Credit Support Amount" has the meaning specified in Paragraph 3.
(D) Addition to Paragraph 3. The following subparagraph (c) is hereby
added to Paragraph 3 of this Annex:
(c) No offset. On any Valuation Date, if (i) each party is required to make a
Transfer under Paragraph 3(a) or (ii) each party is required to make a Transfer
under Paragraph 3(b), then such obligations will not offset each other.
(ii) Eligible Collateral. The following items will qualify as "Eligible
Collateral" for Party B:
Valuation
Percentage
(A) Cash 100%
(B) negotiable debt obligations issued by the 98% U.S. Treasury Department
having an original maturity
at issuance of not more than one year ("Treasury Bills")
(C) negotiable debt obligations issued by the U.S. Treasury 95% Department
having an original maturity at issuance of more than one year but not more than
10 years ("Treasury Notes")
(D) negotiable debt obligations issued by the 95%
Department having an original
maturity at issuance of more than 10 years
("Treasury Bonds")
(E) Other:
(aa) Agency Securities regardless 95%
of original maturity at issuance
As used herein, "Agency Securities" means negotiable debt obligations
which are fully guaranteed as to both principal and interest by the Federal
National Mortgage Association, the Government National Mortgage Association or
the Federal Home Loan Mortgage Corporation, but shall exclude (i) interest only
and principal only securities and (ii) Collateralized Mortgage Obligations (i.e.
CMOs), Real Estate Mortgage Investment Conduits (i.e. REMICS) and similar
derivative securities.
(bb) Any other securities as may be acceptable to the Secured Party in its sole
discretion with such Valuation Percentage as determined by the Secured Party, in
its sole discretion, at the time such other securities are offered as Eligible
Credit Support by the Pledgor.
(iii) Other Eligible Support. Except as provided above, there shall be
no "Other Eligible Support" for purposes of this Annex.
(iv) Thresholds.
(A) "Independent Amount" means (i) with respect to Party A, zero and (ii) with
respect to Party B and any Transaction, the amount specified as such in the
relevant Confirmation.
(B) "Threshold" means $13,500,000.
(C) "Minimum Transfer Amount" means $ 100,000.
(D) Rounding. The Delivery Amount and the Return Amount will be rounded up and
down, respectively, to the nearest integral multiple of $ 10,000.
(c) Valuation and Timing.
(i) "Valuation Agent' means Party A.
(ii) "Valuation Date" means any Local Business Day.
(iii)"Valuation Time" means the close of business on the Local Business Day
immediately preceding the Valuation Date or date of calculation, as applicable,
provided that the calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "Notification Time' means 11:00 a.m., New York time, on a Local Business
Day.
(d) Conditions Precedent and Secured Party's Right and Remedies. The following
Termination Event(s) will be a "Specified Condition " for the party specified
(that party being the Affected Party if the Termination Event occurs with
respect to that party):
Party A Party B
Illegality [X] [X]
Credit Event Upon Merger [X] [X]
(e) Substitution.
(i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
(ii) Consent. Inapplicable; provided that the Pledgor may only request a
substitution if the amount of Posted Credit Support to be substituted for
exceeds the Minimum Transfer Amount applicable to the Pledgor.
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York time, on the Local
Business Day following the date on which the notice is given that gives
rise to a dispute under Paragraph 5.
(ii) Value- For the purpose of Paragraphs 5(i)(C) and 5(ii), the
Value of Posted Credit Support consisting of (x) Cash will be the face amount
thereof, and (y) securities will be calculated based on the bid quotations of
any generally recognized dealer in the relevant securities (which may include an
affiliate of Party A) and adding thereto any accrued interest (except to the
extent such accrued interest has been Transferred to a party pursuant to this
Annex or included in the applicable bid quotation), in each case (x) and (y),
multiplied by the applicable Valuation Percentage.
(iii) Alternative. The provisions of Paragraph 5 will apply.
(g) Holding and Using Posted Collateral.
(i) Eligibility to Hold Posted Collateral; Custodians. Party A will be
entitled to hold Posted Collateral pursuant to Paragraph 6(b) without
using a Custodian provided Party A is not a Defaulting Party.
(ii) Use of Posted Collateral The provisions of Paragraph 6(c) will
apply to both parties.
(h) Distributions and Interest Amount.
(i) Interest Rate. The "Interest Rate" for any day will be zero.
(ii) Transfer of interest Amount. The provisions of Paragraph 6(d)(ii) will not
apply.
(i) Additional Representation(s).
Not applicable.
Other Eligible Support and Other Posted Support.
(i) "Value" with respect to Other Eligible Support and Other Posted
Support shall not be applicable.
(ii) "Transfer' with respect to Other Eligible Support and Other Posted
Support shall not be applicable.
(k) Demands and Notices:
All demands, specifications and notices under this Annex will be made
pursuant to the Notices Section of this Agreement, unless otherwise
specified here:
Party A: 100 Federal Street
Boston, Massachusetts 021 1 0
Attention: Derivatives Operations - Collateral
(Mail Stop 01-12-02)
Fax No.: (617) 434-0505
Party B: Sunday River Road, P.O. Box 450
Bethel, Maine 04217
Attention: Mr. Thomas M. Richardson, Sr. Vice President
Fax No.: (207) 824-5158
(1) Other Provisions.
(i) Severability. Any provision of this Annex which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(ii) Successors. This Annex and all obligations of the Pledgor hereunder
shall be binding upon the successors and assigns of the Pledgor and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party and its respective successors and assigns.
(iii)No Third Party Rights. This Annex has been and is made solely for the
benefit of Party A and Party B and their respective successors and assigns, and
no other person or entity shall acquire or have any right under or by virtue of
this Annex.
(iv) Local Business Day. Notwithstanding anything to the contrary contained
in this Annex or the Agreement, the term Local Business Day shall, in addition
to any other meaning specified herein, also include a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) in New York, New York and Boston, Massachusetts.
(v) Agreement as to Single Secured Party and Pledgor. Party A and Party B
agree that, notwithstanding anything to the contrary in the recital to this
Annex, Paragraph l(b) or in Paragraph 2 or the definitions in Paragraph 12, (A)
the term "Secured Party" as used in this Annex means only Party A, (B) the term
"Pledgor" as used in this Annex means only Party B, (C) only Party B makes the
pledge and grant in Paragraph 2, the acknowledgment in the final sentence of
Paragraph g(a) and the representations in Paragraph 9 and otherwise herein, and
(D) only Party B will be required to make Transfers of Eligible Credit Support
hereunder.
(vi) Liquidation of Equity Collateral.
(x) If the Secured Party wishes to sell any or all Posted Collateral
consisting of equity securities ("Equity Collateral") pursuant to Paragraph 8,
and determines, in its sole and absolute discretion, that it is necessary or
advisable to effect a public registration of all or any of such Equity
Collateral pursuant to the Securities Act of 1933, as amended (or any similar
statutes then in effect) (the "Act"), then Pledgor will, at its own expense:
(A) execute and deliver, and use its best efforts to cause each issuer of the
shares comprising such Equity Collateral (and such issuer's directors and
officers) to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things as may, in the reasonable
judgment of the Secured Party, be necessary or advisable to register the shares
comprising such Equity Collateral under the Act and to cause the related
registration statement to become effective and to remain effective for such
period as may be required by law, and to make all amendments thereto and/or to
the related prospectus that, in the reasonable judgment of the Secured Party,
are necessary or advisable, all in conformity with the Act and the rules and
regulations promulgated thereunder; and
(B) use its best efforts to (1) qualify such shares under, and cause each such
issuer to comply with, the provisions of the securities or "Blue Sky" laws of
any jurisdiction designated by the Secured Party and (2) cause each such issuer
to make available to its security holders, as soon as practicable, an earnings
statement that will satisfy the provisions of Section 11 (a) of the Act.
(y) Notwithstanding anything herein to the contrary, upon an Event of
Default by the Pledgor, the Secured Party may, in its sole and absolute
discretion (subject only to applicable requirements of law), sell all or any of
the Equity Collateral by private sale in such manner and under such
circumstances as the Secured- Party may deem necessary or advisable and
notwithstanding that a registration statement for all or any of such Equity
Collateral could be or shall have been filed under the Act. Without limitation
on the foregoing, the Secured Party may approach and negotiate with a single
possible purchaser to effect such sale and/or require that any such sale
(including one held by auction) be subject to restrictions as to (A) the
financial sophistication and ability of any person permitted to bid or purchase
at such sale, (B) the content of legends to be placed upon any certificates
representing the shares comprising the Equity Collateral sold in such sale,
including restrictions on future transfer thereof, (C) the representations to be
made by each person bidding or purchasing at such sale relating to that person's
access to financial information about the Pledgor, the issuer or the Secured
Party, and such person's intentions as to the holding of the shares comprising
the Equity Collateral so sold for investment, for its own account, and not with
a view to the distribution thereof, and (D) such other matters as the Secured
Party may deem necessary or advisable in order that such sale, notwithstanding
any failure so to register, may be effected in compliance with the Uniform
Commercial Code as in effect in any relevant jurisdiction and other laws
affecting the enforcement of creditors' rights, the Act and all applicable state
securities laws.
IN WITNESS WHEREOF, the parties hereto have executed this Annex on the
respective dates set forth below and with effect from the date of the Agreement
unless otherwise indicated in Paragraph 13(a).
BankBoston, N.A. American Skiing Company
By: /s/ Robert G. Scott By:/s/ Thomas Richardson
-------------------------- ----------------------------
Name: Robert G. Scott Name: Thomas Richardson
Title: Managing Director Title: Chief Financial Officer
Approval (for BankBoston, N.A. internal purposes only):
[GRAPHIC OMITTED]
MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT, dated as of the 19th day of August, 1998("Lease
Agreement") is made at Boston, Massachusetts by and between BancBoston Leasing
Inc. ("Lessor"), a Massachusetts corporation with its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110 and ASC Leasing,
Inc. ("Lessee"), a Maine with its principal place of business at Sunday River
Access Road, Bethel, Maine 04217.
IN CONSIDERATION OF the mutual promises and covenants contained herein,
Lessor and Lessee hereby agree as follows:
1. Property Leased. At the request of Lessee and subject to the terms
and conditions of this Lease Agreement, Lessor shall lease to Lessee and Lessee
shall lease from Lessor such personal property ("Equipment") as may be mutually
agreed upon by Lessor and Lessee. The Equipment shall be selected by or ordered
at the request of Lessee, identified in one or more equipment schedules
substantially in the form of Exhibit A attached hereto ("Equipment Schedule")
and accepted by Lessee in one or more certificates of acceptance ("Certificate
of Acceptance") in the form of Exhibit B attached hereto. Each Equipment
Schedule executed by Lessor and Lessee and each Certificate of Acceptance
executed by Lessee shall constitute a part of this Lease Agreement.
2. Certain Definitions.
2.1 The "Acquisition Cost" shall mean the total cost of the Equipment
paid by Lessor as set forth in the applicable Equipment Schedule.
2.2 The "Commencement Date" shall mean the date on which the Equipment
identified in the applicable Equipment Schedule is accepted and placed in
service by Lessee under this Lease Agreement. Each Commencement Date shall be
evidenced by the Certificate of Acceptance applicable to such Equipment
Schedule.
2.3 The "Rent Start Date" shall mean either (i) the first day of the
month following the month in which the Commencement Date occurs or (ii) the
Commencement Date, if the Commencement Date occurs on the first day of the
month.
2.4 The "Monthly Rent" shall mean the amount set forth in the
applicable Equipment Schedule as Monthly Rent for the Equipment identified on
such Equipment Schedule.
2.5 The "Daily Rent" shall mean one-thirtieth (1/30) of the Monthly
Rent.
2.6 The words "herein", "hereof", and "hereunder" shall refer to this
Lease Agreement as a whole and not to any particular section. All other
capitalized terms defined in this Lease Agreement shall have the meanings
assigned thereto.
<PAGE>
3. Initial Term of Lease; Payment of Rent.
3.1 The term of lease for the Equipment ("Initial Term") shall begin on
the Commencement Date set forth in the applicable Certificate of Acceptance and
shall continue during and until the expiration of the number of full calendar
months set forth in the applicable Equipment Schedule, measured from the Rent
Start Date. The Initial Term may not be cancelled or terminated except as set
forth in Section 10.2 below.
3.2 At the expiration of the Initial Term, Lessor and Lessee may extend
the lease of the Equipment for any period as they may agree upon in writing
("Extended Term") at the then fair market rental value of the Equipment, as
determined in good faith by Lessor.
3.3 Aggregate Daily Rent shall be due and payable by Lessee on the Rent
Start Date in an amount equal to the Daily Rent multiplied by the actual number
of days elapsed from, and including, the Commencement Date to, but excluding,
the Rent Start Date. The Monthly Rent shall be due and payable on the Rent Start
Date and, thereafter on the first day of each month of the Initial Term or any
Extended Term. All Daily Rents and Monthly Rents shall be paid to Lessor at its
office in Boston, Massachusetts.
4. Acceptance of Equipment; Exclusion of Warranties.
4.1 Lessee shall signify its acceptance of the Equipment identified in
the applicable Equipment Schedule by promptly executing and delivering to Lessor
a Certificate of Acceptance. Lessee acknowledges that its execution and delivery
of the Certificate of Acceptance shall conclusively establish, as between Lessor
and Lessee, that the Equipment has been inspected by Lessee, is in good repair
and working order, is of the design, manufacture and capacity selected by
Lessee, and is accepted by Lessee under this Lease Agreement.
4.2 In the event the Equipment is ordered by Lessor from a manufacturer
or supplier at the request of Lessee, Lessor shall not be required to pay the
Acquisition Cost for such Equipment unless and until the applicable Certificate
of Acceptance has been received by Lessor. Lessee hereby agrees to indemnify,
defend and hold Lessor harmless from any liability to any manufacturer or
supplier arising from the failure of Lessee to lease any Equipment which is
ordered by Lessor at the request of Lessee or for which Lessor has assumed an
obligation to purchase.
4.3 Lessor leases the Equipment to Lessee and Lessee leases the
Equipment from Lessor "AS IS" and "WITH ALL FAULTS". Lessee hereby acknowledges
that (i) Lessor is not a manufacturer, supplier or dealer of such Equipment nor
an agent thereof; and (ii) LESSOR HAS NOT MADE, DOES NOT MAKE, AND HEREBY
DISCLAIMS ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT INCLUDING, BUT NOT LIMITED TO, ITS DESIGN, CAPACITY,
CONDITION, MERCHANTABILITY, OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE.
Lessee further acknowledges that Lessor is not responsible for any repairs,
maintenance, service, latent or other defects in the Equipment or in the
operation thereof, or for compliance of any Equipment with requirements of any
laws, ordinances, governmental rules or regulations including, but not limited
to, laws with respect to environmental matters, patent, trademark, copyright or
trade secret infringement, or for any direct or consequential damages arising
out of the use of or inability to use the Equipment.
4.4 Provided no Event of Default, as defined in Section 16 below, has
occurred and is continuing, Lessor agrees to cooperate with Lessee, at the sole
cost and expense of Lessee, in making any claim against a manufacturer or
supplier of the Equipment arising from a defect in such Equipment. At the
request of Lessee, Lessor shall assign to Lessee all warranties on the Equipment
available from any manufacturer or supplier to the full extent permitted by the
terms of such warranties and by applicable law.
5. Ownership; Inspection; Maintenance and Use.
5.1 The Equipment shall at all times be the sole and exclusive property
of Lessor. Any Equipment subject to titling and registration laws shall be
titled and registered by Lessee on behalf of and in the name of Lessor at the
sole cost and expense of Lessee. Lessee shall cooperate with and provide Lessor
with any information or documents necessary for titling and registration of the
Equipment. Upon the request of Lessor, Lessee shall execute any documents or
instruments which may be necessary or appropriate to confirm, to record or to
give notice of the ownership of the Equipment by Lessor including, but not
limited to, financing statements under the Uniform Commercial Code. Lessee, at
the request of Lessor, shall affix to the Equipment, in a conspicuous place, any
label, plaque or other insignia supplied by Lessor designating the ownership of
the Equipment by Lessor.
5.2 The Equipment shall be located at the address specified in the
applicable Equipment Schedule and shall not be removed therefrom without the
prior written consent of Lessor. Lessor, its agents or employees shall have the
right to enter the premises of Lessee, upon reasonable notice and during normal
business hours, for the purpose of inspecting the Equipment.
5.3 Lessee shall pay all costs, expenses, fees and charges whatsoever
incurred in connection with the use and operation of the Equipment. Lessee
shall, at all times and at its own expense, keep the Equipment in good repair
and working order, reasonable wear and tear excepted. Any maintenance contract
required by a manufacturer or supplier for the care and upkeep of the Equipment
shall be entered into by Lessee at its sole cost and expense. Lessee shall
permit the use and operation of the Equipment only by personnel authorized by
Lessee and shall comply with all laws, ordinances or governmental rules and
regulations relating to the use and operation of the Equipment.
6. Alterations and Modifications. Lessee may make, or cause to be made
on its behalf, any improvement, modification or addition to the Equipment with
the prior written consent of Lessor, provided, however, that such improvement,
modification or addition is readily removable without causing damage to or
impairment of the functional effectiveness of the Equipment. To the extent that
such improvement, modification or addition is not so removable, it shall
immediately become the property of Lessor and thereupon shall be considered
Equipment for all purposes of this Lease Agreement.
7. Quiet Enjoyment; No Defense, Set-Offs or Counterclaims.
7.1 Provided no Event of Default, as defined in Section 16 below, has
occurred and is continuing, Lessee shall have the quiet enjoyment and use of the
Equipment in the ordinary course of its business during the Initial Term or any
Extended Term without interruption by Lessor or any person or entity claiming
through or under Lessor.
7.2 Lessee acknowledges and agrees that ANY DAMAGE TO OR LOSS,
DESTRUCTION, OR UNFITNESS OF, OR DEFECT IN THE EQUIPMENT, OR THE INABILITY OF
LESSEE TO USE THE EQUIPMENT FOR ANY REASON WHATSOEVER, SHALL NOT (i) GIVE RISE
TO ANY DEFENSE, COUNTERCLAIM, OR RIGHT OF SET-OFF AGAINST LESSOR, OR (ii) PERMIT
ANY ABATEMENT OR RECOUPMENT OF, OR REDUCTION IN DAILY OR MONTHLY RENT, OR (iii)
RELIEVE LESSEE OF THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS LEASE AGREEMENT
INCLUDING, BUT NOT LIMITED TO, ITS OBLIGATION TO PAY THE FULL AMOUNT OF DAILY
RENT AND MONTHLY RENT, WHICH OBLIGATIONS ARE ABSOLUTE AND UNCONDITIONAL, unless
and until this Lease Agreement is terminated with respect to such Equipment in
accordance with the provisions of Section 10.2 below. Any claim that Lessee may
have which arises from a defect in or deficiency of the Equipment shall be
brought solely against the manufacturer or supplier of the Equipment and Lessee
shall, notwithstanding any such claim, continue to pay Lessor all amounts due
and to become due under this Lease Agreement.
8. Adverse Claims and Interests.
8.1 Except for any liens, claims, mortgages, pledges, encumbrances or
security interests created by Lessor, Lessee shall keep the Equipment, at all
times, free and clear from all liens, claims, mortgages, pledges, encumbrances
and security interests and from all levies, seizures and attachments. Without
limitation of the covenants and obligations of Lessee set forth in the preceding
sentence, Lessee shall immediately notify Lessor in writing of the imposition of
any prohibited lien, claim, levy or attachment on or seizure of the Equipment at
which time Lessee shall provide Lessor with all relevant information in
connection therewith.
8.2 Lessee agrees that the Equipment shall be and at all times shall
remain personal property. Accordingly, Lessee shall take such steps as may be
necessary to prevent any person from acquiring, having or retaining any rights
in or to the Equipment by reason of its being affixed or attached to real
property.
9. Indemnities; Payment of Taxes.
9.1 Lessee hereby agrees to indemnify, defend and hold harmless Lessor,
its agents, employees, successors and assigns from and against any and all
claims, actions, suits, proceedings, costs, expenses, damages and liabilities
whatsoever arising out of or in connection with the manufacture, ordering,
selection, specifications, availability, delivery, titling, registration,
rejection, installation, possession, maintenance, ownership, use, leasing,
operation or return of the Equipment including, but not limited to, any claim or
demand based upon any STRICT OR ABSOLUTE LIABILITY IN TORT and upon any
infringement or alleged infringement of any patent, trademark, trade secret,
license, copyright or otherwise. All costs and expenses incurred by Lessor in
connection with any of the foregoing including, but not limited to, reasonable
legal fees, shall be paid by Lessee on demand.
9.2 Lessee hereby agrees to indemnify, defend and hold Lessor harmless
against all Federal, state and local taxes, assessments, licenses, withholdings,
levies, imposts, duties, assessments, excise taxes, registration fees and other
governmental fees and charges whatsoever, which are imposed, assessed or levied
on or with respect to the Equipment or its use or related in any way to this
Lease Agreement ("Tax Assessments") except for taxes on or measured by the net
income of Lessor determined substantially in the same manner as under the
Internal Revenue Code of 1986, as amended. Lessee shall file all returns,
reports or other such documents required in connection with the Tax Assessments
and shall provide Lessor with copies thereof. If, under local law or custom,
Lessee is not authorized to make the filings required by a taxing authority,
Lessee shall notify Lessor in writing and Lessor shall thereupon file such
returns, reports or documents. Without limiting any of the foregoing, Lessee
shall indemnity, defend and hold Lessor harmless from all penalties, fines,
interest payments, claims and expenses including, but not limited to, reasonable
legal fees, arising from any failure of Lessee to comply with the requirements
of this Section 9.2.
9.3 The obligations and indemnities of Lessee under this Section 9 for
events occurring or arising during the Initial Term or any Extended Term shall
continue in full force and effect, notwithstanding the expiration or other
termination of this Lease Agreement.
10. Risk of Loss; Loss of Equipment.
10.1 Lessee hereby assumes and shall bear the entire risk of loss for
theft, damage, seizure, condemnation, destruction or other injury whatsoever to
the Equipment from any and every cause whatsoever. Such risk of loss shall be
deemed to have been assumed by Lessee from and after such risk passes from the
manufacturer or supplier by agreement or pursuant to applicable law.
