<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1997
REGISTRATION NO. 333-33483
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AMERICAN SKIING COMPANY
(FORMERLY ASC HOLDINGS, INC.)
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
MAINE 7990 04-3373730
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
--------------------------
SUNDAY RIVER ACCESS ROAD
BETHEL, MAINE 04217
(207) 824-8100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
CHRISTOPHER E. HOWARD, ESQ.
SENIOR VICE PRESIDENT AND CHIEF ADMINISTRATIVE OFFICER
AMERICAN SKIING COMPANY
SUNDAY RIVER ACCESS ROAD
BETHEL, MAINE 04217
(207) 824-8100
(207) 824-5158 (FACSIMILE)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies to:
<TABLE>
<S> <C>
THOMAS L. FAIRFIELD, ESQ. IAN B. BLUMENSTEIN, ESQ.
LeBoeuf, Lamb, Greene & MacRae, L.L.P. Latham & Watkins
Goodwin Square, 225 Asylum Street 885 Third Avenue
Hartford, Connecticut 06103 New York, New York 10022
(860) 293-3500 (212) 906-1200
(860) 293-3555 (facsimile) (212) 751-4864 (facsimile)
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value per share $339,250,000 $102,803.00(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) The Company previously paid $75,758.00 in connection with its initial filing
and has paid an additional $27,045.00 in connection with the increase in the
proposed maximum aggregate offering price reflected in this filing.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 1, 1997
PROSPECTUS
, 1997
14,750,000 SHARES
LOGO
COMMON STOCK
All of the 14,750,000 shares of common stock, $.01 par value per share (the
"Common Stock"), offered hereby are being sold by American Skiing Company (the
"Company"). A portion of the proceeds of the Offering (as defined), together
with borrowings under the New Credit Facility (as defined), will be used to fund
the acquisition by the Company of the Steamboat and Heavenly ski resorts (the
"Acquisition") for a purchase price of approximately $290 million. See "Risk
Factors--Substantial Leverage and Financial Risks."
Following the Offering, the outstanding common stock of the Company will
consist of 15,365,022 shares of Common Stock and 14,760,530 shares of Class A
Common Stock, $.01 par value per share (the "Class A Common Stock"). The rights
and preferences of holders of the Common Stock and Class A Common Stock will be
identical, except that (i) holders of Class A Common Stock will elect a class of
directors that constitutes two-thirds of the Board of Directors and holders of
Common Stock will elect a class of directors that constitutes one-third of the
Board of Directors and (ii) each share of Class A Common Stock will be
convertible into one share of Common Stock under certain circumstances. See
"Description of Capital Stock." All of the Class A Common Stock, representing
approximately 42.4% of the combined voting power of all outstanding shares of
Common Stock and Class A Common Stock, will be held by Leslie B. Otten, the
principal shareholder of the Company (the "Principal Shareholder").
A portion of the 14,750,000 shares of Common Stock offered hereby are being
offered by the Company at the price to the public set forth below (less
underwriting discounts and commissions) directly to the Principal Shareholder
(the "Concurrent Offering"). The Principal Shareholder intends to purchase a
number of shares of Common Stock in the Concurrent Offering having an aggregate
purchase price of between $15 million and $40 million. Assuming a price to the
public equal to the midpoint of the range shown below ($18.50 per share),
between 810,811 shares and 2,162,162 shares of Common Stock will be sold to the
Principal Shareholder in the Concurrent Offering. Accordingly, upon consummation
of the Concurrent Offering, the Principal Shareholder will own shares of Common
Stock (including shares of Common Stock which the Principal Shareholder has the
right to purchase pursuant to fully vested stock options, exercisable at the
price to the public set forth below, granted under the Company's Stock Option
Plan (as defined)) representing between 13.8% and 20.8% of the voting power of
all outstanding shares of Common Stock and, when such shares of Common Stock are
aggregated with the Principal Shareholder's shares of Class A Common Stock,
representing between 51.1% and 55.1% of the combined voting power of all
outstanding shares of Common Stock and Class A Common Stock. In addition, so
long as the Principal Shareholder owns shares of Common Stock and Class A Common
Stock representing a majority of the combined voting power of all outstanding
shares of Common Stock and Class A Common Stock, he will be able to determine
the outcome of all matters submitted to a vote of the shareholders of the
Company, except for matters requiring (i) the vote of a higher percentage of
voting power than the percentage held by the Principal Shareholder or (ii) the
vote of the shareholders voting as a separate class under state law or the
Company's Articles of Incorporation and Bylaws. See "Capitalization,"
"Management--Stock Option Plan," "Principal Shareholders" and "Description of
Capital Stock."
All of the 14,750,000 shares of Common Stock that are not sold to the
Principal Shareholder in the Concurrent Offering will be offered by the Company
to the public (the "Public Offering" and, together with the Concurrent Offering,
the "Offering").
Consummation of the Public Offering is conditioned upon the concurrent
consummation of the New Credit Facility, the Acquisition and the Concurrent
Offering.
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be between
$17.00 and $20.00 per share. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price.
The Company intends to apply for listing of the Common Stock on the New York
Stock Exchange under the symbol "SKI."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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<CAPTION>
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PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share
Public Offering........................................ $ $ $
Concurrent Offering.................................... $ -- $
Total (3)................................................ $ $ $
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</TABLE>
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO 2,090,878 ADDITIONAL SHARES OF COMMON STOCK, SOLELY TO COVER OVER-
ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO
THE PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO THE
COMPANY WILL BE $ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITING."
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them against
payment therefor, subject to various prior conditions, including their right to
reject any order in whole or in part. It is expected that delivery of share
certificates will be made in New York, New York, on or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
SCHRODER & CO. INC.
<PAGE>
[Pictures of Ski Areas, Facilities and National Map of Resort Locations]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by its independent accountants, and with quarterly reports for the
first three quarters of each fiscal year containing unaudited summary financial
information.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, CONSOLIDATED FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) AND PRO FORMA COMBINED FINANCIAL
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE
REQUIRES, ALL REFERENCES HEREIN TO THE "COMPANY" SHALL MEAN (A) AMERICAN SKIING
COMPANY AND ITS SUBSIDIARIES, EXCLUDING THE ACQUIRED RESORTS (AS DEFINED), WHEN
USED WITH RESPECT TO HISTORICAL INFORMATION CONTAINED HEREIN OR (B) AMERICAN
SKIING COMPANY AND ITS SUBSIDIARIES, INCLUDING THE ACQUIRED RESORTS, WHEN USED
WITH RESPECT TO INFORMATION ABOUT EVENTS THAT WILL OCCUR AFTER THE ACQUISITION
OR WHEN GIVING PRO FORMA EFFECT THERETO. SEE "THE TRANSACTIONS." ALL REFERENCES
HEREIN TO (A) THE COMPANY'S "FISCAL" YEAR SHALL MEAN THE 52- OR 53-WEEK PERIOD
ENDED OR ENDING ON THE LAST SUNDAY IN JULY, (B) THE ACQUIRED RESORTS' FISCAL
YEAR SHALL MEAN THE ACQUIRED RESORTS' FISCAL YEAR ENDED ON MAY 31, (C) "SKI
SEASON" SHALL MEAN THE PERIOD FROM THE OPENING OF THE FIRST OF THE COMPANY'S
MOUNTAINS FOR SKIING THROUGH THE CLOSING OF THE COMPANY'S LAST MOUNTAIN FOR
SKIING, TYPICALLY MID-NOVEMBER TO LATE MAY, (D) "SKIER VISITS" SHALL MEAN ONE
GUEST ACCESSING A SKI MOUNTAIN ON ANY ONE DAY AND (E) REAL ESTATE "RESIDENTIAL
UNITS" SHALL MEAN RESIDENTIAL REAL ESTATE OWNERSHIP INTERESTS, INCLUDING
INDIVIDUAL INTERVAL INTERESTS. ALL DISCUSSION HEREIN WITH RESPECT TO THE SIZE OF
A RESORT SHALL BE IN TERMS OF THE RELATIVE NUMBER OF SKIER VISITS AT SUCH
RESORT. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS WITH
RESPECT TO THE RELATIVE VOTING POWER OF SHARES OF COMMON STOCK AND CLASS A
COMMON, (A) ASSUMES THAT ALL STOCK OPTIONS TO PURCHASE SHARES OF COMMON STOCK
THAT ARE EXERCISABLE AT OR BELOW THE INITIAL PUBLIC OFFERING PRICE ARE EXERCISED
FOR SHARES OF COMMON STOCK, (B) GIVES EFFECT TO THE VOTING RIGHTS OF HOLDERS OF
THE COMPANY'S 6% CONVERTIBLE PREFERRED STOCK (AS DEFINED), (C) ASSUMES THAT THE
HOLDERS OF COMMON STOCK IN ASC EAST (AS DEFINED) EXCHANGE SUCH STOCK FOR AN
AGGREGATE OF 615,022 SHARES OF COMMON STOCK, (D) ASSUMES THAT THE PRINCIPAL
SHAREHOLDER PURCHASES A NUMBER OF SHARES OF COMMON STOCK IN THE CONCURRENT
OFFERING, AT A PRICE TO THE PUBLIC EQUAL TO THE MIDPOINT OF THE RANGE SHOWN ON
THE COVER PAGE OF THIS PROSPECTUS, HAVING AN AGGREGATE PURCHASE PRICE OF $15
MILLION, (E) ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS
IS NOT EXERCISED, (F) ASSUMES THAT NO SHARES OF CLASS A COMMON STOCK ARE
CONVERTED INTO SHARES OF COMMON STOCK AND (G) GIVES EFFECT TO A 14.76- FOR- 1
STOCK SPLIT (THE "STOCK SPLIT") WITH RESPECT TO CLASS A COMMON STOCK THAT WILL
BE EFFECTED PRIOR TO THE CONSUMMATION OF THE OFFERING. PRIOR TO MAKING AN
INVESTMENT IN THE COMMON STOCK, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY
THE INFORMATION DISCUSSED UNDER "RISK FACTORS."
THE COMPANY
Following the Acquisition, the Company will be the largest operator of
alpine resorts in the United States. The Company will own and operate nine ski
resorts, including two of the five largest resorts in the United States based on
1996-97 skier visits, with at least one resort in each major skiing market.
These nine resorts generated approximately 4.9 million skier visits,
representing approximately 9.4% of total skier visits in the United States
during the 1996-97 ski season. The Company's existing resorts include Sunday
River and Sugarloaf in Maine; Attitash/Bear Peak in New Hampshire; Killington,
Mount Snow/Haystack and Sugarbush in Vermont; and The Canyons, adjacent to Park
City, Utah (collectively, the "Existing Resorts"). On July 31, 1997, the Company
entered into a definitive agreement (the "Acquisition Agreement") to acquire (i)
the Steamboat ski resort and 168 acres of land held for development in Steamboat
Springs, Colorado ("Steamboat") and (ii) the Heavenly ski resort near Lake
Tahoe, California ("Heavenly" and, together with Steamboat, the "Acquired
Resorts"). After giving pro forma effect to the Transactions (as defined) as if
the Transactions occurred on July 28, 1996, the Company's resort revenues,
Resort EBITDA (as defined) and net loss for fiscal 1997 would have been
approximately $253.4 million, $56.2 and $3.6 million, respectively.
The Existing and Acquired Resorts include several of the top resorts in the
United States, including: (i) Steamboat, the number two overall ski resort in
the United States (number three in North America) according to a September 1997
SNOW COUNTRY magazine survey and the fourth largest ski resort in the United
States with over 1.1 million skier visits in the 1996-97 ski season; (ii)
Killington, the fifth largest resort in the United States with over 1.0 million
skier visits in the 1996-97 ski season; (iii) the three largest resorts in the
Northeast (Killington, Sunday River and Mount Snow/Haystack) in the 1996-97 ski
season;
3
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(iv) Heavenly, the second largest resort in the Pacific West Region and the 11th
largest resort in the United States with approximately 700,000 skier visits in
the 1996-97 ski season; and (v) Sugarloaf, the number one resort in the
Northeast according to the September 1997 SNOW COUNTRY magazine survey.
In addition to operating alpine resorts, the Company develops mountainside
real estate which complements the expansion of its on-mountain operations. The
Company has created a unique interval ownership product, the Grand Summit Hotel,
in which individuals purchase quartershare interval interests while the Company
retains ownership of core hotel and commercial properties. The initial sale of
quartershare units typically generates a high profit margin, and the Company
derives a continuing revenue stream from operating the hotel retail, restaurant
and conference facilities and renting quartershare interval interests when not
in use by their owners. The Company also develops alpine villages at prime
locations within certain of its resorts designed to fit that resort's individual
characteristics. The Company's real estate development strategy was developed
and implemented at the Sunday River resort, where over 1,350 units of
residential real estate (including condominiums, townhouses and quartershares)
have been developed and sold since 1983. A new Grand Summit Hotel was recently
completed at Attitash/Bear Peak, one Grand Summit Hotel is currently under
construction at each of Killington, Sunday River and Mount Snow/Haystack, and a
hotel at Sugarbush is near completion of the permitting process. These hotels
will have an aggregate of approximately 2,500 units, with preconstruction sales
contracts currently totaling over $45 million (representing 845 units). In
addition, the Company has over 7,000 acres of real estate available for future
development at its resorts, providing the capacity to support over 30,000
residential units over the next 15 to 20 years. In addition, the Company
operates golf courses at its resorts and conducts other off-season activities.
Such off-season activities accounted for approximately 11% of the Company's
resort revenues for fiscal 1997. See "Business--Operating Strategy--Expand Golf
and Convention Business."
The Company's primary strength is its ability to improve resort operations
by integrating investments in on-mountain capital improvements with the
development of mountainside real estate. Since 1994, the Company has increased
skier visits by 10.0% in the aggregate for the three resorts that it has owned
for multiple seasons. In addition, the Company has increased its market share of
skier visits in the northeastern United States from approximately 21.8% in the
1995-96 ski season to approximately 24.4% in the 1996-97 ski season (after
giving pro forma effect to the acquisition of the Killington, Mount Snow/
Haystack and Sugarloaf ski resorts as if such acquisitions had occurred on July
30, 1995). Management believes that the Acquired Resorts will provide the
Company with several significant operating benefits, including: (i) enhanced
cross-marketing of its resorts on a national basis; (ii) purchasing and other
economies of scale; and (iii) implementation of the Company's operating strategy
at a more diversified resort base.
For an organizational chart of the Company and its material operating
subsidiaries, see "Business-- The Company."
OPERATING STRATEGY
The Company believes that the following key operating strategies will allow
it to increase revenues and profitability by capitalizing on its position as a
leading mountain resort operator and real estate developer.
High Impact Capital Improvements
The Company attracts skiers to its resorts by creating a superior skiing
experience through high impact capital investments in on-mountain facilities.
The Company focuses its investments on increasing lift capacity, expanding
skiable terrain and snowmaking coverage, and developing other exciting alpine
attractions. For example, during the last two years the Company has (i) created
diverse skiing experiences such as the Oz bowl and the Jordan Bowl at Sunday
River, (ii) developed above tree-line snowfields at Sugarloaf, (iii) installed
heated eight-passenger high speed gondolas at Killington and The Canyons and
(iv) built one of the longest and fastest chairlifts in the world to
interconnect Sugarbush's North and South mountains. Since 1994, when the Company
began implementing its acquisition strategy, the Company has
4
<PAGE>
increased lift capacity, skiable terrain and snowmaking coverage at its resorts.
The 1997 summer capital improvement budget for on-mountain improvements totals
over $57.7 million, approximately $18.2 million of which will be invested at The
Canyons and approximately $7.0 million of which will be invested at the Acquired
Resorts.
Integration of Investments in Resort Infrastructure and Real Estate
The Company develops mountainside real estate that complements its
investments in ski operations to enhance the overall attractiveness of its
resorts as vacation destinations. Management believes that this integrated
approach results in growth in overall skier visits, including multi-day visits,
while generating significant revenues from real estate sales and lodging.
Investment typically begins with on-mountain capital improvements such as the
creation of new lifts, trails, expanded snowmaking capability, additional
restaurants and improved ski schools. As resort attendance increases, the
Company develops mountainside real estate to provide accommodations for the
increased number of resort guests. The Company carefully manages the type and
timing of real estate development to achieve capital appreciation and high
occupancy of accommodations. The Company's integrated investment strategy was
developed and refined at its Sunday River resort, where it has sold over 1,350
units of residential real estate since 1983. During that same period, annual
skier visits at Sunday River increased from approximately 50,000 to over
550,000, representing an approximate 18% compound annual growth rate.
Mountainside Real Estate Development
The Company's real estate development strategy is designed to capitalize on
the 7,000 acres of developable land it will control at or near its resorts and
its 15 years of experience in real estate development. Including the Acquired
Resorts, the Company owns or has rights to land providing the capacity to
develop over 30,000 residential units.
The Company's resort real estate development strategy is comprised of three
distinct components: (i) Grand Summit quartershare hotels, (ii) alpine village
development and (iii) discrete resort-specific projects. Residential units in
Grand Summit Hotels are sold in quartershare interval interests that allow each
of four quartershare unit owners to use the unit for 13 weeks divided evenly
over the year. The core commercial areas in the hotels are retained and operated
by the Company and include a lobby area, a sports club, retail shops,
restaurants and banquet and conference facilities. Unit owners may use the unit
during their allotted weeks or make the unit available for rental by the Company
under a management agreement that allows the Company to retain up to 45% of
rental revenues. In addition to its Grand Summit Hotels, the Company has
identified several areas for development of alpine villages unique to their
resort locations that consist of carefully planned communities integrated with
condominiums, luxury townhouses, single family luxury dwellings or lots and
commercial properties. Each of the Company's resorts also has the potential for
additional real estate development involving discrete projects tailored to the
characteristics of the particular resort.
Increase Revenues Per Skier
The Company seeks to increase revenues per skier by managing ticket yields
and expanding revenue sources at each resort. Management seeks to increase
non-lift ticket revenue sources by increasing point-of-sale locations and sales
volume through retail stores, food and beverage services, equipment rentals,
skier development, lodging and property management. In addition, management
believes that aggressive cross-selling of products and programs (such as the
Company's frequent skier and multi-resort programs) to resort guests increases
resort revenues and profitability. The Company believes it can increase ticket
yields by managing ticket discounts, closely aligning ticket programs to
specific customer market segments, offering multi-resort ticket products and
introducing a variety of programs that offer packages which include tickets with
lodging and other services available at its resorts. During the 1996-97 ski
season, the Company increased its average yield per skier visit by approximately
2.9% as compared to the 1995-96 ski season. The Company intends to further
increase revenues by implementing a property management
5
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program at the Acquired Resorts. In addition to its on-mountain activities, the
Company is expanding its retail operations by establishing retail stores in
strategic high traffic and recognized retail districts such as Freeport, Maine;
North Conway, New Hampshire; and South Lake Tahoe, Nevada, thereby strengthening
the name and image of the Company and its resorts.
Innovative Marketing Programs
The Company's marketing program is designed to (i) establish a nationally
recognized high quality name and image, while promoting the unique
characteristics of its individual resorts, (ii) capitalize on cross-selling
opportunities and (iii) enhance customer loyalty. The Company engages in joint
marketing programs with nationally recognized commercial partners such as Mobil,
Budweiser, Pepsi/Mountain Dew, Visa, FILA and Rossignol. Management believes
these joint marketing programs create a high quality image and a strong market
presence on a regional and national basis. In addition, the Company utilizes
loyalty based incentive programs such as the Edge Card, a private label frequent
skier program in which participants receive credits towards lift tickets and
other products.
The Company utilizes a variety of marketing media including direct mail,
television and the Internet. Direct mail marketing efforts include the Company's
"SNO" magazine, which targets the 18 to 30 year age group and currently has a
circulation of over 300,000 copies per issue. Television marketing efforts
include targeted commercials and programming such as the MTV Winter Lodge, which
is hosted by MTV and targets teens and young adults. Internet marketing efforts
include a Company sponsored website at www.peaks.com featuring photographs and
detailed information about the Company's resorts and current skiing conditions.
The Company's aggregate marketing budget for fiscal 1998 is approximately $28
million, including the value of contributions from strategic commercial
marketing partners.
Capitalize on a Multi-Resort Network
The Company's network of resorts provides both geographic diversity and
significant operating benefits. The Company believes its geographic diversity
(i) reduces the risks associated with unfavorable weather conditions, (ii)
insulates the Company from economic slowdowns in any particular region, (iii)
increases the accessibility and visibility of the Company's network of resorts
to the overall North American skier population and (iv) enables the Company to
offer a wide range of mountain vacation alternatives.
The Company believes that its ownership of multiple resorts also provides
the opportunity to (i) create the industry's largest cross-marketing program,
(ii) achieve efficiencies and economies of scale in purchasing goods and
services, (iii) strengthen the distribution network of travel agents and tour
operators by offering a range of mountain resort alternatives, consistent
service quality, convenient travel booking and incentive packages, (iv)
establish performance benchmarks for operations across all of the Company's
resorts, (v) utilize specialized individuals and cross-resort teams at the
corporate level as resources for the entire Company and (vi) develop and utilize
information and technology systems for application across all of the Company's
resorts.
Growth through Acquisitions
Since fiscal 1994, the Company has achieved substantial growth in its
business through acquisitions. The Company intends to consider future
acquisitions of large well-established destination resorts as well as smaller
"feeder" resorts. The Company focuses on acquiring larger resorts where it
believes it can improve profitability by implementing the Company's integrated
real estate development and on-mountain capital improvement strategy. The
Company also believes that by acquiring smaller regional resorts which have a
strong local following it can capitalize on a broader customer base to
cross-market its major destination resorts. The acquisition of less developed
resorts may also offer opportunities for expansion. The Company, however, is
effectively prohibited from acquiring additional resorts in New England as a
result of antitrust concerns. Historically, the Company has financed resort
acquisitions through private and public offerings of debt securities. The
Company expects to finance future acquisitions through a combination of
6
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internally generated funds, bank borrowings and public offerings or private
placements of equity and/or debt securities. Following the Transactions, the
Company will be highly leveraged. See "Risk Factors-- Substantial Leverage and
Financial Risks," "--Growth Through Acquisitions; Integration of Acquired
Resorts; Ability to Finance Acquisitions" and "Description of Indebtedness--The
New Credit Facility."
Expand Golf and Convention Business
The Company is one of the largest owners and operators of resort golf
courses in New England and seeks to capitalize on this status to increase
off-season revenues. Sugarloaf, Killington, Mount Snow/ Haystack and Sugarbush
all operate championship resort golf courses. The Sugarloaf course, designed by
Robert Trent Jones Jr. is rated as one of the top 25 upscale courses in the
country according to the May 1996 GOLF DIGEST magazine survey and one of the top
25 public courses in the country according to the May 1996 GOLF magazine survey.
In addition, a championship course designed by Robert Trent Jones, Jr. is
currently under construction at Sunday River. The Company also operates eight
golf schools at locations along the east coast from Florida to Maine. The
Company's golf program and other recreational activities draw off-season
visitors to the Company's resorts and support the Company's growing off-season
convention business, as well as its real estate development operations.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered:
Public Offering(1)(2)......... 13,939,189
Concurrent Offering(2)........ 810,811
Total(1).................... 14,750,000
Common Stock and Class A Common
Stock to be outstanding after
the Offering:
Common Stock(1)(3)(4)....... 15,365,022 shares
Class A Common Stock(3)..... 14,760,530 shares
Total(1)(4)............... 30,125,552 shares
</TABLE>
- ------------------------
(1) Does not include up to 2,090,878 shares of Common Stock that may be sold by
the Company to the Underwriters to cover over-allotments, if any.
(2) Assuming that the Principal Shareholder purchases a number of shares of
Common Stock in the Concurrent Offering, at a price to the public equal to
the midpoint of the range shown on the cover page of this Prospectus ($18.50
per share), having an aggregate purchase price of $15 million.
(3) Does not give effect to the conversion of any shares of Class A Common Stock
into shares of Common Stock. Each share of Class A Common Stock is
convertible at the option of the holder and upon the happening of certain
events into one share of Common Stock. Assuming full conversion into Common
Stock of all Class A Common Stock, after giving effect to the Offering, a
total of 30,125,552 shares of Common Stock would be outstanding.
(4) Does not include (i) 5,688,699 shares of Common Stock reserved for issuance
pursuant to the Company's Stock Option Plan (the "Stock Option Plan"),
2,475,235 shares of which will be issuable pursuant to options which are
exercisable immediately after the Offering, and (ii) 2,110,518 shares of
Common Stock reserved for issuance upon conversion of the Company's 6%
Convertible Preferred Stock (assuming a price to the public equal to the
midpoint of the range shown on the cover page of this Prospectus ($18.50 per
share)). All of the shares of Common Stock reserved for issuance under the
Stock Option Plan are subject to lock-up restrictions for 180 days following
the consummation of the Offering. See "The Transactions--Exchange Offers"
and "Management--Stock Option Plan."
8
<PAGE>
<TABLE>
<S> <C>
Voting Rights....................... The rights and preferences of holders of Common Stock
and Class A Common Stock are identical, except that
(i) holders of Class A Common Stock will elect a
class of directors that constitutes two-thirds of the
Board of Directors and holders of Common Stock will
elect a class of directors that constitutes one-third
of the Board of Directors and (ii) each share of
Class A Common Stock will be convertible into one
share of Common Stock (A) at the option of the holder
at any time, (B) automatically upon transfer to any
person that is not an affiliate of Leslie B. Otten
and (C) automatically if, at any time, the number of
shares of Class A Common Stock outstanding represent
less than 20% of the combined voting power of all
outstanding shares of Common Stock and Class A Common
Stock. Upon completion of the Offering, the Principal
Shareholder will hold 100% of the Class A Common
Stock, representing approximately 42.4% of the
combined voting power of all outstanding shares of
Common Stock and Class A Common Stock. Accordingly,
the Principal Shareholder initially will be able to
elect six of the nine members of the Board of
Directors of the Company. Mr. Otten also intends to
purchase a number of shares of Common Stock in the
Concurrent Offering having an aggregate purchase
price of between $15 million and $40 million.
Assuming a price to the public equal to the midpoint
of the range set forth on the cover page of this
Prospectus ($18.50 per share), between 810,811 shares
and 2,162,162 shares of Common Stock will be sold to
the Principal Shareholder in the Concurrent Offering.
Accordingly, upon consummation of the Concurrent
Offering, the Principal Shareholder will own shares
of Common Stock (including shares of Common Stock
which Mr. Otten has the right to purchase pursuant to
fully vested stock options, exercisable at the price
to the public set forth on the cover page of this
Prospectus, granted under the Company's Stock Option
Plan) representing between 13.8% and 20.8% of the
voting power of all outstanding shares of Common
Stock and, when such shares of Common Stock are
aggregated with the Principal Shareholder's shares of
Class A Common Stock, representing between 51.1% and
55.1% of the combined voting power of all outstanding
shares of Common Stock and Class A Common Stock. In
addition, so long as Mr. Otten owns shares of Common
Stock and Class A Common Stock representing a
majority of the combined voting power of all
outstanding shares of Common Stock and Class A Common
Stock, he will be able to determine the outcome of
all matters submitted to a vote of the shareholders
of the Company, except for matters requiring (i) the
vote of a higher percentage of voting power than the
percentage held by the Principal Shareholder or (ii)
the vote of the shareholders voting as a separate
class under state law or the Company's Articles of
Incorporation and Bylaws. For a description of the
matters which require a vote of the shareholders
voting as a separate class, see "Description of
Capital Stock--Common Stock." To the extent that all
of the shares of Class A Common Stock are converted
into Common Stock, the class vote for directors will
be extinguished. See "Management," "Principal
Shareholders" and "Description of Capital Stock."
