SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K/A
(Mark One)
[GRAPHIC OMITTED] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: October 30, 1998
OR
[GRAPHIC OMITTED] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
Transition Period from _________ to _____________
Commission File Number: 333-26091
BOOTH CREEK SKI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1359604
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 South Frontage Road West, Suite 100
Vail, Colorado 81657
(970) 476-4030
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
------------------
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
------------------
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 [GRAPHIC OMITTED] No [GRAPHIC
OMITTED]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [GRAPHIC OMITTED]
As of January 15, 1999, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 1,000 shares. There is
no trading market for the Common Stock. Accordingly, the aggregate market value
of the Common Stock held by non-affiliates of the registrant is not
determinable. See Part II, Item 5 of this Report.
- ------------------------------------------------------------------------------
<PAGE>1
Documents Incorporated by Reference: None
FORM 10-K/A
Table of Contents
PART II
Item 8. Annual Report on Form 10-K/A
Booth Creek Ski Holdings, Inc.
PART IV
Item 14. Exhibits and Reports on Form 10-K/A
(a) List of Documents Filed as Part of this Report:
3. List of Exhibits:
4.5 Supplemental Indunture No. 4 dated as of October 8, 1998.
<PAGE>F-1
BOOTH CREEK SKI HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K/A
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Page
<S> <C>
Booth Creek Ski Holdings, Inc.
Financial Statements - October 30, 1998 and October 31, 1997
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets.......................................................... F-3
Consolidated Statements of Operations................................................ F-4
Consolidated Statements of Shareholder's Equity...................................... F-5
Consolidated Statements of Cash Flows................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
<PAGE>F-2
REPORT OF INDEPENDENT AUDITORS
Booth Creek Ski Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Booth Creek
Ski Holdings, Inc. as of October 30, 1998 and October 31, 1997, and the related
consolidated statements of operations, shareholder's equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Booth Creek Ski
Holdings, Inc. at October 30, 1998 and October 31, 1997, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Sacramento, California
December 18, 1998, except for
the first paragraph of
Note 5 for which the date is
January 28, 1999
<PAGE>F-3
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<S> <C> <C>
October 30, October 31,
1998 1997
------------ -----------
ASSETS
Current assets:
Cash ................................................. $ 625 $ 462
Accounts receivable, net of allowance of $54 and
$35, respectively................................... 1,573 1,528
Inventories........................................... 4,370 3,059
Prepaid expenses and other current assets............. 1,377 1,396
------------- ----------
Total current assets.................................... 7,945 6,445
Property and equipment, net............................. 156,469 123,639
Real estate held for development and sale............... 10,155 10,850
Deferred financing costs, net of accumulated amortization
of $1,985 and $782, respectively...................... 6,649 6,229
Timber rights and other assets.......................... 7,428 7,402
Goodwill, net of accumulated amortization of $4,190 and
$1,953, respectively.................................. 29,900 31,851
------------ ---------
Total assets............................................ $ 218,546 $ 186,416
============ =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Senior credit facility................................ $ 17,143 $ 15,000
Current portion of long-term debt..................... 1,785 947
Accounts payable and accrued liabilities.............. 22,110 17,132
----------- -----------
Total current liabilities............................... 41,038 33,079
Long-term debt.......................................... 137,352 120,380
Other long-term liabilities............................. 145 196
Commitments and contingencies
Preferred stock of subsidiary; 28,000 shares authorized,
21,000 shares issued and outstanding at October 30, 1998
(25,000 shares at October 31, 1997); liquidation
preference and redemption value of $2,634 at
October 30, 1998...................................... 2,634 3,354
Shareholder's equity:
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding.............................. - -
Additional paid-in capital............................ 72,000 46,500
Accumulated deficit................................... (34,623) (17,093)
------------ -----------
Total shareholder's equity.............................. 37,377 29,407
------------ -----------
Total liabilities and shareholder's equity.............. $ 218,546 $ 186,416
============ ===========
</TABLE>
See accompanying notes.
<PAGE>F-4
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<S> <C> <C>
Year Ended
----------------------------
October 30, October 31,
1998 1997
------------- ------------
Revenue:
Resort operations.................................... $ 97,248 $ 68,136
Real estate and other................................ 7,608 3,671
------------ ----------
Total revenue.......................................... 104,856 71,807
Operating expenses:
Cost of sales - resort operations.................... 61,325 44,624
Cost of sales - real estate and other................ 4,671 2,799
Depreciation and depletion........................... 15,515 9,728
Amortization of goodwill............................. 2,237 1,953
Selling, general and administrative expense.......... 19,645 13,719
----------- ---------
Total operating expenses............................... 103,393 72,823
----------- ---------
Operating income (loss)................................ 1,463 (1,016)
Other income (expense):
Interest expense..................................... (17,510) (13,269)
Amortization of deferred financing costs............. (1,203) (1,809)
Other income (expense)............................... (20) 166
------------ ---------
Other income (expense), net.......................... (18,733) (14,912)
------------ ---------
Loss before income taxes, minority interest and
extraordinary item................................... (17,270) (15,928)
Income tax benefit..................................... - 1,728
------------ ---------
Loss before minority interest and extraordinary item... (17,270) (14,200)
Minority interest...................................... (260) (229)
------------ ----------
Loss before extraordinary item......................... (17,530) (14,429)
Extraordinary loss on early retirement of debt......... - (2,664)
------------ ----------
Net loss............................................... $ (17,530) $ (17,093)
============ ==========
</TABLE>
See accompanying notes.