10.2 In the event of any loss, seizure, condemnation or destruction of
the Equipment or damage to the Equipment which cannot be repaired by Lessee,
Lessee shall immediately notify Lessor in writing. Within thirty (30) days of
such notice, during which time Lessee shall continue to pay Monthly Rent, Lessee
shall, at the option of Lessor, either (i) replace the Equipment with equipment
of the same type and manufacture and in good repair, condition and working
order, transfer title to such equipment to Lessor free and clear of all liens,
claims and encumbrances, whereupon such equipment shall be deemed Equipment for
all purposes of this Lease Agreement, or (ii) pay to Lessor an amount equal to
the present value of both the aggregate of the remaining unpaid Monthly Rents
and the anticipated residual value of the Equipment plus any other costs
actually incurred by Lessor. Lessor and Lessee agree that the residual value of
the Equipment at the expiration of the Initial Term is reasonably anticipated to
be not less than twenty (20) percent of the Acquisition Cost of the Equipment.
The present value shall be determined by discounting the aggregate of the
remaining unpaid Monthly Rents and the anticipated residual value of the
Equipment to the date of payment by Lessee at the rate of five (5) percent per
annum. When and as requested by Lessor, Lessee shall also pay to Lessor amounts
due pursuant to Section 18 below, if any, arising as a result of the loss,
seizure, replacement, condemnation or destruction of the Equipment. Any
insurance or condemnation proceeds received by Lessor shall be credited to the
obligation of Lessee under this Section 10.2 and the remainder of such proceeds,
if any, shall be paid to Lessee by Lessor in full compensation for the loss of
the leasehold interest in the Equipment by Lessee.
10.3 Upon any replacement of or payment for the Equipment as provided
in Section 10.2 above, this Lease Agreement shall terminate only with respect to
the Equipment so replaced or paid for, and Lessor shall transfer to Lessee title
only to such Equipment "AS IS," "WITH ALL FAULTS", and WITH NO WARRANTIES
WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE.
Lessee shall pay any sales or use taxes due on such transfer.
11. Insurance.
11.1 Lessee shall keep the Equipment insured against all risks of loss
or damage from every cause whatsoever occurring during the Initial Term, or any
Extended Term for an amount not less than the higher of the full replacement
value of the Equipment or the aggregate of unpaid Daily Rent and Monthly Rent
for the balance of the Initial Term, or the Extended Term. Lessee shall also
carry public liability insurance, both personal injury and property damage,
covering the Equipment, and Lessee shall be liable for any deductible portions
of all required insurance.
11.2 All insurance required under this Section 11 shall name Lessor as
additional insured and loss payee. Such insurance shall also be with such
insurers and shall be in such forms and amounts as are satisfactory to Lessor.
All applicable policies shall provide that no act, omission or breach of
warranty by Lessee shall give rise to any defense against payment of the
insurance proceeds to Lessor. Lessee shall pay the premiums for such insurance
and, at the request of Lessor, deliver to Lessor duplicates of such policies or
other evidence satisfactory to Lessor of such insurance coverage. In any event,
Lessee shall provide Lessor with endorsements upon the policies issued by the
insurers which evidence the existence of insurance coverage required by this
Section 11 and by which the insurers agree to give Lessor written notice at
least twenty (20) days prior to the effective date of any expiration,
modification, reduction, termination or cancellation of any such policies.
11.3 The proceeds of insurance required under this Section 11 and
payable as a result of loss or damage to the Equipment shall be applied as set
forth in Section 10.2 above. Upon the occurrence of an Event of Default as
defined in Section 16 below, Lessee hereby irrevocably appoints Lessor as its
attorney-in-fact, which power shall be deemed coupled with an interest, to make
claim for, receive payment of, execute and endorse all documents, checks or
drafts received in payment for loss or damage under any insurance policies
required by this Section 11.
11.4 Notwithstanding anything herein, Lessor shall not be under any
duty to examine any evidence of insurance furnished hereunder, or to ascertain
the existence of any policy or coverage, or to advise Lessee of any failure to
comply with the provisions of this Section 11.
12. Surrender To Lessor. Immediately upon the expiration of the Initial
Term or any Extended Term or at any other termination of this Lease Agreement,
Lessee shall surrender the Equipment to Lessor in good repair and working order,
reasonable wear and tear excepted, by assembling and delivering the Equipment,
ready for shipment, to a place or carrier, as Lessor may designate, within the
state in which the Equipment was originally delivered to Lessee or to which the
Equipment was thereafter moved with the written consent of Lessor. All costs of
removal, assembly, packing and delivery of such Equipment to the place
designated by Lessor shall be borne by Lessee.
13. Fair Market Value Purchase Option. Lessor hereby grants to Lessee
the option to purchase all, but not less than all, Equipment set forth on any
Equipment Schedule at the expiration of the applicable Initial Term or Extended
Term. Any such purchase shall be for cash in an amount equal to the then fair
market value of such Equipment, as determined in good faith by Lessor. This
purchase option may be exercised by Lessee, provided that no Event of Default,
as defined in Section 16 below, has occurred and is continuing. Lessee shall
notify Lessor in writing of its intention to exercise its purchase option at
least thirty (30) days prior to the expiration of the Initial Term or any
Extended Term. Upon payment of the fair market value by Lessee to Lessor, Lessor
shall transfer title to the Equipment to Lessee "AS IS", "WITH ALL FAULTS", and
WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE.
14. Financial Statements. Lessee shall annually, within ninety (90)
days after the close of the fiscal year for Lessee, furnish to Lessor financial
statements of Lessee, including a balance sheet as of the close of such year and
statements of income and retained earnings for such year, prepared in accordance
with generally accepted accounting principles, consistently applied from year to
year, and certified by independent public accountants for Lessee. If requested
by Lessor, Lessee shall also provide quarterly financial statements of Lessee,
similarly prepared for each of the first three quarters of each fiscal year,
certified (subject to normal year-end audit adjustments) by the chief financial
officer of Lessee and furnished to Lessor within sixty (60) days following the
end of the quarter, and such other financial information as may be reasonably
requested by Lessor.
15. Delayed Payment Charge. Lessee shall pay to Lessor interest upon
the amount of any Daily Rent, Monthly Rent or other sums not paid by Lessee when
due and owing under this Lease Agreement, from the due date thereof until paid,
at the rate of one and one half (1-1/2) percent per month, but if such rate
violates applicable law, then the maximum rate of interest allowed by such law.
<PAGE>
16. Default.
16.1 The occurrence of any of the following events shall constitute an
event of default ("Event of Default") under this Lease Agreement.
(a) Lessee fails to pay any Daily Rent or any Monthly Rent
when due and such failure to pay continues for ten (10) consecutive
days; or
(b) Lessee fails to pay any other sum required hereunder, and
such failure continues for a period of ten (10) days following written
notice from Lessor; or
(c) Lessee fails to maintain the insurance as required by
Section 11 above and such failure continues for ten (10) days after
written notice from Lessor; or
(d) Lessee violates or fails to perform any other term,
covenant or condition of this Lease Agreement or any other document,
agreement or instrument executed pursuant hereto or in connection
herewith, which failure is not cured within thirty (30) days after
written notice from Lessor; or
(e) Lessee ceases to exist or terminates its independent
operations by reason of any discontinuance, dissolution, liquidation,
merger, sale of substantially all of its assets, or otherwise ceases
doing business as a going concern; or
(f) Lessee (i) applies for or consents to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar official for itself or for all or a substantial
part of its property, (ii) is generally not paying its debts as such
debts become due, (iii) makes a general assignment for the benefit of
its creditors, (iv) commences a voluntary case under the United States
Bankruptcy Code, as now or hereafter in effect, seeking liquidation,
reorganization or other relief with respect to itself or its debts, (v)
files a petition seeking to take advantage of any other law providing
for the relief of debtors, (vi) takes any action under the laws of its
jurisdiction of incorporation or organization similar to any of the
foregoing, or (vii) takes any corporate action for the purpose of
effecting any of the foregoing; or
(g) A proceeding or case is commenced, without the application
or consent of Lessee, in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, dissolution, winding up of Lessee
or composition or readjustment of the debts of Lessee, (ii) the
appointment of a trustee, receiver, custodian, liquidator or similar
official for Lessee or for all or any substantial part of its assets,
or (iii) similar relief with respect to Lessee under any law providing
for the relief of debtors; or an order for relief is entered with
respect to Lessee in an involuntary case under the United States
Bankruptcy Code, as now or hereafter in effect, or an action under the
laws of the jurisdiction of incorporation or organization of Lessee,
similar to any of the foregoing, is taken with respect to Lessee
without its application or consent; or
(h) Lessee makes any representation or warranty herein or in
any statement or certificate at any time given in writing pursuant to
or in connection with this Lease Agreement, which is false or
misleading in any material respect; or
(i) defaults under any promissory note, credit agreement, loan
agreement, conditional sales contract, guaranty, lease, indenture,
bond, debenture or other material obligation whatsoever, and a party
thereto or a holder thereof is entitled to accelerate the obligations
of thereunder; or defaults in meeting any of its trade, tax or other
current obligations as they mature, unless such obligations are being
contested diligently and in good faith; or
(j) Any party to any guaranty, letter of credit, subordination
or credit agreement or other undertaking, given for the benefit of
Lessor and obtained in connection with this Lease Agreement, breaches,
fails to continue, contests, or purports to terminate or to disclaim
such guaranty, letter of credit, subordination or credit agreement or
other undertaking; or such guaranty, letter of credit, subordination
agreement or other undertaking becomes unenforceable; or a guarantor of
this Lease Agreement shall die, cease to exist or terminate its
independent operations.
16.2 No waiver by Lessor of any Event of Default shall constitute a
waiver of any other Event of Default or of the same Event of Default at any
other time.
17. Remedies.
17.1 Upon the occurrence of an Event of Default and while such Event of
Default is continuing, Lessor, at its sole option, upon its declaration, and to
the extent not inconsistent with applicable law, may exercise any one or more of
the following remedies:
(a) Lessor may terminate this Lease Agreement whereupon all
rights of Lessee to the quiet enjoyment and use of the Equipment shall
cease;
(b) Whether or not this Lease Agreement is terminated, Lessor
may cause Lessee, at the sole cost and expense of Lessee, to return any
or all of the Equipment promptly to the possession of Lessor in good
repair and working order, reasonable wear and tear excepted. Lessor, at
its sole option and through its employees, agents or contractors, may
peaceably enter upon the premises where the Equipment is located and
take immediate possession of and remove the Equipment, all without
liability to Lessor, its employees, agents or contractors for such
entry. LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO NOTICE AND/OR HEARING PRIOR TO THE REPOSSESSION
OR REPLEVIN OF THE EQUIPMENT BY LESSOR, ITS EMPLOYEES, AGENTS OR
CONTRACTORS;
(c) Lessor may proceed by court action to enforce performance
by Lessee of this Lease Agreement or pursue any other remedy Lessor may
have hereunder, at law, in equity or under any applicable statute, and
recover such other actual damages as may be incurred by Lessor;
(d) Lessor may recover from Lessee damages, not as a penalty
but as liquidation for all purposes and without limitation of any other
amounts due from Lessee under this Lease Agreement, in an amount equal
to the sum of (i) any unpaid Daily Rents and/or Monthly Rents due and
payable for periods prior to the repossession of the Equipment by
Lessor plus any interest due thereon pursuant to Section 15 above, (ii)
the present value of all future Monthly Rents required to be paid over
the remaining Initial Term or any Extended Term after repossession of
the Equipment by Lessor, determined by discounting such future Monthly
Rents to the date of payment by Lessee at a rate of five (5) percent
per annum, and (iii) all costs and expenses incurred in searching for,
taking, removing, storing, repairing, restoring, refurbishing and
leasing or selling such Equipment; or
(e) Lessor may sell, lease or otherwise dispose of any or all
of the Equipment, whether or not in the possession of Lessor, at public
or private sale and with or without notice to Lessee, which notice is
hereby expressly waived by Lessee, to the extent permitted by and not
inconsistent with applicable law. Lessor shall then apply against the
obligations of Lessee hereunder the net proceeds of such sale, lease or
other disposition, after deducting therefrom (i) the present value of
the residual value of the Equipment at the expiration of the Initial
Term, which is anticipated by Lessor and Lessee to be not less than
twenty (20) percent of the Acquisition Cost, such present value to be
determined by discounting the residual value to the date of sale, lease
or other disposition at a rate of five (5) percent per annum, and (ii)
all costs incurred by Lessor in connection with such sale, lease or
other disposition including, but not limited to, costs of
transportation, repossession, storage, refurbishing, advertising or
other fees. Lessee shall remain liable for any deficiency, and any
excess of such proceeds over the total obligations owed by Lessee shall
be retained by Lessor. If any notice of such sale, lease or other
disposition of the Equipment is required by applicable law, ten (10)
days written notice to Lessee shall be deemed reasonable.
17.2 No failure on the part of Lessor to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof. No
single or partial exercise of any right or remedy hereunder shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Each right and remedy provided hereunder is cumulative and not exclusive of any
other right or remedy including, without limitation, any right or remedy
available to Lessor at law, by statute or in equity.
17.3 Lessee shall pay all costs and expenses including, but not limited
to, reasonable legal fees incurred by Lessor arising out of or in connection
with any Event of Default or this Lease Agreement. Lessee shall also be liable
for any amounts due and payable to Lessor under any other provision of this
Lease Agreement including, but not limited to, amounts due and payable under
Section 18 below.
18. Tax Indemnification.
18.1 Lessee represents and warrants that the Equipment is and will
remain, during the entire Initial Term and any Extended Term, property used in a
trade or business or for the production of income within the meaning of Section
167 of the Internal Revenue Code of 1986, as amended ("Code"). Lessee further
acknowledges and agrees that, pursuant to the Code, Lessor or its affiliated
group, as defined in Section 1504 of the Code ("Affiliated Group"), shall be
entitled to deductions for the recovery of the Acquisition Cost of the Equipment
over the recovery period as set forth in the applicable Equipment Schedule,
using the Accelerated Cost Recovery System as provided by Section 168 (b) (1) of
the Code ("ACRS Deductions").
18.2 If as a result of any reason or circumstance whatsoever, except as
specifically set forth in Section 18.3 below, Lessor or its Affiliated Group
shall not be entitled to, shall not be allowed, shall suffer recapture of or
shall lose any ACRS Deductions, then Lessee shall pay to Lessor, upon demand, a
sum to be computed by Lessor in the following manner. Such sum, after deduction
of all federal, state and local income taxes payable by Lessor as a result of
the receipt of such sum, shall be sufficient to restore Lessor or its Affiliated
Group to substantially the same position, on an after-tax basis, as it would
have been in but for the loss of such ACRS Deductions. In making its
computation, Lessor or its Affiliated Group shall Considers but shall not be
limited to, the following factors: (i) the amounts and timing of any net loss of
tax benefits resulting from any such lack of, entitlement to or loss, recapture,
or disallowance of ACRS Deductions but offset by any tax benefits derived from
any depreciation or other capital recovery deductions or exclusions from income
allowed to Lessor or its Affiliated Group with respect to the same Equipment;
(ii) penalties, interest or other charges imposed; (iii) differences in tax
years involved; and (iv) the time value of money at a reasonable rate
determined, in good faith, by Lessor. For purposes of computation only, the
amount of indemnification payments hereunder shall be calculated on the
assumption that Lessor and its Affiliated Group have or will have, in all tax
years involved, sufficient taxable income and the tax liability to realize all
tax benefits and incur all losses of tax benefits at the highest marginal
Federal corporate income tax rate in each year. Upon request, Lessor shall
provide Lessee with the methods of computation used in determining any sum that
may be due and payable by Lessee under this Section 18.
18.3 Lessee shall not be obligated to pay any sums required under this
Section 18 in the event that lack of entitlement to, or loss, recapture or
disallowance of any ACRS Deductions results from one or more of the following
events: (i) a disqualifying disposition due to the sale of the Equipment by
Lessor when no Event of Default, as defined in Section 16 above, has occurred,
(ii) a failure of Lessor or its Affiliated Group to timely claim any ACRS
Deductions for the Equipment in its tax return, and/or (iii) the fact that
Lessor or its Affiliated Group does not have, in any taxable year or years,
sufficient taxable income or tax liability to realize the benefit of any ACRS
Deductions that are otherwise allowable to Lessor or its Affiliated Group.
18.4 The representations, obligations and indemnities of Lessee under
this Section 18 shall continue in full force and effect, notwithstanding the
expiration or other termination of this Lease Agreement.
19. Assignment; Sublease.
19.1 Lessor may sell, assign or otherwise transfer all or any part of
its right, title and interest in and to the Equipment and/or this Lease
Agreement to a third-party assignee, subject to the terms and conditions of this
Lease Agreement including, but not limited to, the right to the quiet enjoyment
of the Equipment by Lessee as set forth in Section 7.1 above. Such assignee
shall assume all of the rights and obligations of Lessor under this Lease
Agreement and shall relieve Lessor therefrom. Thereafter, all references to
Lessor herein shall mean such assignee. Notwithstanding any such sale,
assignment or transfer, the obligations hereunder shall remain absolute and
unconditional as set forth in Section 7.2 above.
19.2 Lessor may also pledge, mortgage or grant a security interest in
the Equipment and assign this Lease Agreement as collateral. Each such pledgee,
mortgagee, lienholder or assignee shall have any and all rights as may be
assigned by Lessor but none of the obligations of Lessor hereunder. Any pledge,
mortgage or grant of security interest in the Equipment or assignment of this
Lease Agreement shall be subject to the terms and conditions hereof including,
but not limited to, the right to the quiet enjoyment of the Equipment by Lessee
as set forth in Section 7.1 above. Lessor, by reason of such pledge, mortgage,
grant of security interest or collateral assignment, shall not be relieved of
any of its obligations hereunder which shall remain absolute and unconditional
as set forth in Section 7.2 above. Upon the written request of Lessor, Lessee
shall acknowledge such obligations the pledgee, mortgagee, lienholder or
assignee.
19.3 LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, SUBLEASE, CONVEY OR
PLEDGE ANY OF ITS INTEREST IN THIS LEASE AGREEMENT OR ANY OF THE EQUIPMENT,
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. Any such sale, transfer,
assignment, sublease, conveyance or pledge, whether by operation of law or
otherwise, without the prior written consent of Lessor, shall be void.
20. Optional Performance By Lessor. If an Event of Default, as defined
in Section 16 above, occurs and is continuing, Lessor in its sole discretion may
pay or perform such obligation in whole or in part, without thereby becoming
obligated to pay or to perform the same on any other occasion or to pay any
other obligation of Lessee. Any payment or performance by Lessor shall not be
deemed to cure any Event of Default hereunder. Upon such payment or performance
by Lessor, Lessee shall pay forthwith to Lessor the amount of such payment or an
amount equal to all costs and expenses of such performance, as well as any
delayed payment charges on such amounts as set forth in Section 15 above.
21. Compliance and Approvals. Lessee warrants and agrees that this
Lease Agreement and the performance by Lessee of all of its obligations
hereunder have been duly authorized, do not and will not conflict with any
provision of the charter or bylaws of Lessee or of any agreement, indenture,
lease or other instrument to which Lessee is a party or by which Lessee or any
of its property is or may be bound. Lessee warrants and agrees that this Lease
Agreement does not and will not require any governmental authorization,
approval, license or consent except those which have been duly obtained and will
remain in effect during the entire Initial Term and any Extended Term.
22. Miscellaneous.
22.1 The section headings are inserted herein for convenience of
reference and are not part of and shall not affect the meaning or interpretation
of this Lease Agreement.
22.2 Any provision of this Lease Agreement which is unenforceable in
whole or in part in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such unenforceability without invalidating any
remaining part or other provision hereof and shall not be affected in any manner
by reason of such enforceability in any other jurisdiction. The validity and
interpretation of this Lease Agreement and the rights and obligations of the
parties hereto shall be governed in all respects by the laws of The Commonwealth
of Massachusetts without giving effect to the conflicts of laws provisions
thereof.
22.3 This Lease Agreement, including all Equipment Schedules and
Certificates of Acceptance, constitutes the entire agreement between Lessor and
Lessee. Lessor and Lessee agree that this Lease Agreement shall not be amended,
altered or changed except by a written agreement signed by the parties hereto.
LESSEE ACKNOWLEDGES THAT THERE HAVE BEEN NO REPRESENTATIONS, EXPRESS OR IMPLIED,
BY LESSOR OTHER THAN AS SET FORTH HEREIN AND LESSEE EXPRESSLY CONFIRMS THAT IT
HAS NOT RELIED UPON ANY REPRESENTATIONS BY LESSOR, EXCEPT THOSE SET FORTH
HEREIN, AS A BASIS FOR ENTERING INTO THIS LEASE AGREEMENT.
22.4 Any notice required to be given by Lessee or Lessor hereunder
shall be deemed adequately given if sent by registered or certified mail, return
receipt requested, to the other party at their respective addresses stated
herein or at such other place as either party may designate in writing to the
other.
22.5 Lessee agrees to execute and deliver such additional documents and
to perform such further acts as may be reasonably requested by Lessor in order
to carry out and effectuate the purposes of this Lease Agreement. Upon the
written request of Lessor, Lessee further agrees to execute any instrument
necessary for filing or recording this Lease Agreement or to confirm the
ownership of the Equipment by Lessor. Lessor is hereby authorized to insert in
any Equipment Schedule the serial numbers of the Equipment and other identifying
marks or similar information and to sign, on behalf of Lessee, any Uniform
Commercial Code financing statements.
22.6 This Lease Agreement cannot be cancelled or terminated except as
expressly provided herein.
22.7 Whenever the context of this Lease Agreement requires, the
singular includes the plural and the plural includes the singular. Whenever the
word Lessor is used herein, it includes all assignees and successors in interest
of Lessor. If more than one Lessee are named in this Lease Agreement, the
liability of each shall be joint and several.
22.8 All agreements, indemnities, representations and warranties of
Lessee made herein and all rights and remedies of Lessor shall survive the
expiration or other termination of this Lease Agreement, whether or not
expressly provided herein.