Use of Proceeds..................... The net proceeds from the Offering, together with
borrowings of approximately $137 million under the
New Credit Facility, will be used (i) to fund the
Acquisition price of approximately $290 million, (ii)
to repay all outstanding borrowings under the
Existing Credit Facility (as defined) estimated to be
approximately $60 million, (iii) to make an
investment in ASC East of approximately $27.7 million
to fund the redemption of all outstanding Discount
Notes (as defined), (iv) to repay up to $12.0 million
of indebtedness of the Company and its subsidiaries,
(v) to pay certain fees and expenses relating to the
Transactions and (vi) for general corporate purposes
and capital expenditures. See "Use of Proceeds."
Proposed New York Stock Exchange
symbol............................ "SKI"
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
THE COMPANY
The summary historical financial data and the unaudited pro forma summary
combined financial data (except Other Data set forth below) have been derived
from the financial statements of the Company and the Acquired Resorts and should
be read in conjunction with those statements and the notes thereto included
elsewhere in this Prospectus. The unaudited pro forma summary combined financial
data for the fiscal year ended July 27, 1997 give effect to the Transactions as
if they had occurred on July 29, 1996 with respect to the Statement of
Operations and Other Data, and on July 27, 1997 with respect to the Balance
Sheet Data. See "Pro Forma Financial Data."
The Pro Forma Financial Data is not intended to be indicative of either
future results of operations or results that might have been achieved had the
Transactions actually occurred on the dates specified.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR
ENDED(2)
HISTORICAL FISCAL YEAR ENDED(1) -----------
----------------------------------------------------------- JULY 27,
JULY 25, JULY 31, JULY 30, JULY 28, JULY 27, 1997
1993 1994 1995 1996 1997 (UNAUDITED)
----------- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER SKIER VISIT AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Resort............................................... $ 23,645 $ 26,544 $ 46,794 $ 63,489 $ 166,923 $ 253,397
Real estate.......................................... 6,103 6,682 7,953 9,933 8,468 8,468
----------- ----------- ----------- --------- --------- -----------
Total net revenues................................. 29,748 33,226 54,747 73,422 175,391 261,865
Operating expenses:
Resort............................................... 14,705 15,787 29,725 41,799 109,774 157,744
Real estate.......................................... 3,245 3,179 3,994 5,844 6,813 6,813
Marketing, general and administrative................ 4,718 5,940 9,394 11,289 26,126 39,464
Depreciation and amortization........................ 1,984 2,421 3,910 6,783 18,293 35,993
----------- ----------- ----------- --------- --------- -----------
Total operating expense............................ 24,652 27,327 47,023 65,715 161,006 240,014
----------- ----------- ----------- --------- --------- -----------
Income from operations................................. 5,096 5,899 7,724 7,707 14,385 21,851
Interest expense....................................... 849 1,026 2,205 4,699 23,730 27,327
Net income (loss) available to common shareholders..... $ 5,839 $ 4,873 $ 5,119 $ (2,237) $ (5,926) $ (3,620)
----------- ----------- ----------- --------- --------- -----------
----------- ----------- ----------- --------- --------- -----------
Pro forma earnings per share........................... $ (.35) $ (.17)
--------- -----------
--------- -----------
Pro forma weighted average number of shares
outstanding.......................................... 16,871,048 30,132,568
--------- -----------
--------- -----------
OTHER DATA:
Resort:
Skier visits (000's)(3).............................. 525 528 1,060 1,290 3,025 4,821
Season pass holders (000's).......................... 3.2 3.7 11.2 13.2 30.9 38.3
Resort revenues per skier visit...................... $ 45.04 $ 50.27 $ 44.15 $ 49.22 $ 55.18 $ 52.56
Resort EBITDA(4)(5).................................. $ 4,222 $ 4,817 $ 7,675 $ 10,401 $ 31,023 $ 56,188
Real estate:
Number of units sold................................. 173 155 163 177 123 123
Number of units pre-sold(6).......................... -- -- -- 109 605 605
Real estate EBIT(5)(7)............................... $ 2,858 $ 3,503 $ 3,959 $ 4,089 $ 1,655 $ 1,655
STATEMENT OF CASH FLOWS DATA:
Cash flows from operations........................... $ 2,667 $ 5,483 $ 12,593 $ 7,465 $ 6,788 --
Cash flows from investing activities................. (4,432) (9,041) (13,843) (122,583) (14,070) --
Cash flows from financing activities................. 1,559 3,764 2,399 116,941 19,655 --
</TABLE>
<TABLE>
<CAPTION>
AT JULY 27, 1997
----------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................. $ 15,558 $ 33,031
Total assets.............................................................................. 337,340 653,937
Long-term debt, including current portion................................................. 236,330 283,702
Mandatorily redeemable preferred stock.................................................... 16,821 36,848
Common shareholders' equity............................................................... 15,101 254,649
</TABLE>
11
<PAGE>
THE ACQUIRED RESORTS (11)
<TABLE>
<CAPTION>
HISTORICAL FISCAL YEAR ENDED MAY 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT
PER SKIER VISIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................................................... $ 83,410 $ 82,034 $ 88,567 $ 84,732 $ 89,066
Operating expenses:
Retail, ski, rental and other.......................................... 44,778 46,560 48,714 47,373 51,138
Marketing, general and administrative(9)............................... 15,703 14,778 17,075 16,585 17,178
Writedown of assets(10)................................................ -- -- -- -- 2,000
Depreciation and amortization.......................................... 14,481 14,544 14,643 14,477 12,516
--------- --------- --------- --------- ---------
Total operating expenses............................................. 74,962 75,882 80,432 78,435 82,832
--------- --------- --------- --------- ---------
Operating income....................................................... 8,448 6,152 8,135 6,297 6,234
Net loss............................................................... (3,905) (5,254) (3,906) (4,538) (3,406)
OPERATING DATA:
Skier visits (000's)..................................................... 1,877 1,750 1,858 1,732 1,796
Season pass holders (000's).............................................. 5.7 6.6 6.9 7.0 7.5
Total revenues per skier visit........................................... $ 43.22 $ 45.23 $ 45.99 $ 47.46 $ 47.48
EBITDA(9)(10)............................................................ $ 25,929 $ 23,594 $ 26,078 $ 24,074 $ 24,150
</TABLE>
- ------------------------
(1) The historical results of the Company reflect the results of operations of
the Attitash/Bear Peak ski resort since its acquisition in July 1994, the
results of operations of the Sugarbush ski resort since October 1994, the
results of operations of the Mt. Cranmore ski resort from its acquisition in
June 1995 through its divestiture in November 1996, the results of
operations of S-K-I Ltd. since its acquisition in June 1996, and the results
of operations of Pico Mountain since its acquisition in November 1996.
(2) The results of operations of The Canyons have not been reflected in the pro
forma statement of operations data or other data due to the immateriality of
the results of operations of The Canyons relative to the Company as a whole.
See "Pro Forma Financial Data."
(3) For the purposes of estimating skier visits, the Company assumes that a
season pass holder visits the Company's resorts a number of times equal to
the average cost of a season pass divided by the average daily lift ticket
price.
(4) Resort EBITDA represents resort revenues less cost of resort operations and
marketing, general and administrative expense.
(5) Resort EBITDA and Real Estate EBIT are not measurements calculated in
accordance with generally accepted accounting principles ("GAAP") and should
not be considered as alternatives to operating or net income as an indicator
of operating performance, cash flows as a measure of liquidity or any other
GAAP determined measurement. Certain items excluded from Resort EBITDA
and/or Real Estate EBIT, such as depreciation, amortization and non-cash
charges for stock compensation awards and asset impairments are significant
components in understanding and assessing the Company's financial
performance. Other companies may define Resort EBITDA and Real Estate EBIT
differently, and as a result, such measures may not be comparable to the
Company's Resort EBITDA and Real Estate EBIT. The Company has included
information concerning Resort EBITDA and Real Estate EBIT because management
believes they are indicative measures of the Company's liquidity and
financial position, and are generally used by investors to evaluate
companies in the resort industry.
(6) Pre-sold units represent quartershare and other residential units that are
under construction for which the Company has a binding sales contract,
subject to certain closing conditions, and has received a 5% down payment on
the unit from the purchaser. Recognition of the revenue from such pre-sales
is deferred until the period in which such sales are closed.
(7) Real Estate EBIT represents revenues from real estate sales less cost of
real estate sold, including selling costs, holding costs, the allocated
capitalized cost of land, construction costs and other costs relating to
property sold.
(8) The Acquired Resorts have historically reimbursed Kamori International
Corporation ("Kamori") for certain administrative services provided. Such
reimbursements totalled approximately $3.0 million, $2.9 million, $3.3
million, $3.3 million and $3.4 million, respectively, for each of the years
ended May 31, 1993 through May 31, 1997. Such amounts are included in
marketing, general and administrative expense in the accompanying selected
combined financial information, but have been excluded for purposes of
calculating EBITDA.
(9) In 1997, the Acquired Resorts recorded a $2.0 million impairment loss
related to land, buildings and equipment of its golf resort to properly
state these fixed assets at estimated fair values. Such loss is excluded in
the calculation of EBITDA.
(10) The statement of operations data includes the results of Sabal Point Golf
Course in Orlando, Florida which the Company intends to sell following the
closing of the Acquisition.
12
<PAGE>
RECENT DEVELOPMENTS
THE CANYONS ACQUISITION
In May 1997, the Company commenced development of The Canyons resort.
Through a series of transactions, the Company has acquired ski operations,
development rights or other interests in over 7,100 acres centered around the
former Wolf Mountain ski area ("Wolf"), which the Company intends to integrate
into a world class destination resort.
The Company acquired the existing buildings, ski lifts and other
improvements, related infrastructure and personal property of Wolf for
approximately $8.3 million which was financed primarily through the issuance of
a note payable to the seller in the amount of $6.5 million. The Company also
entered into a 200 year lease with an initial term of 50 years for the 2,100
acres that comprised Wolf, providing for annual payments equal to 4% of the
resort's revenues. The lease provides the option to extend for three additional
50 year periods for an extension fee of $1.0 million for each extension period.
The Company will make additional one-time rental payments upon achieving certain
specified annual skier visit levels above Wolf's historical levels. The Company
also purchased an option which gives it the right to purchase fee title to
parcels of land within this 2,100 acre area on which it desires to develop real
estate for resale for 11% of the capitalized cost of real estate improvements to
be constructed thereon.
In addition to Wolf, the Company acquired 605 acres of land suitable for
real estate development and skiable terrain adjacent to Park City for $4.0
million. The Company has subleased an additional 807 acres in the center of the
resort containing the mid-mountain plateau on which it plans to develop the High
Mountain Meadows alpine village. The Company currently pays $40,000 per annum
under this sublease and is negotiating a direct lease that will include
provisions permitting the Company to acquire fee title to any land required for
the development of residential projects located at the High Mountain Meadows.
The Company has leased ski rights to a third parcel of land, consisting of 450
acres adjacent to Wolf, for annual rental payments of $150,000. In addition, on
September 19, 1997, the Company entered into a joint development agreement with
the owner of approximately 3,000 contiguous acres of land pursuant to which the
Company has the right to develop the property as skiable terrain on an
integrated basis with the owner's development of a low density, large lot
subdivision. The consideration under the agreement is the mutual exchange of
certain property interests required to fully develop both the resort and the
subdivision.
In order to finance certain acquisition costs and capital improvements with
respect to The Canyons, on July 12, 1997, the Company issued $17.5 million of
Series A Exchangeable Preferred Stock (the "Series A Exchangeable Preferred
Stock") and on July 28, 1997, the Company issued $17.5 million principal amount
of 14% Senior Exchangeable Notes (the "14% Exchangeable Notes" and, together
with the Series A Exchangeable Preferred Stock, the "Canyons Securities"). See
"The Transactions--Exchange Offers," "Description of Capital Stock" and
"Description of Certain Indebtedness."
The Canyons is adjacent to the Utah Winter Sports Park which will be the
venue for the ski jumping, bobsled and luge events at the 2002 Winter Olympic
Games. Management believes that The Canyons resort represents a unique
development opportunity to build a world class destination resort in one of the
fastest growing areas in the United States. See "Risk Factors--Required
Development at The Canyons; Historical Losses of Predecessor," "--Real Estate
Development," "--Leased Property and Forest Service Permits," and
"Business--Existing Resorts--The Canyons."
THE FORMATION
In June 1997, Leslie B. Otten, who formerly held 96% of the common stock of
ASC East, a subsidiary of the Company formerly doing business under the name
American Skiing Company ("ASC East"), formed the Company. Mr. Otten contributed
his 96% interest in the common stock of ASC East to the Company in exchange for
100% of the common stock of the Company (the "Formation"). Contemporaneously
with the Formation, the Company formed its ASC Utah subsidiary for the purpose
of acquiring The Canyons
13
<PAGE>
resort. In July 1997, the Company formed its ASC West, Inc. subsidiary for the
purpose of acquiring the Acquired Resorts.
THE TRANSACTIONS
THE ACQUISITION
On August 1, 1997, the Company entered into the Acquisition Agreement to
purchase the Steamboat and Heavenly ski resorts. As part of the Acquisition, the
Company also agreed to purchase the Sabal Point Golf Course in Orlando, Florida
and a residence in Denver, Colorado, both of which the Company intends to sell
following the closing of the Acquisition (the "Divestiture"). The aggregate
consideration to be paid by the Company for the Acquired Resorts is
approximately $290 million. The Company will not assume any of the cash or
funded debt of the Acquired Resorts. The purchase of the Acquired Resorts is
subject to the satisfaction of certain covenants and conditions and there can be
no assurance that the Acquisition will be consummated. Consummation of the
Offering is conditioned upon the concurrent consummation of the Acquisition. See
"Business--Acquired Resorts."
Steamboat is one of the premier ski resorts in the United States, ranked
second overall by the September 1997 SNOW COUNTRY magazine survey and fourth in
skier visits for the 1996-97 ski season. Located in Steamboat Springs, Colorado
and approximately three hours from Denver, Colorado, Steamboat is a world famous
family resort recognized for its "champagne" powder and tree skiing. In the
1996-97 ski season, Steamboat skier visits increased from the 1995-96 ski season
by 8.4% to 1.1 million. As part of the Acquisition, the Company also will
acquire 168 acres of land held for development.
Heavenly is located near Lake Tahoe in the states of Nevada and California.
Heavenly is the second largest ski resort in the Pacific West Region and the
11th largest ski resort in the United States with approximately 700,000 skier
visits in the 1996-97 ski season and approximately 4,800 acres of skiable
terrain.
THE REFINANCING
The Company has accepted a proposal from a lender to provide the Company
with a senior secured credit facility (the "New Credit Facility"), which will
provide borrowings of up to $215 million. The proposal provides that borrowings
under the New Credit Facility will be available: (i) to fund the Acquisition,
(ii) to repay all outstanding borrowings under ASC East's credit agreement dated
June 28, 1996, among Fleet National Bank, certain other banks and ASC East (the
"Existing Credit Facility") estimated to be approximately $60 million, (iii) to
pay certain fees and expenses relating to the Acquisition and (iv) for ongoing
general corporate purposes and capital expenditures. Consummation of the
Offering is conditioned upon the concurrent consummation of the New Credit
Facility. See "Use of Proceeds" and "Description of Certain Indebtedness--The
New Credit Facility."
REDEMPTION OF DISCOUNT NOTES
A portion of the net proceeds of the Offering will be used to make an
approximate $27.7 million investment in ASC East to fund the redemption (the
"Redemption") of all outstanding 13.75% Subordinated Discount Notes due 2007 of
ASC East (the "Discount Notes"). The indenture relating to the Discount Notes
(the "Discount Note Indenture") provides for a redemption price equal to 113.75%
of the Accreted Value (as defined in the Discount Note Indenture) of the
Discount Notes on the redemption date. The Company expects to record a pretax
extraordinary loss of approximately $4.3 million related to the repayment of the
Discount Notes.
14
<PAGE>
EXCHANGE OFFERS
The Company currently owns 96% of the outstanding common stock of ASC East.
Concurrently with the Offering, the Company intends to offer (the "ASC East
Exchange Offer") to exchange an aggregate of 615,022 shares of Common Stock for
the 4% of the outstanding common stock of ASC East not owned by the Company. If
all such holders elect to exchange their shares of ASC East common stock for
Common Stock, the Company will issue 615,022 shares of Common Stock in the ASC
East Exchange Offer, representing approximately 1.8% of all shares of Common
Stock and Class A Common Stock outstanding immediately following the Offering.
The Common Stock issued in the ASC East Exchange Offer will be registered with
the Securities and Exchange Commission on a registration statement to be
effective concurrently with the closing of the Offering. Participation in the
ASC East Exchange Offer is conditioned upon the holders of ASC East common stock
entering into lock-up agreements for a period of 180 days following the
consummation of the Offering.
Pursuant to the terms of a Securities Purchase Agreement, dated as of July
2, 1997 (the "Securities Purchase Agreement"), between the Company and the
holder of the Canyons Securities, the holder of the Canyons Securities has
indicated its intention to exchange (the "Preferred Exchange Offer" and,
together with the ASC East Exchange Offer, the "Exchange Offers") for the
Company's 6% Repriced Convertible Exchangeable Preferred Stock having an
aggregate liquidation preference of approximately $36.0 million (the "6%
Convertible Preferred Stock") for the Canyons Securities. Each share of 6%
Convertible Preferred Stock will be convertible at any time, at the holder's
option, into a number of shares of Common Stock ("Conversion Shares") initially
equal to the liquidation preference per share of 6% Convertible Preferred Stock
divided by the price per share of Common Stock offered to the public in the
Public Offering discounted by 5%, subject to customary antidilution adjustments.
The 6% Convertible Preferred Stock will be registered with the Securities
and Exchange Commission on a registration statement as soon as market conditions
permit but in any event within six months of the closing of the Offering. If the
holder of the Canyons Securities does not exchange the 6% Convertible Preferred
Stock for the Canyons Securities and the Preferred Exchange Offer is not
consummated, consummation of the Offering will trigger a Change of Control (as
defined under the Securities Purchase Agreement). In such event, the Securities
Purchase Agreement requires that the Company offer to purchase the Canyons
Securities for cash at a redemption price of 105.3% of the principal and
liquidation amount outstanding on the date of redemption which would have been
approximately $38.1 million as of September 30, 1997. See "Risk
Factors--Immediate and Substantial Debt Obligations Upon Consummation of the
Offering" and "Description of Certain Indebtedness--14% Exchangeable Notes" and
"Description of Capital Stock--Series A Exchangeable Preferred Stock" and "--6%
Convertible Preferred Stock."
THE CONSENT SOLICITATION
Concurrently with the Offering, the Company is soliciting the consent (the
"Consent Solicitation") from holders of ASC East's 12% Senior Subordinated Notes
due 2006 (the "12% Notes") to amend (the "Proposed Amendment") the definition of
Permitted Holders (as defined under the indenture relating to the 12% Notes (the
"12% Note Indenture")) to permit the consummation of the Offering without
requiring the Company to make a Change of Control Offer (as defined below). The
12% Note Indenture requires the consent of the holders of at least a majority in
aggregate principal amount of the 12% Notes to amend the 12% Note Indenture. If
the Company obtains the requisite amount of consents pursuant to the Consent
Solicitation, the Company will execute a supplemental indenture to give effect
to the Proposed Amendment concurrently with the Offering. In connection with the
Consent Solicitation, the Company expects to pay to the consenting holders of
the 12% Notes a customary consent payment.
To the extent the Company does not receive the necessary consents to amend
the 12% Note Indenture, consummation of the Offering will trigger a Change of
Control (as defined under the 12% Note
15
<PAGE>
Indenture). The 12% Note Indenture provides that upon the occurrence of a Change
of Control, ASC East is required to make an offer to repurchase the 12% Notes at
a price equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest to the date of repurchase (the "Change of Control Offer").
See "Description of Certain Indebtedness--The 12% Notes." In the event of a
Change of Control, ASC East must mail a notice to all holders of 12% Notes
setting forth the terms of the Change of Control Offer. The Company cannot
determine at this time whether or not any or all holders of 12% Notes will
accept such Offer. If all outstanding 12% Notes are tendered, the amount of
funds necessary to consummate the Change of Control Offer would be $121.2
million plus the amount of all accrued and unpaid interest which was $3.6
million as of September 30, 1997. The Company is currently negotiating a standby
credit facility for up to $125 million to fund the repurchase of the 12% Notes
in the event that any or all of such 12% Notes are tendered to ASC East for
repurchase. See "Risk Factors--Immediate and Substantial Debt Obligations Upon
Consummation of the Offering" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Acquisition, the Divestiture, the initial borrowings under the New
Credit Facility, the Redemption, the Exchange Offers, the Consent Solicitation,
the Stock Split and the Offering are collectively referred to herein as the
"Transactions."
16
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED BY
THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS AND THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF NUMEROUS FACTORS, INCLUDING THOSE SET
FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.
SUBSTANTIAL LEVERAGE AND FINANCIAL RISKS
GENERAL. Following the Transactions, the Company will be highly leveraged.
At July 27, 1997, after giving pro forma effect to the Transactions, the
Company's total indebtedness, including current maturities, and shareholders'
equity would have been approximately $284 million and $255 million,
respectively, and the Company would have had up to $83.2 million available for
borrowings under the New Credit Facility. The additional debt of $64.9 million
represents borrowings under the New Credit Facility. For the fiscal year ended
July 27, 1997, after giving pro forma effect to the Transactions, the Company's
earnings would have been insufficient to cover fixed charges by approximately
$3.8 million. In addition, at July 27, 1997, after giving pro forma effect to
the Transactions, total indebtedness would have represented 48% of total capital
and the ratio of Resort EBITDA to interest expense would have been 2.1x. The
Company has incurred additional indebtedness in the first quarter of fiscal 1998
to fund capital improvements, real estate development and operations. In
addition, consummation of the Offering may trigger a change of control under
certain of the Company's indebtedness which could total approximately $133
million. See "The Transactions--Exchange Offers," "--The Consent Solicitation,"
"--Immediate and Substantial Debt Obligations Upon Consummation of the
Offering," "Use of Proceeds," "--Seasonality; Fluctuations in Operating Results;
Dependence on Weather Conditions" and "Description of Indebtedness--The New
Credit Facility."
IMPACT ON FINANCIAL CONDITION. The high level of debt of the Company and
its subsidiaries will have several important effects on the Company's future
operations, including: (a) the Company will have significant cash requirements
to service its debt (including approximately $10.6 million of scheduled
principal repayments over the next two fiscal years), reducing funds available
for operations, capital expenditures and acquisitions, thereby increasing the
Company's vulnerability to adverse general economic and industry conditions; and
(b) the financial covenants and other restrictions contained in the New Credit
Facility, the 12% Note Indenture and other agreements relating to the Company's
indebtedness will require the Company to meet certain financial tests and will
restrict its and its subsidiaries' ability to borrow additional funds and to
dispose of assets. The Company does not plan to establish any debt service
reserves for the payment of principal or interest on any of its indebtedness.
Substantially all of the Company's assets, other than the Grand Summit Hotel
properties, are pledged to secure borrowings under the New Credit Facility. The
Company has granted a mortgage to the construction lender on each Grand Summit
Hotel property to secure the construction financing of such properties. See
"Description of Certain Indebtedness."
MAINTENANCE EXPENDITURE DEFERRAL. Although management believes that capital
expenditures above maintenance levels can be deferred to address cash flow or
other constraints, such activities may not be deferred for extended periods
without adverse effects on skier visits, revenues and profitability.
GROWTH LIMITATIONS. The Company's continued growth depends, in part, on its
ability to maintain and expand its facilities and to engage in successful real
estate development and, therefore, to the extent it is unable to do so with
internally generated cash, its inability to finance capital expenditures or real
estate development through borrowed funds or additional equity investments could
have a material adverse effect on the Company's future operations and revenues.
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CAPITAL REQUIREMENTS
The development of ski resorts is capital intensive. The Company spent
approximately $12.0 million, $25.1 million and $45.7 million in fiscal 1995,
1996 and 1997, respectively, on resort capital expenditures and real estate
development. In fiscal 1995, 1996 and 1997, the Acquired Resorts spent an
aggregate of approximately $6.9 million, $5.9 million and $5.4 million,
respectively, on resort capital expenditures. In fiscal 1998 and fiscal 1999,
the Company plans to spend approximately $65 million and $60 million,
respectively, to enhance its resort operations and approximately $100 million
and $115 million, respectively, to develop its real estate holdings. There can
be no assurance that the Company will have adequate funds, from internal or
external sources, to make all planned or required capital expenditures. A lack
of available funds for such capital expenditures could have a material adverse
effect on the Company's ability to implement its operating strategy. The Company
intends to finance resort capital improvements through borrowings under its New
Credit Facility and internally generated funds and to finance real estate
development through project-specific construction financing. See "--Substantial
Leverage and Financial Risks," "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Liquidity and Capital
Resources," "Business--Operating Strategy," "--Resort Operations" and "--Real
Estate Development."
RISKS ASSOCIATED WITH RAPID GROWTH
Since 1994, the Company has experienced rapid and substantial growth. The
Company's rapid and substantial growth has placed, and could continue to place,
a significant strain on its employees and operations. The Company's growth has
increased the operating complexity of the Company and the level of
responsibility for new and existing management. For example, certain members of
the Company's senior management team have limited experience managing publicly
traded companies. The Company's ability to compete effectively and to manage its
recent and future growth effectively will depend on its ability to implement and
improve financial and management information systems on a timely basis and to
effect changes in its business, such as implementing internal controls to handle
the increased size of its operations and hiring, training, developing and
managing an increasing number of experienced management-level and other
employees. Unexpected difficulties during expansion, the failure to attract and
retain qualified employees, or the Company's inability to respond effectively to
recent growth or plan for future expansion, could have a material adverse effect
on the Company.
GROWTH THROUGH ACQUISITIONS; INTEGRATION OF ACQUIRED RESORTS; ABILITY TO FINANCE
ACQUISITIONS
The Company continually evaluates potential acquisition opportunities. The
Company will need to finance future acquisitions through a combination of
internally generated funds, additional bank borrowings from existing and new
facilities and public offerings or private placements of equity (which may cause
dilution to existing holders of capital stock of the Company) and/or debt
securities, the combination of which will depend on several factors, including
the size of the acquired resort and the Company's capital structure at the time
of an acquisition. There can be no assurance, however, that attractive
acquisition candidates will be identified, that the Company will be able to make
acquisitions on terms favorable to it, that necessary financing will be
available on suitable terms, if at all, or that such acquisitions will be
permitted under applicable antitrust laws. The Company's ability to make such
acquisitions is limited under applicable antitrust laws, and it is effectively
prohibited from acquiring additional resorts in New England. See "--Substantial
Leverage and Financial Risks."
The Company faces risks in connection with the integration of acquired
resorts, including The Canyons and the Acquired Resorts. Significant management
resources and time will be required to integrate any acquired resorts and
unanticipated problems or liabilities with respect to such new resorts may
further divert management's attention from the Company as a whole, which could
have a material adverse effect on the Company's operations and financial
performance. There can be no assurance that the Company will be able to realize
any additional skier visits, revenues or cost savings in connection with
integrating acquired resorts. See "Business--Operating Strategy."
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REQUIRED DEVELOPMENT AT THE CANYONS; HISTORICAL LOSSES OF PREDECESSOR
The Canyons is a largely undeveloped asset that requires substantial
development of on-mountain facilities, real estate and related infrastructure.
The Company has adopted a five-year business plan for development of the resort;
however, accomplishing its plan is contingent upon obtaining necessary permits
and approvals, obtaining required financing for planned improvements and
generating markets for the resort that will produce significant increases in
skier visits. An estimated $60 million (approximately $18.2 million of which is
expected to be spent by December 20, 1997) for on-mountain capital improvements
and approximately $150 million for real estate development will be required to
fulfill the Company's five-year business plan. There can be no assurance that
capital will be available to fund these capital improvements or real estate
development.