<PAGE>F-5
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED OCTOBER 30, 1998 AND OCTOBER 31, 1997
(In thousands, except shares)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Note
Common Stock Additional Receivable
----------------- Paid-in from Accumulated
Shares Amount Capital Shareholder Deficit Total
------- ------- ------------ ------------- ---------- ---------
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.......... - - 25,500 - - 25,500
Net loss....................... - - - - (17,530) (17,530)
------- ------ ---------- ------------ ---------- ----------
Balance at October 30, 1998.... 1,000 $ - $ 72,000 $ - $ (34,623) $ 37,377
======== ======= ========== ============= ========== ==========
</TABLE>
See accompanying notes.
<PAGE>F-6
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<S> <C> <C>
Year Ended
---------------------------
October 30, October 31,
1998 1997
------------ --------------
Cash flows from operating activities:
Net loss.............................................. $ (17,530) $ (17,093)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and depletion........................ 15,515 9,728
Amortization of goodwill.......................... 2,237 1,953
Noncash cost of real estate sales................. 3,721 2,237
Amortization of deferred financing costs.......... 1,203 1,809
Deferred income tax benefit....................... - (1,548)
Minority interest................................. 260 229
Extraordinary loss on early retirement of debt.... - 2,664
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable............................. 279 (914)
Inventories..................................... (785) 1,115
Prepaid expenses and other current assets....... 103 303
Accounts payable and accrued liabilities........ 2,707 1,003
Other long-term liabilities..................... (151) 66
------------ ---------
Net cash provided by operating activities............. 7,559 1,552
Cash flows from investing activities:
Acquisition of ski resorts, net of cash acquired...... (30,211) (142,028)
Capital expenditures for property and equipment....... (15,500) (9,459)
Capital expenditures for real estate held for
development and sale................................ (1,717) (72)
Other assets.......................................... (290) (1,126)
------------ ---------
Net cash used in investing activities................. (47,718) (152,685)
Cash flows from financing activities:
Net borrowings under senior credit facility........... 2,143 15,000
Proceeds of long-term debt............................ 17,500 216,000
Principal payments of long-term debt.................. (2,218) (114,827)
Deferred financing costs.............................. (1,623) (10,703)
Purchase of preferred stock of subsidiary and payment
of dividends........................................ (980) (375)
Payment received on shareholder note receivable....... - 2
Capital contributions................................. 25,500 46,498
------------ ---------
Net cash provided by financing activities............. 40,322 151,595
------------ ---------
Increase in cash...................................... 163 462
Cash at beginning of year............................. 462 -
------------ ----------
Cash at end of year................................... $ 625 $ 462
============ ==========
</TABLE>
See accompanying notes.
<PAGE>F-7
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 30, 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"), Grand Targhee and Loon Mountain as described
more fully in Note 2.
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").
Reporting Periods
The Company's reporting periods end on the Friday closest to the end of
each month. Fiscal 1998 and 1997 were both 52 week years.
Business and Principal Markets
Northstar is a year-round destination resort including ski and golf
facilities. Sierra is a day ski area. Both Northstar and Sierra are located near
Lake Tahoe, California. Bear Mountain is a day ski area located approximately
two hours from Los Angeles, California. Waterville Valley, a destination resort,
and Mt. Cranmore, a day ski area, are located in New Hampshire. Loon Mountain is
a day ski area with other outdoor recreational activities located in Lincoln,
New Hampshire. The Summit is located in Northwest Washington and is a day ski
area. Grand Targhee is a destination ski resort located in Wyoming.
Operations are highly seasonal at all locations with the majority of
revenues realized during the ski season from late November through early April.
The length of the ski season and the profitability of operations are
significantly impacted by weather conditions. Although Northstar, Bear Mountain,
Waterville Valley, Loon Mountain and Mt. Cranmore have snowmaking capacity to
mitigate some of the effects of adverse weather conditions, abnormally warm
weather or lack of adequate snowfall can materially affect revenues. Sierra, the
Summit and Grand Targhee lack significant snowmaking capability but generally
benefit from higher annual snowfall.
Other operational risks and uncertainties that face the Company include
competitive pressures affecting the number of skier visits and ticket prices;
the success of marketing efforts to maintain and increase skier visits; the
possibility of equipment failure; and continued access to water supplies for
snowmaking.
Cash
Included in cash at October 30, 1998 and October 31, 1997 is restricted cash
of $533,000 and $344,000, respectively, relating to advance deposits and rental
fees due to property owners for lodging and property rentals.
<PAGE>F-8
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
1. Organization, Basis of Presentation and Summary of Significant
Accounting Policies - (Continued)
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or
market. The components of inventories are as follows:
October 30, October 31,
1998 1997
------------ ----------
(In thousands)
Retail products........................... $ 3,199 $ 2,560
Supplies.................................. 916 314
Food and beverage......................... 255 185
----------- ----------
$ 4,370 $ 3,059
=========== ==========
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method based upon the estimated service lives, which are as
follows:
Land improvements........................................ 20 years
Buildings and improvements............................... 20 years
Lift equipment........................................... 15 years
Other machinery and equipment............................ 3 to 15 years
Amortization of assets recorded under capital leases is included in depreciation
expense.