22.9 Any waiver of any power, right, remedy or privilege of Lessor
hereunder shall not be effective unless in writing signed by Lessor.
22.10 This Lease Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee, each by its duly authorized
officer or agent, have duly executed and delivered this Lease Agreement, which
is intended to take effect as a sealed instrument, as of the day and year first
written above.
Accepted at Boston, Massachusetts
BANCBOSTON LEASING INC. ASC Leasing, Inc.
By: /s/ illegible By:/s/ Christopher E. Howard
- ---------------------------------- -----------------------------
Title: Title: Senior Vice President
PURCHASE AND DEVELOPMENT AGREEMENT
by and among
AMERICAN SKIING COMPANY
("Seller")
AMERICAN SKIING COMPANY RESORT PROPERTIES, INC.
("Owner")
And
MARRIOTT OWNERSHIP RESORTS, INC.
("Purchaser")
<PAGE>
TABLE OF CONTENTS
ARTICLE I......................................................................2
DEFINITIONS.................................................................2
1.0 DEFINITIONS..........................................................2
ARTICLE II.....................................................................2
PURCHASE AND SALE OF DEVELOPMENT RIGHTS.....................................2
2.1 INTENT OF THE PARTIES................................................2
2.2 PURCHASE AND SALE....................................................2
2.3 PURCHASE PRICE.......................................................3
2.4 CLOSING..............................................................3
ARTICLE III....................................................................3
PURCHASE AND SALE OF REAL PROPERTY..........................................3
3.1 PURCHASE AND SALE OF REAL PROPERTY...................................3
3.2 PURCHASE PRICE.......................................................3
3.3 CLOSINGS.............................................................3
ARTICLE IV.....................................................................3
CONSIDERATION...............................................................3
4.1 PURCHASE PRICE.......................................................3
4.2 PAYMENT OF PURCHASE PRICE............................................3
4.3 ROYALTY FEE..........................................................4
4.4 COLLATERALIZING THE PURCHASE PRICE...................................6
ARTICLE V......................................................................8
CO-DEVELOPMENT AGREEMENT....................................................8
5.1 CO-DEVELOPMENT RELATIONSHIP GENERALLY................................8
5.2 MARKETING AND DEVELOPMENT............................................9
5.3 RESORT PROGRAMS.....................................................16
ARTICLE VI....................................................................17
SURVEY.....................................................................17
6.1 SURVEY..............................................................17
ARTICLE VII...................................................................17
TITLE......................................................................17
7.1 TITLE COMMITMENT....................................................17
7.2 TITLE POLICY........................................................18
ARTICLE VIII..................................................................19
POSSESSION, PRORATIONS AND CLOSING EXPENSES................................19
8.1 POSSESSION..........................................................19
8.2 PRORATIONS..........................................................19
8.3 CLOSING EXPENSES....................................................19
ARTICLE IX....................................................................20
AFFIRMATIVE COVENANTS......................................................20
9.1 TRANSACTIONS AND ENCUMBRANCES AFFECTING THE DEVELOPMENT RIGHTS
OF THE REAL PROPERTY................................................20
9.2 PURCHASER'S ACCESS..................................................20
9.3 OTHER AGREEMENTS....................................................21
9.4 TAXES...............................................................21
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ARTICLE X.....................................................................21
REPRESENTATIONS OF SELLER AND OWNER........................................21
10.1 REPRESENTATIONS OF SELLER AND OWNER.................................21
10.2 SELLER'S AND OWNER'S COVENANT.......................................24
10.3 CONDITIONS PRECEDENT TO SELLER/OWNER OBLIGATIONS TO CLOSE...........24
ARTICLE XI....................................................................25
ENVIRONMENTAL MATTERS......................................................25
11.1 ENVIRONMENTAL REPRESENTATIONS.......................................25
11.2 ENVIRONMENTAL INDEMNITY.............................................26
11.3 NO NOTICES..........................................................26
11.4 ENVIRONMENTAL ASSESSMENT............................................26
ARTICLE XII...................................................................27
REPRESENSTATIONS OF PURCHASER..............................................27
12.1 REPRESENTATIONS OF PURCHASER........................................27
ARTICLE XIII..................................................................27
CONDITIONS PRECEDENT, REMEDIES.............................................27
13.1 CONDITIONS PRECEDENT TO CLOSING.....................................27
13.2 PURCHASER'S RIGHTS AND REMEDIES IN EVENT OF NON-SATISFACTION OF
CONDITIONS PRECEDENT................................................29
13.3 PURCHASER'S REMEDIES................................................30
13.4 SELLER'S AND OWNER'S SOLE AND EXCLUSIVE REMEDY......................31
13.5 NOTICE OF DEFAULT AND OPPORTUNITY TO CURE...........................32
ARTICLE XIV...................................................................32
CROSS DEFAULT..............................................................32
14.1 CROSS DEFAULT.......................................................32
ARTICLE XV....................................................................33
BROKERAGE..................................................................33
15.1 BROKERAGE...........................................................33
ARTICLE XVI...................................................................33
CASUALTY AND CONDEMNATION..................................................33
16.1 CASUALTY AND CONDEMNATION...........................................33
ARTICLE XVII..................................................................34
CLOSING....................................................................34
17.1 CLOSING.............................................................34
17.2 SELLER'S/OWNER'S CLOSING DOCUMENTS..................................35
17.3 APPROVAL OF CLOSING DOCUMENTS.......................................36
17.4 PURCHASER'S CLOSING DOCUMENTS.......................................36
ARTICLE XVIII.................................................................37
CONTEMPLATED USE OF THE REAL PROPERTY......................................37
18.1 CONTEMPLATED USE OF THE REAL PROPERTY...............................37
ARTICLE XIX...................................................................37
NOTICES....................................................................37
19.1 NOTICES.............................................................37
ARTICLE XX....................................................................38
ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS...................................38
20.1 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS............................38
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ARTICLE XXII..................................................................38
NO THIRD PARTY BENEFITS AND ASSIGNMENT.....................................38
21.1 NO THIRD PARTY BENEFITS.............................................38
21.2 ASSIGNMENT..........................................................38
ARTICLE XXII..................................................................39
INCOME TAXES...............................................................39
22.1 FEDERAL WITHHOLDING.................................................39
22.2 DISCLOSURE TO TAXING AUTHORITIES....................................39
ARTICLE XXIII.................................................................39
EVENTS OF DEFAULT..........................................................39
23.1 EVENTS OF DEFAULT...................................................39
ARTICLE XXIV..................................................................40
MISCELLANEOUS..............................................................40
24.1 FURTHER ASSURANCES..................................................40
24.2 SURVIVAL AND BENEFIT................................................40
24.3 INTERPRETATION......................................................40
24.4 DISCREPANCY IN DESCRIPTIONS.........................................41
24.5 PUBLICITY...........................................................41
ARTICLE XXV...................................................................42
OFFER AND ACCEPTANCE.......................................................42
25.1 OFFER AND ACCEPTANCE................................................42
ARTICLE XXVI..................................................................42
MEMORANDUM OF CONTRACT.....................................................42
26.1 RECORDATION OF MEMORANDUM OF CONTRACT...............................42
ARTICLE XXVII.................................................................42
RESTRICTIONS ON COMPETITION................................................42
27.1 RESTRICTIONS........................................................42
ARTICLE XXVIII................................................................44
FUTURE AMENDMENTS..........................................................44
28.1 FUTURE AMENDMENTS...................................................44
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PURCHASE AND DEVELOPMENT AGREEMENT
This Purchase and Development Agreement ("Contract") is entered into as
of the 22nd day of July, 1998 by and among AMERICAN SKIING COMPANY, a Maine
corporation having an office at Sunday River Road, Bethel, Maine 04217
("Seller"), and AMERICAN SKIING COMPANY RESORT PROPERTIES, INC., a Maine
corporation having an office at Sunday River Road, Bethel, Maine 04217 ("Owner")
and MARRIOTT OWNERSHIP RESORTS, INC., a Delaware corporation having an office at
6649 Westwood Boulevard, Suite 500, Orlando, Florida 32821 ("Purchaser").
RECITALS
WHEREAS, Seller is the parent company of Owner and has acquired and/or
developed numerous properties throughout the United States which it operates as
premier resorts, known primarily, but not exclusively, as major ski areas (the
"Seller Resorts");
WHEREAS, Owner, a wholly owned subsidiary of Seller, is (or prior to
any conveyance hereunder, will be) the fee title Owner of the Real Property;
WHEREAS, Purchaser is a company primarily engaged in the development,
sales and marketing and operation of resort properties in which vacation
ownership or timeshare interests are sold;
WHEREAS, Seller, Owner and Purchaser desire to enter into an
arrangement whereby Seller and Owner will sell, and Purchaser will purchase, the
right and opportunity to develop resorts, to be sold to third parties on a
vacation ownership basis, at specified "ski on/ski off" locations at specified
Seller Resorts currently owned by Seller or Owner, pursuant to the terms of this
Contract. This right and opportunity to develop specified sites is defined more
fully in Exhibit B, and is referred to herein as the Development Rights;
WHEREAS, as part of the Development Rights conveyed by this agreement,
Owner is granting to Purchaser the right to purchase five (5) identified "ski
on/ski off" properties (described in detail under the definition of Real
Property set forth in Exhibit B and generally described in Exhibit A hereto)
from the Owner as vacation ownership sites to be developed by Purchaser. In
addition to purchase rights pertaining to the specifically identified
properties, the Development Rights also include the right to acquire and develop
additional parcels on the other Seller Resorts currently owned, or to be
acquired by Seller or Owner or their designee, as more particularly set forth
herein;
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WHEREAS, the parties hereto desire to enter into a further arrangement
whereby each party will market and promote their respective products at
locations owned and operated by the other party, including but not limited to,
the areas around the Real Property, to the extent owned or operated by Seller
and/or Owner, subject to the terms and limited to the extent expressly set forth
herein;
WHEREAS, the parties hereto further desire to enter into a long term
relationship relating to the future development of suitable properties and the
sale and marketing of interests therein, both as relates to their respective
products as well as the products of the other parties; and
WHEREAS, Purchaser contemplates the development and construction on
each parcel included within the Real Property of a minimum of two hundred (200)
residential vacation ownership Units.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, agreements, covenants and conditions herein
contained, and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, Seller, Owner and Purchaser agree as
follows:
ARTICLE I
DEFINITIONS
1.0 Definitions. See Exhibit B attached hereto and made a part hereof.
ARTICLE II PURCHASE AND SALE OF DEVELOPMENT RIGHTS 2.1 Intent of the Parties.
The transaction embodied herein contemplates a relationship among Seller, Owner
and Purchaser continuing for the Term of this Agreement, including any and all
extensions thereof. While that relationship shall not be interpreted or deemed
to create a partnership or joint venture arrangement, there is a continuing
expectation of mutual cooperation, effort, obligation, benefit and reward
arising out of that relationship.
2.2 Purchase and Sale. Subject to the conditions and on the terms contained in
this Contract, on the Closing Date, Seller and Owner hereby agree to sell,
convey and transfer the Development Rights, as defined in Exhibit B, to
Purchaser and Purchaser hereby agrees to purchase such Development Rights, from
2
<PAGE>
Seller and Owner. Conveyance and transfer of the Development Rights at Closing
shall be by an Assignment of Development Rights (in the form of a recorded
Memorandum of this Contract, or similarly titled instrument), which shall
include covenants reflecting Purchaser's interest, which Assignment of
Development Rights (or other document of similar purpose and intent) shall be
recorded against each of the Real Property parcels as well as each of the Seller
Resorts. The form of Assignment of Development Rights (Memorandum of Contract)
shall be substantially as set forth on Exhibit C attached hereto and made a part
hereof.
2.3 Purchase Price. The total combined purchase price (the "Combined Purchase
Price") to be paid to Seller and Owner by Purchaser for the Development Rights
and the Real Property shall be as set forth in Article IV payable and to be
applied as set forth in said Article.
2.4 Closing. The Closing Date for the acquisition of the Development Rights
shall be as defined in Exhibit B to this Contract.
ARTICLE III PURCHASE AND SALE OF REAL PROPERTY
3.1 Purchase and Sale of Real Property. Subject to the conditions and on the
terms contained in this Contract, Seller and Owner hereby agree to sell, convey
and transfer unto the Purchaser fee title absolute to the Real Property as
identified in Exhibit A and as defined in Exhibit B. Each parcel shall be
conveyed by a recordable special warranty deed, subject only to (i) the
Permitted Exceptions and (ii) the restrictions on development set forth in
Article XXVII of this Contract, ("Deed").
3.2 Purchase Price. The Purchase Price for the Real Property shall be the amount
set forth in Article IV of this Contract.
3.3 Closings. The closings on the conveyance and transfer of title to the
individual parcels of the Real Property (collectively referred to herein as the
Conveyance Dates) shall be as set forth in Article 17.1 hereof.
ARTICLE IV
CONSIDERATION
4.1 Purchase Price. The Combined Purchase Price to be paid to Seller/Owner by
Purchaser for the Development Rights and the Real Property shall be (a) Eighteen
Million Dollars ($18,000,000) (the "Fixed Purchase Price"), and (b) the Royalty
Fee (as defined herein), and each shall be payable and applied as set forth
below.
3
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4.2 Payment of Fixed Purchase Price. The Fixed Purchase Price for the
Development Rights inclusive of the Real Property shall be paid by Purchaser to
Seller as follows: At Closing, Purchaser shall (a) make a cash payment of one
million six hundred thousand dollars ($1,600,000) (which may be made by check or
wire transfer, at Seller's election), and (b) execute and deliver to Seller a
full recourse promissory note evidencing a debt of six million four hundred
thousand dollars ($6,400,000) (the "Note"). The Note will be due and payable in
full on July 31, 2003 (the "Maturity Date"). Until the Maturity Date, the
interest on the debt will accrue at the rate equal to the applicable U.S.
government rate paid on Five (5) Year Treasury Notes on the Closing Date. Except
for as otherwise provided herein, or as otherwise set forth in the Note, no
payment of interest or principal shall be due on the Note prior to the Maturity
Date. The Note shall be substantially as set forth on Exhibit D attached hereto
and made a part hereof.
The Development Rights include, among other rights, the right to
acquire the Real Property. The Combined Purchase Price for all five (5) parcels
comprising the Real Property, identified in Exhibit A and the Development Rights
shall be the Fixed Purchase Price plus the Royalty Fee. Excluded from the Fixed
Purchase Price is any additional amount required in connection with acquiring
the development rights of the Heavenly Valley parcel, as discussed in Section
13.1.1. The amount payable at Closing, ($8,000,000) inclusive of interest on the
Note whether paid or accrued, shall be credited against the total Fixed Purchase
Price as follows: as title to a specific parcel of Real Property is conveyed and
transferred from Owner to Purchaser, the Note shall be prepaid by Purchaser in
an amount not to exceed $3,600,000 in any twelve month period from the date of
the transfer of the first parcel of Real Property. Upon repayment of the Note
principal in full, pursuant to the schedule set forth herein, the Purchaser
shall continue to pay the Owner a maximum sum per annum not to exceed $3,600,000
until an aggregate total of $18,000,000 (exclusive of the Royalty Fee payment)
has been paid for acquisition of the Development Rights and title to all five
(5) parcels comprising the Real Property. It is the intent of the parties that
Purchaser shall pay an average price of $3,600,000 per parcel of Real Property
and a Fixed Purchase Price of $18,000,000 for the Development Rights and all
five (5) Real Property parcels combined. The cash payment made at Closing of
$1,600,000 shall be credited in its entirety, against the amount due from
Purchaser in connection with the acquisition of the first parcel of Real
Property, thereby reducing the initial pay-down on the Note to $2,000,000.
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4.3.Royalty Fee. (1) In addition to the Fixed Purchase Price as set forth in
this Article, Purchaser shall pay to Seller a Royalty Fee equal to three percent
(3%) of the Gross Receipts from the initial sale (excluding rescinded sales) of
Purchaser Timeshare Interests in the Units sold at the Real Property, including
any additional properties owned by Seller or Owner which, by future amendment,
or by purchase by Purchaser pursuant to the provisions of this Contract, become
added to the parcels comprising the Real Property, become subject to this
Contract ("Royalty Fee"). Payment of the appropriate Royalty Fee amount shall be
made on a semi-annual basis, within sixty (60) days of the conclusion of
Purchaser's semi-annual accounting period at each of the parcels comprising part
of the Real Property. Such payment shall be based on Gross Receipts resulting
from actually concluded (closed) unrescinded, initial sales transactions. Any
pending contract deposits or sales down-payments for unclosed transactions, or
amounts refunded by Purchaser to the buyer of a Timeshare Interest, for any
reason, in the usual and ordinary course of Purchaser's business, shall be
excluded from the gross, post-closing receipts realized by Purchaser from closed
sales of Purchaser Timeshare Interests at the Real Property, and shall therefore
not constitute amounts to which Seller or Owner shall be entitled in whole or in
any part. Purchaser shall be entitled to redact from such records the names and
addresses (and any other information identifying the Timeshare Interest
purchaser) which may appear on such records regarding closed sales.
(2) The term "Gross Receipts" as used herein is hereby defined to mean gross
receipts from gross sales of Purchaser Timeshare Interests located at the Real
Property by Purchaser or its assignees or successors in interest, or by a third
party on Purchaser's behalf, and whether such sales be evidenced by cash, check,
credit, charge account, exchange or otherwise. If any sales and marketing of
Timeshare Interests shall be conducted by any person, firm or corporation other
than Purchaser with respect to the Real Property, then there shall be included
in the Gross Receipts all of the gross sales of such persons in the same manner
and with the same effect as if the business or sales of such departments or
divisions had been conducted by Purchaser itself. No franchise or capital stock
tax and no income or similar tax based upon income or profits as such shall be
deducted from Gross Receipts in any event whatsoever, nor shall any such tax, or
any other tax of any nature, including but not limited to sales tax, be
construed or considered as part of the Gross Receipts upon which the Royalty Fee
shall be calculated. Each charge or sale upon installment or credit shall be
treated as a sale for the full price in the month during which such charge or
sale shall be made irrespective of the time when Purchaser (or its Affiliates,
assignees or successors in interest) shall receive payment (whether full or
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<PAGE>
partial) therefore. Gross Receipts shall include amounts received from the sale
of Purchaser Timeshare Interests through any point based sales program
implemented by Purchaser.
(3) Within forty-five (45) days after the end of each quarter during the term of
this Contract, Purchaser shall furnish to Owner a written statement setting
forth the amount of Gross Receipts for such quarter. Purchaser also agrees that
it will furnish to Owner on or before May 31 of each year an annual statement
showing in all reasonable detail the amount of Gross Receipts relating to the
period ending with Purchaser's most recently completed quarter. Each quarterly
and annual statement required by this Section shall be verified by the project
comptroller of the respective project. If Purchaser is materially delinquent in
furnishing Owner with quarterly statements of Gross Receipts for two (2)
consecutive periods or is delinquent in furnishing Owner the annual statement of
Gross Receipts, any subsequent audit that Owner conducts shall be at Purchaser's
expense.
(4) At its option, Owner may conduct, at any reasonable time upon twenty (20)
days prior written notice to Purchaser, a complete audit of the books and
records of Purchaser and its assignees or successors relating to such Gross
Receipts. Purchaser shall cause such records to be preserved for a period of not
less than three (3) years. In the event that such examination or audit discloses
that Purchaser has understated Gross Receipts by ten percent (10%) or more,
Purchaser agrees to pay to Owner the reasonable cost of such examination or
audit plus any additional Marketing Fee, and all future annual statements of
Gross Receipts for the following two (2) years shall be certified by an
independent certified public accountant. If, on the other hand, the Owner's
audit discloses that the Purchaser's Gross Receipts report was within ten
percent (10%) of the Gross Receipts amount revealed by said audit, then Owner
shall reimburse Purchaser for its costs of the audit or examination.
4.4 Collateralizing the Purchase Price.
A. In order to secure Seller's and Owner's obligations hereunder and in
consideration of the cash payment to be made by Purchaser at the Closing,
Seller and Owner will deliver to Purchaser, at the Closing, the following
documents, in conjunction with an assignment of the stock of Blunder Bay
Development, Inc. (the "Company"), consisting of one thousand (1000) shares
of common stock, as more particularly set forth below:
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(a) share certificates reflecting 1000 shares of stock in the
Company (the "Shares");
(b) an executed stock power in Purchaser's favor;
(c) an assignment of the Seller's or Owner's interest in the
Company, specifically including the right to receive any and all
revenue derived from said interest (which right will not be exercised
until the transfer of the Collateral pursuant to paragraph B of this
Section);
(d) a title report pertaining to the real property owned by the
Company, including a lien search pertaining to the subject stock;
(e) any additional document required herein in relating to this
assignment of stock and;
(f) a Power of Attorney enabling Purchaser to act as Seller's or
Owner's Attorney-In-Fact with respect to any and all additional
actions which may be required to convey the subject stock to the
Purchaser. The foregoing documents are hereinafter collectively
referred to as the "Collateral".
A. Purchaser agrees to hold the Collateral until such time as Purchaser
acquires fee simple title to the first parcel of Real Property; at which time
the Collateral shall be returned to Seller or Owner, together with any releases
necessary to effect the release of Purchaser's interest in the Collateral. If
Purchaser believes, in good faith, that Seller or Owner has failed to satisfy
its obligations under this Contract, in a material respect, then, subject to the
provisions of Section 13.5 hereof, Purchaser shall be permitted to complete the
conveyance of the Collateral, to the Purchaser, whereupon such interest or the
Collateral, as applicable, shall belong to Purchaser. If, however, the Seller or
Owner has returned to the Purchaser, the cash payment made by Purchaser at
Closing (with interest at the maximum rate permitted by applicable law),
together with the Note and a general release of the Purchaser from any and all
liability under the Note, then Purchaser will release and return the Collateral
to the party from whom it was received.
