<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
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<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-26091
</TABLE>
BOOTH CREEK SKI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 84-1359604
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1000 SOUTH FRONTAGE ROAD WEST, SUITE 100
VAIL, COLORADO 81657
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(970) 476-4030
(Registrant's Telephone Number, Including Area Code)
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 Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
As of August 28, 1998, 1,000 shares of the registrant's common stock were
issued and outstanding.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 1
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations...................................
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 20
Item 2. Changes in Securities and Use of Proceeds................... 22
Item 3. Defaults Upon Senior Securities............................. 22
Item 4. Submission of Matters to a Vote of Security Holders......... 22
Item 5. Other Information........................................... 22
Item 6. Exhibits and Reports on Form 8-K............................ 23
SIGNATURES.................................................. 24
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 927 $ 462
Accounts receivable, net of allowances of $32 and $35,
respectively........................................... 1,372 1,528
Inventories............................................... 2,778 3,059
Prepaid expenses and other current assets................. 1,564 1,396
-------- --------
Total current assets................................... 6,641 6,445
Property and equipment, net................................. 153,962 123,154
Real estate held for development and sale................... 12,919 11,335
Deferred financing costs, net of accumulated amortization of
$1,762 and $782, respectively............................. 6,806 6,229
Timber rights and other assets.............................. 6,699 7,402
Goodwill, net of accumulated amortization of $3,625 and
$1,953, respectively...................................... 30,179 31,851
-------- --------
Total assets........................................... $217,206 $186,416
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Senior credit facility.................................... $ 19,414 $ 15,000
Current portion of long-term debt......................... 1,816 947
Accounts payable and accrued liabilities.................. 19,760 17,132
-------- --------
Total current liabilities......................... 40,990 33,079
Long-term debt.............................................. 137,325 120,380
Other long-term liabilities................................. 113 196
Commitments and contingencies
Preferred stock of subsidiary; 28,000 shares authorized,
22,000 shares issued and outstanding at July 31, 1998
(25,000 shares at October 31, 1997); liquidation
preference and redemption value of $2,769 at July 31,
1998...................................................... 2,769 3,354
Shareholder's equity:
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding................................. -- --
Additional paid-in capital................................ 57,000 46,500
Accumulated deficit....................................... (20,991) (17,093)
-------- --------
Total shareholder's equity............................. 36,009 29,407
-------- --------
Total liabilities and shareholder's equity.................. $217,206 $186,416
======== ========
</TABLE>
See accompanying notes.
1
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BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
--------------------- ---------------------
JULY 31, AUGUST 1, JULY 31, AUGUST 1,
1998 1997 1998 1997
-------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Resort operations................................. $ 91,709 $ 63,753 $ 3,861 $ 3,284
Real estate and other............................. 207 1,647 207 1,197
-------- -------- -------- --------
Total revenue....................................... 91,916 65,400 4,068 4,481
Operating expenses:
Cost of sales -- resort operations................ 54,952 40,778 6,381 4,673
Cost of sales -- real estate and other............ 96 1,146 96 768
Depreciation and depletion........................ 10,675 6,998 4,033 2,571
Amortization of goodwill.......................... 1,672 1,150 556 453
Selling, general and administrative expense....... 10,902 8,475 2,412 1,957
Management fees and corporate expenses............ 3,386 1,465 1,622 638
-------- -------- -------- --------
Total operating expenses............................ 81,683 60,012 15,100 11,060
-------- -------- -------- --------
Operating income (loss)............................. 10,233 5,388 (11,032) (6,579)
Other income (expense):
Interest expense.................................. (12,954) (8,863) (4,607) (3,700)
Amortization of deferred financing costs.......... (980) (1,541) (369) (345)
Interest and other income......................... 11 140 4 85
-------- -------- -------- --------
Other income (expense), net....................... (13,923) (10,264) (4,972) (3,960)
-------- -------- -------- --------
Loss before income taxes............................ (3,690) (4,876) (16,004) (10,539)
Income tax benefit.................................. -- 1,219 -- 2,635
-------- -------- -------- --------
Loss before minority interest and extraordinary
item.............................................. (3,690) (3,657) (16,004) (7,904)
Minority interest................................... (208) (157) (70) (70)
-------- -------- -------- --------
Loss before extraordinary item...................... (3,898) (3,814) (16,074) (7,974)
Extraordinary loss on early retirement of debt (net
of applicable income taxes of $666)............... -- (1,998) -- --
-------- -------- -------- --------
Net loss............................................ $ (3,898) $ (5,812) $(16,074) $ (7,974)
======== ======== ======== ========
</TABLE>
See accompanying notes.
2
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BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
NINE MONTHS ENDED JULY 31, 1998 (UNAUDITED)
AND THE YEAR ENDED OCTOBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RECEIVABLE
---------------- PAID-IN FROM ACCUMULATED
SHARES AMOUNT CAPITAL SHAREHOLDER DEFICIT TOTAL
------ ------ ---------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization and balance
at October 31, 1996............... 1,000 $-- $ 2 $(2) $ -- $ --
Payment received on shareholder note
receivable........................ -- -- -- 2 -- 2
Capital contributions............... -- -- 46,498 -- -- 46,498
Net loss............................ -- -- -- -- (17,093) (17,093)
----- -- ------- --- -------- --------
Balance at October 31, 1997......... 1,000 -- 46,500 -- (17,093) 29,407
Capital contributions............... -- -- 10,500 -- -- 10,500
Net loss............................ -- -- -- -- (3,898) (3,898)
----- -- ------- --- -------- --------
Balance at July 31, 1998............ 1,000 $-- $57,000 $-- $(20,991) $ 36,009
===== == ======= === ======== ========
</TABLE>
See accompanying notes.
3
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BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------
JULY 31, 1998 AUGUST 1, 1997
------------- --------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (3,898) $ (5,812)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and depletion................................ 10,675 6,998
Amortization of goodwill.................................. 1,672 1,150
Noncash cost of real estate sales......................... -- 851
Amortization of deferred financing costs.................. 980 1,541
Deferred income tax benefit............................... -- (1,219)
Minority interest......................................... 208 157
Extraordinary loss on early retirement of debt............ -- 1,998
Changes in operating assets and liabilities:
Accounts receivable.................................... 480 145
Inventories............................................ 806 826
Prepaid expenses and other current assets.............. (47) 262
Accounts payable and accrued liabilities............... 482 1,747
Other long-term liabilities............................ (83) --
-------- ---------
Net cash provided by operating activities................... 11,275 8,644
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ski resorts, net of cash acquired............ (30,016) (141,222)
Capital expenditures for property and equipment............. (8,604) (4,550)
Capital expenditures for real estate held for development
and sale.................................................. (684) (282)
Other, net.................................................. 643 488
-------- ---------
Net cash used in investing activities....................... (38,661) (145,566)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under Senior Credit Facility................. 4,414 7,000
Proceeds of long-term debt.................................. 17,500 216,000
Principal payments of long-term debt........................ (2,213) (114,288)
Deferred financing costs.................................... (1,557) (10,484)
Purchase of preferred stock of subsidiary and payment of
dividends................................................. (793) (375)
Payment received on shareholder note receivable............. -- 2
Capital contributions....................................... 10,500 46,498
-------- ---------
Net cash provided by financing activities................... 27,851 144,353
-------- ---------
Increase in cash............................................ 465 7,431
Cash at beginning of period................................. 462 --
-------- ---------
Cash at end of period....................................... $ 927 $ 7,431
======== =========
</TABLE>
See accompanying notes.
4
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BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Booth Creek Ski Holdings, Inc. ("Booth Creek") was organized on October 8,
1996 in the State of Delaware for the purpose of acquiring and operating various
ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe
("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, the Summit at
Snoqualmie Pass (the "Summit" -- formerly Snoqualmie Pass), Grand Targhee and
Loon Mountain.
The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"). Booth Creek
owns all of the common stock of its subsidiaries. Ski Lifts, Inc. (the operator
of the Summit) has shares of preferred stock owned by a third party. All
significant intercompany transactions and balances have been eliminated.
Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent").
The accompanying consolidated financial statements as of July 31, 1998 and
for the three and nine month periods ended July 31, 1998 and August 1, 1997 are
unaudited, but include all adjustments (consisting only of normal, recurring
adjustments) which, in the opinion of management of the Company, are considered
necessary for a fair presentation of the Company's financial position at July
31, 1998, and its operating results and cash flows for the three and nine month
periods ended July 31, 1998 and August 1, 1997. Due to the highly seasonal
nature of the Company's business and the effect of acquisitions (Note 2), the
results for the interim periods are not necessarily indicative of results for
the entire year. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles ("GAAP") have been omitted pursuant to GAAP applicable for
interim periods. Management believes that the disclosures made are adequate to
make the information presented not misleading.
REPORTING PERIODS
The Company's reporting periods end on the Friday closest to the end of
each month.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those results.
2. ACQUISITIONS
1997 ACQUISITIONS
During the year ended October 31, 1997, the Company made the following
acquisitions (the "1997 Acquisitions"), which have been included in the
accompanying statements of operations since the effective dates of such
acquisitions, and accounted for using the purchase method.
<TABLE>
<CAPTION>
RESORT ACQUISITION DATE
------ ----------------
<S> <C>
Waterville Valley......................................... November 27, 1996
Mt. Cranmore.............................................. November 27, 1996
Northstar................................................. December 3, 1996
Sierra.................................................... December 3, 1996
Bear Mountain............................................. December 3, 1996
The Summit................................................ January 15, 1997
Grand Targhee............................................. March 18, 1997
</TABLE>
5
<PAGE> 8
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
LOON MOUNTAIN ACQUISITION
On February 26, 1998, the Company acquired Loon Mountain Recreation
Corporation ("LMRC"), the owner and operator of the Loon Mountain ski resort
located in New Hampshire. The acquisition of LMRC (the "Loon Mountain
Acquisition") was effected pursuant to an Agreement and Plan of Merger, dated
September 18, 1997, as amended as of December 22, 1997, by and among the
Company, as assignee of Parent, LMRC Acquisition Corp. and LMRC.
The aggregate net purchase price for the Loon Mountain Acquisition,
determined through negotiations between the Company and LMRC, was approximately
$30.0 million (including the assumption of debt which was repaid in connection
with the acquisition and acquisition costs). The Loon Mountain Acquisition was
financed through (i) proceeds from the offering at par of $17.5 million
aggregate principal amount of the Company's 12.5% Series C Senior Notes due 2007
(see Note 4), issued under the Indenture, dated as of March 18, 1997, as amended
and supplemented among the Company, the Guarantors named therein, and the
trustee, (ii) a capital contribution of $10.5 million to the Company by Parent
(the "Equity Financing"), and (iii) available cash on hand and borrowings under
the Company's Amended and Restated Credit Agreement dated March 18, 1997, as
amended (the "Senior Credit Facility").
PRO FORMA FINANCIAL INFORMATION
The following table represents unaudited pro forma financial information
which presents the Company's consolidated results of operations for the nine
month periods ended July 31, 1998 and August 1, 1997 as if the 1997
Acquisitions, Loon Mountain Acquisition and related financing transactions
occurred on November 1, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------
JULY 31, AUGUST 1,
1998 1997
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Statement of operations data:
Revenue............................................... $102,555 $90,066
Operating income...................................... $ 13,885 $ 4,005
Net loss.............................................. $ (1,125) $(8,841)
Other data:
EBITDA................................................ $ 27,026 $16,656
Noncash cost of real estate and other................. $ -- $ 984
</TABLE>
EBITDA represents income from operations before depreciation, depletion and
amortization expense and the noncash cost of real estate sales. EBITDA is not
intended to represent cash flow from operations or net income as defined by
generally accepted accounting principles and should not be considered as a
measure of liquidity or an alternative to, or more meaningful than, operating
income or operating cash flow as an indication of the Company's operating
performance.
The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions been made on the dates
indicated or of results which may occur in the future.
6
<PAGE> 9
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at July
31, 1998 and October 31, 1997:
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable........................................ $ 5,603 $ 7,618
Accrued compensation and benefits....................... 2,629 1,575
Taxes other than income................................. 644 545
Unearned income and customer deposits................... 1,626 3,341
Interest................................................ 6,400 2,027
Other................................................... 2,858 2,026
------- -------
$19,760 $17,132
======= =======
</TABLE>
4. FINANCING ARRANGEMENTS
SENIOR CREDIT FACILITY
Effective February 26, 1998, the borrowing availability under the Senior
Credit Facility was increased to $25 million (the "Senior Credit Facility
Amendment"). The Senior Credit Facility requires that the Company not have
borrowings thereunder in excess of $6.0 million between February 15 and two
business days preceding March 15 of each year, have no borrowings on the
business day preceding March 15 of each year and cannot have borrowings in
excess of $6.0 million between March 15 and April 15 of each year. Total
borrowings outstanding under the Senior Credit Facility at July 31, 1998 were
approximately $19.4 million, which bore interest at 8.5%.
LONG-TERM DEBT
On February 26, 1998, the Company consummated an offering (the "Offering")
of $17.5 million of its 12.5% Series C Senior Notes due 2007 (the "Series C
Notes"). The net proceeds of the Offering, the $10.5 million Equity Financing,
and available cash on hand and borrowings under the Senior Credit Facility, were
used to finance the Loon Mountain Acquisition (Note 2). Pursuant to a registered
exchange offer which expired on July 31, 1998, the Series C Notes were exchanged
for a like principal amount of the Company's 12.5% Series B Senior Notes (the
"Notes"). On July 31, 1998, after giving effect to such exchange, $133.5 million
aggregate principal amount of the Notes were outstanding. The Notes mature on
March 15, 2007, and bear interest at 12.5% per annum, payable semiannually on
each March 15 and September 15.
The Notes are unconditionally guaranteed, on an unsecured senior basis, as
to the payment of principal, premium, if any, and interest, jointly and
severally (the "Guarantees"), by all Restricted Subsidiaries of the Company (as
defined in the Indenture) having either assets or shareholders' equity in excess
of $20,000 (the "Guarantors"). All of the Company's direct and indirect
subsidiaries are Restricted Subsidiaries, except the Real Estate LLC. Each
Guarantee is effectively subordinated to all secured indebtedness of such
Guarantor. The Notes are general senior unsecured obligations of the Company
ranking equally in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company. The Notes are effectively subordinated in right of
payment to all secured indebtedness of the Company and the Guarantors, including
indebtedness under the Senior Credit Facility. In addition, the Notes are
structurally subordinated to any indebtedness of the Company's subsidiaries that
are not Guarantors. The Guarantors are wholly-owned subsidiaries of Booth Creek
and have fully and unconditionally guaranteed the Notes on a joint and several
basis. Booth Creek is a holding company and has no operations, assets or cash
flows separate from its investments in its subsidiaries. In addition, the
7
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BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. FINANCING ARRANGEMENTS (CONTINUED)
LONG-TERM DEBT (CONTINUED)
assets, equity, income and cash flow of the Real Estate LLC, Booth Creek's only
non-guarantor subsidiary, are inconsequential and the common stock of the Real
Estate LLC is entirely owned by Booth Creek. Accordingly, Booth Creek has not
presented separate financial statements and other disclosures concerning the
Guarantors or its non-guarantor subsidiary because management has determined
that such information is not material to investors.
For the nine months ended July 31, 1998, the Company entered into long-term
debt and capital lease obligations of approximately $2.5 million for the
purchase of equipment.
5. INCOME TAXES
During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the three and nine month periods
ended July 31, 1998, no federal income tax provision has been provided.
Based on preliminary purchase price allocations for the 1997 Acquisitions
as described in Note 2, deferred tax liabilities of approximately $4.4 million
were recorded in the preliminary opening balance sheets. This resulted in an
expected effective income tax rate of approximately 25%, which was used by the
Company in preparing its consolidated financial statements for the three and
nine month periods ended August 1, 1997. Final purchase price allocations,
primarily for the Summit acquisition, resulted in less value being assigned to
property and equipment, more to goodwill and a corresponding reduction in the
original deferred tax liabilities. Accordingly, the actual income tax rate for
the year ended October 31, 1997 was 10.8%, and was adjusted for in the fourth
quarter of 1997 on a catch-up basis as a change in estimate.
6. SUBSEQUENT EVENTS
CAPITAL CONTRIBUTIONS FROM PARENT
On September 14, 1998, the Company received a $15 million capital
contribution from Parent, which will be utilized to fund certain expansion
related capital expenditures planned for fiscal 1998 and fiscal 1999, working
capital and other general corporate purposes. After giving effect to such
capital contribution and the receipt of expected net proceeds of approximately
$6.3 million from the recent sale of real estate at Northstar (described below),
outstanding borrowings under the Senior Credit Facility at September 14, 1998
are expected to be approximately $1.6 million, which would provide the Company
with borrowing availability of approximately $23.4 at such date.
REAL ESTATE AUCTION
On August 16, 1998, Northstar conducted an auction of certain real estate
parcels as part of the third phase of an ongoing real estate development
project. All of the lots available for sale were sold at an average lot price of
approximately $210,000 as compared to an average lot price of $154,000 for the
two prior phases. Such sales are expected to result in net proceeds to the
Company of approximately $6.3 million after deduction for sales commissions and
other selling costs. The proceeds from the sales are expected to be received in
September 1998 upon the close of escrow and the transfer of title. The revenues
and costs of sales associated with these transactions will be recognized in the
fourth quarter of fiscal 1998.
8
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BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SUBSEQUENT EVENTS (CONTINUED)
PROPOSED ACQUISITION
On August 28, 1998, the Company, Booth Creek Ski Acquisition, Inc., a
wholly-owned subsidiary of Booth Creek ("Acquisition Sub"), and Seven Springs
Farm, Inc. ("Seven Springs"), the owner and operator of the Seven Springs
Mountain Resort, a ski resort and conference center, entered into an Agreement
of Merger (the "Merger Agreement"), pursuant to which the Company would acquire
Seven Springs through the merger of Acquisition Sub with and into Seven Springs.
The aggregate merger consideration and related payments will be approximately
$83.0 million plus certain deferred payments, subject to certain price
adjustments. The proposed acquisition is conditioned on the receipt of a
judicial determination that the terms of a certain shareholders' agreement among
Seven Springs and its shareholders (the "Seven Springs Shareholder Agreement")
does not apply to the transactions contemplated by the Merger Agreement, as well
as customary closing conditions. In connection with the proposed acquisition,
certain shareholders of Seven Springs filed a lawsuit in the Court of Common
Pleas of Somerset County, Pennsylvania against the Company, Acquisition Sub, and
Seven Springs and certain of its directors, seeking a declaratory judgment,
along with other relief including the rescission of the Merger Agreement.
Plaintiffs allege that the terms of the Seven Springs Shareholder Agreement ban
the consummation of the proposed acquisition. While the Company believes that
Seven Springs' position will prevail that the Seven Springs Shareholders
Agreement does not apply to the transactions contemplated by the Merger
Agreement, no assurance can be made regarding the timing or the outcome of this
litigation.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The discussion and analysis below relates to the historical financial
statements and historical and pro forma results of operations of the Company and
the liquidity and capital resources of the Company. The following discussion
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this report.
Except for historical matters, the matters discussed in Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements that involve risks and uncertainties.
Forward-looking statements are based on management's current views and
assumptions and involve risks and uncertainties that could significantly affect
expected results. The Company wishes to caution the reader that certain factors
below could significantly and materially affect the Company's actual results,
causing results to differ materially from those in any forward-looking
statement. These factors include: regional and national economic conditions, the
successful or unsuccessful integration of acquired businesses, weather
conditions, natural disasters (such as earthquakes), industry competition and
governmental regulation, risks associated with expansion, leased property and
property used pursuant to the United States Forest Service permits, and the
ability of the Company to make its information technology assets and systems
year 2000 compliant and the costs of any modifications necessary in this regard.
GENERAL
The Company's ski operations are highly sensitive to regional weather
conditions and the overall strength of the regional economies in the areas in
which the Company operates. The Company believes that the geographic diversity
of the Company's resorts and the use of extensive snowmaking technology coupled
with advanced trail grooming equipment, which together can provide consistent
skiing conditions, can partially mitigate the risk of both economic downturns
and adverse weather conditions in any given region. However, the Company remains
vulnerable to warm weather, heavy rains and drought conditions, which can have a
significant effect on the operating revenues and profitability at any one of the
Company's resorts.
The Company's four most weather-sensitive resorts, Bear Mountain,
Waterville Valley, Loon Mountain and Mt. Cranmore, have invested heavily in
snowmaking capabilities to provide coverage on virtually all of their trails and
have been open for skiing at least 123, 144, 145, and 105 days, respectively,
during each of the last five ski seasons. The Company's Northstar, Sierra,
Summit and Grand Targhee resorts are less weather-sensitive based on their
historical natural snowfall, averaging approximately 326, 518, 422, and 512
inches of snow, respectively, per year for the past five ski seasons. As a
result of their historic natural snowfall, their snowmaking capabilities are
considerably less extensive than at Bear Mountain, Waterville Valley, Loon
Mountain or Mt. Cranmore.
The Company's results of operations are also highly dependent on its
ability to compete in each of the large regional ski markets in which it
operates. At Northstar and Sierra, more than 70% of the 1997/98 ski season total
skier days were attributable to residents of the San Francisco, Sacramento,
Central California Valley and Lake Tahoe regions. At Bear Mountain, more than
90% of the 1997/98 ski season total skier days were attributable to residents of
the Los Angeles and San Diego metropolitan regions. At Waterville Valley, Loon
Mountain and Mt. Cranmore, approximately 80% of the 1997/98 ski season total
skier days were attributable to residents of Massachusetts and New Hampshire,
with a large percentage of such visitors coming from the Boston metropolitan
area. At the Summit, the Company estimates that more than 90% of the 1997/98 ski
season total skier days were attributable to residents of the Seattle/Tacoma
metropolitan region. The Company's Grand Targhee resort attracts approximately
50% of its skiers from outside its local skiing population.
In addition to revenue generated from skiing operations, the Company's
resorts generate significant revenue from non-ski operations, including lodging,
conference center services, health and tennis clubs and summer activities such
as mountain biking rentals and golf course fees.
10
<PAGE> 13
A significant portion of total operating costs at the Company's resorts are
variable, consisting primarily of retail and food service cost of sales,
utilities and labor expense. These variable costs can fluctuate significantly
based upon skier days and other seasonal factors. With the exception of certain
management, marketing, administrative and maintenance personnel, all of the
Company's employees are compensated on an hourly basis.
RESULTS OF OPERATIONS OF THE COMPANY
Historical Nine Months Ended July 31, 1998 as Compared to the Historical Nine
Months Ended August 1, 1997
The Company was formed October 8, 1996. Since inception, the Company made
the following acquisitions which are included in the results of operations of
the Company from the respective purchase dates and were accounted for using the
purchase method:
<TABLE>
<CAPTION>
RESORT ACQUISITION DATE
------ ----------------
<S> <C>
Waterville Valley......................................... November 27, 1996
Mt. Cranmore.............................................. November 27, 1996
Northstar................................................. December 3, 1996
Sierra.................................................... December 3, 1996
Bear Mountain............................................. December 3, 1996
The Summit................................................ January 15, 1997
Grand Targhee............................................. March 18, 1997
Loon Mountain............................................. February 26, 1998
</TABLE>
Total revenue for the nine months ended July 31, 1998 was $91,916,000, an
increase of $26,516,000 or 40.5%, over the Company's revenues for the nine
months ended August 1, 1997. Due to the timing of the acquisitions, the 1997
period does not reflect a full period of operating revenues for the resorts,
which accounts for a significant part of the increase. The increase in revenue
is also due to more typical weather conditions in the Lake Tahoe region in the
current period than during the comparable period in the 1996/97 ski season,
which resulted in increased revenues at Sierra and Northstar of 65.1% and 24.5%,
respectively. During the 1996/97 ski season, revenue was negatively impacted by
a mudslide which shut down the highway which provides primary access to Sierra
and poor weather conditions during the Christmas holiday period at many of the
Company's other resorts. Total skier visits at Sierra and Northstar increased by
62.7% and 21.9% or approximately 132,000 and 97,000, respectively, in the 1998
period as compared to the 1997 period.
Total operating expenses for the nine months ended July 31, 1998 were
$81,683,000, an increase of $21,671,000 or 36.1%, over the Company's total
operating expenses for the nine months ended August 1, 1997. Due to the timing
of the acquisitions, the 1997 period does not reflect a full period of operating
expenses for the resorts, which accounts for a significant part of the increase.
Payroll related costs, the single largest component of operating expenses, were
approximately $32,084,000 for the nine months ended July 31, 1998, as compared
to $22,398,000 for the 1997 period.
Interest expense for the nine months ended July 31, 1998 totaled
$12,954,000, an increase of $4,091,000 over the Company's interest expense for
the nine months ended August 1, 1997, reflecting generally higher levels of
borrowings in the 1998 period and a slightly higher interest rate on the Senior
Notes as compared to the interest rates on the bridge financing facilities in
place through March 17, 1997.
During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the nine months ended July 31,
1998, no federal income tax provision has been provided.
For the nine months ended August 1, 1997, income taxes were based on
preliminary purchase price allocations for the Company's acquisitions of the
resorts. Deferred tax liabilities of approximately $4.4 million
11
<PAGE> 14
were recorded in the preliminary opening balance sheets. This resulted in an
expected income tax benefit rate of approximately 25%, which was used by the
Company in preparing its financial statements through the third quarter of 1997.
Final purchase allocations, primarily for the Summit acquisition, resulted in
less value being assigned to fixed assets, more to goodwill and a corresponding
reduction in the original deferred tax liabilities. Accordingly, the actual
income tax benefit rate for the year ended October 31, 1997 was 10.8%, and was
adjusted for in the fourth quarter on a catch-up basis as a change in estimate.
Historical Three Months Ended July 31, 1998 as Compared to the Historical
Three Months Ended August 1, 1997
Total revenue for the three months ended July 31, 1998 was $4,068,000, a
decrease of $413,000 or 9.2%, over the Company's revenues for the three months
ended August 1, 1997. Revenue from resort operations increased $577,000 or
17.6%, due primarily to the impact of the Loon Mountain Acquisition, as Loon
Mountain generated $715,000 in resort operating revenue for the three months
ended July 31, 1998. Revenues from real estate and timber operations declined
$990,000 in the 1998 period due to the timing of real estate sales.
Total operating expenses for the three months ended July 31, 1998 were
$15,100,000, an increase of $4,040,000 or 36.5%, over the Company's total
operating expenses for the three months ended August 1, 1997. Approximately
$2,300,000 of the increase is due to the inclusion of Loon Mountain in the 1998
period as a result of the timing of the Loon Mountain Acquisition. Payroll
related costs were $5,923,000 for the three months ended July 31, 1998, as
compared to $4,438,000 for the 1997 period.
Interest expense for the three months ended July 31, 1998 totaled
$4,607,000, an increase of $907,000 over the level of interest expense for the
comparable 1997 period, reflecting generally higher levels of borrowings in the
1998 period.
During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the three months ended July 31,
1998, no federal income tax provision has been provided.
For the three months ended August 1, 1997, income taxes were based on
preliminary purchase price allocations for the Company's acquisitions of the
resorts. Deferred tax liabilities of approximately $4.4 million were recorded in
the preliminary opening balance sheets. This resulted in an expected income tax
benefit rate of approximately 25%, which was used by the Company in preparing
its financial statements through the third quarter of 1997. Final purchase price
allocations, primarily for the Summit acquisition, resulted in less value being
assigned to fixed assets, more to goodwill and a corresponding reduction in the
original deferred tax liabilities. Accordingly, the actual income tax benefit
rate for the year ended October 31, 1997 was 10.8%, and was adjusted for in the
fourth quarter on a catch-up basis as a change in estimate.
Pro Forma Nine Months Ended July 31, 1998 as Compared to the Pro Forma Nine
Months Ended August 1, 1997
The following unaudited pro forma results of operations of the Company for
the nine months ended July 31, 1998 and August 1, 1997 assume that all the
resort acquisitions and related financings had occurred on November 1, 1996.
These unaudited pro forma results of operations are not necessarily indicative
of the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations.
12
<PAGE> 15
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NINE MONTHS ENDED NINE MONTHS ENDED
JULY 31, 1998 AUGUST 1, 1997
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort operations..................................... $102,348 $88,115
Real estate and other................................. 207 1,951
-------- -------
102,555 90,066
Operating expenses:
Resort operations..................................... 75,433 73,087
Cost of sales -- real estate and other................ 96 1,307
Depreciation, depletion and amortization.............. 13,141 11,667
-------- -------
Operating income........................................ 13,885 4,005
Interest expense, net................................... 14,802 13,680
-------- -------
Loss before income taxes................................ (917) (9,675)
Income tax benefit...................................... -- 1,045
-------- -------
Loss before minority interest........................... (917) (8,630)
Minority interest....................................... (208) (211)
-------- -------
Net loss................................................ $ (1,125) $(8,841)
======== =======
OTHER DATA:
EBITDA.................................................. $ 27,026 $16,656
Noncash cost of real estate sales....................... $ -- $ 984
</TABLE>
Total pro forma revenues for the nine months ended July 31, 1998 would have
been $102,555,000, an increase of $12,489,000 or 13.9% over the comparable
period in 1997. Sierra, Northstar, Grand Targhee, Bear Mountain and Waterville
Valley generated increased revenues in the 1998 period of 65.1%, 22.4%, 11.1%,
12.5%, and 9.1%, respectively, due primarily to skier day increases. The
increase in revenue is primarily due to more typical weather conditions in the
Lake Tahoe region in the current period than during the comparable period in the
1996/97 ski season. Pro forma revenues for Mt. Cranmore, the Summit and Loon
Mountain for the 1998 period were generally comparable to the level of revenues
in the 1997 period. Total skier visits would have increased 9.2%, or
approximately 200,000, in the 1998 period as compared to the 1997 period
primarily due to improved weather conditions during the holiday periods which
allowed travelers to reach the Company's resorts. During the 1996/97 ski season,
revenues were negatively impacted by a mudslide which shut down the highway
which provides primary access to Sierra and poor weather conditions during the
holiday period at many of the Company's other resorts. Sales of real estate and
timber during the nine months ended July 31, 1998 were $207,000, as compared to
$1,951,000 in the comparable 1997 pro forma period. The decline in real estate
sales in the 1998 period was due to the timing of lot sales.
Pro forma resort operating expenses, excluding depreciation, depletion and
amortization, for the nine months ended July 31, 1998 would have been
$75,433,000, an increase of $2,346,000, or 3.2%, over the comparable period in
1997. Pro forma payroll related costs would have been $34,534,000, an increase
of $2,984,000 or 9.5%, over the comparable 1997 period. The increase in pro
forma payroll related costs was due primarily to higher seasonal employment at
Northstar and Sierra due to the improved operating conditions and extended
season.
Pro forma depreciation, depletion and amortization for the pro forma nine
month period ended July 31, 1998 would have been $13,141,000. The increase of
$1,474,000 or 12.6% over the 1997 period was due to higher average asset
balances in the 1998 period.
Net interest expense for the pro forma nine months ended July 31, 1998
would have totaled $14,802,000, an increase of $1,122,000 or 8.2% from the
comparable period in 1997. The increase was due to interest
13
<PAGE> 16
expense on borrowings under the Senior Credit Facility used to fund capital
expenditures, maintenance activities and normal seasonal working capital
requirements in the off-season periods.
Income tax benefit for the pro forma nine months ended August 1, 1997 of
$1,045,000 reflects the effective tax rate of 10.8% utilized for the year ended
October 31, 1997. As it was assumed that the effective rate for the year ended
October 30, 1998 will be zero, no income tax benefit was recorded during the pro
forma nine month period ended July 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund capital expenditures,
service indebtedness and support seasonal working capital requirements. The
Company's primary sources of liquidity are cash flow from operations and
borrowings under the Senior Credit Facility. Virtually all of the Company's
operating income is generated by its subsidiaries. As a result, the Company is
dependent on the earnings and cash flow of, and dividends and distributions or
advances from, its subsidiaries to provide the funds necessary to meet its debt
service obligations. The Senior Credit Facility currently provides for borrowing
availability of up to $25 million during the term of such facility, which
expires in March 1999. The Senior Credit Facility requires that the Company not
have borrowings thereunder in excess of $6.0 million between February 15 and two
business days preceding March 15 of each year, have no borrowings on the
business day preceding March 15 of each year and not have borrowings in excess
of $6.0 million between March 15 and April 15 of each year. The Company intends
to use borrowings under the Senior Credit Facility to meet seasonal fluctuations
in working capital requirements, primarily related to off-season operations and
maintenance activities during the months of May through November, to fund
capital expenditures for lifts, trail work, grooming equipment and other
on-mountain equipment and facilities and to build retail and other inventories
prior to the start of the skiing season and for other cash requirements. As of
July 31, 1998, outstanding borrowings under the Senior Credit Facility totaled
$19.4 million.
While the Company's ski resorts typically generate significant amounts of
cash during the ski season, the Company had a working capital deficit of $34.3
million as of July 31, 1998 which will negatively affect liquidity during the
remainder of 1998.
The Company generated cash from operating activities of $11.3 million for
the nine months ended July 31, 1998 as compared to $8.6 million for the nine
months ended August 1, 1997. This increase is due to the significantly improved
operating results in the 1998 period and the inclusion of all resorts for the
full period in 1998 (except for Loon Mountain which has been included in 1998
operations since February 26, 1998).
Cash used in investing activities totaled $38.7 million and $145.6 million
for the nine months ended July 31, 1998 and August 1, 1997, respectively. The
results for the 1998 period reflect primarily capital expenditures and the Loon
Mountain Acquisition, whereas the results for the 1997 period include $141.2
million of cash used for the acquisition of the Company's other ski resorts.
Cash provided by financing activities totaled $27.9 million and $144.4
million for the nine months ended July 31, 1998 and August 1, 1997,
respectively. The results for the 1998 period reflect net borrowings and receipt
of additional capital contributions to fund the Loon Mountain Acquisition. The
results for the 1997 period reflect borrowings on long-term debt and capital
contributions used to fund the 1997 ski resort acquisitions.
The Company's capital expenditures for property and equipment for the nine
months ended July 31, 1998 and August 1, 1997 were approximately $11.1 million
(including approximately $2.5 million financed through capital leases and
deferred payment obligations) and $4.6 million, respectively, and were funded by
cash provided by operating activities and borrowings under the Senior Credit
Facility. Management anticipates that annual capital expenditures for property
and equipment in each of fiscal 1998 and 1999 will be approximately $18 million
and $5 million, respectively, for resort maintenance, safety and planned
return-based upgrades that management has deemed appropriate. The Company plans
to fund these capital expenditures from the $15 million capital contribution
received from Parent on September 14, 1998, available operating cash flows,
vendor financing to the extent permitted under the Senior Credit Facility and
the Indenture and borrowings
14
<PAGE> 17
under the Senior Credit Facility. In addition, capital expenditures for real
estate development activities at Northstar are expected to be approximately $1.5
million for fiscal 1998, and approximately $1.0 million to $2.0 million for
fiscal 1999.
Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the capital expenditure program described above is regarded by
management as important, both as to timing and scope, discretionary capital
spending above maintenance levels can be deferred, in some instances for
substantial periods of time, in order to address cash flow or other constraints.
With respect to the Company's potential real estate development opportunities,
management believes that such efforts will enhance ski-related revenues and will
contribute independently to earnings. In addition, with respect to significant
development projects, the Company anticipates entering into joint venture
arrangements that would reduce infrastructure and other development costs.