The Canyons has historically experienced net operating losses. The Company's
business plan assumes that it can significantly increase skier visits and
generate positive Resort EBITDA and net income at The Canyons. There can be no
assurance, however, that The Canyons will generate additional skier visits,
positive Resort EBITDA or net income for the Company. See "Business--Alpine
Village Development."
REAL ESTATE DEVELOPMENT
The Company intends to construct, operate and sell interval ownership and
condominium units and other real estate at its ski resorts. Real estate
development and the Company's ability to generate revenues therefrom may be
adversely affected by numerous factors, many of which are beyond the control of
the Company, including the ability of the Company to successfully market its
resorts, the national and regional economic climate, local real estate
conditions (such as an oversupply of space or a reduction in demand for real
estate), costs to satisfy environmental compliance and remediation requirements
associated with new development/renovation and ongoing operations, the
attractiveness of the properties to prospective purchasers and tenants,
competition from other available property or space, the ability of the Company
to obtain adequate insurance, the ability of the Company to obtain all necessary
zoning, land use, building, occupancy and other required governmental permits
and authorizations and changes in real estate, zoning, land use, environmental
or tax laws. In addition, real estate development will be dependent upon, among
other things, receipt of adequate financing on suitable terms, obtaining and
maintaining the requisite permits and licenses and, in certain circumstances,
acquiring additional real estate. There can be no assurance as to whether, when
or on what terms such financing, permits, licenses and real estate may be
obtained. Upon the closing of the Offering, the Company will not have the
financing available to complete all of its planned real estate development as
set forth in "Business--Real Estate Development." In addition, such efforts
entail risks associated with development and construction activities, including
cost overruns, shortages of materials or skilled labor, labor disputes,
unforeseen environmental or engineering problems, work stoppages, and natural
disasters, any of which could delay construction and result in a substantial
increase in cost to the Company. Moreover, the Company's construction activities
typically are performed by third-party contractors, the timing, quality and
completion of which cannot be controlled by the Company. Nevertheless, claims
may be asserted against the Company for construction defects and such claims may
give rise to liability. There can also be no assurance that the Company will
achieve any additional revenues from such projects. See "--Substantial Leverage
and Financial Risks," "Business-- Real Estate Development" and "--Government
Regulation."
CONCENTRATION IN INTERVAL OWNERSHIP INDUSTRY
Because a material portion of the Company's real estate development business
is conducted within the interval ownership industry, any adverse changes
affecting the interval ownership industry such as an oversupply of interval
ownership units, a reduction in demand for interval ownership units, changes in
travel and vacation patterns, changes in governmental regulations of the
interval ownership industry and increases in construction costs or taxes could
have a material adverse effect on the Company's operations. The Company enters
into sales contracts for its quartershare interval ownership units prior to
completion of construction. Although such contracts require a 5% deposit, there
can be no assurance that any or all purchasers will consummate the purchase of
units under contract and the failure by a large number of
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purchasers to complete such purchases could have a material adverse effect on
the Company's operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
REGULATION OF MARKETING AND SALES OF QUARTERSHARES; OTHER LAWS
The Company's marketing and sales of Grand Summit Hotel quartershares and
other operations are subject to extensive regulation by the federal government
and the states in which the resorts are located and in which Grand Summit Hotel
intervals are marketed and sold. On a federal level, the Federal Trade
Commission Act prohibits unfair or deceptive acts or competition in interstate
commerce. Other federal legislation to which the Company is or may be subject
includes the Truth-in-Lending Act, the Equal Opportunity Credit Act, the
Interstate Land Sales Full Disclosure Act, the Real Estate Standards Practices
Act and the Fair Housing Act. In addition, many states have adopted specific
laws and regulations regarding the sale of interval ownership programs. For
example, certain state laws grant the purchaser the right to cancel a contract
of purchase within a specified period following the earlier of the date the
contract was signed or the date the purchaser has received the last of the
documents required to be provided by the Company. No assurance can be given that
the cost of qualifying under interval ownership regulations in all jurisdictions
in which the Company desires to conduct sales will not be significant. The
Company believes that it is in compliance with all material federal, state and
local laws and regulations. The failure to comply with such laws or regulations
could have a material adverse effect on the Company.
GROWTH THROUGH RESORT EXPANSION
A key element of the Company's strategy is to attract additional skiers
through investment in on-mountain capital improvements. Such investments are
capital intensive and, to the extent that the Company is unable to finance such
capital expenditures from internally generated cash or otherwise, the Company's
results of operations would be adversely affected. In addition, there can be no
assurance that the Company's investment in on-mountain capital improvements will
attract additional skiers and/or generate additional revenues. See
"--Substantial Leverage and Financial Risks," "--Capital Requirements" and
"Business--Operating Strategy."
IMMEDIATE AND SUBSTANTIAL DEBT OBLIGATIONS UPON CONSUMMATION OF THE OFFERING
If the Consent Solicitation is not successfully consummated, consummation of
the Offering will trigger a Change of Control under the 12% Note Indenture which
will require ASC East to make the Change of Control Offer. See "The
Transactions--The Consent Solicitation." In the event any or all holders of 12%
Notes tender their 12% Notes for repurchase by ASC East, ASC East would be
required to obtain additional financing in an amount of up to $125 million to
fund the repurchase of the 12% Notes. There can be no assurance that ASC East
would be able to obtain the necessary financing on terms acceptable to it or at
all and the failure to obtain such financing could have a material adverse
effect on ASC East and the Company. Consummation of the Offering will also
trigger the acceleration of approximately $12.0 million of other indebtedness of
the Company, which indebtedness will be repaid with the proceeds of the
Offering. See "Use of Proceeds" and "Description of Certain Indebtedness." In
addition, to the extent the Preferred Exchange Offer is not consummated, the
Company will be required to offer to purchase the Canyons Securities. See "The
Exchange Offers."
DEPENDENCE ON HIGHLY LEVERAGED AND RESTRICTED SUBSIDIARIES
The Company is a holding company and its ability to pay principal and
interest on its New Credit Facility and its other debt is dependent upon the
receipt of dividends and other distributions, or the payment of principal and
interest on intercompany borrowings from its subsidiaries. The Company does not
have, and may not in the future have, any assets other than the common stock of
ASC East and its other direct subsidiaries, including subsidiaries acquired in
connection with the Acquisition. ASC East and its subsidiaries are parties to
the 12% Note Indenture, which imposes substantial restrictions on ASC East's
ability to pay dividends and other distributions to the Company until the
earlier of the maturity of the 12% Notes in 2006 or the redemption thereof
pursuant to the terms of the 12% Note Indenture. In addition, Grand Summit
Resort Properties, Inc., a subsidiary of ASC East, is restricted in its ability
to pay
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dividends and other distributions to ASC East under the terms of the
construction financing facility for its Grand Summit Hotel projects. The
Company's other subsidiaries may become restricted in their ability to pay
dividends and other distributions to the Company in the future. In addition, the
breach of any of the conditions or provisions under the documents governing the
indebtedness of the Company's subsidiaries could result in a default thereunder
and, in the event of any such default, the holders of such indebtedness could
elect to accelerate the maturity thereof. If the maturity of any such
indebtedness were to be accelerated, such indebtedness would be required to be
paid in full before such subsidiary would be permitted to distribute any assets
or cash to the Company. There can be no assurance that the assets of ASC East or
any of the Company's other subsidiaries would be sufficient to repay all of its
outstanding debt or that the assets of the Company would be sufficient to repay
all of its outstanding debt. In addition, state law further restricts the
payment of dividends or other distributions to the Company by its subsidiaries.
SEASONALITY; FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON WEATHER CONDITIONS
Ski and resort operations are highly seasonal. Over the last five fiscal
years, the Company realized an average of approximately 86% of its resort
revenues and over 100% of Resort EBITDA and net income during the period from
November through April and a significant portion of resort revenues (and
approximately 23% of annual skier visits) was generated during the Christmas and
Presidents' Day vacation weeks. In addition, the Company's resorts typically
experience operating losses and negative cash flows for the period from May to
October. During the six-month period from May to October 1996, for example, the
Company had operating losses aggregating $15.1 million and negative cash flow
from operations aggregating $0.6 million. The Acquired Resorts have historically
experienced similar seasonality. There can be no assurance that the Company will
be able to finance its capital requirements from external sources during this
period. See "--Substantial Leverage and Financial Risks," "--Capital
Requirements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The high degree of seasonality of revenues increases the impact of adverse
events on operating results including, without limitation, adverse weather
conditions, access route closures, equipment failures, and other developments of
even moderate or limited duration occurring during its peak revenue periods.
Adverse weather conditions may lead to increased power and other operating costs
associated with snowmaking and could render snowmaking wholly or partially
ineffective in maintaining quality skiing conditions. It has been the Company's
experience that unfavorable weather conditions in more highly populated areas,
regardless of actual skiing conditions, can result in decreased skier visits.
Prolonged adverse weather conditions, or the occurrence of such conditions
during key periods of the ski season, can adversely affect operating results.
PURCHASE PRICE ALLOCATION FOR THE ACQUISITION
Under the purchase accounting method, the total purchase price for the
Acquisition will be allocated to the assets and liabilities of the Acquired
Resorts on the basis of their relative fair values and pursuant to certain
appraisals of such assets and liabilities which the Company expects to complete
prior to the end of fiscal 1998. The Company's preliminary allocation of the
Acquisition purchase price resulted in an excess of purchase price over the fair
value of the net tangible assets acquired, which was allocated to various
identifiable intangible assets and goodwill. The Company believes that its final
allocation (and related amortization periods) will not differ materially from
its preliminary allocation. No assurance can be given, however, that the actual
allocation of the Acquisition purchase price and the resulting effect on
operating income will not differ materially from the Company's preliminary
allocation as discussed in the General Note to the Unaudited Pro Forma Combined
Financial Data.
COMPETITION
The skiing industry is highly competitive and is capital intensive. The
Company's competitors include other major ski resorts throughout the United
States, Canada and Europe. The Company's competitors also include other
worldwide recreation resorts, including warm weather resorts and various
alternative
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leisure activities. The competitive position of the Company's resorts is
dependent upon numerous factors, such as proximity to population centers,
availability and cost of transportation to and within a resort, natural
snowfall, snowmaking quality and coverage, resort size, attractiveness of
terrain, lift ticket prices, prevailing weather conditions, appeal of related
services, quality and availability of lodging facilities, duration of the ski
season and resort reputation. In addition, some of the Company's competitors
have greater financial resources than the Company which could adversely affect
the Company's competitive position and relative ability to withstand adverse
developments. There can be no assurance that its competitors will not be
successful in capturing a portion of the Company's present or potential customer
base. See "Business--Competition."
REGIONAL AND NATIONAL ECONOMIC CONDITIONS
The skiing and real estate development industries are cyclical in nature and
are particularly vulnerable to shifts in regional and national economic
conditions. In particular, a significant portion of the Company's current skier
visits are generated from customers that reside in the New England states which
experienced a significant economic downturn beginning in 1988. Although data
indicate that the New England economy has recovered significantly, there can be
no assurance that improvement will continue or that stagnation or declines in
skier visits or revenues will not occur. Skiing and vacation unit ownership are
discretionary recreational activities entailing relatively high costs of
participation, and any decline in the regional economies where the Company is
operating, or deterioration in national economic conditions, could adversely
impact skier visits, real estate sales and revenues. Accordingly, the Company's
financial condition, particularly in light of its highly leveraged condition,
could be adversely affected by a worsening in the regional or national economy.
See "--Substantial Leverage and Financial Risks" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
ENVIRONMENTAL AND LAND USE MATTERS
The Company is subject to a wide variety of federal, state and local laws
and regulations relating to land use and development and to environmental
compliance and permitting obligations (including those related to the use,
storage, discharge, emission and disposal of hazardous materials and hazardous
and nonhazardous wastes). Failure to comply with such laws could result in the
need for capital expenditures and/or the imposition of severe penalties or
restrictions on operations that could adversely affect present and future resort
operations and real estate development. In addition, such laws and regulations
could change in a manner that materially and adversely affects the Company's
ability to conduct its business or to implement desired expansions and
improvements to its facilities. See "Business--Government Regulation."
LEASED PROPERTY AND FOREST SERVICE PERMITS
Significant portions of the land underlying certain of the Company's ski
resorts are leased or subleased by the Company or used pursuant to renewable
permits or licenses. If any such lease, sublease, permit or license were to be
terminated or not renewed upon expiration, or renewed on terms materially less
favorable to the Company, the Company's ability to possess and use the land
subject thereto and any improvements thereon would be materially adversely
affected. A substantial portion of the land constituting skiable terrain at
Attitash/Bear Peak, Sugarbush, Mount Snow/Haystack, Steamboat and Heavenly is
located on federal land that is used under the terms of the permits with the
United States Forest Service (the "Forest Service"). Generally, under the terms
of such permits, the Forest Service has the right to review and comment on the
location, design and construction of improvements in the permit area and on many
operational matters. The permits can be terminated or modified by the Forest
Service to serve the public interest. A termination or modification of any of
the Company's permits could have a material adverse effect on the results of
operations of the Company, however, the Company believes termination or
modification of the Forest Service permits is not likely. See "Business--Leased
Properties."
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ADEQUACY OF WATER SUPPLY
The Company's current operations and anticipated growth are heavily
dependent upon its ability, under applicable federal, state and local laws,
regulations, permits, and/or licenses or contractual arrangements, to have
access to adequate supplies of water with which to make snow and otherwise to
conduct its operations. There can be no assurance that applicable laws and
regulations will not change in a manner that could have an adverse effect, or
that important permits, licenses or agreements will be renewed, not cancelled,
or, if renewed, renewed on terms no less favorable to the Company. The failure
of the Company to have access to adequate water supplies to support its current
operations and anticipated expansion would have a material adverse effect on the
Company. See "Business--Government Regulation."
POTENTIAL ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation contain, among other things,
provisions authorizing the issuance of "blank check" preferred stock and two
classes of common stock. The Company is also subject to the provisions of
Section 611-A of the Maine Business Corporation Act (the "MBCA"). See
"Description of Capital Stock." These provisions could delay, deter or prevent a
merger, consolidation, tender offer or other business combination or change of
control involving the Company that some or a majority of the Company's
shareholders might consider to be in their best interests or that might
otherwise result in such shareholders receiving a premium over the market price
for the Common Stock.
CONTROL OF THE COMPANY BY PRINCIPAL SHAREHOLDER
The Company's common stock is divided into two classes. Leslie B. Otten, the
Company's principal shareholder, owns 100% of the Class A Common Stock, and,
therefore, has the power to elect two-thirds of the Board of Directors of the
Company, which allows for the maintenance of control of the Company by Mr. Otten
with respect to all matters requiring approval of the Board of Directors. In
addition, upon consummation of the Offering, Mr. Otten will own shares of Common
Stock and Class A Common Stock, representing at least 50.0% of the combined
voting power of all outstanding shares of Common Stock and Class A Common Stock
and, accordingly, will be able to determine the outcome of all matters submitted
to a vote of the shareholders of the Company, except for matters requiring (i)
the vote of a higher percentage of voting stock than that held by Mr. Otten, or
(ii) the vote of the shareholders voting as a separate class under state law or
the Articles of Incorporation and Bylaws of the Company. See "Description of
Capital Stock--Common Stock."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance
and continued service of Mr. Otten, as well as several other key management and
operational personnel. The loss of the services of Mr. Otten or of such other
personnel could have a material adverse effect on the business and operations of
the Company. Other than with respect to Warren C. Cook and Christopher E.
Howard, Mr. Otten and the other key members of management are not subject to
employment agreements with the Company or any of its subsidiaries. The Company
maintains key person life insurance on Mr. Otten in the amount of $14.0 million.
See "Management."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Transactions, the Company will have outstanding
17,948,365 shares of Common Stock (excluding all shares issuable upon the
exercise of options and assuming no exercise of the Underwriters' over-allotment
option and no conversion of the Class A Common Stock into Common Stock) and
14,760,530 shares of Class A Common Stock. All of the shares of Common Stock
sold in the Offering will be freely tradeable under the Securities Act unless
purchased by "affiliates" of the Company as that term is defined under the
Securities Act. Upon the expiration of the lock-up agreements discussed below
and exercise of all options granted under the Stock Option Plan, 4,585,753
shares of Common Stock and 14,760,530 shares of Class A Common Stock (the
"Restricted Shares") will become eligible for sale, subject to compliance with
Rule 144 of the Securities Act. Pursuant to the lock-up agreements, the Company,
certain shareholders and the executive officers and directors of the Company
have agreed with the Underwriters, until 180 days after the
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consummation of the Offering, not to directly or indirectly offer, pledge, sell,
contract to sell, sell any option or contract to purchase or grant any option,
right or warrant to purchase or otherwise transfer or dispose of any Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or enter into any swap or other arrangement that transfers all or
a portion of the economic consequences associated with the ownership of the
Common Stock, or cause a registration statement covering any shares of Common
Stock to be filed, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), subject to certain exceptions,
including pursuant to a foreclosure by a lender on a loan to the Principal
Shareholder for which shares of Class A Common Stock and/or Common Stock will be
pledged as collateral. No prediction can be made as to the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on the market price of the Common Stock. Sales of substantial amounts of Common
Stock in the public market, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise additional capital through an offering of its
equity securities. See "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock is expected to be approved for listing on the New York
Stock Exchange (subject to notice of issuance), there can be no assurance that
an active public market for the Common Stock will develop or continue after the
Offering. Prices for the Common Stock will be determined in the marketplace and
may be influenced by many factors, including variations in the financial results
of the Company, changes in earnings estimates by industry research analysts,
investors' perceptions of the Company and general economic, industry and market
conditions. The initial public offering price per share of the Common Stock will
be determined by negotiations among the Company and the representatives of the
Underwriters and may not be indicative of the price at which the Common Stock
will trade after completion of the Offering. See "Underwriting." The Company
believes that there are relatively few comparable companies that have
publicly-traded equity securities which may also impact the trading price of the
Common Stock after the Offering. In addition, the stock market has from time to
time experienced extreme price and volume volatility. The fluctuations may
adversely affect the market price of the Common Stock. The market price of the
Common Stock could be subject to significant fluctuations in response to the
Company's operating results and other factors, and there can be no assurance
that the market price of the Common Stock will not decline below the initial
public offering price.
DIVIDENDS
The Company currently intends to retain earnings, if any, to support its
operating strategy and does not anticipate paying cash dividends on its Common
Stock or Class A Common Stock in the foreseeable future. In addition, the New
Credit Facility will contain restrictions on the ability of the Company to pay
cash dividends on its Common Stock or Class A Common Stock. See "Dividend
Policy" and "Description of Certain Indebtedness--The New Credit Facility."
DILUTION
Purchasers of Common Stock offered hereby will experience immediate and
substantial dilution in the net tangible book value of the Common Stock. See
"Dilution."
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USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock pursuant to the Offering are expected to be approximately $250.9 million,
assuming an initial public offering price of $18.50 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses. The net proceeds, together with borrowings of approximately $137
million under the New Credit Facility, will be used (i) to fund the Acquisition
price of approximately $290 million, (ii) to repay all outstanding borrowings
under the Existing Credit Facility, estimated to be approximately $60 million,
(iii) to make an investment in ASC East of approximately $27.7 million, the
proceeds of which will be used to fund the redemption of all outstanding
Discount Notes, (iv) to repay up to $12 million of indebtedness of the Company
and its subsidiaries, (v) to pay certain fees and expenses relating to the
Transactions and (vi) for general corporate purposes and capital expenditures.
The Existing Credit Facility bears interest at a rate of LIBOR plus 1.5% to 2.5%
per annum and matures on December 31, 2001. The Discount Notes bear interest at
a rate of 13.75% per annum and mature on January 15, 2007. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Certain Indebtedness."
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the net tangible book value per share of Common Stock.
At July 27, 1997, the deficit in the net tangible book value of the Company was
approximately $(3.7) million, or $(.25) per share of Common Stock and Class A
Common Stock. The deficit in net tangible book value per share is equal to the
Company's total tangible assets less total liabilities, divided by the number of
shares of Common Stock and Class A Common Stock outstanding at July 27, 1997
(after giving effect to the Stock Split). After giving effect to the sale of
14,750,000 shares at an assumed initial Public Offering price of $18.50 per
share (the midpoint of the range for the estimated initial Public Offering
price) and after deducting underwriting discounts and commissions, the pro forma
net tangible book value of the Company at July 27, 1997 would have been
approximately $247.2 million, or $8.38 per share. This represents an immediate
increase in pro forma net tangible book value of $8.63 per share to existing
shareholders and an immediate dilution of $10.12 per share to new investors
purchasing shares of Common Stock in the Public Offering. Dilution to new
investors is determined by subtracting pro forma net tangible book value per
share of Common Stock and Class A Common Stock after giving effect to the
assumed initial Public Offering price to be paid by new investors in the Public
Offering for a share of Common Stock. The following table illustrates the per
share dilution to investors in the Public Offering:
<TABLE>
<S> <C> <C>
Assumed Public Offering price............................... $ 18.50
Net tangible book value per share as of July 27, 1997....... $ (.25)
Increase per share attributable to new investors in the
Public Offering........................................... 8.63
Pro forma net tangible book value per share................. 8.38
Dilution per share to new investors in the Public
Offering(1)(2)............................................ $ 10.12
---------
---------
</TABLE>
- ------------------------
(1) Does not give effect to the exercise of all fully vested options granted to
certain employees at an exercise price less than the initial Public Offering
price. Exercise of such options would result in further dilution to new
investors in the Public Offering. If all such options eligible for exercise
at July 27, 1997 were exercised, per share dilution to the new investors in
the Public Offering would be $10.26
(2) Does not give effect to the shares of Common Stock that would be issued in
the ASC East Exchange Offer. Exchange of such shares would result in further
dilution to new investors in the Public Offering.
25
<PAGE>
If all such ASC East shares were exchanged for 615,022 shares of Common
Stock, per share dilution to the new investors in the Public Offering would
be $10.42.
The following table summarizes on a pro forma basis as of July 27, 1997
after giving effect to the Offering the number of shares of Common Stock and
Class A Common Stock purchased from the Company, the total consideration paid to
the Company and the average consideration paid per share by the existing
shareholders and by the new investors in the Public Offering and the Concurrent
Offering (at an assumed initial Public Offering price of $18.50 per share):
<TABLE>
<CAPTION>
COMMON STOCK AND
CLASS A
COMMON STOCK
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- -------------- ----------- -------------
Existing shareholders..................... 14,760,530 49.0% $ 2,796,000 1.0% $ 0.19
Investors in ASC East Exchange Offer...... 615,022 2.0 976,000 .4 1.59
Investors in the Public Offering.......... 13,939,189 46.3 257,875,000 93.2 18.50
Investor in the Concurrent Offering....... 810,811 2.7 15,000,000 5.4 18.50
------------- --- -------------- ----- ------
Total................................... 30,125,552 100% $ 276,647,000 100.0% $ 9.18
------------- --- -------------- ----- ------
------------- --- -------------- ----- ------
</TABLE>
DIVIDEND POLICY
Since the Formation, the Company has not declared or paid any cash dividends
on its capital stock. The Company currently intends to retain earnings, if any,
to support its capital improvement and growth strategies and does not anticipate
paying cash dividends on its Common Stock or Class A Common Stock in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account various
factors, including the Company's financial condition, operating results, current
and anticipated cash needs and plans for capital improvements and expansion. The
New Credit Facility will contain certain restrictions on the ability of the
Company to pay any cash dividends on its Common Stock or Class A Common Stock.
The 12% Note Indenture contains certain restrictive covenants that, among other
things, limit the payment of dividends or the making of distributions on equity
interests of ASC East. See "Risk Factors--Dependence on Highly Leveraged and
Restricted Subsidiaries," "--Dividends" and "Description of Certain
Indebtedness."
26
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at July 27,
1997 on an actual basis and on a pro forma basis after giving effect to the
Transactions (assuming a Public Offering price of $18.50 per share), after
deducting underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds." This table should be read in conjunction with
the Consolidated Financial Statements and the Unaudited Pro Forma Combined
Financial Data and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JULY 27, 1997
----------------------
<S> <C> <C>
ACTUAL(1) PRO FORMA
--------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash................................................................................................ $ 15,558 $ 33,031
--------- ---------
--------- ---------
Short-term debt and current portion of long-term debt............................................... $ 39,748 $ 14,681
--------- ---------
Long-term debt:
Existing Credit Facility.......................................................................... $ 30,000 $ --
New Credit Facility............................................................................... -- 131,801
12% Notes (net of unamortized discount of $3,322)................................................. 116,678 116,678
Discount Notes.................................................................................... 22,121 --
Other long-term debt.............................................................................. 27,783 20,542
--------- ---------
Total long-term debt, including current portion............................................... 236,330 283,702
--------- ---------
14% Series A Exchangeable Preferred Stock, $1,000 par value per share; 200,000 shares authorized;
17,500 shares issued and outstanding; net of unaccreted issuance costs and including accretion of
discount and cumulative dividends in arrears (redemption value of $18,537)........................ 16,821 --
6% Convertible Preferred Stock...................................................................... -- 36,848
Shareholders' equity:
Common Stock, $.01 par value per share; [ ] shares authorized, issued and
outstanding (actual); 100,000,000 shares authorized, 32,236,071 shares issued and outstanding
(pro forma)..................................................................................... 10 10
Class A Common Stock, $.01 par value per share; no shares authorized (actual); 15,000,000 shares
authorized, 14,760,530 shares outstanding (pro forma)........................................... -- --
Additional paid in capital........................................................................ 2,786 275,303
Retained earnings................................................................................. 12,305 (20,664)
--------- ---------
Total shareholders' equity.................................................................... 15,101 254,649
--------- ---------
Total capitalization.......................................................................... $ 268,252 $575,199
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Does not include $17.5 million in principal amount of 14% Senior
Exchangeable Notes issued on July 28, 1997 in connection with the financing
of The Canyons acquisition, which securities will be converted into 6%
Convertible Preferred Stock upon consummation of the Offering.
27
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Pro Forma Financial
Data") is derived from the historical financial statements of the Company and
the Acquired Resorts, in each case included elsewhere in this Prospectus. The
Pro Forma Financial Data and accompanying notes should be read in conjunction
with the historical financial statements and the notes thereto included
elsewhere in this Prospectus.
The unaudited pro forma combined balance sheet data as of July 27, 1997
gives effect to the Transactions as if they had occurred on such date. The
unaudited pro forma combined statement of operations data for the year ended
July 27, 1997 gives effect to the Transactions as if they had occurred on July
29, 1996. The Unaudited Pro Forma Combined Balance Sheet Data for the Acquired
Resorts is as of May 31, 1997; the Unaudited Pro Forma Combined Statement of
Operations Data of the Acquired Resorts is for the year ended May 31, 1997.
The Pro Forma Financial Data is not intended to be indicative of either
future results of operations or results that might have been achieved had the
Transactions actually occurred on the dates specified. In the opinion of the
Company's management, all adjustments necessary to present fairly the Pro Forma
Financial Data have been made based upon the terms and structure of each of the
Transactions noted above. The following information should be read in
conjunction with "Selected Historical Consolidated Financial Data of the
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements of the Company and the
Acquired Resorts and the notes thereto included elsewhere in this Prospectus.
Management expects to realize annual cost reductions following the
Transactions that have not been identified at this time and that are not
reflected in the Pro Forma Financial Data. These reductions are expected to
result largely from decreases in discretionary costs and savings from purchasing
efficiencies. There can be no assurance, however, that any such cost reductions
will be realized.