Real Estate Activities
The Company capitalizes as real estate held for development and sale the
original acquisition cost (or appraised value in connection with purchase
business combinations), direct construction and development costs, and other
related costs. Property taxes, insurance and interest incurred on costs related
to real estate under development are capitalized during periods in which
activities necessary to get the property ready for its intended use are in
progress. Land costs and other common costs incurred prior to construction are
allocated to each land parcel benefited. Construction related costs are
allocated to individual units in each development phase using the relative sales
value method. Selling expenses are charged against income in the period
incurred. Interest capitalized on real estate development projects for the year
ended October 30, 1998 was $162,000 (none for the year ended October 31, 1997).
Sales and profits on real estate sales are recognized using the full accrual
method at the point that the Company's receivables from land sales are deemed
collectible and the Company has no significant remaining obligations for
construction or development, which typically occurs upon transfer of title. If
such conditions are not met, the recognition of all or part of the sales and
profit is postponed.
Long-Lived Assets
The Company evaluates potential impairment of long-lived assets and
long-lived assets to be disposed of in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No.
121 establishes
<PAGE>F-9
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Long-Lived Assets - (Continued)
procedures for review of recoverability, and measurement of impairment if
necessary, of long-lived assets, goodwill and certain identifiable intangibles
held and used by an entity. SFAS No. 121 requires that those assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. SFAS No. 121 also
requires that long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of carrying amount or fair value less
estimated selling costs. As of October 30, 1998 and October 31, 1997, management
believes that there has not been any impairment of the Company's long-lived
assets or goodwill.
Fair Value of Financial Instruments
The fair value of amounts outstanding under the Company's Senior Credit
Facility approximates book value, as the interest rate on such debt generally
varies with changes in market interest rates. The fair value of the Company's
Senior Notes was approximately $124 and $114 million at October 30, 1998 and
October 31, 1997, respectively, which is based on the market price of such debt.
Revenue Recognition
Revenues are recognized as services are provided and products are sold.
Sales of season passes are initially deferred in unearned income and recognized
ratably over the ski season.
Amortization
The excess of the purchase price over the fair values of the net assets
acquired (goodwill) is being amortized using the straight-line method over a
period of 15 years.
Deferred financing costs are being amortized over the lives of the related
obligations.
Advertising Costs
The cost of advertisements is expensed when the advertisement is initially
released. The cost of professional services for advertisements, sales campaigns,
promotion, and public relations is expensed when the services are rendered. The
cost of brochures is expensed over the ski season. Advertising expenses for the
years ended October 30, 1998 and October 31, 1997 were $3,193,000 and
$1,983,000, respectively.
Income Taxes
Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
The Company is included in the federal and state tax returns of Parent. The
provision for federal and state income tax is computed as if the Company filed
separate consolidated tax returns.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") requires that comprehensive income and
its components, as defined in the pronouncement, be reported within the
<PAGE>F-10
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Comprehensive Income - (Continued)
consolidated financial statements of the Company. The Company adopted SFAS No.
130 during the year ended October 30, 1998. The Company currently does not have
any transactions that would necessitate disclosure of comprehensive income;
however, the Company will continue to evaluate the impact of SFAS No. 130.
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 estimates.
Pending Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 is required
to be adopted by the Company during fiscal 1999. SFAS No. 131 requires that
annual and interim financial and descriptive information about reportable
operating segments be reported on the same basis used internally for evaluating
segment performance and the allocation of resources. The Company anticipates
providing segment disclosures for its resort operations and real estate and
other segments. However, the Company does not expect any change to its primary
financial statements.
The Accounting Standards Executive Committee recently issued Statement of
Position ("SOP") 98-1 providing guidance on accounting for the costs of computer
software developed or obtained for internal use. The effective date for SOP 98-1
is for fiscal years beginning after December 15, 1998. Currently, the Company
capitalizes purchased software above its capitalization threshold, and expenses
development, production and maintenance costs associated with computer software
developed for internal use. The Company is in the process of reviewing its
current policies for accounting for costs associated with internal use software
and how they may be affected by SOP 98-1.
Reclassifications
Certain amounts in the 1997 consolidated financial statements have been
reclassified to conform with the current year's presentation.
2. Acquisitions
As described below, Booth Creek consummated the Waterville Valley, Mt.
Cranmore, California, Summit and Grand Targhee acquisitions prior to October 31,
1997, and the Loon Mountain acquisition prior to October 30, 1998. These
acquisitions have been accounted for using the purchase method of accounting.
The results of operations of the resorts have been included in the accompanying
consolidated statements of operations since the effective dates of such
acquisitions.
The Waterville Valley and Mt. Cranmore Acquisitions
On November 27, 1996, Booth Creek purchased the assets of the Waterville
Valley and Mt. Cranmore resorts from subsidiaries of American Skiing Company
("ASC") for an aggregate purchase price of $17.5 million. The purchase price was
paid with $14.75 million in cash, before giving effect to normal working capital
adjustments for current assets acquired and current liabilities assumed, and the
$2.75 million ASC Seller Note (Note 5).
<PAGE>F-11
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
2. Acquisitions - (Continued)
The California Acquisitions
On December 3, 1996, Booth Creek purchased from Fibreboard Corporation all
of the issued and outstanding capital stock of Trimont Land Company, which
operates Northstar, Sierra-at-Tahoe, Inc., which operates Sierra, and Bear
Mountain, Inc., which operates Bear Mountain. The aggregate purchase price was
$121.5 million in cash, before giving effect to normal working capital
adjustments for current assets acquired and current liabilities assumed.