Nonetheless, existing lodging facilities in the vicinity of each resort are
believed to be adequate to support current skier volumes, and a deferral or
curtailment of these development efforts is not regarded by management as likely
to adversely affect skier days and ski-related revenues or profitability. The
Company also believes that its current infrastructure is sufficient, and that
development of real estate opportunities is not presently necessary, to support
its existing operations.
The Company's liquidity has been and will continue to be significantly
affected by its high leverage. As a result of its leveraged position, the
Company has significant cash requirements to service debt and funds available
for working capital, capital expenditures, acquisitions and general corporate
purposes are limited. In addition, the Company's high level of debt may increase
its vulnerability to competitive pressures and the seasonality of the skiing and
recreational industries. Any decline in the Company's expected operating
performance could have a material adverse effect on the Company's liquidity and
on its ability to service its debt and make required capital expenditures.
Further, upon the occurrence of a Change of Control (as defined in the
Indenture), the Company may be required to repurchase the Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest. The occurrence of a
Change of Control may also constitute a default under the Senior Credit
Facility. No assurance can be given that the Company would be able to finance a
Change of Control repurchase offer.
In addition, the Senior Credit Facility and the Indenture each contain
covenants that significantly limit the Company's ability to obtain additional
sources of capital and may affect the Company's liquidity. These covenants
restrict the ability of the Company and its restricted subsidiaries to, among
other things, incur additional indebtedness, create liens, make investments,
consummate certain asset sales, create subsidiaries, issue subsidiary stock,
consolidate or merge with any other person, or transfer all or substantially all
of the assets of the Company.
The Company currently has $133.5 million aggregate principal amount of
Notes outstanding, which will result in annual cash interest requirements of
approximately $16.7 million. On September 14, 1998 the Company received a $15
million capital contribution from Parent and expects to receive approximately
$6.3 million from the recent sale of real estate at Northstar (see Note 6 to
Consolidated Financial Statements included herein). Taking into consideration
the receipt of such funds, the Company expects that cash generated from
operations, together with borrowing availability, will be adequate to fund the
interest requirements on the Notes and the Company's other cash operating and
debt service requirements over the next twelve months. However, any decline in
the Company's expected operating performance could have a material adverse
effect on the Company's liquidity. In such case, the Company could be required
to attempt to refinance all or a portion of its existing debt, sell assets or
obtain additional financing. No assurance can be given of the Company's ability
to do so or the terms of any such transaction. In addition, the Company would
require additional financing for future acquisitions.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or
15
<PAGE> 18
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business activities.
The Company has conducted an assessment of its information and
telecommunications technology ("IT") assets and systems. Substantially all of
the Company's IT systems, except for a portion of the Company's ticketing and
sales systems, operate using software developed and supported by third party
vendors. The Company is in the process of implementing its planned program to
remedy such third party developed systems, which will entail either
modifications to or replacement of certain existing IT systems. The cost of
modifications will be expensed as incurred and is not expected to be
significant. The cost of purchased replacements will be capitalized and is
expected to range from $500,000 to $700,000.
The Company is currently performing an assessment of the necessary efforts
to make its primary ticketing and sales system year 2000 compliant, and expects
to complete this assessment by December 1998. The cost of necessary
modifications to the ticketing and sales software will be expensed as incurred.
Purchases of replacement hardware, if any, will be capitalized. The expected
cost of necessary software modifications and hardware replacements is not
currently known.
The Company has commenced a program to ensure that significant vendors and
service providers with which it does business are year 2000 compliant. In
addition, the Company has conducted an assessment of its operating assets and
has determined that there will be no significant financial impacts to ensure
year 2000 compliance for operating assets.
The Company intends to complete its year 2000 assessments and remediation
program by the third calendar quarter of 1999. However, if the Company or its
vendors are unable to resolve the year 2000 issue in a timely manner, or the
Company's assessment of the extent of year 2000 issues surrounding its IT
systems, operating assets or significant vendors or service providers were to be
incorrect, the year 2000 issue could have a material impact on the operations of
the Company. The Company does not presently have a contingency plan in the event
its year 2000 compliance program is unsuccessful or not completed on a timely
basis.
The cost of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
SEASONALITY
The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. During the
off-season months of May through October, the Company's resorts typically
experience a substantial reduction in labor and utility expense due to the
absence of ski operations, but make significant expenditures for maintenance,
expansion and capital improvement in preparation for the ensuing ski season.
REGULATION AND LEGISLATION
The Company's operations are dependent upon its ownership or control over
the real estate constituting each resort. The real property presently used at
the Northstar and Mt. Cranmore resorts is owned by the Company. The Company has
the right to use a substantial portion of the real property associated with the
Bear Mountain, Sierra, the Summit, Grand Targhee and Waterville Valley resorts
under the terms of special use permits issued by the United States Forest
Service (the "Forest Service" or the "USFS"). The special use permits for the
Bear Mountain, Sierra, Waterville Valley, the Summit and Grand Targhee resorts
were reissued at the time of the Company's acquisition of such resorts, with the
Bear Mountain permit expiring in
16
<PAGE> 19
2020, the Sierra permit expiring in 2008, the Waterville Valley permit expiring
in 2034, the Summit permit expiring in 2032 and the Grand Targhee permit
expiring in 2034.
A substantial portion of the real property associated with the Loon
Mountain resort is likewise used under Forest Service permits. In 1993, the
Forest Service authorized various lift, trail and snowmaking improvements on
Loon Mountain and an expansion onto South Mountain. In 1996, the United States
Court of Appeals for the First Circuit overturned this authorization on the
ground that the Forest Service had failed to properly address certain
environmental issues under the National Environmental Policy Act ("NEPA").
Certain improvements and part of the expansion had been constructed before the
First Circuit ruled. On May 5, 1997, the United States District Court for the
District of New Hampshire entered a stipulated order which authorizes existing
improvements to remain in place and existing operations to continue but
generally prohibits future construction, restricts use of a major snowmaking
water source, and requires certain water discharge permits to be pursued,
pending Forest Service reconsideration of the projects under NEPA. In August
1998, the Forest Service announced that it expects to complete this NEPA process
and issue a new decision on the improvements sometime in the Spring of 1999. See
Part II -- Item 1 for a further discussion.
Existing use of Loon Mountain is authorized under a term permit, which
covers facilities and expires in 2006, and a supplemental permit, which covers
the balance of Loon Mountain; existing, non-skiing, use of South Mountain is
authorized under an annual permit which expires in February 1999, but is
expected to be reissued. After the Forest Service reconsiders the improvements
and expansion under NEPA, it will need to render a new decision and, if
appropriate, issue a new permit. At that time, the District Court order will
terminate. Based upon the existing administrative record, and certain proposed
modifications to the resort's snowmaking operations which are intended to better
protect water resources, the Company expects that the improvements and expansion
will be approved by the Forest Service. However, no assurance can be given
regarding the timing or outcome of this process.
In August 1997, the Forest Service authorized the Loon Mountain resort to
construct a new snowmaking pipeline across permitted land. The Forest Service
found that such construction is consistent with the District Court order and
will enable the resort to modify its snowmaking operations to better protect
water resources and replace snowmaking capacity lost under the order. Although
the pipeline has been completed, its use was challenged by private parties who
assert that the Forest Service violated NEPA. On January 20, 1998, the United
States District Court for the District of New Hampshire issued a decision
finding that the Forest Service violated NEPA in failing to address the
potential for the new pipeline to increase the amount of snow made and any
associated environmental effects. On March 10, 1998, the District Court issued a
series of further orders which, among other things, direct the Forest Service to
re-evaluate the pipeline, allow such re-evaluation to proceed separate from and
prior to the Forest Service's reconsideration of the larger expansion, and
preclude LMRC from using the pipeline pending further action by the Court.
On July 2, 1998, the Forest Service issued a new decision reapproving the
pipeline and addressing its potential to increase the amount of snow made. This
decision was challenged by several of the same private parties, who, again,
asserted that it violated NEPA. At this time, briefing on these challenges has
been completed and they are awaiting decision by the District Court. In
addition, the Forest Service is currently considering the potential effect on
its decision of certain additional information relating to one of the studies
that it relied upon; it is possible that this could lead to further analysis or
modification of the decision. Finally, two of the parties whose challenge to the
new pipeline decision is pending before the District Court filed a new lawsuit
on August 20, 1998, in the same Court, challenging the same decision on the same
grounds, as well as additional grounds that another party has asserted in that
case or that were previously addressed by the District Court in its January 20,
1998 decision. No assurances can be given regarding the timing or outcome of
this process. See Part II -- Item I for a further discussion.
The Forest Service has the right to approve the location, design and
construction of improvements in the permit area and many operational matters.
Under the permits, the Company is required to pay fees to the Forest Service.
Under recently enacted legislation, retroactively effective to the 1995/96 ski
season, the fees range from 1.5% to approximately 4.0% of certain revenues, with
the rate generally rising with increased revenues. However, through fiscal 1998,
the Company is required to pay the greater of (i) the fees due under
17
<PAGE> 20
the new legislation and (ii) the fees actually paid for the 1994/95 ski season,
unless gross revenue in a ski season falls more than 10% below that of the
1994/95 ski season, in which case the fees due are calculated solely under the
new legislation. The calculation of gross revenues includes, among other things,
lift tickets, ski school lessons, food and beverages, rental equipment and
retail merchandise revenues. Total fees paid to the Forest Service by the
Company during the year ended October 31, 1997 were approximately $665,000. The
new legislation is not expected to have a material effect on fees payable in
future periods.
The Company believes that its relations with the Forest Service are good,
and, to the best of its knowledge, no special use permit for any major ski
resort has ever been terminated by the Forest Service. Prior to permit
termination, the USFS would be required to notify the Company of the grounds for
such action and to provide it with reasonable time to correct any curable
non-compliance.
REGULATORY MATTERS
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use, water resources, discharge,
storage, treatment and disposal of various materials and other environmental
matters. Management believes that the Company's resorts are presently in
compliance with all land use and environmental laws, except where non-compliance
is not expected to result in a material adverse effect on its financial
condition. The Company also believes that the cost of complying with known
requirements, as well as anticipated investigation and remediation activities,
will not have material adverse effect on its financial condition or future
results of operations. However, failure to comply with such laws could result in
the imposition of severe penalties and other costs or restrictions on operations
by government agencies or courts that could adversely affect operations.
The Company has not received any notice of material non-compliance with
permits, licenses or approvals necessary for the operation of its properties or
of any material liability under any environmental law or regulation. However, at
Grand Targhee, the Wyoming Department of Environmental Quality (the "DEQ") has
issued a Notice of Violation of state water pollution requirements based on
alleged discharge from a wastewater lagoon without a permit. The Company has
entered into a negotiated compliance order with the DEQ requiring construction
and operation of a new wastewater facility by November 1998 at a cost of
approximately $1.0 million. In November 1997, the concrete construction of the
footings, walls and treatment tanks of such facility was completed.
Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District, where Bear
Mountain is located, Bear Mountain will be required to "bank" emission credits
from other facilities which have already implemented NO(x) emission reductions.
The Company may purchase "banked" emission credits in a one-time transaction at
the current market rate of approximately $700,000 or over time up to the year
2010 at prevailing market rates.
The operations at the resorts require permits and approvals from certain
federal, state and local authorities. In addition, the Company's operations are
heavily dependent upon its continued ability, under applicable laws,
regulations, policies, permits, licenses or contractual arrangements, to have
access to adequate supplies of water with which to make snow and service the
other needs of its facilities, and otherwise to conduct its operations. There
can be no assurance that new applications of existing laws, regulations and
policies, or changes in such laws, regulations and policies will not occur in a
manner that could have a detrimental effect on the Company, or that material
permits, licenses or agreements will not be canceled, non-renewed, or renewed on
terms materially less favorable to the Company. Major expansions of any one or
more resorts could require, among other things, the filing of an environmental
impact statement or other documentation with the Forest Service and state or
local governments NEPA and certain state or local counterparts if it is
determined that the expansion may have a significant impact upon the
environment. Although the Company has no reason to believe that it will not be
successful in implementing its operations and development plans, no assurance
can be given that necessary permits and approvals will be obtained.
Pursuant to the First Circuit's decision and the District Court order, each
discussed under Part II -- Item 1, LMRC has applied to the Environmental
Protection Agency ("EPA") for a Clean Water Act (the "CWA") discharge permit
covering discharges associated with its snowmaking operations. Certain ongoing
18
<PAGE> 21
discharges are authorized by the District Court order pending final action on
the permit and subject to the Court's reserved power to modify such approval to
address any resulting environmental issues. The Company expects the EPA to issue
a permit addressing future discharges prior to the 1998/99 ski season. LMRC does
not expect this permit to involve costs or restrictions that have a material
adverse effect on the resort's operations, but no assurances may be given as to
the outcome or timing of this process.
Certain regulatory approvals associated with the new snowmaking pipeline at
Loon Mountain impose minimum stream flow requirements on LMRC. These
requirements will compel LMRC to construct water storage facilities within the
next ten years, and such construction will require further regulatory approvals
and environmental documentation under the NEPA.
In addition, LMRC was notified in September 1997 that it had allegedly
filled certain wetlands at the resort in violation of the CWA. In response, LMRC
worked with the EPA to remove the alleged fill and implement certain erosion
control measures. On January 15, 1998, an individual notified the EPA, LMRC, and
certain other persons that he intends to instigate within 60 days thereof a
lawsuit under the CWA regarding the alleged wetland violation. On February 2,
1998, the EPA wrote such individual that the alleged fill had been removed and
that it does not believe there is a continuing violation at the site. While the
Company believes that its position will prevail, no assurance can be given
regarding the outcome.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Each of the Company's resorts has pending and is regularly subject to
litigation with respect to personal injury claims relating principally to skiing
activities at its resorts. The Company and each of its resorts maintain
extensive liability insurance that the Company considers adequate to insure
claims related to usual and customary risks associated with the operation of ski
resorts. However, the outcome of any litigation is inherently uncertain and no
assurances can be given as to the effects that any litigation in which the
Company is involved will have on the Company's future results of operations or
financial condition.
On March 25, 1997, Killington West, Ltd., a California corporation formerly
known as Bear Mountain, Ltd. ("Killington"), filed a breach of contract lawsuit
in the Superior Court of the State of California (County of San Bernardino)
against Fibreboard Corporation ("Fibreboard") and Bear Mountain, Inc. alleging
that Fibreboard and Bear Mountain, Inc. breached the asset purchase agreement
dated October 6, 1995 (the "Original Bear Mountain Agreement") among Killington,
Fibreboard and Bear Mountain, Inc., pursuant to which Bear Mountain, Inc.
acquired the Bear Mountain ski resort from Killington. Killington's lawsuit
concerns an alleged breach by Fibreboard and Bear Mountain, Inc. of a change of
control provision in the Original Bear Mountain Agreement. In connection with
the Company's acquisition of Bear Mountain, Inc. in December 1996, the Company
obtained from Fibreboard indemnification for any claim that might be made by
Killington, and further, required that $1.0 million of the purchase price be
held in escrow pending the outcome of any potential disputes with Killington.
Fibreboard has acknowledged its obligation to indemnify Bear Mountain, Inc. with
respect to the Killington lawsuit and has commended the defense of such lawsuit
on behalf of Fibreboard and Bear Mountain, Inc. However, no assurances can be
given regarding the outcome of this litigation.
In connection with the Loon Mountain Acquisition, certain shareholders (the
"Plaintiffs") of LMRC filed a lawsuit in New Hampshire state court against LMRC
and its former directors alleging breach of fiduciary duty and against the
Company alleging that the Company failed to comply with the New Hampshire
Security Takeover Disclosure Act (the "Takeover Statute"). Prior to the filing
of the lawsuit against the Company, the Company had sought and received a "no
action" order from the Bureau of Securities Regulation, New Hampshire Department
of State (the "Bureau") finding that the Takeover Statute was inapplicable to
the proposed merger. The two lawsuits were consolidated in the Superior Court in
Grafton County, New Hampshire. The Plaintiffs' initial request for a preliminary
injunction prohibiting the Company (or its affiliates) from proceeding with the
Loon Mountain Acquisition based on allegations that the Company failed to comply
with the Takeover Statute was denied on October 28, 1997. Before the litigation
proceeded further, both parties amended the merger agreement relating to the
Loon Mountain Acquisition. The Company then sought and obtained an additional
order by the Bureau that the Takeover Statue did not apply. On January 30, 1998,
the Company filed its answer to the Plaintiffs' petition and, on February 10,
1998, filed a motion to dismiss the action against the Company under the
Takeover Statute in its entirety, asserting, inter alia, that the Takeover
Statute did not apply to the transaction as a matter of law. On June 11, 1998,
the Court denied the Company's motion to dismiss. On July 2, 1998, the Company
filed a motion to reconsider the Court's decision. On August 1, 1998, the Court
granted the Company's motion for reconsideration and dismissed Plaintiffs'
claims under the Takeover Statute. Plaintiffs have filed a motion for
reconsideration as to the Court's dismissal of the Takeover Statute claim, and
they retain appeal rights with respect to the issue. Plaintiffs' breach of
fiduciary duty action against LMRC and its directors remains pending. Plaintiffs
have conducted limited discovery and a trial date has not been set. Plaintiffs'
potential remedies include monetary damages for the directors' alleged failure
to maximize the consideration to LMRC shareholders in the Loon Mountain
Acquisition. If Plaintiffs are successful in pursuing their claims against the
former LMRC directors, LMRC has certain indemnity obligations to the former
directors and is currently involved in such directors' defense. The Company may
have available to it as a defense the exclusive remedy provisions of the New
Hampshire statute on dissenters' rights, which rights the Plaintiffs have
exercised. While management of the Company believes that the former LMRC
directors will prevail against Plaintiffs' claims, no assurance can be given
regarding the outcome of this litigation.
20
<PAGE> 23
In 1995, an individual sued the Forest Service in the United States
District Court for the District of New Hampshire alleging that the Forest
Service had violated NEPA, the CWA, and an executive order in 1993 approving
improvements to facilities on Loon Mountain and an expansion of the Loon
Mountain resort onto South Mountain. LMRC and an environmental group intervened.
The District Court entered summary judgment for the Forest Service on all claims
and the original plaintiff along with an intervening party appealed. In December
1996, the United States Court of Appeals for the First Circuit reversed the
District Court and ruled that the Forest Service must reconsider certain
environmental issues under NEPA and that LMRC must obtain a discharge permit
under the CWA for certain discharges from its snowmaking system. On May 5, 1997,
the District Court entered a stipulated order that: enjoins LMRC from any
further construction implementing the project, with certain limited exceptions;
imposes various restrictions on LMRC's existing snowmaking operations and
requires LMRC to apply for a CWA discharge permit for discharges of water and
any associated pollutants associated with its snowmaking: allows existing
construction to remain in place and existing uses to continue; requires LMRC to
undertake certain erosion control and monitoring measures; requires the Forest
Service to prepare supplemental NEPA documentation on the improvements and
expansion; and reserves the right to require restoration of areas developed
under the 1993 Forest Service decision to their preexisting condition if not
ultimately approved by the Forest Service. This order will remain in effect
until the supplemental NEPA process is completed and the Forest Service issues a
new special use permit. The Forest Service currently expects to complete this
process in the Spring of 1999. The Company has applied for requisite permits
under the CWA for its snowmaking system and expects them to be issued upon
acceptable terms. However, no assurance can be provided on the timing or terms
of these permitting proceedings.
Following the First Circuit's decision, the plaintiffs filed a motion with
the District Court asking it to impose a civil penalty under the CWA of
$5,550,125 and attorney fees and costs against LMRC for unpermitted discharges
into Loon Pond without a discharge permit during its snowmaking operations in
the 1996/97 ski season and preceding years. The discharge at issue involves
water transfers from the East Branch of the Pemigewasset River and drain back
from the snowmaking system into Loon Pond. In connection with the Loon Mountain
Acquisition, the Company obtained environmental pollution insurance for
$4,500,000 of coverage above a $1.2 million deductible to cover any penalties,
fees, and costs that the Court assesses against LMRC. LMRC has asserted various
defenses to the merits and amount of penalty sought. However, no assurances can
be given regarding the outcome of this litigation.
On August 29, 1997, the plaintiffs filed a second lawsuit against the
Forest Service in the United States District Court for the District of New
Hampshire alleging that the Forest Service violated NEPA in authorizing LMRC to
construct and operate a snowmaking pipeline across permitted land. Another party
intervened as plaintiff, and LMRC intervened as defendant. The Forest Service
and LMRC asserted various defenses. On January 20, 1998, the District Court held
that the pipeline may be analyzed and approved by the Forest Service separately
from the South Mountain expansion, but that the Forest Service violated NEPA by
failing to consider the potential environmental effects of the alleged increase
in snowmaking capacity. On March 10, 1998, the District Court issued a series of
further orders which establish a schedule for the Forest Service's
reconsideration of the pipeline and any resulting challenges, deny plaintiffs'
request that such reconsideration be deferred until the Forest Service's
decision on the larger expansion, and preclude Loon Mountain from using the
pipeline pending further action by the Court. Three of the plaintiffs have
appealed the District Court's denial of their claim that reconsideration of the
pipeline be deferred until the Forest Service's decision on the larger
expansion, but briefing on these appeals has not yet commenced in the United
States Court of Appeals for the First Circuit.
On July 2, 1998, the Forest Service issued a new decision reauthorizing the
pipeline and addressing the potential environmental effects of the projected
increase in snowmaking capacity. Three of the prior plaintiffs filed challenges
to this decision with the District Court, alleging that it, too, violated NEPA.
The Forest Service and LMRC have asserted various defenses, and the challenges
are currently awaiting decision by the District Court. In addition, the Forest
Service is currently considering the potential effect on its decision of certain
additional documentation relating to one of the studies that it relied upon; it
is possible that this could
21
<PAGE> 24
lead to further analysis or modification by the Forest Service of its decision.
No assurances can be given regarding the timing or outcome of this process.
On August 20, 1998, two of the plaintiffs who have challenges to the new
pipeline decision pending before the District Court filed a separate lawsuit
against the Forest Service in the same Court challenging the pipeline decision
on the same grounds, as well as additional grounds that another party has
asserted in that case or that are identical to claims that the Court addressed
in its January 20, 1998 decision. The government has not yet responded to the
complaint and LMRC is not a party to the case. The Company believes that there
are defenses to the new complaint, but no assurances can be given regarding the
outcome or timing of this litigation.
On August 1, 1997, two plaintiffs filed a lawsuit against the Town of
Lincoln Planning Board and LMRC in the Grafton County Superior Court in the
State of New Hampshire alleging that the Lincoln Planning Board had improperly
approved various facilities associated with the snowmaking pipeline. On
September 30, 1997, LMRC moved to dismiss the claims against it, but sought to
remain in the case as in intervenor. Also on September 30, 1997, the Planning
Board answered the complaint, denying most of the allegations and raising
various defenses. On February 23, 1998, the court granted LMRC's motion to
dismiss. However, in the event that the plaintiffs are successful, the Planning
Board would be requested to reconsider the facilities and issue a new decision.
No assurance can be given regarding the outcome or timing of this litigation or
any resulting Planning Board review.
In connection with the Seven Springs Acquisition certain shareholders of
Seven Springs filed a lawsuit in the Court of Common Pleas of Somerset County,
Pennsylvania against the Company, Acquisition Sub, and Seven Springs and certain
of its directors, seeking a declaratory judgment, along with other relief
including the rescission of the Merger Agreement by and among the Company,
Acquisition Sub and Seven Springs. Plaintiffs allege that the terms of the Seven
Springs Shareholder Agreement ban the consummation of the Seven Springs
Acquisition. While the Company believes that Seven Springs' position will
prevail that the Seven Springs Shareholders Agreement does not apply to the
transactions contemplated by the Merger Agreement, no assurance can be made
regarding the timing or the outcome of this litigation. See Part II -- Item 5.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There has been no material default with respect to any of the Company's
senior securities which has not been waived or cured.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On August 28, 1998, Booth Creek, Acquisition Sub, and Seven Springs, the
owner and operator of the Seven Springs Mountain Resort, a ski resort and
conference center, entered into the Merger Agreement, pursuant to which Booth
Creek would acquire Seven Springs through the merger of Acquisition Sub with and
into Seven Springs. The aggregate merger consideration and related payments will
be approximately $83.0 million plus certain deferred payments, subject to
certain price adjustments. The Seven Springs Acquisition is conditioned on the
receipt of a judicial determination that the Seven Springs Shareholder Agreement
does not apply to the transactions contemplated by the Merger Agreement, as well
as various customary closing conditions. Booth Creek has been made a party to
the litigation seeking a declaratory judgment as to the foregoing. See Part
II -- Item 1.
22
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Agreement of Merger dated as of August 28, 1998 by and among
Booth Creek Ski Holdings, Inc., Booth Creek Ski Acquisition,
Inc. and Seven Springs Farm, Inc.
27.1 Financial Data Schedule regarding 1998 Financial Statements
</TABLE>
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period ended
July 31, 1998.
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
Undersigned, thereunto duly authorized.
BOOTH CREEK SKI HOLDINGS, INC.
(Registrant)
/s/ ELIZABETH J. COLE
--------------------------------------
Elizabeth J. Cole
Executive Vice President, Chief
Financial Officer
/s/ BRIAN J. POPE
--------------------------------------
Brian J. Pope
Vice President of Accounting and
Finance
(Chief Accounting Officer)
September 14, 1998
Date
24
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement of Merger dated as of August 28, 1998 by and among
Booth Creek Ski Holdings, Inc., Booth Creek Ski Acquisition,
Inc. and Seven Springs Farm, Inc.
27.1 Financial Data Schedule regarding 1998 Financial Statements
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
AGREEMENT OF MERGER
DATED AS OF AUGUST 28, 1998
BY AND AMONG
BOOTH CREEK SKI HOLDINGS, INC.,
BOOTH CREEK SKI ACQUISITION, INC.
AND
SEVEN SPRINGS FARM, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................................. 1
1.1 Definitions.............................................................................. 1
1.2 Interpretation........................................................................... 11
ARTICLE II THE MERGER............................................................................... 11
2.1 The Merger............................................................................... 11
2.2 Conversion of Shares Upon the Merger..................................................... 11
2.3 Surrender of Certificates and Payment of Closing Per Common Share
Merger Consideration and Per Preferred Share Merger
Consideration..................................................................... 12
2.4 Payment of Deferred Common Share Merger Consideration.................................... 13
2.5 Dissenters'Rights........................................................................ 15
2.6 Obligation to Make Payment............................................................... 16
2.7 Articles of Incorporation................................................................ 16
2.8 By-laws.................................................................................. 16
2.9 Directors and Officers................................................................... 16
2.10 Withholding Rights....................................................................... 16
2.11 Working Capital for Deferred Exchange Agents............................................. 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 17
3.1 Corporate Status; Due Authorization; Authority of the Company;
Enforceability.................................................................... 17
3.2 Accounts Receivable...................................................................... 18
3.3 Trade Names, Trademarks and Copyrights................................................... 18
3.4 No Patent Rights......................................................................... 18
3.5 Free Passes.............................................................................. 18
3.6 Contracts................................................................................ 18
3.7 Compliance with Laws..................................................................... 19
3.8 Litigation............................................................................... 19
3.9 Personnel Identification and Compensation................................................ 19
3.10 Existing Employment Contracts............................................................ 19
3.11 Capitalization; Subsidiaries............................................................. 20
3.12 Title to Shares.......................................................................... 20
3.13 Forest Service Permits................................................................... 20
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY (CONT.).................................... 17
3.14 Environmental Definitions................................................................ 21
3.15 Compliance with Environmental Laws....................................................... 21
3.16 Handling of Hazardous Substances......................................................... 22
3.17 No Release of Hazardous Substances....................................................... 22
3.18 Environmental Permits.................................................................... 22
3.19 No Environmental Proceedings............................................................. 22
3.20 No Tanks, Asbestos or PCB's.............................................................. 22
3.21 Environmental Lists and Restrictions..................................................... 23
3.22 Environmental Documents.................................................................. 23
3.23 Occupational Safety and Health........................................................... 23
3.24 Water Rights............................................................................. 23
3.25 Certain Transactions..................................................................... 23
3.26 Employee Benefit Matters................................................................. 24
3.27 Tax Matters.............................................................................. 26
3.28 Inventories.............................................................................. 28
3.29 Title to Assets (Other than Real Property)............................................... 28
3.30 Real Property............................................................................ 29
3.31 Improvements............................................................................. 30
3.32 Zoning................................................................................... 30
3.33 No Real Property Commitments............................................................. 30
3.34 Continued Use of Real Property........................................................... 30
3.35 Condition of Assets...................................................................... 30
3.36 Consents................................................................................. 31
3.37 Licenses and Permits..................................................................... 31
3.38 Insurance................................................................................ 31
3.39 Financial Statements..................................................................... 31
3.40 Undisclosed Liabilities.................................................................. 31
3.41 Conduct of Business...................................................................... 32
3.42 Broker's or Consultant's Fees............................................................ 32
3.43 Banking Arrangements..................................................................... 33
3.44 Powers of Attorney....................................................................... 33
3.45 Bonds.................................................................................... 33
3.46 Buy/Sell Agreement....................................................................... 33
3.47 Partnership Agreements................................................................... 33
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................. 33
4.1 Corporate Status......................................................................... 34
4.2 Due Authorization........................................................................ 34
4.3 Authority of Purchaser................................................................... 34
4.4 Enforceability........................................................................... 34
4.5 Consents................................................................................. 34
4.6 Broker's or Consultant's Fees............................................................ 34
4.7 Purchaser SEC Reports.................................................................... 35
4.8 Funds.................................................................................... 35
ARTICLE V PRE-CLOSING COVENANTS.................................................................... 35
5.1 Required Consents........................................................................ 35
5.2 Conduct of the Business.................................................................. 35
5.3 Right of Inspection; Access to Books and Personnel....................................... 36
5.4 Notification of Material Adverse Events.................................................. 36
5.5 Code Section 1445 Withholding............................................................ 36
5.6 Required Filings......................................................................... 37
5.7 Supplemental Disclosures................................................................. 37
5.8 Bond Redemption Funds.................................................................... 37
5.9 Shareholder Approval..................................................................... 38
5.10 Acquisition Proposals.................................................................... 38
5.11 Authorization to Use Information......................................................... 38
5.12 Guaranty of Acquisition Sub Covenants.................................................... 39
5.13 Company Closing Expenses................................................................. 39
5.14 Partnership Merger....................................................................... 39
5.15 Real Estate Title Matters................................................................ 39
ARTICLE VI CONDITIONS PRECEDENT TO PURCHASER'S AND ACQUISITION SUB'S OBLIGATIONS................... 40
6.1 Obligations to be Satisfied on or Prior to Closing Date.................................. 40
ARTICLE VII CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS........................................ 42
7.1 Obligations to Be Satisfied on or Prior to Closing Date.................................. 42
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE VIII CLOSING.................................................................................. 44
8.1 Time and Place........................................................................... 44
8.2 Simultaneous Delivery.................................................................... 44
8.3 Deliveries by the Company to Purchaser and Acquisition Sub............................... 44
8.4 Deliveries by Purchaser to the Company................................................... 45
ARTICLE IX POST-CLOSING COVENANTS................................................................... 46
9.1 Further Assurance........................................................................ 46
9.2 Confidentiality.......................................................................... 47
9.3 Company's Future Real Estate Development................................................. 47
ARTICLE X INDEMNIFICATION.......................................................................... 48
10.1 Indemnification by Merger Consideration Recipients....................................... 48
10.2 Indemnification by Purchaser............................................................. 48
10.3 Procedure for Indemnification............................................................ 49
10.4 Limitations on Indemnification........................................................... 49
10.5 Payment Due Date; Interest............................................................... 51
10.6 Escrow Arrangement....................................................................... 51
ARTICLE XI TERMINATION.............................................................................. 52
11.1 Rights to Terminate...................................................................... 52
11.2 Effects of Termination................................................................... 53
ARTICLE XII MISCELLANEOUS PROVISIONS................................................................. 53
12.1 Public Announcements..................................................................... 53
12.2 Notices.................................................................................. 53
12.3 Assignment............................................................................... 55
12.4 Benefit of the Agreement................................................................. 55
12.5 Survival................................................................................. 55
12.6 Exhibits and Schedules................................................................... 55
12.7 Headings................................................................................. 55
12.8 Entire Agreement......................................................................... 55
12.9 Modifications and Waivers................................................................ 56
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE XII MISCELLANEOUS PROVISIONS (CONT.) ........................................................ 53
12.10 Counterparts............................................................................. 56
12.11 Severability............................................................................. 56
12.12 GOVERNING LAW............................................................................ 56
12.13 Expenses................................................................................. 56
</TABLE>
<TABLE>
EXHIBITS
<S> <C>
Exhibit A Form of Letter of Transmittal
Exhibit B Form of Plan of Merger
Exhibit C Form of Opinion of Kirkpatrick & Lockhart LLP
Exhibit D Form of Opinion of Winston & Strawn
Exhibit E Form of Opinion of Buchanan Ingersoll Professional Corporation
Exhibit F Form of Escrow Agreement
SCHEDULES
Schedule 1.1 Description of Assets
Schedule 3.8 Litigation
Schedule 3.9 Personnel Identification and Compensation
Schedule 3.10 Existing Employment Contracts
Schedule 3.11 Capitalization; Subsidiaries
Schedule 3.12 Title to Shares
Schedule 3.15 Compliance with Environmental Laws
Schedule 3.18 Environmental Permits
Schedule 3.20 Tanks, Asbestos, PCBs
Schedule 3.25 Certain Transactions
Schedule 3.26 Employee Benefit Matters
Schedule 3.27 Taxes
Schedule 3.29 Title to Assets (Other than Real Property)
Schedule 3.33 Commitments
Schedule 3.36 Consents
Schedule 3.37 Licenses and Permits
Schedule 3.38 Insurance
Schedule 3.39 Financial Statements
Schedule 3.41 Affiliated Transactions
Schedule 3.42 Broker's Fees
Schedule 3.43 Banking Arrangements
Schedule 5.2 Planned Non-Ordinary Course Activities
</TABLE>
v
<PAGE> 7
AGREEMENT OF MERGER
This Agreement of Merger (this "Agreement") is made as of the
28th day of August, 1998, by and among BOOTH CREEK SKI HOLDINGS, INC., a
Delaware corporation ("Purchaser"), BOOTH CREEK SKI ACQUISITION, INC., a
Pennsylvania corporation and a wholly owned subsidiary of Purchaser
("Acquisition Sub"), and SEVEN SPRINGS FARM, INC., a Pennsylvania corporation
(the "Company").
RECITALS
WHEREAS, the Company has authorized capital stock of (i) 750 shares of
common stock, $100 par value per share ("Company Common Shares"), of which 750
shares are outstanding as of the date hereof and (ii) 1,750 shares of preferred
stock, $100 par value per share ("Company Preferred Shares"), of which 1,750
shares are outstanding as of the date hereof;
WHEREAS, the Company is engaged in the ownership and operation of a resort
and conference center by the name of "Seven Springs Mountain Resort," and other
facilities and properties, all located in Somerset, Fayette and Westmoreland
Counties, Pennsylvania (the "Business");
WHEREAS, Purchaser desires to acquire the Company and the Company desires
to be acquired by Purchaser through the merger of Acquisition Sub with and into
the Company (the "Merger"), all subject to the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Purchaser, Acquisition Sub and the Company
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
meanings ascribed to them in this Section 1.1:
Accounts Receivable. All present and future rights to payment for
goods sold or services rendered, including, without limitation, all accounts or
notes receivable owned or held by the Company.