28
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA
AS OF JULY 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
THE ACQUIRED FORMA TRANSACTION PRO FORMA
COMPANY RESORTS COMBINED ADJUSTMENTS AS ADJUSTED
-------- -------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents......................... $ 15,558 $ 15,654 $31,212 $ 1,819 $ 33,031
Restricted cash................................... 2,812 -- 2,812 -- 2,812
Accounts receivable, net.......................... 3,801 575 4,376 -- 4,376
Inventory and supplies............................ 7,282 3,321 10,603 -- 10,603
Prepaid expenses and other current assets......... 3,339 743 4,082 (246) 3,836
Real estate developed for sale.................... 537 -- 537 -- 537
-------- -------- ------- --------- ------------
Total current assets.......................... 33,329 20,293 53,622 1,573 55,195
Property and equipment, net....................... 252,346 92,632 344,978 65,996 410,974
Land held for development and sale................ -- 27,382 27,382 7,700 35,082
Assets held for sale.............................. -- -- -- 4,500 4,500
Real estate developed for sale.................... 23,003 -- 23,003 -- 23,003
Other assets, net................................. 17,998 7,110 25,108 (1,285) 23,823
Goodwill and other intangibles, net............... 10,664 2,027 12,691 88,669 101,360
-------- -------- ------- --------- ------------
Total assets.................................. $337,340 $149,444 $486,784 $167,153 $ 653,937
-------- -------- ------- --------- ------------
-------- -------- ------- --------- ------------
LIABILITIES:
Line of credit and current portion of long-term
debt............................................ $ 39,748 $ 5,054 $44,802 $(30,121) $ 14,681
Accounts payable and other current liabilities.... 25,738 7,828 33,566 3,648 37,214
Accrued interest.................................. -- 1,204 1,204 (1,204) --
Demand note, shareholder.......................... 1,933 -- 1,933 -- 1,933
Deposits and deferred revenue..................... 4,379 -- 4,379 -- 4,379
-------- -------- ------- --------- ------------
Total current liabilities..................... 71,798 14,086 85,884 (27,677) 58,207
Deferred income taxes............................. 28,514 -- 28,514 -- 28,514
Indebtedness of Kamori............................ -- 130,359 130,359 (130,359) --
Other long-term debt.............................. 46,833 -- 46,833 (37,286) 9,547
New Credit Facility............................... -- -- -- 131,801 131,801
Subordinated notes and debentures................. 149,749 -- 149,749 (22,076) 127,673
Other long-term liabilities....................... 7,898 -- 7,898 (1,200) 6,698
Minority interest in subsidiary................... 626 -- 626 (626) --
-------- -------- ------- --------- ------------
Total long-term liabilities................... 233,620 130,359 363,979 (59,746) 304,233
14% Series A mandatorily redeemable Preferred
Stock........................................... 16,821 -- 16,821 (16,821) --
6% Repriced Converts.............................. -- -- -- 36,848 36,848
Common and Class A stock.......................... 10 -- 10 -- 10
Additional paid-in capital........................ 2,786 44,400 47,186 228,117 275,303
Retained earnings................................. 12,305 (39,401) (27,096) 6,432 (20,664)
-------- -------- ------- --------- ------------
Total shareholders' equity.................... 15,101 4,999 20,100 234,549 254,649
-------- -------- ------- --------- ------------
Total liabilities, manditorily redeemable
preferred stock and shareholders' equity.... $337,340 $149,444 $486,784 $167,153 $ 653,937
-------- -------- ------- --------- ------------
-------- -------- ------- --------- ------------
</TABLE>
29
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 27,
BALANCE SHEET ACCOUNT NOTE ADJUSTMENT 1997
- --------------------------------------------- ----- --------------------------------------------- ------------
<S> <C> <C> <C>
Cash and cash equivalents.................... a Gross proceeds from the Offering $ 272,875
b Proceeds from the New Credit Facility 131,801
b Retirement of the Existing Credit Facility (55,067)
c Issuance of 14% Senior Exchangeable Notes 17,474
d Purchase price of Acquired Resorts (287,365)
b Prepayment of Discount Notes (22,076)
b Prepayment penalty pertaining to Discount
Notes (3,036)
e Underwriting discounts and other Offering
expenses (22,000)
b Repayment of indebtedness accelerated upon
change of control (11,858)
b Payment of commitment fee pertaining to the
New Credit Facility (3,275)
f Cash excluded from the Acquired Resorts (15,654)
------------
Net adjustment to cash and cash equivalents 1,819
------------
Prepaid expenses and other current assets.... f Receivable from parent excluded from the
Acquired Resorts (246)
------------
Property and equipment, net.................. g Allocation of purchase price pertaining to
the Acquired Resorts 65,996
------------
Land held for development and sale........... h Allocation of purchase price pertaining to
the Acquired Resorts 7,700
------------
Assets held for sale......................... i Reclassification of assets held for sale 4,500
------------
Other assets, net............................ c Elimination of capitalized financing costs:
Fees on Convertible Debt 26
b Retirement of Discount Notes (1,081)
b Retirement of Existing Credit Facility (1,290)
b Capitalized financing costs on New Credit
Facility 3,275
f Other assets excluded from the acquisition of
the Acquired Resorts (2,215)
------------
Net adjustment to other assets (1,285)
Goodwill and other intangibles, net.......... j Allocation of purchase price pertaining to
the Acquired Resorts 88,669
------------
Net effect on total assets............... $ 167,153
------------
------------
</TABLE>
30
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 27,
BALANCE SHEET ACCOUNT NOTE ADJUSTMENT 1997
- --------------------------------------------- ----- --------------------------------------------- ------------
<S> <C> <C> <C>
Line of credit and current portion of
long-term debt............................. f Current debt excluded from the acquisition of
the Acquired Resorts $ (5,054)
b Retirement of Exisiting Credit Facility (25,067)
------------
(30,121)
------------
Accounts payable and other current
liabilities................................ m Accrual for tax liability relating to grant
of Stock Options 3,648
------------
Accrued interest............................. f Acquired Resorts liability not assumed (1,204)
------------
Indebtedness of Kamori....................... f Acquired Resorts long-term debt not assumed (130,359)
------------
Other long-term debt......................... b Retirement of Existing Credit Facility (30,000)
n Proceeds from issuance of 14% Exchangeable
Notes 17,500
b Retirement Sugarbush acquisition debt (7,286)
n Conversion of 14% Exchangeable Notes (17,500)
------------
Net adjustments to other long-term debt (37,286)
--- --------------------------------------------- ------------
New Credit Facility.......................... b Proceeds from the New Credit Facility 131,801
------------
Subordinated notes and debentures............ b Prepayment of Discount Notes (22,076)
------------
Other long-term liabilities.................. d Contingency consideration pertaining to
acquisition 3,000
b Retirement of Wolf acquisition debt.......... (4,200)
------------
Net adjustments to other long-term
liabilities (1,200)
Minority interest in subsidiary.............. k Remove minority interest from exchange of 4%
of outstanding shares of ASC East (626)
------------
Net effect on total long-term liabilities.... (59,746)
------------
14% Series A Preferred Stock................. n Exchange of Series A mandatory redeemable
Preferred Stock to 6% Repriced Converts (16,821)
------------
6% Repriced Converts......................... n Exchange of Securities for 6% Repriced
Converts 36,848
Additional paid-in capital................... a Gross proceeds from the issuance of Common
Stock 272,875
e Payment of costs pertaining to the issuance
of Common Stock (22,000)
f Elimination of Acquired Resorts shareholders'
Common Stock (44,400)
k Conversion of minority interest 11,378
m Effect of stock compensation award on
additional paid-in capital 10,264
Net effect on additional paid-in capital..... 228,117
------------
Retained earnings............................ f Remove accumulated deficit of Acquired
Resorts 39,401
n Exchange of 14% Series A mandatorily
redeemable Preferred Stock (2,526)
b Retirement of Sugarbush acquisition debt (371)
b Prepayment penalty on Discount Notes (3,036)
b Write-off of prepaid loan fees (1,081)
b Retirement of the Existing Credit Facility (1,290)
k Conversion of minority shareholders (10,752)
m Effect of stock compensation award on
retained earnings (13,913)
------------
Net effect on retained earnings.............. $ 6,432
------------
------------
</TABLE>
31
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA FOR THE YEAR ENDED
JULY 27, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE YEAR ENDED
JULY 27, 1997 MAY 31, 1997 RESULTS OF
----------------- ------------------- OPERATIONS TRANSACTION PRO FORMA
INCOME STATEMENT THE COMPANY ACQUIRED RESORTS TO BE SOLD ADJUSTMENTS AS ADJUSTED
- ------------------------------- ----------------- ------------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Resort....................... $ 166,923 $ 86,474 $ -- $ -- $ 253,397
Real estate sales............ 8,468 -- -- -- 8,468
Other........................ -- 2,592 (2,592) -- --
-------- ------- ------------- ----------- --------
Total revenues........... 175,391 89,066 (2,592) -- 261,865
Operating expenses:
Cost of resort operations.... 109,774 51,079 (2,088) (1,021) 157,744
Cost of real estate sold..... 6,813 -- -- -- 6,813
Writedown of assets.......... -- 2,000 (2,000) -- --
Marketing, general and
administrative............. 26,126 17,238 (500) (3,400) 39,464
Depreciation and
amortization............... 18,293 12,516 (265) 5,449 35,993
-------- ------- ------------- ----------- --------
Total operating
expenses............... 161,006 82,833 (4,853) 1,028 240,014
-------- ------- ------------- ----------- --------
Income from operations......... 14,385 6,233 2,261 (1,028) 21,851
Other income and expenses:
Interest income.............. -- (682) -- 682 --
Interest expense............. 23,730 10,659 (332) (6,730) 27,327
-------- ------- ------------- ----------- --------
Income (loss) before taxes..... (9,345) (3,744) 2,593 5,020 (5,476)
Provision (benefit) for income
taxes........................ (3,613) (338) -- 1,651 (2,300)
-------- ------- ------------- ----------- --------
Net income (loss) before
minority interest in loss of
subsidiary................... (5,732) (3,406) 2,593 3,369 (3,176)
-------- ------- ------------- ----------- --------
Minority interest in loss of
subsidiary................... (250) -- -- 250 --
-------- ------- ------------- ----------- --------
Net income (loss) after
minority interest in loss of
subsidiary................... (5,482) (3,406) 2,593 3,119 (3,176)
-------- ------- ------------- ----------- --------
Accretion of discount and
dividends accrued on
mandatorily redeemable
preferred stock.............. (444) -- -- -- (444)
-------- ------- ------------- ----------- --------
Net income (loss) available to
common shareholders.......... $ (5,926) $ (3,406) $ 2,593 $ 3,119 $ (3,620)
-------- ------- ------------- ----------- --------
-------- ------- ------------- ----------- --------
Net loss per weighted average
common shares outstanding.... (6.04) (.17)
--------
--------
Weighted average common shares
outstanding.................. [] 30,132,568
--------
--------
</TABLE>
32
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
STATEMENT OF OPERATIONS ITEM NOTE ADJUSTMENT JULY 27, 1997
- ------------------------------------------------ --------- --------------------------------------------- --------------
<S> <C> <C> <C>
Cost of resort operations....................... q Expected insurance savings (325)
q Capitalization of equipment costs (350)
q Purchase of operating leases (346)
--------------
(1,021)
Marketing, general and
administrative................................ p Elimination of Kamori management fees (3,400)
--------------
Depreciation and amortization................... j Amortization of goodwill and other
intangibles of Acquired Resorts 3,900
b Amortization of the New Credit Facility
commitment fee 409
r Remove depreciation and amortization of
acquired assets (12,251)
r Depreciation related to assets of Acquired
Resorts 13,219
b Amortization of deferred financing costs
relating to the Existing Credit Facility (322)
b Amortization of deferred financing costs
relating to Discount Notes (119)
q Reclassification of capital expenditures by
Acquired Resorts 350
q Purchase of operating leases 263
--------------
Total 5,449
Interest income................................. f Remove interest income from Acquired Resorts 682
Interest expense................................ q Interest on Discount Notes (2,890)
f Interest on Kamori long-term debt (10,326)
b Interest on incremental borrowings under the
New Credit Facility 5,482
n Additional accretion on 6% Repriced Converts 921
q Interest expense from additional capital
leases 83
--------------
(6,730)
--------------
Provision (benefit) for income taxes............ l Tax effect of pro forma adjustments 1,651
--------------
Effect on net loss.............................. 3,369
--------------
Minority interest in loss of subsidiary......... k ASC East Exchange Offer 250
Net loss available to common
shareholders.................................. $ 3,119
--------------
--------------
</TABLE>
33
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
GENERAL
The acquisition of the Acquired Resorts by the Company will result in the
assets of the Acquired Resorts being written up to reflect the purchase
price. The purchase price of the Acquired Resorts will be calculated as the
sum of (i) cash paid to the current Acquired Resorts shareholder, (ii) the
fair value of any liabilities of the Acquired Resorts assumed, and (iii) the
transaction costs incurred by the Company. The deposit of $11 million for
the purchase of the Acquired Resorts is not included in the historical
accounts since the event occurred after the Company's fiscal 1997 year end
and is not reflected in the pro forma adjustments because it is included as
part of the purchase price. The Acquisition will be treated as a purchase
for financial reporting purposes. Preliminary analyses indicate that there
will be a portion of the purchase price allocated to goodwill and other
intangibles. The acquisition of the Acquired Resorts will be funded from the
issuance of Common Stock and additional borrowings from the New Credit
Facility.
Pro forma adjustments have been made to depreciate these assets acquired
over their estimated useful lives and to amortize goodwill and other
intangibles over estimated useful lives ranging from 10 to 40 years. The
actual depreciation and amortization charges recorded subsequent to the
Acquisition may differ when the final purchase price is computed as of the
closing date and an actual allocation of the purchase price to the
underlying assets acquired is completed. Only after the final purchase price
has been allocated and the estimated remaining useful lives are determined
by management will the actual depreciation and amortization charges
associated with the assets of the Acquired Resorts become available. These
charges could ultimately be higher than what has been reflected in the
Unaudited Pro Forma Combined Statement of Operations. The Company has not
yet received the results of appraisals and other valuation studies which are
in process, nor has it made a final determination of the useful lives of the
assets acquired. Accordingly, the allocation of the excess of purchase cost
over the fair value of the assets acquired to identifiable intangibles and
goodwill may differ from that reflected herein. The actual allocation of
purchase cost and the resulting effect on operating income may differ
significantly from the pro forma amounts below. No deferred taxes have been
provided on the step-up in the basis of the assets acquired because a
338(h)(10) election was made, and therefore the assets acquired are also
written up to fair value for tax purposes.
The Company expects to finalize purchase accounting for the acquisition by
the end of fiscal 1998.
(a) The gross proceeds to be received by the Company from the sale of Common
Stock pursuant to the Offering are expected to be approximately $272,875
assuming an initial public offering price of $18.50 per share.
(b) A portion of the initial proceeds of the New Credit Facility will be used to
retire the Existing Credit Facility. In connection with the retirement of
the Existing Credit Facility, certain prepaid loan fees related to such
facility amounting to $1,290 will be written off and charged to expense when
incurred. These nonrecurring charges are not included in the Unaudited Pro
Forma Combined Statement of Operations. Upon closing of the New Credit
Facility, the Company will pay $3,275 as a commitment fee to the lender. The
commitment fee will be amortized to expense over the term of the credit
facility. The Unaudited Pro Forma Combined Statement of Operations reflects
$409 of commitment fee amortization related to the New Credit Facility for
the year ended July 27, 1997. The amortization of the Existing Credit
Facility's prepaid loan fees of $322 for the year ended July 27, 1997 has
been removed.
A portion of the proceeds of the Offering will be used to retire the
outstanding principal balance of Discount Notes and a prepayment premium of
$3,036 as of July 27, 1997 related to such prepayment. In connection with
the retirement of the Discount Notes, certain prepaid loan fees associated
with
34
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
such debt in the amount of $1,081 will be written off and charged to expense
when incurred. The prepayment penalty and the write-off of the prepaid loan
fees represent nonrecurring charges and, therefore, are not included in the
Unaudited Pro Forma Combined Statement of Operations. Such amounts have been
charged against retained earnings in the Unaudited Pro Forma Combined
Balance Sheet Data.
The amortization of the Prepaid loan fees for the Discount Notes total $119
for the year ended July 27, 1997 and has been removed from the Pro Forma
Financial Data
Two notes associated with the acquisition of Sugarbush become due based on a
change in control. The amount of these notes is approximately $7,700.
The following table details the anticipated initial advances on the new
credit facility:
<TABLE>
<S> <C>
Retirement of Discount Notes...................................... $ 22,076
Prepayment penalty on Discount Notes.............................. 3,036
Retirement of Existing Credit Facility, current portion........... 25,067
Retirement of Existing Credit Facility, long term portion......... 30,000
Closing fees on New Credit Facility............................... 3,275
Payment of Sugarbush acquisition notes required by change of
control......................................................... 7,657
Payment of Wolf Mountain (The Canyons) acquisition note required
by Initial Public Offering...................................... 4,200
Amount required in addition to offering to purchase Acquired
Resorts......................................................... 36,490
---------
$ 131,801
---------
---------
</TABLE>
(c) The Company issued $17,500 in 14% Senior Exchangeable Notes due 2002 in a
private offering to an institutional investor on July 28, 1997. There were
various fees totaling $26 making the net proceeds $17,474.
(d) The purchase price of the Acquired Resorts is listed in the following table,
the actual cash price excludes the "Liability established for
contingencies."
<TABLE>
<S> <C>
Stated Purchase Price............................................. $ 290,000
Net working capital adjustment.................................... (3,435)
Estimated Transaction costs....................................... 800
Liability established for contingencies........................... 3,000
---------
$ 290,365
---------
---------
</TABLE>
(e) The Company estimates that total costs associated with the issuance of the
Common Stock will be approximately $22,000.
(f) Certain assets and liabilities including all cash and funded debt of the
Acquired Resorts are being excluded in the Acquisition and are therefore
eliminated in the pro forma balance sheet data.
(g) Fixed assets were adjusted to their estimated fair market value pursuant to
purchase accounting. These estimates are based on preliminary purchase price
allocations which are subject to final allocations pursuant to appraisals.
(h) Adjusts real estate held for development and sale to estimated fair value
pursuant to purchase accounting. These are estimated based on preliminary
purchase price allocations which are subject to final allocations pursuant
to appraisals.
(i) Management has determined that the golf course assets to be purchased from
the Acquired Resorts will be sold. These assets are presented at their
estimated net realizable value and are classified as assets held for sale in
the accompanying Unaudited Pro Forma Combined Balance Sheet Data. The
results of operations of the golf course operations have been eliminated in
the Unaudited Pro Forma Combined Statement of Operations Data. Included in
this adjustment is a personal residence which will also be sold.
35
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
(j) Various intangible assets were recorded based on their fair value and
goodwill was recorded as part of purchase accounting.
These are estimates based on preliminary purchase price allocations which are
subject to final allocations pursuant to appraisals.
The following table lists the purchase price that was allocated to intangible
assets:
<TABLE>
<CAPTION>
ANNUAL
USEFUL LIFE AMORTIZATION
--------------- -------------
<S> <C> <C> <C>
Tradenames................................................ 22,000 30 733
Software.................................................. 5,000 10 500
Customers................................................. 15,000 10 1,500
Goodwill.................................................. 46,669 40 1,167
--------- -----
Total................................................. 88,669 3,900
--------- -----
--------- -----
</TABLE>
(k) The Company currently owns 96% of the outstanding common stock of ASC East.
Concurrently with the Offering the Company intends to offer (the ASC East
Exchange Offer) to exchange stock in ASC all minority interests owned in ASC
East. The pro forma financial data assumes all minority owners exchange
their shares. The amount of $626,000 represents the elimination of the
minority interest holders.
The fair market value of the minority interest at the IPO price of $18.50 a
share is $10.3 million. This entire amount is recorded to common stock with
the difference between the book value of the minority interest and the fair
market value of the shares exchanged being a reduction to additional
retained earnings.
(l) All adjustments to the Unaudited Pro Forma Combined Statement of Operations
Data have been tax-effected using the expected effective tax rate of 42%.
(m) The Company has adopted a stock option plan for senior and other management
of the Company. The senior management group will receive, prior to the date
of the Acquisition and the Offering, deeply discounted options with a $2.00
exercise price. The estimated compensation expense related to the vested
portion of the discounted options is $13,912,000, which has not been
reflected as a pro forma adjustment to the Income Statement because the
granting of discounted options is a one time occurrence, and all future
options granted by the Company are expected to have an exercise price equal
to the fair market value of the underlying shares as of the date the option
is granted. The effect of the Stock Option Plan has been recorded as a pro
forma adjustment to the Balance Sheet.
(n) On July 3, 1997, ASC Utah, a sister corporation to ASC East, acquired The
Canyons. Prior to such acquisition, Leslie B. Otten, who formerly held 96%
of the outstanding common stock of ASC East, transferred all his shares of
common stock of ASC East to the Company. The effects of such transactions
are reflected in the Company's financial statements as of and for the year
ended July 27, 1997.
Concurrently with the Offering, the Company intends to conduct the ASC East
Exchange Offer. If all such holders elect to exchange their shares of ASC
East common stock for Common Stock, the Company will issue 615,022 shares of
Common Stock in the ASC East Exchange Offer, representing approximately 1.8%
of all shares of Common Stock outstanding immediately following the
Offering, Consummation of the ASC East Exchange Offer is conditioned upon
such holders entering into lock-up agreements for a period of 180 days
following the consummation of the Offering.
Pursuant to the terms of the Securities Purchase Agreement, the Company
intends to conduct the Preferred Exchange Offer, and will exchange all of
such securities for shares of the Company's 6% Convertible Preferred Stock
or an aggregate of 1,991,794 shares of Common Stock at a 5% discount
36
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
to the initial public offering price, representing 11.5% of the Common Stock
outstanding after giving affect to the Offering. The effects of such
discount are accounted for in the Unaudited Pro Forma Combined Financial
Statements for the year ended July 27, 1997. If the holders of Series A
manditorily redeemable Preferred Stock and 14% Senior Exchangeable Notes do
not elect to exchange such securities for 6% Convertible Preferred Stock or
Common Stock, consummation of the Offering will trigger a Change of Control
(as defined) under the Securities Purchase Agreement relating to the
Company's Series A manditorily redeemable Preferred Stock and 14% Senior
Exchangeable Notes. In such event the Securities Purchase Agreement would
require that the Company offer to purchase the Series A Preferred Stock and
14% Senior Exchangeable Notes for cash at a redemption price of 105.3% of
the principal amount outstanding or the amount of the liquidation preference
on the date of redemption. See "Description of Certain Indebtedness--14%
Exchangeable Notes" and "Description of Capital Stock--Series A Exchangeable
Preferred Stock" and "--6% Convertible Preferred Stock".
Related to the purchase of The Canyons, ASC Utah entered into a long-term
lease of the real estate constituting the resort. The results of operations
of The Canyons have not been reflected in the pro forma statements of
operations due to the immateriality of the activity.
(o) Gives pro forma effect to the incremental interest expense related to the
New Credit Facility. Included in the accompanying pro forma financial data
is interest expense from the New Credit Facility of $5,482 for the year
ended July 27, 1997. The incremental interest expense is based on a net
increase in the Senior Credit Facility of $64.9 million.
Historical interest expense related to the Discount Notes of $2,890 for the
year ended July 27, 1997 has been eliminated in the pro forma statement of
operations.
(p) The pro forma adjustment reflects the elimination of reimbursements paid to
the parent company of the Acquired Resorts for the guarantee of the Acquired
Resorts' debt obligations by the parent. These costs would not have been
incurred had the Acquired Resorts been subsidiaries of the Company for the
year ended July 27, 1997 nor will such payments be required by the Acquired
Resorts prospectively.
In addition to the pro forma adjustments described above, management expects
to realize further annual costs reductions following the Acquisition. These
reductions are expected to result largely from decreases in discretionary
costs yet to be incurred and, therefore, have not been reflected in the pro
forma adjustments.
(q) Management has specifically identified certain costs which will be
eliminated in connection with the Acquisition. Insurance expense will be
reduced by $325,000 based on preliminary quotes received from the Company's
current insurance provider.
The Aquired resorts have classified expenditures related to rental equipment
purchases and uniform purchases as operating expenses, these expenditures
will be capitalized and depreciated to be consistent with the Company's
historical treatment.
The Acquired Resorts have historically used several operating leases for
grooming equipment, new equipment will be purchased and depreciated over the
useful life of the equipment.
(r) Total purchase price allocated to Acquired Resorts is $158.6 million. An
estimated average useful life of these assets is estimated to be 12 years.
Estimated annual depreciation is $13.2 million. The depreciation previously
recorded on the Acquired Resorts has been eliminated.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
PRO FORMA FINANCIAL INFORMATION
GENERAL
Since 1994, the Company's growth has been substantially as a result of
acquisitions. The Company acquired Attitash/Bear Peak in 1994, Sugarbush in
1995, the S-K-I Ltd. resorts (Killington, Sugarloaf and Mount Snow/Haystack) in
1996 and The Canyons, formerly Wolf Mountain, in 1997. In August 1997, the
Company agreed to acquire the Steamboat and Heavenly ski resorts. The operations
of S-K-I Ltd. are only included in the Company's historical financial statements
for one month of fiscal 1996, accordingly, the Company believes that a
comparison of the pro forma results of operations for fiscal 1996 and fiscal
1997 is more meaningful to investors than a comparison of the actual results of
operations for the same period.
The following table sets forth the pro forma results of operations of the
Company as if the acquisitions of S-K-I Ltd. and the Acquired Resorts and all
related transactions had taken place at the beginning of fiscal 1996.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FISCAL 1996 FISCAL 1997
--------------------- ---------------------
% OF % OF
$ REVENUE $ REVENUE
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Resort.................................................... $ 241,996 95.32 $ 253,397 96.77
Real Estate............................................... 11,877 4.68 8,468 3.23
---------- --------- ---------- ---------
Total revenues........................................ 253,873 100.00 261,865 100.00
Operating Expenses:
Cost of resort operations................................. 151,595 59.71 157,744 60.24
Cost of real estate sold.................................. 6,273 2.47 6,813 2.60
Marketing, general and administrative..................... 37,302 14.69 39,464 15.07
Depreciation and amortization............................. 34,207 13.48 35,993 13.74
---------- --------- ---------- ---------
Total operating expenses.............................. 229,377 90.35 240,014 91.65
---------- ----------
Commitment fee.............................................. 1,447 .57 -- --
Interest expense............................................ 26,002 10.24 27,327 10.44
Provision (benefit) for income taxes........................ (344) (.13) (2,300) (.88)
---------- --------- ---------- ---------
Net loss.................................................... (2,609) (1.03) (3,176) (1.21)
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
PRO FORMA FISCAL YEAR ENDED JULY 27, 1997 VS. PRO FORMA FISCAL YEAR ENDED JULY
28, 1996
Pro forma total revenues in fiscal 1997 were $261.9 million, an increase of
$8.0 million, or 3.2%, as compared to pro forma total revenues of $253.9 million
in fiscal 1996. Pro forma resort revenues in fiscal 1997 were $253.4 million, an
increase of $11.4 million, or 4.7%, as compared to pro forma resort revenues of
$242.0 million in fiscal 1996. The increase in pro forma resort revenues was due
primarily to a 2.1% increase in aggregate skier visits (to 4.8 million from 4.7
million) and a 1.5% increase in average resort revenues per skier visit.
The pro forma resort revenues in fiscal 1997 of the Company's northeastern
resorts were $166.9 million, an increase of $5.2 million, or 3.2%, as compared
to pro forma resort revenues of $161.7 million in fiscal 1996. This increase was
due primarily to a 1.6% increase in skier visits and a 1.8% increase in resort
revenues per skier visit. The increase in resort revenues per skier visit was
attributable to increased ticket prices and yield management and increases in
non-ticket revenues per skier visit, offset, in part, by
38
<PAGE>
increased promotional activity. The Company achieved these results
notwithstanding a 10.6% decrease in industry-wide skier visits in the Northeast.