The Summit Acquisition
Effective January 15, 1997, Booth Creek purchased all of the issued and
outstanding common stock of Ski Lifts, Inc. ("Ski Lifts"), the owner and
operator of the ski resort assets of the Summit for an aggregate purchase price
of approximately $14 million, which included the assumption of approximately
$3.6 million of indebtedness, the issuance by Ski Lifts of the approximately
$9.8 million Summit Seller Note, and other obligations to the selling
shareholders of approximately $600,000.
In connection with the consummation of the Summit acquisition, Ski Lifts
transferred certain owned real estate held for development purposes and related
buildings into a Delaware limited liability company (the "Real Estate LLC"), of
which Ski Lifts is a member and 99% equity interest holder and Booth Creek is
the other member and 1% equity interest holder. In addition, Ski Lifts granted
the Real Estate LLC an option (the "Real Estate Option") to purchase acreage of
developmental real estate for nominal consideration. Ski Lifts also issued
28,000 shares of non-voting preferred stock (the "Ski Lifts Preferred Stock") to
its prior owners having an aggregate liquidation preference equal to $3.5
million, the aggregate estimated fair market value of the real estate
transferred to the Real Estate LLC and the real estate subject to the Real
Estate Option. Concurrently with these transactions, the Real Estate LLC entered
into an agreement to purchase (the "Preferred Stock Purchase Agreement") the Ski
Lifts Preferred Stock, on a quarterly basis over the five years following the
date of the Summit Acquisition, at a purchase price equal to the liquidation
preference thereof plus accrued dividends to the date of purchase. Through
October 30, 1998, the Company has paid $875,000 under the Preferred Stock
Purchase Agreement. The Real Estate LLC's obligations under the Preferred Stock
Purchase Agreement are secured by a first priority lien on the developmental
real estate held by the Real Estate LLC and substantially all of its other
assets. The Ski Lifts Preferred Stock provides for a 9% cumulative dividend and
is redeemable at the option of Ski Lifts without premium. In addition, pursuant
to the terms of the Ski Lifts Preferred Stock, the holders thereof have no
redemption rights.
The Grand Targhee Acquisition
On March 18, 1997, Booth Creek acquired all the issued and outstanding
capital stock of Grand Targhee Incorporated, the owner of the ski resort assets
of Grand Targhee, for an aggregate purchase price of approximately $7.9 million
plus contingent payments of up to $1.5 million based on the performance of Grand
Targhee during the 1998/99 ski season and additional commissions based on the
number of dwelling units developed at the resort through 2012.
The 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.
The aggregate net purchase price for the Loon Mountain acquisition was
approximately $30.2 million (including the assumption of debt which was repaid
in connection with the acquisition and acquisition costs).
<PAGE>F-12
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
2. Acquisitions - (Continued)
Summary of Purchase Price Allocations
Summary information regarding the purchase price allocations to the assets
acquired and liabilities assumed in each of the acquisitions described above is
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Waterville
Valley and Grand Loon
Mt. Cranmore California Summit Targhee Mountain
Acquisitions Acquisitions Acquisition Acquisition Acquisition
------------ ------------- ----------- ----------- -----------
(In thousands)
Net working capital........ $ (714) $ (5,206) $ (5,822) $ (752) $ (1,339)
Property and equipment..... 17,500 86,078 9,148 8,837 30,045
Real estate and other long-
term assets.............. - 15,608 4,189 26 1,319
Goodwill................... 1,931 22,318 9,655 - 186
Long-term debt............. (3,172) (796) (9,880) (80) -
Deferred income taxes and
other long-term liabilities - - (6,782) (58) -
--------- ---------- ---------- --------- ---------
$ 15,545 $ 118,002 $ 508 $ 7,973 $ 30,211
========= ========== ========== ========= =========
</TABLE>
Pro Forma Financial Information
The following table represents unaudited pro forma financial information
which presents the Company's consolidated results of operations for the years
ended October 30, 1998 and October 31, 1997 as if the acquisitions and related
financing transactions occurred on November 1, 1996.
1998 1997
---- ----
(In thousands)
Statement of operations data:
Revenues................................. $ 115,495 $ 97,825
Income (loss) from operations............ $ 5,114 $ (3,929)
Net loss................................. $ (14,758) $ (21,241)
Other data:
EBITDA................................... $ 27,382 $ 14,236
Noncash cost of real estate sales........ $ 3,721 $ 2,370
EBITDA represents income from operations before depreciation, depletion and
amortization expense and the noncash cost of real estate sales.
The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions been made on the date
indicated or of results which may occur in the future.
Proposed Seven Springs Acquisition
On August 28, 1998 the Company, Booth Creek Ski Acquisition, Inc., a wholly
owned subsidiary of Booth Creek ("Aquisition Sub"), and Seven Srings 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 Acquistion Sub with and into Seven Springs. The aggregate
merger consideration and related payments will be approxmimately $83.0
<PAGE>F-13
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
2. Acquisitons - (Continued)
Proposed Seven Springs Acquisition (continued)
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. On October 29, 1998, the Court
entered a final judgment denying Plaintiff's motion and has permitted the
consummation of the transactions contemplated by the Merger Agreement. On
December 28, 1998, the Plaintiff's filed an amended notice of appeal which is
currently pending. While the Company believes that Seven Springs will prevail
with its position 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.