Acquisition Sub. As defined in the first paragraph of this
Agreement.
<PAGE> 8
Acquisition Sub Shares. All of the issued and outstanding shares
of capital stock of Acquisition Sub, consisting of 100 shares of common stock,
$.01 par value per share.
Adverse Consequences. All actions, suits, proceedings, hearings,
investigations, claims, demands, judgments, orders, decrees, injunctions,
damages, penalties, fines, costs, amounts paid in settlement, liabilities,
interest paid to third parties, losses, and all expenses and fees directly
relating to any of the foregoing, including reasonable accounting, consultant
and attorneys' fees and court costs, costs of expert witnesses and other
necessary or advisable expenses of litigation, in each case to the extent that
any of the foregoing are uninsured.
Affiliate. As set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
Affiliated Transaction. As defined in Section 3.25.
Aggregate Closing Common Share Merger Consideration.
Seventy-Three Million One Hundred Thousand Dollars ($73,100,000), less the sum
of the amount of the Company Closing Expense Estimate, the Aggregate Preferred
Share Merger Consideration and the amount of funds to be deposited by Purchaser
to redeem the Bonds in accordance with the provisions of Section 5.8.
Aggregate Common Share Merger Consideration. The sum of the
Aggregate Closing Common Share Merger Consideration, amounts payable to the
Merger Consideration Recipients under the Escrow Agreement, and the Aggregate
Deferred Common Share Merger Consideration.
Aggregate Deferred Common Share Merger Consideration. The amounts
payable pursuant to the provisions of Section 2.4.
Aggregate Merger Consideration. The sum of the Aggregate Common
Share Merger Consideration and the Aggregate Preferred Share Merger
Consideration.
Aggregate Preferred Share Merger Consideration. The aggregate
amount of the par value of the Company Preferred Shares outstanding at the
Effective Time plus all declared but unpaid dividends thereon as of the
Effective Time.
Agreement. This Agreement of Merger, together with all Exhibits
and Schedules referred to herein, as amended, modified or supplemented from time
to time in accordance with the terms hereof.
Alternative Acquisition Proposal. As defined in Section 5.10.
Articles of Merger. As defined in Section 2.1(b).
2
<PAGE> 9
Authority. Any governmental, regulatory or administrative body,
agency or authority, any court of judicial authority or any arbitrator, whether
foreign, federal, state or local.
Bonds. Collectively, The Municipal Authority of the Borough of
Seven Springs, Somerset County, Pennsylvania, Various Purpose Municipal Revenue
Bonds, Series A, limited in aggregate principal amount of $300,000 dated as of
June 1, 1968, The Municipal Authority of the Borough of Seven Springs, Somerset
County, Pennsylvania, Various Purpose Municipal Revenue Bonds, Series B, limited
in aggregate principal amount of $1,200,000 dated as of January 1, 1984, The
Municipal Authority of the Borough of Seven Springs, Somerset County,
Pennsylvania, Various Purpose Municipal Revenue Bonds, Series C, limited in
aggregate principal amount of $3,000,000 dated as of April 1, 1985, The
Municipal Authority of the Borough of Seven Springs, Somerset County,
Pennsylvania, Various Purpose Municipal Revenue Bonds, Series D, limited in
aggregate principal amount of $3,000,000 dated as of May 1, 1987, The Municipal
Authority of the Borough of Seven Springs, Somerset County, Pennsylvania,
Various Purpose Municipal Revenue Bonds, Series E, limited in aggregate
principal amount of $5,000,000 dated as of May 1, 1988 and The Municipal
Authority of the Borough of Seven Springs, Somerset County, Pennsylvania,
Various Purpose Municipal Revenue Bonds, Series F, limited in aggregate
principal amount of $3,000,000 dated as of September 15, 1991.
Bond Indentures. Collectively, the Trust Indenture, dated as of
June 1, 1968, between the Municipal Authority and the Bond Trustee, as
supplemented by the First Supplemental Trust Indenture, dated as of January 1,
1984, between the Municipal Authority and the Bond Trustee, the Second
Supplemental Trust Indenture, dated as of April 1, 1985, between the Municipal
Authority and the Bond Trustee, the Third Supplemental Trust Indenture, dated as
of May 1, 1987, between the Municipal Authority and the Bond Trustee, the Fourth
Supplemental Trust Indenture, dated as of May 1, 1988, between the Municipal
Authority and the Bond Trustee and the Fifth Supplemental Trust Indenture, dated
as of September 15, 1991, between the Municipal Authority and the Bond Trustee.
Bond Trustee. Somerset Trust Company, a corporation organized and
existing under and by virtue of the laws of the Commonwealth of Pennsylvania, as
trustee under the Bond Indentures.
Business. As defined in the recitals hereto.
Buy/Sell Agreement. The Agreement Affecting the Transfer of the
Common and Preferred Stock of Seven Springs Farm, Inc., dated January 10, 1969,
among the Company, Helen Dupre, Phillip Dupre, Herman Dupre and Luitgarde Dupre
Sujansky, as amended.
CERCLA. Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq.
Claiming Party. As defined in Section 10.3(a).
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<PAGE> 10
Closing. The closing of the Merger.
Closing Date. The forty-fifth (45th) day following the first date
on which all closing conditions have been satisfied or waived (other than those
which are to be satisfied immediately prior to or concurrently with the Closing)
(or if such 45th day is not a business day, the next business day), or such
other date as Purchaser and the Company may mutually agree in writing, and in
either case, the date upon which the Closing shall occur.
Closing Exchange Agent. As defined in Section 2.3.
Closing Per Common Share Merger Consideration. An amount equal to
the Aggregate Closing Common Share Merger Consideration divided by the number of
outstanding Company Common Shares at the Effective Time.
Code. Internal Revenue Code of 1986, as amended.
Company. As defined in the first paragraph of this Agreement.
Company Closing Expenses. An amount equal to the sum of (i) the
premium incurred by Purchaser and the Company in connection with obtaining the
Title Policies (but not in excess of Fifty Thousand Dollars ($50,000)), (ii) all
attorneys' fees and other legal costs and expenses, accountants' fees and other
accounting costs and expenses, investment banking fees and other investment
banking costs and expenses, including, without limitation, fees and expenses
relating to the issuance of any fairness opinions, and other costs and expenses,
in each case incurred by the Company after June 22, 1998, in connection with its
negotiation, preparation and execution of this Agreement and its consummation of
the Merger and the other transactions contemplated hereby, (iii) the amount to
be paid by Purchaser to the Deferred Exchange Agents pursuant to the provisions
of Section 2.11, (iv) one-half of any fees and expenses charged by Closing
Exchange Agent in performing the activities provided for in Section 2.3, and (v)
one-half of the fee of the Escrow Agent provided for in the Escrow Agreement.
Company Closing Expense Estimate. As defined in Section 5.13.
Company Common Shares. As defined in the recitals hereto.
Company Preferred Shares. As defined in the recitals hereto.
Company's Knowledge or Knowledge of the Company. The Knowledge of
James N. McClure, Frank J. Kovak, Jr., Scott L. Bender, William G. Aldom, Jr.,
Lauri L. Bigham, Leo J. Cavanaugh, Jeffrey L. Coulter, Timothy Henderson, Edward
P. Staryarssky and Donald M. Stumpf, Jr.
Company Warranty Claim. As defined in Section 10.2.
Confidential Information. As defined in Section 9.2(a).
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<PAGE> 11
Contracts. All contracts, leases, subleases, arrangements,
commitments and other agreements of the Company, including all customer
agreements, vendor agreements, purchase orders, installation and maintenance
agreements, computer software licenses, hardware lease or rental agreements, and
those contracts which are listed on Schedule 1.1 to this Agreement under the
heading "Contracts."
Deferred Exchange Agency Agreement. The agreement which relates
to the payment of Aggregate Deferred Common Share Merger Consideration and is
attached as a part of the Letter of Transmittal.
Deferred Exchange Agents. As defined in the Deferred Exchange
Agency Agreement.
Deferred Per Common Share Merger Consideration. As defined in
Section 2.4(a).
DLJ. Donaldson, Lufkin & Jenrette Securities Corporation.
DOJ. United States Department of Justice.
Disclosure Schedule. The Financial Statements, including all
footnotes thereto, the Title Commitments, the Environmental Site Assessment
Report, all matters specifically referred to in this Agreement, and all of the
Schedules hereto (all of which are contained in a separate bound volume which is
incorporated herein by reference and made a part hereof).
Dissenting Common Shares. As defined in Section 2.5(a).
Dissenting Preferred Shares. As defined in Section 2.5(a).
Dissenting Shares. As defined in Section 2.5(a).
Earn-Out Formula. As defined in Section 2.4(a).
Effective Time. As defined in Section 2.1(b).
Employee Benefit Plan. Any employee benefit plan within the
meaning of ERISA Section 3(3) which is maintained by the Company or within the
past six years was maintained by the Company.
Environmental Claims. As defined in Section 3.19.
Environmental Laws. As defined in Section 3.14(a).
Environmental Permits. As defined in Section 3.18.
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<PAGE> 12
Environmental Site Assessment Report. The Environmental Site
Assessment Report dated August 4, 1998, prepared by Project Performance Corp.
with respect to the Real Property.
Equipment and Improvements. All ski lifts, pylons, towers,
ski-lift machinery and equipment, snow-cats, snow-making machinery and
equipment, lighting equipment, ski trail improvements, mountain restaurants,
signs, snow-making facilities and other facilities and structures, buildings,
installations, fixtures, improvements, betterments and additions located on or
within the Real Property, machinery, equipment, service trucks, shuttle busses,
golf carts, snowmobiles, vehicles, tractors, spare tires and parts, tools,
appliances, furniture, office furniture, fixtures, office supplies and office
equipment, computers, computer terminals and printers, computer software,
telephone systems, telecopiers and photocopiers, and other tangible personal
property of every kind and description that are located upon or within the Real
Property, which are owned or leased by the Company, or are utilized in
connection with the Company's operations upon or within the Real Property,
including, without limitation, the items listed on Schedule 1.1 to this
Agreement under the heading "Equipment and Improvements," but other than items
owned by the Partnership or other third parties so long as such items are the
subject of a Contract.
ERISA. Employee Retirement Income Security Act of 1974, as it may
be amended from time to time, and the regulations thereunder.
Escrow Agent. Title Company.
Escrow Agreement. As defined in Section 10.6(a).
Escrow Fund. As defined in Section 10.6(a).
Exchange Act. As defined in Section 4.7.
Financial Statements. The Reference Balance Sheet, the unaudited
balance sheet of the Company as of October 31, 1996, the audited balance sheet
of the Company as of October 31, 1997, the unaudited income statement of the
Company for the fiscal year ended October 31, 1996, and the audited income
statement of the Company for the fiscal year ended October 31, 1997, copies of
which are attached hereto as Schedule 3.39.
Forest Service. The United States Forest Service.
FTC. United States Federal Trade Commission.
HSR Act or Hart-Scott-Rodino Act. The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Hazardous Substances. As defined in Section 3.14(b).
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<PAGE> 13
Intangibles. All trade names, trademarks, service marks,
copyrights, trade secrets, registrations and applications for any thereof, and
all technical know-how and other intellectual property rights or intangibles
used by the Company in the operation of the Business, including, without
limitation, those listed on Schedule 1.1 to this Agreement under the heading
"Intangibles," and all goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto and rights thereunder, remedies
against infringement thereof and rights to protection of interests therein under
all applicable Laws.
Inventories. All of the Company's retail inventory (including,
without limitation, all inventories of food and beverages and inventory
customarily sold by the Company in new or used condition to the public) and
non-retail inventory (including, without limitation, all inventories of ski
rental equipment and employee and ski patrol jackets, parkas, pants and other
uniform items, other than those which are customarily sold by the Company in new
or used condition to the public and which are included in the Company's retail
inventory), consumable supplies, spare parts and repair materials and any and
all other inventories of the Company ("Inventories").
IRS. Internal Revenue Service.
Knowledge. Knowledge after reasonable investigation.
Law. Any law, statute, regulation, rule, ordinance or binding
action or requirement of an Authority.
Letter of Intent. The letter of intent dated June 22, 1998
between Purchaser and the Company relating to the transactions contemplated by
this Agreement.
Letter of Transmittal. The letter of transmittal substantially in
the form of Exhibit A hereto.
Liabilities. Any obligation or liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and whether due or to
become due), including, without limitation, any liability for Taxes.
Lien. Any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, capitalized lease or other title retention
agreement).
Material Adverse Effect. Any condition, event, change, or
occurrence which is or would reasonably be expected to be materially adverse to
either (i) the operations, results of operations or condition (financial or
otherwise) of a Person, (ii) the operation or use of any material facility of a
Person, or (iii) the ability of the parties hereto to consummate the
transactions contemplated hereby.
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<PAGE> 14
Merger. As defined in the first paragraph of this Agreement.
Merger Consideration Recipient. At the Effective Time, each
holder of Company Common Shares (other than any holder of Dissenting Shares) and
each holder of Company Preferred Shares (other than any holder of Dissenting
Shares), and their permitted assigns.
Multiemployer Plan. A multiemployer plan as defined in ERISA
Section 4001(a)(3) to which the Company is making or is accruing any obligation
to make contributions within the preceding six years.
Municipal Authorities. The Municipal Authority, the Youghiogheny
Hydroelectric Authority, a Pennsylvania municipal corporation, and the Airport
Authority of Seven Springs Borough, a Pennsylvania municipal corporation.
Municipal Authority. The Municipal Authority of the Borough of
Seven Springs, Somerset County, Pennsylvania, a Pennsylvania municipal
corporation.
Order. Any decree, order, judgment, writ, award, injunction,
stipulation or consent of or by an Authority.
Ordinary Course of Business. The ordinary course of business of
the Company in accordance with past custom and practice (including with respect
to quantity and frequency).
PBGC. The Pension Benefit Guaranty Corp.
Partnership. Dupre Enterprises (24), a Pennsylvania general
partnership.
Partnership Agreements. The agreements between the Partnership
and the Company respectively captioned Agreement to Manage the Alpine Slide
Amusement Ride dated April 1, 1998, Agreement to Collect the Revenue from Coin
and Ski Lockers dated April 1, 1998, and Joint Venture Agreement dated March 19,
1994, as amended by an amendment dated May 1, 1997.
Partnership Merger. As defined in Section 5.14.
Pennsylvania Corporation Law. As defined in Section 2.1(a).
Pension Plan. At any time an employee pension benefit plan that
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either: (i) maintained by the Company for
employees of the Company, or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which the Company is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions.
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<PAGE> 15
Per Common Share Merger Consideration. An amount equal to the
Aggregate Common Share Merger Consideration divided by the number of issued and
outstanding shares of Company Common Shares.
Per Preferred Share Merger Consideration. An amount equal to the
Aggregate Preferred Share Merger Consideration divided by the number of issued
and outstanding shares of Company Preferred Shares.
Per Share Minimum Aggregate Amount. As defined in Section 2.4(a).
Permits. As defined in Section 3.37.
Permitted Liens. As defined in Section 3.29.
Permitted Real Estate Exceptions. As defined in Section 3.30(e).
Person. Any natural person, corporation, limited liability
company, partnership, firm, joint venture, joint-stock company, trust,
association, Authority, unincorporated entity or organization of any kind.
Plan of Merger. As defined in Section 2.1(a).
Prior Property. As defined in Section 3.15.
Purchaser. As defined in the first paragraph of this Agreement.
Purchaser 10-K. As defined in Section 4.7.
Purchaser Financial Statements. As defined in Section 4.7.
Purchaser SEC Reports. As defined in Section 4.7.
Purchaser Warranty Claim. As defined in Section 10.1(a).
RCRA. As defined in Section 3.14(a).
Real Property. Those certain parcels of land more fully described
on Schedule 1.1 under the heading "Real Property," together with all timber and
water rights, easements and rights-of-way, and other privileges and
appurtenances thereto and all plants, buildings, structures, installations,
fixtures, fittings, improvements, betterments and additions situated thereon
(other than those owned by the Partnership or by a lessee under a Real Property
Lease).
Real Property Leases. All leases of the Real Property as to which
the Company is the lessor.
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<PAGE> 16
Reference Balance Sheet. The unaudited balance sheet for the
Business dated the Reference Balance Sheet Date.
Reference Balance Sheet Date. March 31, 1998.
Release. As defined in Section 3.14(c).
Reportable Event. As defined in ERISA Section 4043(b).
Responding Party. As defined in Section 10.3(a).
SEC. As defined in Section 4.7.
Securities Act. As defined in Section 4.7.
Superior Proposal. As defined in Section 5.10.
Survey. The survey(s) of the Real Property being prepared by
Gusbar & Associates and to be delivered at the Closing.
Surviving Company. As defined in Section 2.1(a).
Tanks. As defined in Section 3.20.
Taxes. As defined in Section 3.27(a).
Termination Event. (i) a Reportable Event with respect to any
Plan; (ii) the withdrawal of the Company from a Plan during a plan year in which
the Company was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (iii) the imposition of an obligation on the Company under Section 4041
of ERISA to provide effected parties written notice of intent to terminate a
Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan; (v) any event or
condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; or (vi)
the partial or complete withdrawal of the Company from a Multiemployer Plan.
Third-Party Notice. As defined in Section 10.3(b).
Title Commitments. Those certain Title Commitments issued by the
Title Company to Purchaser numbered 98-691-A (effective July 1, 1998), 98-691-B
(effective July 1, 1998), 98-691-C (effective August 3, 1998), 98-691-D
(effective August 3, 1998), 98-691-E (effective July 1, 1998) and 98-691-F
(effective August 18, 1998) with respect to the Real Property.
Title Company. Chicago Title Insurance Company, a Missouri
corporation.
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<PAGE> 17
Title Policies. Each of the policies to be issued by the Title
Company pursuant to the Title Commitments.
1.2 Interpretation. Unless otherwise expressly provided or unless the
context requires otherwise, (a) all references in this Agreement to Articles,
Sections, Schedules and Exhibits shall mean and refer to Articles, Sections,
Schedules and Exhibits of this Agreement; (b) all references to laws, statutes
and related regulations shall be limited to such laws, statutes and regulations
as are in effect on the date hereof; (c) words using the singular or plural
number also shall include the plural and singular number, respectively; (d)
references to "hereof," "herein," "hereby" and similar terms shall refer to this
entire Agreement (including the Schedules and Exhibits hereto); and (e)
references to any Person shall be deemed to mean and include the successors and
permitted assigns of such Person (or, in the case of an Authority, Persons
succeeding to the relevant functions of such Person).
ARTICLE II
THE MERGER
2.1 The Merger.
(a) In order to effectuate the Merger, the Company and
Acquisition Sub shall execute and deliver a Plan of Merger substantially in the
form of Exhibit B hereto (the "Plan of Merger"). Subject to the terms and
conditions of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements made in this Agreement by Purchaser,
Acquisition Sub and the Company, at the Effective Time, Acquisition Sub shall be
merged with and into the Company in accordance with the Plan of Merger, this
Agreement and the Pennsylvania Business Corporation Law of 1988, as amended (the
"Pennsylvania Corporation Law"), the separate existence of Acquisition Sub shall
cease and the Company shall continue as the surviving corporation in the Merger
(herein sometimes called the "Surviving Company"), under the name "Seven Springs
Farm, Inc."
(b) At the Closing, the parties hereto shall cause the Merger to
be consummated by filing in the Department of State of Pennsylvania the
appropriate articles of merger, substantially in the form attached to the Plan
of Merger (the "Articles of Merger"), duly executed by the Company and
Acquisition Sub in accordance with the requirements of Pennsylvania Corporation
Law and with this Agreement. The date and time of filing of the Articles of
Merger in the Department of State of Pennsylvania is referred to herein as the
"Effective Time."
2.2 Conversion of Shares Upon the Merger. At the Effective Time, the
outstanding Company Common Shares (other than Dissenting Shares), Preferred
Shares (other than Dissenting Shares), and Acquisition Sub Shares will be
converted or cancelled and retired or
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<PAGE> 18
remain outstanding, in each case pursuant to the Merger and without any
action on the part of the holder thereof, as follows:
(a) The Acquisition Sub Shares shall be converted into one
hundred (100) validly issued, fully paid and nonassessable shares of Common
Stock, par value $.01 per share, of the Surviving Company. The certificate which
formerly represented the outstanding Acquisition Sub Shares shall, from and
following the Effective Time, represent, and for all purposes be evidence of
ownership of, the number of shares of the class of the Surviving Company set
forth in the preceding sentence.
(b) Any Company Common Shares and Company Preferred Shares which,
immediately prior to the Effective Time, were held by the Company as treasury
shares shall be canceled and retired without any payment being made therefor.
(c) Each Company Common Share issued and outstanding at the
Effective Time, other than Dissenting Shares, shall be converted into the right
to receive the Closing Per Common Share Merger Consideration, amounts payable to
the Merger Consideration Recipients pursuant to the Escrow Agreement, and the
Deferred Per Common Share Merger Consideration. Each Company Preferred Share
issued and outstanding at the Effective Time, other than Dissenting Shares,
shall be converted into the right to receive in cash the Per Preferred Share
Merger Consideration. The Per Common Share Merger Consideration shall be payable
in the manner set forth in Sections 2.3 and 2.4 and the Per Preferred Share
Merger Consideration shall be paid in the manner set forth in Section 2.3. From
and after the Effective Time, the holders of the Company Common Shares (other
than Dissenting Shares) and the Company Preferred Shares (other than Dissenting
Shares) shall have no rights with respect to the Surviving Company by virtue of
their ownership of such shares immediately prior to the Effective Time, and each
certificate which formerly represented a Company Common Share (other than
Dissenting Shares) or a Company Preferred Share (other than Dissenting Shares)
shall, from and following the Effective Time, represent only the right to
receive the respective Per Common Share Merger Consideration or Per Preferred
Share Merger Consideration, as the case may be.
2.3 Surrender of Certificates and Payment of Closing Per Common Share
Merger Consideration and Per Preferred Share Merger Consideration. At the
Effective Time, Purchaser shall make delivery of the amount equal to the sum of
(i) the product of the Closing Per Common Share Merger Consideration times the
difference of 750 minus the number of Dissenting Common Shares, plus (ii) the
product of the Per Preferred Share Merger Consideration times the difference of
1750 minus the number of Dissenting Preferred Shares, to an agent mutually
appointed by the Company and Purchaser (the "Closing Exchange Agent"). From and
after the Effective Time, the Closing Exchange Agent shall deliver to each
holder of Company Common Shares (except holders of Dissenting Shares) and
Company Preferred Shares (except for holders of Dissenting Shares), who has
complied with the provisions of Section 2.6, a check (or, if required by the
next sentence, immediately available funds by wire transfer to the account
designated in writing by such holder) for an amount equal to the Closing Per
Common Share Merger Consideration or Per Preferred Share Payment Merger
Consideration, as the case may be, multiplied by the number of Company Common
Shares or Company Preferred Shares, as the
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<PAGE> 19
case may be, so held. Purchaser shall cause the Closing Exchange Agent to
make delivery of such funds to each such holder by wire transfer in immediately
available funds, provided the Closing Exchange Agent is in receipt of a written
request containing all of the necessary information to effectuate a wire
transfer to such holder of such certificate(s) no later than 3:00 p.m. New York
City time on the business day prior to the Closing.
2.4 Payment of Deferred Common Share Merger Consideration.
(a) For purposes of this Agreement, "Earn-Out Formula" shall mean
(x) the first Forty-Five Million Dollars ($45,000,000) of (y) ten percent (10%)
of the gross revenue (without any deductions) earned from the sale by the
Surviving Company after Closing but prior to the twenty-fifth anniversary of the
Closing Date of (i) residential units (including any land, fixtures, easements,
licenses, common area rights, and other appurtenances transferred in connection
therewith) and (ii) land (together with any fixtures, improvements, easements,
licenses and other appurtenances transferred in connection therewith), in each
case located on the Real Property, subject to Purchaser's right of set-off in
Article X and adjustment in accordance with clause (d) of this Section below.
For purposes of this Section 2.4, revenue from such sales shall be deemed earned
when it is includable in the Surviving Company's income on the quarterly income
statements of the Surviving Company. At the Effective Time, each Company Common
Share (other than Dissenting Shares) shall be converted into the right to
receive the Closing Per Common Share Merger Consideration and an undivided
interest in 1/750 of the Earn-Out Formula (the "Deferred Per Common Share Merger
Consideration") described in this Section 2.4 and the holders of Dissenting
Shares shall have no rights with respect to the Earn-Out Formula. All payments
of the Deferred Per Common Share Merger Consideration shall be made jointly and
severally by Purchaser and the Surviving Company to the Deferred Exchange Agents
for the benefit of the Merger Consideration Recipients. Purchaser and the
Surviving Company shall make such payments in cash not later than the
forty-fifth day following the last day of each and every calendar quarter year
subsequent to the Closing. The amount of each such payment shall be based upon
the amount under the Earn-Out Formula which was earned during the calendar
quarter year then ending; provided, however, that such payments shall be
adjusted so that in no event shall the aggregate of such payments of Deferred
Per Common Share Merger Consideration paid be less than the Per Share Minimum
Aggregate Amount as of the Anniversary Date of the Closing set forth below (the
"Per Share Minimum Aggregate Amount"). Insofar as the aggregate of the payments
of Deferred Per Common Share Merger Consideration is less than the Per Share
Minimum Aggregate Amount as of a particular date set forth below, Purchaser and
the Surviving Company shall pay such an amount to the Deferred Exchange Agent
within 15 days of such anniversary which is sufficient to cause the sum of the
amount of Deferred Per Common Share Merger Consideration actually paid plus the
Merger Consideration Recipient's pro rata share (based on the number of Company
Common Shares previously held by the Merger Consideration Recipients) of set-off
or pending claims for set-off to be equal to the Per Share Minimum Aggregate
Amount:
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<PAGE> 20
<TABLE>
<CAPTION>
CLOSING PER SHARE MINIMUM
ANNIVERSARY AGGREGATE AMOUNT
----------- -----------------
<S> <C>
Third $1,333
Fourth $2,667
Fifth $4,000
Sixth $5,333
Seventh $6,667
Eighth $13,333
</TABLE>
; provided, that (y) if any payment due under this Section 2.4 is not paid
when due, and in the event that such payment is not made within 180 days after
written notice of such non-payment has been delivered to the Purchaser and the
Surviving Company, then, at the election of the Deferred Exchange Agents, the
Per Share Minimum Aggregate Amount as of such default date shall be accelerated
to Thirteen Thousand Three Hundred Thirty-Three Dollars ($13,333) and the amount
owing with respect thereto shall become immediately due and payable. Each such
payment shall be accompanied by a certificate signed by the Chief Financial
Officer of the Surviving Company certifying as to the amount of such payment
then due, which certificate shall be in such form and contain such detail as the
Deferred Exchange Agents shall reasonably request. The Deferred Exchange Agents
and their accountants shall have the right to audit the Surviving Company's
books and records at any reasonable time and from time to time to confirm the
amounts owing. Purchaser and Surviving Company shall jointly and severally
reimburse the Deferred Exchange Agents on demand for any attorneys' fees or
other costs incurred in enforcing the provisions of this Section 2.4 (other than
in the context of a good faith dispute regarding the amounts owing). Any amount
not paid when due under this Section 2.4 shall bear interest at the rate of
twelve percent (12%) per annum from the due date of such amount through the date
of payment.
(b) Insofar as any of the Company Common Shares are not converted
into Deferred Per Common Share Merger Consideration by virtue of their status as
Dissenting Shares, such amounts that would have been otherwise payable with
respect to such Deferred Per Common Share Merger Consideration shall be retained
by the Surviving Company.
(c) All payments of Deferred Per Common Share Merger
Consideration shall be made pursuant to the Deferred Exchange Agency Agreement
to the Deferred Exchange Agents. Payments to the Deferred Exchange Agents shall
fully satisfy the obligations of Purchaser and the Surviving Company to make any
payments of Deferred Merger Consideration, to the extent of the payments so
made.
(d) The Aggregate Deferred Common Share Merger Consideration
shall be increased by an amount equal to (i) the excess of (a) the Per Common
Share Merger Consideration (assuming only Per Share Minimum Aggregate Amounts of
the Deferred Per Common Share Merger Consideration are paid) multiplied by the
number of Dissenting Common Shares over (b) the aggregate amount, if any,
awarded with respect to Dissenting
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<PAGE> 21
Common Shares pursuant to Pennsylvania statutory dissenters rights
proceedings (whether by a final, non-appealable judicial determination or by a
settlement in lieu thereof), plus (ii) the excess of (a) the Per Preferred Share
Merger Consideration multiplied by the number of Dissenting Preferred Shares
over (b) the aggregate amount, if any, awarded with respect to Dissenting
Preferred Shares pursuant to Pennsylvania statutory dissenters rights
proceedings (whether by a final, non-appealable judicial determination or by a
settlement in lieu thereof), in each case (i) and (ii) taking into account the
time value of money from and after the Effective Time at a rate of 9% per annum.
Such amount shall be paid to the Deferred Exchange Agents not later than 15 days
following the date of such judicial determination or settlement.
2.5 Dissenters' Rights.
(a) Notwithstanding any other provision of this Agreement to the
contrary, Company Common Shares and Company Preferred Shares outstanding
immediately prior to the Effective Time that are held by shareholders of the
Company who are entitled to and shall have properly complied with all
requirements of and asserted dissenters rights under the provisions of
Subchapter D of Chapter 15 (relating to dissenters rights) of the Pennsylvania
Corporation Law and who shall not have withdrawn such assertion or otherwise
have forfeited dissenters' rights (in respect of Company Common Shares,
"Dissenting Common Shares"; in respect of Company Preferred Shares, "Dissenting
Preferred Shares"; and in respect of Company Common Shares and Company Preferred
Shares, collectively, the "Dissenting Shares"), shall be entitled to their
rights under the Pennsylvania Corporation Law with respect to such shares. The
Surviving Company shall pay to such shareholders the fair value of any
Dissenting Shares and, if applicable, interest as required by and as determined
in accordance with the Pennsylvania Corporation Law.
(b) The Company shall give Purchaser and after the Effective Time
the Surviving Company shall give the Deferred Exchange Agents, prompt written
notice of its receipt of any notices of intention to demand payment of fair
value for shares or other demands for payment or appraisals, any withdrawals of
such notices or demands and any other instruments or certificates deposited with
the Company or the Surviving Company or served by the shareholders of the
Company in accordance with or pursuant to the Pennsylvania Corporation Law
relating thereto. The Company and Purchaser and, after the Effective Time, the
Surviving Company and the Deferred Exchange Agents, shall jointly direct all
negotiations and proceedings with respect to notices or demands for payment or
appraisals under the Pennsylvania Corporation Law. The Company shall not, except
with the prior written consent of Purchaser, and after the Effective Time the
Surviving Company shall not, except with the prior written consent of the
Deferred Exchange Agents, settle or offer to settle, or make any payment with
respect to, any demands for payment of fair value for shares or other demands
for payment or appraisal except as required by the provisions of the
Pennsylvania Corporation Law. The Company and, after the Effective Time, the
Surviving Company, shall timely comply with all requirements and provisions of
the Pennsylvania Corporation Law relating to any Dissenting Shares and shall
give Purchaser and, after the Effective Time, the Deferred Exchange Agents,
prompt written notice prior to taking any action in connection therewith or
making any payment required thereunder.
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<PAGE> 22
2.6 Obligation to Make Payment. There shall be no obligation to deliver the
Closing Per Common Share Merger Consideration in respect of any Company Common
Shares, or the Preferred Share Merger Consideration in respect of any Company
Preferred Shares, until (and then only to the extent that) the holder thereof
surrenders its certificate(s) representing Company Common Shares or Company
Preferred Shares, as applicable, for exchange, together with a duly executed
Letter of Transmittal as provided in Section 2.3 or, in lieu thereof, delivers
to the Closing Exchange Agent an appropriate affidavit of loss and an indemnity
agreement and/or a bond as may be reasonably required in any such case by
Purchaser. If any payment for Company Common Shares or Company Preferred Shares
is to be made or is to be issued in a name other than that in which the
certificate for Company Common Shares or Company Preferred Shares surrendered
for exchange is registered, it shall be a condition to the payment or issuance
that the certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer, that all signatures shall be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, or the Stock
Exchange Medallion Program, and that the person requesting the payment shall
either (a) pay to the Closing Exchange Agent any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the certificate surrendered or (b) establish to the reasonable satisfaction
of the Closing Exchange Agent that such taxes have been paid or are not payable.
From and after the Effective Time, there shall be no transfers on the stock
transfer books of the Company of any of the Company Common Shares or Company
Preferred Shares outstanding immediately prior to the Effective Time and any of
such Company Common Shares or Company Preferred Shares presented to the Closing
Exchange Agent shall be cancelled in exchange for the merger consideration
payable as provided in Sections 2.2, 2.3 and 2.4.
2.7 Articles of Incorporation. The Articles of Incorporation of Acquisition
Sub, as in effect at the Effective Time, shall be the Articles of Incorporation
of the Surviving Company until otherwise amended as provided by law or by such
Articles of Incorporation.
2.8 By-laws. The By-laws of Acquisition Sub, as in effect at the Effective
Time, shall be the By-laws of the Surviving Company from and after the Effective
Time until otherwise amended as provided by law or by such By-laws.
2.9 Directors and Officers. The directors and officers of Acquisition Sub
at the Effective Time shall be the directors and officers of the Surviving
Company and shall hold office from and after the Effective Time until their
respective successors are duly elected or appointed and qualified. Purchaser and
the Surviving Company shall take any corporate action necessary to effectuate
the provisions of this Section 2.9.
2.10 Withholding Rights. Purchaser shall be entitled to deduct and
withhold from any amounts otherwise payable pursuant to this Agreement to any
holder of Company Common Shares or Company Preferred Shares such amounts as
Purchaser is required under the Code or any provision of state, local or foreign
tax law to deduct and withhold with respect to the making of such payment. Any
amounts so withheld shall be treated for all purposes of this Agreement as
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<PAGE> 23
having been paid to the holder of Company Common Shares or Company
Preferred Shares in respect of which such deduction or withholding was made by
Purchaser.
2.11 Working Capital for Deferred Exchange Agents. Purchaser shall at the
Effective Time pay to the Deferred Exchange Agents the sum of One Hundred
Thousand Dollars ($100,000) to be used by the Deferred Exchange Agents to pay
costs incurred in performing their duties and any remainder to be paid to the
Merger Consideration Recipients in accordance with the terms of the Deferred
Exchange Agency Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Purchaser and Acquisition Sub to enter into and perform
their obligations under this Agreement, and in consideration of the covenants of
Purchaser and Acquisition Sub contained herein, the Company represents and
warrants to Purchaser and Acquisition Sub (regardless of any examinations,
inspections, audits and other investigations Purchaser and/or Acquisition Sub
have heretofore made, or may hereafter make, with respect to such
representations and warranties) as follows (with any information in the
Disclosure Schedule being deemed to qualify all of the following):
3.1 Corporate Status; Due Authorization; Authority of the Company;
Enforceability.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. The
Company is not required to qualify in any jurisdiction to transact business as a
foreign corporation. The Company has the corporate power and authority necessary
to own, lease, operate or otherwise hold its properties and assets and to carry
on its business as currently conducted.