The pro forma resort revenues in fiscal 1997 of the Acquired Resorts were
$86.5 million, an increase of $6.2 million, or 7.7%, as compared to pro forma
resort revenues of $80.3 million in fiscal 1996. This increase was due primarily
to an 8.8% increase in skier visits at the Steamboat resort, offset, in part, by
a 3.1% decrease in skier visits at the Heavenly resort. Skier visits at Heavenly
were adversely impacted by the extended closure of U.S. Route 50, a major access
road to the resort, during the 1996-97 ski season for 45 days in December and
January. Changes in revenues per skier visit were immaterial during these
periods at the Acquired Resorts.
Pro forma real estate revenues in fiscal 1997 were $8.5 million, a decrease
of $3.4 million, or 28.6%, as compared to pro forma real estate revenues of
$11.9 million in fiscal 1996. This decrease was due primarily to the sale of all
available quartershare units at the Company's Sunday River quartershare hotel in
the fourth quarter of fiscal 1996, with no additional quartershare units being
available for sale until the Company's quartershare hotel at Attitash/Bear Peak
was completed in the third quarter of fiscal 1997. During the last four months
of fiscal 1997, the Company closed $5.0 million in quartershare unit sales at
Attitash/Bear Peak, and the Acquired Resorts had $1.9 million of real estate
revenues from the sale of miscellaneous undeveloped parcels of land.
Pro forma cost of resort operations in fiscal 1997 was $157.7 million, an
increase of $6.1 million, or 4.0%, as compared to pro forma cost of resort
operations of $151.6 million in fiscal 1996. The increase of .5% as a percentage
of revenue was primarily from increased snowmaking activity necessitated by the
adverse weather conditions in the Northeast during the 1996-97 ski season.
Pro forma cost of real estate sold in fiscal 1997 was $6.8 million, an
increase of $.5 million, or 7.9%, as compared to pro forma cost of real estate
sold of $6.3 million in fiscal 1996. This increase was due primarily to
approximately $1.0 million of development costs expensed in fiscal 1997 relating
to projects that are currently under development, and consequently, did not
generate revenues.
Pro forma marketing, general and administrative expense in fiscal 1997 was
$39.5 million, an increase of $2.2 million, or 5.9%, as compared to pro forma
marketing, general and administrative expense of $37.3 million in fiscal 1996.
As a percentage of resort revenues, marketing, general and administrative
expense increased from 14.7% in fiscal 1996 to 15.1% in fiscal 1997. This
increase was due primarily to increased marketing activities at the Company's
resorts in the Northeast following the S-K-I Ltd. acquisition.
Pro forma depreciation and amortization in fiscal 1997 was $36.0 million, an
increase of $1.8 million, or 5.3%, as compared to pro forma depreciation and
amortization of $34.2 million in fiscal 1996. This increase was due to the
extensive capital programs during the summer of 1996 and the depreciation
associated with these capital improvements.
Pro forma interest expense in fiscal 1997 was $27.3 million, an increase of
$1.2 million, or 4.6%, as compared to pro forma interest expense of $26.1 in
fiscal 1996. This increase was due to additional borrowings from the acquisition
of Pico and expenditures related to capital improvements.
39
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
OF THE COMPANY
THE COMPANY
The following selected historical financial data of the Company (except
Other Data) (i) as of and for the fiscal years ended July 30, 1995, July 28,
1996 and July 27, 1997 have been derived from the financial statements of the
Company audited by Price Waterhouse LLP, independent accountants and (ii) as of
and for each of the fiscal years ended July 25, 1993 and July 31, 1994 have been
derived from the financial statements of the Company audited by Berry, Dunn,
McNeil & Parker, independent accountants.
<TABLE>
<CAPTION>
HISTORICAL YEAR ENDED (1)
---------------------------------------------------------
JULY 25, JULY 31, JULY 30, JULY 28, JULY 27,
1993 1994 1995 1996 1997
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SKIER VISIT AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net revenues:
Resort........................................................... $ 23,645 $ 26,544 $ 46,794 $ 63,489 $ 166,923
Real estate...................................................... 6,103 6,682 7,953 9,933 8,468
----------- ----------- --------- --------- ---------
Total net revenues............................................. 29,748 33,226 54,747 73,422 175,391
----------- ----------- --------- --------- ---------
Operating expenses:
Resort........................................................... 14,705 15,787 29,725 41,799 109,774
Real estate...................................................... 3,245 3,179 3,994 5,844 6,813
Marketing, general and administrative............................ 4,718 5,940 9,394 11,289 26,126
Depreciation and amortization.................................... 1,984 2,421 3,910 6,783 18,293
----------- ----------- --------- --------- ---------
Total operating expenses....................................... 24,652 27,327 47,023 65,715 161,006
----------- ----------- --------- --------- ---------
Income from operations............................................. 5,096 5,899 7,724 7,707 14,385
Other expenses:
Commitment fee..................................................... -- -- -- 1,447 --
Interest expense................................................... 849 1,026 2,205 4,699 23,730
----------- ----------- --------- --------- ---------
Income (loss) before provision (benefit) for income taxes, minority
interest in loss of subsidiary and extraordinary gain from
insurance claim.................................................. 4,247 4,873 5,519 1,561 (9,345)
Provision (benefit) for income taxes............................... -- -- 400 3,906 (3,613)
Minority interest in loss of subsidiary............................ -- -- -- 108 250
----------- ----------- --------- --------- ---------
Income (loss) before extraordinary gain from insurance claim....... 4,247 4,873 5,119 (2,237) (5,482)
Extraordinary gain from insurance claim............................ 1,592 -- -- -- --
----------- ----------- --------- --------- ---------
Net income (loss).................................................. $ 5,839 $ 4,873 $ 5,119 $ (2,237) $ (5,482)
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
OTHER DATA:
Resort:
Skier visits(000's)(2)........................................... 525 528 1,060 1,290 3,025
Season pass holders (000's)...................................... 3.2 3.7 11.2 13.2 30.9
Resort revenues per skier visit.................................. $ 45.04 $ 50.26 $ 44.14 $ 49.20 $ 55.18
Resort EBITDA(3)(4).............................................. $ 4,222 $ 4,817 $ 7,675 $ 10,401 $ 31,023
Real estate:
Number of units sold............................................. 173 155 163 177 123
Number of units pre-sold(5)...................................... -- -- -- 109 605
Real estate EBIT(4)(6)........................................... $ 2,858 $ 3,503 $ 3,959 $ 4,089 $ 1,655
STATEMENT OF CASH FLOWS DATA:
Cash flows from operations....................................... $ 2,667 $ 5,483 $ 12,593 $ 7,465 $ 7,344
Cash flows from investing activities............................. (4,432) (9,041) (13,843) (122,583) (14,626)
Cash flows from financing activities............................. 1,559 3,764 2,399 116,941 19,655
BALANCE SHEET DATA:
Total assets..................................................... $ 39,850 $ 51,784 $ 72,434 $ 298,732 $ 337,340
Long term debt, excluding current maturities..................... 14,453 19,103 27,169 187,827 196,582
Mandatory redeemable Preferred Stock............................. -- -- -- -- 16,821
Common shareholders' equity...................................... 23,167 26,212 30,502 21,903 15,101
</TABLE>
40
<PAGE>
- ------------------------
(1) The historical results of the Company reflect the results of operations of
the Attitash/Bear Peak ski resort since its acquisition in July 1994, the
results of operations of the Sugarbush ski resort since October 1994, the
results of operations of the Mt. Cranmore ski resort from its acquisition in
June 1995 through its divestiture in November 1996, the results of
operations of S-K-I Ltd. since its acquisition in June 1996, and the results
of operations of Pico Mountain since its acquisition in December 1996.
(2) For the purposes of estimating skier visits, the Company assumes that a
season pass holder visits the Company's resorts a number of times equal to
the average cost of a season pass divided by the average daily lift ticket
price.
(3) Resort EBITDA represents resort revenues less cost of resort operations and
marketing, general and administrative expense.
(4) Resort EBITDA and Real Estate EBIT are not measurements calculated in
accordance with GAAP and should not be considered as alternatives to
operating or net income as an indicator of operating performance, cash flows
as a measure of liquidity or any other GAAP determined measurement. Certain
items excluded from Resort EBITDA and/or Real Estate EBIT, such as
depreciation, amortization and non-cash charges for stock compensation
awards and asset impairments are significant components in understanding and
assessing the Company's financial performance. Other companies may define
Resort EBITDA and Real Estate EBIT differently, and as a result, such
measures may not be comparable to the Company's Resort EBITDA and Real
Estate EBIT. The Company has included information concerning Resort EBITDA
and Real Estate EBIT because management believes they are indicative
measures of the Company's liquidity and financial position, and are
generally used by investors to evaluate companies in the resort industry.
(5) Pre-sold units represent quartershare and other residential units that are
under construction for which the Company has a binding sales contract and
has received a 5% down payment on the unit from the purchaser. Recognition
of the revenue from such pre-sales is deferred until the period in which
such sales are closed.
(6) Real estate EBIT represents revenues from real estate sales less cost of
real estate sold, including selling costs, holding costs, the allocated
capitalized cost of land, construction costs and other costs relating to
property sold.
41
<PAGE>
SELECTED COMBINED FINANCIAL DATA
OF THE ACQUIRED RESORTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SKIER AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Ski operations.................................. $ 65,181 $ 62,700 $ 67,843 $ 64,967 $ 67,423
Retail, ski rental and other.................... 18,229 19,334 20,724 19,765 21,643
---------- ---------- ---------- ---------- ----------
Total revenues.............................. 83,410 82,034 88,567 84,732 89,066
---------- ---------- ---------- ---------- ----------
Operating expenses:
Ski operations.................................. 32,590 33,543 34,682 34,033 36,712
Retail, ski rental and other.................... 12,188 13,017 14,032 13,341 14,427
Marketing, general, administrative and
other(1)...................................... 15,703 14,778 17,075 16,585 17,178
Writedown of assets(2).......................... -- -- -- -- 2,000
Depreciation and amortization................... 14,481 14,544 14,643 14,477 12,516
---------- ---------- ---------- ---------- ----------
Total operating expenses.................... 74,962 75,882 80,432 78,436 82,833
---------- ---------- ---------- ---------- ----------
Operating income.................................. $ 8,448 $ 6,152 $ 8,135 $ 6,296 $ 6,233
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net loss.......................................... $ (3,905) $ (5,254) $ (3,906) $ (4,538) $ (3,406)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
Skier visits (000's).............................. 1,877 1,750 1,858 1,732 1,796
Season pass holders (000's)....................... 5.7 6.6 6.9 7.0 7.5
Total revenues per skier visit.................... $ 43.22 $ 45.23 $ 45.99 $ 47.46 $ 47.48
EBITDA(1)(2)...................................... $ 25,929 $ 23,594 $ 26,078 $ 24,074 $ 24,150
Capital expenditures.............................. $ 11,998 $ 3,382 $ 6,925 $ 5,864 $ 5,344
BALANCE SHEET DATA:
Total assets...................................... $ 188,513 $ 174,325 $ 166,610 $ 159,067 $ 149,444
Long-term debt.................................... 160,910 153,675 147,185 142,146 135,414
Total shareholders' equity........................ 18,603 13,349 9,443 8,405 4,999
</TABLE>
- ------------------------
(1) The Acquired Resorts have historically reimbursed Kamori for certain
administrative services provided. Such reimbursements totalled approximately
$3.0 million, $2.9 million, $3.3 million, $3.3 million and $3.4 million,
respectively, for each of the years ended May 31, 1993 through May 31, 1997.
Such amounts are included in marketing, general and administrative expense
in the accompanying selected combined financial information, but have been
excluded for purposes of calculating EBITDA.
(2) In 1997, the Acquired Resorts recorded a $2.0 million impairment loss
related to land, buildings and equipment of its golf resort to properly
state these fixed assets at estimated fair values. Such loss is excluded in
the calculation of EBITDA.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS AND THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The discussion and analysis below relates to (i) the historical financial
statements and results of operations of the Company, (ii) the historical
financial statements and results of operations of the Acquired Resorts and (iii)
the liquidity and capital resources of the Company after giving effect to the
consummation of the Transactions. The Company was formed in July 1997 pursuant
to the Formation. The historical financial statements of the Company for all
periods ending prior to the Formation are the financial statements of ASC East.
For periods ending subsequent to the Formation, the financial statements of the
Company will include the accounts of ASC East and the Company's other
operations. The following discussion should be read in conjunction with the
financial statements and the notes thereto contained elsewhere in this
Prospectus.
The Company has, over the past several years, undertaken a strategy to
differentiate its resorts from the competition by enhancing the quality and
scope of on-mountain facilities and services, including (i) improving lifts,
trail design, snowmaking, grooming and base facilities, (ii) increasing the
on-mountain bed base and (iii) marketing these facilities and services
aggressively, while maintaining ownership of all revenue sources connected with
the resorts, including retail sales, food and beverage concessions, lodging and
real estate development. This strategy has been coupled in the last three years
with growth through acquisitions, as reflected in the acquisitions of the Mount
Attitash/Bear Peak and Sugarbush resorts in 1994, the S-K-I Ltd. resorts in 1996
and the Steamboat and Heavenly ski resorts to be consummated in October 1997,
and subsequent or proposed capital expenditures at those resorts. See
"Business--Existing Resorts" and "--Acquired Resorts." These efforts have
resulted in significant growth both in revenues and profitability.
Historically, both the Company and the Acquired Resorts have generated the
vast majority of their revenues in the second and third quarters of their
respective fiscal years, of which a significant portion is produced in two key
weeks--the Christmas and Presidents' Day vacation weeks (during which
approximately 23% of annual skier visits are generated). During the first and
fourth fiscal quarters, the Company and the Acquired Resorts experience
substantial reductions in utility expense, due to the absence of snowmaking and
lift operation, while making significant expenditures for off-season
maintenance, expansion and capital improvement activities in preparation for the
ensuing ski season.
43
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth, for the periods indicated, certain operating
data of the Company as a percentage of revenues.
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------
<S> <C> <C> <C>
JULY JULY JULY
30, 28, 27,
1995 1996 1997
------- ------ ------
Revenues
Resort.................................................................. 85.5% 86.5% 95.2%
Real estate............................................................. 14.5 13.5 4.8
------- ------ ------
Total revenues........................................................ 100.0 100.0 100.0
------- ------ ------
Expenses
Cost of operations including wages, maintenance and supplies............ 54.3 56.9 62.6
Cost of real estate sold................................................ 7.3 8.0 3.9
Marketing, general and administrative................................... 17.2 15.4 14.9
Depreciation and amortization........................................... 7.1 9.2 10.4
------- ------ ------
Total other expenses.................................................. 85.9 89.5 91.8
------- ------ ------
Income from operations.................................................... 14.1 10.5 8.2
Commitment fee............................................................ -- 2.0 --
Interest expense.......................................................... 4.0 6.4 13.5
------- ------ ------
Income (loss) before provision for income taxes and minority interest in
loss of subsidiary...................................................... 10.1 2.1 (5.3)
Provision (benefit) for income taxes...................................... 0.7 5.3 (2.1)
------- ------ ------
Income (loss) before minority interest in loss of subsidiary.............. 9.4 (3.2) (3.2)
Minority interest in loss of subsidiary................................... -- 0.2 0.1
------- ------ ------
Net income (loss)......................................................... 9.4% (3.0)% (3.1)%
------- ------ ------
------- ------ ------
</TABLE>
FISCAL YEAR ENDED JULY 27, 1997 COMPARED TO FISCAL YEAR ENDED JULY 28, 1996
Resort revenues in fiscal 1997 were $166.9 million, an increase of $103.4
million, or 162.8%, as compared to resort revenues of $63.5 million in fiscal
1996. This increase was due primarily to the addition of the S-K-I resorts in
June 1996, which accounted for $106.6 million, which was offset by $3.2 million
attributable to a decrease in revenues due to the divestiture of the Cranmore
ski resort and an increase in resort revenues at the Company's other resorts.
Revenues from real estate operations in fiscal 1997 were $8.5 million, a
decrease of $1.4 million, or 14.1%, as compared to revenues from real estate
operations of $9.9 million in fiscal 1996. This decrease was due primarily to
all quartershare units at the Summit Hotel at Sunday River being fully sold by
July 1996. The Company has completed construction of the Grand Summit Hotel at
the Attitash/Bear Peak ski resort and began closing on quartershare unit sales
thereof at the Grand Summit Hotel on April 6, 1997. As of July 27, 1997 the
Grand Summit at Attitash/Bear Peak had $5.0 million in quartershare unit sales.
Cost of resort operations in fiscal 1997 were $109.8 million, an increase of
$68.0 million, or 162.7%, as compared to cost of resort operations of $41.8
million in fiscal 1996. This increase was due primarily to the addition of the
S-K-I resorts.
Cost of real estate operations in fiscal 1997 were $6.8 million, an increase
of $1.0 million, or 17.2%, as compared to cost of real estate operations of $5.8
million in fiscal 1996. This increase was due to pre-construction activities on
the hotel projects that began construction in the fourth quarter of the year
ended July 27, 1997 and costs related to the sales of quartershares at the Grand
Summit at Attitash/Bear Peak.
44
<PAGE>
Marketing, general and administrative expenses in fiscal 1997 were $26.1
million, an increase of $14.8 million, or 131.0%, as compared to marketing,
general and administrative expenses of $11.3 million in fiscal 1996. This
increase was due to the addition of the S-K-I resorts, which account for an
increase of $11.9 million. The remaining difference of $2.9 million is due to a
decrease in expense of $0.5 million due to the divestiture of the Cranmore ski
resort and an increase in expense of $3.4 million due to increased marketing
activity at the pre-merger resorts.
Depreciation and amortization expenses in fiscal 1997 were $18.3 million, an
increase of $11.5 million, or 169.1%, as compared to depreciation and
amortization expenses of $6.8 million in fiscal 1996. This increase was due
primarily to the addition of the S-K-I resorts, which account for an increase of
$10.2 million. The remainder of the increase results from capital improvements
and the amortization of goodwill and prepaid loan fees that did not exist prior
to the acquisition of the S-K-I resorts.
FISCAL YEAR ENDED JULY 28, 1996 COMPARED TO FISCAL YEAR ENDED JULY 30, 1995.
Resort revenues in fiscal 1996 were $63.5 million, an increase of $16.7
million, or 35.7%, as compared to resort revenues of $46.8 million in fiscal
1995. This increase was due to (i) $4.0 million attributable to the acquisition
of Mt. Cranmore in June 1995, (ii) an increase of approximately 19,000 skier
visits, or approximately 10%, at Attitash/Bear Peak, (iii) an increase of
approximately 42,000 skier visits, or approximately 13%, at Sugarbush, (iv) an
increase in lift ticket prices, resulting in an increase in revenues per skier
visit from $41.89 in fiscal 1995 to $44.61 in fiscal 1996, (vi) an approximate
10% increase in season pass revenues, primarily due to the addition of a
multi-resort season pass, and (vii) $2.8 million attributable to the inclusion
of the S-K-I resorts for the final month of fiscal 1996.
Real estate revenues in fiscal 1996 were $9.9 million, an increase of $2.0
million, or 24.3%, as compared to real estate revenues of $7.9 million in fiscal
1995. This increase was due to increased sales of quartershare units at the
Summit Hotel at Sunday River and the sale of 16 additional townhouse units at
Sunday River in fiscal 1996 compared to fiscal 1995, as well as higher average
sales prices.
Cost of operations in fiscal 1996 were $41.8 million, an increase of $12.1
million, or 40.7%, as compared to cost of operations of $29.7 in fiscal 1995.
This increase was due to (i) $1.5 million attributable to the acquisition of Mt.
Cranmore, (ii) incremental costs resulting from the increased skier visits,
(iii) operating costs resulting from the increased snowmaking and lift capacity
and skiable terrain that resulted from the $22.2 million of capital expenditures
during fiscal 1996 and (iv) $2.9 million attributable to the inclusion of the
S-K-I resorts for the final month of fiscal 1996.
Cost of real estate sold in fiscal 1996 was $5.8 million, an increase of
$1.9 million, or 48.7%, as compared to cost of real estate sold of $3.9 in
fiscal 1995. This increase was due to the increased real estate sales volume.
Marketing, general and administrative expense in fiscal 1996 were $11.3
million, an increase of $1.9 million, or 20.2%, as compared to marketing,
general and administrative expenses of $9.4 in fiscal 1995. This increase was
due to (i) approximately $0.7 million attributable to the acquisition of Mt.
Cranmore, (ii) an extensive marketing campaign following the significant
improvements made at Sugarbush, (iii) expenses resulting from the acquisition of
Mt. Cranmore and Sugarbush and (iv) $0.9 million attributable to the inclusion
of the S-K-I resorts for the final month of fiscal 1996.
Depreciation and amortization in fiscal 1996 were $6.8 million, an increase
of $2.9 million, or 74.4%, as compared to depreciation and amortization of $3.9
million in fiscal 1995. This increase was due to depreciation resulting from (i)
the $24 million capital program completed prior to the 1995-96 ski season, (ii)
the acquisitions of Mt. Cranmore and Sugarbush and (iii) $0.9 million
attributable to the inclusion of S-K-I resort for the final month of fiscal
1996.
Interest expense in fiscal 1996 was $4.7 million, an increase of $2.5
million, or 113.6%, as compared to interest expenses of $2.2 in fiscal 1995.
This increase was due to (i) increased borrowings to support the
45
<PAGE>
Company's capital program, (ii) the acquisitions of Mt. Cranmore and Sugarbush
and (iii) $0.2 million attributable to the inclusion of the S-K-I resorts for
the final month of fiscal 1996.
Income tax expense in fiscal 1996 was $3.9 million, an increase of $3.5
million, or 875.0%, as compared to income tax expenses of $0.4 million in fiscal
1995. The majority of the increase in the Company's provision for income taxes
was attributable to the conversion of the former S corporations to C
corporations, offset by an $0.8 million benefit due to inclusion of the S-K-I
resorts for the final month of fiscal 1996.
RESULTS OF OPERATIONS OF THE ACQUIRED RESORTS
FISCAL YEAR ENDED MAY 31, 1997 COMPARED TO FISCAL YEAR ENDED MAY 31, 1996
Total revenues in fiscal 1997 were $89.1 million, an increase of $4.4
million, or 5.2%, as compared to total revenues of $84.7 million in fiscal 1996.
This increase was attributable primarily to an 8.4% increase in skier visits at
Steamboat, offset partially by a 3.1% decrease in skier visits at Heavenly.
Access to the Heavenly ski area was impeded for a portion of the 1996-97 ski
season due to the temporary closure of U.S. Highway 50, which leads into South
Lake Tahoe. Average revenue per skier visit remained relatively constant in
fiscal 1997 compared to fiscal 1996.
Cost of ski operations in fiscal 1997 were $36.7 million, an increase of
$2.7 million, or 7.9%, as compared to cost of ski operations of $34.0 million in
fiscal 1996. This increase was attributable primarily to higher variable costs
associated with the increase in skier visits at Steamboat, in addition to higher
snowgrooming and vehicle maintenance expenses at Heavenly. As a percentage of
ski revenues, cost of ski operations increased to 54% in fiscal 1997 from 52% in
fiscal 1996.
Retail and ski rental expenses in fiscal 1997 were $8.6 million, an increase
of $0.1 million, or 1.2%, as compared to retail and ski rental expenses of $8.5
million in fiscal 1996. Retail and ski rental expenses represented 73.3% of
related revenues in fiscal 1997 as compared to 76.0% in fiscal 1996.
Marketing, general and administrative costs in fiscal 1997 were $17.2
million, an increase of $0.7 million, or 4.2%, as compared to general,
administrative and marketing costs of $16.5 million in fiscal 1996. Included in
this expense item were fees paid to Kamori of $3.4 million in fiscal 1997 and
$3.3 million in fiscal 1996. Marketing, general and administrative expense was
19.3% of revenue in fiscal 1997 as compared to 19.6% in fiscal 1996.
Interest expense in fiscal 1997 was $10.7 million, a decrease of $1.2
million, or 10.1%, as compared to interest expense of $11.9 million in fiscal
1996. This decrease was attributable primarily to lower long-term debt balances
due to principal payments and decreases in the average balances of seasonal
borrowings.
Net loss in fiscal 1997 was $3.4 million, a decrease of $1.1 million, or
24.4%, as compared to net loss of $4.5 million in fiscal 1996. This decrease was
attributable primarily to the decrease in interest expense of $1.2 million
discussed above.
FISCAL YEAR ENDED MAY 31, 1996 COMPARED TO FISCAL YEAR ENDED MAY 31, 1995
Total revenues in fiscal 1996 were $84.7 million, a decrease of $3.9
million, or 4.4%, as compared to total revenues of $88.6 million in fiscal 1995.
The decrease was attributable to a 15.3% decrease in skier visits at Heavenly,
which was caused by a year of drought in the Pacific West in fiscal 1996
following the record snowfall experienced at the resort in fiscal 1995.
Cost of ski operations in fiscal 1996, were $34.0 million, a decrease of
$0.7 million, or 2.0%, as compared to cost of ski operations of $34.7 million in
fiscal 1995. This decrease resulted from cost saving measures implemented at
Heavenly to account for the decrease in skier visits. As a percentage of ski
revenues, cost of ski operations increased to 52.4% in fiscal 1996 from 51.1% in
fiscal 1995.
46
<PAGE>
Retail and ski rental expenses in fiscal 1996 were $8.6 million, a decrease
of $0.2 million, or 2.3%, as compared to retail and ski rental expenses of $8.8
million in fiscal 1995. Retail and ski rental expenses represented 76.0% of
related revenues in fiscal 1996 as compared to 74.0% in fiscal 1995.
Marketing, general and administrative costs in fiscal 1996 were $16.5
million, as compared to marketing, general and administrative costs of $16.5
million in fiscal 1995. Included in these costs were $3.3 million and $3.3
million in fiscal 1996 and fiscal 1995, respectively, of management and other
fees paid to Kamori.
Interest expense in fiscal 1996 was $11.9 million, a decrease of $0.1
million, or 0.1%, as compared to interest expense of $12.0 million in fiscal
1995. This decrease was attributable primarily to lower long-term debt balances
due to principal payments and was offset by an increase in average balances of
seasonal borrowings due to the decrease in skier visits at Heavenly as discussed
above.
Net loss in fiscal 1996 was $4.5 million, an increase of $0.6 million, or
15.4%, as compared to net loss of $3.9 million in fiscal 1995. This increase was
attributable primarily to the decrease in skier visits at Heavenly, as discussed
above, offset by an income tax benefit recorded in fiscal 1996 compared to an
income tax provision recorded in fiscal 1995.
SELECTED QUARTERLY OPERATING RESULTS
The following table presents certain unaudited quarterly financial
information of the Company for the eight quarters ended July 27, 1997. In the
opinion of the Company's management, this information has been prepared on the
same basis as the Consolidated Financial Statements appearing elsewhere in this
Prospectus and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial results set forth herein.