3. Property and Equipment
Property and equipment consist of the following:
October 30, October 31,
1998 1997
------------- ------------
(In thousands)
Land and improvements.............. $ 36,933 $ 28,791
Buildings and improvements......... 45,309 34,624
Lift equipment..................... 42,807 32,998
Other machinery and equipment...... 45,099 29,008
Construction in progress........... 10,670 7,491
----------- -----------
180,818 132,912
Less accumulated depreciation..... 24,349 9,273
----------- -----------
$ 156,469 $ 123,639
=========== ===========
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
October 30, October 31,
1998 1997
------------ -----------
(In thousands)
Accounts payable..................... $ 10,652 $ 7,618
Accrued compensation and benefits.... 3,164 1,575
Taxes other than income.............. 973 545
Unearned income and deposits......... 4,017 3,341
Interest............................. 2,349 2,027
Other................................ 955 2,026
----------- -----------
$ 22,110 $ 17,132
=========== ===========
<PAGE>F-14
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
5. Financing Arrangements
Senior Credit Facility
The following is a summary of certain provisions of the Amended and
Restated Credit Agreement (the "Senior Credit Facility"), as amended and
restated on January 28, 1999 and effective beginning October 30, 1998, among
Booth Creek, its subsidiaries, the financial institutions party thereto and
BankBoston, N.A., as administrative agent ("Agent").
General - The Senior Credit Facility provides for borrowing
availability of up to $25 million. The Senior Credit Facility requires
that the Company not have borrowings thereunder in excess of $8.0
million in addition to certain amounts maintained by the Company in
certain depository accounts with the Agent for a period of 60
consecutive days each year commencing sometime between February 1 and
February 28. Borrowings under the Senior Credit Facility are
collectively referred to herein as the "Loans." Total borrowings
outstanding under the Senior Credit Facility at October 30, 1998 was
$17,143,000.
Interest - For purposes of calculating interest, the Loans can be, at
the election of the Company, Base Rate Loans or LIBOR Rate Loans or a
combination thereof. Base Rate Loans bear interest at the sum of (a) a
margin of between 0% and .5%, depending on the level of consolidated
EBITDA of the Company and its subsidiaries (as determined pursuant to
the Senior Credit Facility), plus (b) the higher of (i) the Agent's base
rate or (ii) the federal funds rate plus .5%. LIBOR Rate Loans bear
interest at the LIBOR rate plus a margin of between 2% and 3%, depending
on the level of consolidated EBITDA. The Senior Credit Facility also
requires a commitment fee of .375% based on the unused borrowing base.
As of October 30, 1998 the borrowings outstanding bore interest at 8%,
pursuant to the Base Rate Loans option.
Repayment - Subject to the provisions of the Senior Credit Facility,
the Company may, from time to time, borrow, repay and reborrow under the
Senior Credit Facility. The entire unpaid balance under the Senior
Credit Facility is due and payable on November 15, 1999.
Security - Borrowings under the Senior Credit Facility are secured by
(i) a pledge of the Agent for the ratable benefit of the financial
institutions party to the Senior Credit Facility of all of the capital
stock of Booth Creek's principal subsidiaries and (ii) a grant of a
security interest in substantially all of the consolidated assets of
Booth Creek and its subsidiaries (excluding the Real Estate LLC).
Covenants - The Senior Credit Facility contains financial covenants
relating to the maintenance of (i) ratios of (a) financing debt to
consolidated cash flow, (b) adjusted consolidated cash flow to
consolidated debt service and (c) consolidated cash flow to consolidated
interest expense, (ii) consolidated net worth, and (iii) consolidated
cash flow. The Senior Credit Facility also contains restrictive
covenants pertaining to the management and operation of Booth Creek and
its subsidiaries. The covenants include, among others, significant
limitations on indebtedness, guarantees, mergers, acquisitions,
fundamental corporate changes, capital expenditures, asset sales,
leases, investments, loans and advances, liens, dividends and other
stock payments, transactions with affiliates, optional payments and
modification of debt instruments and issuances of stock.
<PAGE>F-15
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
5. Financing Arrangements - (Continued)
Long-Term Debt
Long-term debt consists of the following instruments, which are described
below:
October 30, October 31,
1998 1997
------------ -----------
(In thousands)
Senior Notes........................ $ 133,500 $ 116,000
ASC Seller Note..................... 2,400 2,500
Other debt.......................... 3,237 2,827
------------ -----------
139,137 121,327
Less current portion............... 1,785 947
------------- -----------
$ 137,352 $ 120,380
============= ===========
Senior Notes
As of October 30, 1998, the Company had outstanding $133.5 million aggregate
amount of its senior debt securities (the "Senior Notes"). The Senior Notes
mature on March 15, 2007, and bear interest at 12.5% per annum, payable
semi-annually on March 15 and September 15. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time after March 15,
2002, with an initial redemption price of 106.25% declining through maturity,
plus accrued and unpaid interest to the redemption date.
The Senior 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 Senior 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 Senior 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 Senior Notes are structurally
subordinated to any indebtedness of the Company's subsidiaries that are not
Guarantors. The indenture for the Senior Notes (the "Indenture") contains
covenants for the benefit of the holders of the Senior Notes that, among other
things, restrict the ability of the Company and any Restricted Subsidiaries to:
(i) incur additional indebtedness; (ii) pay dividends and make distributions;
(iii) issue stock of subsidiaries; (iv) make certain investments; (v) repurchase
stock; (vi) create liens; (vii) enter into transactions with affiliates, (viii)
enter into sale and leaseback transactions, (ix) create dividend or other
payment restrictions affecting Restricted Subsidiaries; (x) merge or consolidate
the Company or any Guarantors; and (xi) transfer and sell assets.