(b) The execution and delivery by the Company of this Agreement,
the Plan of Merger and the Articles of Merger, and the performance by the
Company of its obligations hereunder and thereunder, have been duly and validly
authorized and approved by all necessary corporate action on the part of the
Company, subject only to approval of its shareholders.
(c) The Company has the corporate power and authority to execute
and deliver this Agreement, the Plan of Merger and the Articles of Merger and to
perform its obligations hereunder and thereunder. Neither the execution or
delivery of this Agreement, the Plan of Merger and the Articles of Merger by the
Company nor the performance by the Company of its obligations hereunder and
thereunder will (assuming that the approval of the shareholders of the Company
is obtained and assuming the receipt of all consents referred to in Section
3.36), conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any contract, lease, license, franchise, permit,
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which the Company is a party or is bound, the
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<PAGE> 24
Articles of Incorporation or By-laws of the Company or any applicable Law or
Order to which the Company is a party or by which the Company is bound.
(d) This Agreement is, and the Plan of Merger and the Articles of
Merger when executed and delivered will be, binding upon, and enforceable
against, the Company in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally
and by general principles of equity (whether in a proceeding at law or in
equity).
3.2 Accounts Receivable. Except as reserved against on the Reference
Balance Sheet, the Accounts Receivable reflected on the Reference Balance Sheet:
(a) were acquired by the Company in the Ordinary Course of Business and
represent bona fide transactions that require no further act on the part of the
Company to make such Accounts Receivable payable by the account debtors; (b) are
not subject to any claim, counterclaim, set-off or deduction; (c) to the
Company's Knowledge, represent valid obligations owing to the Company by account
debtors that are not Affiliates of the Company, which are enforceable in
accordance with their respective terms; and (d) are owned by the Company free
and clear of all Liens (other than Permitted Liens).
3.3 Trade Names, Trademarks and Copyrights. Schedule 1.1 to this Agreement,
under the heading "Intangibles," identifies all registrations and applications
for registration of trademarks, service marks, fictitious names and copyrights,
if any, owned by the Company or in which the Company has any rights or licenses,
together with a brief description of each. To the Company's Knowledge, there is
no infringement or alleged infringement by any Person of any such trademark,
service mark, fictitious name or copyright. To the Company's Knowledge, it has
not infringed, nor is now infringing on, any trademark, service mark, fictitious
name or copyright belonging to any other Person. Except as identified on
Schedule 1.1, the Company is not a party to any license, agreement or
arrangement, whether as licensor, licensee, franchisor, franchisee or otherwise,
with respect to any trademarks, service marks, fictitious names or any
copyrights or any applications therefor.
3.4 No Patent Rights. Except as identified on Schedule 1.1, the Company
does not own, hold, or have any right, license or immunity with respect to any
patents or applications for patents. To the Company's Knowledge, it has not
infringed, nor is it now infringing, on any patent or other right belonging to
any Person. The Company is not a party to any license, agreement or arrangement,
whether as licensee, licensor or otherwise, with respect to any patent or
application for any patent.
3.5 Free Passes. The Company has not issued any ski passes for any period
beyond the 1998/1999 ski season.
3.6 Contracts. Schedule 1.1 to this Agreement, under the heading
"Contracts," contains a complete list of all Contracts to which the Company is
party or by which the Company is currently bound which either (i) were not
entered into by the Company in the Ordinary Course of Business, (ii) severally
have or will have an economic effect on the Company or require
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<PAGE> 25
payment by any party thereto of at least One Hundred Thousand Dollars
($100,000) during the term of the Contract (without taking into account optional
renewal periods), or (iii) will not or cannot be terminated by the Company upon
written notice of thirty (30) days or less without penalty. Copies of such
written Contracts have been made available to Purchaser or its counsel. All
Contracts are valid and binding upon the Company, and, to the Company's
Knowledge, the other parties thereto, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally
and by general equitable principles. There is no default under any Contract or
event that with notice or lapse of time, or both, would constitute such a
default by the Company or, to the Company's Knowledge, by any other party to any
of the Contracts. The Company has not received notice that any party to any of
the Contracts intends to cancel or terminate any of such Contracts or to
exercise or not exercise any options under any of such agreements.
3.7 Compliance with Laws. The Company has complied in all material respects
with all, and is not in violation in any material respect of any, applicable
Laws or Orders (including, without limitation, any applicable building, zoning,
employment, disability rights or food service facilities or beverage alcohol
law, ordinance or regulation) affecting its properties or the operation of its
Business. To the Company's Knowledge, no material capital expenditures will be
required for compliance with applicable Laws. No notice of or accusation of any
state or local alcohol or beverage commission has been received by or is pending
against the Company as a holder of any alcoholic beverage license and, to the
Company's Knowledge, no investigation is now in progress by any state or local
alcohol or beverage commission concerning any act or omission that could result
in an accusation, claim or proceeding being filed against the Company.
3.8 Litigation. Schedule 3.8 sets forth a brief description of all suits,
actions, arbitrations, and legal, administrative and other proceedings and
governmental investigations pending or, to the Company's Knowledge, threatened
against the Company or the Business. None of the matters set forth in Schedule
3.8, if decided adversely to the Company, could reasonably be expected to have a
Material Adverse Effect on the Company. The Company is not currently engaged in
any legal action to recover moneys due to it or damages sustained by it.
3.9 Personnel Identification and Compensation. Schedule 3.9 contains a true
and complete list of the names, addresses and titles of all current officers,
directors and senior managers of the Company. The Company has previously made
available to Purchaser a true and correct schedule stating (a) the rates of
compensation payable (or paid, as the case may be) to each such person and (b)
the names and titles of all employees, agents and representatives of the Company
(other than legal counsel) and the rates of compensation payable (or paid, as
the case may be) to each such person.
3.10 Existing Employment Contracts. Schedule 3.10 contains a list of all
employment contracts (other than "at will" contracts) and collective bargaining
agreements, if any, to which the Company is a party or by which the Company is
bound. All these contracts are in full force and effect, and neither the Company
nor, to the Company's Knowledge, any other Person is in default under any such
contract. There have been no claims of default and, to the Company's Knowledge,
there are no facts or conditions which if continued, or on notice, will result
in a
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<PAGE> 26
default under these contracts or arrangements. There is no pending or, to
the Company's Knowledge, threatened labor dispute, strike or work stoppage
affecting the Business.
3.11 Capitalization; Subsidiaries.
(a) The total number of shares of capital stock and the par value
thereof which the Company is authorized to issue and the number of such shares
which are issued and outstanding are as follows:
<TABLE>
<CAPTION>
ISSUED AND
PER SHARE AUTHORIZED OUTSTANDING
CLASS PAR VALUE SHARES SHARES
- --------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Company Common Stock $100 750 750
Company Preferred Stock $100 1,750 1,750
</TABLE>
(b) There are no outstanding options, conversion rights,
warrants, convertible or exchangeable securities or other rights or commitments
in existence to acquire from the Company any of its shares of capital stock. No
equity securities are reserved for issuance to any Person.
(c) The Company Common Shares have been duly and validly issued
and are fully paid and nonassessable and are not subject to any preemptive
rights; and there are no voting trust agreements or other contracts, agreements
or arrangements restricting voting or dividend rights or transferability with
respect to the outstanding shares of capital stock of the Company other than the
Buy/Sell Agreement.
(d) The Company has not violated in any material respect any
federal, state or local Law in connection with the offer for sale or sale and
issuance of its outstanding shares of capital stock or any other securities.
(e) The Company does not own, of record or beneficially, the
capital stock, securities or other equity interests issued by any other Person,
and has no economic or other interest in any partnership, joint venture or other
Person, enterprise or business, except as set forth on Schedule 3.11.
3.12 Title to Shares. The persons listed as shareholders of the Company in
Schedule 3.12 are all of the record owners of the capital stock of the Company,
and such persons own of record the number of shares of capital stock of the
Company set forth in Schedule 3.12. The Company Common Shares and the Company
Preferred Shares constitute all of the issued and outstanding shares of capital
stock of the Company.
3.13 Forest Service Permits. The Company has no Forest Service Permits, nor
does the conduct of the Business require that any such Permits be obtained or in
force.
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3.14 Environmental Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) The term "Environmental Law(s)" means each and every Law,
Order, Environmental Permit, or rule of each and every Authority, pertaining to
(i) the protection of human health, safety, the environment, natural resources
and wildlife, (ii) the protection or use of surface water, groundwater, rivers
and other bodies of water, (iii) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal,
release, threatened release, abatement, removal, remediation or handling of, or
exposure to, any Hazardous Substance or (iv) pollution, including without
limitation, as amended, CERCLA, the Solid Waste Disposal Act, as amended by the
Resources Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., and the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Toxic Substance Control
Act, 15 U.S.C. Section 2601 et seq., the Federal Safe Drinking Water Act, 42
U.S.C. Sections 300f-300j, the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Sections 136-136y, and any analogous state or local Law.
(b The term "Hazardous Substance(s)" means any substance which is
defined or regulated as a hazardous substance, hazardous material, hazardous
waste, pollutant or contaminant under any Environmental Law, including without
limitation, petroleum hydrocarbons, crude oil or any fraction thereof, asbestos
or PCBs.
(c) The term "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including without limitation the abandonment
or discarding of barrels, containers and other receptacles containing any
Hazardous Substance), except for any such event occurring pursuant to an
Environmental Permit.
(d) For purposes of Sections 3.15 through 3.21, inclusive, use of
"the Company" shall be deemed to include any predecessor to the Company,
respectively, and any Persons from which the Company has assumed liabilities by
contract, operation of Law, or otherwise.
3.15 Compliance with Environmental Laws. Except as described on Schedule
3.15, the Company is and, to the Company's Knowledge, has been in material
compliance with all Environmental Laws, and the Company has not received, within
the five (5) years preceding the date hereof, any notice of violation and has no
Company Knowledge of any alleged violation or liability arising under any
Environmental Law with respect to the Real Property or the Business. To the
Company's Knowledge, no material capital expenditures will be required for
compliance with applicable Environmental Laws. With respect to any real property
formerly owned or leased by the Company ("Prior Property"), the Company was in
compliance with all Environmental Laws during the Company's period of ownership
or operation and the Company has not received, within the five (5) years
preceding the date hereof, any notice of violation and has no Company Knowledge
of any alleged violation or liability arising under any
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<PAGE> 28
Environmental Law with respect to the Company's ownership and operation of
such Prior Property.
3.16 Handling of Hazardous Substances. The Company and to the Company's
Knowledge, any other present or former owner, tenant or occupant of the Real
Property has not used, handled, generated, produced, manufactured, treated,
stored, transported or Released any Hazardous Substance on, under, about, to or
from the Real Property or any Prior Property in violation of any Environmental
Law or in a manner requiring investigation or remediation.
3.17 No Release of Hazardous Substances. There is no Release or to the
Company's Knowledge, threatened Release of any Hazardous Substance that would
give rise to a requirement to investigate or remediate, existing on, beneath or
from the surface, subsurface or in the ground water of the Real Property, nor,
to the Company's Knowledge, is there or has there been any Release or threatened
Release of Hazardous Substances adjacent to, or from the Real Property.
3.18 Environmental Permits. All permits, licenses, bonds, approvals or
authorizations required by or issued pursuant to any Environmental Law
("Environmental Permits") for the ownership, use or operation of the Real
Property or the Business as currently used or operated are currently maintained
in full force and effect. Schedule 3.18 contains a true and complete listing of
all such Environmental Permits. The operations of the Company are in compliance
with all terms and conditions of such Environmental Permits and the Company has
not received within the five (5) years preceding the date hereof, any notice
concerning any alleged violation of any such Environmental Permits and has no
Company Knowledge of any facts or circumstances that any such Environmental
Permits may be suspended, revoked or modified by any Authority.
3.19 No Environmental Proceedings. The Company has not received, within the
five (5) years preceding the date hereof, any Order, written demand, notice of
suit, proceeding, citation, directive, summons, notice of investigation,
information request or notice of violation pursuant to any Environmental Law
relating to (a) the ownership, lease, occupation or use of the Real Property or
Prior Property by the Company, (b) any alleged violation of or liability under
any Environmental Law by the Company, including without limitation any liability
related to the off-site disposal or Release of Hazardous Substances, (c) the
suspected presence, Release or threatened Release of any Hazardous Substance on,
under, in or from the surface, subsurface, or groundwater located under the Real
Property, or any Prior Property, (d) any actual or alleged damage, injury,
threat or harm to health, safety, natural resources or the environment
(collectively referred to herein as "Environmental Claims") nor, to the
Company's Knowledge, do there exist any facts or circumstances that could
reasonably give rise to any such valid Environmental Claims.
3.20 No Tanks, Asbestos or PCB's. Except as set forth on Schedule 3.20, (a)
there are and, to the Company's Knowledge, were no aboveground or underground
storage tanks located on the Real Property used or formerly used for the purpose
of storing any Hazardous Substance ("Tanks"); (b) any Tanks currently present on
the Real Property, as identified on Schedule 3.20, satisfy requirements of
Environmental Laws, including the performance standards with which all
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<PAGE> 29
underground tanks must comply by December 1998; (c) any Tanks formerly
owned or operated by the Company located on the Real Property, as identified on
Schedule 3.20, have been either removed or closed in accordance with
Environmental Laws; (d) to the Company's Knowledge, there is no
asbestos-containing building material on the Real Property that does not comply
with Environmental Law and no asbestos abatement or remediation work has been
performed on the Real Property; (e) to the Company's Knowledge, there is no
lead-based paint on the Real Property that does not comply with Environmental
Law and no lead-based paint or remediation work has been performed on the Real
Property; (f) to the Company's Knowledge, there is no lead in drinking water
supplied to the Real Property that does not comply with Environmental Law; and
(g) to the Company's Knowledge, there is no PCB-containing equipment or
PCB-containing material located on the Real Property that does not comply with
Environmental Law.
3.21 Environmental Lists and Restrictions. Neither the Real Property nor
any Prior Property (i) is identified on any or, to the Company's Knowledge,
nominated for identification on any published list of contaminated properties or
other properties that pursuant to Environmental Laws are the subject of an
investigation or remediation action by any Authority, or (ii) are to the
Company's Knowledge, subject to any restriction under Environmental Law on the
ownership, occupancy, use or transferability of the Real Property (other than
Permitted Real Estate Exceptions), and (iii) to the Company's Knowledge, there
are no such imminent restrictions that are reasonably likely to be imposed upon
the Real Property.
3.22 Environmental Documents. The Company has made available to Purchaser
any and all documents, correspondence, pleadings, reports, assessments and
analytical results in its possession, whether prepared by or for the Company by
any third party relating to Environmental Claims, Environmental Laws,
Environmental Permits or Hazardous Substances.
3.23 Occupational Safety and Health. The Company has not received any
notice, citation, claim, assessment or proposed assessment as to or alleging any
violation of any federal, state or local occupational safety and health laws nor
has the Company been subject to any investigation by any federal, state or local
occupational safety and health agency within the three (3) years preceding the
date hereof. The Company is not a party to any pending dispute with respect to
compliance with any federal, state or local occupational safety and health law.
3.24 Water Rights. The Company has all necessary Permits (including
Environmental Permits), property rights and other necessary approvals to use the
water it uses in the operation of the Business, including, but not limited to,
the use of water for snowmaking, and its water use has otherwise been in
compliance in all material respects with all applicable Laws and Orders
(including Environmental Laws). To the Company's Knowledge, no event has
occurred or failed to occur that currently, or upon the giving of notice could
reasonably be expected to materially adversely affect the current supply of
water to the Company's premises or materially adversely affect the Company's
ability to manufacture snow at its premises after the Closing Date in amounts
approximating the maximum amount previously manufactured by the Company.
3.25 Certain Transactions. Except as previously disclosed to Purchaser, all
transactions between the Company, on the one hand, and any officer, director,
shareholder or
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<PAGE> 30
senior management employee or Affiliate thereof, on the other hand (an
"Affiliated Transaction"), within the three (3) years immediately preceding the
date hereof have been made on the basis of prevailing market rates and terms
such that all such transactions have been made on terms no less favorable than
those which would have been available from unrelated third parties. Except as
set forth on Schedule 3.25, neither any officer, nor any director or employee of
the Company, nor any spouse, child or other relative of any of such persons,
owns, or has any interest, directly or indirectly, in any of the real or
personal property owned by or leased to the Company or any copyrights, patents,
trademarks, trade names or trade secrets owned or licensed by the Company.
3.26 Employee Benefit Matters.
(a) Except as disclosed on Schedule 3.26 hereto, no Employee
Benefit Plan, including without limitation, any Multiemployer Plan, exists or
has ever existed and the Company is not a participating employer in any Employee
Benefit Plan in which more than one employer makes contributions as described in
Sections 4063 and 4064 of ERISA. Except as disclosed on Schedule 3.26, the
Company has no contingent liability with respect to any post-retirement benefit
under any employee welfare benefit plan which is a welfare plan (as defined in
Section 3(1) of ERISA), other than liability for health plan continuation
coverage described in Part 6 of Title I of ERISA, which will not have a Material
Adverse Effect on the Company. The Company has given to Purchaser true and
complete copies of all the following: each Employee Benefit Plan and related
trust agreement (including all amendments and commitments with respect to such
Employee Benefit plan or trust) which the Company maintains or is committed to
contribute to as of the date hereof and the most recent summary plan
description, actuarial report, determination letter issued by the Internal
Revenue Service and Form 5500 filed in respect of each such Employee Benefit
Plan; a listing of all of the Multiemployer Plans to which the Company
contributes or is committed to contribute and the aggregate amount of the most
recent annual contributions required to be made to each such Multiemployer Plan,
and any information which has been provided to the Company regarding withdrawal
liability under any Multiemployer Plan and the collective bargaining agreement
pursuant to which such contribution is required to be made.
(b) Each Employee Benefit Plan complies, in both form and
operation in all material respects, with its terms, ERISA and the Code
including, without limitation, Code Section 4980B, and no condition exists or
event has occurred with respect to any such plan which would result in the
incurrence by the Company of any material liability, fine or penalty. The
Company has not incurred any liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premiums which have become
due which are unpaid. The Company has not engaged in any transaction which could
subject it to liability under Section 4069 or Section 4212(c) of ERISA. Each
Employee Benefit Plan, related trust agreement, arrangement and commitment of
the Company is legally valid and binding in full force and effect. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified, and each
trust related to such plan has been determined to be exempt under Section 501(a)
of the Code. To the Company's Knowledge, nothing has occurred or is expected to
occur that would adversely affect
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<PAGE> 31
the qualified status of any Employee Benefit Plan or any related trust
subsequent to the issuance of such determination letter. To the Company's
Knowledge, no Employee Benefit Plan is being audited or investigated by any
government agency or subject to any pending or threatened claim or suit.
(c) Each Plan currently meets and has met during the past six
years the minimum funding standard of Section 302 of ERISA and Section 412 of
the Code (without regard to any funding waiver). All contributions or payments
due and owing as required by Section 302 of ERISA, Section 412 of the Code or
the terms of any Plan have been made by the due date for such contributions or
payments. With respect to each Multiemployer Plan, the Company has paid or
accrued all contributions pursuant to the terms of the applicable collective
bargaining agreement required to be paid or accrued by it. Except as disclosed
on Schedule 3.26, with respect to each Plan, the market value of assets
(exclusive of any contribution due to the Plan) equals or exceeds the present
value of benefit liabilities as of the latest actuarial valuation date for such
plan (but not prior to 12 months prior to the date hereof), determined on the
basis of a shutdown of the Company in accordance with actuarial assumptions used
by the PBGC in single-employer plan terminations and since its last valuation
date and assuming further that all employees who had an option elected
annuities, there have been no amendments to such plan that materially increased
the present value of accrued benefits nor any other material adverse changes in
the funding status of such plan. The Company is not required to provide security
to a Plan pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code.
(d) Neither the Company nor, to the Knowledge of the Company, any
fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code. The execution, delivery
and carrying out of the terms of any agreements that are related to this
transaction will not constitute a prohibited transaction under the
aforementioned sections.
(e) Other than any Reportable Event that may occur pursuant to
the transactions contemplated by this Agreement, no Termination Event has
occurred or is reasonably expected to occur.
(f) None of the following "reportable events" which are subject
to the 30-day notice requirement of Section 4043(b) of ERISA in respect of any
of the Employee Benefit Plans has occurred: (i) an inability to pay benefits
when due, (ii) bankruptcy or insolvency of the sponsor of any Employee Benefit
Plan, (iii) liquidation or dissolution of the sponsor of any Pension Plan, (iv)
a failure to meet the minimum funding standards, or (v) certain transactions
involving a change of employer. The Company has not received any notice from the
PBGC that any of the Pension Plans is being involuntarily terminated or from the
Secretary of the Treasury that any partial or full termination of any of the
Pension Plans has occurred and no such event has occurred. There exists as of
the date hereof no condition or set of circumstances which present a material
risk of the involuntary termination of any of the Pension Plans.
(g) There are no agreements which will provide payments to any
officer, employee, shareholder or highly compensated individual which will be
"parachute payments"
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<PAGE> 32
under Section 280G of the Code that are nondeductible to the Company and which
will be subject to the tax under Section 4999 of the Code for which the Company
would have a material withholding liability.
(h) Any governmental plan directly or indirectly maintained by
the Company complies in all material respects with the laws of the Commonwealth
of Pennsylvania.
(i) The Company is not, and has never been, a member of a
"controlled group of corporations" within the meaning of Section 414(b) of the
Code or a member of a group under "common control" within the meaning of Section
414(c) of the Code.
3.27 Tax Matters.
(a) The term "Taxes" means all net income, capital gains, gross
income, gross receipts, sales, use, transfer, ad valorem, franchise, profits,
license, capital, withholding, payroll, employment, excise, goods and services,
severance, stamp, occupation, premium, property, assessments or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or additional amounts incurred or accrued
under applicable federal, state, local or foreign tax law or assessed, charged
or imposed by any Authority, domestic or foreign, provided that any interest,
penalties, additions to tax or additional amounts that relate to Taxes for any
taxable period (including any portion of any taxable period ending on or before
the Closing Date) shall be deemed to be Taxes for such period, regardless of
when such items are incurred, accrued, assessed or charged. For the purposes of
this Section 3.27, references to the "Company" shall be deemed to include any
predecessor to the Company, respectively, and any Person from which the Company
incurs a liability for Taxes as a result of transferee liability.
(b) The Company has duly and timely filed (and prior to the
Closing Date will duly and timely file) true, correct and complete Tax returns,
reports or estimates, all prepared in accordance with applicable Laws, for all
years and periods (and portions thereof), for all jurisdictions (whether
federal, state, local or foreign) in which any such returns, reports or
estimates were due, and for all such returns, reports and estimates which are
required to be filed by any applicable Law on or prior to the Closing Date. All
Taxes shown as due and payable on such returns, reports and estimates have been
paid (or will be paid prior to the Closing), and there is no current liability
for any Taxes due and payable in connection with any such returns, except as
provided in the Financial Statements. Any charges, accruals and reserves for
Taxes provided for on the Financial Statements as of their respective dates are
adequate. There are no existing liens for unpaid Taxes upon any of the assets of
the Company, other than for taxes not yet due and payable. The Company has
provided to Purchaser copies of all federal, state, local and foreign tax
returns, reports or estimates filed by the Company for the past five (5) years.
All applicable sales Taxes, to the extent imposed on the Company, were paid by
the Company when its assets were acquired by the Company.
(c) The Company has (i) withheld all required amounts from its
employees, agents, contractors and nonresidents and remitted such amounts to the
proper Authorities; (ii)
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paid all employer contributions and premiums; and (iii) filed all federal,
state, local and foreign returns, reports and estimates with respect to
Tax withholding and social security and unemployment Taxes and premiums, all in
compliance with the withholding provisions of the Code, or any prior provision
of the Code and other applicable Laws.
(d) None of the Company's assets is tax exempt use property under
Code Section 168(h). None of the Company's assets is property that the Company
is required to treat as being owned by any other Person pursuant to the safe
harbor lease provision of former Code Section 168(f)(8).
(e) No portion of the cost of any of the Company's assets was
financed directly or indirectly from the proceeds of any tax exempt state or
local government obligation described in Code Section 103.
(f) The Company has no (and has not previously had any) permanent
establishment in any foreign country and the Company does not engage (and has
not previously engaged) in a trade or business within the meaning of the Code
relating to the creation of a permanent establishment in any foreign country.
(g) The Company is not a foreign person within the meaning of
Code Section 1445.
(h) Neither the Code nor any other provision of Law requires
Purchaser to withhold any portion of the Aggregate Merger Consideration.
(i) The Company has never been a member of any consolidated,
combined or unitary group for federal, state, local or foreign Tax purposes.
(j) The Company is not a party to any joint venture, partnership
or other arrangement that could be treated as a partnership for federal income
Tax purposes other than as set forth on Schedule 3.27 hereto.
(k) The federal income Tax returns of the Company have been
examined by the IRS, or have been closed by the applicable statute of
limitations, for all periods through taxable year ended March 31, 1995; the
state Tax returns of the Company have been examined by the relevant agencies or
such returns have been closed by the applicable statute of limitations for all
periods through taxable year ended March 31, 1995; no deficiencies or
reassessments for any Taxes for any period subsequent to March 31, 1995 have
been proposed, asserted or assessed against the Company by any federal, state,
local or foreign taxing authority.
(l) The Company has not executed or filed with any taxing
authority (whether federal, state, local or foreign) any agreement or other
document extending or having the effect of extending the period for assessment,
reassessment or collection of any Taxes, and no power of attorney granted by the
Company with respect to any Taxes is currently in force.
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(m) No federal, state, local or foreign Tax audits or other
administrative proceedings, discussions or court proceedings are currently
pending with regard to any Taxes or Tax returns of the Company other than as set
forth on Schedule 3.27 hereto.
(n) The Company has not entered into any agreement relating to
Taxes which affects any taxable year ending after the Closing Date.
(o) The Company has not agreed to and is not required to make any
adjustment by reason of a change in accounting methods that affects any taxable
year ending after the Closing Date. Neither the IRS nor any other agency has
proposed any such adjustment or change in accounting methods that affects any
taxable year ending after the Closing Date. The Company does not have any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to its business or operations and that
affects any taxable year ending after the Closing Date.
(p) The Company is not and has never been a party to any Tax
sharing agreement or similar arrangement for the sharing of Tax liabilities or
benefits.
(q) The Company has not consented to the application of Code
Section 341(f).
(r) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company that, individually or
collectively, could give rise to the payment by the Company of any amount that
would not be deductible by reason of Code Section 280G.
3.28 Inventories. The Inventories consist of items of a quality and
quantity useable or saleable in the Ordinary Course of Business, except for
obsolete or slow moving items and items below standard quality, all of which
have been written down on the books of the Company to net realizable market
value or have been provided for by adequate reserves. All items included in the
Inventories are the property of the Company, except for sales made in the
Ordinary Course of Business; for each of these sales either the purchaser has
made full payment or the purchaser's liability to make payment is reflected in
the books of the Company. No items included in the Inventories have been pledged
as collateral, or are held by the Company on consignment from third parties. The
Company's inventories shown on the balance sheets included in the Financial
Statements are based on quantities determined by physical count or measurement,
taken within the preceding twelve (12) months, and are valued at the lower of
cost (determined on a first-in, first-out basis) or market value and on a basis
consistent with prior years.
3.29 Title to Assets (Other than Real Property). The Company has good and
marketable fee simple title to all of its assets (other than Real Property,
which is discussed below), free and clear of all Liens, other than the following
("Permitted Liens"): (i) those identified on Schedule 3.29, (ii) imperfections
of title, none of which, individually or in the aggregate, materially detracts
from the value of or impairs the use of the affected properties or impairs the
operations of the Company, (ii) liens for governmental charges that are not yet
due
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and payable, (iii) mechanic's and materialmen's liens and rights of possession,
and (iv) liens for current taxes not yet due.
3.30 Real Property.
(a) Schedule 1.1 to this Agreement, under the heading "Real
Property," contains descriptions of the Real Property owned, leased or occupied
under permit by the Company and a list of all Real Property Leases affecting the
Real Property.
(b) All of the Real Property Leases are valid and in full force,
and there does not exist any default or event that with notice or lapse of time,
or both, would constitute a default under any of the Real Property Leases, and
in the case where the Company is the lessor, there exists no right of set-off,
counterclaim, rights of first refusal, expansion rights or options to purchase,
no rents have been paid more than thirty (30) days in advance, there have been
no assignments or subletting, and the Company is in compliance with all Laws
regarding security deposits.
(c) There are no adverse or other parties in possession of any
part of the Real Property. The Company has not granted any license, lease or
other right or interest relating to the use and possession of any part of the
Real Property, other than the Real Property Leases, except as set forth on
Schedule 1.1.
(d) To the Company's Knowledge, all building, fixtures and
leasehold improvements currently being used by the Company in the Business are
located on the Real Property. All the Real Property has access to publicly
dedicated streets or roads so as to permit reasonable vehicular and pedestrian
access for ingress and egress. The Real Property is currently adequately served
by public utilities including, but not limited to, sewer, water, electricity,
telephone. The Company has not received any notice or other communication from
any Authority that would result in the termination of the foregoing described
access or utility services.
(e) The Company has good, insurable and marketable fee simple
title to the Real Property, free and clear of all Liens, other than as follows
("Permitted Real Estate Exceptions"): (i) Permitted Liens, (ii) Real Property
Leases, (iii) Liens, easements, covenants, rights-of-way and other encumbrances
or restrictions of record, zoning and other similar restrictions that in each
case do not prohibit or interfere with the operations of the Business, and (iv)
matters identified in the Title Commitments. Except for the Permitted Real
Estate Exceptions, to the Company's Knowledge, there is no unrecorded or
undisclosed legal or equitable interest in any Real Property owned or claimed by
any Person. Subject to the Real Property Leases, the Company has enjoyed the
continuous and uninterrupted quiet possession, use and operation of its Real
Property without any material objection by any Person. All real estate taxes and
assessments which are due and payable with respect to the Real Property have
been paid. There are no real estate tax appeals pending, and the Company is not
aware of any obligation that it has to dedicate or grant an easement over any
part or portion of the Real Property to any Authority.
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(f) The Company has not received any notice of any general or
special tax or municipal assessment affecting any property owned or leased in
connection with the Business, and no such assessments are pending or, to the
Company's Knowledge, threatened. There are no pending or planned municipal
improvements.
3.31 Improvements. The improvements located on the Real Property are in
compliance with all applicable Laws and Orders in all material respects, and, to
the Company's Knowledge, such improvements as are currently in service are in
good and serviceable condition and repair, normal wear and tear excepted in all
material respects. Neither the Real Property nor the condition, use or
occupancy, thereof violates in any way any applicable Laws, Orders or covenants,
conditions and restrictions, whether federal, state, local or private; there is
no exception, conditional use, variance, off-site obligation or requirement
which affects the Real Property or is necessary for the use, management,
occupancy, maintenance or operation of the Real Property as currently conducted,
and there is no use which is nonconforming and no structure thereon which is
nonconforming whether or not permitted.
3.32 Zoning. To the Company's Knowledge, the zoning of each parcel of Real
Property permits the currently existing improvements and the continuation of the
business currently being conducted on such parcel. There is no pending or, to
the Company's Knowledge, contemplated rezoning of any Real Property. The Company
has not received any written notice that any part or portion of the Real
Property is not in compliance with any applicable zoning laws or ordinances or
state or local subdivision laws or ordinances.
3.33 No Real Property Commitments. Except as set forth on Schedule 3.33,
there are no outstanding, defaulted or unsatisfied contracts, commitments,
agreements (including, without limitation, developer agreements) or
understandings which have been made to, with or for the benefit of any utility
companies, school districts, water districts, improvement districts or other
Authorities which could reasonably be expected to impose any obligation,
liability or condition on the Company with respect to Real Property, to grant
any easements or to make any payments, contributions or dedications of money or
land or to construct, install or maintain or to contribute to the construction,
installation or maintenance of any improvements of a public or private nature,
whether on or off the Real Property.
3.34 Continued Use of Real Property. There are no currently pending or, to
the Company's Knowledge, threatened, proceedings to (a) condemn, take or
demolish the Real Property or any part thereof, (b) declare the Real Property or
any part of it a nuisance or (c) exercise the power of eminent domain or a
similar power with respect to all or any part of the Real Property.
3.35 Condition of Assets. All of the Equipment and Improvements currently
in service are adequate and fit to be used for the purposes for which they are
currently used and are in good operating condition and repair subject to normal
wear and tear in all material respects.
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3.36 Consents. Except as contemplated by this Agreement with respect to the
filing of the Articles of Merger with the Department of State of Pennsylvania,
the appropriate filings pursuant to the HSR Act, if applicable, or as otherwise
disclosed on Schedule 3.36, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Authority or any other Person is
required to be obtained or made by the Company in connection with the execution
and delivery of this Agreement or the performance by the Company of its
obligations hereunder.
3.37 Licenses and Permits. Schedule 3.37 lists and describes all
qualifications, registrations, filings, privileges, franchises, immunities,
licenses, permits, authorizations and approvals of Authorities which are used or
required in order for the Company to own and operate the Business (except
Environmental Permits), including, without limitation, all certificates of
occupancy and certificates, licenses and permits relating to alcoholic
beverages, zoning, building, housing, safety and fire (collectively, the
"Permits"); and each Permit is in good standing, valid and subsisting, and in
full force and effect in accordance with its terms. Schedule 3.37 lists all of
the alcohol beverage license citations issued to the Company by any commission
having jurisdiction over the Company during the previous ten (10) year period.
3.38 Insurance. Schedule 3.38 sets forth a list of all insurance policies
maintained by the Company. The Company is not in default with respect to any
provision contained in any such insurance policy, nor has it failed to give any
notice or present any claim thereunder in a due and timely fashion. The Company
has not received notice from any insurance carrier that material alterations to
the Real Property, the facilities located thereon or the Business are required
by such carrier.
3.39 Financial Statements. The Financial Statements attached hereto as
Schedule 3.39 were prepared by the Company from the books and records of the
Business and in accordance with generally accepted accounting principles
consistently applied (except in the case of the Reference Balance Sheet, for
year-end adjustments and the absence of footnotes) and present fairly the
financial position and results of operations of the Company at the dates and for
the periods indicated therein.
3.40 Undisclosed Liabilities. As of the Reference Balance Sheet Date, the
Company had no liability of any nature (whether accrued, absolute, contingent or
otherwise) of the type which should have been reflected in the Reference Balance
Sheet prepared in accordance with generally accepted accounting principles
(except for year-end adjustments and the absence of footnotes) which is not
disclosed, reflected or reserved against in the Reference Balance Sheet; and,
except for liabilities which have been incurred in the Ordinary Course of
Business or as otherwise contemplated by this Agreement, since the Reference
Balance Sheet Date, the Company has not incurred any liability of any nature
(whether accrued, absolute, contingent or otherwise).
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3.41 Conduct of Business.
(a) Since the Reference Balance Sheet Date, except as otherwise
contemplated by this Agreement:
(i) the Business has been conducted only in the Ordinary
Course of Business;
(ii) except for equipment, inventory and supplies
purchased, sold or otherwise disposed of in the Ordinary Course of the
Business, the Company has not purchased, sold, leased, mortgaged,
pledged or otherwise acquired or disposed of any properties or
assets;
(iii) the Company has not sustained or incurred any loss or
damage (whether or not insured against) on account of fire,
flood, accident or other calamity which has interfered with or
affected, or may interfere with or affect, the operation of the
Business;
(iv) the Company has not increased the rate of
compensation of any officer or other employee, except in the Ordinary
Course of Business;
(v) there has been no material adverse change in or with
respect to the condition (financial or otherwise), operations,
rights, properties, assets or liabilities of the Company;
(vi) the Company has not canceled any of its debts or
claims owed to it;
(vii) the Company has not changed any accounting methods or
practices (including, without limitation, any change in
depreciation or amortization policies or rates); and
(viii) the Company has not agreed to take any of the actions
described in paragraphs (ii), (iv), (vi) or (vii) above.