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B. The Company is the fee title owner of a fifty percent (50%) interest in
a parcel of property (more particularly described in the Lease as defined below)
comprising a Seller Resort operated as a ski area, commonly known as Sunday
River in Bethel, Maine. The real property underlying portions of this Seller
Resort is leased by the Company, and the other tenants in common, to Sunday
River Skiway Corporation ("SRSC") a Maine corporation which is a wholly owned
subsidiary of the Seller, pursuant to a lease agreement dated October 15, 1980
between the predecessors in interest of the current lessor and SRSC (the
"Lease"). The annual rental income payable under the Lease includes, but is not
limited to "the greater of 2% of the Skiway's (SRSC) gross ski-related receipts
or $6,000.00. Ski related receipts shall include gross receipts from lift
tickets, restaurants, transient lodging, lounges, ski rentals, instruction,
lessons, and ski equipment sales in connection with all lands owned or
controlled by the Skiway and all future lands controlled by the Skiway, its
subsidiaries or assigns in the Town of Newry, Maine." As a result of the
Company's fifty-percent (50%) ownership interest, it is entitled to a rental
equal to the greater of one percent (1%) of the amount realized from ski-related
operations or $3,000. Seller hereby represents to Purchaser that the rent paid
by SRSC to the lessors based on the gross receipts formula under the Lease is
approximately $525,000 per annum, of which one-half or approximately $262,500 is
paid to the Company as a fifty-percent (50%) owner of the leased property.
C. Subject to the terms of this Section and provided the Collateral has not
been returned to Seller, commencing on the date which is eighteen (18) months
after the Effective Date, the portion of rental income required to be paid under
the Lease to the Company shall be paid into an escrow account held and
maintained by BankBoston, having its principal place of business at One Hundred
Federal Street, Boston, Massachusetts, pursuant to the terms of a separate
escrow agreement, for the purpose of further securing Seller's and Owner's
obligations hereunder. In the event, however, that prior to such eighteen month
date, the Purchaser has exercised its right to complete the conveyance of the
Collateral to the Purchaser (under Paragraph B above) then the rental payment
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due to the Company shall be made to the Company, the stock of which shall, as a
result of the conveyance, belong to Purchaser. Accordingly, in such case the
rental payment shall thereafter be forwarded directly to the Purchaser for as
long as the Lease shall remain in effect.
ARTICLE V
CO-DEVELOPMENT AGREEMENT
5.1 Co-Development Relationship Generally. The specific provisions, terms and
conditions of the parties post-Effective-Date relationship are set forth below,
subject to mutually agreed to modifications, revisions and adjustments which may
be mutually agreed to be necessary or desirable as the contemplated relationship
evolves. The terms of this Article shall apply to Seller and Owner and their
respective affiliates, subsidiaries, successors and assigns.
5.2 Marketing and Development. (1) Subject to the provisions of paragraph (10)
below, Purchaser shall have the exclusive right market, promote, rent, exchange
and sell Purchaser's Timeshare Interests at all Seller Resorts (including but
not limited to the Real Property) for the period commencing on the Effective
Date and continuing until the expiration of the Term of this Contract, as
defined in Exhibit B annexed hereto and made a part hereof. This exclusive right
shall, nonetheless, be subject to (a) Seller's, Owner's and their affiliates'
right to market, promote and sell their own Timeshare Interests, as further
described and restricted below and (b) the provisions of the fourth and fifth
sentences of paragraph (3) below.
(2) A. Except as provided in the fourth and fifth sentences of paragraph (3)
below, or in Article XXVII hereof, for the Term of this Contract, neither Seller
nor Owner shall enter into any other marketing agreement(s) or co-development
agreements with any third party (not including sales and marketing agents acting
on behalf of Seller/Owner) for the development, marketing, promotion, rental,
exchange or sale of Timeshare Interest or interests therein, provided, however,
that the terms of this sentence shall not restrict Seller's or Owner's ability
to enter into such agreements with respect to Seller Timeshare Interests, which
shall be governed entirely by Section 5.2(16) hereof. Notwithstanding the
foregoing, neither Seller nor Owner shall be prohibited from acquiring a
property which, at the time of acquisition, includes a parcel developed for the
sale of on-site Timeshare Interests at such property. If such acquisition
occurs, the following conditions shall apply: (i) the on-site Timeshare Interest
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developer would not be entitled to any marketing rights or opportunities as
contemplated by this Contract and Seller/Owner shall not enter into a systemwide
or "global" agreement for marketing (similar to this Contract); (ii) any new
development site at the acquired property must be offered to Purchaser, pursuant
to the terms of paragraph (3) below; and (iii) Purchaser shall be entitled to
market Purchaser Timeshare Interest at the acquired property, along with the
developer of Timeshare Interests at said property, and the Seller/Owner, subject
to any existing exclusive arrangements which exist at the time of acquisition.
Seller/Owner will exercise reasonable efforts to enable Purchaser to market at
the subject location (where the pre-existing exclusive arrangement applies) at
the earliest possible time.
B. In the event Seller/Owner acquires a property (which would thereby
automatically become a Seller Resort) which does not include, at the time of
acquisition, a parcel developed for the sale of on-site Timeshare Interests,
then such property shall be subject to all of the terms and provisions of this
Contract. Without limiting the generality of the foregoing, any portion of such
property conveyed by Seller/Owner to a third party, other than Purchaser or its
Affiliates, (for hotel or other use) shall be subject to the prohibition against
marketing Timeshare Interest at such conveyed property, by the purchaser thereof
and any other party, except as permitted hereunder. Moreover, Seller shall use
reasonable efforts to enable Purchaser to market and promote its Timeshare
Interests within the improved property.
(3) A. For the period commencing with the Effective Date, and continuing until
the third anniversary of the issuance to the Purchaser of the first permit
authorizing the start of construction of Units at a Real Property site acquired
by the Purchaser, (the "Exclusive Development Period") Purchaser shall have the
exclusive right to acquire and develop sites for Purchaser Timeshare Interests
at all other Seller Resorts (in addition to the Real Property). If, after the
expiration of the Exclusive Development Period, Seller or Owner decides to make
any Seller Resort property (or portion thereof) available to a third party other
than an affiliate of Seller for development of Purchaser Timeshare Interests
(outside of the Real Property, as to which the Purchaser is hereby granted the
exclusive right to develop) then Purchaser shall have the further exclusive
right for a period of thirty (30) days from receipt of a notice of Seller's or
Owner's intent to convey any such parcel to (a) acquire that parcel made
available by Seller or Owner at a purchase price equal to the lesser of (i)
$18,000 per timeshare Unit plus the Royalty Fee described in Section 4.3 hereof
or (ii) the purchase price and terms which Owner intends to offer such property
(the "Asking Price"), or (b) decline to acquire the available parcel, whereupon
Seller or Owner may sell such property within 180 days of Purchaser's response
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hereunder at a price equal to or greater than the Asking Price; provided
however, that such transaction may not be on terms less advantageous to
Seller/Owner (than those originally presented to Purchaser) unless and until
such less advantageous terms are first made available to the Purchaser, pursuant
to the procedures set forth herein. In the event Purchaser exercises its right
to purchase a parcel (other than the Real Property parcels discussed herein)
made available by Seller hereunder, pursuant to subparagraph 5.2(3)(a)(i)
hereof, payment of the purchase price to Seller shall be made in five equal
installments over a period of five (5) years from the date of conveyance of
title. In the event of a purchase pursuant to subparagraph 5.2(3)(a)(ii), such
purchase price shall be paid in accordance with the terms of the Asking Price.
Owner and Seller retain the right to permit the purchaser of any parcel under
this paragraph (3) to market, on a non-exclusive basis, such purchaser's
timeshare product at such resort only; subject to Purchaser's right to also
market its product at said resort. The provisions of this paragraph shall not
apply to any property located within the Park Avenue Development District in
South Lake Tahoe, Nevada and California.
B. With respect to any Seller Resort acquired (in fee title) by Seller/Owner
after the Effective Date, a portion of which is made available for timeshare
development, (excluding the Real Property and all Seller Resorts existing as of
the Effective Date), such portion shall first be made available to Purchaser on
the same terms and conditions as would apply pursuant to subparagraph A of this
paragraph (3), with the following exceptions: (i) no Exclusive Development
Period shall apply to any such post Effective Date acquisitions by Seller/Owner,
(ii) the Purchaser shall be given one hundred twenty (120) days (in lieu of
thirty (30) days pertaining to existing Seller Resorts) to elect or decline to
acquire the subject parcel from the Seller/Owner and (iii) no more than one such
parcel in any twelve (12) month period shall be made available for timeshare
development by Seller/Owner. All other terms and conditions pertaining to the
party's respective rights and obligations as set forth in subparagraph A of this
paragraph (3) shall continue to apply, with respect to any such Seller Resort
acquired subsequent to the Effective Date.
(4) Purchaser shall have the right to promote, maintain and staff marketing
desks at designated marketing areas at each Grand Summit Hotel owned/operated by
Seller or Owner as well as at other ski area facilities at Seller (including,
for example, at base lodges, summit lodges and similar locations); hereinafter
the "Concierge/Marketing Areas". In Seller's hotels, these areas will be in the
form of Concierge Desks, at which Purchaser shall provide concierge-type
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services to Seller's guests. In addition to concierge type services (which shall
be the primary purpose of such desks at Seller's hotels) Purchaser may, on a
secondary basis, also market and promote Purchaser Timeshare Interests and
finally will endeavor, in appropriate circumstances, to also promote Seller
ski-related products, including Seller Timeshare Interests. However, the
marketing of Purchaser Timeshare Interests at Concierge/Marketing Areas shall
consist primarily of lead generation and similar activities (as opposed to the
conducting of sales presentations). The Concierge/Marketing Areas shall be at
high-traffic, high profile locations within each facility, such as adjacent to
the front desk, check-in area or in the main lobby area. The cost and
responsibility (including the responsibility for staffing) for the maintenance
of such Concierge/Marketing Areas shall be borne by the Purchaser. The design
and location of all Concierge/Marketing Areas must be mutually and reasonably
acceptable to Seller, Owner and Purchaser and shall be operated in a manner
consistent with the remaining provisions hereof and similar desks located at
premier MORI locations. The concierge desks and marketing desks shall include
signage, in the form reasonably acceptable to Owner and Seller, identifying such
desks as Marriott Vacation Club International concierge desks and marketing
desks, as applicable, and shall be staffed by employees of Purchaser, and shall
distribute materials regarding both Purchaser's and Owner's Timeshare Interests.
(5) Purchaser shall have the right to provide marketing materials pertaining to
its properties and timeshare products in all guestrooms, transient occupancy
facilities (including timeshare properties) and similar accommodations owned or
managed by Seller or Owner or their respective subsidiaries and affiliates. The
cost and content of such materials shall be the Purchaser's responsibility. The
marketing materials contemplated herein shall be subject to Seller's prior
approval and satisfaction by Purchaser of Seller's reasonable marketing
standards, which approval shall not be unreasonably withheld or delayed.
(6) Purchaser shall have the right to directly communicate with Seller's and
Owner's guests and customers, regarding Purchaser's timeshare products. Any such
communication shall be subject to Seller's prior approval, based upon such
factors as the form, frequency, general content and timing of such
communication(s), which approval, considering the aforementioned factors, shall
not be unreasonably withheld or delayed.
(7) Purchaser, Seller and Owner shall enhance their respective marketing efforts
on behalf of the others by creating an internal or venture-specific "currency"
for use by guests or customers while at either parties property and those of
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said parties affiliates. This currency shall be non-legal tender and
sufficiently distinct in appearance to avoid confusion with actual U.S. (or any
other sovereign's) currency. The purpose of this currency shall be to promote
the products and properties of the parties hereto by facilitating the purchase
process, promoting discounts to users of the currency, generating interest in
such products and properties and generally disseminating information regarding
the parties hereto. With respect to this currency program the parties shall do
whatever is necessary to assure compliance with any and all applicable federal,
state and local statutes, ordinances or regulations. Moreover, and in
furtherance thereof, the parties will prepare and compile mutually acceptable
"program rules" in order to set forth the details and specific terms and
provision of this currency program, including without limitation, the value,
volume allowed, permitted use and circumstances under which the currency may be
disseminated.
(8) Seller and Owner will (in addition to the Concierge/Marketing Areas referred
to above) provide space for the Purchaser to construct or supply one hospitality
structure per Seller Resort for use by Purchaser in connection with the
marketing, promotion, sale and development of Purchaser's properties and
Timesharing Interests. The specific location of such hospitality structures will
be subject to the reasonable approval of all of the parties hereto; with the
general understanding that they will be in high-traffic, high profile areas at
each Seller Resort. Additional hospitality structures may be permitted at Seller
Resorts, on a case by case basis, and Seller and Owner agree to be reasonable
with respect to the granting of their approval of said additional hospitality
structures.
(9) Subject to the limitations set forth herein, including specifically
Purchaser's and it's Affiliate's right to market and promote their own Timeshare
Interests, Seller shall be entitled to market and promote its ski- and
golf-related products, which may include Seller's thirteen (13) week or greater
Timeshare Interest on an exclusive basis, at resorts owned and controlled by
Purchaser. This shall not include, however, any resort where the Purchaser does
not enjoy a controlling number of Association Directorship votes or a
controlling percentage of common elements, even in the event that Purchaser or
an affiliate of Purchaser is the managing agent of said resort property. At such
properties, Purchaser will make a reasonable effort to secure the Association's
consent to such marketing activities by the Seller. In addition, Seller shall be
entitled to market and promote its ski-related products, which may include
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Seller Timeshare Interests, at other locations, such as retail outlets, where
Purchaser controls such locations and where such activities by Seller or a third
party is permitted, subject to the right of Purchaser and its Affiliates to also
market at such locations. Seller's/Owner's right to market and promote shall
include, without limiting the generality of that right, (i) the right to provide
marketing materials pertaining to Seller's/Owner's resorts and products in
guestrooms at such resorts, (ii) the right to display and provide for
distribution from Purchaser's controlled concierge facilities marketing and
promotional materials regarding Seller's/Owner's resorts and products, and (iii)
the right to directly communicate with Purchaser's guests and customers
regarding Seller's ski- and golf-related products (but not, in any
circumstances, regarding Timeshare Interests), provided that Seller's rights
under this clause (iii) shall be subject to Purchaser's prior approval, based
upon such factors as the form, frequency, general content and timing of such
communication. Seller shall retain responsibility for the cost, content, supply
and display of any such material which it desires to exhibit at a qualifying
MORI property. Seller's rights hereunder shall be subject to its satisfaction of
reasonable marketing and other standards required by Purchaser. Purchaser shall
be reasonable and prompt with respect to its determination concerning Seller's
satisfaction of such standards.
(10) Notwithstanding anything to the contrary set forth in this Contract,
Purchaser shall have the right to market any of its products, including but not
limited to its Timeshare Interests, pursuant to a co-development agreement or
joint marketing agreement on a "global", system-wide or networking basis
(similar hereto) in the following instances: (i) at any resort or property
outside of the continental United States; (ii) at any resort or property
acquired by virtue of the acquisition (through merger or otherwise) of a
controlling interest in the owner of said property; (iii) at any resort or
property owned or operated by an affiliate or subsidiary of Purchaser, unless
Purchaser has a controlling interest therein. [An example of the last
restriction includes all of Purchaser's lodging affiliates, such as The Ritz
Carlton Company.], and (iv) at a resort or property acquired by Purchaser in a
single, individual transaction, which does not create, or constitute part of a
system or network of properties. Any such agreement as provided for hereunder
shall not limit, curtail or compromise Purchaser's right of exclusivity as set
forth herein. In the event Purchaser enters into any "global", system-wide or
networking co-development agreement or joint marketing agreement with a third
party which is not expressly permitted under clauses (i) through (iv) above,
then the rights of the Purchaser set forth in Sections 5.2(1) and (2) and any
exclusive rights of the Seller shall be discontinued and the remaining terms and
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provisions set forth herein, regarding marketing, shall continue on a
non-exclusive basis, and the Exclusive Development Period set forth in Section
5.2(3) shall have been deemed to have expired.
(11) Seller and Purchaser will endeavor, in good faith, to cooperatively create
a mutually beneficial program whereby the sales and marketing personnel of each
party hereto will be trained, encouraged and incentivized to refer prospects who
are either not qualified or not interested in such party's Timeshare Interests
to the other party's sales personnel. Even where affirmative referrals are not
appropriate, "negative marketing" or "marketing-off" of the other party's
product will be avoided, and a sales and marketing training program jointly
developed by Seller and Purchaser will be employed to achieve this goal. Another
key component of this effort shall be the creation of a jointly designed and
mutually acceptable commission or other payment structure which is conducive
(from a sales standpoint) to the cross-referral of appropriate prospects. This
program will include appropriate monitoring devices and opportunities to further
the goals of Seller and Purchaser to create mutually beneficial referral
practices pertaining to each party's respective product by the other party's
sales and marketing personnel.
(12) Seller and Purchaser will endeavor, in good faith, to cooperatively develop
and implement, as soon as reasonably practicable, a joint "vacation store"
program to the benefit of both parties. The vacation store program will involve
the joint operation by the parties of a retail location in high traffic, urban
and suburban areas such as malls. The parties will jointly promote their
respective Timeshare Interests from such locations, as well as each other's
Timeshare Interests, and will share equally in all expenses associated with such
locations. The parties will test the vacation store program in one or more
mutually agreed upon venues and, if successful, will develop and implement the
program as agreed on a multi-site basis. The only obligation of the parties
created under this Contract with respect to the vacation store program shall be
a good faith obligation to develop and implement a definitive agreement for such
program, the terms of which are acceptable to both Seller and Purchaser.
(13) (1) For the Term of this Contract, Owner shall be entitled to include
marketing materials for Owner's or Sellers ski-related products, which may
include Seller's thirteen (13) week or greater Timeshare Interest, but shall not
pertain exclusively or primarily to any Timeshare Interest within certain
distributions by Purchaser of written marketing materials to Purchaser's clients
or prospective clients. Owner's rights hereunder shall be subject to its
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satisfaction of marketing and other reasonable standards required by Purchaser.
(2) For the Term of this Contract, Purchaser shall be entitled to include
marketing materials for Purchaser's Timeshare Interests within certain
distributions by Owner of written marketing materials to Owner's clients or
prospective clients. Purchaser's rights hereunder shall be subject to its
satisfaction of marketing and other reasonable standards required by Owner. (3)
The specific distributions of either party, with which the other party's
marketing collateral may be included, shall be determined on the basis of
appropriateness of the other party's materials (in the context of the subject
distribution), the timing of the distribution, avoidance of an unreasonable
burden to the "distributing party," expectation of return (profitability), and
other similar factors mutually agreeable to the parties. Both parties shall
cooperate fully with one another to provide effective analysis of, and use of,
their respective databases, including without limitation, demographic or
geographic selection of distributions. Each party hereunder will be responsible
for the costs of their respective marketing collateral. The distribution costs
(for those cases where both parties marketing collateral is included in the same
distribution) shall be borne proportionally between Owner and Purchaser.
(14) In the event Seller or Owner shall seek to offer or market a site or parcel
in connection with the development, construction, conversion or operation of a
currently owned property (or one in which Seller or Owner acquire an interest in
the future) for traditional hotel use (excluding Timeshare Interests as
otherwise covered herein), Seller or Owner shall first offer the opportunity to
conclude such a transaction to the Purchaser and its Affiliates. The Purchaser
shall have a reasonable period of time within which to review the opportunity.
Should Purchaser initially decline to develop the site or parcel, Purchaser
shall have a continuing right to be kept apprised with respect to a proposed
development under this paragraph, and Seller and Purchaser shall continue to
negotiate in good faith in order to attempt to conclude the subject transaction.
Any such development with a third party shall be subject to the marketing and
other restrictions set forth in this Contract.
(15) Purchaser's marketing rights hereunder shall be primarily directed to the
promotion of Purchaser's relationship with Seller/Owner and the sale of
Purchaser Timeshare Interests located at the Seller Resorts, secondarily to
market and sell MORI products located elsewhere; provided, however, that
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Purchaser's rights hereunder shall not include the right to market, promote or
sell any Timeshare Interest associated with, or located at, a ski resort not
owned by Seller/Owner, except to the extent included in Purchaser's general
marketing materials.
(16) In the event Seller or Owner shall seek to enter into any marketing or
codevelopment agreement with respect to Seller Timeshare Interests, Seller or
Owner shall first offer the opportunity to enter into such an agreement to the
Purchaser. The Purchaser shall have a reasonable period of time within which to
review the opportunity. Should Purchaser initially decline to enter into such an
agreement, Purchaser shall have a continuing right to be kept apprised with
respect to a proposed agreement under this paragraph, and Seller and Purchaser
shall continue to negotiate in good faith in order to attempt to conclude the
subject transaction. The parties acknowledge, however, that Seller or Owner may,
in the exercise of their reasonable business judgment, need to terminate such
negotiations in order to enter into more extensive negotiations with other
potential parties, and the terms of this paragraph (subject to Purchaser's right
to receive notification and a proposal overview) shall not restrict such
ability. Any such agreement with a third party shall be subject to the marketing
and other restrictions set forth in this Contract.
5.3 Resort Programs (1) Ski Lift Tickets. Purchaser agrees to purchase not less
than 14,000 full day transferable ski lift tickets per six (6) month ski season
during the period in which Timeshare Interests are being actively marketed and
sold (i.e. during which Royalty Fees are being generated under Section 4.3 of
this Contract) by Purchaser at any of the five (5) parcels comprising the Real
Property ("Sales Period"), pursuant to the terms of the Ski and Golf Package
Agreement entered into contemporaneously herewith. For example, if Royalty Fees
are being generated at two (2) Seller Resorts, Purchaser shall only be obligated
to purchase 28,000 ski-lift tickets during such period. (2) Golf Rounds.
Purchaser shall purchase from Seller and Seller shall sell to Purchaser Golf
Rounds, as defined in, and on the terms and conditions set forth in the Ski and
Golf Package Agreement. (3) Owners of Purchaser Timeshare Interests shall,
through their respective owners associations, be entitled to purchase ski lift
ticket packages and golf rounds packages either directly from Seller/Owner or
through either of them, based on mutually agreeable terms to be determined.
ARTICLE VI SURVEY
6.1 Survey. Owner shall, at its sole cost and expense, engage a surveyor or
engineer licensed in each state in which a parcel of the Real Property is
located to prepare a parcel map, subdivision plat or other appropriate map
("Maps"), fully describing each parcel of the Real Property and suitable for
recording in the Land Records office for each county in which a parcel of the
Real Property is situated. Such Maps or descriptions shall conform to the
requirements for an ALTA Form B Owners Policy. Any revisions to such Maps or
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descriptions (other than corrections of same) shall be at Purchaser's expense.