The Guarantors are wholly-owned subsidiaries of Booth Creek and have fully
and unconditionally guaranteed the Senior 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 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.
<PAGE>F-16
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
5. Financing Arrangements - (Continued)
Long-Term Debt (continued)
On March 18, 1997, the Company consummated an offering of $110 million in
Senior Notes. A portion of the proceeds from the offering were used to repay $90
million in bridge notes bearing interest at approximately 11%. Existing deferred
financing costs at March 18, 1997 of $2,664,000 relating principally to the
bridge notes repaid, were charged off in connection with the early
extinguishment of debt, and have been reflected as an extraordinary item in the
accompanying statement of operations for the year ended October 31, 1997.
ASC Seller Note
As part of the purchase price for the acquisitions of Waterville Valley and
Mt. Cranmore, Booth Creek issued a promissory note to American Skiing Company in
the aggregate principal amount of $2.75 million. The ASC Seller Note requires
annual principal payments at an initial level of $100,000 per year and
increasing to $350,000 by January 31, 2003, with the remaining principal balance
of $1,150,000 due on June 30, 2004. The ASC Seller Note bears interest at 12%
per annum payable semi-annually on each June 30 and December 31.
Other Debt
Other debt of $3,237,000 and $2,827,000 at October 30, 1998 and October 31,
1997, respectively, consists of various capital lease obligations, notes
payables and improvement bond obligations.
For the year ended October 30, 1998, the Company entered into long-term debt
and capital lease obligations of approximately $2.5 million for the purchase of
equipment.
During the years ended October 30, 1998 and October 31, 1997, the Company
paid cash for interest costs (net of amounts capitalized) of $17,176,000 and
$11,243,000, respectively.
6. Commitments and Contingencies
Lease Commitments
The Company leases certain machinery, equipment and facilities under
operating leases. Aggregate future minimum lease payments as of October 30, 1998
are as follows:
Year
Ending
October (In thousands)
------- --------------
1999.................................. $ 2,713
2000.................................. 1,888
2001.................................. 1,619
2002.................................. 1,427
2003.................................. 1,421
Thereafter............................ 284
-----------
$ 9,352
===========
Total rent expense for all operating leases amounted to $2,675,000 and
$2,882,000 for the years ended October 30, 1998 and October 31, 1997,
respectively.
<PAGE>F-17
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
6. Commitments and Contingencies - (Continued)
Lease Commitments (continued)
The Company leases certain machinery and equipment under capital leases.
Aggregate future minimum lease payments as of October 30, 1998 for years ending
October 1999 and October 2000 were $783,000 and $823,000, respectively. The cost
and accumulated depreciation of equipment recorded under capital leases at
October 30, 1998 were $2,511,000 and $791,000, respectively.
In addition, the Company leases property from the U.S. Forest Service under
Special Use Permits for all or certain portions of the operations of Sierra,
Bear Mountain, Waterville Valley, Loon Mountain, the Summit and Grand Targhee.
These leases are effective through 2008, 2020, 2034, 2006, 2032 and 2034,
respectively. Lease payments are based on a percentage of revenues, and were
$1,014,000 and $665,000 for the years ended October 30, 1998 and October 31,
1997, respectively.
Other Commitments
Commitments for future capital expenditures totaled approximately $4.4
million at October 30, 1998.
In September 1997, the Company acquired a two year land purchase option for
$500,000. The land purchase option permits the Company to acquire certain land
for additional consideration of approximately $3.2 million. If the land purchase
option is not exercised due to certain events, $250,000 of the option price is
refundable.
Litigation
The nature of the ski industry includes the risk of skier injuries.
Generally, the Company has insurance to cover potential claims; in some cases
the amounts of the claims may be substantial. The Company is also involved in a
number of other claims arising from its operations.
Management, in consultation with legal counsel, believes resolution of these
claims will not have a material adverse impact on the Company's consolidated
financial condition or results of operations.
Pledge of Stock
The stock of the Company is pledged to secure $54.0 million of indebtedness
of the Parent.
7. Income Taxes
The income tax benefit (provision) consists of the following:
Year Ended
October 30, October 31,
1998 1997
----------- -----------
(In thousands)
Current:
Federal.............................. $ - $ 200
State................................ - (20)
--------- -----------
- 180
========= ============
Deferred:
Federal............................. - 1,442
State............................... - 106
--------- -----------
- 1,548
--------- -----------
$ - $ 1,728
========= ===========
<PAGE>F-18
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
7. Income Taxes - (Continued)
The difference between the statutory federal income tax rate and the
effective tax rate is attributable to the following:
Year Ended
---------------------------
October 30, October 31,
1998 1997
---------------------------
(In thousands)
Tax benefit computed at federal statutory rate
of 35% of pre-tax loss..................... $ 6,045 $ 5,575
Net change in valuation allowance........... (6,073) (3,691)
Other, net................................... 28 (156)
------------ ----------
$ - $ 1,728
============ ==========
As all of the income tax benefit for the year ended October 31, 1997 was
attributable to the losses from continuing operations, none of the benefit was
allocated to the extraordinary loss on early retirement of debt (Note 5).