(b) Since December 31, 1997, except as set forth in Schedule
3.41 and except as otherwise contemplated by this Agreement, the Company has
not:
(i) declared or paid any dividends or made any
distributions to its shareholders; or
(ii) entered into, or agreed to enter into, any Affiliated
Transactions.
3.42 Broker's or Consultant's Fees. Except as set forth in Schedule 3.42
hereof, the Company represents and warrants that it has dealt with no broker,
finder or consultant in connection with any of the transactions contemplated by
this Agreement, and, to the Company's
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Knowledge, no Person is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
3.43 Banking Arrangements. Except as set forth in Schedule 3.43, the
Company has no banking, borrowing or depository relationship, or accounts or
deposits of funds, and all persons authorized as signatories on each such
account are listed in Schedule 3.43.
3.44 Powers of Attorney. No Person holds any power of attorney from the
Company.
3.45 Bonds. The Company has previously provided to Purchaser true and
complete copies of the Bond Indentures. The Bond Indentures are valid, binding
and enforceable against the parties thereto, subject to bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and by
general principles of equity (whether in a proceeding at law or in equity). The
Bonds are redeemable at par plus accrued but unpaid interest without any payment
of premium or penalty). Upon issuance of an election of redemption by the
Municipal Authority to the Bond Trustee and the deposit by Purchaser of funds
equal to the par value of the Bonds outstanding plus accrued but unpaid interest
thereon with the Bond Trustee (plus any fees or expenses owed to the Bond
Trustee under the Bond Indentures), and upon the payment by the Bond Trustee to
the holders of the Bonds in compliance with the redemption provisions of the
Bond Indentures, there will be no obligations remaining with respect to the
Bonds. As of October 31, 1998, the aggregate par value of the Bonds outstanding
will be approximately $9,555,000.
3.46 Buy/Sell Agreement. The Company has previously provided to Purchaser
copies of the Buy/Sell Agreement.
3.47 Partnership Agreements. The Company has previously provided to
Purchaser true and complete copies of the Partnership Agreements. Such
agreements are valid, binding and enforceable against the parties thereto,
subject to bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally and by general principles of equity (whether in a
proceeding at law or in equity).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company to enter into and perform its obligations
under this Agreement, and in consideration of the covenants of the Company
contained herein, Purchaser and Acquisition Sub hereby, jointly and severally,
represent and warrant to the Company (regardless of any examinations,
inspections, audits and other investigations the Company has heretofore made, or
may hereafter make, with respect to such representations and warranties) as
follows:
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4.1 Corporate Status. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Acquisition Sub is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania.
4.2 Due Authorization. The execution and delivery by each of (a) Purchaser
and Acquisition Sub of this Agreement, and (b) Acquisition Sub of the Plan of
Merger and the Articles of Merger, and the performance by each of Purchaser and
Acquisition Sub of its obligations hereunder and thereunder, have been duly and
validly authorized and approved by all necessary corporate action on the part of
each of Purchaser and Acquisition Sub.
4.3 Authority of Purchaser. Each of Purchaser and Acquisition Sub has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Acquisition Sub has the corporate power and
authority to execute and deliver the Plan of Merger and the Articles of Merger
and to perform its obligations thereunder. Neither the execution or delivery of
this Agreement by Purchaser or Acquisition Sub, or the Plan of Merger and the
Articles of Merger by Acquisition Sub, nor the performance by Purchaser or
Acquisition Sub of its obligations hereunder and thereunder, on the Closing Date
will conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any contract, lease, license, franchise, permit,
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which Purchaser or Acquisition Sub is a party or is bound, its
certificate or articles of incorporation, by-laws or any applicable Law or Order
to which Purchaser or Acquisition Sub is a party or by which Purchaser or
Acquisition Sub is bound.
4.4 Enforceability. This Agreement is binding upon, and enforceable
against, each of Purchaser and Acquisition Sub, and the Plan of Merger and the
Articles of Merger will be binding upon, and enforceable against, Acquisition
Sub, in accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and by
principles of equity (whether in a proceeding at law or in equity).
4.5 Consents. Except as contemplated by this Agreement with respect to the
filing of the Articles of Merger with the Department of State of Pennsylvania,
the appropriate filings pursuant to the HSR Act, if applicable, filings under
applicable liquor licensing laws and FCC laws, or as otherwise contemplated by
this Agreement, on the Closing Date no consent, approval, Order or authorization
of, or registration, declaration or filing with, any Authority or any other
Person will be required to be obtained or made by Purchaser or Acquisition Sub
in connection with its execution and delivery of this Agreement or the
performance by either of them of its obligations hereunder.
4.6 Broker's or Consultant's Fees. Each of Purchaser and Acquisition Sub
represents and warrants that it has dealt with no broker, finder or consultant
in connection with any of the transactions contemplated by this Agreement, and,
to its knowledge, no Person is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
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4.7 Purchaser SEC Reports. Since December 31, 1997, Purchaser has filed
with the U.S. Securities & Exchange Commission (the "SEC") all material forms,
statements, reports and documents (including all exhibits, amendments and
supplements) required to be filed by it under each of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the respective rules and regulations
thereunder, all of which, as amended, if applicable, complied as to form in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. Purchaser has previously delivered to the
Company copies of its Annual Report on Form 10-K for the fiscal year ended
October 31, 1997 ("Purchaser 10-K"), as filed with the SEC, and all other
reports, including quarterly reports, or registration statements filed by
Purchaser with the SEC since October 31, 1997 and prior to the date hereof (such
documents are collectively referred to as the "Purchaser SEC Reports"). As of
its respective date, the Purchaser 10-K did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements contained in the Purchaser 10-K (collectively, the "Purchaser
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
Purchaser and its subsidiaries as of the date thereof and the results of their
operations and cash flows for the periods then ended.
4.8 Funds. Purchaser will have all funds necessary to deliver the Aggregate
Merger Consideration required to be delivered at the Closing, to fund the
redemption of the Bonds, as provided in Section 5.8, to fund the Partnership
Merger, as contemplated by Section 5.14, and to fund the Company Closing
Expenses.
ARTICLE V
PRE-CLOSING COVENANTS
Each of the Company, Purchaser and Acquisition Sub covenant and agree that
from the date hereof through and including the Closing Date:
5.1 Required Consents. The Company, Purchaser and Acquisition Sub will use
their respective commercially reasonable efforts to obtain the consents listed
on Schedule 3.36.
5.2 Conduct of the Business. Except as otherwise contemplated by this
Agreement or consented to by Purchaser in writing:
(a) The Company will (i) operate and maintain the Business in the
Ordinary Course of Business; (ii) maintain all Equipment and Improvements in
accordance with past practice; and (iii) maintain normal quantities of retail
and non-retail Inventories; provided, however, that the Company may take the
actions described on Schedule 5.2.
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(b) The Company shall not (i) permit or allow any of the
Company's assets to be subjected to any Lien (other than Permitted Liens or
Permitted Real Estate Exceptions); (ii) sell, lease, transfer or otherwise
dispose of any of the Company's assets, except in the Ordinary Course of
Business; (iii) terminate, modify or amend materially any of the Contracts
except in the Ordinary Course of Business; (vi) enter into any material
contract, lease, registration, license or permit except in the Ordinary Course
of Business; (v) change the Business' accounting methods, principles or
practices (including without limitation, any change in depreciation or
amortization methods, policies or rates or income recognition methods); (vi)
increase or otherwise change the rate or nature of the compensation (including
wages, salaries, bonuses and benefits under any Employee Benefit Plan) which is
paid or payable to any officer, employee or other representative of the
Business, except in the Ordinary Course of Business; (vii) make, or commit to
make, any payment, contribution or award under or into any bonus, pension,
profit-sharing, deferred compensation or similar plan, program or trust except
in the Ordinary Course of Business; or (viii) make any other material change in
the Business or the operation thereof.
(c) The Company shall use its commercially reasonable efforts to
preserve and protect the Business' goodwill, rights, properties, assets and
business, to keep available to it and Purchaser the services of the Business'
employees, and to preserve and protect the Business' relationships with
Authorities and its employees, officers, advertisers, suppliers, customers,
creditors and others having business relationships with it.
(d) The Company shall not (i) declare or pay any dividends or
make any distributions to its shareholders or (ii) enter into any new Affiliated
Transactions other than those set forth on Schedule 5.2.
5.3 Right of Inspection; Access to Books and Personnel. The Company shall,
and shall cause the Company's officers, employees, auditors and agents to,
afford to Purchaser and Purchaser's officers, employees, auditors, agents and
lenders the right at any time prior to the Closing during normal business hours,
reasonable access to the Company's officers, employees, auditors, agents,
facilities, books and records as Purchaser reasonably shall deem necessary or
desirable and shall furnish such financial and operating data and other
information as Purchaser may reasonably require; provided, however, that
Purchaser shall not have the right to undertake any invasive environmental
testing without the prior written consent of the Company in each instance. No
such access, examination or review shall in any way affect, diminish or
terminate any of the representations, warranties or covenants of the Company set
forth herein.
5.4 Notification of Material Adverse Events. The Company shall promptly
notify Purchaser in writing of any event following the date hereof of which the
Company is or becomes aware that will or may reasonably be expected to have a
Material Adverse Effect on the Company.
5.5 Code Section 1445 Withholding. The Company shall take all actions as
may be necessary to comply with Sections 897 and 1445 of the Code and any rules,
regulations and orders which may be promulgated thereunder. The Company will
provide to Purchaser, at or
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prior to the Closing, either (a) an affidavit in form reasonably acceptable
to Purchaser, or (b) evidence satisfactory to Purchaser's counsel that the
transaction contemplated by this Agreement is exempt from any Taxes which may
apply by reason of Section 897 of the Code.
5.6 Required Filings.
(a) The Company and Purchaser shall cause to be filed with the
DOJ and the FTC not later than September 8, 1998 the premerger notification form
required pursuant to the HSR Act with respect to the transactions contemplated
hereby unless, in the unqualified opinion of Purchaser's counsel, such filing is
not required. The parties agree with respect to such filing that they shall (i)
after any request by the DOJ or FTC, promptly file any information or documents
requested by the DOJ or the FTC and (ii) notify each other of any communications
with the DOJ or the FTC which relate to the transactions contemplated hereby.
Purchaser shall pay the HSR Act filing fee.
(b) Purchaser shall cause to be timely filed with the
Pennsylvania Liquor Control Board all notices, applications, and other documents
as may be required by said Authority with regard to the transactions
contemplated by this Agreement and shall thereafter diligently pursue all
consents, approvals and authorizations from said Authority as may be necessary
to consummate the transactions contemplated hereby. The Company shall provide to
Purchaser for use in connection with such filings all information which
Purchaser shall request and shall otherwise provide such assistance and
cooperation as Purchaser shall reasonably request in connection therewith,
including, without limitation, executing necessary forms and filings.
(c) The Company, Purchaser and Acquisition Sub agree to (i)
promptly file, or cause to be promptly filed, with all appropriate Authorities
all notices, registrations, declarations, applications and other documents as
may be necessary to consummate the transactions contemplated hereby and (ii)
thereafter diligently pursue all consents, approvals and authorizations from
such Authorities as may be necessary to consummate the transactions contemplated
hereby.
5.7 Supplemental Disclosures. The Company shall have the continuing
obligation to supplement promptly and amend the Schedules as necessary or
appropriate with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules; provided, however, that for the purpose
of the rights and obligations of the parties hereunder, any such supplemental or
amended disclosure shall not, except as Purchaser may otherwise agree in
writing, be deemed to have cured any breach of any representation or warranty
made in this Agreement.
5.8 Bond Redemption Funds. Purchaser, on behalf of the Municipal Authority,
shall irrevocably deposit funds sufficient to redeem the Bonds with the Bond
Trustee concurrently with the Closing, all in accordance with the provisions of
the Bond Indentures, including any final fees or expenses owed to the Bond
Trustee.
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5.9 Shareholder Approval. The Company will take all steps necessary to
submit this Agreement and the Plan of Merger to its shareholders at a meeting of
its shareholders, which the Company shall hold as promptly as practical.
5.10 Acquisition Proposals. From and after the date hereof until the
earlier of the termination of this Agreement or the Effective Time, the Company
will, and will cause its officers, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to an Alternative Acquisition Proposal (as defined below).
The Company will not, nor will it authorize or permit any of its officers or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it to, directly or indirectly, (i) solicit,
initiate or encourage, or knowingly take any other action (except as required by
15 Pa. C.S.A. Section 1508(b)) to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Alternative Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding any Alternative Acquisition Proposal; provided, however,
that if the Board of Directors of the Company determines in good faith, after
consultation with and based upon the written advice of outside counsel to the
Company, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
respect to an Alternative Acquisition Proposal that was not solicited or
initiated by the Company, participate in discussions or negotiations regarding
such Alternative Acquisition Proposal. "Alternative Acquisition Proposal" means
any bona fide proposal or offer (other than the transactions contemplated by
this Agreement) from a third party with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of, all or
substantially all of the assets or securities of the Company. In the event that
the Board of Directors of the Company determines in good faith, after
consultation with and based upon the written advice of outside counsel to the
Company, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, the Board of
Directors of the Company may approve or recommend a Superior Proposal (as
defined below) or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any acquisition
agreement with respect to any Superior Proposal), but in each case only at a
time that is not less than three business days following Purchaser's receipt of
written notice that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal. For purposes
of this Agreement, a "Superior Proposal" means any bona fide fully financed
written Acquisition Proposal made by a third party the terms of which the Board
of Directors of the Company determines in its good faith judgment (based on the
advice of a financial advisor to the Company of nationally recognized
reputation) to be more favorable to the Company's stockholders from a financial
point of view than the transactions contemplated hereby and for which any
required financing is committed.
5.11 Authorization to Use Information.
(a) Purchaser hereby consents to and authorizes the use by the
Company of the information contained in Purchaser SEC Reports in connection with
any disclosure materials prepared for the shareholders of the Company for their
use in connection with their determination
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whether to approve the proposal to merge set forth in this Agreement, provided
that the Company shall provide Purchaser and its counsel such materials prior
to any such use and shall afford Purchaser and its counsel the reasonable
opportunity to comment thereon.
(b) The Company hereby consents to and authorizes the use by
Purchaser and Acquisition Sub of any Confidential Information in connection with
any disclosure materials prepared for any financing sources or prospective
purchasers of any debt securities in connection with the financing of the
transactions contemplated hereby, so long as the financing source executes a
confidentiality agreement satisfactory to the Company and its counsel, and in
each case provided that Purchaser and Acquisition Sub provide to the Company and
its counsel such materials prior to any such use and afford the Company and its
counsel the reasonable opportunity to comment thereon.
5.12 Guaranty of Acquisition Sub Covenants. Purchaser hereby
unconditionally guarantees for the benefit of the Company and the Merger
Consideration Recipients the performance by Acquisition Sub and the Surviving
Company of all of their obligations under this Agreement. The discharge,
termination or extinguishment of any undertakings and indemnifications of
Acquisition Sub or the Surviving Company for any reason including, without
limitation, their respective dissolution, liquidation or bankruptcy, shall not
release Purchaser from its obligations under this Section 5.12.
5.13 Company Closing Expenses. The Company shall provide to Purchaser,
three business days prior to the Closing, its good faith estimate of Company
Closing Expenses that shall have accrued or which it expects to accrue prior to
or as of the Closing Date (the "Company Closing Expense Estimate"). Immediately
prior to the Closing, Purchaser shall advance to or for the benefit of the
Company such funds as it may require to pay the Company Closing Expenses.
5.14 Partnership Merger. The Company shall form a new, wholly owned
subsidiary prior to Closing and will use all commercially reasonable efforts
necessary to cause the Partnership to be merged with and into the subsidiary,
concurrently with the Closing, with the subsidiary as the surviving company, in
a transaction in which the current partners in the Partnership receive cash in
the aggregate amount of Six Million Four Hundred Thousand Dollars ($6,400,000)
in exchange for their partnership interests and the Company receives all of the
capital stock of the surviving company in exchange for its capital stock in the
merged subsidiary (the "Partnership Merger"). Immediately prior to Closing,
Purchaser shall advance to the subsidiary such funds as it may require to effect
the Partnership Merger.
5.15 Real Estate Title Matters. The Company shall use its commercially
reasonable efforts to cause each of the matters reflected on the Title
Commitments and designated by the Purchaser, of which designations Purchaser
shall from time to time notify the Company prior to the Closing, to be cleared
or otherwise satisfied prior to the Closing.
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ARTICLE VI
CONDITIONS PRECEDENT TO PURCHASER'S
AND ACQUISITION SUB'S OBLIGATIONS
6.1 Obligations to be Satisfied on or Prior to Closing Date. The
obligations of Purchaser and Acquisition Sub to effect the Merger and the
transactions contemplated by this Agreement is subject to the satisfaction (or
waiver by Purchaser or Acquisition Sub), on or prior to the Closing Date, of the
following conditions:
(a) Accuracy of Representations and Warranties. None of the
representations and warranties made by the Company in this Agreement shall be
incorrect in any respect on the Closing Date to the extent that any such
inaccuracies, when taken individually or in the aggregate, would be reasonably
likely to result in a Material Adverse Effect on the Company.
(b) Compliance with Agreement. The Company shall not have failed
to perform or comply in any respects with the covenants, agreements and
obligations required by this Agreement to be performed or complied with by the
Company on or prior to the Closing Date to the extent that any such
non-performance or non-compliance, when taken individually or in the aggregate,
would be reasonably likely to result in a Material Adverse Effect on the Company
or the Surviving Company.
(c) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against the Company, Purchaser or Acquisition Sub of
substantial damages if the Merger is consummated, shall be pending.
(d) Laws. No Law shall have been enacted by any Authority which
would make the consummation of the Merger illegal.
(e) No Material Adverse Change. There shall have occurred no
Material Adverse Change with respect to the Company since the date hereof.
(f) Schedules. All amendments or supplements to the Schedules
made by the Company pursuant to Section 5.7 shall be reasonably acceptable to
Purchaser and Acquisition Sub.
(g) Closing Documents. The Company shall have delivered all
agreements, certificates, opinions and other documents required to be delivered
by the Company on the Closing Date pursuant to Section 8.3, and the form and
substance of all such agreements, certificates, opinions and other documents
shall be reasonably satisfactory to Purchaser.
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(h) Title Insurance and Surveys. At the Closing, Purchaser shall
have received the Title Policies, each dated the Closing Date, and the Surveys,
each in form and substance reasonably satisfactory to Purchaser.
(i) Hart-Scott-Rodino Act. All filings required pursuant to the
Hart-Scott-Rodino Act shall have been made, and any approvals required
thereunder shall have been obtained, or the waiting period required thereby will
have expired or have been terminated, as the case may be.
(j) Shareholder Approval. This Agreement, the Plan of Merger and
the Merger shall have been approved and adopted by the requisite vote or consent
of the shareholders of the Company in accordance with applicable Law.
(k) Dissenters. Holders of the Company Common Shares holding at
least sixty percent 60% of the Company Common Shares outstanding shall not have
exercised dissenters rights under Pennsylvania Corporation Law.
(l) Partnership Merger. The Partnership Merger shall have been
consummated concurrently with the Closing upon terms and conditions reasonably
satisfactory to Purchaser.
(m)Bonds. Irrevocable notices sufficient to redeem the Bonds
shall have been issued pursuant to the Bond Indentures.
(n) Buy/Sell Agreement. There shall have been a judicial
determination that the Buy/Sell Agreement is inapplicable to the Merger and
counsel for Purchaser and Acquisition Sub shall be satisfied that the Merger and
the transactions contemplated by the Agreement will not be in violation of the
Buy/Sell Agreement or enable any party to the Buy/Sell Agreement to enforce any
rights under such agreement.
(o) Escrow Agreement. The Escrow Agreement shall have been
entered into by the Escrow Agent, Purchaser, the Surviving Company and the
Deferred Exchange Agents.
(p) Consents. All authorizations, agreements and consents of any
Persons or Authorities required by Law (other than any consent from the
Pennsylvania Liquor Control Board or the Federal Communications Commission) to
the consummation of the transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect as of the Closing Date, and
no such authorizations, agreements and consents shall impose any burdensome or
unsatisfactory conditions or requirements on Purchaser or Acquisition Sub.
(q) Golf Course Labor Contract. The Labor Service Contract
relating to the maintenance and operation by the Company of the golf course
owned by the Municipal Authority shall be evidenced by a written agreement
between the Company and the Municipal Authority on the terms currently in effect
for a term extending until at least the first anniversary of the Closing Date.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
7.1 Obligations to Be Satisfied on or Prior to Closing Date. The
obligations of the Company to effect the Merger and the transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by the
Company), on or prior to the Closing Date, of the following conditions:
(a) Accuracy of Representations and Warranties. None of the
representations and warranties made by each of Purchaser and Acquisition Sub in
this Agreement shall be incorrect in any respect on the Closing Date to the
extent that any such inaccuracies when taken individually or in the aggregate,
would be reasonably likely to result in a Material Adverse Effect on Purchaser
or the Surviving Company.
(b) Compliance with Agreement. Purchaser and Acquisition Sub
shall not have failed to perform or comply in any respects with the covenants,
agreements and obligations required by this Agreement to be performed or
complied with by them on or prior to the Closing Date to the extent that any
such non-performance or non-compliance, when taken individually or in the
aggregate, would be reasonably likely to result in a Material Adverse Effect on
Purchaser or the Surviving Company.
(c) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against the Company, Purchaser or Acquisition Sub of
substantial damages if the Merger is consummated, shall be pending.
(d) Buy/Sell Agreement. There shall have been a judicial
determination that the Buy/Sell Agreement is inapplicable to the Merger and
counsel for the Company shall be satisfied that the Merger and the transactions
contemplated by the Agreement will not be in violation of the Buy/Sell Agreement
or enable any party to the Buy/Sell Agreement to enforce any rights under such
agreement.
(e) Laws. No Law shall have been enacted by any Authority which
would make the consummation of the Merger illegal.
(f) No Material Adverse Change. There shall have occurred no
Material Adverse Change with respect to the Purchaser since the date hereof.
(g) Closing Documents. Purchaser and Acquisition Sub shall have
delivered all reports, agreements, certificates, opinions and other documents
required to be delivered by it
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on the Closing Date pursuant to Section 8.4, and the form and substance of all
such certificates, opinions and other documents shall be reasonably
satisfactory to the Company.
(h) Hart-Scott-Rodino Act. All filings required pursuant to the
Hart-Scott-Rodino Act shall have been made, and any approvals required
thereunder shall have been obtained, or the waiting period required thereby will
have expired or have been terminated, as the case may be.
(i) Shareholder Approval. This Agreement, the Plan of Merger and
the Merger shall have been approved and adopted by the requisite vote or consent
of the shareholders of the Company in accordance with applicable law.
(j) Bonds. Irrevocable notices sufficient to redeem the Bonds
shall have been issued, and Purchaser shall have irrevocably deposited funds
sufficient therefor with the Bond Trustee in accordance with the provisions of
Section 5.8.
(k) Fairness Opinion. The opinion dated August 28, 1998 issued by
DLJ to the Company to the effect that the consideration to be received in
connection with the Merger by the Merger Consideration Recipients is fair from a
financial point of view shall not have been withdrawn or modified.
(l) Release of Certain Parties. Purchaser and the Surviving
Company shall have unconditionally released each Merger Consideration Recipient,
officer and Director of the Company pursuant to a general release relating to
all matters other than those arising out of this Agreement or any of the
Affiliated Transactions referred to at A.23, A.24, or A.28 through A.35,
inclusive in Schedule 1.1.
(m) Partnership Merger. The Partnership Merger shall have been
consummated concurrently with the Closing upon terms and conditions reasonably
satisfactory to the Company.
(n) Escrow Agreement. The Escrow Agreement shall have been
entered into by the Escrow Agent, Purchaser, the Surviving Company and the
Deferred Exchange Agents.
(o) Consents. All authorizations, agreements and consents of any
Persons or Authorities required by Law (other than any consent from the
Pennsylvania Liquor Control Board or the Federal Communications Commission) to
the consummation of the transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect as of the Closing Date, and
no such authorizations, agreements and consents shall impose any burdensome or
unsatisfactory conditions or requirements on Purchaser or Acquisition Sub.
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ARTICLE VIII
CLOSING
8.1 Time and Place. The Closing shall be a "New York style" closing and
shall take place at 10:00 a.m. (Eastern standard time) on the Closing Date at
the offices of Winston & Strawn, 200 Park Avenue, New York, New York, or at such
other time and place as the Company, Purchaser and Acquisition Sub may mutually
agree.
8.2 Simultaneous Delivery. All documents and other instruments required to
be delivered at the Closing shall be regarded as having been delivered
simultaneously, and no document or other instrument shall be regarded as having
been delivered until all have been delivered.
8.3 Deliveries by the Company to Purchaser and Acquisition Sub. At the
Closing, the Company shall deliver or cause to be delivered to Purchaser and
Acquisition Sub:
(a) articles of incorporation of the Company certified by the
Department of State of Pennsylvania and the by-laws of the Company certified by
the Secretary or Assistant Secretary of the Company;
(b) certificates of subsistence for the Company from the
Commonwealth of Pennsylvania;
(c) the legal opinion of Kirkpatrick & Lockhart, LLP, special
counsel for the Company and the Partnership, substantially in the form of
Exhibit C hereto.
(d) the legal opinion of Fike, Cascio & Boose, counsel for the
Municipal Authorities, in form reasonably acceptable to Purchaser and its
counsel;
(e) the legal opinion of Lynch & Lynch, bond counsel with respect
to the Bonds, in form reasonably acceptable to Purchaser and its counsel;
(f) a non-recourse certificate executed by the President of the
Company, dated as of the Closing Date, certifying that all representations and
warranties of the Company herein contained are correct in all material respects
as of the Closing Date as if made thereon and that the Company has performed or
complied in all material respects with all of the covenants and obligations
required by this Agreement to be performed or complied with by the Company on or
prior to the Closing Date;
(g) an affidavit of the President of the Company stating, under
penalty of perjury, the Company's United States taxpayer identification number
and that the Company is not a foreign person, pursuant to Section 1442 of the
Code;
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(h) all releases necessary to terminate and discharge any Liens
(other than Permitted Liens and Permitted Real Estate Exceptions) on the
Company's assets;
(i) a GAP undertaking (to the effect that the Company has not
taken any action that would change the state of its title to the Real Property
subsequent to the most recent title search conducted by the Title Company) and
all other documents, affidavits and certificates reasonably deemed necessary by
the Title Company for purposes of delivering the Title Policies;
(j) a copy of the agreements pursuant to which the Partnership
Merger is effected;
(k) a certificate executed by the President of the Company
setting forth the amount of Company Closing Costs as of such date to be paid or
payable by the Company;
(l) a non-recourse certificate of the Company, executed by the
Secretary or an Assistant Secretary of the Company, dated as of the Closing
Date, certifying to (i) the certificate of incorporation and by-laws of the
Company, (ii) resolutions of the Board of Directors of the Company, approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby; and (iii) incumbency and signatures of
the officers of the Company, executing this Agreement and any other certificate
or document delivered in connection herewith;
(m) executed forms required in connection with the Closing by the
Pennsylvania Liquor Control Board;
(n) such other instruments and documents as are required by any
other provisions of this Agreement to be delivered on the Closing Date by the
Company to Purchaser or Acquisition Sub.
8.4 Deliveries by Purchaser to the Company. At the Closing, Purchaser shall
deliver or cause to be delivered the funds to be delivered by it (v) to the
Closing Exchange Agent pursuant to Section 2.3, (w) to the Bond Trustee pursuant
to Section 5.8, (x) to the Company pursuant to Section 5.13, (y) in connection
with the Partnership Merger pursuant to Section 5.14, and (z) to the Escrow
Agent pursuant to Section 10.6, and shall deliver or cause to be delivered to
the Company:
(a) the legal opinion of Winston & Strawn, special counsel for
Purchaser and Acquisition Sub, substantially in the form of Exhibit D hereto;
(b) the legal opinion of Buchanan Ingersoll Professional
Corporation, special local counsel for Purchaser and Acquisition Sub,
substantially in the form of Exhibit E hereto;
(c) a non-recourse certificate of each of Purchaser and
Acquisition Sub, executed by the Secretary or an Assistant Secretary of
Purchaser and Acquisition Sub, respectively, dated as of the Closing Date,
certifying to (i) the certificate of incorporation and by-
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laws of Purchaser or Acquisition Sub, as applicable; (ii) resolutions of the
Board of Directors of Purchaser or Acquisition Sub, as applicable, approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby; and (iii) incumbency and signatures
of the officers of Purchaser or Acquisition Sub, as applicable, executing this
Agreement and any other certificate or document delivered in connection
herewith;
(d) a non-recourse certificate of each of Purchaser and
Acquisition Sub, executed by the President or Vice President of Purchaser and
Acquisition Sub, respectively, dated as of the Closing Date, certifying that all
representations and warranties of Purchaser or Acquisition Sub, as applicable,
herein contained are correct in all material respects as of the Closing Date as
if made thereon and that Purchaser or Acquisition Sub, as applicable, has
performed or complied in all material respects with all of the covenants and
obligations required by this Agreement to be performed or complied with by
Purchaser or Acquisition Sub, as applicable, on or prior to the Closing Date;
(e) certificate of incorporation of Purchaser certified by the
Secretary of State of the State of Delaware;
(f) certificate of good standing for Purchaser from the Secretary
of State of Delaware;
(g) Articles of Incorporation of Acquisition Sub certified by the
Secretary of State of the Commonwealth of Pennsylvania;
(h) certificate of subsistence for Acquisition Sub from the
Secretary of State of the Commonwealth of Pennsylvania;
(i) the releases contemplated by Section 7.1(l); and
(j) such other instruments and documents as are required by any
other provisions of this Agreement to be delivered on the Closing Date by
Purchaser or Acquisition Sub to the Company.
ARTICLE IX
POST-CLOSING COVENANTS
9.1 Further Assurance. At any time and from time to time from and after the
Closing, the Company, Purchaser and Acquisition Sub will, at the request of the
other parties hereto, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such instruments and other documents and perform or
cause to be performed such acts and provide such information, as may reasonably
be required to evidence or effectuate the Merger or
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the transactions contemplated by this Agreement or for the performance by
the Company, Purchaser or Acquisition Sub of any of their other respective
obligations under this Agreement.
9.2 Confidentiality
(a) The parties hereto agree with respect to the terms and
conditions of this Agreement, including, without limitation, the Aggregate
Merger Consideration, and all information that is furnished or disclosed by the
other party (collectively, "Confidential Information"), that (i) such
Confidential Information is confidential and/or proprietary to the
furnishing/disclosing party and entitled to and shall receive treatment as such
by the receiving party; (ii) the receiving party will hold in confidence and not
disclose nor use (except in respect of the transactions contemplated by this
Agreement) any such Confidential Information, treating such Confidential
Information with the same degree of care and confidentiality as it accords its
own confidential and proprietary information; provided, however, that (A) the
receiving party shall not have any restrictive obligation with respect to any
Confidential Information which (1) is contained in a printed publication
available to the general public, (2) is or becomes publicly known through no
wrongful act or omission of the receiving party, or (3) is known by the
receiving party without any proprietary restrictions by the
furnishing/disclosing party at the time of receipt of such Confidential
Information, (B) the receiving party shall be entitled to disclose such
information to its officers, directors, affiliates, employees, agents, advisors,
lenders and prospective lenders, and (C) the Company shall be entitled to
disclose any of the terms and conditions of this Agreement in the course of
prosecuting its Action for Declaratory Judgment against Lynda Croker filed at
G.D. 535 Civil 1998 in the Court of Common Pleas, Somerset County, Pennsylvania;
and (iii) all such Confidential Information furnished to either party by the
other, unless otherwise specified in writing, shall remain the property of the
furnishing/disclosing party, and in the event this Agreement is terminated,
shall be returned to it, together with any and all copies made thereof, upon
request for such return by it (except for documents submitted to an Authority
with the consent of the furnishing/disclosing party or upon subpoena and which
cannot be retrieved with reasonable effort).
(b) Each party hereto acknowledges that the remedy at law for any
breach by either party of its obligations under Section 9.2(a) is inadequate and
that the other party shall be entitled to equitable remedies, including an
injunction, in the event of breach by the other party.
9.3 Company's Future Real Estate Development.
(a) The Surviving Company shall, and Purchaser shall cause the
Surviving Company to, use commercially reasonable efforts from and after the
Closing to develop residential units on the Real Property at such times and in
such manner as is commercially prudent.
(b) From and after the Closing, the Company shall not make any
transfer of residential units or land (i) for consideration other than cash,
without the prior written consent of the Deferred Exchange Agents, which consent
shall not be unreasonably withheld, or (ii) in a transaction that is not either
at arm's length or in consideration for less than fair market value
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unless the Company pays to the Deferred Exchange Agents the amount due under
Section 2.4 with respect to such transfer as if such transfer had been made for
fair market value.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Merger Consideration Recipients. Subject to the
limitations set forth below, Purchaser and the Surviving Company shall be
entitled to be indemnified after the Closing for Adverse Consequences arising
out of or resulting from any of the following:
(a) the inaccuracy as of the date hereof of any representation or
warranty of the Company contained in this Agreement (each a "Purchaser Warranty
Claim");
(b) the failure by the Company to perform any of its covenants or
obligations hereunder;
(c) the payment by the Company of any Company Closing Expenses in
excess of the Company Closing Expense Estimate;
(d) the amount, if any, awarded with respect to Dissenting Shares
pursuant to Pennsylvania statutory dissenters rights proceedings (whether by a
final, non-appealable judicial determination or by a settlement in lieu thereof)
in excess of (i) with respect to Company Common Shares, the Per Common Share
Merger Consideration (assuming only Per Share Minimum Aggregate Amounts of the
Deferred Per Common Share Merger Consideration are paid) multiplied by the
number of Dissenting Common Shares, and (ii) with respect to Company Preferred
Shares, the Per Preferred Share Merger Consideration multiplied by the number of
Dissenting Preferred Shares, in each case (i) and (ii) taking into account the
time value of money from and after the Effective Time at a rate of 9% per annum;
or
(e) the failure by the Company to pay all Taxes imposed on or
incurred by the Company for any taxable period ending on or before the Closing
Date or any action by the Company which would cause the representations in
Section 3.27 (Tax Matters) to be inaccurate if such representations were made on
and as of the Closing Date.
Any indemnification under this Section 10.1 shall be allocated equally among
the Company Common Shares, other than Dissenting Common Shares. Purchaser and
Acquisition Sub hereby acknowledge that the rights of indemnification of
Purchaser and the Surviving Company as provided in this Section 10.1 are
and shall be non-recourse to the Merger Consideration Recipients and the
Deferred Exchange Agents.