Owner shall further obtain, prior to the Conveyance Date of each parcel of Real
Property, final permission from the appropriate government agency(ies) of the
recordation of the Map or description for each such parcel, all upon conditions
satisfactory to both Purchaser and Owner.
The parties hereto acknowledge that the depictions of the Real Property in
Exhibit A hereto are not intended to reflect exact boundary lines or distances
but rather to provide a general identification of the subject parcels.
Accordingly, all parties agree to endeavor to make such adjustments as may be
necessary to more fully define the metes and bounds of each parcel comprising
part of the Real Property, in keeping with the Contemplated Use of the property,
as discussed in Article XVIII of this Contract.
ARTICLE VII TITLE
7.1 Title Commitment. Not later than sixty (60) days after the Purchaser's
request with respect to each Real Property parcel, and provided that the legal
description of the parcel has been adequately identified, Owner shall furnish
Purchaser the commitment of the Title Insurer to issue an ALTA Form B Owner's
Policy of title insurance covering each parcel of the Real Property
(individually "Title Commitment"), together with legible copies of all documents
appearing as exceptions to title insurance coverage in the case of each parcel
of Real Property. Not later than ninety (90) days after receipt of each Title
Commitment, Purchaser shall notify Owner in writing of those exceptions set
forth on Schedule B to each Title Commitment which Purchaser will not accept as
permitted exceptions to title. Any item on Schedule B to each Title Commitment
or any state of facts shown on any survey to which Purchaser does not object
within such ninety (90) days shall become permitted exceptions to title (the
"Permitted Exceptions"). Mortgages, deeds of trust, mechanics' liens, tax liens,
and judgment liens affecting any parcel comprising part of the Real Property are
not Permitted Exceptions (regardless of whether specifically objected to by
Purchaser or not) and must therefore be cleared by Owner at or prior to each
parcel's respective Conveyance Date. If Purchaser timely disapproves of certain
other exception(s), Owner shall have the right to cure any disapproved items
within thirty (30) days of Owner's receipt of Purchaser's objection. Owner shall
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notify Purchaser of its election in writing within five (5) days after receipt
of Purchaser's notice. If Owner elects not to cure such disapproved items, or
elects to cure and fails to do so, Purchaser may elect, on or before the
Conveyance Date to any parcel of the Real Property which is the subject of
Purchaser's notice, to either (i) terminate this Contract, to the extent of that
specifically affected parcel of Real Property, in which event Purchaser shall be
entitled to Liquidated Damages, or (ii) accept title such as Owner is willing to
convey, with the further right to deduct from the next installment of the cash
portion Purchase Price the cost of removing such objections, provided such
objection is of a nature where removal is possible by payment of a predetermined
liquidated amount. If that is not the case, Purchaser may still accept such
title as Seller can convey, but no adjustment to the Purchase Price would be
granted to Purchaser; or (iii) select, in cooperation with Seller/Owner, an
alternate parcel at such Seller Resort in accordance with the provisions of the
definition of Real Property as well as Article XIII hereof. Any objection
arising after Purchaser's notice to Seller or Owner pursuant to this Section may
be referred to Owner for disposition as set forth herein, regardless of when
(after Purchaser's initial notice) such objection arises, up to and at
Conveyance Date for the subject parcel.
7.2 Title Policy. Upon the transfer of title to each parcel on its respective
Conveyance Date, Owner shall cause the Title Insurer to issue an updated Title
Commitment to insure to Purchaser's fee simple title to each parcel of the Real
Property, subject only to the Permitted Exceptions and the restrictions set
forth in Article XXVII hereof. On or before the Conveyance Date for each parcel
of the Real Property, Owner shall satisfy all conditions stated therein to be
satisfied in order for Title Insurer to issue the Title Policy. The cost of the
Title Policy, and any endorsements therein, consistent with Purchaser's
contemplated use of the Property, as defined herein, shall be paid by the party
customarily responsible for the payment therefor at each location where the Real
Property parcels are situated.
ARTICLE VIII
POSSESSION, PRORATIONS AND CLOSING EXPENSES
8.1 Possession. Sole, exclusive, and vacant possession of each parcel of the
Real Property shall be delivered to Purchaser on the date on which title to each
respective parcel is conveyed to the Purchaser.
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8.2 Prorations. General and special real estate and other ad valorem taxes,
affecting the subject parcel of Real Property for the year of conveyance shall
be prorated as of the Conveyance Date based upon the most recent ascertainable
amounts of each such item. Any such taxes prorated on an estimated basis on the
Conveyance Date shall be adjusted by the parties when and as the actual amount
of such item becomes known. Any such adjustment shall be effected not later than
fifteen (15) days following final determination of the amount of such item and
demand by the party to whom credit is due. All liens or assessments, special or
otherwise, imposed against the Real Property as of the Conveyance Date and not
resulting from the acts or omissions of Purchaser shall be paid by Owner.
8.3 Closing Expenses. Owner shall pay and be responsible for the following costs
associated with the transfer of the Development Rights and the conveyance of the
Real Property, (i) the cost of preparing and recording the Deeds and any other
instruments, (ii) the cost of curing title objections, and (iii) any other
expenses customarily charged to Seller (Owner) in connection with similar
transactions, except as otherwise provided herein. Except as otherwise
specifically set forth herein, the fees and expenses of Seller's designated
representatives, accountants and attorneys shall be borne by Seller, the fees
and expenses of Owner's designated representatives, accountants and attorneys
shall be borne by Owner, and the fees and expenses of Purchaser's designated
representatives, accountants and attorneys shall be borne by Purchaser. The
Title Policy premium and the cost of stamp taxes or other transfer taxes shall
be paid by the party which customarily pays such expenses based on the practices
where each Real Property parcel is situated. Both parties acknowledge that the
current practice or convention is for a Seller to pay for title charges and
transfer expenses relating to properties to the west of the Mississippi River,
and for the Purchaser to pay such expenses relating to properties east of the
Mississippi River.
ARTICLE IX
AFFIRMATIVE COVENANTS
9.1 Transactions and Encumbrances Affecting the Development Rights of the Real
Property. From the date hereof to the date on which the last parcel of Real
Property is conveyed to the Purchaser, none of Purchaser, Seller nor Owner shall
do, suffer, permit or agree to do any of the following:
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9.1.1 Enter into any transaction affecting the Development Rights or the
Real Property inconsistent with, or in violation of, this Contract or out
of the ordinary course of business; or
9.1.2 Sell, lease, encumber or grant any interest in the Development Rights
or Real Property, or any part thereof, in any form or manner whatsoever, or
otherwise perform or permit any act which will diminish or otherwise affect
Purchaser's interest under this Contract or which will prevent Seller's and
Owner's full performance of their obligations hereunder; provided that
Seller or Owner may cause to be placed a mortgage lien on the Real Property
parcels, so long as such lien is satisfied and removed of record prior to
the parcel's Conveyance Date;
9.1.3 Except as otherwise provided in this Contract, seek, permit, approve
or consent to, with respect to the Development Rights or the Real Property
(i) any zoning change, (ii) annexation or subdivision, (iii) erect or
demolish any structures on the Real Property, or (iv) deposit on or remove
from the Real Property any soil, rocks, plantings or other materials,
without the other party's prior written request or consent, which consent
may be granted or withheld by such other party in its sole discretion.
9.2 Purchaser's Access. From the date hereof to the date on which the last
parcel of Real Property is conveyed to the Purchaser, Seller and Owner shall
permit the Purchaser, and representatives, agents, employees, contractors,
appraisers, architects and/or engineers designated by Purchaser access to, and
entry upon, the Real Property to examine, inspect, measure and test the Real
Property for the purposes set forth in Articles X, XI and XII hereof and for all
other reasonable purposes. Purchaser shall indemnify and hold Seller and Owner
harmless from and against any and all actions or demands arising from or related
to any incident, occurrence, damage, personal injury or property damage
resulting from Purchaser or Purchaser's agents, employees or contractors, or
anyone on Purchaser's behalf performing the Purchaser's examinations,
inspections, measurements and testing of and on the Real Property. Purchaser
also agrees that upon the completion of any such examinations, inspections,
measurements or tests that the Real Property will remain in or be restored to
substantially the same condition as before such examinations, inspections,
measurements or tests.
9.3 Other Agreements. Until the conveyance of the last parcel comprising the
Real Property to the Purchaser, Seller and Owner shall comply with all
agreements affecting the Real Property which survive the Closing Date and
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Conveyance Dates of the transfers of title, and shall deliver to Purchaser
immediately upon receipt, copies of all material notices of default under any of
the foregoing served upon Seller or Owner.
9.4 Taxes. Owner shall pay when due all real estate and other ad valorem taxes
assessed against the Real Property and applicable to the period prior to the
conveyance of title to each respective Real Property parcel.
ARTICLE X
REPRESENTATIONS OF SELLER AND OWNER
10.1 Representations of Seller and Owner. To induce Purchaser to execute,
deliver and perform under this Contract, Seller and Owner hereby represent and
warrant the following on and as of the Effective Date and on and as of the
Closing Date, and on and as of the Date of Conveyance of title to the last
parcel comprising the Real Property.
10.1.1 Accuracy of Representations. All representations of Seller and Owner
appearing in this and other Articles and Sections of this Contract are true and
correct, to the best of Seller's and Owner's knowledge and without additional
investigation in each case.
10.1.2 Recapture Agreements. To the best of Seller's and Owner's knowledge,
there are no obligations in connection with the Development Rights or the Real
Property involving a refund for sewer extension, oversizing utility lines,
lighting or like expense or charge for work or services done upon or relating to
the Real Property (so called "recapture agreements") which will bind Purchaser
or the Real Property after the Closing Date or the Date of Conveyance of title
to any parcel comprising the Real Property. Moreover, the Real Property is not
the Subject of, or entitled to, any real estate tax exemption or abatement or
other tax holiday of any kind. 10.1.3 Roadwork and Access. There is no agreement
or undertaking or bond with any governmental agency or private association
respecting construction or repaving of any street or road, acceleration or
deceleration lane or access or street lighting, nor is Seller or Owner aware of
any facts or circumstances which would result in termination of the current
access to and from any parcel comprising the Real Property.
10.1.4 Donations. There are no donations or payments to or for housing,
schools, parks, fire departments or any other public entity or facilities which
are required to be made in respect to any parcel comprising the Real Property,
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and which will be required on or after the conveyance of title to each parcel;
except to the extent that the donation or payment has been actually disclosed to
Purchaser and is a usual and ordinary donation required of all participants in a
master planned area.
10.1.5 Possession and Use. Unless contradicted by any of the Permitted
Exceptions, there are no persons who have possessory rights or rights of use in
respect to any parcel comprising the Real Property in the future.
10.1.6 Authorization. Seller and Owner each has full capacity, right, power
and authority to execute, deliver and perform under this Contract and all
documents to be executed by Seller or Owner pursuant hereto, and all required
corporate action and approvals therefor have been duly and previously taken and
obtained. The individuals signing this Contract and all other documents executed
or to be executed pursuant hereto on behalf of Seller or Owner are and shall be
duly authorized to sign the same on Seller's and Owner's behalf and to bind
Seller and Owner thereto. This Contract and all documents to be executed
pursuant hereto by Seller and Owner are and shall be binding upon and
enforceable against Seller and Owner in accordance with their respective terms.
10.1.7 Litigation. Neither Seller nor Owner has been served with notice of
any claims, causes of action or other litigation or proceedings pending or, to
the best of their knowledge, threatened in respect to the Development Rights or
to the Ownership, operation or environmental condition of the Real Property or
any part thereof (including disputes with governmental authorities, utility
companies, Contractors, nearby or adjoining land Owners or suppliers of goods or
services).
10.1.8 Violations. There are no violations of any health, safety,
pollution, environmental, zoning or other laws, ordinances, rules or regulations
with respect to the Real Property which affect the use, development, sale and
enjoyment of the Real Property and which have not been heretofore entirely
corrected. In the event any such violations exist, Seller or Owner shall cure
and remove same of record prior to the conveyance of title to each respective
parcel to Purchaser.
10.1.9 Condemnation. There is no existing, pending or threatened (i)
condemnation of any part of the Real Property, (ii) widening, change of grade or
limitation on use of streets, roads or highways abutting the Real Property,
(iii) special tax or assessment to be levied against the Real Property, (iv)
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change in the zoning classification or permitted use of the Real Property, or
(v) change in the basis of the tax assessment of the Real Property.
10.1.10 FIRPTA Withholdings. Purchaser will have no duty to collect
withholding taxes from Seller or Owner pursuant to the Foreign Investors Real
Property Tax Act of 1980, as amended ("FIRPTA").
10.1.11 Material Facts. There are no facts or circumstances not disclosed
in writing to Purchaser of which Seller or Owner has knowledge which have or
would have a material adverse effect upon the Development Rights or the Real
Property. Seller and Owner agree to notify Purchaser immediately in writing of
such facts or circumstances if Seller or Owner becomes aware of the same.
10.1.12 Collateral. Seller is the actual and beneficial owner of all of the
Shares of stock in Blunder Bay Development, Inc. and the 1000 shares of common
stock referred to in Article IV represent all of the shares of said Company. The
Shares are all of the outstanding Shares of Blunder Bay Development, Inc.; there
are no outstanding options, warrants, preferred shares, preference shares,
bearer shares or any other securities convertible into or exchangeable for
shares of Blunder Bay Development, Inc.; in addition, no rights of first offer
or first refusal in the Shares have been granted. The Shares are duly
authorized, validly issued, fully paid and nonassessable. As of the Closing
Date, all of the Shares will be owned directly by Seller, free and clear of all
liens. No new or additional shares in the Company will be issued, of any class,
for as long as the Collateral is in Purchaser's possession. The Lease, as
defined in said Article IV is in full force and effect without any defenses or
set-offs available to the lessee. Any amendment or modification to the Lease on
or after December 31, 1997 and prior to the return of the Collateral to Seller
made without Purchaser's consent, which consent shall not be unreasonably
withheld, shall, at Purchaser's election, constitute a breach of this Contract
by Seller and Owner. The lease has not been modified in any manner except for
that certain lease amendment dated December 31, 1997 (the "Lease Amendment").
The Seller and the Company each represent, warrant and covenant that they shall
not (without Purchaser's consent which shall not be unreasonably withheld or
delayed) exercise the option to purchase the underlying real property which is
the subject of the lease for as long as the collateral is hereby pledged to, and
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in the possession of, the Purchaser. On or before the Closing Date, Seller shall
be required to secure a fully executed estoppel certificate (as discussed in
Section 17.2.8) signed by all appropriate parties including, but not limited to,
the Company. Seller and Owner will, pursuant to the terms of said estoppel
certificate, provide additional collateral if requested by the Purchaser, based
on a good faith belief that the value of the Collateral has diminished.
Moreover, Seller and Owner agree to take any and all further actions as
Purchaser reasonably requires to evidence the Collateral, perfect Purchaser's
interest therein or provide substitute collateral, all pursuant to and as
contemplated by this Contract.
10.1.13 As of the Effective Date, no portion of any Seller Resort is being
utilized, developed or marketed for the sale of Purchaser Timeshare Interest,
nor has Seller or Owner conveyed a parcel of its Seller Resorts to a third party
for the development, sales and marketing of Purchaser Timeshare Interest.
10.2 Seller's and Owner's Covenant. Seller and Owner shall notify Purchaser
promptly in writing if Seller or Owner becomes aware of any transaction or
occurrence prior to the Closing Date or any Conveyance Date pertaining to a
specific parcel of the Real Property which would make any of the representations
of Seller or Owner contained in this Article or elsewhere in this Contract
untrue in any material respect. Moreover, Seller and Owner shall not take or
permit any action or inaction that would adversely affect or diminish or cause a
devaluation of the Development Rights or change the physical characteristics of
the Real Property or that would change or contradict or render incomplete or
breach any of Seller's or Owner's representations or warranties.
10.3 Conditions Precedent to Seller/Owner Obligation to Close. The
obligations of Seller/Owner to close the transaction contemplated hereby, or any
portion thereof, is, at Seller/Owner's option, further subject to all
representations and warranties of Purchaser contained in this Contract being
true and correct on and as of the Effective Date and the Closing Date and the
Conveyance Date of each of the individual parcels comprising the Real Property
and all obligations of Purchaser to have been performed on or before the Closing
Date and Conveyance Dates having been timely and duly performed.
ARTICLE XI ENVIRONMENTAL MATTER
11.1 Environmental Representations. Except as may be revealed by an
Environmental Assessment, on and as of the Effective Date and on and as of the
date title to each parcel comprising the Real Property is conveyed to Purchaser,
Seller represents and warrants that with regard to each parcel of the Real
Property:
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11.1.1 No part of the Real Property is in violation of any Environmental
Laws;
11.1.2 No underground storage tanks (or piping other than water and sewer)
are or have been present on the Real Property or on adjacent property within 200
yards of the Real Property;
11.1.3 Neither the Real Property nor any part thereof, or adjacent property
within 200 yards of the Real Property, have been used as a sanitary landfill,
waste dump site or for the treatment, storage or disposal of Hazardous
Materials;
11.1.4 No Release of Hazardous Materials has occurred from or upon the Real
Property, nor has any Release of Hazardous Materials migrated from adjacent
property onto any parcel comprising part of the Real Property; and
11.1.5 The entire Real Property is free of any Hazardous Materials that
would trigger response action under any Environmental Laws or existing common
law theory based on, among others, nuisance, negligence, waste, trespass or
strict liability ("Common Law Theories").
If any representation made in this Article XI is in any manner inaccurate
(a "Breach"), and if such Breach gives rise to or results in liability
(including, but not limited to, a response action, remedial action or removal
action) under any Environmental Laws or any Common Law Theories, or causes a
significant effect on public health, and if Seller or Owner shall fail to
promptly take or cause to be taken any and all remedial and removal action as
required by law to clean up the Real Property, mitigate exposure to liability
arising therefrom, and keep the Real Property free of any lien imposed pursuant
to any Environmental Laws as a result of such Breach (the "Remedial Action"),
then Purchaser may elect to terminate this Contract, on a prospective basis and
to the extent any further rights or obligations exist (apart from the
obligations under the Note and those regarding accrued (for parcels acquired by
Purchaser) but unpaid portions of the Purchase Price, as well as payment of the
Royalty Fee). If any such Breach exist or if any required remedial action is not
taken, such Breach or inaction shall not impact Purchaser's rights under the
Contract to the extent or pertaining to any other parcel (not impacted by the
Breach or failure to undertake Remedial Action) comprising the Real Property.
The termination of this Contract as to a specific parcel of the Real Property
shall result in Purchaser's right to Liquidated Damages.
11.2 Environmental Indemnity. Additionally, but not in lieu of Seller's and
Owner's affirmative undertakings set forth in Section 11.1, Seller and Owner
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agree to indemnify, defend and hold harmless Purchaser from and against any and
all debts, liens, claims, causes of action, administrative orders and notices,
costs (including, without limitation, response and/or remedial costs), personal
injuries, losses, damages, liabilities, demands, interest, fines, penalties (to
the maximum extent permitted by law) and expenses, including reasonable
attorney's fees and expenses, consultants' fees and expenses, court costs and
all other out-of-pocket expenses, suffered or incurred by Purchaser as a result
of (i) the presence of Hazardous Materials in, on, at, about or beneath any
portion of the Real Property, which are established as having been caused by
Seller, Owner or their agents or others acting on their behalf, or ii) with
respect to any portion of the Real Property, the violation of any Environmental
Laws or existing Common Law Theories which are established as having been caused
by Seller, Owner or their agents or others acting on their behalf.
11.3 No Notices. Neither Seller nor Owner has received any notice that any
part of the Real Property is located within an area that has been designated by
the Federal Emergency Management Agency, the Army Corps of Engineers or any
other governmental body as being subject to special hazards.
11.4 Environmental Assessment. As soon as practicable after the Effective
Date, Purchaser may select and retain an environmental consultant to perform an
"Environmental Assessment" of each parcel comprising the Real Property, at
Purchaser's sole cost and expense, (consisting of a phase one assessment and any
further assessment or testing that may be recommended by the environmental
consultant). The scope and form of the Environmental Assessments shall be
determined by Purchaser in its sole discretion and may include soil and ground
water analyses. Seller and Owner shall on or before the Closing Date, provide
Purchaser with its most recent copies of Environmental Assessment Reports (Phase
I) for each parcel comprising the Real Property.
ARTICLE XII
REPRESENTATIONS OF PURCHASER
12.1 Representations of Purchaser. To induce Seller and Owner to execute,
deliver and perform under this Contract, Purchaser hereby represents to Seller
and Owner on and as of the Effective Date and on and as of the Closing Date, and
on and as of the Date of Conveyance of title to each parcel comprising the Real
Property as follows:
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12.1.1 Accuracy of Representations. All representations of Purchaser
appearing in this and the other Articles and Sections of this Contract are true
and correct to the best of Purchaser's knowledge and without additional
investigation in each case.
12.1.2 Authorization. Purchaser has full capacity, right, power and
authority to execute, deliver and perform under this Contract, the Note, and all
other documents to be executed by Purchaser pursuant thereto, and, except for
obtaining the authorization of its parent corporation as described in Section
13.1 (which approval has been obtained for execution of this Contract and
delivery of the Note; provided that such approval shall not limit or compromise
the provisions of Section 13.1.4 concerning any or all of the Real Property
parcels), all required corporate actions and approvals therefor have been duly
taken and obtained. The individuals signing this Contract and all other
documents executed or to be executed pursuant hereto on behalf of Purchaser are
and shall be duly authorized to sign the same on Purchaser's behalf and to bind
Purchaser thereto. This Contract and all documents to be executed pursuant
hereto by Purchaser are and shall be binding upon and enforceable against
Purchaser in accordance with their respective terms.
ARTICLE XIII
CONDITIONS PRECEDENT, REMEDIES
13.1 Conditions Precedent to Closing. The obligation of Purchaser to
acquire title to each parcel of the Real Property, is subject to satisfaction of
each of the following conditions precedent, the satisfaction of which shall be
determined solely by Purchaser in the exercise of its reasonable judgment
(unless a different standard is stated). Any of these conditions precedent may
be waived in Purchaser's sole discretion.