Results of operations for any previous quarters are not necessarily indicative
of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OCT. 28, JAN. 28, APR. 28, JULY 28, OCT. 27, JAN. 26, APR. 27, JUL. 27,
1995 1996 1996 1996 1996 1997 1997 1997
----------- ----------- ----------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Resort......................... $ 4,490 $ 26,451 $ 26,342 $ 6,206 $ 11,541 $ 64,533 $ 86,288 $ 4,561
Real Estate.................... 387 4,307 4,788 451 1,569 1,740 1,886 3,273
----------- ----------- ----------- --------- --------- --------- --------- ---------
Total Revenues................... 4,877 30,758 31,130 6,657 13,110 66,273 88,174 7,834
----------- ----------- ----------- --------- --------- --------- --------- ---------
Expenses
Cost of operations............. 5,576 18,221 8,864 9,138 20,351 40,573 40,737 8,113
Cost of real estate sold....... -- -- 4,806 1,038 -- -- 2,061 4,752
Marketing, general and
administrative............... 2,537 2,927 4,919 906 5,405 7,096 8,595 5,030
Depreciation and
amortization................. 327 2,500 2,788 1,168 1,527 7,344 8,558 864
----------- ----------- ----------- --------- --------- --------- --------- ---------
Total operating expenses......... 8,440 23,648 21,377 12,250 27,283 55,013 59,951 18,759
----------- ----------- ----------- --------- --------- --------- --------- ---------
Income (loss) from operations.... $ (3,563) $ 7,110 $ 9,753 $ (5,593) $ (14,173) $ 11,260 $ 28,223 $ (10,925)
----------- ----------- ----------- --------- --------- --------- --------- ---------
----------- ----------- ----------- --------- --------- --------- --------- ---------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Following the Transactions, the Company's primary liquidity needs will be to
fund capital expenditures, service indebtedness and support seasonal working
capital requirements. In connection with the Transactions, the Company expects
to enter into the New Credit Facility to obtain financing in an aggregate
principal amount of up to $215 million. See "Description of Certain
Indebtedness--The New Credit Facility." The New Credit Facility is expected to
be comprised of a combination of term loan facilities and revolving loan
facilities, of which approximately $75 million will be made available to ASC
East and its subsidiaries and $140 million will be made available to the Company
excluding ASC East and
47
<PAGE>
its subsidiaries. The Company has received a proposal from a lender with respect
to the New Credit Facility but has not yet received a binding commitment. The
Company's primary sources of liquidity will be cash flow from operations of its
subsidiaries and borrowings under the New Credit Facility, under which
approximately $83.2 million is expected to be available for future borrowing
after consummation of the Transactions, subject to compliance by the Company
with the provisions thereof. The 12% Note Indenture contains restrictive
covenants that, among other things, impose limitations on ASC East and its
subsidiaries' ability to pay dividends or make other distributions to the
Company. ASC East is currently prohibited from paying dividends or other
distributions to the Company under these provisions. See "Risk
Factors--Dependence on Highly Leveraged and Restricted Subsidiaries," "Use of
Proceeds" and "Description of Certain Indebtedness." The Company intends to use
borrowings under the New Credit Facility to meet seasonal fluctuations in
working capital requirements, primarily related to off-season operations and
maintenance activities in the Company's first and fourth fiscal quarters,
buildup of retail and other inventories prior to the start of the skiing season,
and to fund on-mountain capital expenditures.
As of July 27, 1997, the Company was in violation of certain financial
covenants in the Existing Credit Facility. As of September 24, 1997, all of such
violations were waived by the lenders party to the Existing Credit Agreement and
the financial covenants with respect to which the Company was in default were
amended.
In fiscal 1997, cash provided from operating activities of $7.3 million was
attributable primarily to net losses of $5.5 million, offset primarily by
depreciation and amortization of $18.3 million, non-cash interest of $3.3
million, release of escrowed funds of $12.6 million and an increase in accounts
payable and other current liabilities of $6.8 million. Such cash flows from
operating activities were reduced by a net investment of approximately $22.0
million in real estate developed for resale, much of which is expected to be
completed and available for sale in fiscal 1998. In fiscal 1996, cash provided
by operating activities of $7.5 million was attributable to a net loss of $2.2
million plus depreciation and amortization of $6.8 million, the addback of a
$5.6 million non-cash tax charge related to the conversion from S corporation
status to C corporation status, reduced by a reduction in accounts payable and
other accrued liabilities of approximately $3.6 million. In fiscal 1995, cash
flow from operating activities of $12.6 million was generated by net income of
$5.1 million plus depreciation and amortization of $3.9 million and a $2.5
million increase in accounts payable and other accrued liabilities.
Over the last three years, the Company's cash flows from investing
activities have consisted primarily of payments for acquisitions, capital
expenditures and proceeds from the sale of businesses. In fiscal 1997, the
Company's net investments were $14.6 million, consisting primarily of purchases
of businesses of $7.0 million and capital expenditures of $23.7 million, net of
$15.0 million of proceeds from the sale of businesses and property and
equipment. In fiscal 1996, the Company invested an aggregate of $122.6 million
including $97.1 million to acquire businesses and $25.1 million of capital
expenditures. In fiscal 1995, the Company invested $13.8 million, including $1.8
million of acquisitions and $12.0 million of capital expenditures.
The Company generated cash from financing activities of $19.7 million in
fiscal 1997, consisting primarily of net receipts under borrowing agreements and
$16.4 million of net proceeds from the issuance of Series A Exchangeable
Preferred Stock. In fiscal 1996, cash provided by financing activities of $116.9
million included $121.1 million of net proceeds from issuance of long-term
subordinated notes and debentures and $17.1 million of net revolving loan
borrowings, less $8.5 million of deferred financing costs, $13.6 million of
payments on long-term debt and a $3.2 million shareholder distribution. In
fiscal 1995, cash provided by financing activities of $2.4 million included $4.0
million of increases under lines of credit and revolving credit loans, net of
repayments of long-term debt of $0.8 million and a $0.9 million shareholder
distribution.
The Acquired Resorts' capital expenditures for the fiscal 1997 were $5.3
million. The Company's 1997 summer capital improvement budget for on-mountain
improvements at the Existing Resorts and the
48
<PAGE>
Acquired Resorts is approximately $57.7 million. See "Business--Operating
Strategy." Management plans to fund the completion of these capital expenditures
from proceeds of the Canyons Securities, borrowings under the New Credit
Facility and cash provided by operations.
Management also plans to undertake hotel and condominium development and
construction activities in fiscal 1998 at The Canyons, Sunday River, Killington,
Mount Snow/Haystack, Steamboat, Sugarbush and Sugarloaf (see "Business--Real
Estate Development"), incurring total estimated costs of approximately $100
million. It is expected that these activities will be conducted through special
purpose subsidiaries with limited guarantees of associated indebtedness being
provided by the Company, to the extent permitted by the New Credit Facility and
the 12% Note Indenture. The Company's ability to guarantee the obligations of
unrestricted real estate development subsidiaries is limited under the New
Credit Facility to an aggregate amount of $25 million of indebtedness. In
keeping with the Company's historical real estate development practices, and as
required under the 12% Note Indenture, such development projects generally must
attain pre-construction sales (evidenced by executed purchase agreements and
security deposits from purchasers) equal to approximately 35% of total projected
construction costs, in order for the project to proceed. Liquidity may also be
affected by the debt service requirements associated with such borrowings, as
well as any required equity investments by the Company in such entities.
Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the Company's capital expenditure program is regarded by
management as important, both as to timing and scope, additional or subsequent
capital spending can be deferred, in some instances for substantial periods of
time, in order to address cash flow or other constraints. However, management
believes that, in light of current competitive conditions in the ski industry,
such initiatives cannot be deferred indefinitely or even for extended periods
without adverse effects on skier visits, revenues and profitability. With
respect to the Company's proposed real estate development program, management
believes that such efforts will enhance ski revenues and will contribute
independently to earnings, as has been the case historically at the Company's
resorts. 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, unlike the capital expenditure
program, is not regarded by management as likely to result in substantial
decreases in skier visits, revenues or profitability.
The Company's liquidity also will be affected by the indebtedness which will
be outstanding following the Transactions, including the indebtedness evidenced
by the 12% Note Indenture and the New Credit Facility. Such indebtedness
requires cash for debt service and imposes various restrictions on additional
indebtedness, capital expenditures, creation of liens, sales of assets,
permitted investments and mergers or other business reorganizations. See
"Description of Certain Indebtedness."
Management believes that the Company's cash flow from operations, combined
with borrowings available under the New Credit Facility and additional
borrowings to the extent permitted under the New Credit Facility and the 12%
Note Indenture, will be sufficient to enable the Company to meet all of its cash
requirements for the foreseeable future. The Company expects that independent
financing facilities must be established to carry out its real estate
development strategy. See "Risk Factors--Substantial Leverage and Financial
Risks," "--Real Estate Development" and "--Growth Through Resort Expansion."
The business of the Company is highly seasonal, with the vast majority of
its annual revenues historically being generated in the second and third fiscal
quarters, of which a significant portion is produced in two key weeks--the
Christmas and Presidents' Day vacation weeks, during which over 23% of annual
skier visits are realized. Cash flow from operations in the first and fourth
quarters of the year typically will not be sufficient to cover fixed charges in
such quarters. See "Risk Factors--Seasonality; Fluctuations in Operating
Results; Dependence on Weather Conditions."
49
<PAGE>
BUSINESS
THE COMPANY
Following the Acquisition, the Company will be the largest operator of
alpine resorts in the United States. The Company will own and operate nine ski
resorts, including two of the five largest resorts in the United States based on
1996-97 skier visits, with at least one resort in each major skiing market.
These nine resorts generated approximately 4.9 million skier visits,
representing approximately 9.3% of total skier visits in United States, during
the 1996-97 ski season. The Company's existing resorts include Sunday River and
Sugarloaf in Maine; Attitash/Bear Peak in New Hampshire; Killington, Mount
Snow/Haystack and Sugarbush in Vermont; and The Canyons, adjacent to Park City,
Utah. On July 31, 1997, the Company entered into the Acquisition Agreement to
acquire (i) the Steamboat ski resort and 168 acres of land held for development
in Steamboat Springs, Colorado and (ii) the Heavenly ski resort near Lake Tahoe,
California. After giving pro forma effect to the Transactions as if the
Transactions occurred on July 29, 1996, the Company's resort revenues, Resort
EBITDA and net loss for fiscal 1997 would have been approximately $253.4
million, $56.2 million and $3.6 million, respectively.
The Existing and Acquired Resorts include several of the top resorts in the
United States, including: (i) Steamboat, the number two overall ski resort in
the United States (number three in North America) according to the September
1997 SNOW COUNTRY magazine survey and the fourth largest ski resort in the
United States with over 1.0 million skier visits in the 1996-97 ski season; (ii)
Killington, the fifth largest resort in the United States with over 1.0 million
skier visits in the 1996-97 ski season; (iii) the three largest resorts in the
Northeast (Killington, Sunday River and Mount Snow/Haystack) in the 1996-97 ski
season; (iv) Heavenly, the second largest resort in the Pacific West Region and
the 11th largest resort in the United States with approximately 700,000 skier
visits in the 1996-97 ski season; and (v) Sugarloaf, the number one resort in
the Northeast according to the September 1997 SNOW COUNTRY magazine survey.
In addition to operating alpine resorts, the Company develops mountainside
real estate which complements the expansion of its on-mountain operations. The
Company has created a unique interval ownership product, the Grand Summit Hotel,
in which individuals purchase quartershare interval interests while the Company
retains ownership of core hotel and commercial properties. The initial sale of
quartershare units typically generates a high profit margin, and the Company
derives a continuing revenue stream from operating the hotel retail, restaurant
and conference facilities and renting quartershare interval interests when not
in use by their owners. The Company also develops alpine villages at prime
locations within certain of its resort designed to fit that resort's individual
characteristics. The Company's real estate development strategy was developed
and implemented at the Sunday River resort, where over 1,350 units of
residential real estate (including condominiums, townhouses and quartershares)
have been developed and sold since 1983. A new Grand Summit Hotel was recently
completed at Attitash/Bear Peak, one Grand Summit Hotel is currently under
construction at each of Killington, Sunday River and Mount Snow/Haystack, and a
hotel at Sugarbush is near completion of the permitting process. These hotels
will have an aggregate of approximately 2,500 units, with preconstruction sales
contracts currently totaling over $45 million (representing 845 units). In
addition the Company has over 7,000 acres of real estate available for future
development at its resorts, providing the capacity to support over 30,000
residential units over the next 15 to 20 years. In addition, the Company
operates golf courses at its resorts and conducts other off-season activities.
Such off-season activities accounted for approximately 11% of the Company's
resort revenues for fiscal 1997.
The Company's primary strength is its ability to improve resort operations
by integrating investments in on-mountain capital improvements with the
development of mountainside real estate. Since 1994, the Company has increased
skier visits by 10.0% in the aggregate for the three resorts that it has owned
for multiple seasons. In addition, the Company has increased its market share of
skier visits in the northeastern United States from approximately 21.8% in the
1995-96 ski season to approximately 24.4% in the 1996-97 ski season (after
giving pro forma effect to its acquisition of the Killington, Mount Snow/
50
<PAGE>
Haystack and Sugarloaf ski resorts as if such acquisitions had occurred on July
30, 1995). Management believes that the Acquired Resorts will provide the
Company with several significant operating benefits, including: (i) enhanced
cross-marketing of its resorts on a national basis; (ii) purchasing and other
economies of scale; and (iii) implementation of the Company's operating strategy
at a more diversified resort base.
Set forth below is an organizational chart of the Company and its material
operating subsidiaries and the principal assets owned by each such entity:
[CHART]
ALPINE RESORT INDUSTRY
There are approximately 750 ski areas in North America. In the United
States, approximately 507 ski areas generated over 52 million skier visits
during the 1996-97 ski season. Since 1985, the ski resort industry has undergone
a period of consolidation and attrition resulting in a significant decline in
the total number of ski areas in North America. The number of ski resorts in the
United States has declined from approximately 735 in 1983 to approximately 507
in 1997, although the number of skier visits has remained relatively flat.
Despite the recent consolidation trend overall, ownership of the smaller
regional ski resorts remains highly fragmented. The Company believes that
technological advances and rising infrastructure costs are the primary reasons
for the ski resort industry consolidation, and that further consolidation is
likely as smaller regional resorts are acquired by larger resort operators with
more sophisticated management capabilities and increased availability of
capital. In addition, the ski resort industry is characterized by significant
barriers to entry because the number of attractive sites is limited, the costs
of resort development are high, and environmental regulations impose significant
restrictions on new development.
51
<PAGE>
The following chart shows a comparison of the industry-wide skier visits
compared to the Company's skier visits in the U.S. regional ski markets during
the 1996-97 ski season:
<TABLE>
<CAPTION>
PERCENTAGE SKIER
1996-97 OF VISITS
TOTAL TOTAL AT COMPANY
SKIER SKIER COMPANY MARKET
GEOGRAPHIC REGION VISITS* VISITS RESORTS SHARE COMPANY RESORTS
- --------------------------- ------ ------- ----- ------- -----------------------------------
<S> <C> <C> <C> <C> <C>
(SKIER VISITS IN MILLIONS)
Northeast.................. 12.4 23.7% 3.0 24.2% Killington, Sunday River, Mount
Snow/Haystack, Sugarloaf,
Sugarbush, Attitash/Bear Peak
Southeast.................. 4.2 8.0 -- -- --
Midwest.................... 7.1 13.5 -- -- --
Rocky Mountain............. 18.9 36.1 1.2 6.3 The Canyons, Steamboat
Pacific West............... 9.8 18.7 0.7 7.1 Heavenly
------ ------- ----- -------
U.S. Overall............. 52.4 100.0% 4.9 37.6%
------ ------- ----- -------
------ ------- ----- -------
</TABLE>
- ------------------------
* Source: Kottke National End of Season Survey 1996/97 Final Report.
United States ski resorts range from small operations which cater primarily
to day skiers from nearby population centers to larger resorts which attract
both day skiers and destination resort guests. Management believes that day
skiers focus primarily on the quality of the skier experience and travel time,
while destination travelers are attracted to the number and type of amenities
available and activities offered, as well as the perceived overall quality of
the vacation experience. Destination guests generate significantly higher resort
operating revenue per skier day than day skiers because of their additional
spending on lodging, food and other retail items over a multiple-day period.
Since 1985, the total number of skier visits has been relatively flat.
However, according to the National Ski Area Association, the number of skier
visits represented by snowboarders in the United States has increased from
approximately 6.4 million in the 1994-95 ski season to approximately 9.3 million
in the 1996-97 ski season, an increase of approximately 45.3%. Management
believes that snowboarding will continue to be an important source of lift
ticket, skier development, retail and rental revenue growth for the Company.
The Company believes that it is well-positioned to capitalize on certain
favorable recent trends and developments affecting the alpine resort industry in
the United States, including (i) the 66.7 million members of the "baby boom"
generation that are now approaching the 40 to 59 year age group where
discretionary income, personal wealth and pursuit of leisure activities are
maximized (this group is estimated to grow by 16.7% over the next 23 years),
(ii) the "echo boom" generation (children of baby boomers) is emerging as a
significant economic force as they begin to enter the prime entry age for
skiing, snowboarding and other "on-snow" sports, (iii) advances in ski equipment
technology such as development of parabolic skis which facilitate learning and
make the sport easier to enjoy, (iv) the continued growth of snowboarding as a
significant and enduring segment of the industry, which is increasing youth
participation in alpine sports and (v) a greater focus on leisure and fitness.
There can be no assurance, however, that such trends and developments will
continue to have a favorable impact on the ski industry.
OPERATING STRATEGY
The Company believes that the following key operating strategies will allow
it to increase revenues and profitability by capitalizing on its position as a
leading mountain resort operator and real estate developer.
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High Impact Capital Improvements
The Company attracts skiers to its resorts by creating a superior skiing
experience through high impact capital investments in on-mountain facilities.
The Company focuses its investments on increasing lift capacity, expanding
skiable terrain and snowmaking coverage, and developing other exciting alpine
attractions. For example, during the last two years the Company has (i) created
diverse skiing experiences such as the Oz bowl and the Jordan Bowl at Sunday
River, (ii) developed above tree-line snowfields at Sugarloaf, (iii) installed
heated eight-passenger high speed gondolas at Killington and The Canyons and
(iv) built one of the longest and fastest chairlifts in the world to
interconnect Sugarbush's North and South mountains. Since 1994, when the Company
began implementing its acquisition strategy, the Company has increased lift
capacity, skiable terrain and snowmaking coverage at its resorts. The 1997
summer capital improvement budget for on-mountain improvements totals over $57.7
million, approximately $18.2 million of which will be invested at The Canyons
and approximately $7.0 million of which will be invested at the Acquired
Resorts.
Integration of Investments in Resort Infrastructure and Real Estate
The Company develops mountainside real estate that complements its
investments in ski operations to enhance the overall attractiveness of its
resorts as vacation destinations. Management believes that this integrated
approach results in growth in overall skier visits, including multi-day visits,
while generating significant revenues from real estate sales and lodging.
Investment typically begins with on-mountain capital improvements such as the
creation of new lifts, trails, expanded snowmaking capability, additional
restaurants and improved ski schools. As resort attendance increases, the
Company develops mountainside real estate to provide accommodations for the
increased number of resort guests. The Company carefully manages the type and
timing of real estate development to achieve capital appreciation and high
occupancy of accommodations. The Company's integrated investment strategy was
developed and refined at its Sunday River resort, where it has sold over 1,350
units of residential real estate since 1983. During that same period, annual
skier visits at Sunday River increased from approximately 50,000 to over
550,000, representing an approximate 18% compound annual growth rate.
Mountainside Real Estate Development
The Company's real estate development strategy is designed to capitalize on
the 7,000 acres of developable land it will control at or near its resorts and
its 15 years of experience in real estate development. Including the Acquired
Resorts, the Company owns or has rights to land providing the capacity to
develop over 30,000 residential units.
The Company's resort real estate development strategy is comprised of three
distinct components (i) Grand Summit quartershare hotels, (ii) alpine village
development and (iii) discrete resort-specific projects. Residential units in
Grand Summit Hotels are sold in quartershare interval interests that allow each
of four quartershare unit owners to use the unit for 13 weeks divided evenly
over the year. The core commercial areas in the hotels are retained and operated
by the Company and include a lobby area, a sports club, retail shops,
restaurants and banquet and conference facilities. Unit owners may use the unit
during their allotted weeks or make the unit available for rental by the Company
under a management agreement that allows the Company to retain up to 45% of
rental revenues. In addition to its Grand Summit Hotels, the Company has
identified several areas for development of alpine villages unique to their
resort locations that consist of carefully planned communities integrated with
condominiums, luxury townhouses, single family luxury dwellings or lots and
commercial properties. Each of the Company's resorts also has the potential for
additional real estate development involving discrete projects tailored to the
characteristics of the particular resort.
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<PAGE>
Increase Revenues Per Skier
The Company seeks to increase revenues per skier by managing ticket yields
and expanding revenue sources at each resort. Management seeks to increase
non-lift ticket revenue sources by increasing point-of-sale locations and sales
volume through retail stores, food and beverage services, equipment rentals,
skier development, lodging and property management. In addition, management
believes that aggressive cross-selling of products and programs (such as the
Company's frequent skier and multi-resort programs) to resort guests increases
resort revenues and profitability. The Company believes it can increase ticket
yields by managing ticket discounts, closely aligning ticket programs to
specific market segments, offering multi-resort ticket products and introducing
a variety of programs that offer packages which include tickets with lodging and
other services available at its resorts. During the 1996-97 ski season, the
Company increased its average yield per skier visit by approximately 2.9% as
compared to the 1995-96 ski season. The Company intends to further increase
revenues by implementing a property management program at the Acquired Resorts.
In addition to its on-mountain activities, the Company is expanding its retail
operations by establishing retail stores in strategic high traffic and
recognized retail districts such as Freeport, Maine; North Conway, New
Hampshire; and South Lake Tahoe, Nevada, thereby strengthening the name and
image of the Company and its resorts.
Innovative Marketing Programs
The Company's marketing program is designed to (i) establish a nationally
recognized high quality name and image, while promoting the unique
characteristics of its individual resorts, (ii) capitalize on cross-selling
opportunities and (iii) enhance customer loyalty. The Company engages in joint
marketing programs with nationally recognized commercial partners such as Mobil,
Budweiser, Pepsi/Mountain Dew, Visa, FILA and Rossignol. Management believes
these joint marketing programs create a high quality image and a strong market
presence on a regional and national basis. In addition, the Company utilizes
loyalty based incentive programs such as the Edge Card, a private label frequent
skier program in which participants receive credits towards lift tickets and
other products.
The Company utilizes a variety of marketing media including direct mail,
television and the Internet. Direct mail marketing efforts include the Company's
"SNO" magazine, which targets the 18 to 30 year age group and currently has a
circulation of over 300,000 copies per issue. Television marketing efforts
include targeted commercials and programming such as the MTV Winter Lodge, which
is hosted by MTV and targets teens and young adults. Internet marketing efforts
include a Company sponsored website at www.peaks.com featuring photographs and
detailed information about the Company's resorts and current skiing conditions.
The Company's aggregate marketing budget for fiscal 1998 is approximately $28
million, including the value of contributions from strategic commercial
marketing partners.
Capitalize on a Multi-Resort Network
The Company's network of resorts provides both geographic diversity and
significant operating benefits. The Company believes its geographic diversity
(i) reduces the risks associated with unfavorable weather conditions, (ii)
insulates the Company from economic slowdowns in any particular region, (iii)
increases the accessibility and visibility of the Company's network of resorts
to the overall North American skier population and (iv) enables the Company to
offer a wide range of mountain vacation alternatives.
The Company believes that its ownership of multiple resorts also provides
the opportunity to (i) create the industry's largest cross-marketing program,
(ii) achieve efficiencies and economies of scale in purchasing goods and
services, (iii) strengthen the distribution network of travel agents and tour
operators by offering a range of mountain resort alternatives, consistent
service quality, convenient travel booking and incentive packages, (iv)
establish performance benchmarks for operations across all of the Company's
resorts, (v) utilize specialized individuals and cross-resort teams at the
corporate level as resources for the
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entire Company and (vi) develop and utilize information and technology systems
for application across all of the Company's resorts.
Growth through Acquisitions
Since fiscal 1994, the Company has achieved substantial growth in its
business through acquisitions. The Company intends to consider future
acquisitions of large well-established destination resorts as well as smaller
"feeder" resorts. The Company focuses on acquiring larger resorts where it
believes it can improve profitability by implementing the Company's integrated
real estate development and on-mountain capital improvement strategy. The
Company also believes that by acquiring smaller regional resorts which have a
strong local following it can capitalize on a broader customer base to
cross-market its major destination resorts. The acquisition of less developed
resorts may also offer opportunities for expansion. The Company, however, is
effectively prohibited from acquiring additional resorts in New England as a
result of antitrust concerns.
Historically, the Company has financed resort acquisitions through private
and public offerings of debt securities. The Company expects to finance future
acquisitions through a combination of internally generated funds, bank
borrowings and public offerings or private placements of equity and/or debt
securities. Following the Transactions, the Company will be highly leveraged.
See "Risk Factors-- Substantial Leverage and Financial Risks," "--Growth Through
Acquisitions; Integration of Acquired Resorts; Ability to Finance Acquisitions"
and "Description of Indebtedness--The New Credit Facility."
Expand Golf and Convention Business
The Company is one of the largest owners and operators of resort golf
courses in New England and seeks to capitalize on this status to increase
off-season revenues. Sugarloaf, Killington, Mount Snow and Sugarbush all operate
championship resort golf courses. The Sugarloaf course, designed by Robert Trent
Jones Jr., is rated as one of the top 25 upscale courses in the country
according to the May 1996 GOLF DIGEST magazine survey and one of the top 25
public courses according to the May 1996 GOLF magazine survey. In addition, a
championship course designed by Robert Trent Jones, Jr. is currently under
construction at Sunday River. The Company also operates eight golf schools at
locations along the east coast from Florida to Maine. The Company's golf program
and other recreational activities draw off-season visitors to the Company's
resorts and support the Company's growing off-season convention business, as
well as its real estate development operations.
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RESORTS
The following table summarizes certain key statistics of the Company's
resorts after giving effect to the Company's summer 1997 capital improvement
program:
<TABLE>
<CAPTION>
SNOWMAKING 1996-97
SKIABLE VERTICAL TOTAL COVERAGE SKIER
TERRAIN DROP LIFTS (% OF SKI VISITS
RESORT (YEAR ACQUIRED) (ACRES) (FEET) TRAILS (HIGH-SPEED) ACRES) LODGES (000S)
- ---------------------------------------- ------- ------- ------ ---------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Killington (1996)....................... 1,200 3,150 212 33(8) 56.0% 8 1,000
Sunday River (1980)..................... 654 2,340 126 17(4) 92.0 4 557
Mount Snow/Haystack (1996).............. 768 1,700 133 26(3) 70.0 5 560
Sugarloaf (1996)........................ 1,400 2,820 122 14(2) 87.4 1 336
Sugarbush (1995)........................ 432 2,650 112 18(4) 67.4 5 362
Attitash/Bear Peak (1994)............... 273 1,750 60 11(1) 89.7 2 210
The Canyons (1997)...................... 2,400 2,580 74 9(3) 8.3 1 100
Steamboat (1997)........................ 1,879 3,668 135 21(4) 13.6 4 1,103
Heavenly (1997)......................... 4,800 3,500 82 27(5) 5.7 7 693
------- ------- ------ ---------- --- ----- ---------
Total............................... 13,806 1,056 176(34) 37 4,921
------- ------ ---------- ----- ---------
------ ---------- ----- ---------
</TABLE>
Since acquiring each of the Existing Resorts, the Company has committed its
resources to create a superior skiing experience by increasing lift capacity,
skiable terrain and snowmaking coverage. The following chart shows the
percentage increase in lift capacity, skiable terrain and snowmaking coverage
since the date of acquisition of each resort after giving effect to the
Company's summer 1997 capital improvement program:
<TABLE>
<CAPTION>
% INCREASE IN KEY OPERATING
CAPACITIES
FROM DATE OF RESORT ACQUISITION
---------------------------------
LIFT
CAPACITY
(SKIERS SKIABLE
PER TERRAIN SNOWMAKING
RESORT (YEAR ACQUIRED) HOUR) (ACRES) COVERAGE
- ------------------------------------------------------------- ------ ----- ------
<S> <C> <C> <C>
Killington (1996)............................................ 51% 36% 56%
Sunday River (1980)(1)....................................... 28 23 26
Mount Snow/Haystack (1996)................................... 6 7 1
Sugarloaf (1996)............................................. 9 4 4
Sugarbush (1995)............................................. 56 9 56
Attitash/Bear Peak (1994).................................... 48 34 34
The Canyons (1997)........................................... 100 18 100
------ ----- ------
Weighted Average......................................... 33% 38% 30%
------ ----- ------
------ ----- ------
</TABLE>
- ------------------------------
(1) Does not include capital improvements completed prior to 1994.