10.2 Indemnification by Purchaser. Subject to the limitations set forth
below, each of Purchaser and the Surviving Company shall, jointly and severally,
indemnify, defend and hold harmless the Merger Consideration Recipients after
the Closing from and against any Adverse
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Consequences arising out of or resulting from the inaccuracy of any
representation or warranty of Purchaser or Acquisition Sub contained in this
Agreement (each a "Company Warranty Claim") or the failure by Purchaser or
Acquisition Sub to perform any of its covenants or obligations hereunder.
10.3 Procedure for Indemnification.
(a) If any Person shall claim indemnification hereunder (the
"Claiming Party") for any claim other than a third party claim, the Claiming
Party shall promptly give written notice to the other party from whom
indemnification is sought (the "Responding Party") of the nature and amount of
the claim.
(b) If a Claiming Party shall claim indemnification hereunder
arising from any claim or demand of a third party, the Claiming Party shall
promptly give written notice (a "Third-Party Notice") to the Responding Party of
the basis for such claim or demand, setting forth the nature of the claim or
demand in detail. The Responding Party shall have the right to compromise or, if
appropriate, defend at its own cost and through counsel of its own choosing, any
claim or demand set forth in a Third-Party Notice giving rise to such claim for
indemnification. In the event the Responding Party undertakes to compromise or
defend any such claim or demand, it shall promptly (and in any event, no later
than fifteen (15) days after receipt of the Third-Party Notice) notify the
Claiming Party in writing of its intention to do so. The Claiming Party shall
fully cooperate with the Responding Party and its counsel in the defense or
compromise of such claim or demand. After the assumption of the defense by the
Responding Party, the Claiming Party shall not be liable for any legal or other
expenses subsequently incurred by the Responding Party in connection with such
defense, but the Claiming Party may participate in such defense at its own
expense. No settlement of a third party claim or demand defended by the
Responding Party shall be made without the written consent of the Claiming
Party, such consent not to be unreasonably withheld. The Responding Party shall
not, except with written consent of the Claiming Party, such consent not to be
unreasonably withheld, consent to the entry of a judgment or settlement which
does not include as an unconditional term thereof, the giving by the claimant or
plaintiff to the Claiming Party of an unconditional release from all liability
in respect of such third party claim or demand.
(c) Any claim for indemnification by Purchaser or the Surviving
Company shall be directed to the Deferred Exchange Agents.
10.4 Limitations on Indemnification.
(a) Survival. The indemnities contained in this Article X shall
expire on March 31, 2000, except with respect to claims (i) under Section 3.27
(Taxes), Section 3.29 (Title) and Section 3.45 (Bonds) as to which the
indemnification rights shall survive only until thirty (30) days after the
expiration of any applicable statute of limitations; (ii) under Sections 3.15
through 3.22 (Environmental Matters) as to which indemnification rights shall
survive only until the third anniversary of the Closing; and (iii) under
Sections 3.1, 4.1, 4.2, 4.3 and 4.4 (Corporate Formality) and Section 3.11
(Capitalization) as to which there shall be no expiration date of
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indemnification rights; provided, that if at the stated expiration of any
indemnification rights there shall then be pending any indemnification claim
duly made by a party hereto in accordance with this Agreement, such party
shall continue to have the right to such indemnification rights with respect
to such claim notwithstanding such expiration.
(b) Exclusive Remedy. The indemnification rights provided in this
Article X are the party's exclusive remedies with respect to the matters
described in Sections 10.1 and 10.2 and shall limit any liability of any party
hereto which may arise by statute or common law (with the sole exception of
fraud) with respect to such matters. Purchaser's and the Surviving Company's
sole and exclusive remedy with respect to claims for indemnification under
Section 10.1 (other than any claims pursuant to Section 10.1(c), 10.1(d), or
10.1(e), for which Purchaser and the Surviving Company shall also be entitled to
indemnity under Section 10.6) shall be to set-off, dollar-for-dollar, against
Purchaser's obligation to pay the Aggregate Deferred Common Share Merger
Consideration upon due notice to the Deferred Exchange Agents (who shall have
the right to dispute any such claim against Purchaser or the Surviving Company)
in accordance with Section 10.3 hereof. Other than as set forth in this Section
10.4(b), no pre-Closing or post-Closing claim under this Agreement may be made
by Purchaser, Acquisition Sub or the Surviving Company against any Merger
Consideration Recipient or against the Deferred Exchange Agents.
(c) Deductible Against and Limitation On Purchaser's Right to
Indemnification. Neither Purchaser nor the Surviving Company shall be entitled
to indemnification for any amounts pursuant to Section 10.1(a) or 10.1(e) unless
and until the aggregate Adverse Consequences suffered by Purchaser and the
Surviving Company thereunder collectively exceeds $500,000, whereupon Purchaser
and the Surviving Company shall be entitled only to be indemnified for Adverse
Consequences suffered by Purchaser and the Surviving Company with respect
thereto in excess of $500,000 (in the aggregate); provided, however, that
Purchaser and the Surviving Company shall have no right of indemnification
pursuant to Section 10.1(a) or 10.1(e) with respect to any single Adverse
Consequence which is less than $25,000, and no such Adverse Consequence shall be
taken into account in determining whether or the extent to which the $500,000
deductible in the preceding sentence has been exceeded.
(d) Purchaser's Deductible. The Merger Consideration Recipients
shall not be entitled to indemnification pursuant to Section 10.2 unless and
until the Adverse Consequences suffered by the Merger Consideration Recipients
in the aggregate exceeds $500,000, whereupon the Merger Consideration Recipients
shall be entitled to indemnification in accordance with the provisions of
Section 10.2 from Purchaser for all Adverse Consequences suffered by the Merger
Consideration Recipients in excess of $500,000. The Merger Consideration
Recipients shall have no rights to indemnification pursuant to Section 10.2 with
respect to any single Adverse Consequence which is less than $25,000 and no such
Adverse Consequence shall be taken into account in determining whether or the
extent to which the $500,000 deductible in the preceding sentence has been
exceeded.
50
<PAGE> 57
10.5 Payment Due Date; Interest. Except for third-party claims being
defended in good faith by the Responding Party in accordance with Section
10.3(b), the Responding Party shall satisfy its obligations hereunder within
fifteen (15) days after receipt of notice of a claim. Any amount not paid to the
Claiming Party by such date shall bear interest from the date and to the extent
that the Responding Party disburses funds with respect thereto or, if no
disbursement shall be made with respect thereto, the date of notice of its
claim, at a rate equal to nine percent (9%) per annum from the date due until
the date paid. If Purchaser is entitled to set-off any amounts against the
Aggregate Deferred Common Share Merger Consideration pursuant to Section
10.4(b), such amount shall bear interest until the date that a payment would
otherwise first be due and payable to the Deferred Exchange Agents pursuant to
Section 2.4, provided, however, that if the amount entitled to be set-off is
greater than any such payment, the amount in excess of such payment shall
continue to bear interest until the next payment equal to or greater than such
amount would otherwise be due and payable pursuant to Section 2.4. Any amount
improperly set-off hereunder whether or not being disputed in good faith and
with respect to which it is determined, whether as a result of a final judgment
or agreement between the parties, was not properly set-off, shall also bear
interest at a rate of nine percent (9%) per annum from the date such amount
should otherwise have been paid by Purchaser.
10.6 Escrow Arrangement.
(a) At the Effective Time, Purchaser shall deposit the sum of
Three Million Dollars ($3,000,000) (such amount, as adjusted from time to time
in accordance with the provisions of this Section 10.6, together with any income
earned thereon, the "Escrow Fund") with the Escrow Agent to be held and
disbursed by the Escrow Agent in accordance with the terms of this Agreement and
the escrow agreement a ; provided, however, that in the event that there are no
Dissenting Shares, the Escrow Fund shall initially be Two Million Dollars
($2,000,000).
(b) In the event that Purchaser or the Surviving Company suffers
any Adverse Consequences arising out of Section 10.1(c), 10.1(d) or 10.1(e),
then, subject in the case of Section 10.1(e) to the limitation set forth in
Section 10.4(c), Purchaser and the Surviving Company, collectively, shall be
entitled to be indemnified for such Adverse Consequences from the Escrow Fund
and shall be paid in accordance with the terms of the Escrow Agreement.
(c) Unless the amount of the Escrow Fund was initially Two
Million Dollars ($2,000,000) because there were no Dissenting Shares, at such
time as all Pennsylvania statutory dissenters rights proceedings with respect to
Dissenting Shares are finally determined (whether by a final, non-appealable
judicial determination or by a settlement in lieu thereof), the Escrow Fund
shall be reduced by the excess, if any, of (i) One Million Dollars ($1,000,000)
over (ii) the amount of the Adverse Consequences arising out of Section 10.1(d)
suffered by Purchaser or the Surviving Company, collectively.
(d) On the third anniversary of the Closing Date, any remaining
Escrow Fund in excess of any pending claims by Purchaser or the Surviving
Company for indemnification
51
<PAGE> 58
shall be disbursed by the Escrow Agent to the Deferred Exchange Agents for the
benefit of the Merger Consideration Recipients and thereafter any remaining
Escrow Funds shall be disbursed by the Escrow Agent as the pending claims to
which they relate are resolved.
ARTICLE XI
TERMINATION
11.1 Rights to Terminate. This Agreement and the Plan of Merger may be
terminated at any time prior to the Closing only as follows:
(a) by mutual written consent of the Company and Purchaser;
(b) by the Company if Purchaser is in material breach of any
material representation, warranty or covenant under this Agreement (and the
Company is not then in material breach of any material representation, warranty
or covenant) and such breach continues for ten (10) business days after written
notice of the same to the breaching party or if the alleged breach is reasonably
capable of being cured and the breaching party is working in good faith to cure
such breach but it cannot be cured in ten (10) business days, said ten (10)
business day period to cure such breach shall be extended by an additional
twenty (20) days;
(c) by Purchaser if the Company is in material breach of any
material representation, warranty or covenant under this Agreement (and
Purchaser and Acquisition Sub are not then in material breach of any material
representation, warranty or covenant) and such breach continues for ten (10)
business days after written notice of the same to the breaching party or if the
alleged breach is reasonably capable of being cured and the breaching party is
working in good faith to cure such breach but it cannot be cured in ten (10)
business days, said ten (10) business day period to cure such breach shall be
extended by an additional twenty (20) days;
(d) by the Company or by Purchaser if, at or before the Closing,
(i) any condition set forth herein for the benefit of the Company or Purchaser,
respectively, has not been met and has not been waived on or before October 31,
1998 or (ii) at any earlier date, circumstances become such that any such
condition cannot be met by such date and such condition has not been waived;
(e) by Purchaser or the Company if the Closing shall not have
occurred on or before the close of business on the Closing Date, provided, that
neither such party shall be entitled to terminate this Agreement pursuant to
this Section 11.1(e) if such party's willful breach of this Agreement has
prevented the consummation of the transactions contemplated hereby; or
(f) by the Company if it accepts a Superior Proposal pursuant to
Section 5.10 prior to approval of this Agreement by the Company's shareholders.
52
<PAGE> 59
Each party's right of termination hereunder is in addition to any of the rights
it may have hereunder or otherwise.
11.2 Effects of Termination. Notwithstanding any other provision of this
Agreement and the Plan of Merger, no termination of this Agreement and the Plan
of Merger shall release (i) any party from any Liabilities arising hereunder for
any pre-termination breaches hereof or intentional misrepresentations made
herein or (ii) any party from its obligations under Section 9.2. If the Company
terminates this Agreement pursuant to Section 11.1(f) (Superior Proposal), the
Company shall pay to Purchaser as a break-up fee (and not as a penalty) the sum
of Five Million Dollars ($5,000,000). If this Agreement is terminated pursuant
to Section 11.1(d) because the condition set forth in Sections 6.1(n) (relating
to the Buy/Sell Agreement) or 7.1(d) (relating to the Buy/Sell Agreement) either
has not been satisfied or is not capable of being satisfied prior to the date
set forth in Section 11.1(d), the Company shall pay to Purchaser as a break-up
fee (and not as a penalty) the sum of One Million Dollars ($1,000,000).
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Public Announcements. Prior to the Closing Date, any announcements or
similar publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as the Company and
Purchaser shall mutually agree; provided, that nothing herein shall prevent
either party upon notice to the other party from making such public
announcements as such party's counsel may consider advisable in order to satisfy
that party's legal obligations in such regard.
12.2 Notices. All notices or other communications required or permitted by
this Agreement shall be in writing and shall be deemed to have been duly
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a business day and during
normal business hours of the recipient, and otherwise on the next business day
following transmission, (b) if given by certified or registered mail, return
receipt requested, postage prepaid, three business days after being deposited in
the U.S. mails and (c) if given by courier or other means, when received or
personally delivered, and, in any such case, addressed as follows:
(i) if to Purchaser or Acquisition Sub:
Booth Creek, Inc.
1000 South Frontage Road
Vail, Colorado 81657
Attention: George N. Gillett, Jr.
Facsimile: (970) 479-0291
53
<PAGE> 60
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Bruce A. Toth
Facsimile: (312) 558-5700
(ii) if to the Company:
Seven Springs Farm, Inc.
1976 Helen Road
Champion, PA 15622
Attention: James N. McClure
Facsimile: (814) 352-7215
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222-2312
Attention: Sanford B. Ferguson
Facsimile: (412) 355-8332
(iii) if to the Deferred Exchange Agents:
Denise M. Dupre
49 Shaw Street
West Newton, MA 01473
Kenneth Dupre
Seven Springs
R.R. #1
Champion, PA 15622
James V. Sujansky
664 Samuels Road
Somerset, PA 15501
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<PAGE> 61
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222-2312
Attention: Sanford B. Ferguson
Facsimile: (412) 355-8332
or to such other addresses as may be specified by any such Person to the other
Person pursuant to notice given by such Person in accordance with the provisions
of this Section 12.2.
12.3 Assignment. No party may assign or transfer any or all of its rights
or obligations under this Agreement without the prior written approval of all
the other parties; provided, however, that Purchaser may assign or transfer all
(but not less than all) of its rights (but not its obligations) under this
Agreement to any Person that is an Affiliate of Purchaser or Booth Creek, Inc.;
and, provided, further, that Purchaser may collaterally assign its rights
hereunder to any Person or Persons providing financing to Purchaser in
connection with the transactions contemplated hereby; and provided, further,
that any Merger Consideration Recipient may assign after Closing his, her or its
rights to Deferred Common Share Merger Consideration to any other Merger
Consideration Recipient, to any lineal descendent of any Merger Consideration
Recipient or any trust or partnership established for the benefit of any such
descendant, or to any Person by will.
12.4 Benefit of the Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall not be construed so as to confer any
right or benefit upon any Person, other than the parties hereto, the Merger
Consideration Recipients and their respective successors and permitted assigns.
12.5 Survival. Except as otherwise provided herein, the representations,
warranties and covenants of the parties shall survive the Closing.
12.6 Exhibits and Schedules. The Exhibits and Schedules hereto shall be
construed with and as an integral part of this Agreement to the same effect as
if the contents thereof had been set forth verbatim herein.
12.7 Headings. The headings used in this Agreement are for convenience of
reference only and shall not be deemed to limit, characterize or in any way
affect the interpretation of any provision of this Agreement.
12.8 Entire Agreement. This Agreement, together with the Partnership
Agreements Amendment and the Partnership Interest Purchase Agreement contains
the entire agreement and understanding of the parties with respect to the
subject matter hereof, and no other representations, promises, agreements or
understandings regarding the subject matter hereof
55
<PAGE> 62
(including, without limitation, the Letter of Intent) shall be of any force
or effect unless in writing, executed by the party to be bound thereby and dated
on or after the date hereof.
12.9 Modifications and Waivers. No change, modification or waiver of any
provision of this Agreement shall be valid or binding unless it is in writing,
dated subsequent to the date hereof and signed by Purchaser, Acquisition Sub and
the Company. No waiver of any breach, term or condition of this Agreement by any
party shall constitute a subsequent waiver of the same breach, term or condition
or any other breach, term or condition.
12.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.11 Severability. In case any one or more of the provisions contained
herein for any reason shall be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
12.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
12.13 Expenses. Except as otherwise expressly provided herein, each party
hereto shall pay all of its own costs and expenses incurred or to be incurred in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Merger as of the date first written above.
BOOTH CREEK SKI HOLDINGS, INC.
By: /s/ George Gillett, Jr.
--------------------------------------
Title: Chairman, Chief Executive Officer
and Assistant Secretary
BOOTH CREEK SKI ACQUISITION, INC.
By: /s/ George Gillett, Jr.
--------------------------------------
Title: Chairman, Chief Executive Officer
and Assistant Secretary
SEVEN SPRINGS FARM, INC.
By: /s/ James N. McClure
---------------------------------------
Title: President
<PAGE> 64
EXHIBIT A
LETTER OF TRANSMITTAL
To accompany certificates for shares of Common Stock and Preferred Stock of
SEVEN SPRINGS FARM, INC.
surrendered for the applicable merger consideration in connection with the
merger of Booth Creek Ski Acquisition, Inc., a wholly-owned subsidiary of
Booth Creek Ski Holdings, Inc., with and into Seven Springs Farm, Inc.
This letter should be delivered with accompanying stock certificates as soon as
possible to:
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Overnight Mail or Courier: By Hand:
<S> <C> <C>
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Group Corporate Trust and Agency Group
P. O. Box 292737 Reorganization Unit Attn: Reorganization Department
Nashville, Tennessee 37229-2737 648 Grassmere Park Road Receipt & Delivery Window
Nashville, Tennessee 37211 123 Washington Street, 1st Floor
New York, New York 10006
Facsimile Transmission Number: Confirm by Telephone: Information:
(615) 835-3701 (615) 835-3572 (800) 735-7777
</TABLE>
PLEASE READ THE ATTACHED INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Pursuant to the Agreement of Merger dated as of August 28, 1998 (the
"Merger Agreement") among Booth Creek Ski Holdings, Inc. ("Purchaser"), Booth
Creek Ski Acquisition, Inc. ("Acquisition Sub") and Seven Springs Farm, Inc.
(the "Company"), the undersigned shareholder ("Merger Consideration Recipient")
herewith surrenders for cancellation the following certificate(s), which
formerly represented all of the shares of common stock of the Company ("Company
Common Shares") and/or preferred stock of the Company ("Company Preferred
Shares") owned (beneficially or of record) by the Merger Consideration Recipient
(the Company Common Shares and Company Preferred Shares being surrendered
hereunder, collectively, the "Shares"):
<PAGE> 65
<TABLE>
<CAPTION>
================================================================================
Company Common Shares
================================================================================
Name and Address of
Merger Consideration Recipient Cert. No. Number of Shares
================================================================================
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Total
================================================================================
</TABLE>
(If the above space is inadequate, please attach a schedule)
<TABLE>
<CAPTION>
================================================================================
Company Preferred Shares
================================================================================
Name and Address of
Merger Consideration Recipient Cert. No. Number of Shares
================================================================================
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Total
================================================================================
</TABLE>
(If the above space is inadequate, please attach a schedule)
Terms used herein, but not otherwise defined herein, shall have the
meanings subscribed thereto in the Merger Agreement.
PAYMENT FOR SHARES: You are hereby authorized and instructed to
deliver, as set forth below, to the Merger Consideration Recipient the Closing
Per Common Share Merger Consideration (as defined in the Merger Agreement) for
each share evidenced by the enclosed certificate(s) formerly representing a
Company Common Share and/or the Per Preferred Share Merger Consideration (as
defined in the Merger Agreement) for each share evidenced by the enclosed
certificate(s) formerly representing a Company Preferred Share, less any
withholding
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<PAGE> 66
therefrom required by applicable law, for all Company Common Shares
and/or Company Preferred Shares, as applicable, owned by the Merger
Consideration Recipient and formerly represented by the stock certificate(s) so
surrendered and to take all necessary actions to effect such delivery.
Each Merger Consideration Recipient is entitled to receive amounts
payable to him or her by wire transfer pursuant to the "Wire Transfer
Instructions" set forth on the last page hereof. If such instructions are not
provided, the Closing Per Common Share Merger Consideration and/or Per Preferred
Share Merger Consideration, as applicable, shall be paid by you by issuing a
cashier's check in the name of the Merger Consideration Recipient and mailing
the same to the address of the Merger Consideration Recipient indicated herein.
The Merger Consideration Recipient understands that if payment is to be made to
a person other than the registered holder of the certificate(s) surrendered
herewith, it is a condition of such payment that the certificate(s) be properly
endorsed or otherwise in proper form for transfer and that the Merger
Consideration Recipient must pay any transfer or other Taxes required by reason
of the payment to such other person or establish to the reasonable satisfaction
of Purchaser that such Taxes have been paid or are not applicable.
OWNERSHIP OF SHARES; AUTHORIZATIONS: The Merger Consideration Recipient
represents and warrants that the Merger Consideration Recipient: (i) is the
record owner of the certificates formerly representing the Shares, (ii) is the
beneficial owner of the certificates formerly representing the Shares or has
full authority and capacity to deliver certificates formerly representing the
Shares on behalf of the beneficial owners, and (iii) has good and marketable
title to the certificates formerly representing the Shares, free and clear of
any liens, encumbrances, security agreements, claims, equities, charges,
restrictions, voting agreements, proxies, options, rights of first refusal,
calls, contractual rights or other interests or adverse claims. The Merger
Consideration Recipient has all necessary power and authority to execute and
deliver this Letter of Transmittal, and to consummate the transactions described
herein, and the Letter of Transmittal is the legal, valid and binding obligation
of the Merger Consideration Recipient.
DEFERRED EXCHANGE AGENCY AGREEMENT: Reference is hereby made to Section
2.4, Section 2.11 and Article X of the Merger Agreement which provide for (i)
the payment of the Aggregate Deferred Common Share Merger Consideration (as
defined in the Merger Agreement) to the Merger Consideration Recipients (the
"Deferred Merger Consideration Recipients") who hold Company Common Shares
(other than Dissenting Shares (as defined in the Merger Agreement)) and
surrender such Shares to you, together with a properly executed Letter of
Transmittal and (ii) a portion of the merger consideration payable to the
Deferred Merger Consideration Recipients to be held in escrow pursuant to the
terms of the escrow agreement (the "Escrow Agreement") among Purchaser, the
Surviving Company, the Deferred Exchange Agents (as defined below) and the
escrow agent thereunder (the "Escrow Agent").
3
<PAGE> 67
The Merger Consideration Recipient agrees, on behalf of
himself or herself and his or her successors, permitted assigns, heirs,
executors and legal representatives, to the following:
(a) Appointment. The Merger Consideration Recipient
hereby constitutes and appoints, effective from and after the effective time of
the Merger, Denise M. Dupre, an individual residing in West Newton,
Massachusetts, Kenneth Dupre, an individual residing in Champion, Pennsylvania,
and James V. Sujansky, an individual residing in Somerset, Pennsylvania, and
their respective successors, assigns, heirs, executors and legal
representatives, as the agents and representatives (the "Deferred Exchange
Agents") of the Merger Consideration Recipient for all purposes relating to the
Merger Agreement and the Escrow Agreement. In event of the death, resignation,
incapacity or refusal to act of (i) Denise M. Dupre, then Rosemary Littlefield,
an individual residing in Champion, Pennsylvania, shall automatically be deemed
to be appointed as successor Deferred Exchange Agent to Denise M. Dupre, (ii)
Kenneth Dupre, then Helen Dupre Durfee, an individual residing in Tahoe City,
California, shall automatically be deemed to be appointed as successor Deferred
Exchange Agent to Kenneth Dupre, and (iii) James V. Sujansky, then Joyce
Monigal, an individual residing in Grover, Missouri, shall automatically be
deemed to be appointed as successor Deferred Exchange Agent to James V.
Sujansky, in each case subject to receipt by the Company, as the surviving
company in the Merger (the "Surviving Company"), of a written acceptance from
such successor. Notwithstanding the foregoing, in the event that any of the
above-named individuals is a holder of Dissenting Shares, then such individual
shall not be a Deferred Exchange Agent. In such event, or in the event of any of
the successor Deferred Exchange Agents' death, resignation, incapacity or
failure to timely accept the appointment in writing, the Deferred Merger
Consideration Recipients shall promptly use their best efforts to designate
another individual or individuals to act as their Deferred Exchange Agent or
Agents, as the case may be, so that at all times there will be three Deferred
Exchange Agents with the authority provided herein. Such successor Deferred
Exchange Agents shall be designated by the Deferred Merger Consideration
Recipients by an instrument in writing executed by Deferred Merger Consideration
Recipients with an aggregate interest or right to receive not less than sixty
percent (60%) of the unpaid Aggregate Deferred Common Share Merger
Consideration, and such appointment shall become effective as to the successor
Deferred Exchange Agents when such instrument shall have been delivered to any
such proposed successor Deferred Exchange Agents (and accepted in writing) and a
copy thereof received by Purchaser and the Surviving Company. If at any time
there are less than three Deferred Exchange Agents, the act of the Deferred
Exchange Agents then serving shall be the act of the Deferred Exchange Agents
and shall bind the Deferred Merger Consideration Recipients, and Purchaser, the
Surviving Company and the Escrow Agent shall be entitled to rely on any such
action.
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<PAGE> 68
(b) Authorization. The Merger Consideration Recipient
hereby authorizes the Deferred Exchange Agents, on the Merger Consideration
Recipient's behalf and in his or her name, without inquiry of and without
additional approval from the Merger Consideration Recipient to:
(i) Collect from Purchaser and the Surviving
Company and distribute from time to time to
the Deferred Merger Consideration Recipients
and their successors and permitted assigns
the Deferred Per Common Share Merger
Consideration;
(ii) Initiate legal suits or other proceedings in
the name of and on behalf of the Deferred
Merger Consideration Recipients;
(iii) Receive all notices or documents given or to
be given to the Deferred Merger
Consideration Recipients by Purchaser or the
Surviving Company pursuant to the Merger
Agreement, the Escrow Agreement or hereto or
in connection therewith or herewith, and to
receive and accept service of legal process
in connection with any suit or proceeding
against the Deferred Merger Consideration
Recipients arising under the Merger
Agreement or the Escrow Agreement;
(iv) Engage counsel and such accountants and
other advisors on behalf of the Deferred
Merger Consideration Recipients and incur
such other reasonable expenses on behalf of
the Deferred Merger Consideration Recipients
in connection with the Merger Agreement and
the Escrow Agreement and the transactions
contemplated thereby as the Deferred
Exchange Agents may deem appropriate;
(v) Take such action on behalf of the Deferred
Merger Consideration Recipients as the
Deferred Exchange Agents may deem
appropriate in respect of:
(A) taking such action as the Deferred
Exchange Agents are authorized to take
herein and in the Merger Agreement and the
Escrow Agreement;
(B) receiving all documents or certificates
and making all determinations on behalf of
the Deferred Merger Consideration Recipients
required herein and in the Merger Agreement
and the Escrow Agreement;
(C) all such other matters as the Deferred
Exchange Agents may deem necessary or
appropriate in connection with the
administration of their duties under the
Merger Agreement and the
5
<PAGE> 69
Escrow Agreement and the transactions
contemplated by the Merger Agreement and the
Escrow Agreement;
(D) taking all such action as may be
necessary after the date of the closing of
the Merger (the "Closing Date") on behalf of
the Deferred Merger Consideration Recipients
to carry out any of the transactions
contemplated by the Merger Agreement or the
Escrow Agreement and permit any
disbursements or payments out of the
Deferred Per Common Share Merger
Consideration or funds held pursuant to the
Escrow Agreement (the "Escrow Funds"); and
(vi) Negotiate, compromise, settle and resolve on
behalf of the Deferred Merger Consideration
Recipients any claim by Purchaser or the
Surviving Company for indemnification
against the Deferred Merger Consideration
Recipients pursuant to Article X
of the Merger Agreement.
(c) Payments to Merger Consideration Recipients. The Deferred
Exchange Agents shall from time to time (and in no event less frequently than
annually) pay to the Deferred Merger Consideration Recipients, on a pro rata
basis, in accordance with their respective rights under the Merger Agreement to
receive Deferred Per Common Share Merger Consideration or Escrow Funds, the
funds then held by the Deferred Exchange Agents received pursuant to the Merger
Agreement or the Escrow Agreement, less such amount as the Deferred Exchange
Agents deem appropriate, in their sole discretion, as a reserve to make the
payments contemplated in (i) below.
(d) Irrevocable Appointment; Binding Effect. The appointment
of the Deferred Exchange Agents hereunder is irrevocable (except as provided
below), coupled with an interest and unconditional, will survive any subsequent
disability or incapacity, and any action taken by the Deferred Exchange Agents
pursuant to the authority granted hereunder shall be effective and absolutely
binding on the Deferred Merger Consideration Recipients notwithstanding any
contrary action of, or direction from, Purchaser or the Surviving Company or any
of the Deferred Merger Consideration Recipients, except for actions taken by the
Deferred Exchange Agents which are in bad faith or grossly negligent, and
subject in all events to the right of all Deferred Merger Consideration
Recipients to be treated on a pro rata basis, in accordance with their
respective rights hereunder to receive Deferred Per Common Share Merger
Consideration and Escrow Funds.
(e) Resignation and Removal. Any Deferred Exchange Agent may
resign at any time by giving notice to Purchaser, the Surviving Company and the
other Deferred Exchange Agents and to the Deferred Merger Consideration
Recipients (at their addresses then last known to such Deferred Exchange Agent),
which resignation shall be effective upon the appointment and qualification of a
successor, the acceptance of the appointment by such successor and the giving of
notice thereof to Purchaser, the Surviving Company and the other Deferred
Exchange Agents. Any one or more Deferred Exchange Agents may be discharged and
replaced by another
6
<PAGE> 70
person to act as his or her successor for any reason or no reason by an
instrument in writing signed by Deferred Merger Consideration Recipients holding
in the aggregate rights to receive not less than sixty percent (60%) of the
Aggregate Deferred Common Share Merger Consideration then due, provided that
notice thereof is delivered to Purchaser, the Surviving Company and the other
Deferred Exchange Agents.
(f) Majority of Deferred Exchange Agents; Pro Rata Treatment
of Merger Consideration Recipients. The act of a majority of the Deferred
Exchange Agents shall be effective to bind all of the Deferred Merger
Consideration Recipients; provided, however, that if at any time there are less
than three Deferred Exchange Agents, the act of the Deferred Exchange Agents
then serving shall be the act of the Deferred Exchange Agents and shall bind the
Deferred Merger Consideration Recipients, and Purchaser, the Surviving Company
and the Escrow Agent shall be entitled to rely on any such action.
Notwithstanding anything else herein to the contrary, the Deferred Exchange
Agents shall treat all Deferred Merger Consideration Recipients pro rata.
(g) Purchaser's Reliance. Purchaser, the Surviving Company and
the Escrow Agent shall not be obliged to inquire into the identity or authority
of the Deferred Exchange Agents, and such parties shall be fully protected in
dealing with the Deferred Exchange Agents in good faith.
(h) Exculpation and Indemnification.
(i) In performing any of such Deferred Exchange
Agents' duties hereunder and under the Merger Agreement and the Escrow
Agreement, the Deferred Exchange Agents shall not incur any liability to any
Person, except for liability caused by the Deferred Exchange Agents' willful
misconduct, unlawful acts or gross negligence. Accordingly, the Deferred
Exchange Agents shall not incur any such liability for (A) any action that is
taken or omitted in good faith regarding any questions relating to the duties
and responsibilities of the Deferred Exchange Agents hereunder and under the
Merger Agreement and the Escrow Agreement, or (B) any action taken or omitted to
be taken in reliance upon any instrument that the Deferred Exchange Agents shall
in good faith believe to be genuine, to have been signed or delivered by a
proper person or persons and to conform with the provisions of the Merger
Agreement or the Escrow Agreement.
(ii) The Deferred Merger Consideration Recipients shall,
on a pro rata basis, indemnify, defend and hold harmless the Deferred Exchange
Agents against, from and in respect of any Adverse Consequence arising out of or
resulting from the performance of such Deferred Exchange Agents' duties
hereunder or in connection herewith and with the Merger Agreement and the Escrow
Agreement (except for liabilities arising from the gross negligence, unlawful
acts or willful misconduct of the Deferred Exchange Agents).
(i) Use of Funds. In satisfying any indemnification claims
hereunder by the Deferred Exchange Agents against the Deferred Merger
Consideration Recipients or in satisfying any amounts due for any fees or
expenses incurred in connection with negotiating, compromising, settling and
resolving on behalf of the Deferred Merger Consideration Recipients any claims
pursuant to Article X of the Merger Agreement or in satisfying any other fees or
7
<PAGE> 71
expenses incurred by them in performance of their duties under the Merger
Agreement or the Escrow Agreement, the Deferred Exchange Agents may use any cash
received by them pursuant to the Merger Agreement or cash distributed to them
pursuant to the Escrow Agreement.
(j) Interpleader. If the Deferred Exchange Agents are in their
sole discretion unable to resolve any disputes that may arise between them and
the Deferred Merger Consideration Recipients, the Deferred Exchange Agents may
institute a bill of interpleader in any court of competent jurisdiction to
determine the rights of the Deferred Merger Consideration Recipients.
RELEASE: Effective as of the Closing, the Merger Consideration
Recipient hereby irrevocably waives and releases all known and unknown claims it
may have, in such Merger Consideration Recipient's capacity as a shareholder of
the Company, against the Company, the Surviving Company, Purchaser, or
Acquisition Sub, or any present, future and former directors, officers, agents,
affiliates and employees of the Company, the Surviving Company, Purchaser or
Acquisition Sub, from any and all actions, claims, causes of action or
liabilities of any nature, in law or equity, known or unknown, and whether or
not heretofore asserted, which such Merger Consideration Recipient ever had, now
has or hereafter can, shall or may have against any of the foregoing entities or
persons for, upon or by reason of any matter, cause or thing relating to the
Merger Consideration Recipient's status as a shareholder of the Company,
provided that this release shall not be deemed to limit or release any party
from the provisions of the Merger Agreement or the Escrow Agreement or the
provisions of any of the agreements referred to at A.23, A.24 or A.28 through
35, inclusive, in Schedule 1.2 of the Disclosure Schedules of the Merger
Agreement. The release set forth in the foregoing sentence shall be binding upon
all beneficiaries, heirs, executors, administrators, trustees in bankruptcy,
legatees, distributes, successors, assigns and legal representatives of the
Merger Consideration Recipient, and shall not be affected by, and shall survive
the death, incapacity, dissolution, bankruptcy, liquidation or reorganization of
the Merger Consideration Recipient.
SO LONG AS THERE IS AT LEAST ONE DEFERRED EXCHANGE AGENT, THE MERGER
CONSIDERATION RECIPIENT ACKNOWLEDGES THAT THE PURCHASER AND THE SURVIVING
COMPANY SHALL HAVE NO OBLIGATION TO DEAL WITH ANY INDIVIDUAL MERGER
CONSIDERATION RECIPIENT REGARDING ANY ISSUE ARISING UNDER THE ESCROW AGREEMENT
OR THE MERGER AGREEMENT. SO LONG AS THERE IS AT LEAST ONE DEFERRED EXCHANGE
AGENT, THE MERGER CONSIDERATION RECIPIENT WAIVES ANY AND ALL RIGHTS TO BRING ANY
CLAIMS OR CAUSES OF ACTION UNDER THE MERGER AGREEMENT OR THE ESCROW AGREEMENT.