13.1.1 Suitability of Real Property. Purchaser shall have obtained
architectural, engineering and environmental studies showing that the physical
aspects and condition of each parcel of the Real Property are acceptable to
Purchaser and suitable for Purchaser's contemplated use of each such parcel.
Such suitability shall include use of each parcel of the Real Property for
development and construction of the Units, vehicular parking, approval of
ingress/egress curb cuts off public rights-of-way adjoining the Real Property,
and the current availability of sufficient and necessary utilities, including
water. Seller represents, and Purchaser acknowledges, that additional
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development rights must be secured for development of the Heavenly Valley parcel
and Seller is obligated to secure such rights, as a condition precedent to
closing. Purchaser agrees to pay the costs of such additional development rights
(not to exceed $2,000,000) upon its acquisition of the Heavenly Valley parcel.
13.1.2 No Other Approvals. Purchaser shall have determined that no unusual
approvals or permits from either governmental agencies, including, but not
limited to, zoning boards or agencies, or private parties are required for the
construction and use of Purchaser's Contemplated Use of each parcel of the Real
Property and that there are no donations or payments under Section 10.1.4
hereof, except for those to which Purchaser has agreed in writing.
13.1.3 Environmental. Purchaser shall have obtained a written report
containing the results of an Environmental Assessment and Purchaser shall have
determined in its sole subjective judgment that the results of the Environmental
Assessment are satisfactory to Purchaser and allow Purchaser's Contemplated Use
of each parcel of the Real Property.
13.1.4 Authorization from Parent Company. A. Purchaser shall have obtained
by the Closing Date, the authorization of the appropriate executive committee of
its parent corporation, Marriott International, Inc., to carry out the
Purchaser's obligations under this Contract pertaining to the Development
Rights. In addition thereto, Purchaser's parent company must approve the
acquisition of each parcel of the Real Property prior to the Conveyance Date
thereof. In the event Purchaser's parent company does not approve the
Purchaser's acquisition of a particular parcel of Real Property, the parties
will endeavor, in good faith, to select an alternate parcel or to revise the
terms of the transaction, as they relate to the disapproved site, so as to gain
the approval of Marriott International, Inc. Seller and Owner acknowledge that
the authorization from Purchaser's parent company may be granted or denied,
subject to the remaining provisions hereof.
B. Seller/Owner acknowledge that Purchaser's obligations under this
Contract are subject to, and expressly conditioned upon, receipt of Marriott
International's approval of each specific parcel of Real Property, in addition
to the acquisition of Development Rights on the Closing Date. If no parcel of
Real Property is approved by Marriott International, due to Marriott
International's good faith determination that the projects fail to satisfy
Purchaser's generally applicable economic performance requirements for similarly
situated projects, then Purchaser and Seller/Owner shall have no liability
hereunder, whereupon the cash portion of the Fixed Purchase Price, and the Note
given in connection therewith, will be promptly returned to Purchaser by
Seller/Owner, and the Collateral will be returned to Seller/Owner, together with
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a release of the Memoranda of Contract as defined in Articles II and XXVI,
whereupon neither party will have any further right or liability hereunder. If
Purchaser fails to secure Marriott International's approval for the acquisition
of any single parcel of the Real Property, after attempting to do so in
accordance with the previous paragraph, then Purchaser shall have the option, in
its sole and exclusive discretion, to reduce the Fixed Purchase Price by an
amount equal to $3,600,000 for each Real Property parcel for which Marriott
International approval is sought and not received, provided that Purchaser shall
have such option only in the event that the failure to gain such approval was
due to Marriott International's good faith determination that the project fails
to satisfy Purchaser's generally applicable economic performance requirements
for similarly situated projects. If Purchaser exercises its right to reduce the
Fixed Purchase Price by an amount equal to $7,200,000 (based on two parcels of
Real Property having been disapproved by Marriott International), then, in that
event only, Seller shall have the option of either continuing with this
Contract, subject to a reduction in the Fixed Purchase Price, as recited herein,
or prospectively terminating this Contract, whereupon neither Seller nor
Purchaser shall have any further right or liability hereunder except that (i)
Purchaser must pay to the Seller any accrued Purchase Price for a previously
acquired parcel of Real Property; and (ii) Purchaser shall be entitled to
continue to market and develop its Timeshare Interests at Seller Resorts for
which Royalty Fees will be paid or are continuing to be paid. Seller shall in no
event have a right to terminate this Contract if (a) Purchaser has not reduced
the Fixed Purchase Price by $7,200,000 or more due to the inability to secure
Marriott International's approval, or (b) Purchaser has secured Marriott
International approval for the acquisition of title to at least four (4) parcels
at Seller Resorts, provided Purchaser has in fact acquired such parcels, or (c)
Seller has failed to satisfy any of its closing obligations, accruing to date,
including but not limited to the obligation to secure Entitlements for any given
parcel of Real Property.
C. The parties hereto recognize that Purchaser's performance requirements
and all economic information pertaining thereto is proprietary in nature, and
will be held in strict confidence by the parties hereto.
13.2 Purchaser's Rights and Remedies in Event of Non-Satisfaction of
Conditions Precedent. If Purchaser, in its discretion, subject to the exercise
of its reasonable judgment, determines that any of the conditions precedent set
forth in Sections 13.1, 13.2 or 13.3 of this Article XIII shall be unsatisfied
by either the Closing Date and/or the date scheduled as the Conveyance Date of
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title to any parcel comprising the Real Property, as applicable, Purchaser may,
at its option, elect i) following a good faith, unsuccessful attempt to select
another parcel in accordance with clause (iv) hereof, to terminate this Contract
in its entirety, but only on a prospective basis (i.e. with respect to
obligations and rights which are yet to be fulfilled and satisfied and without
affecting Purchaser's obligations regarding the Royalty Fee, the Note and any
accrued (for parcels previously acquired by Purchaser) but unpaid portion of the
Fixed Purchase Price) by notice to Seller and Owner in which event the Contract
shall be terminated and of no further force or effect, ii) to waive satisfaction
of the condition precedent, iii) to continue this Contract in full force and
effect and extend the Closing Date, or the Conveyance Date, if applicable, by
written notice to Seller and Owner for up to (2) consecutive thirty (30) day
periods, or (iv) to select an alternate parcel at the affected Seller Resort,
subject to the reasonable approval of both Seller and Owner, and in the manner
specified under the definition of Real Property herein, which parcel shall then
constitute part of the Real Property hereunder, or (v) in the event the parties
good faith effort to select an alternate parcel at the affected Seller Resort
(pursuant to clause iv) is unsuccessful, to terminate the Contract as to such
Real Property and to recover Liquidated Damages, as defined in Exhibit B annexed
hereto and made a part hereof, in which case the remainder of the Contract with
respect to the Development Rights and all other Real Property parcels would
continue.
13.3 Purchaser's Remedies. The obligation of Purchaser to close the
transaction contemplated hereby, or any portion thereof, is, at Purchaser's
option, further subject to all representations of Seller and Owner contained in
this Contract being true and correct on and as of the Effective Date and the
Closing Date and Conveyance Date of each of the individual parcels comprising
the Real Property and all obligations of Seller and Owner to have been performed
on or before the Closing Date and Conveyance Dates having been timely and duly
performed. Subject to the requirements set forth in Section 13.5 below, upon
default by Seller or Owner or either's obligation to convey the Development
Rights and the Real Property, Purchaser may, by notice to Seller and Owner,
elect at any time during the term of this Contract, either to (i) terminate this
Contract with respect to such parcel; or (ii) seek specific performance of
Seller's and Owner's obligation to convey the Development Rights and/or title to
each parcel comprising the Real Property under this Contract; or (iii) avail
itself of any other remedy pursuant to applicable law or in equity.
13.3.1 In the event that this Contract shall not be successfully
consummated as a result of the Seller's or Owner's inability to deliver the
Development Rights to Purchaser or to convey title to a parcel of the Real
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Property to the Purchaser or the refusal of the Title Insurer to deliver to
Purchaser a policy of title insurance as required herein, or for any other
reason entirely beyond the control of Seller, then, subject to Purchaser's
receipt of the return of all amounts paid by Purchaser to Seller or Owner as
part of the Purchase Price, as well as all other sums reasonably expended by
Purchaser in connection with the transaction contemplated herein, as they relate
to such parcel of Real Property, as well as the Note, (if Seller is unable to
convey title to three or more Real Property parcels), Seller and Owner shall
have no further liability to Purchaser of any kind or nature and this Agreement
shall be prospectively terminated with respect to such parcel. Purchaser shall
continue to be responsible for payment of the Royalty Fee and the accrued
purchase price, if any, for parcels of the Real Property previously acquired by
Purchaser. Purchaser may nonetheless, at its sole option, retain title to any
parcel conveyed to it by Seller whereupon the allowable portion of the Purchase
Price and related expenses (for such parcel(s)) shall be retained by Seller or
Owner.
13.4 Seller's and Owner's Sole and Exclusive Remedy. Prior to entering into
this Contract, Purchaser, Seller and Owner have considered the damages that
would be suffered by Seller and Owner in the event of default by Purchaser of
its obligation to purchase the Development Rights. Given all the factors which
directly affect the value and marketability of the Development Rights, the
parties realize that it would be extremely difficult and impracticable, if not
impossible, to ascertain with any degree of certainty the amount of damages
which would be suffered by Seller and Owner in the event of Purchaser's failure
to perform its obligations under this Contract to purchase the Development
Rights. The parties hereto hereby agree that the prospective termination of this
Contract, represents a reasonable and adequate remedy to Seller and Owner and,
in the event of Purchaser's failure to perform its obligations under this
Contract to purchase the Development Rights, Seller and Owner shall, as their
sole and exclusive remedy for such failure, be entitled to such termination of
this Contract. The termination of this Contract in its entirety, or as to a
specific Real Property parcel, shall not affect Purchaser's continuing
obligation to pay Royalty Fees, or to make payments under the Note, or to pay
the accrued but unpaid Purchase Price, as it pertains to a parcel of Real
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Property acquired by Purchaser. If this Contract terminates due to Purchaser's
breach or default, then at Seller's or Owner's request, Purchaser shall deliver
to Seller or Owner, at no additional charge, all surveys, engineering studies,
soil reports, maps, master plans, and other similar items prepared by or for
Purchaser in connection with the Real Property, and further shall deliver to
Seller or Owner any and all documents which Seller or Owner may reasonably
require for the purpose of removing any cloud on title to the Real Property
created by the execution of this Contract, provided Purchaser shall not be
required to incur any additional expense as a result of such request (except to
the extent of the cost of a release of a memorandum of this Contract, including
any termination of a financing statement pursuant thereto). Subject to Section
13.5 below, and to the terms of the Note, the terms or this paragraph shall not
affect Seller/Owners right to accelerate repayment (to the extent necessary for
payment of accrued purchase price for a parcel of Real Property previously
acquired by Purchaser) of the Note upon a breach of the provisions thereof.
13.4.1 Remedies for Other Defaults: In the event that Purchaser shall
default in its obligations hereunder in a material respect, other than as set
forth in Section 13.4, subject to the provisions of Section 13.5, Seller/Owner
may either: (i) terminate this Contract with respect to the affected Seller
Resort, or (ii) avail itself of any other remedy pursuant to applicable law or
in equity subject, in the case, of both clause (i) and (ii) to Seller's and
Purchaser's respective rights and obligations at all other Seller Resorts.
13.5 Notice of Default and Opportunity to Cure. Prior to any party hereto
being held in default, said party shall be entitled to written notice from the
party alleging the default or breach and shall be afforded an opportunity to
cure the claimed default or breach, which opportunity shall extend for a period
of thirty (30) days from receipt of the notice, unless the nature of the alleged
breach or default is such that it cannot be cured within such period, in which
case the period within which to cure shall be extended as necessary to
effectuate the curing of the breach or default, provided that the party alleged
to have defaulted or breached commences to cure same within said thirty (30) day
period and continues to pursue, in good faith, all actions necessary to curing
the alleged default or breach.
ARTICLE XIV
CROSS DEFAULT
14.1 Cross Default. Purchaser's obligations under the Note are hereby
expressly made subject to and contingent upon the Seller's and Owner's
performance of all the terms and conditions imposed upon Seller and Owner
pursuant to this Contract. In the event either Seller or Owner fails to satisfy,
in any material respect, any requirement or obligation imposed on either such
party hereunder, after receipt of written notice to such effect from Purchaser,
which shall include an opportunity to satisfy any such requirement or obligation
(for a period not to exceed thirty (30) days), in Purchaser's subjective
judgment, then Purchaser shall have no further liability for repayment of the
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debt (principal or interest) under the Note and Purchaser shall be entitled to
the immediate return of the original Note from Seller or Owner. Moreover,
Purchaser shall not be obligated to make a payment during the Seller's or
Owner's cure period, referred to above. The cessation of the Purchaser's
liability under the Note under the terms of this paragraph shall in no manner
limit, alter, or otherwise compromise the remedies available to Purchaser either
under this Article or by virtue of applicable law, nor shall such cessation
otherwise affect the remaining rights and obligations of Purchaser and
Seller/Owner. Moreover, the Note shall include a provision referencing this
Article.
ARTICLE XV
BROKERAGE
15.1 Brokerage. Seller and Owner hereby represent and warrant to Purchaser that
neither Seller nor Owner has dealt with any broker or finder with respect to the
transaction contemplated hereby. Purchaser hereby represents and warrants to
Seller and Owner that Purchaser has not dealt with any broker or finder with
respect to the transaction contemplated hereby. Seller and Owner shall each
indemnify, defend and hold Purchaser harmless from any claim for brokerage
commission or finder's fee asserted by any broker or finder or any other person,
firm or corporation claiming to have been engaged by either Seller or Owner.
Purchaser hereby agrees to indemnify, defend and hold Seller and Owner harmless
from any claim for brokerage commission or finder's fee asserted by any broker
or finder or any other person, firm or corporation claiming to have been engaged
by Purchaser. These indemnities of the parties shall survive the expiration of
the term of this Contract.
ARTICLE XVI
CASUALTY AND CONDEMNATION
16.1 Casualty and Condemnation. If, after the Effective Date and prior to
the Conveyance Date pertaining to any of the parcels comprising the Real
Property, any portion of the Real Property is damaged by a natural disaster or
other casualty or is taken by exercise of the power of eminent domain or any
proceedings are threatened or instituted to effect such a taking, Seller or
Owner shall immediately give Purchaser notice of such occurrence, and if in the
sole but reasonable judgment of Purchaser such casualty or condemnation is
material and would frustrate Purchaser's Contemplated Use of the affected
portion of the Real Property or any other part thereof, Purchaser may, within
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fifteen (15) days after receipt of such notice elect either (i) to sever such
affected parcel of Real Property from this Contract in which event Purchaser
shall be entitled to Liquidated Damages, or (ii) to prospectively terminate the
Contract in which event all obligations (on a going forward basis) shall cease
and this Contract shall have no further force and effect, with respect to a
parcel of Real Property not conveyed to Purchaser, but shall have continuing
effect with respect to terms and provisions applicable to parcels previously
acquired by Purchaser, including any Royalty Fee, Note payment and accrued Fixed
Purchase Price obligations, as such pertains to such previously acquired
parcel(s), or (iii) to close the transaction contemplated hereby as scheduled
(except that if the Closing Date or the Conveyance Date pertaining to any parcel
of Real Property is scheduled to occur sooner than fifteen (15) days following
Purchaser's receipt of such notice, the Closing Date or the Conveyance Date
shall be delayed until Purchaser makes such election), in which event Seller or
Owner shall assign and/or pay to Purchaser at Closing (Conveyance Date) all
insurance proceeds or condemnation awards or other damages collected or claimed
with respect to such casualty or taking, or, if such sums are paid to a
mortgagee, the Fixed Purchase Price shall be reduced by the amount so paid. In
the case of a casualty loss, the Fixed Purchase Price shall be reduced by the
amount of any deductible or co-insurance amount applicable to the unrestored
loss.
ARTICLE XVII
CLOSING
17.1 Closing. The sale of Development Rights contemplated hereby shall
close at 10:00 A.M. (local time) on the Closing Date at the Purchaser's offices,
or on such other date, place and/or time as the parties may mutually agree. In
addition, the transfer of title to each of the individual parcels comprising the
Real Property shall take place at Purchaser's office on separate dates to be
mutually agreed upon among the parties hereto. The scheduled date of transfer of
the separate parcels is sometimes referred to herein as the Conveyance Date, for
each respective parcel. Notwithstanding the foregoing, the Conveyance Date of
each Real Property parcel shall be on or about that date which is thirty-five
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(35) days from Purchaser's notification by Seller of the receipt by Seller of
all applicable Entitlements pertaining to each respective Real Property parcel,
provided Purchaser is notified by Seller of the receipt of such Entitlements
within a reasonable time after such receipt. The Entitlements must permit and
provide for the development of each Real Property parcel in not less than five
(5) phases or increments of forty (40) Units in each phase.
17.2 Seller's/Owner's Closing Documents. A. On the Conveyance Date of each
parcel comprising part of the Real Property, Seller or Owner shall deliver to
Purchaser the following Closing documents, all duly executed by the Seller or
Owner, as applicable:
17.2.1 Owner's special warranty grant deed in recordable form conveying to
Purchaser good, marketable and indefeasible fee simple title to the respective
parcel of the Real Property, subject only to the Permitted Exceptions.
17.2.2 Owner's FIRPTA Affidavit, dated as of the Conveyance Date.
17.2.3 The updated Title Commitment.
17.2.4 An assignment and transfer of, and physical delivery to Purchaser
of, all of the Entitlements, including but not limited to, all local, municipal,
state, county and federal approvals and permits pertaining to the Property and
development and building rights on the subject parcel of the Real Property.
17.2.5 Documents evidencing the legal status, good standing and authority
of Owner and such other documents, transfer tax returns (including certified
checks for payment of same), instruments, affidavits, certifications and
confirmations as may reasonably be required and designated by Purchaser,
Purchaser's attorney or the Title Insurer to fully effect and consummate the
transactions contemplated hereby, so long as they do not require Owner to expend
any additional money not contemplated in this Contract.
17.2.6 Final consent of the appropriate agency to the recordation of the
Maps. All costs and expenses of recordation of the Maps shall be borne by
Seller. B. On the Closing Date, Seller or Owner shall deliver to Purchaser the
following closing documents, all duly executed by the Seller or Owner, as
applicable:
17.2.7 The Collateral.
17.2.8. An estoppel certificate, signed by Lessor and Lessee, pertaining to
the Lease, as defined in Article IV of this Contract. The estoppel certificate
shall contain a provision to the affect that if, for any reason, Purchaser
believes, in good faith, that the Collateral has, or is about to, experience a
diminution of value, the Seller/Owner shall immediately substitute the
Collateral with other assets of Seller/Owner having a value equal to or greater
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than the value of the Collateral at the time of the pledge thereof to Purchaser,
or otherwise enhance the Collateral value to the extent necessary, in
Purchaser's judgment, to restore the total value of the assets pledged to
Purchaser. Moreover, the signatories of the estoppel certificate shall agree
therein to notify the Purchaser of any event, act, or omission which could or
has caused or resulted in a diminution in the value of the Collateral. In
addition, said certificate shall contain a provision prohibiting SRSC from
incurring any further debt or other obligations which, in Purchaser's reasonable
judgment, could impair or compromise SRSC's ability to make the required
payments under the Lease, provided, however that the foregoing restriction shall
not in any manner restrict SRSC from incurring further debt or other obligations
which are permitted under its senior credit facility with BankBoston, N.A. dated
as of November 12, 1997, as the same may be amended from time to time, or any
superseding credit facility from an institutional lender.
17.2.9 The Assignment of Development Rights, as described in Section 2.2 of
this Contract, in form suitable for recording in each jurisdiction where a
Seller Resort is located.
17.2.10 An Assignment of Seller's interest in the Company.
17.2.11 A Power of Attorney pursuant to Section 4.4 of this Contract.
17.2.12 The original Lease, as amended, or a certified copy thereof.
17.2.13 All other documents reasonably requested by Purchaser and/or Title
Insurer in order to close on the acquisition of Development Rights, as
contemplated herein.
17.3 Approval of Closing Documents. All Closing documents to be furnished
by Owner or Seller pursuant hereto shall be in form and substance reasonably
satisfactory to Purchaser and Title Insurer. All closing documents to be
furnished by Purchaser pursuant hereto shall be in form and substance reasonably
satisfactory to Seller and Owner.
17.4 Purchaser's Closing Documents. On the Conveyance Date of each parcel
comprising part of the Real Property, Purchaser shall deliver to the Owner:
17.4.1 Documents evidencing the legal status, standing and authority of
Purchaser and such other documents, instruments, certifications and confirmation
as may reasonably be required and designated by Owner, Owner's attorney, or the
Title Insurer to fully effect and consummate the transactions contemplated
hereby, so long as they do not require Purchaser to expend any additional money
not contemplated in this Contract.
17.4.2 The portion of the Purchase Price required at time of the transfer
of title to the respective parcel pursuant to Article IV of this Contract.
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ARTICLE XVIII
CONTEMPLATED USE OF THE REAL PROPERTY
18.1 Contemplated Use of the Real Property. The parties hereto acknowledge
that Purchaser contemplates (i) developing and constructing a residential,
condominium resort on each parcel identified in Exhibit A containing no less
than two hundred (200) Units per parcel; (ii) submitting some or all of the
Real Property to a vacation or interval ownership plan and (iii) selling
interval Purchaser Timeshare Interests pursuant thereto. The size and
configuration of the Units, including number of bedrooms and bathrooms, shall
be left to Purchaser's sole discretion. Any use in this Contract of the
phrases "Purchaser's Contemplated Use", "contemplated use of the Real
Property," or words of similar meaning shall mean Purchaser's development, use
and enjoyment of the Real Property as described in this Article.