EXISTING RESORTS
KILLINGTON. Killington, located in central Vermont, is the largest ski
resort in the northeast and the fifth largest in the United States, with over
1.0 million skier visits in 1996-97. Killington is a seven-mountain resort
consisting of approximately 1,200 acres with 212 trails serviced by 33 lifts.
The resort has a 4,241 foot summit and a 3,150 foot vertical drop. The resort's
base facilities include eight full-service ski lodges, including one located at
the top of Killington Peak. In December 1996, the Company acquired the Pico
Mountain ski resort located adjacent to Killington and integrated the two
resorts. Management believes the size and diversity of skiable terrain at
Killington make it attractive to all levels of skiers and one of the most widely
recognized of the Company's resorts with regional, national and international
clientele.
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<PAGE>
The on-mountain accommodations at Killington consist of approximately 4,700
beds. The off-mountain bed base in the greater Sherburne, Vermont area is
approximately 12,000 beds. Killington also owns and operates nine retail shops,
seven rental and repair shops, a travel and reservation agency and a cable
television station. At the base of Pico Mountain, the Company owns a well
developed retail village and a health club. Killington is a year-round resort
offering complete golf amenities including an 18-hole championship golf course,
a golf school, a pro shop, a driving range and a tennis school.
Notwithstanding that it is the largest ski resort in the Northeast, the
Company has identified Killington as one of its most underdeveloped resorts.
Since its acquisition in June 1996, the Company has invested $20.5 million in
capital improvements to update Killington's snowmaking, trail and lift systems,
and to develop base facilities and real estate potential at the base areas.
Major improvements and enhancements to the resort completed since June 1996
include (i) installation of two high speed quad lifts, (ii) installation one
high-speed gondola to service the Peak Restaurant at the Killington summit and
to replace the old Killington Peak double chair, (iii) construction of a new
children's center and related base area improvements and (iv) an increase in
snowmaking capacity and coverage to approximately 56%. Management expects the
gondola to increase summer revenues by attracting summer tourists for
sightseeing and dining.
The Company's three-year capital program for the 1998-01 ski seasons
includes the interconnection of lift and trail systems between the Killington
and Pico resorts. The interconnection of the two mountains will result in a 16%
increase in lift capacity and an additional 110 acres (9%) of skiable terrain.
Other improvements include connecting the resort to a nearby reservoir in 1998
through a 1.8 mile pipeline, which, when combined with other new water sources
accessed via the pipeline, will expand snowmaking capacity by approximately 62%.
SUNDAY RIVER. Sunday River, located in the western mountains of Maine,
approximately a three-hour drive from Boston, is New England's third largest ski
resort with over 550,000 skier visits in 1996-97. Extending over eight
interconnected mountain peaks, its facilities consist of approximately 654 acres
of skiable terrain and 126 trails serviced by 17 lifts. The resort has a 3,140
foot summit and a 2,340 foot vertical drop. The Company believes Sunday River
has one of the most modern lift systems in the Northeast. Sunday River has four
base lodges, one of which is located at the top of North Peak.
The on-mountain accommodations of Sunday River consist of approximately
5,400 beds including 714 condominium units and 648 quartershare units at the
Summit Hotel. The off-mountain bed base in greater Bethel, Maine totals
approximately 2,000 beds. The resort owns and operates five ski shops, five
full-service restaurants, four cafeteria-style restaurants and four bars. The
Company also owns and operates a 67-unit hotel and manages the Summit Hotel and
approximately 714 condominium units. In addition, the Company is currently
constructing a 588-unit Grand Summit Hotel at Sunday River's Jordan Bowl which
is scheduled to open in December 1997.
Since 1981, the Company has continually invested in capital improvements at
Sunday River to expand and improve its on-mountain facilities and in real estate
development. The most recently completed improvements include the creation of
new skiing attractions at the Oz bowl and the Jordan Bowl which added
approximately 158 acres (32%) of skiable terrain. In addition, Sunday River's
1997 capital program includes (i) installation of a new high speed quad lift to
North Peak, (ii) complete renovation of its largest base lodge to improve skier
amenities and increase retail and food and beverage space and (iii) an upgrade
of other facilities located at the resort. In addition, the Company recently
completed preliminary construction of a three mile scenic access road to the
Jordan Bowl area and a Robert Trent Jones, Jr. championship golf course is
currently under construction. Management believes that Sunday River has
significant growth potential with over 325 acres of land at the base of the new
Jordan Bowl area which are planned for development of extensive base facilities
and a new Grand Summit Hotel. Additionally, there are over 4,000 acres of
undeveloped land owned by the Company and 3,000 acres for which the Company
holds purchase options that are suitable for development as skiable terrain.
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<PAGE>
MOUNT SNOW/HAYSTACK. Mount Snow, located in Brattleboro, Vermont, the
second largest ski resort in the Northeast with 560,000 skier visits in 1996-97,
is the southernmost of the Company's resorts. A large percentage of the skier
base for Mount Snow derives from Massachusetts, Connecticut and New York. The
resort consists of two mountains separated by approximately three miles, which
have been combined under single management. Its facilities consist of 133 trails
and approximately 768 acres of skiable terrain serviced by 26 lifts. The resort
has a 3,580 foot summit and a 1,700 foot vertical drop. The resort has five
full-service base lodges.
Mount Snow's on-mountain bed base currently consists of 1,280 beds. The
off-mountain bed base in the greater Dover, Vermont area has approximately 7,300
beds. The resort owns and operates eight retail shops, four rental and repair
shops, a pro shop, a country club and a nightclub. Mount Snow also headquarters
the Company-owned "Original Golf School," and operates an 18-hole golf course,
eight golf schools throughout the east coast, a mountain bike school, a 92-room
hotel and a low-voltage local television station.
Since its acquisition in June 1996, the Company has invested approximately
$11.0 million in capital improvements to the resort, including the installation
of two high speed quad chairlifts and increasing skiable terrain and snowmaking
capacity and coverage. The capital improvements for summer 1997 include $2.6
million for additional lift capacity and over $500,000 for increased snowmaking
capacity and base area expansion such as expanded retail and food and beverage
outlets to complement the new Grand Summit Hotel. The Company's three-year
capital program for the 1998-01 ski seasons includes three new high speed
detachable quad lifts and conversion of an existing quad lift to a high speed
detachable lift. The Company plans to expand Mount Snow's lodges to provide a
new children's center, a new nightclub and more retail, food and beverage and
guest service space. The Company also plans to expand snowmaking coverage and
trails, adding approximately 100 acres of skiable terrain (representing an
increase of approximately 13%).
SUGARLOAF. Sugarloaf is located in Carrabassett Valley, Maine and was
ranked as the number one overall ski resort in the East by the September 1997
SNOW COUNTRY magazine survey. Sugarloaf is a single mountain with approximately
1,400 acres of terrain and 122 trails covering approximately 530 acres serviced
by 14 lifts. There are approximately 895 additional acres of off-trail skiable
terrain. The mountain has a 4,237 foot summit and a 2,820 foot vertical drop.
Sugarloaf offers one of the largest ski-in/ski-out base villages in the
Northeast, containing numerous restaurants, retail shops and an abundance of
lodging. Sugarloaf is widely recognized for its challenging terrain, including
its snowfields, which represent the only lift-serviced above-treeline skiing in
the Northeast. As a destination resort, Sugarloaf has a broad market, including
areas as distant as New York, New Jersey, Pennsylvania and Canada.
Sugarloaf operates a year-round conference center, a cross-country ski
facility and an 18-hole championship golf course designed by Robert Trent Jones,
Jr., which is rated by GOLF DIGEST and GOLF magazines as one of the top 25
public courses in the United States. Sugarloaf's slope side ski village consists
of its base lodge, two hotels, banquet facilities for up to 800 people, retail
stores, a rental and repair shop, a sports and fitness club, 900 condominium
units, rental homes, restaurants and an extensive recreational path network.
Improvements currently underway at Sugarloaf include a new high speed quad
chair to service lower mountain terrain and an additional fixed grip quad chair
accessing the snowfields.
SUGARBUSH. Sugarbush, located in Vermont's Mad River Valley, features the
three highest mountain peaks of any single resort in the East and was ranked as
the ninth most popular ski area in North America by SKIING magazine in 1996.
Extending over six mountain peaks, its facilities consist of 432 acres of
skiable terrain and 112 trails serviced by 18 lifts. The resort has a 4,135 foot
summit and a 2,650 foot vertical drop. The mountains are serviced by three base
lodges and two summit lodges.
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<PAGE>
The on-mountain accommodations at Sugarbush consist of approximately 3,200
beds. The off-mountain bed base within the Mad River Valley totals approximately
6,600 beds. The resort operates three ski shops, three full-service restaurants
and four cafeteria-style restaurants. The Company also owns and operates the
46-unit Sugarbush Inn, manages approximately 200 condominium units, and owns and
operates a championship golf course as well as a sports center and a conference
center.
Since the acquisition of Sugarbush by the Company in October 1995, the
Company has invested $19.5 million in capital improvements to expand and improve
its on-mountain facilities. The most recently completed improvements include
four high speed quad chairlifts, a 56% increase in snowmaking capacity, the
creation of new glade skiing terrain, and numerous base area improvements. In
addition, in 1997 expansions are scheduled to facilities at the base of Lincoln
Peak which house children's programs, rental and repair services and retail
outlets. As part of management's development plan, an 8,000 square foot addition
to the Gate House Base Lodge and a new full service 12,000 square foot
mid-mountain lodge for the top of the Gate House Express Chairlift are proposed
for 1998.
ATTITASH/BEAR PEAK. Attitash/Bear Peak, located in the Mount Washington
Valley, New Hampshire, is one of New Hampshire's largest ski resorts. Covering
two mountain peaks, its facilities consist of 273 acres of skiable terrain and
60 trails serviced by 11 lifts. The resort has a 2,350 foot summit and a 1,750
foot vertical drop. The resort benefits from its location in the heart of New
Hampshire ski country and its proximity to the Town of North Conway and the Mt.
Washington valley tourist area, and is widely recognized as a family-oriented
resort. The mountains are serviced by two base lodges.
The on-mountain accommodations of Attitash/Bear Peak consist of
appromimately 1,700 beds. The off-mountain bed base in the Mt. Washington Valley
area totals approximately 16,000 beds. The resort operates two ski shops, two
full-service restaurants, three cafeteria-style restaurants and two bars.
Since its acquisition in July 1994, the Company has invested approximately
$10.0 million in capital improvements at Attitash/Bear Peak. The most recently
completed improvements have been the development of the new Bear Peak area,
construction of a modern base lodge facility, installation of a new high speed
quad lift and trails. The summer 1997 capital program at Attitash/Bear Peak
includes the addition of a triple-chair lift and increases in skiable terrain
and snowmaking. The resort's three-year capital improvement program includes
potential expansion into the Attitash bowl area and a proposed expansion into
the National Forest area adjacent to the existing resort (both of which require
the approval by the Forest Service), the installation of a high-speed
six-passenger lift and a high-speed quad lift. In addition, in fiscal 1998 the
Company expects to expand the children's center and to begin construction of a
new 18-hole golf course.
THE CANYONS. The Canyons, located in the Wasatch Mountains adjacent to Park
City, Utah, is primarily an undeveloped ski resort with potential for future
operational and real estate development. The resort generated approximately
100,000 skier visits in the 1996-97 ski season. Currently, the resort has
approximately 1,700 acres of skiable terrain with an elevation of 9,380 feet and
a 2,580 foot vertical drop. The area has one base lodge and one on-mountain
restaurant.
During the summer of 1997, the Company is investing approximately $18.2
million to develop and construct (i) an eight passenger high-speed gondola, (ii)
five new quad lifts and to increase skiable terrain to approximately 2,400 acres
at the resort, (iii) construction of a mid-mountain lodge which will begin
operation prior to the opening of the resort on December 20, 1997. Its new Red
Pine lodge will serve as the cornerstone of the Company's planned High Mountain
Meadows real estate development located on a plateau at an elevation of 8,000
feet.
Management believes the resort has significant growth potential due to its
proximity to Salt Lake City, its undeveloped skiable terrain and its real estate
development opportunities. The resort is located approximately 35 minutes from
Salt Lake City and is accessed by a major state highway. Air transportation is
provided through the Salt Lake City airport, which is a major regional hub with
direct access from most
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<PAGE>
major domestic airports. The Salt Lake City area has been one of the fastest
growing regions in the United States over the past several years, and the Park
City area has an active real estate market undergoing rapid expansion.
The Utah Winter Sports Park, which is located immediately adjacent to the
resort, is scheduled to serve as the venue for the ski jumping, bobsled and luge
events in the 2002 Winter Olympic Games. Management believes the 2002 Olympic
Games will provide international exposure for the resort. The five-year capital
plan currently calls for substantial development of the resort to be completed
prior to the 2002 Olympic Games.
Management believes that when The Canyons is fully developed, the resort
could encompass over 7,200 acres of skiable terrain consisting of 14 mountain
peaks with a maximum elevation of 10,000 feet, a vertical drop of approximately
3,400 feet, 22 high speed quad ski lifts and an eight passenger high speed
gondola. In addition to the $18.2 million of capital improvements for the
1997-98 ski season, the Company estimates that it will need approximately $42.0
million for on-mountain capital improvements and approximately $150 million for
real estate development in order to fulfill its five-year development plan for
The Canyons. The Company plans to fund such capital improvements and real estate
development from cash flow, bank borrowings or debt and/or equity offerings. See
"Risk Factors--Substantial Leverage and Financial Risks" and "Description of
Indebtedness--The New Credit Facility."
ACQUIRED RESORTS
STEAMBOAT. Steamboat is one of the premier ski resorts in the United
States, ranked second overall by the September 1997 SNOW COUNTRY magazine survey
and fourth nationally in skier visits for the 1996-97 ski season. Located in
Steamboat Springs, Colorado and approximately three hours from Denver, Colorado,
Steamboat is recognized for its "champagne" powder and tree skiing. In the
1996-97 ski season, Steamboat skier visits increased by 8.4%, to 1.1 million,
from the 1995-96 ski season. U.S. Highway 40, a major east-west thoroughfare
connecting the cities of Denver and Salt Lake City, is located approximately one
mile west of the ski area. Steamboat is easily accessible through flights to the
Denver, Colorado airport from many major U.S. cities. Steamboat has
approximately 1,879 acres of skiable terrain which consists of 135 trails
serviced by 21 lifts.
Steamboat is making on-mountain improvements for the upcoming 1997-98 ski
season, including the addition of a high-speed quad chairlift, approximately 260
acres of advanced/expert terrain in the Pioneer Ridge and snowmaking capacity.
Lodge facilities are currently located in the base area and at three other
points throughout the resort, Thunderhead, Four Points and Rendez Vous Saddle.
Steamboat operates or leases 13 retail shops, four equipment rental shops, 15
miscellaneous retail shops and 19 food and beverage operations, having a total
seating capacity of approximately 2,734.
Steamboat's master plan calls for expansion to include Pioneer Ridge which
will involve the installation of two detachable chair lifts servicing 27 open
and graded trails for intermediate and expert skiers. Snowmaking covering 66
acres will be phased in over three years at Pioneer Ridge. The Morningside Park
expansion will add one fixed grip chair lift servicing designated tree skiing
and open bowl skiing area for intermediate skiers. Because the natural snowpack
in Morningside Park is very high due to snow blowing over a ridge and depositing
in the bowl, snowmaking is not needed in this area. The expansion into both
areas will take place in three phases. Additionally, the resort has submitted an
application to the Forest Service for conceptual approval to develop
approximately 960 acres of contiguous forest lands. There can be no assurance,
however, that the Company's application will be approved. See "Risk Factors
"--Real Estate Development" and "--Growth through Resort Expansion"."
HEAVENLY. Located on the south shore of Lake Tahoe in the states of Nevada
and California, Heavenly consists of two peaks with a maximum elevation of
approximately 10,000 feet, a 3,500 foot vertical drop with approximately 4,800
acres of skiable terrain and 82 trails serviced by 27 lifts. Heavenly is the
second largest resort in the Pacific West Region with approximately 700,000
skier visits for the 1996-97
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ski season. Snowmaking covers over 268 acres of skiable terrain, representing
approximately 43% of the trails. Access to the resort is primarily through the
Reno Cannon International Airport and by automobile via Route 50 from San
Francisco and Sacramento, California. There are three base lodges and four on-
mountain lodge restaurants. There are no residential units or tourist
accommodation units adjacent to the ski resort; however, there is a well
developed 11,000 bed base in the greater South Lake Tahoe area.
Heavenly's master plan was approved in 1996 and is being implemented by the
Company. The plan calls for the improvement and expansion of winter and summer
uses and support facilities at the resort. A six-person high-speed chairlift
known as the Tamarack Express is currently under construction. Associated with
the new lift will be three new ski runs, adding approximately 13 acres of new
terrain. Snowmaking capacity will also be added to an existing trail serviced by
the Tamarack Express. A primary objective of the plan is to refocus the primary
entrance to the ski resort from the three existing base lodges (California,
Stagecoach and Boulder) to the commercial core of South Lake Tahoe utilizing a
new high capacity gondola. The gondola has been designed for year round
sightseeing, while the top station will provide direct ski access to both the
Nevada and California sides via three new lifts.
Additional snowmaking coverage is contemplated which will increase existing
coverage from approximately 268 acres to approximately 500 acres. The master
plan provides for the construction of base facilities and new restaurants at Sky
Meadows, East Peak Lake and California base. The Company is also contemplating
an additional 1,852 food service seats through a new ski lodge at the top of the
gondola and modifications to Boulder lodge. Other proposed improvements include
replacement of two existing maintenance facilities.
The master plan also provides for eight new lifts, including the gondola,
and the removal of the existing West Bowl lift. The master plan also provides
for the widening of some existing trails and construction of new trails, adding
approximately 117 acres of skiable terrain.
RESORT OPERATIONS
The Company's resort revenues are derived from a wide variety of sources
including lift ticket sales, food and beverage, retail sales including rental
and repair, skier development, lodging and property management, golf, other
summer activities and miscellaneous revenue sources. Lift ticket sales represent
the single largest source of resort revenues and represent approximately 46% of
total resort operations revenue for fiscal 1997.
The following chart reflects the Company's sources of resort revenues
(excluding the Acquired Resorts and The Canyons) across certain revenue
categories as well as the percentage of resort revenues constituted by each
category for fiscal 1997.
<TABLE>
<CAPTION>
RESORT REVENUES FOR PERCENTAGE OF RESORT REVENUES FOR
REVENUE SEGMENT YEAR ENDED JULY 27, 1997 YEAR ENDED JULY 27, 1997
- ----------------------------------------------- ------------------------------- -----------------------------------
<S> <C> <C>
(IN MILLIONS)
Lift tickets................................... $ 77.2 46%
Food and beverage.............................. 20.8 13
Retail sales................................... 19.9 12
Skier development.............................. 8.5 5
Lodging and property........................... 21.6 13
Golf, other summer activities, and
miscellaneous................................ 19.0 11
------- ---
Total $ 167.0 100%
------- ---
------- ---
</TABLE>
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LIFT TICKET SALES. The Company manages its lift ticket programs and
products so as to increase the Company's ticket yields. Lift tickets are sold to
customers in packages including accommodations in order to maximize occupancy.
In order to maximize skier visits during non-peak periods and to attract
specific market segments, the Company offers a wide variety of incentive-based
lift ticket programs. The Company manages its ticket yields during peak periods
so as to maximize aggregate lift ticket revenues. The Company's new Magnificent
7 lift ticket program offers a multi-day, multi-resort lift ticket package and
generated over $5 million in sales during the 1996-97 ski season.
FOOD AND BEVERAGE. Food and beverage sales provide significant revenues for
the Company. The Company owns and operates the food and beverage facilities at
its resorts, with the exception of the Sugarloaf resort, which is under a
long-term concession contract that pre-existed the Company's ownership. The
Company's food and beverage strategy is to provide a wide variety of
restaurants, bars, cafes, cafeterias and other food and beverage outlets. The
Company's control of its on-mountain and base area food and beverage facilities
allows it to capture a larger proportion of guest spending as well as to ensure
product and service quality. The Company currently owns and operates 79
different food and beverage outlets and has five outlets being expanded or
constructed.
RETAIL SALES. Retail revenue aids in stabilizing the Company's daily and
weekly cash flows, as the Company's retail shops tend to have the strongest
sales on poor weather days. Across all of its resorts, the Company owns 28
retail shops and 18 ski rental shops. The large number of retail locations
operated by the Company allows it to improve margins through large quantity
purchase agreements and sponsorship relationships. On-mountain shops sell ski
accessories such as goggles, sunglasses, hats, gloves, skis, snowboards, boots
and larger soft goods such as jackets and snowsuits. In addition, all locations
offer the Company's own logo-wear which generally provides higher profit margins
than other retail products. In the non-winter seasons, the shops sell mountain
bikes, in-line skates, tennis equipment and warm weather apparel. In addition,
the Company plans to expand its retail operations, including expanding and
opening new off-site retail facilities in high traffic areas, such as stores on
the Killington Access Road and in the North Conway, New Hampshire retail
district, and a discount sporting goods chain with locations in Maine.
SKIER DEVELOPMENT. The Company has been an industry leader in the
development of learn to ski programs. Its Guaranteed Learn to Ski Program was
one of the first skier development programs to guaranty that a customer would
learn to ski in one day. The success of this program lead to the development of
"Perfect Turn," which management believes was the first combined skier
development and marketing program in the ski industry. Perfect Turn ski
professionals receive specialized training in coaching, communication, skiing
and both selling related products and cross selling other resort goods and
services. Perfect Turn is currently licensed to five resorts in the United
States and Canada. The Company operates a hard goods marketing program at each
of its resorts designed to allow customers to test skis and snowboards with ski
professionals, purchase their equipment from those professionals and receive
ongoing product and technological support through Perfect Turn.
LODGING AND PROPERTY MANAGEMENT. The Company's lodging and property
management departments manage its own properties as well as properties owned by
third parties. Currently, the Company's lodging departments manage approximately
1,750 lodging units at the Existing Resorts. The lodging departments perform a
full complement of guest services including reservations, property management,
housekeeping and brokerage operations. Each resort has a welcome center to which
newly arriving guests are directed. The center allocates accommodations and
provides guests with information on all of the resort's activities and services.
The Company's property management operation seeks to maximize the synergies that
exist between lodging and lift ticket promotions.
The Company's real estate development program is designed to ensure the
continued growth of its lodging operation. Typically, newly constructed
condominiums and townhomes are sold to owners who place the units into the
optional rental program managed by the Company. The resulting growth in
occupancy may increase skier visits and provide an additional source of fee
revenue for the Company.
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MARKETING PROGRAMS
General. The Company's marketing program is designed to (i) build a
nationally recognized high quality name and image while perpetuating the unique
image of its individual resorts, (ii) capitalize on opportunities to cross-sell
resorts and (iii) enhance customer loyalty. As part of its marketing strategy,
the Company engages in joint marketing programs with nationally recognized
commercial partners, such as Mobil, Budweiser, Pepsi/Mountain Dew, Visa, FILA
and Rossignol, whose target demographics complement those of the Company.
Management believes these joint marketing programs provide it with advantages in
creating a favorable image and market presence, both regionally and on a
national basis. In addition, the Company utilizes loyalty based incentive
programs such as its private label Edge Card, in which participants get credit
towards resort purchases.
PROGRAMS AND PROMOTIONS. The Company's strategy is to develop new and
innovative programs and promotions to increase skier visits, ticket yields,
spending per skier visit and Resort EBITDA. Management plans to focus the
1997-98 ski season programs primarily on ski weeks, fun centers and the
Company's new Edge Card. The fun center program develops activities targeted at
family participation in alpine sports. Fun center programs include sponsored
evening activities and non-skiing and snowboarding activities that enhance the
overall vacation experience, such as snow tubing, ice skating, luge, snowcat
rides, arcades and outdoor evening activities. The Company's Edge Card is a
private label frequent skier card through which participants gain credit toward
resort purchases. This card is the central focus of the Company's loyalty based
incentive programs, which it believes will help retain skiers in the Company's
resort network and expand the volume and scope of information available for
marketing purposes.
MEDIA STRATEGIES. The Company utilizes both traditional marketing media
such as advertisements in industry and lifestyle publications and an increasing
number of traditional marketing media. Advertisements also appear in
publications such as MEN'S JOURNAL, CONDE NAST TRAVELER, THE BOSTON GLOBE and
OUTSIDE magazines. The Company utilizes other marketing media such as direct
mail, television and the Company's Internet site at www.peaks.com.
PROMOTIONAL PARTNERS. The Company enhances its marketing budget through
forming promotional partnerships with major sponsors. Each of these sponsors is
selected because of similarity in demographic profile between its customer base
and that of the Company. Sponsors include Mobil, Budweiser, Pepsi/ Mountain Dew,
Visa, FILA and Rossignol. Working with its promotional partners, the Company
formulates television, radio and special event programs and activities that are
designed to appeal to the target demographic segment.
GROUP SALES. In addition to advertisements directed at the vacation guest,
the Company's marketing activities are focused on attracting ski groups,
corporate meetings and convention business. During the 1996-97 ski season, the
Company's Existing Resorts and the Acquired Resorts hosted over 1,000 groups.
The Company is able to attract new conference business due to its expertise in
providing professional planning services, recreational activities and high
quality dining and lodging facilities.
REAL ESTATE DEVELOPMENT
General. The Company has been developing alpine resort real estate for over
fifteen years as part of its integrated resort and real estate investment
strategy. Since 1983, the company has sold over 1,350 units of residential real
estate at Sunday River (including condominiums, townhouses and quartershare
interval ownership interests). The three components of the Company's real estate
development strategy are (i) the Grand Summit quartershare hotel concept, (ii)
development of alpine villages, and (iii) resort-specific discrete projects. The
Company believes it will have a significant real estate development pipeline
over the next 10 to 15 years.
According to industry sources, the interval ownership industry has grown at
a compound annual growth rate of approximately 18% from 1980 to 1994, with
interval ownership sales increasing from $490 million to $4.8 billion. According
to the American Resort Development Association ("ARDA"), the median age and
annual household income of an interval ownership buyer at the time of purchase
are 50
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years and $71,000, respectively. Industry statistics indicate that the interval
ownership concept has achieved low market penetration, with approximately 3%
penetration among households with income above $35,000 per year and 3.7%
penetration among households earning more than $50,000 per year.
The Company believes it has a competitive advantage over traditional
timeshare developers due to (i) its inventory of developable real estate, (ii)
the relative affluence of its resort guests and (iii) the market created by
guest visitation at its resorts. These factors lower land and marketing costs
relative to traditional time share developers allowing the sale of longer
duration intervals which differentiate the Grand Summit Hotel from traditional
timeshares.
The following table summarizes certain key statistics relating to each of
the Company's resort real estate holdings as of September 19, 1997 added since
the Company acquired each respective resort.