Accordingly, the extraordinary loss increased the Company's net operating losses
by $2,664,000 and the valuation allowance by $972,000. In connection with the
purchase accounting for the Loon Mountain acquisition, approximately $13 million
of the Company's existing net operating losses were used to offset net taxable
temporary differences relating principally to Loon Mountain's long-term assets.
Accordingly, the Company's valuation allowance for net deferred tax assets was
reduced by $4,639,000. After consideration for the Loon Mountain acquisition,
the net increase in the Company's valuation allowance for the year ended October
30, 1998 was $826,000, which included the effect of adjustments to the prior
year's estimated net operating loss.
At October 30, 1998, the Company has net operating loss carryforwards of
approximately $43 million for federal income tax reporting purposes, which
expire in 2012 and 2018.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
October 30, October 31,
1998 1997
------------ -----------
(In thousands)
Deferred tax assets:
Accruals and reserves.................. $ 1,216 $ 754
Alternative minimum tax credit
carryforwards.......... 545 130
Net operating loss carryforwards....... 15,806 5,909
------------ ---------
Total deferred tax assets.......... 17,567 6,793
Deferred tax liabilities:
Property and equipment................. (10,514) (2,000)
------------ --------
Total deferred tax liabilities......... (10,514) (2,000)
------------ --------
Net deferred tax assets................. 7,053 4,793
Valuation allowance..................... (7,053) (4,793)
------------ --------
Net deferred tax assets reflected in
the accompanying consolidated balance
sheet.................................. $ - $ -
============= =========
8. Management Agreement and Related Party Transactions
Booth Creek has in effect a management agreement with Booth Creek, Inc. (the
"Management Company") dated November 27, 1996 (the "Management Agreement")
pursuant to which the Management Company provides Parent, Booth Creek and its
subsidiaries with financial advice with respect to, among other matters, cash
<PAGE>F-19
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
8. Management Agreement and Related Party Transactions - (Continued)
management, accounting and data processing systems and procedures, budgeting,
equipment purchases, business forecasts, treasury functions and investor
relations. The Management Company also provides general supervision and
management advice concerning tax, legal and corporate finance matters,
administration and operation, personnel matters, business insurance and the
employment of consultants, contractors and agents.
Under the terms of the Management Agreement, the Company provides customary
indemnification, reimburses certain costs and pays the Management Company an
annual management fee of $350,000 plus an operating bonus (the "Operating
Bonus"), not to exceed $400,000, equal to 2.5% of the excess of Consolidated
EBITDA (as defined in the Management Agreement) for such year over $25 million.
The Operating Bonus for each fiscal year must be paid within 15 days after
Parent receives its fiscal year-end audited financial statements for that year.
Booth Creek pays the Management Company amounts necessary to cover operations
costs (other than office operations cost but including, without limitation,
reasonable travel and entertainment costs) and reimburse certain costs and
expenses, of the Management Company attributable to, arising out of, in
connection with, or related to management services rendered by the Management
Company. Management fees and reimbursable operating expenses during the years
ended October 30, 1998 and October 31, 1997 were $646,000 and $350,000,
respectively.
During the year ended October 30, 1998, the Management Company incurred fees
and expenses of approximately $119,000 in connection with certain of the
acquisitions. For the year ended October 31, 1997, the Management Company and
certain of its affiliates made advances and deposits of approximately
$1,400,000, and incurred expenses of approximately $1,000,000, in connection
with certain of the acquisitions. All of these costs were later reimbursed by
the Company pursuant to the Management Agreement.
At October 31, 1997, the Company had a receivable of $331,000 from Parent
which is included in other current assets in the accompanying consolidated
balance sheet at October 31, 1997 (none at October 30, 1998).
9. Employee Benefit Plan
The Company maintains a defined contribution retirement plan (the "Plan"),
qualified under Section 401(k) of the Internal Revenue Code, for certain
eligible employees. Pursuant to the Plan, eligible employees may contribute a
portion of their compensation, subject to a maximum amount per year as specified
by law. The Company provides a matching contribution based on specified
percentages of amounts contributed by participants. The Company's contribution
expense for the years ended October 30, 1998 and October 31, 1997 was $490,000
and $215,000, respectively.
10. Business Segments
The Company currently operates in two business segments, Resorts and Real
Estate and other. Data by segment is as follows:
October 30, October 31,
1998 1997
--------------- -------------
(In Thousands)
Revenue:
Resorts......................... $ 97,248 $ 68,136
Real estate and other........... 7,608 3,671
--------------- ------------
$ 104,856 $ 71,807
=============== ============
Operating income (loss):
Resorts............................. $ (1,201) $ (1,628)
Real estate and other............... 2,664 612
-------------- -------------
$ 1,463 $ (1,016)
============== ============
<PAGE>F-20
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued)
10. Business Segments - (Continued)
October 30, October 31,
1998 1997
----------- ----------
(In thousands)
Depreciation, depletion and amortization:
Resorts.............................. $ 17,479 $ 11,421
Real estate and other................ 273 260
----------- ----------
$ 17,752 $ 11,681
=========== ==========
Capital expenditures:
Resorts.............................. $ 15,042 $ 8,918
Real estate and other................ 1,717 72
----------- ----------
$ 16,759 $ 8,990
=========== ==========
Identifiable assets:
Resorts.............................. $ 162,796 $ 127,709
Real estate and other................ 15,240 16,559
----------- ----------
$ 178,036 $ 144,268
=========== ==========
<PAGE>F-21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Truckee, State of California, as of February 5, 1999.