ARTICLE XIX
NOTICES
19.1 Notices. Any notice, request, demand, instruction or other document to be
given or served hereunder or under any document or instrument executed pursuant
hereto shall be in writing and shall be delivered personally with a receipt
requested therefor or by cable, telex or telephone facsimile or sent by a
recognized overnight courier service or by United States registered or certified
mail, return receipt requested, postage prepaid and addressed to the parties at
their respective addresses set forth herein, and the same shall be effective (i)
upon receipt or refusal if delivered personally or by cable, telex or by
telephone facsimile, (ii) one business day after depositing with such an
overnight courier service, or (iii) three business days after deposit in the
mails if mailed. A party may change its address for receipt of notices by
service of a notice of such change in accordance herewith. All notices by cable,
telex or telephone facsimile shall be subsequently confirmed by U.S.
certified or registered mail or by recognized overnight courier service.
If to Purchaser: Marriott Ownership Resorts, Inc.
Attn: David E. Holton
Vice President - Development
6649 Westwood Boulevard
Suite 500
Orlando, Florida, 32021
FAX: (407) 206-6030
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with a copy to: Marriott Ownership Resorts, Inc.
Attn: Daniel B. Zanini
14344 State Road 535
Orlando, Florida 32821
FAX: (407) 206-6420
If to Seller/Owner: American Skiing Company
P. O. Box 450
Sunday River Road
Bethel, Maine 04217
Attn: Christopher E. Howard
with a copy to: Foster A. Stewart, Jr. Esq
American Skiing Company
8th Floor
One Monument Square
Portland, Maine 04101
FAX: 207-791-1350
ARTICLE XX
ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS
20.1 Entire Agreement, Amendments and Waivers. This Contract contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and the same may not be amended, modified or discharged nor may
any of its terms be waived except by an instrument in writing signed by the
party to be bound thereby.
ARTICLE XXI
NO THIRD PARTY BENEFITS AND ASSIGNMENT
21.1 No Third Party Benefits. This Contract is for the sole and exclusive
benefit of the parties hereto and their respective permitted successors and
assigns, and no third party other than a permitted assignee of Purchaser, Seller
or Owner is contemplated to or shall have any rights hereunder. 21.2 Assignment.
No party hereto may assign any of its rights or obligations hereunder without
the prior written consent of the other parties, which consent may be withheld in
the sole and absolute discretion of other parties, provided, however, that
Purchaser may assign its rights and obligations under this Contract to an
Affiliate without Seller's or Owner's consent so long as Purchaser remains bound
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hereunder. Any sale or transfer of a controlling interest in any party hereto
shall be deemed to be a prohibited assignment of such party's rights under this
Contract.
ARTICLE XXII
INCOME TAXES
22.1 Federal Withholding. Pursuant to FIRPTA, and the regulations promulgated
thereunder, Seller and Owner agree to deliver to Purchaser, at or prior to the
Closing Date, and at or prior to each Conveyance Date, an affidavit executed by
Seller and Owner, certifying that neither Seller nor Owner will be subject to
federal withholding pursuant to this Contract.
22.2 Disclosure to Taxing Authorities. Each of Seller, Owner and Purchaser
agree to cooperate fully with the others in completing or filing any disclosure
documents or in otherwise satisfying any disclosure requirements of the Internal
Revenue Code and any state or local taxing authority.
ARTICLE XXIII
EVENTS OF DEFAULT
23.1 Events of Default. In addition to the default events described
elsewhere herein, each of the following shall constitute an event of default to
the extent permitted by applicable law: (a) the filing by a party hereunder of a
voluntary petition under any bankruptcy, insolvency or similar law or a petition
for reorganization under any bankruptcy, insolvency or similar law, the
admission by a party hereunder that it is unable to pay its debts as they become
due or the consent by a party hereunder to an involuntary petition under any
bankruptcy, insolvency or similar law; (b) the failure to vacate, within ninety
(90) days from the date of entry thereof, any order approving an involuntary
petition under any bankruptcy, insolvency or similar law by a party hereunder;
(c) the entering of an order, judgment, or decree by any court of competent
jurisdiction, on the application of a creditor, adjudicating any party hereto as
bankrupt, insolvent or similar status or approving a petition seeking
reorganization or appointing a receiver, trustee, or liquidator of all or a
substantial part of such person's assets, and such order, judgment, or decree
continuing unstayed and in effect for any period of ninety (90) days; (d)
failure of any party hereto to make any payment required to be made pursuant to
this Contract within thirty (30) days after notice that such payment has not
been made; or (e) the material failure of a party hereunder to perform, keep or
fulfill any of the other warranties, covenants, undertakings, obligations or
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standards set forth in this Contract, which failure shall continue for a period
of thirty (30) days following notice thereof by a non-defaulting party (or such
longer period of time as is necessary to cure such default if such failure is
not susceptible to being cured within thirty (30) days and the defaulting party
shall promptly after such notice diligently begin, prosecute, and complete
curing such failure). Any non-defaulting party may (but shall not be obligated
to) cure any default hereunder by taking action on behalf of the defaulting
party.
ARTICLE XXIV
MISCELLANEOUS
24.1 Further Assurances. The parties each agree to do, execute, acknowledge
and deliver all such further acts, instruments and assurances and to take all
such further action before or after the Closing Date and the respective
Conveyance Dates for each parcel of Real Property as shall be necessary or
desirable to fully carry out the intentions set forth in this Contract and to
fully consummate and effect the transactions contemplated hereby.
24.2 Survival and Benefit. All representations, agreements,
indemnification's and obligations of the parties shall survive the Closing Date
and the respective Conveyance Dates for each parcel of Real Property and the
same shall inure to the benefit of, and be binding upon, the respective
permitted successors and assigns of the parties.
24.3 Interpretation.
24.3.1 The headings and captions herein are inserted for convenient
reference only and the same shall not limit nor construe the paragraphs or
sections to which they apply nor otherwise affect the interpretation hereof.
24.3.2 The terms "hereby", "hereof", "hereto", "herein", "hereunder", and
any similar terms shall refer to this Contract, and the term "hereafter" shall
mean after, and the term "heretofore" shall mean before the Effective Date.
24.3.3 Words of the masculine, feminine or neuter gender shall mean and
include the correlative words of other genders, and words importing the singular
number shall mean and include the plural number and vice versa.
24.3.4 Words importing persons shall include firms, associations,
partnerships (including limited partnerships), limited liability companies,
trusts, corporations and other legal entities, including public bodies, as well
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as natural persons. No reference herein to Seller, Owner or Purchaser shall, in
and of itself, be deemed to refer to its shareholders as such.
24.3.5 The terms "include," "including," and similar terms shall be
construed as if followed by the phrase "without being limited to".
24.3.6 This Contract and any document or instrument executed pursuant
hereto may be executed in any number of identical counterparts each of which
shall be deemed an original, but all of which together shall collectively
constitute one and the same instrument. In making proof of this Contract, it
shall not be necessary to produce or account for more than one such counterpart.
24.3.7 Whenever the terms of this Contract describes the time for
performance of a covenant or condition, all references herein to "days" shall
mean calendar days.
24.3.8 This Contract shall be governed by and construed in accordance with
the laws of the State of Florida.
24.3.9 Neither Seller, Owner nor Purchaser shall avail itself of any remedy
granted to it hereunder based upon an alleged default of another party hereunder
unless and until written notice of the alleged default, in reasonable detail,
has been delivered to a defaulting party by a non-defaulting party and the
alleged default has not been cured on or before 5:00 p.m. (local time) on the
tenth fifth (10th) day next following delivery of said notice of default, except
as otherwise specifically set forth in this Contract.
24.3.10 This Contract shall not be construed more strictly against one
party than against the other merely by virtue of the fact that it may have been
prepared primarily by counsel for one of the parties, it being recognized that
Purchaser, Owner and Seller have each contributed substantially and materially
to the preparation of this Contract.
24.3.11 Any condition precedent imposed as a contingency under this
Contract may be waived by the party entitled to satisfaction of the condition as
a pre-requisite to that party's performance. Any condition precedent which
remains unsatisfied upon the Closing Date and the Conveyance Dates for each of
the respective parcels comprising the Real Property shall be deemed to be waived
by the party entitled to satisfaction.
24.4 Discrepancy in Descriptions. If prior or subsequent to the delivery of
each Deed, it appears that the legal description of the subject parcel of the
Real Property to be purchased does not include or correctly describe Owner's fee
simple title therein or appurtenances thereto, the legal description of the
respective parcel shall be modified to correctly describe the same at
Purchaser's request.
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24.5 Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated hereby prior to the Closing Date and
each respective Conveyance Date, including but not limited to press releases of
any kind or nature, shall be jointly planned and coordinated by and among
Purchaser, Owner and Seller. This requirement shall not apply, however, to any
notice, document or information which any party hereto is required by law to
provide or disclose. None of the parties shall act unilaterally in this regard
without the prior written approval of the others; however, this approval shall
not be unreasonably withheld or delayed.
ARTICLE XXV
OFFER AND ACCEPTANCE
25.1 Offer and Acceptance. Delivery by Purchaser to Seller or Owner of a
copy of this Contract executed by Purchaser shall constitute an offer by
Purchaser to purchase the Development Rights and the Real Property upon the
terms and conditions herein set forth and subject to the provisions herein
contained, which offer shall be effective until the close of business five (5)
business days after delivery of an executed copy of this Contract by Purchaser
to Seller and Owner (unless otherwise previously revoked). If Seller and Owner
fail to deliver a fully executed counterpart of this Contract to Purchaser prior
to expiration of the offer period, then the offer shall automatically be revoked
and rescinded in its entirety, and upon such revocation and rescission, the
offer and this Contract shall have no further force or effect.
ARTICLE XXVI
MEMORANDUM OF CONTRACT
26.1 Recordation of Memorandum of Contract. Seller, Owner and Purchaser agree to
execute counterparts of memoranda of this Contract, in recordable form, and to
do all that is necessary for the recordation of such memoranda with the
appropriate office or department where Land Records are recorded for properties
situated where the individual parcels comprising the Real Property are located.
ARTICLE XXVII
RESTRICTIONS ON COMPETITION
27.1 Restrictions.
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A. Except as otherwise set forth in this Section, during the term of
this Contract; (i) Seller shall not market, develop or sell any Purchaser
Timeshare Interests without the prior written consent of Purchaser, which
consent may be withheld in Purchaser's sole and absolute discretion; and (ii)
Purchaser shall not market, develop or sell any Seller Timeshare Interests
without the prior written consent of Seller, which consent may be withheld in
Seller's sole and absolute discretion.
B. In the event that either Purchaser or Seller shall determine that it
wishes to market, develop and/or sell Restricted Buffer Timeshare Interests,
such party (the "Offering Party") shall provide written notification of such
intent to the other party (the "Receiving Party"), which notification shall set
forth in reasonable detail: (i) the length of the Timeshare Interests which the
Offering Party wishes to develop, market and sell; (ii) the location,
configuration and number of units of the project to be developed; and (iii) a
preliminary or draft project proforma showing project cost estimates, sales
estimates, marketing cost estimates and projections of profitability (the "Offer
Notice"). Within thirty (30) days following receipt of the Offer Notice, the
Receiving Party shall notify the Offering Party whether it wishes to pursue the
project as a Joint Development Timeshare Interest. In the event that the parties
agree to pursue the project as a Joint Development Timeshare Interest, they
shall do so pursuant to a Joint Development Agreement whereby each party shares,
on an equal basis, in all aspects of the Joint Development Timeshare Interest,
including, without limitation, an allocable value of the development site (land
and improvements), on a fair market value basis, profits, losses, expenses,
capitalization and financial backing, sales and marketing, construction
management and management following completion. If, on the other hand, the
Receiving Party declines to pursue the project as a Joint Development Timeshare
Interest, then neither party shall pursue or conclude the subject Restricted
Buffer Timeshare Interest project.
C. In the event that Seller shall determine that it wishes to market,
develop and/or sell Conditional Buffer Timeshare Interests, Seller shall provide
written notification of such intent to the Purchaser, which notification shall
set forth in reasonable detail: (i) the length of the Timeshare Interests which
Seller wishes to develop, market and sell; (ii) the location, configuration and
number of units of the project to be developed; and (iii) a preliminary or draft
proforma showing project cost estimates, sales estimates, marketing costs
estimates and projections of profitability (the "Offer Notice"). Within thirty
(30) days following receipt of the Offer Notice, Purchaser shall notify Seller
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whether it wishes to pursue the project as a Joint Development Timeshare
Interest. In the event that the parties agree to pursue the project as a Joint
Development Timeshare Interest, they shall do so pursuant to a Joint Development
Agreement whereby each party shares, on an equal basis, in all aspects of the
Joint Development Timeshare Interest, including, without limitation, an
allocable value of the development site (land and improvements), on a fair
market value basis, profits, losses, expenses, capitalization and financial
backing, sales and marketing, construction management and management following
completion. If, on the other hand, the Purchaser declines to pursue the project
as a Joint Development Timeshare Interest, then the Seller shall be permitted to
pursue or conclude the subject Conditional Buffer Timeshare Interest project,
without the participation of any third party primarily engaged in the lodging
(including timeshare sales and development) industry, other than as provider of
capital.
ARTICLE XXVIII
FUTURE AMENDMENTS
28.1 Future Amendments. This Contract shall be amended from time to time in
order to add to the definition of Real Property, as set forth in Exhibit B, any
other parcel of Real Property (outside of the Initial Resorts) which Seller or
Owner currently owns or which may be acquired by Seller or Owner at any time
during the term of this Contract, from which a mutually agreed upon portion may
be segregated and conveyed to Purchaser, for the purposes consistent with the
Purchaser's Contemplated Use as defined herein. It is the understanding of the
parties hereto that any such other Real Property parcel owned or operated by (by
conveyance, stock transfer, asset purchase or any other means) Seller or Owner
shall be subject to the terms and provisions hereof, including, without
limitation, the exclusive right of the Purchaser to develop, market, sell and
promote its product at an agreed upon parcel comprising part of any such
property which may be rendered part of this Contract subsequent to the Effective
Date.
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IN WITNESS WHEREOF, this Contract has been executed and delivered by Seller,
Owner and Purchaser on the respective dates set forth next to each of their
signatures.
SELLER:
AMERICAN SKIING COMPANY
a Maine corporation
By: /s/ Christopher E. Howard -
Senior Vice President
Attest: /s/ Foster A. Stewart, Jr.
Vice President
Dated: July 22, 1998
OWNER:
AMERICAN SKIING COMPANY RESORT PROPERTIES, INC.
a Maine corporation
By: /s/ Christopher E. Howard
Senior Vice President
Attest: /s/ Foster A. Stewart, Jr.
Vice President
Dated: July 22, 1998
PURCHASER:
MARRIOTT OWNERSHIP RESORTS, INC.
a Delaware corporation
By: /s/ Stephen P. Weisz
President
Attest: /s/ Joseph Scallo
Assistant Secretary
Dated: July 22, 1998
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LIST OF EXHIBITS TO PURCHASE AND DEVELOPMENT AGREEMENT
Exhibit A Descriptions of the Real Property
Exhibit B Definitions
Exhibit C Assignment of Development Rights
Exhibit D Form of Promissory Note
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EXHIBIT A
DESCRIPTIONS OF PROPERTY
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EXHIBIT A-1
HEAVENLY VALLEY
LAKE TAHOE, CALIFORNIA
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EXHIBIT A-2
THE CANYONS
PARK CITY, UTAH
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EXHIBIT A-3
STEAMBOAT
STEAMBOAT SPRINGS, COLORADO
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EXHIBIT A-4
KILLINGTON
KILLINGTON, VERMONT
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EXHIBIT A-5
SUNDAY RIVER
BETHEL, MAINE
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EXHIBIT B
DEFINITIONS
Affiliate means (i) any corporation or partnership that controls, is controlled
by, or is under common control with, Purchaser, (ii) any corporation resulting
from the merger or consolidation with Purchaser, (iii) any entity that acquires
all of Purchaser's assets as a going concern, (iv) Marriott International, Inc.
("Marriott"), or any wholly-owned subsidiary thereof, (v) Host Marriott
Corporation ("Host"), or a wholly-owned subsidiary thereof, and (vi) any
corporation or partnership that is controlled by, or under common control with,
Marriott or Host.
Canyons that parcel of Real Property located in Park City, Utah, more
particularly identified on Exhibit A-2 to this Contract.
Closing means the conveyance and transfer of the Development Rights, including
the right to purchase the Real Property pursuant to the Contract and the
consummation of all the other transactions specified in the Contract to occur on
the Closing Date.
Closing Date means that date on which the Closing occurs, which is anticipated
to be on or about July 22, 1998, or such other date as may be agreed upon in
writing by Seller and Purchaser.
Collateral has the meaning ascribed to it in Article IV of this Contract.
Combined Purchase Price has the meaning ascribed to it in Section 2.3 of this
Contract.
Conditional Buffer Timeshare Interest means any Timeshare Interest at a Seller
Resort not exceeding a twelve and one-half (12-1/2) week period of time and not
less than a six and one-half (6-1/2) week period of time.
Contemplated Use means the use described in Article XVIII of the Contract.
Contract means the Purchase and Development Agreement between Seller, Owner and
Purchaser to which this Exhibit is attached.
Conveyance Date means the date of the transfer of title to each of the
respective parcels which comprise a part of the Real Property. While specific
Conveyance Dates will be left to the mutual agreement of the parties hereto, it
is generally intended that the Conveyance Date for each parcel shall be on or
about 35 days from the date on which Purchaser has received notice from Seller
or Owner that all Entitlements applicable to the parcel which is the subject of
the notice have been received by the Seller or Owner; provided copies thereof
are included with the notice to the Purchaser.
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Development Rights means the rights, opportunities, entitlements, approvals,
permits, licenses and authorizations hereby granted to Purchaser to do the
following with respect to each parcel of Real Property described in Exhibit A of
this Contract, as well as all other Real Property parcels referred to in the
Contract and pursuant to the terms hereof (some of which are currently owned and
operated by Seller and Owner while others are subject to future acquisition or
operation by Seller or Owner or their respective designees): (i) to acquire each
parcel in fee simple absolute (or in any other interest which Purchaser may
elect) inclusive of all future Development Rights, mineral rights, entitlements,
approvals, permits, licenses and all benefits arising therefrom on, beneath or
above the surface of each such parcel of Real Property; (ii) to construct on
each parcel of Real Property any improvements permitted by law, including but
not limited to Units (as defined herein) together with any amenities,
recreational facilities, commercial structures or other structures which
Purchaser elects to construct; (iii) to operate, manage and maintain the parcels
of Real Property and all improvements, amenities and facilities situated
thereon; (iv) to market, sell, convey, transfer any interest in any parcel of
Real Property in whole or in part which is owned or controlled by Purchaser; (v)
to, upon acquisition of title by the Purchaser, pledge, hypothecate, enfeoff,
mortgage or use as collateral any parcel of Real Property or interest therein in
connection with any financing or borrowing which Purchaser seeks or solicits
from any third party; and (vi) to perform any other action or course of conduct
arising out of the Purchaser's right to acquire the Real Property as well as the
actual acquisition of said Real Property. In addition, Development Rights shall
also include all of the marketing, promotion, sales, access and similar
opportunities afforded to Purchaser at all Seller Resorts as defined herein, as
well as all future opportunities for same as contemplated hereby.
Effective Date means the date on which the last party to sign executes this
Contract, and delivers same to the other party.
Entitlements means all necessary approvals, consents, filings, permits,
certificates or similar items necessary for the development of each parcel
comprising the Real Property, in a manner consistent with Purchaser's
Contemplated Use of the Real Property. The Entitlements hereunder must
specifically permit and provide for the development of each parcel of Real
Property in not less than five (5) phases or increments of forty (40) Units in
each phase. Examples of such Entitlements include, without limitation,
subdivision approval, plot plan approval, environmental clearances, site plan
approval, Map filings, zoning approvals and related governmental authorizations.
It shall be the obligation of the Seller and Owner to secure all necessary and
applicable Entitlements pertaining to each parcel comprising the Real Property.
Entitlements shall also specifically include providing any and all utilities to
the boundary line of each respective parcel conveyed to Purchaser, including but
not limited to gas, electricity, water, cable, and telephone. Purchaser retains
the right, without any obligation whatsoever, to take measures necessary to
secure the Entitlements in which case Seller/Owner will cooperate fully with
Purchaser, including by signing all necessary documents.
Environmental Assessment has the meaning ascribed to it in Section 11.4.
Environmental Law means the Clean Air Act, 42 U.S.C. ss.7401 et seq.; the
Federal Water Pollution Control Act of 1977, 33 U.S.C. ss.1251 et seq., as
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amended by the Water Quality Act of 1987; FIFRA; the National Environmental
Policy Act of 1969, 42 U.S.C. ss.4321 et seq.; the Noise Control Act of 1972, 42
U.S.C. ss.4901 et seq.; the Occupational Safety and Health Act of 1970, 29
U.S.C. ss.651 et seq., as amended by the Hazardous and Solid Waste Amendments of
1984; the Safe Drinking Water Act, 42 U.S.C. ss.300f et seq.; CERCLA, as amended
by the Superfund Amendments and Reauthorization Act; the Emergency Planning and
Community Right-To-Know Act of 1986, 42 U.S.C. ss.11001, and the Radon Gas and
Indoor Air Quality Research Act of 1986, 42 U.S.C. ss.4701; RCRA; TSCA; AEA; and
NWPA, all as may be amended, with implementing regulations and guidelines.
Environmental Laws shall also include all federal, state, regional, county,
municipal, and other local laws, regulations, and ordinances insofar as they are
equivalent or similar to the federal laws above or purport to regulate (now or
in the future) Hazardous Materials.
FIRPTA has the meaning ascribed to it in Section 10.1.10 of this Contract.
Fixed Purchase Price has the meaning ascribed to it in Section 4.1 of this
Contract.
Hazardous Materials means any substance, material, waste, gas or particulate
matter, hazardous substance, pollutant or contamination, giving those terms the
broadest meaning as accorded by statutes, regulations and/or court decisions in
the jurisdiction in which the Property is located. Without limiting the
generality of the foregoing, the definition of those terms shall include
substances which are regulated under the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA"); oil and
petroleum products and by-products and natural gas, natural gas liquids,
liquefied natural gas, and synthetic gas usable for fuel, urea formaldehyde foam
insulation, and chlorofluorocarbons; pesticides regulated under the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. ss.136 et seq.