GOVERNING LAW; CONSENT TO JURISDICTION. THE MERGER CONSIDERATION
RECIPIENT AGREES THAT THE LETTER OF TRANSMITTAL AND THE AGREEMENTS SET FORTH
HEREIN SHALL BE GOVERNED BY, CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE
PARTIES ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. THE MERGER CONSIDERATION RECIPIENT (A) CONSENTS TO SUBMIT HIMSELF
OR
8
<PAGE> 72
HERSELF TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE COMMONWEALTH OF PENNSYLVANIA IN THE EVENT ANY DISPUTE ARISES UNDER THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, (B) AGREES THAT HE OR
SHE WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION OR VENUE BY
MOTION OR OTHER REQUEST FOR LEAVE FROM SUCH COURT, AND (C) AGREES THAT HE OR SHE
WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT SITTING IN
THE COMMONWEALTH OF PENNSYLVANIA.
OTHER DOCUMENTS: The Merger Consideration Recipient hereby agrees to
execute or provide any additional documents, or take such additional actions, as
Purchaser or the Surviving Company may deem reasonably necessary to evidence or
effect surrender of the certificates formerly representing Shares covered by
this Letter of Transmittal or to establish the right of the persons indicated in
this Letter of Transmittal to receive any payment indicated in this Letter of
Transmittal.
9
<PAGE> 73
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder who surrenders certificates
formerly evidencing Company Common Shares or Company Preferred Shares for
payment of the applicable merger consideration is generally required by law to
provide Purchaser with his or her correct taxpayer identification number on the
Form W-9 accompanying this Letter of Transmittal. If Purchaser is not provided
with the Merger Consideration Recipient's correct taxpayer identification
number, the Merger Consideration Recipient may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such Merger Consideration Recipient may be subject to backup withholding. Backup
withholding also may be imposed if the Internal Revenue Service notifies
Purchaser that the taxpayer identification number provided by the Merger
Consideration Recipient is incorrect.
If backup withholding applies, Purchaser is required to withhold 31% of
any payments made to the Merger Consideration Recipient. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF FORM W-9
To prevent withholding on payments that are made to a Merger
Consideration Recipient, the Merger Consideration Recipient must notify
Purchaser of the Merger Consideration Recipient's correct taxpayer
identification number by completing the Form W-9 certifying under penalties of
perjury that the taxpayer identification number provided on Form W-9 is correct
(or that the Merger Consideration Recipient has applied for or intends, in the
near future, to apply for a taxpayer identification number, and the Merger
Consideration Recipient is not waiting for such number).
WHAT NUMBER TO GIVE
The taxpayer identification number that the Merger Consideration
Recipient is required to give is his or her social security number. If payment
is to be made to other than the registered holder, the payee indicated under
"Special Payment Instructions" or "Wire Transfer Instructions" must provide such
payee's taxpayer identification number and complete the Form W-9 accompanying
this Letter of Transmittal.
FORM W-8/FOREIGN PERSONS
All persons who are not citizens of the United States or who are not
otherwise United States persons, as that term is defined in the Internal Revenue
Code of 1986, as amended, which term includes, among other things, a corporation
organized under the laws of any state, should complete Form W-8 in lieu of Form
W-9.
10
<PAGE> 74
EMPLOYEE OWNERS OF STOCK
Payments made to employees who otherwise own stock acquired as a
consequence of their employment with the Company, which stock is still subject
to ownership restrictions that cause the employee or other persons to then not
be treated as the unrestricted owner of the stock for tax purposes, are
generally subject to withholding of applicable Federal, state and local income
and employment related taxes. Any income taxes withheld shall be deemed to have
been paid by such shareholder, who may then claim a credit against such
shareholder's personal tax liability in an amount equal to such withheld taxes.
Any affected shareholders should consult with their tax advisors and the Company
as to the impact of such taxes.
INSTRUCTIONS FOR SURRENDERING CERTIFICATE(S)
(in connection with the merger of Booth Creek Ski Acquisition, Inc.,
a wholly-owned subsidiary of Booth Creek Ski Holdings, Inc.,
with and into Seven Springs Farm, Inc.)
In accordance with the terms of the Merger Agreement, upon surrender of
certificates representing the Shares, the holder thereof is entitled to receive
his or her portion of the applicable merger consideration described in the
Merger Agreement for all Company Common Shares or Company Preferred Shares
surrendered by the Merger Consideration Recipient. To receive such merger
consideration, the Merger Consideration Recipient must send this Letter of
Transmittal, properly filled in, dated, and signed, together with the
certificate(s) evidencing the Shares, to Bankers Trust Company at the address
set forth above.
1. Signatures. This Letter of Transmittal must either: (a) be signed
by the registered holder(s) of the certificate(s) transmitted with this Letter
of Transmittal; or (b) signed by a transferee to whom such certificates have
been duly transferred by the registered holder (such transfer to be evidenced as
described in paragraph 2 below). THE MERGER CONSIDERATION RECIPIENT MUST HAVE
HIS OR HER SIGNATURE GUARANTEED BY A FINANCIAL INSTITUTION (INCLUDING MOST
BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE HOUSES) WHICH IS A
PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM, THE NEW YORK
STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM, OR THE STOCK EXCHANGE MEDALLION
PROGRAM, and such persons must complete the Internal Revenue Service Form W-9,
as described below. If any surrendered certificates are held of record in joint
tenancy, both joint tenants must sign. If the surrendered certificates are held
of record in joint tenancy and one joint tenant is deceased, the surviving joint
tenant must send a death certificate of the deceased joint tenant along with
this Letter of Transmittal. All signatures must correspond with the name as
written on the tendered certificates or as otherwise provided in this paragraph.
2. Payment to Other than the Registered Holder. If any payment for
Company Common Shares or Company Preferred Shares is to be made in a name other
than the name of the registered holder of the surrendered certificate, the
certificate so surrendered must be duly
11
<PAGE> 75
endorsed by the registered holder to the person to whom payment is to be made,
or the surrendered certificate must be accompanied by a duly executed stock
power, in each case with the signature guaranteed (as described above in
paragraph 1), evidencing proper assignment of the Company Common Shares or
Company Preferred Shares represented by said certificate. Also, any person
requesting payment to anyone other than the registered holder of the Company
Common Shares or Company Preferred Shares being surrendered must pay any
transfer or other Taxes required by reason of the payment to a person other than
the registered holder or establish to the satisfaction of Purchaser that such
Tax has been paid or is not payable.
3. Special Instructions/Wire Transfers. Please complete the applicable
special instruction boxes if either: (a) cashier's checks for the merger
consideration are to be issued in a name other than the name of the Merger
Consideration Recipient; or (b) payments of the applicable merger consideration
are to be made by wire transfer (whether such payments are to be made for the
account of the Merger Consideration Recipient or that of a person other than the
Merger Consideration Recipient).
4. Certificates in Different Names. If certificates are registered in
different names, it will be necessary to complete, sign, and submit as many
separate Letters of Transmittal as there are different registrations or
certificates surrendered.
5. Lost Certificates. If certificates have been lost, stolen, or
destroyed, that fact should be indicated on the face of this Letter of
Transmittal, and the Merger Consideration Recipient should contact Bankers Trust
Company for further instructions.
6. Delivery of Certificates. All certificates should be delivered at
one time for surrender. A Letter of Transmittal and the stock certificate(s)
must be received by Bankers Trust Company, in satisfactory form, in order to
make an effective surrender. Delivery of the certificates and other documents
will be effected, and the risk of loss and title to the certificate(s) will
pass, only upon proper delivery of the certificate(s) to Bankers Trust Company.
The method of delivery of the Letter of Transmittal and the stock certificate(s)
is at the option and risk of the Merger Consideration Recipient, but if mail is
used, registered mail with proper insurance is suggested as a precaution against
loss.
7. Comply with all Conditions. Failure to accurately complete this
Letter of Transmittal, to obtain guarantees of signatures, or to comply with the
other conditions and requirements of this Letter of Transmittal may affect the
closing of the Merger Agreement. Purchaser may, entirely at its election, waive
any of the conditions or requirements specified herein. All determinations as to
whether the conditions and requirements of this Letter of Transmittal have been
complied with shall be made by Bankers Trust Company and shall be final and
binding.
8. Form W-9. Please complete the Internal Revenue Service Form W-9
(or, in the case of a non-United States person, a Form W-8) accompanying this
Letter of Transmittal. Failure to do so may result in withholding of a portion
of the payment to be made hereunder.
12
<PAGE> 76
9. Additional Information. If you need an additional Letter of
Transmittal or require additional information or explanations, please call the
Corporate Trust and Agency Group at Bankers Trust Company at 1-800-735-7777.
10. Cancellation of Shares. Subject to and in accordance with the terms
of the Merger Agreement, all Company Common Shares and Company Preferred Shares
outstanding prior to the Merger and held by the Merger Consideration Recipient
will be canceled at the Effective Time.
11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of the Merger Consideration Recipient
contained in this agreement shall survive the Closing Date indefinitely.
12. Representations Regarding Merger Agreement. The Merger
Consideration Recipient acknowledges that he, she or it has been provided with a
fully executed copy of the Merger Agreement (including schedules and exhibits)
and the Escrow Agreement and approves the terms and provisions thereof. In the
event of any conflict between the terms of the Merger Agreement and this Letter
of Transmittal, the Merger Agreement shall be controlling.
13
<PAGE> 77
- --------------------------------------------------------------------------------
WIRE TRANSFER INSTRUCTIONS
To be completed if payments are to be made by wire transfer. Please
make payments by wire transfer to the following accounts and in the following
amounts in accordance with the following instructions:
Bank ABA Number:
---------------------------------------
Bank Name and Address:
---------------------------------
---------------------------------
---------------------------------
Account Name:
------------------------------------------
Account Number:
----------------------------------------
- --------------------------------------------------------------------------------
Guarantee of Signature(s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(ALL MERGER CONSIDERATION RECIPIENTS' SIGNATURES APPEARING HEREON MUST
BE GUARANTEED BY A FINANCIAL INSTITUTION (INCLUDING MOST BANKS, SAVINGS AND LOAN
ASSOCIATIONS AND BROKERAGE HOUSES) WHICH IS A PARTICIPANT IN THE SECURITIES
TRANSFER AGENTS MEDALLION PROGRAM, THE NEW YORK STOCK EXCHANGE MEDALLION
SIGNATURE PROGRAM, OR THE STOCK EXCHANGE MEDALLION PROGRAM)
The undersigned hereby guarantees the signature(s) that appear on this
Letter of Transmittal and the stock certificate(s) formerly representing the
Company Common Shares and/or Company Preferred Shares surrendered pursuant to
this Letter of Transmittal.
Authorized Signature:
-----------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
*THE MERGER CONSIDERATION RECIPIENT MUST ALSO COMPLETE THE FORM W-9 ACCOMPANYING
THIS LETTER OF TRANSMITTAL. FAILURE TO COMPLETE SUCH FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS DUE.
ALL MERGER CONSIDERATION RECIPIENTS
SIGN HERE
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Signature(s) of Owner(s)
(Must be signed by registered holder(s) as name(s) appear on stock
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If any certificate being
surrendered is held of record in joint tenancy, both joint tenants must sign.
MERGER CONSIDERATION RECIPIENT SHOULD COMPLETE:
Dated:
--------------------------------------------------------------------------
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number ( )
--- --------------
CHECKS WILL BE MAILED TO THE ADDRESS ABOVE UNLESS OTHERWISE INDICATED
14
<PAGE> 78
WITHHOLDING TAX CERTIFICATE
(INDIVIDUALS)
I, ___________________, hereby certify the following:
1. I am not a nonresident alien or foreign person for purposes
of U.S. income taxation;
2. My U.S. taxpayer identification number (Social Security
number) is ________________________; and
3. My home address is ____________________________________.
I understand that this certification may be disclosed to the
Internal Revenue Service.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete.
_________________________
SIGNATURE
_________________________
DATE
15
<PAGE> 79
SUBSTITUTE FORM W-9
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: BANKERS TRUST COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name
-----------------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
FORM W-9 (Number and Street)
DEPARTMENT OF THE
TREASURY --------------------------------------------------------------------------------------
INTERNAL REVENUE (City) (State) (Zip Code)
SERVICE
PAYOR'S REQUEST
FOR TAXPAYER
IDENTIFICATION
NUMBER (TIN) AND
CERTIFICATION
----------------------------------------------------------------------------------------------------------
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ----------------------------------
(Social Security Number or
Employer Identification Number)
----------------------------------------------------------------------------------------------
PART 2 - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE
(SEE INSTRUCTIONS)
---------------------------------------------------------------------
----------------------------------------------------------------------------------------------
PART 3 - CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on this form is my
correct TIN (or I am waiting for a number to be issued to me), and (2) I am not subject to backup
withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup
withholding.
SIGNATURE DATE:
------------------------------------- ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
You must cross out Part 2 above if you have been notified by the IRS
that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE
"APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and that I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a taxpayer identification number to the payor, the Payor is required to
withhold 31 percent of all cash payments made to me until I provide a number.
SIGNATURE DATE
-------------------------------------------- ----------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31 PERCENT OF ANY CASH PAYMENTS.
16
<PAGE> 80
EXHIBIT B
PLAN OF MERGER
THIS PLAN OF MERGER, dated __________, 1998, between SEVEN SPRINGS
FARM, INC., a Pennsylvania corporation (the "Company"), and Booth Creek Ski
Acquisition, Inc., a Pennsylvania corporation ("Acquisition") (the Company and
Acquisition are collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the Company is a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania, with its registered office at 1976
Helen Road, Champion, Pennsylvania 15622; and
WHEREAS, Acquisition is a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania, with its registered office provider at
CT Corporation System, County of Philadelphia, Pennsylvania; and
WHEREAS, the authorized capital stock of the Company consists of 750
shares of common stock, par value $100 per share (the "Company Common Stock"),
all of which are issued and outstanding and none of which is held in the
treasury of the Company and 1,750 shares of preferred stock, par value $100 per
share (the "Company Preferred Stock"), all of which are issued and outstanding
and none of which is held in the treasury of the Company; and
WHEREAS, the authorized capital stock of Acquisition consists of 100
shares of common stock, par value $.01 per share (the "Acquisition Common
Stock"), all of which are issued and outstanding and none of which is held in
the treasury of Acquisition; and
<PAGE> 81
WHEREAS, the Constituent Corporations and Booth Creek Ski Holdings,
Inc., a Delaware corporation (the "Purchaser"), have entered into an Agreement
of Merger dated August 28, 1998 (the "Agreement"), providing for, among other
things, the execution and acknowledgment of this Plan of Merger and for the
merger of Acquisition with and into the Company, with the Company as the
surviving corporation (the "Merger"), upon the terms set forth in the Agreement
and this Plan of Merger; and
WHEREAS, the respective Boards of Directors of the Constituent
Corporations deem the Merger to be desirable and in the best interests of each
of the Constituent Corporations and their respective shareholders and have
approved the Agreement, the Merger and this Plan of Merger by resolutions duly
adopted and have directed that the Plan of Merger be submitted to a vote of
their respective shareholders entitled to vote thereon for consideration and
action with respect thereto.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual promises, stipulations, agreements, covenants and conditions herein
contained, and for the purpose of stating the terms and conditions of the
Merger, the mode of carrying the same into effect, the manner of converting the
shares of Company Common Stock and Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (defined below) of the
Merger into cash and certain other rights and the manner of converting the
shares of Acquisition Common Stock issued and outstanding immediately prior to
the Effective Time into shares of Company Common Stock, and such other details
and provisions as are deemed desirable and in
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<PAGE> 82
accordance with the applicable provisions of the Pennsylvania Business
Corporation Law of 1988, as amended, the parties hereto agree as follows,
intending to be legally bound hereby:
1. Merger
At the Effective Time on the Effective Date (defined below) of the
Merger, Acquisition shall be merged with and into the Company, with the Company
as the surviving corporation of the Merger (the "Surviving Company"). Subject to
the terms and conditions herein provided, Articles of Merger prepared in
accordance with this Plan of Merger and in accordance with the provisions of the
Pennsylvania Business Corporation Law of 1988, as amended, shall be executed and
filed with the Department of State of the Commonwealth of Pennsylvania on the
Effective Date. Following the Effective Time of the Merger, the corporate
existence of the Company shall continue unaffected and unimpaired, and as the
Surviving Company of the Merger, the Company shall continue to be a corporation
governed by the laws of the Commonwealth of Pennsylvania.
2. Effective Time and Effective Date of Merger
The Merger shall become effective at the time (the "Effective Time")
and on the date (the "Effective Date") that the Articles of Merger shall have
been filed in the Department of State of the Commonwealth of Pennsylvania.
3. Articles of Incorporation
At the Effective Time, the Articles of Incorporation of the Surviving
Company shall be amended and restated so that the same shall read as did the
Articles of Incorporation of Acquisition as in effect immediately prior to the
Effective Time of the Merger, except that the
-3-
<PAGE> 83
name of the Surviving Company shall remain unchanged. Said Articles
shall be and remain the Articles of Incorporation of the Surviving Company until
amended in accordance with applicable law.
4. Bylaws
At the Effective Time of the Merger, the bylaws of the Company shall be
amended and restated so that the same shall read as did the bylaws of
Acquisition as in effect immediately prior to the Effective Time of the Merger,
except that the name of the Surviving Company shall remain unchanged.
5. Board of Directors and Officers
At the Effective Time of the Merger, those persons serving as the
directors and officers of Acquisition immediately prior to the Effective Time of
the Merger shall become the directors and officers of the Surviving Company,
respectively, each of such directors and officers to hold office until their
respective successors are duly elected or appointed or qualified or their
earlier death, resignation or removal.
6. Manner of Converting and Exchanging Shares
6.1 The manner of converting and exchanging the Company Common Stock
shall be as follows:
(a) Each share of Company Common Stock issued and outstanding on
the Effective Date (including shares subject to restrictions as to transfer or
otherwise, but excluding
-4-
<PAGE> 84
Company Common Stock held by the Company's shareholders, if any, who
shall object to this Plan of Merger pursuant to Section 1930 of the Pennsylvania
Business Corporation Law of 1988, as amended, and who shall comply with the
provisions of Subchapter D of Chapter 15 of such law concerning dissenting
shareholders) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and exchanged for the right to receive
(i) the Closing Per Common Share Merger Consideration (as defined in the
Agreement), (ii) a pro rata portion of amounts payable to the Merger
Consideration Recipients (as defined in the Agreement) under the Escrow
Agreement (as defined in the Agreement), and (iii) the Deferred Per Common Share
Merger Consideration (as defined in the Agreement), payable pursuant to the
terms of the Agreement.
(b) Each share of Company Preferred Stock issued and outstanding on
the Effective Date (including shares subject to restrictions as to transfer or
otherwise, but excluding Company Preferred Stock held by the Company's
shareholders, if any, who shall object to this Plan of Merger pursuant to
Section 1930 of the Pennsylvania Business Corporation Law of 1988, as amended,
and who shall comply with the provisions of Subchapter D of Chapter 15 of such
law concerning dissenting shareholders) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchanged for the right to receive the Per Preferred Share Merger Consideration
(as defined in the Agreement), payable pursuant to the terms of the Agreement.
(c) Each share of Company Common Stock and Company Preferred Stock
issued and outstanding on the Effective Date of the Merger held by a Company
shareholder who
-5-
<PAGE> 85
shall object to this Plan of Merger pursuant to Section 1930 of
the Pennsylvania Business Corporation Law of 1988, as amended, and who shall
comply with the provisions of Subchapter D of Chapter 15 of such law concerning
dissenting shareholders, shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into a right in such shareholder
only to receive payment therefor as provided in said Subchapter D of Chapter 15
of such law, and such shareholder shall not be entitled to vote or to exercise
any other rights of a shareholder as to such shares of Company Common Stock and
Company Preferred Stock with respect to which such shareholder dissents.
6.2 The manner of converting and exchanging the shares of
Acquisition Common Stock shall be as follows: each share of Acquisition Common
Stock issued and outstanding on the Effective Date of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and exchanged for one share of the Surviving Company's Common
Stock of the par value of $.01 per share, duly and validly issued and fully paid
and non-assessable.
7. Surrender of Certificates for Cash Payments
From and after the Effective Time, each holder of certificates formerly
representing shares of Company Common Stock and Company Preferred Stock
converted by virtue of the Merger shall, upon surrender of such certificates to
the Closing Exchange Agent (as defined in the Agreement), together with a duly
executed Letter of Transmittal (as defined in the Agreement), and in accordance
with Sections 2.3 and 2.6 of the Agreement, be entitled forthwith
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<PAGE> 86
to receive the consideration to which such holder is entitled pursuant to the
terms of this Plan of Merger and the Agreement.
From and after the Effective Time, each certificate which, prior to the
Effective Time, represented shares of the outstanding Company Common Stock and
Company Preferred Stock shall evidence only the right to the consideration on
the basis set forth in Article 6 hereof. The aforesaid conversion shall be
complete and effective at the Effective Time without regard to the date or dates
upon which outstanding certificates of Company Common Stock and Company
Preferred Stock are surrendered.
8. Rights and Obligations
At the Effective Time of the Merger, the separate existence of
Acquisition shall cease and in accordance with the terms of the Agreement and
this Plan of Merger, the Company shall possess and be vested with all of the
rights, privileges, franchises, immunities and powers and all property (real,
personal or mixed) of Acquisition, debts due to Acquisition, chooses in action
and all other things belonging to Acquisition, and the Company shall be subject
to all of the restrictions, liabilities, disabilities and duties of Acquisition.
The identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the Company shall continue unaffected and
unimpaired by the Merger.
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<PAGE> 87
9. Multiple Counterparts; Titles
For the convenience of the parties hereto and to facilitate the
required filing of documents, any number of counterparts of this Plan of Merger
may be executed, and each such counterpart shall be deemed to be an original
instrument.
The titles of the Articles of this Plan of Merger are inserted for
convenience of reference and shall not affect the meaning of the terms hereof.
10. Abandonment of Merger
Notwithstanding the approval of this Plan of Merger by the shareholders
of either or both of the Constituent Corporations, this Plan of Merger may be
terminated and the Merger abandoned at any time prior to the Effective Date of
the Merger in the manner and upon the conditions set forth in the Agreement.
11. Amendments
Prior to the Effective Time, the Boards of Directors of the Constituent
Corporation may amend this Plan of Merger, except that any amendment made
subsequent to the adoption of the Plan by the shareholders of any Constituent
Corporation shall not change:
(a) the amount or kind of shares, obligations, cash, property
or rights to be received in exchange for or on conversion of all or any of the
shares of the Constituent Corporations;
(b) any term of the Articles of Incorporation of the Surviving
Company to be effected by the Merger; or
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<PAGE> 88
(c) any of the terms and conditions of this Plan of Merger if
the change would adversely affect the holders of any shares of the Constituent
Corporations.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Plan of Merger to be signed by a duly authorized officer in accordance with
the Pennsylvania Business Corporation Law of 1988, as amended, and attested by
the signature of its Secretary or an Assistant Secretary, all as of the day and
year first above written.
SEVEN SPRINGS FARM, INC.
By: ___________________________________
Title: ________________________________
BOOTH CREEK SKI ACQUISITION, INC.
By: ___________________________________
Title: ________________________________
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<PAGE> 89
EXHIBIT C
FORM OF OPINION OF KIRKPATRICK & LOCKHART LLP
[Closing Date]
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
c/o Booth Creek, Inc.
1000 South Frontage Road
Vail, Colorado 81657
Re: Seven Springs Farm, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Seven Springs Farm, Inc., a
Pennsylvania corporation (the "Company"), Dupre Enterprises (24), a Pennsylvania
general partnership (the "Partnership"), and Seven Springs Enterprises, Inc., a
Pennsylvania corporation (the "Partnership Merger Subsidiary") in connection
with the execution and delivery by (i) the Company of the Agreement of Merger
dated as of August 28, 1998 (the "Booth Creek Merger Agreement"), by and between
Booth Creek Ski Holdings, Inc., a Delaware corporation ("Purchaser"), Booth
Creek Ski Acquisition, Inc., a Pennsylvania corporation ("Acquisition Sub"), and
the Company, which agreement provides for the merger of Acquisition Sub with and
into the Company (the "Booth Creek Merger") and (ii) the Partnership and the
Partnership Merger Subsidiary of the Dupre Enterprises (24) Partnership
Agreement and Plan of Merger dated September __, 1998 between the Partnership
and the Partnership Merger Subsidiary (the "Partnership Merger Agreement"),
which agreement provides for the merger of the Partnership into the Partnership
Merger Subsidiary (the "Partnership Merger"). We are delivering this opinion
letter to you at the Company's request pursuant to Section 8.3(c) of the Merger
Agreement.
Capitalized terms used but not defined in this opinion letter have the
meanings given them in the Booth Creek Merger Agreement.
In connection with rendering the opinions set forth below, we have
examined the Merger Agreement, the Plan of Merger attached as Exhibit B to the
Merger Agreement, the Escrow Agreement dated as of _________, 1998 by and among
Purchaser, the Company, the Deferred Exchange Agents and Chicago Title Insurance
Company as Escrow Agent, the Partnership Merger Agreement, the Articles of
Merger in respect of the Booth Creek Merger (the "Booth Creek Articles of
Merger") and the Articles of Merger in respect of the Partnership Merger (the
"Partnership Articles of Merger") (collectively, the "Transaction Documents").
We have also
<PAGE> 90
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
[Closing Date]
Page 2
reviewed the Letters of Transmittal attached as Exhibits A to the
Booth Creek Merger Agreement and the Partnership Merger Agreement (the "Letters
of Transmittal"). We have also examined and relied on certificates of public
officials, certificates of an officer of the Company and a managing partner of
the Partnership (the "Partnership Certificate") with respect to certain matters
of fact that are material to our opinions in this letter. A copy of these
certificates are attached to this opinion letter. We have not independently
established the facts so relied on.
References in this opinion letter to our knowledge or our awareness
mean a conscious awareness of facts by lawyers currently with this firm who have
given substantive legal attention to representation of the Company, the
Partnership Merger Subsidiary and the Partnership (the "Pennsylvania Companies")
in matters relating directly to the Transaction Documents.
For purposes of this opinion letter, we have made the assumptions
listed in Section 4 of the Legal Opinion Accord of the American Bar Association
Section of Business Law (1991). We also point out that the proposed parties to
the Letters of Transmittal are not our clients and that, for the limited purpose
set out below, we have made the assumptions listed in Section 4 of the Legal
Opinion Accord of the American Bar Association Section of Business Law (1991)
with respect to all such persons.
The opinions expressed in this letter are limited to the effect on the
Transaction Documents of the laws of the Commonwealth of Pennsylvania and the
federal laws of the United States of America. We are not opining on, and we
assume no responsibility with respect to, the laws of any other jurisdiction or
the local laws of any jurisdiction within the Commonwealth of Pennsylvania. We
express no opinion as to choice of law with respect to, or consent to
jurisdiction contained in, the Letters of Transmittal.
Based on the foregoing and such other inquiry as to fact and law as we
have deemed necessary, and subject to the foregoing and additional
qualifications and other matters set forth below, it is our opinion that:
1. Each of the Company and the Partnership Merger Subsidiary (each a
"Pennsylvania Corporation") is a corporation validly existing and presently
subsisting under the laws of the Commonwealth of Pennsylvania. Each Pennsylvania
Corporation has the corporate power and authority to carry on its business as
presently conducted, to execute, deliver, and perform its obligations under the
Transaction Documents to which it is a party and, to consummate the Booth Creek
Merger (in the case of the Company) and the Partnership Merger (in the case of
the Partnership Merger Subsidiary), (b) has taken all necessary corporate action
to authorize the execution, delivery, and performance of the Transaction
Documents to which it is a
<PAGE> 91
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
[Closing Date]
Page 3
party and to consummate the transactions thereunder, and (c) has duly executed
and delivered the Transaction Documents to which it is a party.
2. The Partnership (a) has the partnership power and authority under
the Pennsylvania UPA (as defined below) to execute, deliver, and perform its
obligations under the Partnership Merger Agreement and to consummate the
Partnership Merger, (b) has, to our knowledge, taken all necessary partnership
action under the Pennsylvania Business Corporation Law ("BCL") to authorize the
execution, delivery and performance of the Partnership Merger Agreement, and (c)
has duly executed and delivered the Partnership Merger Agreement.
3. Subject to filing Articles of Merger in the Office of the
Department of State of the Commonwealth of Pennsylvania applicable to the Booth
Creek Merger and the Partnership Merger (collectively, the "Mergers"), the
Transaction Documents to which each Pennsylvania Company is a party are each a
valid and binding obligation of such entity, each enforceable against it in
accordance with its terms.
4. The Letters of Transmittal, when duly executed and delivered by the
Merger Consideration Recipients or the partners of the Partnership, as the case
may be, other than Partners (defined below) who exercise dissenters rights, will
be a valid and binding obligation of each such person, enforceable against such
person in accordance with its terms.
5. The execution and delivery by each Pennsylvania Corporation of, and
the performance by each Pennsylvania Corporation of its obligations under, the
Transaction Documents to which it is a party do not violate its articles of
incorporation or bylaws.
6. The execution and delivery by each Pennsylvania Company of, and the
performance by each Pennsylvania Company under, the Transaction Documents to
which it is a party do not breach or constitute a default under, and do not
create any lien or encumbrance upon the assets or property of any surviving
company to the Mergers under any written contract identified in Schedule 1.1 of
the Disclosure Schedules to the Booth Creek Merger Agreement, the effect of
which would have a Material Adverse Effect on the surviving companies to the
Mergers, except that we express no opinion with respect to the effect of the
Transaction Documents or the consummation thereof on the Agreement Affecting the
Transfer of the Common and Preferred Stock of Seven Springs Farm, Inc., dated
January 10, 1969, as amended, among the Company, Helen Dupre, Phillip Dupre,
Herman Dupre, and Luitgarde Dupre Sujansky (the "Buy/Sell Agreement") which is
currently the subject of litigation in Civil Action G.D. No. 535 Civil 1998 in
the Court of Common Pleas of Somerset County, Pennsylvania.
<PAGE> 92
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
[Closing Date]
Page 4
7. [Based on our understanding that the waiting period applicable to
the application submitted by Purchaser to the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act, as amended, has expired], the
execution and delivery by each Pennsylvania Company of, and the performance by
each such entity of its obligations under, the Transaction Documents to which it
is a party do not violate any applicable statute, law, or regulation of the
Commonwealth of Pennsylvania or the United States of America which would have a
Material Adverse Effect on the surviving companies to the Mergers.
8. Other than required notices, filings and approvals described in the
Disclosure Schedules or the Booth Creek Merger Agreement and other than any
consent from the Pennsylvania Liquor Control Board or the Federal Communications
Commission, to our knowledge, no authorizations, consents or approvals of or
filings with any governmental agencies or authorities are required in connection
with the execution, delivery and performance of the Transaction Documents by any
Pennsylvania Company, the failure of which to obtain would have a Material
Adverse Effect on the surviving companies to the Mergers.
9. The Company has total authorized capital stock of 750 shares of
common stock (the "Common Shares") of $100 par value per share, and 1,750 shares
of preferred stock (the "Preferred Shares") of $100 par value per share. Based
solely on a review of the stock records of the Company, as of the date hereof,
there are 750 Common Shares issued and outstanding and 1,750 Preferred Shares
issued and outstanding. Based solely on a review of the stock records of the
Company, to our knowledge, the persons identified as shareholders of the Company
on the Disclosure Schedules, as amended and in effect on the date hereof, are
all of the record owners of the capital stock of the Company. The Partnership
Merger Subsidiary has total authorized capital stock of 1,000 shares of common
stock, par value $0.01 per share, and based solely on a review of the stock
records of the Partnership Merger Subsidiary, all of such shares are outstanding
and held of record by the Company.
10. Upon filing of the Booth Creek Articles of Merger with the Office
of the Department of State of the Commonwealth of Pennsylvania and payment of
the filing fees attendant thereto, and subject to no further action under the
BCL, the Booth Creek Merger will be duly consummated and become effective in
accordance with the terms and provisions of the Booth Creek Articles of Merger
and the BCL.
11. Upon filing of the Partnership Articles of Merger with the Office
of the Department of State of the Commonwealth of Pennsylvania and payment of
the filing fees attendant thereto, and subject to no further action under the
BCL, the Partnership Merger will be
<PAGE> 93
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
[Closing Date]
Page 5
duly consummated and become effective in accordance with the terms and
provisions of the Partnership Articles of Merger and the BCL.
Regarding the Partnership, we note that under the Pennsylvania Uniform
Partnership Act, 15 Pa. Cons. Stat. ss.ss. 8301 - 8365 (the "Pennsylvania UPA"),
a partnership is "an association of two or more persons to carry on as co-owners
a business for profit." In rendering the foregoing opinions, we have assumed
that the Partnership is a general partnership under the Pennsylvania UPA.
However, based on the representations contained in the Partnership Certificate
and our review of Forms 1065 filed by the Partnership with the Internal Revenue
Service, and assuming that the Partnership was intended to be formed and
operated in the Commonwealth of Pennsylvania, it would appear that the
Partnership is a partnership under the Pennsylvania UPA. To our knowledge there
is no written partnership agreement among the persons who have been identified
to us as partners of the Partnership (the "Partners"). The terms of any
agreement among the Partners would therefore be those agreed to orally among the
Partners or established through a course of conduct among the Partners or by the
Partnership. We point out that the provision of the BCL that authorizes mergers
of general partnerships into corporations is untested in the courts of the
Commonwealth of Pennsylvania. Historically, the Pennsylvania UPA has required
the consent of all partners of a partnership in respect of certain actions.
Because the BCL was amended after adoption of the Pennsylvania UPA to permit
mergers of Pennsylvania general partnerships into Pennsylvania corporations and
expressly provides that the powers and duties vested in boards of directors and
shareholders under the merger provisions of the BCL shall be exercised and
performed by partnership managers and partners, respectively, it is our belief
that approval of Partners holding a majority of the interests in the Partnership
should be sufficient to authorize the Partnership Merger.
We express no opinion regarding the following portions of the Merger
Agreement: Section 5.10 (Acquisition Proposals); Section 11.2 (last sentence);
Section 12.09 (Modification and Waivers); and Section 12.11 (Severability).
The opinions set forth above are subject to the effect of bankruptcy,
insolvency, fraudulent transfer, reorganization, receivership, moratorium, and
other similar laws affecting the rights and remedies of creditors generally, and
to the effect of the exercise of judicial discretion in accordance with general
principles of equity.
We express no opinion as to the applicability or effect of laws that
are not customarily addressed by legal opinions, such as laws regulated by the
Federal Communication Commission, the Employee Retirement Income Security Act of
1974, federal or state securities laws, liquor control, antitrust, tax,
environmental, banking, or insurance law. We express no opinion with
<PAGE> 94
Booth Creek Ski Holdings, Inc.
Booth Creek Ski Acquisition, Inc.
[Closing Date]
Page 6
respect to the redemption of the Bonds or the laws of any Authority which is an
instrumentality of the Commonwealth of Pennsylvania. We express no opinion
regarding the Company's or the Partnership's title to or ownership of, any
assets.
We are furnishing this legal opinion to you solely for your information
and benefit in connection with the Transaction Documents. You may not rely on
this opinion in any other connection, and it may not be furnished to or relied
upon by any other person for any purpose, without our specific prior written
consent.