BOOTH CREEK SKI HOLDINGS, INC.
(Registrant)
By: /s/ GEORGE N. GILLETT
----------------------
George N. Gillett
Chairman of the Board of Directors and
Chief Executive Officer
By: /s/ ELIZABETH J. COLE
----------------------------------
Elizabeth J. Cole
Executive Vice President and Chief
Financial Officer
By: /s/ BRIAN J. POPE
-----------------------------------
Brian J. Pope
Vice President of Accounting and Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and as of the dates indicated.
Signature Title Date
- --------- ------ ----
/s/ GEORGE N. GILLETT Chairman of the Board February 5, 1999
- ------------------------------- of Directors and Chief
George N. Gillett Executive Officer
/s/ ELIZABETH J. COLE Executive Vice President February 5, 1999
- -------------------------------- and Chief Financial
Elizabeth J. Cole Officer
/s/ BRIAN J. POPE Vice President of Accounting February 5, 1999
- ------------------------------ and Finance (Chief Accounting
Brian J. Pope Officer)
This SUPPLEMENTAL INDENTURE NO. 4 to INDENTURE (this "Supplemental
Indenture") is entered into among Booth Creek Ski Holdings, Inc., a Delaware
corporation (the "Company") and Booth Creek Ski Acquisition, Inc. ("Acquisition
Sub"), a Pennsylvania corporation, and Marine Midland Bank, a New York banking
corporation and trust company, as Trustee (the "Trustee").
RECITALS
WHEREAS, the Company, the Guarantors and the Trustee have entered
into that certain Indenture dated as of March 18, 1997, as amended by
Supplemental Indenture No. 1 dated as of April 25, 1997, Supplemental Indenture
No. 2 dated as of February 20, 1998 and Supplemental Indenture No. 3 dated as of
February 26, 1998 (the "Indenture") providing for the issuance and delivery by
the Company of its 12 1/2% Senior Notes due 2007;
WHEREAS, the Company has entered into certain
financing and related transactions;
WHEREAS, Acquisition Sub has become a Restricted
Subsidiary of the Company;
WHEREAS, pursuant to Section 4.14 of the Indenture, any Restricted
Subsidiary with assets or stockholder's equity in excess of $20,000 is required
to become a Guarantor under the Indenture; and
WHEREAS, Article 10 of the Indenture provides for the terms and
conditions of the guarantee of the obligations of the Company under the
Indenture by the Restricted Subsidiaries of the Company.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows for the
benefit of each other party and for the equal and ratable benefit of the Holders
of the Company's 12% Senior Notes due 2007:
Section 1. GUARANTEE.
For value received. Acquisition Sub hereby agrees to become a
party to the Indenture as a Guarantor under and pursuant to Article 10 of the
Indenture and to jointly and severally unconditionally guarantee to each Holder
and the Trustee (a) the due and punctual payment of the principal of, and
premium, if any, and interest on each Note, when and as
<PAGE>
the same shall become due and payable, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest (including Additional
Interest) on the overdue principal of, and premium, if any, and interest, and
the due and punctual performance of all other obligations of the Company to the
Holders or the Trustee, all in accordance with the terms set forth in such Note
and Article 10 of the Indenture, and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. Acquisition Sub further agrees that its obligations under Article 10
of the Indenture shall be absolute and unconditional, irrespective of, and shall
be unaffected by, any invalidity, irregularity or unenforceability of any such
Note or the Indenture, any failure to enforce the provisions of any such Note or
the Indenture, any waiver, modification or indulgence granted to the Company
with respect thereto by the Holder of such Note or the Trustee, or any other
circumstances which may otherwise constitute a legal or equitable discharge of a
surety or such Guarantor.
Section 2. MISCELLANEOUS.
2.1. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.
2.2. Confirmation of the Indenture. Except as amended hereby, the
Indenture shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
2.3. Multiple Counterparts. The parties may sign multiple
counterparts of this Supplemental Indenture. Each signed counterpart shall be
deemed an original, but all of them together represent one and the same
agreement.
2.4. Separability. Each provision of this Supplemental Indenture
shall be considered separable and if for any reason any provision which is not
essential to the effectuation of the basic purpose of this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
2.5. Headings. The captions of the various section headings of this
Supplemental Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof, and shall in no way modify or restrict any
of the terms or provisions hereof.
<PAGE>
2.6. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Company and Acquisition Sub.
2.7. Definitions. All terms defined in the Indenture shall have
the same meaning in this Supplemental Indenture unless otherwise defined herein.
IN WITNESS WHEREOF, the parties hereto caused this Supplemental
Indenture to be duly executed as of this 8th day of October, 1998.
BOOTH CREEK SKI HOLDINGS, INC
By: /s/ JEFFREY J. JOYCE
--------------------------
Name: Jeffrey J. Joyce
Title: Executive Vice President
BOOTH CREEK SKI ACQUISITION. INC.
By: /s/ JEFFREY J. JOYCE
--------------------------
Name: Jeffrey J. Joyce
Title: Executive Vice President
MARINE MIDLAND BANK, as Trustee
By: /s/ROBERT A. CONRAD
---------------------------
Name: Robert A. Conrad
Title: President