("FIFRA"); asbestos, polychlorinated biphenyl, and other substances regulated
under the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq.
("TSCA"); chemicals subject to the Occupational Safety and Health Standards,
Hazard Communication, 29 C.F.R. ss.1910.1200, as amended; source material,
special nuclear by-product materials, and any other radioactive materials or
radioactive wastes, however produced, regulated under the Atomic Energy Act of
1954, as amended, 42 U.S.C. ss.2011 et seq. ("AEA"); or the Nuclear Waste Policy
Act of 1982, as amended, 42 U.S.C. ss.10101 et seq. ("NWPA"); industrial process
and pollution control wastes whether or not hazardous within the meaning of the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.6901 et
seq. ("RCRA"); and any other hazardous substance, pollutant or contaminant that
is regulated or becomes regulated under any other Environmental Laws.
Heavenly Valley means that parcel of Real Property located in Lake Tahoe,
California more particularly identified on Exhibit A-1 to this Contract.
Immediately Available Funds means funds deposited to the transferee's account by
federal funds wire transfer.
Initial Resorts means the five (5) properties owned by Owner from which the
parcels identified in Exhibit A will be conveyed to Purchaser, to wit, Heavenly
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Valley, The Canyons, Steamboat, Killington and Sunday River. Initial Resorts are
distinguished from the other resort properties currently owned or operated by
Owner or Seller or their affiliates as well as from future acquired properties
which may be subject to this Contract at a later time; pursuant to and to the
extent provided herein.
Joint Development Timeshare Interest means any Buffer Timeshare Interest which
has been offered to Seller or Purchaser by the other party hereto pursuant to
Section 26.1 hereof and which Seller and Purchaser have agreed to pursue on a
joint development basis pursuant to said Section.
Killington means that parcel of Real Property located in Killington, Vermont
more particularly identified on Exhibit A-4 to this Contract.
Land Records means the records of the clerk of court of the County where each
parcel of Real Property is located or other such official depository in which
documentation of/and transfers, such as deeds and mortgages, are recorded to
satisfy requirements of notice and applicable law.
Liquidated Damages means, with respect to each Real Property parcel, the sum of
$3,600,000.00. In the event Purchaser shall select Liquidated Damages as a
remedy, Purchaser's right to such Liquidated Damages shall only be exercised via
a reduction in the Purchase Price.
Permitted Exceptions has the meaning ascribed to it in Section 7.1.
Purchaser means Marriott Ownership Resorts, Inc., a Delaware corporation.
Purchaser Timeshare Interest means any Timeshare Interest at a Seller
Resort not exceeding a two (2) week period of time.
Real Property means collectively, those parcels of real estate identified in
Exhibit A of this Contract. Individual parcels comprising the Real Property are
sometimes referred to as a "parcel comprising part of the Real Property" or a
"Real Property parcel". Purchaser, Owner and Seller recognize and acknowledge
that the parcels described in Exhibit A are inexact and may require additional
refinement or adjustment (of their respective size, boundary lines, orientation
and/or configuration) in order to render same adequate for development of
Purchaser Timeshare Interests. However, in each case, the Real Property to be
conveyed hereunder shall be adequate for the development, marketing and sales of
Purchaser Timeshare Interests in no less than five (5) phases of forty (40)
Units each. Purchaser, Owner and Seller agree to work together in a reasonable
and cooperative manner to identify the parcels to be ultimately conveyed to
Purchaser hereunder, which shall be reasonably acceptable to both Purchaser and
Owner/Seller. The foregoing shall apply to initial site selection/refinement and
any subsequent site selection/refinement provided for under this Agreement.
Release or Released means any actual or threatened spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
presence, dumping, migration on or from the Property or adjacent property, or
disposing of Hazardous Materials into the environment, as "environment" is
defined in CERCLA.
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Restricted Buffer Timeshare Interest means any Timeshare Interest at a Seller
Resort not exceeding a six and one-half (6-1/2) week period of time and not less
than a two (2) week period of time.
Seller means American Skiing Company, a Maine corporation.
Seller Resorts means all parcels of real property currently or hereafter owned
(including all properties in which Seller or Owner has a controlling interest by
virtue of a conveyance, stock transfer, asset purchase or otherwise) by Seller
or Owner or their affiliates, subsidiaries, parents or other related entities.
Seller Timeshare Interest means any Timeshare Interest at a Seller Resort
not less than a thirteen (13) week period of time.
Ski and Golf Package Agreement means that certain agreement entered into between
the parties contemporaneously herewith which sets forth the terms and conditions
pertaining to the sale and purchase of ski lift tickets and rounds of golf, as
more particularly set forth therein.
Steamboat means that parcel of Real Property located in Steamboat Springs,
Colorado more particularly identified on Exhibit A-3 to this Contract.
Sunday River means that parcel of Real Property located in Bethel, Maine more
particularly identified on Exhibit A-5 to this Contract.
Survey has the meaning ascribed to it in Section 6.1.
Term means the period which this Contract shall remain in effect, including all
renewal terms and extensions. The initial Term shall commence on the Effective
Date and shall continue for a period of ten (10) years from the date of the
issuance to the Purchaser of the first permit authorizing the start of
construction of Units at a Real Property parcel acquired by the Purchaser. The
initial Term shall automatically be extended, however, (i) to allow Purchaser to
complete its sales and marketing activities (on an exclusive basis) at a
particular Real Property site or sites, and (ii) if there remains, in
Purchaser's inventory, not less than One Thousand (1,000) Purchaser Timeshare
Interests at the Seller Resorts. If less than 1,000 Purchaser Timeshare
Interests remain in Purchaser's inventory at Seller Resorts, then the exclusive
right to market at Seller Resorts, as well as Purchaser's exclusive development
rights as set forth in Section 5.2(3) shall be deemed to have expired (except at
Seller Resorts where Purchaser continues to market its Timeshare Interest at
said Seller Resort, which Purchaser may continue to do on an exclusive basis).
When Purchaser's total Timeshare Interest inventory at Seller Resorts is reduced
to less than 1,000 Timeshare Interests, its rights to market and develop, as set
forth herein, shall continue, but on a non-exclusive basis, for a maximum period
of five (5) years from the date when Purchaser's inventory was reduced to below
1,000 Timeshare Interests.
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Timeshare Interest means any vacation ownership undivided fractional interest in
a specific timeshare Unit, together with the right to use and occupy such a Unit
for a fixed period of time, on a recurring basis (generally annually or every
other year). In addition, such term shall include all ancillary marketing
programs relating to the promotion and sale of such Interests. For purposes of
this Contract, Timeshare Interests may not and shall not include any vacation
ownership interest consisting of an undivided fractional interest equal to or
less than one-half (1/2) of one week. Any Timeshare Interest consisting of a
three (3) to twelve (12) week period (inclusive) may be developed pursuant to
the terms and conditions set forth in Article XXVII of this Contract. Nothing
contained herein shall restrict or limit either party's right to sell or convey
multiple Timeshare Interests to the same purchaser. For example, Purchaser may
sell more than two (2) consecutive one (1) week Timeshare Interests to the same
Purchaser, provided Purchaser is not actively marketing and packaging interests
of three (3) or more weeks as part of its sales and marketing program.
Title Commitment has the meaning ascribed to it in Section 7.1
Title Insurer means First American Title Insurance Company, or such other title
insurance underwriter as may be approved in writing by Purchaser.
Title Policy has the meaning ascribed to it in section 7.2.
Unit means that certain portion of the improvements to be constructed on each
parcel of the Real Property by Purchaser and designated as residential Units or
apartments and included in a plan for the sale of Timeshare Interests therein
pursuant to a vacation ownership or interval ownership plan or arrangement
created and implemented by Purchaser.
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EXHIBIT C
ASSIGNMENT OF DEVELOPMENT RIGHTS
MEMORANDUM OF CONTRACT
This Memorandum of Contract, dated as of July 22, 1998, is entered into
by and among American Skiing Company, a Maine corporation ("ASC"),
________________, a _______________ corporation ("Owner") American Skiing
Company Resort Properties, Inc., a Maine corporation ("ASCRP" and, together with
ASC and Owner, the "Grantors") and Marriott Ownership Resorts, Inc. ("Grantee")
for the purpose of setting forth of record certain terms of the Purchase and
Development Agreement dated July 22, 1998, among ASC, ASCRP and Grantee (the
"Purchase Agreement").
A._______Grantors' Covenants: Under the terms of the Purchase
Agreement, the Grantors have conveyed to Grantee (and do hereby confirm the
conveyance of) the following:
(1) The exclusive right to market, promote, rent, exchange and sell
Purchaser Timeshare Interests (as defined below) at the Seller Resorts
(as defined below), including, without limitation, the real property
described on Exhibit A hereto (the "Property"). This exclusive right is
subject to the right of Grantors and their affiliates to market,
promote and sell Seller Timeshare Interests (as defined below) and the
rights of third parties to market, promote and sell Timeshare Interests
at portions of the Property which Grantee has declined to acquire
pursuant to Section A(4) hereof.
(2) The right to acquire one (1) parcel of real estate for development
and sale of Purchaser Timeshare Interests (in not less than 200 units
per location, and developed in not less than five (5) phases of forty
(40) Units each) at a to be agreed upon location within the Property
(each such parcel is referred to herein as a "Development Parcel"),
subject to payment of any purchase price required under the Purchase
Agreement.
(3) From the date hereof until a date which is not later than
thirty-six (36) months after the issuance to Purchaser of the first
building permit authorizing the start of construction of Units (as
defined in the Purchase Agreement) at any Development Parcel purchased
under the Purchase Agreement (the "Option Date"), Grantee shall have
the exclusive right to acquire parcels of real property for development
of Purchaser Timeshare Interests thereon at the Seller Resorts and the
Property. Grantee shall execute and record a certificate certifying the
Option Date promptly after the issuance of such permit.
(4) From the Option Date through the remainder of the term of this
Memorandum (as defined in Section D(2) hereof), should Grantors or
either of them determine that they wish to make any of the Property
available for development of Purchaser Timeshare Interests, then
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Grantee shall have the exclusive right for a period of thirty (30) days
from receipt of notice of Grantors' intent to convey such parcel to
either: (a) make a binding commitment to acquire such parcel at a
purchase price established in accordance with the provisions of the
Purchase Agreement, or (b) to decline to acquire such parcel, whereupon
Grantors may sell such Property within 180 days of Grantee's response
at a price equal to or greater than the price at which such parcel was
offered to Grantee. Grantors may permit any purchaser of such a parcel
to market, on a non-exclusive basis, such purchaser's timeshare product
at Grantors' resort, subject to Grantee's right to market Purchaser
Timeshare Interests at such resort.
B. Release Mechanism: Grantors or either of them may release any portion of
the Property from the covenants and effect of this Memorandum by recording a
release sworn to and executed by a duly authorized officer of such entity, which
release describes the portion of the Property to be so released and provides:
(1) that such Property is being developed by Grantors or their affiliates;
or
(2) that such Property is being sold for use as a Seller Timeshare
Interest, whole ownership condominium or single family residential use.
In any other circumstance, the Property (or any portion thereof) may only be
released from the covenants and effect of this Memorandum prior to the end of
its term by a release executed by Grantee, in form and substance reasonably
acceptable to Grantee.
C. _____ Definitions: The following terms used herein shall have the
meanings ascribed to them below:
(1) Timeshare Interest: means any vacation ownership undivided fractional
interest in a specific timeshare unit, together with the right to use and occupy
such unit for a fixed period of time, on a recurring basis (generally annually
or every other year). In addition, such term shall include all ancillary
marketing programs relating to the promotion and sale of such interests.
(2) Seller Resorts: means all parcels of real property currently or
hereafter owned by Grantors, their subsidiaries or affiliates.
(3) Purchaser Timeshare Interest: means any Timeshare Interest at a Seller
Resort not exceeding a two (2) week period of time.
(4) Seller Timeshare Interest: means any Timeshare Interest at a Seller
Resort not less than a thirteen (13) week period of time.
D. Miscellaneous:
(1) The parties hereto agree that the provisions of Section A(2) of
this Memorandum shall not restrict any portion of the Property which is
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used in or essential to the ski operations of the Grantors, and that a
release properly executed pursuant to Section B hereof shall be
conclusive notice to third parties that this Memorandum does not affect
such Property.
(2) The Purchase Agreement has a minimum term of ten (10) years from
the issuance to the Grantee of the first building permit for any one
Development Parcel, subject to extension in certain circumstances set
forth in the Purchase Agreement. Grantors and Grantee agree that this
Memorandum shall be of no further force and effect with respect to the
Property on July 31, 2009 unless an extension, executed by all parties
hereto, is recorded against the Property on or before July 31, 2009;
provided, however, that Grantee may unilaterally extend the effect of
this Memorandum for a single, five (5) year period by recording a
notice of extension against the Property on or before July 31, 2009,
which extension shall require only Grantee's signature. Grantee hereby
covenants to provide prior notice to Grantor of its intent to file such
an extension. If such an extension is recorded, this Memorandum shall
continue in full force and effect as to any Property to which it then
applies until July 31, 2014; provided that the recording of such notice
of extension shall not, in and of itself, effect any change in the term
of the Purchase Agreement, which document shall substantively control
with respect to this and all other issues set forth in the Memorandum.
(3) This Memorandum of Contract shall be construed in accordance with
the laws of the state in which the Property is located.
(4) This Memorandum of Contract is executed pursuant to the provisions
contained in the Purchase Agreement and is not intended to, and does
not, vary the terms and conditions of such Purchase Agreement.
(5) This Memorandum of Contract shall be subordinate to the mortgage
lien of Owner's senior lender, and Grantee hereby agrees to execute a
subordination agreement in favor of such lender upon request.
(6) The terms of Section A(1) hereof shall not restrict the ability of
purchasers of Seller Timeshare Interests to rent or exchange any
portion of those interests.
AMERICAN SKIING COMPANY
By:______________________________
Christopher E. Howard
Senior Vice President
AMERICAN SKIING COMPANY
RESORT PROPERTIES, INC.
By:____________________________
Christopher E. Howard
Senior Vice President
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MARRIOTT OWNERSHIP RESORTS, INC.
By:____________________________
Its:
Printed Name:
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EXHIBIT D
FORM OF PROMISSORY NOTE
$6,400,000.00 Date: July 22, 1998
COMMERCIAL TERM NOTE
PROMISE TO PAY: FOR VALUE RECEIVED, Marriott Ownership Resorts, Inc.
("Maker") promises to pay to the order of American Skiing Company Resort
Properties, Inc. ("Holder") the principal amount of Six Million Four Hundred
Thousand Dollars ($6,400,000.00) plus interest, costs and fees as described
herein.
FIXED INTEREST RATE: So long as there is no default under this Note,
interest shall be calculated at the fixed rate of five and one- half percent
(5.5%) per annum (the "Interest Rate"). Interest shall be computed on the basis
of actual days elapsed over a 360-day year. In the event of any default under
this Note, the Holder may, in its discretion, determine that all amounts owed to
Holder shall subsequently bear interest at a rate equal to the Interest Rate
plus four percent (4%) per annum.
PAYMENT SCHEDULE: Maker shall pay the principal and interest according
to the following schedule: (i) 4 installments of principal in the amount of
$320,000.00 each, plus accrued interest, payable annually beginning on the first
anniversary of the date of this Note, followed by, (ii) a single balloon payment
on July 22, 2003 (the "Maturity Date") equal to all remaining principal balance
of this Note, together with all accrued and unpaid interest and all fees and
charges payable to the Holder hereunder. All payments will be made to Holder at
the address designated by Holder in lawful currency of the United States of
America. This Note may be prepaid without penalty in part or in full on or
before the Maturity Date.
PURCHASE AND DEVELOPMENT AGREEMENT: This Note is delivered pursuant to
a Purchase and Development Agreement among Maker, Holder and American Skiing
Company dated July 22, 1998 (the "Purchase and Development Agreement"). Holder
acknowledges that Maker's obligations to make payments hereunder are subject to
the provisions of Article XIV of the Purchase and Development Agreement. In the
event of a conflict between the terms of the Purchase and Development Agreement
and the terms of this Note, the terms of the Purchase and Development Agreement
shall control, except with regard to the Events of Default set forth herein.
EVENTS OF DEFAULT: The following shall be events of default under this
Note (each referred to herein as a "Default"): (1) failure by Maker to make full
and prompt payment when due, of any amount required to be paid to Holder
hereunder, which failure continues for 180 days following receipt by Maker of
notice of the first such failure, or continues for 90 days following receipt by
Maker of notice of any subsequent failure; (2) the entry of a decree or order
for relief with respect to the Maker in an involuntary case under the federal
bankruptcy law, as now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, trustee, custodian (or similar official) of or for the Maker, or
ordering the winding-up or liquidation of its affairs which is not promptly
contested and released or discharged within sixty (60) days; (3) the
commencement by the Maker of a voluntary case under the federal bankruptcy law,
as now constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or the consent by Maker to
the appointment of or taking possession by a receiver, liquidator, trustee,
custodian (or other similar official) of or for the Maker or for any substantial
part of its property, or the making by Maker of any assignment for the benefit
of creditors, or the insolvency or the failure of the Maker generally to pay its
debts as such debts become due, or the taking of action by the Maker in
furtherance of any of the foregoing.
POWERS UPON DEFAULT: Upon the occurrence of any Default or at any time
thereafter, Holder may, at its option, without notice or demand, in addition to
any other right or remedy that Holder may have at law or in equity, declare all
amounts owed under this Note to be immediately due and payable. The Maker waives
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the rights of demand, protest, notice of acceptance of this Note, notice of
default or dishonor, presentment, notice of loans made, credit extended,
collateral received or delivered or other action taken by the Holder hereunder
and all other demands and notices of any description.
HOLDER'S RIGHTS: The Holder shall not be deemed to have waived any of
its rights under this Note or otherwise unless such waiver is in writing and
signed by the Holder. Holder's failure to require strict performance of the
terms, covenants and agreements of this Note, or any delay or omission on the
part of the Holder in exercising any right, or any acceptance of partial or
adequate payment or performance shall not waive, affect or diminish such right
or Maker's duty of compliance and performance therewith. A waiver on any one
occasion shall not be construed as a bar to or waiver of the same or any other
right on the same or any future occasion. All rights and remedies of the Holder
under this Note shall be cumulative and may be exercised singularly or
concurrently. This Note may be negotiated, extended or renewed by the Holder
without releasing the Maker.
GOVERNING LAW; SEVERABILITY: This Note shall be construed in all
respects in accordance with, and governed by, the internal laws of the State of
Maine. Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provisions of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note. This Note may not be altered or amended
except by an agreement in writing signed by both Holder and Maker.
NOTICES: All notices and other communications required or permitted
under this Note shall be in writing and shall be personally delivered or given
by registered or certified mail. Any such notice shall be deemed effective on
the earlier of (a) the time when such notice is actually received or (b) the
third day following its deposit in the United States mail, postage prepaid and
addressed to the addresses of Maker and Holder set forth in the Purchase and
Development Agreement.
ASSIGNMENT; SUCCESSORS AND ASSIGNS: Neither party shall assign any of
its rights or obligations under this Note without the other's prior written
consent, which may be withheld in such other party's absolute discretion,
provided, however, that any such assignment shall not relieve the assigning
party of its obligations hereunder. This Note shall be binding upon and inure to
the benefit of Maker, Holder and their respective permitted successors, assigns,
trustees, receivers, administrators, personal representatives, legatees and
devisees.
MAKER: MARRIOTT OWNERSHIP RESORTS, INC.
______________________ By: ___________________________
Name:
Title:
65
<PAGE>
<TABLE>
<CAPTION>
ASC EAST, INC.
EPS EXHIBIT
JULY 26,1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JULY 26,
1998
<S> <C>
PRIMARY AND FULLY DILUTED CALCULATION
Net income from continuing operations ............................ 1,380
Extraordinary loss, net of income tax benefit of $2,854 ......... 4,464
--------------
Net loss ......................................................... (3,084)
--------------
Weighted average shares outstanding:
Common Stock ............................................. 978,300
--------------
Loss per share (basic and fully diluted):
Net income from continuing operations .................... 1.41
Extraordinary loss ....................................... (4.56)
Net loss ................................................. (3.15)
</TABLE>
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of ASC East, Inc. hereby
severally constitute and appoint Christopher E. Howard and Leslie B. Otten, and
each of them singly, our true and lawful attorneys with full power to them, and
each of them singly, to sign for us and in our names in the capacities indicated
below, the Annual Report on Form 10-K filed herewith and generally to do all
such things in our names and on our behalf in our capacities as offices and
directors to enable ASC East, Inc. to comply with the provision of the
Securities Exchange Act of 1934, as amended, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
Annual Report.
Signature Title Date
Chairman of the Board of Directors,
/s/ Leslie B. Otten President and Chief Executive Officer November 10, 1998
- ------------------- (Principal Executive Officer)
Leslie B. Otten
/s/ Gordon M. Gillies
- -------------------------- Director November 10, 1998
Gordon M. Gillies
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-26-1998
<PERIOD-END> JUL-26-1998
<CASH> 4,157,000
<SECURITIES> 0
<RECEIVABLES> 7,138,000
<ALLOWANCES> 0
<INVENTORY> 10,226,000
<CURRENT-ASSETS> 27,159,000
<PP&E> 352,509,000
<DEPRECIATION> 55,753,000
<TOTAL-ASSETS> 396,351,000
<CURRENT-LIABILITIES> 77,209,000
<BONDS> 127,952,000
0
0
<COMMON> 10,000
<OTHER-SE> 72,404,000
<TOTAL-LIABILITY-AND-EQUITY> 396,351,000
<SALES> 60,782,000
<TOTAL-REVENUES> 240,164,000
<CGS> 42,430,000
<TOTAL-COSTS> 144,328,000
<OTHER-EXPENSES> 24,710,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,273,000
<INCOME-PRETAX> 2,423,000
<INCOME-TAX> 1,043,000
<INCOME-CONTINUING> 1,380,000
<DISCONTINUED> 0
<EXTRAORDINARY> (4,464,000)
<CHANGES> 0
<NET-INCOME> (3,084,000)
<EPS-PRIMARY> (3.15)
<EPS-DILUTED> (3.15)
</TABLE>