The foregoing opinions are rendered as of the date of this opinion
letter. We assume no obligation to update or supplement any of our opinions to
reflect any changes of law or fact that may occur.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
<PAGE> 95
PARTNERSHIP CERTIFICATE
The undersigned represents to Kirkpatrick & Lockhart LLP, for purposes
of an opinion letter to be rendered by that firm to Booth Creek Holdings, Inc.
and Booth Creek Ski Acquisition, Inc., as follows:
1. The partners ("Partners") of Dupre Enterprises (24), a
Pennsylvania general partnership (the "Partnership"), and
the ownership interests of the Partnership are identified
on Exhibit B to the Dupre Enterprises (24) Partnership
Merger Agreement dated September __, 1998 between the
Partnership and Seven Springs Enterprises, Inc., a
Pennsylvania corporation (the "Partnership Merger
Agreement").
2. Attached to this Certificate is a copy of the
Partnership's most recent Form 1065 filed with the
Internal Revenue Service and executed on the Partnership's
behalf.
3. There is no written agreement setting forth the terms of
the agreement among the Partners.
4. The Partners have agreed orally and have established a
course of conduct that the purposes of the Partnership are
(1) to purchase, own, and operate ski lifts on the
property of Seven Springs Farms, Inc. (the "Company"); (2)
to purchase and own an alpine slide amusement ride on the
property of the Company; and (3) to purchase and own coin
lockers installed on the property of the Company. There is
no other business conducted by the Partnership, and in the
past there has not been any other business conducted by
the Partnership.
5. The Partners have agreed orally and have established a
course of conduct whereby certain members of the
Partnership have been designated by majority vote of the
Partners as Managing Partners with the authority to cause
the Partnership to enter into agreements in furtherance of
the purposes of the Partnership.
6. The Managing Partners of the Partnership are ____________.
7. The Partnership is a party to a written Joint Venture
Agreement dated March 19, 1994, as amended by amendment
dated May 1, 1997, relating to the operation of the ski
lifts; and an Agreement to Manage the Alpine Slide
Amusement Ride dated April 1, 1998, relating to the alpine
slide amusement ride; and an Agreement to Collect the
Revenue from Coin and Ski Lockers dated April 1, 1998,
concerning the Company's appointment as Collecting Agent
for the coin lockers. The Partners, most of whom are
residents of the Commonwealth of Pennsylvania, are
associated with one another for the purpose of carrying on
the business of owning, among other things, ski lifts,
<PAGE> 96
an alpine slide and coin lockers for profit within the
Commonwealth of Pennsylvania. Other than the three
agreements identified in the immediately preceding
sentence and the Merger Agreement, the Partnership is not,
to the knowledge of the undersigned, a party to or
otherwise bound by any agreements, written or unwritten.
8. There has been no agreement among the Partners that action
by the Partnership would require the consent or vote of
more than a majority of the Partners, and there has been
no course of conduct among the Partners whereby a minority
of the Partners have been able to prevent the Partnership
from entering into any agreements, nor in past was there
any such agreement or course of conduct relating to any
other assets or action of the Partnership
9. Other than as set forth above, there have been no other
agreements among the Partners relating to the Partnership,
and there has been no course of conduct of the Partnership
or the Partners.
The undersigned understands that Kirkpatrick & Lockhart LLP will be
relying on the representations in this certificate in providing its legal
opinion letter to Booth Creek Holdings, Inc. and Booth Creek Ski Acquisition,
Inc.
DUPRE ENTERPRISES (24)
---------------------------------
By:
------------------------------
Managing Partner
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<PAGE> 97
EXHIBIT D
FORM OF OPINION OF WINSTON & STRAWN
_____________________, 1998
Seven Springs Farm, Inc.
1976 Helen Road
Champion, Pennsylvania 15622
Ladies and Gentlemen:
We have acted as special counsel for Booth Creek Ski Holdings,
Inc., a Delaware corporation ("Purchaser"), and Booth Creek Ski Acquisition,
Inc., a Pennsylvania corporation and a wholly-owned subsidiary of Purchaser
("Acquisition Sub"), in connection with the execution and delivery of the
Agreement of Merger dated as of August 28, 1998 (the "Merger Agreement"), by and
among Purchaser, Acquisition Sub and Seven Springs Farm, Inc., a Pennsylvania
corporation (the "Company"), which provides, among other things, for the merger
of Acquisition Sub with and into the Company (the "Merger") and the transactions
contemplated thereby. This opinion letter is being delivered to you at our
client's request pursuant to Section 8.4(a) of the Merger Agreement. Unless
otherwise defined herein, capitalized terms used herein are defined as set forth
in the Merger Agreement.
In connection with the foregoing, we have reviewed an executed
copy of the Merger Agreement, the Plan of Merger related to the Merger, the
Escrow Agreement dated as of ___________, 1998 (the "Escrow Agreement") by and
among the Deferred Exchange Agents (as defined in the Escrow Agreement),
Purchaser, the Company and Chicago Title Insurance Company as the Escrow Agent,
the Exchange Agent Agreement dated as of ___________, 1998 by and between the
Company and __________________ as the Closing Exchange Agent, and a form of the
Letter of Transmittal attached as Exhibit A to the Merger Agreement
(collectively, the "Transaction Documents"). In addition to the foregoing, we
have examined the following documents:
(i) (A) A certified copy of the Certificate of
Incorporation of Purchaser as in effect on the date hereof (the "Charter");
<PAGE> 98
Seven Springs Farm, Inc.
__________________, 1998
Page 2
(B) the Bylaws of Purchaser as in effect on the
date hereof (the "By-Laws");
(C) Certificate dated ______________ from the
Secretary of State of Delaware, attesting to the continued corporate existence
and good standing of Purchaser in such state ("Good Standing Certificate");
(D) A copy of the written consent of the director
of Purchaser, certified by an authorized officer of Purchaser, authorizing the
execution, delivery and performance of the Transaction Documents; and
(ii) such other corporate records of Purchaser as we have
deemed necessary as a basis for the opinions hereinafter expressed.
In our capacity as such counsel, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such corporate
records of Purchaser and Acquisition Sub, certificates of public officials and
of officers of Purchaser and Acquisition Sub and such other documents in regards
to Purchaser or Acquisition Sub as we have deemed necessary as a basis for the
opinions hereafter expressed. As to various questions of fact material to our
opinions, we have relied solely upon the accuracy of the statements,
representations and warranties made in the Merger Agreement and upon
certificates from public officials and from officers of Purchaser and
Acquisition Sub and we have, with your consent, made no independent
investigation or inquiry with respect to such factual matters. In our
examination of the documents referred to above, we have assumed that Purchaser
has received any notices sent in connection with any agreements material to its
businesses and operations.
In rendering this opinion letter, we have made the assumptions
adopted in Section 4 and the "General Qualifications" in Section 11 of the Legal
Opinion Accord of the ABA Section of Business Law concerning third party legal
opinions (1991), which assumptions and qualifications we incorporate in this
letter.
Whenever our opinion with respect to the existence or absence
of facts is indicated to be based on our knowledge or awareness, we are
referring to the actual present knowledge of the particular Winston & Strawn
attorneys who have actively represented Purchaser during the course of our
limited representation of Purchaser in connection with the Transaction
Documents. Except as expressly set forth herein, we have not undertaken any
independent investigation, examination or inquiry to determine the existence or
absence of any facts (and have not caused the review of any court file or
indices), and no inference as to our
<PAGE> 99
Seven Springs Farm, Inc.
__________________, 1998
Page 3
knowledge concerning any facts should be drawn as a result of the limited
representation undertaken by us.
Based upon the foregoing, and subject to the qualifications
and further assumptions set forth herein, we hereby advise you in connection
with the Merger Agreement that it is our opinion that:
1. Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
has full corporate power and authority to operate the business of Purchaser as
now operated.
2. Purchaser has the corporate power and authority to execute
and deliver the Transaction Documents to which it is a party and to perform its
obligations thereunder. All requisite corporate action has been taken by
Purchaser to authorize Purchaser to execute and deliver the Transaction
Documents to which it is a party and to consummate the transactions contemplated
thereunder.
3. The Transaction Documents to which Purchaser is a party
have been duly and validly authorized, executed and delivered by Purchaser and
are valid and binding on Purchaser.
4. Neither the execution, delivery nor performance by
Purchaser or Acquisition Sub of the Transaction Documents to which it is a party
will conflict with, result in a breach of, or constitute a default under the
Charter or By-Laws of Purchaser, or violate any federal or New York state law,
statute, ordinance, rule or regulation or any material contract listed on
Schedule 1 hereto, where such conflict, breach, violation or default would have
a Material Adverse Effect on Purchaser or Acquisition Sub.
5. To our knowledge, there is no decree, judgment, order, or
litigation at law or in equity, no arbitration proceeding, and no proceeding
before or by any commission, agency or other administrative or regulatory body
or authority, pending which is reasonably likely to have a Material Adverse
Effect on Purchaser or Acquisition Sub.
6. Other than required notices, filings and approvals set
forth in the Merger Agreement or the Disclosure Schedules, to our knowledge, no
authorizations, consents or approvals of or filings with any New York state
governmental agencies or authorities are required in connection with the
execution, delivery and performance of the Transaction
<PAGE> 100
Seven Springs Farm, Inc.
__________________, 1998
Page 4
Documents by Purchaser or Acquisition Sub, the failure of which to obtain would
have a Material Adverse Effect on Purchaser or Acquisition Sub.
The opinions expressed herein are subject to the following
qualifications:
(a) We are attorneys admitted to practice in the State of New York, and
we express no opinion with respect to any matter insofar as it is
governed by laws other than the laws of the State of New York, the
General Corporation Law of the State of Delaware [or the laws of the
United States]; furthermore, we express no opinion as to the validity,
binding effect or enforceability of any choice of law provisions in the
Transaction Documents. We express no opinion as to the laws of, or the
effect or applicability of the laws of, any jurisdiction other than the
laws of the [United States, the] State of New York and the Delaware
General Corporation Law.
(b) We express no opinion as to any federal, state or local securities,
tax, antitrust [(other than with respect to notices, fillings and
approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended)] or environmental, health, safety, forestry,
agriculture or employment laws or matters of title or ownership of
personal or real property.
(c) Requirements in the Transaction Documents specifying that
provisions thereof may only be waived in writing may not be valid,
binding or enforceable to the extent that an oral agreement or an
implied agreement by trade practice or course of conduct has been
created modifying any provision of such document.
(d) We assume that the Company does not know of any agreements,
understandings or negotiations between the parties not set forth or
expressly referenced in the Transaction Documents that would modify the
terms thereof or the rights or obligations of any of the parties
thereunder.
Our opinions as to the matters set forth herein are based upon
a review of those (i) statutes, rules and regulations which, in our experience,
are normally applicable to transactions of the type contemplated by the
Transaction Documents and (ii) statutes, rules and regulations applicable to
corporations generally.
We express no opinion as to the enforceability of any rights
of setoff or similar provisions, as to the enforceability of any provisions of
the Transaction Documents to the extent they apply to any waiver of the defense
of forum non conveniens, any submission to the
<PAGE> 101
Seven Springs Farm, Inc.
__________________, 1998
Page 5
jurisdiction of any court or as to the enforceability of any provision imposing
the payment of interest on interest, any severability or savings clauses, any
best efforts clauses, any provisions purporting to require exclusive contractual
remedies or agreeing to injunctive relief or specific performance,
non-competition provisions, restrictions or limitations on whether any
allocation of asset or other values for tax purposes in the Transaction
Documents would be recognized. The opinion in paragraph 1 hereof relating to
Purchaser's good standing is based solely on the receipt by us of the Good
Standing Certificate, and we have with your consent and approval undertaken no
further investigation with respect to this opinion letter.
The opinions expressed herein are expressed as of the date
hereof without any undertaking to amend or supplement this opinion letter to
take into account any change after the date hereof.
This opinion letter is solely for the benefit of the addressee
hereof in connection with the transactions contemplated by the Merger Agreement
and may not be relied upon in any other manner or by any other Person, or
disclosed, quoted, filed with a governmental agency or otherwise referred to,
without our prior written consent.
Very truly yours,
WINSTON & STRAWN
<PAGE> 102
EXHIBIT E
FORM OF OPINION OF
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
_____________________, 1998
Seven Springs Farm, Inc.
Seven Springs Mountain Resort
1976 Helen Road
Champion, Pennsylvania 15622
Ladies and Gentlemen:
We have acted as special Pennsylvania counsel for Booth Creek Ski
Holdings, Inc., a Delaware corporation ("Purchaser"), and Booth Creek Ski
Acquisition, Inc., a Pennsylvania corporation and a wholly-owned subsidiary of
Purchaser (the "Company"), in connection with the merger of the Company with and
into Seven Springs Farm, Inc., a Pennsylvania corporation ("Seven Springs"),
pursuant to the Agreement of Merger dated as of August 28, 1998, by and among
the Purchaser, the Company and Seven Springs (the "Agreement") and in connection
with the transactions contemplated thereby.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991), as supplemented or modified by Parts I and III, together
with the Forward and Glossary, of the Pennsylvania Third-Party Legal Opinion
Supplement (1992) (the "Pennsylvania Supplement") of the PBA Section of
Corporation, Banking and Business Law (1992). As a consequence, it is subject to
a number of qualifications, exceptions, definitions, limitations on coverage and
other limitations, all as more particularly described in the Accord and the
Pennsylvania Supplement. Therefore, this Opinion Letter should be read in
conjunction with the Accord and the Pennsylvania Supplement. The law covered by
the Opinions expressed herein is limited to the laws of the Commonwealth of
Pennsylvania. All capitalized terms used and not otherwise defined in this
Opinion shall have the respective meanings ascribed to them in the Agreement,
the Accord or the Pennsylvania Supplement. In the case of a definitional
inconsistency between the Agreement and the Accord or Pennsylvania Supplement,
the definition in the Agreement shall apply. This Opinion is furnished to you
pursuant to Section 8.4(b) of the Agreement.
<PAGE> 103
__________________, 1998
Page -2-
Based upon and subject to the foregoing and the qualifications below,
we are of the opinion that:
1. The Company is a corporation duly incorporated and organized,
validly existing and presently subsisting under the laws of the
Commonwealth of Pennsylvania.
2. The Company has the requisite corporate power and authority to
carry on its business as it is now being conducted.
3. The Company has the corporate power to execute, deliver and
perform the Agreement.
4. The Agreement has been duly executed by the Company, and all
necessary corporate action of the Company has been duly taken to
authorize the execution, delivery and performance of the
Agreement by the Company and the consummation by the Company of
the transactions contemplated by the Agreement.
5. The Agreement is enforceable against the Company and the
Purchaser.
6. Neither the execution, delivery nor performance by the Company
of the Agreement will conflict with, result in a breach of, or
constitute a default under the Articles of Incorporation or
By-Laws of the Company or violate Pennsylvania law where such
conflict, breach, violation or default would have a Material
Adverse Effect on the Company.
7. Other than required notices, filings and approvals set forth in
the Agreement or the Disclosure Schedules which have been made
or received and other than any required notices, filings,
consents and approvals from the Pennsylvania Liquor Control
Board, to our knowledge, no authorizations, consents or
approvals of or filings with any Pennsylvania state governmental
agencies or authorities are required on behalf of the Purchaser
or the Company in connection with the execution, delivery and
performance of the Agreement by the Purchaser or the Company.
We express no opinion as to any matter insofar as it is governed by the
Pennsylvania Liquor Code.
<PAGE> 104
__________________, 1998
Page -3-
The phrase "Primary Lawyer Group," as used in the Accord, is hereby
modified and for purposes of applying the Accord to this Opinion Letter the
Primary Lawyer Group means the lawyers in this firm who have given substantive
legal attention to representation of the Company and the Purchaser in connection
with the Agreement and the transactions contemplated thereby.
This Opinion is issued as of the date hereof and is necessarily limited
to the laws now in effect and the facts and circumstances known to the
undersigned on the date hereof. We are not assuming any obligation to review or
update this Opinion should applicable law or the existing facts or circumstances
change. Our advice is provided herein solely for your benefit and this Opinion
does not extend to and may not be relied upon by any other party other than the
named addressee of this Opinion without our express written consent.
Very truly yours,
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By:_____________________
<PAGE> 105
EXHIBIT F
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made and entered
into this ______ day of _______________, 1998, by and among DENISE M. DUPRE, an
individual residing in West Newton, Massachusetts, KENNETH DUPRE, an individual
residing in Champion, Pennsylvania, JAMES V. SUJANSKY, an individual residing in
Somerset, Pennsylvania (Denise M. Dupre, Kenneth Dupre and James V. Sujansky,
together with their successors and assigns, [modify in accordance with the
definition in the Merger Agreement of Deferred Exchange Agents pre-closing] the
"Deferred Exchange Agents"), BOOTH CREEK SKI HOLDINGS, INC., a Delaware
corporation ("Purchaser"), SEVEN SPRINGS FARM, INC., a Pennsylvania corporation
(the "Company"), and CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation
(the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Purchaser, Booth Creek Ski Acquisition, Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of Purchaser
("Acquisition Sub"), and the Company have entered into an Agreement of Merger,
dated as of August 28, 1998 (as amended or otherwise modified from time to time,
the "Merger Agreement"), pursuant to which, among other things, Acquisition Sub
will merge (the "Merger") with and into the Company, which shall continue as the
surviving corporation in the Merger (the "Surviving Company");
WHEREAS, Section 10.6 of the Merger Agreement provides that at
the effective time of the Merger, Purchaser shall deposit into an escrow account
(the "Escrow Account") by wire transfer the sum of Three Million Dollars
($3,000,000); provided, however, that in the event that there are no Dissenting
Shares (as defined in the Merger Agreement), Purchaser shall deposit the sum of
Two Million Dollars ($2,000,000) into the Escrow Account;
WHEREAS, all such amounts deposited with the Escrow Agent into
the Escrow Account pursuant to this Agreement, together with all Earnings (as
hereinafter defined), shall hereafter be referred to as the "Escrow Fund";
WHEREAS, the Escrow Agent is willing to accept said amounts,
to serve as a depositary and to distribute the same in accordance with the terms
and conditions of this Agreement; and
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition precedent to the closing under the Merger
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
<PAGE> 106
SECTION 1
ESCROW
(a) The Deferred Exchange Agents, Purchaser and the Surviving
Company hereby appoint the Escrow Agent, and the Escrow Agent hereby agrees to
serve, as the escrow agent for Purchaser, the Surviving Company and the Deferred
Exchange Agents, on behalf of the Merger Consideration Recipients (as defined in
the Merger Agreement), subject to and upon the terms and conditions set forth in
this Agreement.
(b) The Escrow Agent shall acknowledge receipt of the Escrow
Fund by the execution and delivery to the Deferred Exchange Agents, Purchaser
and the Surviving Company of a receipt substantially in the form of Exhibit I
attached hereto and agrees to hold, administer and distribute the Escrow Fund in
accordance with the terms and conditions of this Agreement.
(c) The Escrow Agent is authorized and directed to invest the
Escrow Fund deposited pursuant hereto in accordance with the guidelines set
forth on Exhibit II attached hereto and made a part hereof. All income or
earnings, if any, resulting from the investment of the Escrow Fund pursuant to
this Agreement are hereinafter referred to as "Earnings".
(d) The Escrow Agent shall distribute the Escrow Fund only in
accordance with Section 2 hereof and otherwise in accordance with this
Agreement, and all distributions of the Escrow Fund by the Escrow Agent
hereunder shall be made in cash by bank certified cashier's check or wire
transfer.
(e) For purposes of this Agreement, capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Merger Agreement.
SECTION 2
RELEASE AND DISTRIBUTION OF THE ESCROW FUND
Purchaser, the Deferred Exchange Agents, the Surviving Company
and the Escrow Agent each agree that the Escrow Fund, and any portion thereof,
shall be delivered exclusively in accordance with one of the following
provisions (whichever may be applicable):
(a) If at any time after the deposit of the Escrow Fund into
the Escrow Account, Purchaser, the Surviving Company or the Deferred Exchange
Agents, on behalf of the Merger Consideration Recipients, shall become entitled
to receive all or any part of the Escrow Fund under the terms and conditions of
the Merger Agreement, then Purchaser, the Surviving Company and the Deferred
Exchange Agents covenant and agree to execute and deliver jointly to the Escrow
Agent a written certificate in the form of Exhibit III attached hereto
requesting payment by the Escrow
2
<PAGE> 107
Agent of the Escrow Fund or such portion thereof to Purchaser, the Surviving
Company or the Deferred Exchange Agents (on behalf of the Merger Consideration
Recipients), as applicable. The Escrow Agent shall deliver the entire balance of
the Escrow Fund, minus any amount previously claimed by Purchaser or the
Surviving Company against the Escrow Fund in accordance with Section 10.6 of the
Merger Agreement and not delivered by Escrow Agent to Purchaser or the Surviving
Company, to the Deferred Exchange Agents on the third anniversary of the date
hereof.
(b) Purchaser, the Surviving Company and the Deferred Exchange
Agents agree not to dispute any payment of the Escrow Fund requested by a party
hereto unless such disputing party shall determine in good faith that the other
party or parties hereto shall not be entitled to such payment of the Escrow
Fund.
(c) All distributions of the Escrow Fund pursuant to this
Section 2 shall be without liability to the Escrow Agent. The Deferred Exchange
Agents (on behalf of the Merger Consideration Recipients), Purchaser and the
Surviving Company, jointly and severally, agree to indemnify, defend and hold
harmless the Escrow Agent from and against any claim, loss, damage or expense
incurred by the Escrow Agent and arising out of the Escrow Agent's actions as
the Escrow Agent pursuant to this Agreement, except for such claim, loss, damage
or expense suffered or incurred as a result of its wilful misconduct or gross
negligence.
SECTION 3
DUTIES OF THE ESCROW AGENT
(a) The Escrow Agent shall be entitled to reasonable
compensation for all services rendered and expenses incurred by it in the
performance of its obligations hereunder. The Escrow Agent shall be entitled to
employ such legal counsel and other experts as it may deem reasonably necessary
to properly advise it in connection with its obligations hereunder, and may rely
on the advice of such counsel, and may pay them reasonable compensation
therefor. The Escrow Agent's and such legal counsel's and other expert's fees
and expenses shall be shared equally by Purchaser and the Surviving Company on
the one hand, and the Deferred Exchange Agents on behalf of the Merger
Consideration Recipients on the other hand, and shall be paid in accordance with
the compensation schedule attached hereto as Exhibit IV.
(b) The Escrow Agent shall not be liable for any diminution of
value of the Escrow Fund except to the extent any diminution in the Escrow Fund
is attributable to the Escrow Agent's willful misconduct or gross negligence,
and shall be under no responsibility in respect of the Escrow Fund deposited
with it, other than to follow the instructions herein contained in good faith.
3
<PAGE> 108
(c) Notwithstanding any other provisions herein contained, the
Escrow Agent may at all times act upon and in accordance with the joint written
instructions of Purchaser, the Surviving Company and the Deferred Exchange
Agents.
(d) The duties and responsibilities of the Escrow Agent shall
be limited to those expressly set forth in this Agreement, and to instructions
given to the Escrow Agent pursuant to this Agreement. The Escrow Agent shall not
be subject to, nor obliged to recognize, any other agreement between any or all
of the parties hereto even though reference thereto may be made herein.
(e) The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity, or genuineness of
documents now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein, nor
shall it be responsible or liable in any respect on account of the identity,
authority, or rights of the persons executing or delivering or purporting to
execute or deliver any such document, or endorsement of this Agreement, and the
Escrow Agent shall be fully protected in relying upon any written notice,
demand, certificate or document which it in good faith believes to be genuine.
(f) The Escrow Agent is authorized, in its sole discretion, to
disregard any and all notices or instructions given by any of the undersigned or
by any other person, firm, or corporation, except only such notice or
instructions as are herein provided for and orders or process of any court
entered or issued with or without jurisdiction. If any of the Escrow Fund
(including investments in respect thereof) subject hereto is at any time
attached, garnished, or levied upon under any court order or in case the
payment, assignment, transfer, conveyance or delivery of any portion of the
Escrow Fund (including investments in respect thereof) shall be stayed or
enjoined by any court order, or in case any order, judgment or decree shall be
made or entered by any court affecting any portion of the Escrow Fund (including
investments in respect thereof), then and in any of such events, the Escrow
Agent is authorized, in its sole discretion, to rely upon and comply with any
such order, writ, judgment or decree which the Escrow Agent is advised by legal
counsel of its selection is binding upon it; and if the Escrow Agent complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other person, firm or corporation by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.
(g) The Escrow Agent may resign by giving ninety (90) days
advance written notice to Purchaser, the Surviving Company and the Deferred
Exchange Agents and thereafter shall deliver the Escrow Fund to a substitute
escrow agent as Purchaser, the Surviving Company and the Deferred Exchange
Agents shall jointly direct in writing. If such selection of a substitute escrow
agent is not received by the Escrow Agent within ninety (90) days after mailing
such notice of resignation, it is unconditionally and irrevocably authorized,
directed and empowered to deposit all of the Escrow Fund and other property with
any state or federal court of competent jurisdiction located in the Commonwealth
of Pennsylvania and shall stand fully released and discharged of any further
duties (but not liabilities for prior actions) hereunder.
4
<PAGE> 109
(h) The Escrow Agent hereby acknowledges and agrees that it
has no ownership interest or right whatsoever to any of the Escrow Fund.
SECTION 4
TERMINATION
This Agreement shall terminate upon the earlier to occur of
the following:
(a) the mutual agreement of the parties hereto; or
(b) the distribution by the Escrow Agent in accordance with
this Agreement of the entire Escrow Fund; provided, however, the indemnification
provisions set forth in Section 2(c) of this Agreement shall not terminate.
SECTION 5
NOTICES
All notices, requests, demands, instructions or other
communications hereunder shall be in writing and sent by overnight courier or
telecopy (with receipt confirmed and hard copy to follow) or sent by certified
mail return receipt requested, postage prepaid, to the parties hereto at the
following addresses, or such other addresses as a party hereto may designate
from time to time in accordance with this Agreement:
To the Deferred Exchange Agents:
Denise M. Dupre
49 Shaw Street
West Newton, Massachusetts 01473
Kenneth Dupre
Seven Springs
R.R. #1
Champion, Pennsylvania 15622
James V. Sujansky
664 Samuels Road
Somerset, Pennsylvania 15501
5
<PAGE> 110
with a copy to :
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Sanford B. Ferguson
Phone: (412) 355-6494
Fax: (412) 355-8332
To Purchaser:
Booth Creek Ski Holdings, Inc.
c/o Booth Creek, Inc.
1000 South Frontage Road, Suite 100
Vail, Colorado 81657
Attn: George N. Gillett, Jr.
Phone: (970) 476-4030
Fax: (970) 479-0291
with a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Illinois 60601
Attn: Bruce A. Toth, Esq.
Phone: (312) 558-5723
Fax: (312) 558-5700
To the Surviving Company:
Seven Springs Farm, Inc.
1976 Helen Road
Champion, Pennsylvania 15622
Attention: James McClure
Phone: (814) 352-7777
Fax: (814) 352-7215
with a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Illinois 60601
Attn: Bruce A. Toth, Esq.
Phone: (312) 558-5723
Fax: (312) 558-5700
6
<PAGE> 111
To the Escrow Agent:
Chicago Title Insurance Company
920 Grant Building
Pittsburgh, Pennsylvania 15291
Attn: Stephen Emery, Jr.
Phone: (412) 281-8080
Fax: (412) 281-6946
SECTION 6
APPLICABLE LAW
THE VALIDITY, INTERPRETATION AND EFFECT OF THIS AGREEMENT
SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
EXCLUDING THE "CONFLICT OF LAWS" RULES THEREOF.
SECTION 7
ASSIGNMENT AND AMENDMENT
This Agreement shall inure to the benefit of and be
enforceable by and against the parties hereto and their respective heirs,
executors, administrators, successors and assigns, provided, however, that this
Agreement shall not be assignable by any of the parties hereto without the
written consent of the others (such consent not to be unreasonably withheld)
except that (i) the Escrow Agent may assign this Agreement without such written
consent in accordance with Section 3(g) hereof and (ii) each Deferred Exchange
Agent may assign this Agreement to a successor Deferred Exchange Agent appointed
in accordance with the provisions of the Letter of Transmittal (as defined in
the Merger Agreement) related thereto. This Agreement may not be amended or
modified without the written consent of Purchaser, the Surviving Company, the
Deferred Exchange Agents, and the Escrow Agent.
SECTION 8
NON-EXCLUSIVE REMEDY
The rights of each party hereunder are cumulative and are not
exclusive of any other rights each party may have under the Merger Agreement or
otherwise.
7
<PAGE> 112
SECTION 9
COUNTERPARTS
This 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.
SECTION 10
TAX MATTERS
The Escrow Agreement constitutes Purchaser's obligation to pay in part
Aggregate Common Share Merger Consideration to the Merger Consideration
Recipients pursuant to the Merger Agreement, and the escrow established hereby
in part secures such obligation. Purchaser shall include all Earnings hereunder
on its federal and state income tax returns.
SECTION 11
JURY TRIAL WAIVER
PURCHASER, THE SURVIVING COMPANY, THE DEFERRED EXCHANGE AGENTS
AND THE ESCROW AGENT EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH OR
HEREAFTER AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
SECTION 12
SECTION TITLES
The captions of the various section headings of this Agreement
have been inserted only for convenience of reference and shall not be deemed to
be part of this Agreement or modify, explain, enlarge or restrict any of the
provisions of this Agreement.
[signature page follows]
8
<PAGE> 113
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
DEFERRED EXCHANGE AGENTS:
__________________________________
Denise M. Dupre
__________________________________
Kenneth Dupre
__________________________________
James V. Sujansky
BOOTH CREEK SKI HOLDINGS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
SEVEN SPRINGS FARM, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
CHICAGO TITLE INSURANCE COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
9
<PAGE> 114
EXHIBIT I
FORM OF RECEIPT
Booth Creek Ski Holdings, Inc., James V. Sujansky
c/o Booth Creek, Inc. 664 Samuels Road
1000 South Frontage Road, Suite 100 Somerset, Pennsylvania 15501
Attn: George N. Gillett, Jr.
Seven Springs Farm, Inc.
Denise M. Dupre 1976 Helen Road
49 Shaw Street Champion, Pennsylvania 15622
West Newton, Massachusetts 01473 Attn: James McClure
Kenneth Dupre
R.R. #1
Champion, Pennsylvania 15622
Re: Escrow Agreement -- Receipt of Funds
Ladies and Gentlemen:
In connection with that certain Escrow Agreement (the
"Agreement") dated as of , 1998 by and among each of you and the undersigned,
relating to the establishment of an escrow account, account no. ____________
(the "Account"), and the appointment of the undersigned as escrow agent, the
undersigned does hereby acknowledge receipt from Booth Creek Ski Holdings, Inc.
of the amount of $________________, which amount has been deposited into the
Account and shall hereafter constitute the Escrow Fund (as defined in the
Agreement) and shall hereafter be subject to the terms and conditions of the
Agreement.
Dated:_____________, 1998
CHICAGO TITLE INSURANCE COMPANY
as Escrow Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
cc: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Bruce A. Toth, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Sanford B. Ferguson
<PAGE> 115
EXHIBIT II
PERMITTED INVESTMENTS OF THE ESCROW FUND
Purchaser, the Surviving Company and the Deferred Exchange
Agents mutually agree that investment of the Escrow Fund will be directed in
writing to the Escrow Agent by the mutual agreement (not to be unreasonably
withheld) of Purchaser, the Surviving Company and the Deferred Exchange Agents
and will be limited to the following (collectively, "Permitted Investments"):
(1) Direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof;
(2) Commercial paper rated "P1" by Moody's Investors Service, Inc. or
"A1" by Standard & Poor's Corporation;
(3) Time deposits with and certificates of deposit issued by any office
located in the continental United States of any bank or trust company that is
organized under the laws of the United States or any state thereof if the
certificates of deposit issued by such bank or trust company are rated in one of
the two highest grades by a nationally recognized credit rating agency; or
(4) Mutual funds invested solely in securities or obligations of the
type set forth in items (1)-(3) above.
Until further written notice from the parties, the Escrow Agent is
authorized and directed to invest all of the Escrow Fund in investments meeting
the requirements of paragraph 1. Permitted Investments may be purchased by the
Escrow Agent notwithstanding that an affiliate of the Escrow Agent has
underwritten, privately placed or made a market for, any such Permitted
Investments, or may in the future underwrite, privately place or make a market
in any such Permitted Investments. Each writing which directs investment of the
Escrow Fund shall be delivered in accordance with Section 5 of the Escrow
Agreement to which this Exhibit is attached.
<PAGE> 116
EXHIBIT III
FORM OF PAYMENT REQUEST
CHICAGO TITLE INSURANCE COMPANY
920 Grant Building
Pittsburgh, Pennsylvania 15291
Attn: Stephen Emery, Jr.
Fax: (412) 281-6946
Re: Seven Springs Farm, Inc. - Escrow Agreement
Gentlemen:
In connection with that certain Escrow Agreement (the
"Agreement") dated as of _________________, 1998 by and among you and the
undersigned, relating to the establishment of an escrow account and the
appointment of you as escrow agent, the undersigned do hereby instruct you to
distribute $_________ of the Escrow Fund (as defined in the Agreement) to
______________________ [describe either the Deferred Exchange Agents or
Purchaser or the Surviving Company] by wire transfer of such amounts to
[describe bank account with wire transfer instructions] no later than two (2)
business days after the date hereof.
Date: _________________
DEFERRED EXCHANGE AGENTS: BOOTH CREEK SKI HOLDINGS, INC.
By:_____________________________
Name:___________________________
Signature:__________________________ Title:__________________________
Print Name: Denise M. Dupre
Signature:__________________________ SEVEN SPRINGS FARM, INC.
Print Name: Kenneth Dupre
By:_____________________________
Name:___________________________
Title:__________________________
Signature:__________________________
Print Name: James V. Sujansky
<PAGE> 117
EXHIBIT IV
ESCROW AGENT FEES AND EXPENSES
The Escrow Agent shall receive compensation ("Escrow Agent
Fees") pursuant to Section 3(a) of the Escrow Agreement as follows:
$10,000 payable upon the execution and delivery of this
Agreement.
The Escrow Agent shall bill 50% of any fees and expenses of
legal counsel or other experts as contemplated under Section 3(a) of the
Agreement to the Deferred Exchange Agents, and 50% of said fees and expenses to
Purchaser and the Surviving Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS OF BOOTH CREEK SKI HOLDINGS,
INC. AS OF JULY 31, 1998 AND FOR THE THREE MONTHS AND NINE MONTHS THEN ENDED,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> OCT-30-1998 OCT-30-1998
<PERIOD-START> NOV-01-1997 MAY-02-1998
<PERIOD-END> JUL-31-1998 JUL-31-1998
<CASH> 927 927
<SECURITIES> 0 0
<RECEIVABLES> 1,404 1,404
<ALLOWANCES> 32 32
<INVENTORY> 2,778 2,778
<CURRENT-ASSETS> 6,641 6,641
<PP&E> 173,801 173,801
<DEPRECIATION> 19,839 19,839
<TOTAL-ASSETS> 217,206 217,206
<CURRENT-LIABILITIES> 40,990 40,990
<BONDS> 137,325 137,325
2,769 2,769
0 0
<COMMON> 0 0
<OTHER-SE> 36,009 36,009
<TOTAL-LIABILITY-AND-EQUITY> 217,206 217,206
<SALES> 0 0
<TOTAL-REVENUES> 91,916 4,068
<CGS> 0 0
<TOTAL-COSTS> 55,048 6,477
<OTHER-EXPENSES> 26,635 8,623
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,934 4,976
<INCOME-PRETAX> (3,690) (16,004)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,690) (16,004)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,898) (16,074)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