<TABLE>
<CAPTION>
RESIDENTIAL UNITS
-------------------------------------------------------
DEVELOPMENT
COMMENCEMENT RESERVED
DATES FOR
(FISCAL UNDER FUTURE
RESORT YEAR) SOLD DEVELOPMENT(1) PRE-SOLD DEVELOPMENT(2)
- ------------------------------ ------------ ----- ---------- ------ -----------
<S> <C> <C> <C> <C> <C>
Sunday River.................. 1982 1,362 892 256 4,894
Sugarbush..................... 1996 -- 420 170 2,150
Attitash/Bear Peak............ 1996 124 880 3 219
Killington.................... 1997 -- 508 213 11,282
Mount Snow/Haystack........... 1997 -- 540 203 2,308
The Canyons................... 1997 -- 880 -- 5,992
Sugarloaf..................... 1998 -- 160 -- 1,820
Steamboat..................... 1998 -- 468 -- 3,005
Heavenly...................... 1998 -- 320 -- 30
----- ----- ------ -----------
Total 1,486 5,068 845 31,700
----- ----- ------ -----------
----- ----- ------ -----------
<CAPTION>
COMMERCIAL SPACE (SQUARE FT)
--------------------------------------
RESERVED FOR
UNDER FUTURE
RESORT COMPLETED DEVELOPMENT(1) DEVELOPMENT(2)
- ------------------------------ --------- ----------- ------------
<S> <C> <C> <C>
Sunday River.................. 206,000 33,900 216,500
Sugarbush..................... 1,800 32,800 30,200
Attitash/Bear Peak............ 40,800 -- 60,000
Killington.................... 17,000 38,300 349,400
Mount Snow/Haystack........... 2,200 43,000 169,600
The Canyons................... -- 14,900 406,100
Sugarloaf..................... -- -- 120,000
Steamboat..................... -- 30,000 203,300
Heavenly...................... -- -- 122,500
--------- ----------- ------------
Total 267,800 192,900 1,677,600
--------- ----------- ------------
--------- ----------- ------------
</TABLE>
- ------------------------
(1) Includes all units or commercial space currently under construction or in
the permitting process. Completed, but unsold units, currently totalling
293, are all located at Attitash/Bear Peak. None of the other units
identified in the table as under development have been completed.
(2) Based on, among other things, the Company's capital and development plan for
the next 10-15 years, the Company's estimates for projected demand of units,
and the availability of developable acreage. There can be no assurance,
however, that the Company will choose to undertake, or will have adequate
financing to complete, such development. See "Risk Factors--Real Estate
Development."
GRAND SUMMIT HOTELS. The Grand Summit Hotel is a unique interval ownership
product which is based on the Company's successful Summit Hotel at its Sunday
River resort. Each hotel is a condominium consisting of both residential and
commercial units and includes: a three-level atrium lobby, two or more
restaurants, retail space, a grand ballroom, conference space, a health club
with an outdoor heated pool and other recreational amenities. The commercial
space is retained by the Company and used to operate the core hotel business,
while the residential units are sold in quartershare interests. Each
quartershare consists of a 13-week ownership interest in a unit spread evenly
across the year. At the Company's Sunday River Hotel, owners utilize the unit
for an average of approximately three weeks out of a possible 13 weeks. Weeks
that are not used by an owner are typically dedicated to the Company's optional
rental program for rental to a third party on terms allowing the Company to
retain up to 45% of gross rental revenue. Consequently, the Company benefits
from revenue generated by (i) the sale of units, (ii) the recurring revenues
from lodging rental revenue and (iii) other hotel operations.
Quartershare owners participate in Resort Condominium International ("RCI"),
the world's largest vacation interval exchange program. In a 1995 study
sponsored by the Alliance for Timeshare Excellence and ARDA, the "exchange
opportunity" was cited by purchasers of vacation intervals as one of the most
significant factors in determining whether to purchase a vacation interval.
Participation in the RCI program allows the Company's quartershare owners to
exchange their occupancy right for an occupancy right in one of approximately
3,000 participating resorts worldwide. Grand Summit Hotels are rated in
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RCI's highest exchange category, the Gold Crown Club, which permits the owner to
exchange their interest for an interval at RCI's finer properties.
The Company intends to operate an internal exchange program within its
expanding Grand Summit Hotel network. The Company expects that the opportunity
to exchange intervals at any of its resorts nationwide will enhance its loyalty
programs, cross-marketing of resorts and unit sales opportunities.
ALPINE VILLAGE DEVELOPMENT
The Company is currently in the planning and permitting stage of developing
alpine villages at The Canyons, Killington and Sunday River's Jordan Bowl. Each
village will be characterized by its proximity to resort facilities, ski in/ski
out access, dramatic landscape and resort specific design and architecture.
THE CANYONS. Two distinct areas at The Canyons are in the permitting
process for resort village development. One area consists of approximately 350
acres in the base area, 150 acres of which are controlled by the Company. The
second area is the Company's High Mountain Meadows development consisting of
approximately 120 acres located on a mid-mountain plateau at an elevation of
over 8,000 feet. The base area is under a long-term lease that provides an
option to purchase fee title to parcels within that area. The Company is
negotiating a similar arrangement with the owner of the mid-mountain plateau
area. The base area development is currently in the master planning process with
county authorities. The base village will be a mix of residential and commercial
space arranged in six neighborhoods designed to create an integrated base area
community, anchored by a Grand Summit Hotel. The master plan provides for the
integrated development of 150 acres of Company-controlled property, as well as
approximately 200 acres of surrounding property owned by unrelated third parties
who have elected to participate in the village development.
The High Mountain Meadows development presents an opportunity to develop a
mid-mountain base area surrounded by six of the resort's 14 mountain peaks. The
mid-mountain village will be accessed by a four-mile scenic drive and an
eight-passenger, high-speed heated gondola currently under construction. The
village will serve as the base for skiing the surrounding mountains, creating
access to an additional 2,000 vertical feet of skiable terrain. The primary
lodge, the Red Pine Lodge, is currently under construction at the mid-mountain
development and is expected to be completed for the 1997-98 ski season. The
Company proposes to commence construction of a Grand Summit Hotel in Summer
1998. The village will consist of approximately two million square feet of
compact, high density residential and commercial development. The development
will be principally a pedestrian village characterized by resort lodging, luxury
condominiums and ranches and mountain recreation properties.
The zoning for the base area and High Mountain Meadows development is being
revised in connection with a complete amendment of the county's general plan.
The proposed amendment would permit extensive development in each area. Adequate
sewer and water capacity are available in close proximity to the resort;
however, such capacity must be purchased from third party vendors and the
Company must construct the necessary infrastructure for transport to both
developments. See "Risk Factors -- Development of The Canyons."
KILLINGTON BASE AREA. In May 1997, the Company entered into an agreement
with the State of Vermont to exchange essential wildlife habitat owned by the
Company for approximately 1,050 acres of undeveloped land centrally located in
the base area. As part of the Company's proposed development plan for
Killington, this parcel will be combined with an existing 400 acre planned unit
development adjacent to Killington's golf facilities and the resort's primary
base area. The Company has retained Snow Engineering, an internationally
recognized resort and mountain planning firm, to assist in the master planning
of the village. The 400 acre planned unit development is specifically zoned for
commercial development. The village will integrate four "neighborhoods" into a
planned community containing a variety of real estate uses. The 1,050 acres to
be acquired from the State must be rezoned to accommodate the planned
development. The City of Rutland, Vermont and certain environmental groups
traditionally active in ski resort development have entered into a memorandum of
understanding designating the area as a growth zone to be utilized for
development.
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The Company believes that adequate water is available from nearby wells for
both projects. Sewer capacity will be provided through the Company's connection,
currently under construction, to a municipal sewer system with 600,000 gallons
per day excess capacity.
JORDAN BOWL AT SUNDAY RIVER. Jordan Village will be located on
approximately 1,100 acres of a 4,000 acre undeveloped parcel owned by the
Company at the western end of the existing resort and the center of the
Company's landholdings. The village will rest at the base of the Jordan Bowl,
one of the resort's most popular skiing areas. Development of Jordan Village
began with the construction of a scenic four-mile access road from the existing
resort center to the Jordan Village area and commencement of construction of a
ski-in/ski-out 220-unit Grand Summit Hotel, which is expected to be operational
during the 1997-98 ski season. Construction of a Robert Trent Jones, Jr.
championship golf course also began in Summer 1997.
The master plan for the area also contemplates a high density village
surrounded by neighborhoods consisting of luxury townhouses and detached single
family dwellings.
The Jordan Bowl area is zoned for village development. No density
restrictions apply to the area. The Company believes adequate water is available
for contemplated development and Sunday River's sewage treatment facility has
sufficient capacity to allow completion of the planned development of the
resort.
OTHER RESORT DEVELOPMENT
Each of the Company's resorts has the potential for additional real estate
development involving discrete projects tailored to the characteristics of the
particular resort. There can be no assurances, however, that the Company will
successfully pursue any of the development opportunities described below.
STEAMBOAT. The Company believes that the real estate development potential
at Steamboat is among the most significant of its resorts. The Company has
acquired 168 acres of real estate held for development at or near the base area.
Included in these properties are several locations the Company has targeted for
development, including (i) a 26 acre parcel centrally located in Steamboat's
Village Commercial Center, which is zoned for commercial development, (ii) a 47
acre site with potential ski-in/ski-out access located at Tennis Meadows, which
could support a Grand Summit Hotel and related development and (iii) a 20 acre
site zoned for over 275 units together with commercial development. The Company
is also a 50% partner in Country Club Highlands Partnership, a residential
development located at the Sheraton Golf Club consisting of 142 lots being built
in several phases, of which 49 lots and 38 townhouse units remain to be
developed.
SUGARLOAF. Development plans have begun for the expansion of an existing
hotel, a new Grand Summit Hotel, a high density condominium development and
commercial space as an expansion to the existing alpine village. There are
several planned developments including single family homes around the 18-hole
Robert Trent Jones, Jr. championship golf course. Sugarloaf has over 1,100 acres
of land held for development.
MOUNT SNOW/HAYSTACK. There are several undeveloped sites at Mount
Snow/Haystack with potential for future projects including renovation of the
current base lodge, a 21 acre parcel which could support up to 72 three-bedroom
units with direct ski lift access, and a two acre parcel for a convention
center. Mount Snow/Haystack also owns an 800 acre parcel slated for a proposed
golf course expansion, which could create the opportunity for substantial golf
course frontage real estate development. In addition, there are approximately 30
acres of developable land at the base of Haystack.
KILLINGTON. In addition to the development of Killington's alpine village
and Grand Summit Hotel, there are three distinct real estate parcels available
for development. At the base of the Skyeship Gondola, there is a 165 acre site
commercially zoned for a 150-room hotel and 40,000 square feet of commercial
real estate, or for up to 200 townhouse duplexes. At the Falls Brook area,
located at Bear Mountain, there are approximately 376 acres available for real
estate development. A chair lift and ski trails serve a major portion of the
site. In addition, an 11 acre parcel with several hundred feet of frontage on
U.S. Route 4 is zoned for single and multi-family dwellings, hotels, motels and
lodging, office, retail space and restaurants.
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SYSTEMS AND TECHNOLOGY
Information Systems. The Company's information systems are designed to
improve the ski experience through the development of more efficient guest
service products and programs. The Company is currently implementing a
comprehensive $3.2 million system and technology plan including (i) a radio
frequency lift ticket scanning system that provides more accurate tracking,
control and information on all ticket products, (ii) a direct-to-lift access
system that allows skiers to bypass the ticket window and proceed directly to
the lift with an individualized radio frequency card that directly debits their
credit or frequent-skier card, (iii) a resort-wide guest charging system
utilizing individualized credit cards that can be used to charge goods and
services at most of the Company's facilities, (iv) an integrated customer
database that tracks information regarding guest preferences and product
purchasing patterns, (v) an extensive data communications network linking most
point-of-sale locations through a central database, (vi) a central reservations
system for use in the resort's rental management business and (vii) a skier
development reservation and instructor scheduling system that simplifies the
booking process and allows for optimal utilization of instructors.
SNOWMAKING SYSTEMS AND TECHNOLOGY. The Company believes it operates the
largest consolidated snowmaking operation in existence. Including the 1997
expansion currently underway, it has over 7,000 acres of snowmaking coverage.
The Company's proprietary snowmaking software program enables it to produce what
management believes is the highest quality man-made snow in the industry. The
Company's snowmaking capability can be implemented at its western resorts
resulting in an extended season and reliable snow conditions and consistent
quality surfaces during unfavorable weather conditions.
All of the Company's snowmaking systems are operated via computer-based
control using industrial automation software and a variety of state of the art
hardware and instrumentations. The Company utilizes an efficient ground based,
tower based and fully automated snowgun nozzle technology and has developed
software for determining the optimal snowmaking nozzle setting at multiple
locations on the mountain. This system monitors the weather conditions and
system capacities and determines the proper operating water pressure for each
nozzle, eliminating guesswork and ensuring the ideal snow quality. The Company
refers to this ideal quality product as "Retail Snow," a high quality, durable
skiing surface with top to bottom consistency. All of the snowmaking systems are
networked to provide the ability to view information from multiple locations
within its resort network. Another unique feature of the Company's system is the
current display of trail status, lift status, weather conditions and other
various on mountain information at locations throughout each resort. Much of
this information will also be available on the world wide web at the Company's
and its individual resorts' web sites for the 1997-98 season.
LEASED PROPERTIES
The Company's operations are wholly dependent upon its ownership or control
over the real estate constituting each resort. The following summarizes
non-owned real estate critical to operations at each resort. Management believes
each of the following leases, permits or agreements is in full force and effect
and that the Company is entitled to the benefit of such agreements.
Sunday River leases approximately 1,500 acres, which constitute a
substantial portion of its skiable terrain, under a 50-year lease terminating on
October 14, 2030. The lease renews automatically thereafter on a year-to-year
basis unless terminated by either the lessor or lessee.
The Sugarbush resort uses approximately 1,915 acres pursuant to a special
use permit issued by United States Forest Service dated May 17, 1995. The permit
has a 40-year term expiring April 30, 2035. The special use permit has a renewal
option which provides that it may be renewed if the use of the property remains
compatible with the special use permit, the site is being used for the purposes
previously authorized, and the ski area has been continually operated and
maintained in accordance with all the provisions of the permit.
Mount Snow leases approximately 1,315 acres which constitute a substantial
portion of its skiable terrain. Of this total, 893 acres are occupied by Mount
Snow pursuant to a special use permit granted by the United States Forest
Service dated November 29, 1989. The permit has a 40-year term expiring December
31, 2029, which is subject to renewal at the option of Mount Snow if certain
renewal conditions
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are satisfied. Mount Snow also leases 252 acres, which constitute a portion of
its skiable terrain, from the Town of Wilmington, Vermont. The lease expires
November 15, 2030. There are no renewal options. In addition, Mount Snow leases
approximately 169 acres from Sargent Inc. pursuant to two separate leases
expiring September 30, 2018 and March 31, 2025, respectively. Each lease can be
renewed for an additional 30-year term. Mount Snow also has the option to
purchase the leased property and a right of first refusal in the event Sargent
Inc. receives a bona fide offer for the leased properties.
Attitash/Bear Peak uses approximately 281 acres of its skiable terrain
pursuant to a special use permit issued by the United States Forest Service
dated July 19, 1994. The permit has a 40-year term expiring July 18, 2034, which
is renewable subject to certain conditions. In addition, Attitash/Bear Peak
leases a portion of its parking facilities under a lease expiring December 31,
2003. Attitash/Bear Peak has the option to purchase this leased property at any
time during the lease term.
Killington leases approximately 2,500 acres from the State of Vermont. A
substantial portion of that property constitutes skiable terrain. The initial
lease was for an initial 10-year term which commenced in 1960. The lease
contains nine 10-year renewal options. Killington exercised the renewal option
in 1970, 1980 and 1990. Assuming continued exercise of Killington's option, the
lease ultimately expires in the year 2060. The lease is subject to a buy-out
option retained by the State of Vermont, as landlord. At the conclusion of each
10-year term (or extended term) the State has the option to buy out the lease
for an amount equal to Killington's adjusted capital outlay plus 10% of the
gross receipts from the operation for the preceding three years. Adjusted
capital outlay means total capital expenditures extending back to the date of
origin of the lease depreciated at 1% per annum, except that non-operable assets
depreciate at 2% per annum. This buy-out option will next become exercisable in
the year 2000. Although the Company has not had confirmation from Vermont state
officials, it has no reason to believe that the State intends to exercise the
option at that time.
The Sugarloaf resort leases the Sugarloaf Golf Course from the Town of
Carrabassett Valley, Maine pursuant to a lease dated June 3, 1987. The lease
term expires December 2003. Sugarloaf has an option to renew the lease for an
additional 20-year term.
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The Canyons leases approximately 2,100 acres, including most of the base
area and a substantial portion of the skiable terrain, under a lease from Wolf
Mountain Resorts, L.L.C. The initial term of this lease is 50 years expiring
July 2047, with an option to extend for three additional terms of 50 years each
(the "Wolf Lease"). The lease provides an option to purchase (subject to certain
reconveyance rights) those portions of the leased property that are intended for
residential or commercial development at a cost of 11% of the full capitalized
cost of such development. The Wolf Lease includes a sublease of approximately
807 acres, which constitutes the area for the planned mid-mountain village and a
substantial portion of skiable terrain, from the State of Utah School and
Institutional Trust Land Administration, which terminates January 1, 2027. The
sublease is being renegotiated as a direct lease extending its term to the year
2078 and provides an option to purchase those portions of the mid-mountain
village area that are intended for real estate development at a cost of 25% of
their fair market value on an undeveloped basis. The Wolf Lease also includes a
sublease of certain skiable terrain owned by the Osguthoorpe family. The Company
has established certain additional ski development rights under a direct
agreement with the Osguthorpe family. The ski development rights for
approximately 3,000 acres of skiable terrain targeted for development by the
Company are contained in a development agreement with Iron Mountain Associates,
LLC, which agreement effectively constitutes a lease of all skiable terrain for
a term ending September 13, 2094.
Heavenly uses approximately 1,543 acres of its skiable terrain located in
California and Nevada pursuant to special use permit issued by the United States
Forest Service dated December 18, 1990. The permit expires on August 5, 2029.
Heavenly uses approximately 2,000 acres of additional skiable terrain in Nevada
pursuant to a special use permit dated December 18, 1990. The permit expires on
August 5, 2029.
Steamboat uses approximately 2,644 acres, a substantial portion of which is
skiable terrain, pursuant to a special use permit issued by the United States
Forest Service. The permit expires on August 31, 2029. Under Steamboat's
existing master plan, an additional 958 acres of contiguous National Forest
lands is expected to be added to the permitted area.
COMPETITION
The ski industry is highly competitive. The Company competes with mountain
resort areas in the United States, Canada and Europe. The Company also competes
with other recreation resorts, including warm weather resorts, for the vacation
guest. In order to cover the high fixed costs of operations associated with the
ski industry, the Company must maintain each of its regional, national and
international skier bases. The Company's prices are directly impacted by the
variety of alternatives presented to skiers in these markets. The most
significant competitors are resorts that are well capitalized, well managed and
have significant capital improvement and resort real estate development
programs.
The Company's resorts also face strong competition on a regional basis. With
approximately three million skier visits generated by its northeastern resorts,
competition in that region is an important consideration. The Company's
northeastern markets are the major population centers in the northeast,
particularly eastern Massachusetts, northern Connecticut, New York and northern
New Jersey. For example, skier origin data collected at Sunday River indicates
that approximately 43% of its weekend skiers reside in Massachusetts. Similar
data collected at Killington and Mount Snow indicate that approximately 23% and
35%, respectively, of their weekend skiers reside in New York, with high
concentrations from Massachusetts, Connecticut, New Jersey and Vermont. The
Colorado, Utah and California ski markets are also highly competitive.
EMPLOYEES AND LABOR RELATIONS
The Company employs approximately 6,300 employees at peak season and
approximately 1,200 persons full time. None of the Company's employees are
covered by any collective bargaining agreements. The Company believes it has
good relations with its employees.
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<PAGE>
GOVERNMENT REGULATION
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use environmental/health and safety,
water resources, air and water emissions, sewage disposal, and the use, storage,
discharge, emission and disposal of hazardous materials and hazardous and
nonhazardous wastes, and other environmental matters. While management believes
that the Company's resorts are currently in material compliance with all land
use and environmental laws, failure to comply with such laws could result in
costs to satisfy environmental compliance and/or remediation requirements or the
imposition of severe penalties or restrictions on operations by government
agencies or courts that could adversely affect operations. Phase I environmental
assessments have been completed on all nine resort properties. The reports
identified areas of potential environmental concern including the need to
upgrade existing underground storage tanks at several facilities and to
potentially remediate petroleum releases. In addition, the Phase I environmental
assessment for The Canyons indicated some soil contamination in areas where
underground storage tanks have been removed. At this point, the extent or
significance of the contamination at that site is unknown. The reports did not,
however, identify any environmental conditions or non-compliance at any of the
resorts, the remediation or correction of which management believes would have a
material adverse impact on the business or financial condition of the Company or
results of operations or cash flows. The Killington resort has been identified
by the U.S. Environmental Protection Agency (the "EPA") as a potentially
responsible party at two sites pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund"). Killington
has entered into a settlement agreement with the EPA at one of the sites, the
Solvents Recovery Service of New England Superfund site in Southington,
Connecticut. Killington recently rejected an offer to enter into a de minimis
settlement with the EPA for the other site, the PSC Resources Superfund Site in
Palmer, Massachusetts. The Company believes that its liability for these
Superfund sites, individually and in the aggregate, will not have a material
adverse effect on the business or financial condition of the Company or results
of operations or cash flows.
The Company believes it has all permits, licenses and approvals from
governmental authorities material to the operation of the resorts as currently
configured. The Company has not received any notice of material non-compliance
with permits, licenses or approvals necessary for the operation of any of its
properties.
The purchase of the Acquired Resorts is subject to the satisfaction of
certain covenants and conditions, including those related to environmental and
land-use development issues. The Company is not aware of any environmental
issues or conditions related to the Acquired Resorts which, individually or in
the aggregate, would have a material adverse effect on the business or financial
condition of the Company or results of operations or cash flow.
The capital programs at the resorts will require permits and approvals from
certain federal, state and local authorities. The Company's operations are
heavily dependent upon its continued ability, under applicable laws,
regulations, policies, permits, licenses or contractual arrangements, to have
access to adequate supplies of water with which to make snow and service the
other needs of its facilities, and otherwise to conduct its operations. There
can be no assurance that new applications of existing laws, regulations and
policies, or changes in such laws, regulations and policies will not occur in a
manner that would have a material adverse effect on the Company, or that
important permits, licenses or agreements will not be canceled, not renewed, or
renewed on terms no less favorable to the Company. Major expansions of any one
or more resorts could require the filing of an environmental impact statement
under environmental laws and applicable regulations if it is determined that the
expansion has a significant impact upon the environment and could require
numerous other federal, state and/or local approvals. Although the Company has
consistently been successful in implementing its capital expansion plans, no
assurance can be given that necessary permits and approvals will be obtained.
70
<PAGE>
The Company's marketing and sales of interval ownership interests is subject
to extensive federal and state government regulation. See "Risk
Factors--Regulation of Marketing and Sales of Quartershares; Other Laws."
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
arising in the ordinary course of its business. The Company does not believe
that it is involved in any litigation that will, individually or in the
aggregate, have a material adverse effect on its financial condition or results
of operations or cash flows.
Each of the resort operating companies have pending and are regularly
subject to suits with respect to personal injury claims related principally to
skiing activities at such resort. Each of the operating companies maintains
liability insurance that the Company considers adequate to insure claims related
to usual and customary risks associated with the operation of a ski resort. The
Company operates a captive insurance company authorized under the laws of the
State of Vermont, which provides liability and workers' compensation coverage
for its resorts located in Vermont.
71
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages and their
respective positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Leslie B. Otten...................................... 48 Director, President and Chief Executive Officer
Thomas M. Richardson................................. 44 Director, Senior Vice President, Chief Financial
Officer and Treasurer
Christopher E. Howard................................ 39 Director, Senior Vice President, Chief Administrative
Officer, General Counsel and Clerk
Burton R. Mills...................................... 44 Senior Vice President--Mountain Operations
G. Christopher Brink................................. 44 Senior Vice President--Marketing
Warren C. Cook....................................... 52 Senior Vice President--Resort Operations
W. Scott Oldakowski.................................. 33 Vice President--Real Estate Sales
Michael Meyers....................................... 44 Vice President--Real Estate Development
</TABLE>
Each officer serves at the discretion of the Board of Directors. Each
director holds office until his successor is duly elected and qualified or until
his resignation or removal. There are no family relationships among any of the
directors or executive officers of the Company. On or prior to the consummation
of the Offering, the Company intends to appoint two independent directors.
LESLIE B. OTTEN, Director, President and Chief Executive Officer. In 1970,
Mr. Otten joined Sherburne Corporation, then the parent company of Sunday River,
Killington and Mount Snow. Mr. Otten became Assistant General Manager of Sunday
River in 1972 and became General Manager of Sunday River in 1974. He has been a
director and the President and Chief Executive Officer of the Company (or a
subsidiary of the Company) since 1980. Mr. Otten is currently a director and was
previously chairman of the Portland Museum of Art, the Maine Chamber and
Alliance, Maine Handicap Skiing, Gould Academy (a private secondary school) and
Project Opportunity (a higher education scholarship program).
THOMAS M. RICHARDSON, Director, Senior Vice President, Chief Financial
Officer and Treasurer. Mr. Richardson joined the Company in the spring of 1993
as Vice President of Finance and Base Operations and has served in his present
position since July 1996. From 1992 until joining the Company, he worked at Loon
Mountain Recreation Corporation (a ski resort operator) as Treasurer and
Director of Food, Beverage and Tickets. From 1983 to 1992, Mr. Richardson worked
at S-K-I Ltd. (an owner of ski resorts) as an Internal Auditor, Accounting
Manager and Division Controller at Killington. Mr. Richardson serves on the
Economic Committee of the National Ski Area Association.
CHRISTOPHER E. HOWARD, Director, Senior Vice President, Chief Administrative
Officer, General Counsel and Clerk. Mr. Howard joined the Company in 1996 after
serving as the Company's outside counsel. Prior to joining the Company, Mr.
Howard was a partner in the law firm of Pierce Atwood where he practiced in the
firm's corporate department since 1982.
BURTON R. MILLS, Senior Vice President--Mountain Operations. Mr. Mills has
spent his entire 22-year career with the Company (or its predecessor), serving
in his present capacity since July 1996. Prior thereto, he served as Vice
President of Mountain Operations.
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<PAGE>
G. CHRISTOPHER BRINK, Senior Vice President--Marketing. Mr. Brink has been
with the Company since 1993 and in his present capacity since July 1996. Prior
to joining the Company, Mr. Brink served from 1991-1993 as a director of
off-site sale centers for Marriott Vacation Ownership, Inc.
WARREN C. COOK, Senior Vice President--Resort Operations. Mr. Cook joined
the Company in 1996 as Managing Director of Sugarloaf Mountain Corp. (a
subsidiary of the Company). Since January 1997 he has served in his present
capacity with the Company. From 1986 to 1996 he was chief executive officer and
general manager of Sugarloaf, USA (a ski resort operator).
W. SCOTT OLDAKOWSKI, Vice President--Real Estate Sales. Mr. Oldakowski
started working for the Company in 1991 as an independent consultant on the
Summit Hotel project before being hired as Director of Real Estate in 1993. He
became Vice President of Real Estate Sales for the Company in 1995. From 1986 to
1991, he served as Director of Sales and Marketing at multiple resorts for Dunes
Marketing Group, a resort development firm.
MICHAEL MEYERS, Vice President--Real Estate Development. Mr. Meyers joined
the Company in April 1995 and has led the master planning, permitting and
development of five hotels for Grand Summit Resort Properties, Inc., a
subsidiary of the Company. From 1989 to 1993, Mr. Meyers was a Vice President at
Stanmar Development, a real estate development firm. Immediately prior to
joining the Company, he was chief operating officer from 1993 to 1995 for
Massachusetts Industrial Finance Agency (a bond issuer for borrowers consisting
of commercial, industrial and charitable organizations or entities).
BOARD COMMITTEES
Upon the appointment of the independent directors, the Board of Directors
intends to establish a Compensation Committee, an Audit Committee and an Options
Committee. The Compensation Committee, in conjunction with the entire Board of
Directors, will make recommendations concerning salaries and incentive
compensation for employees of and consultants to the Company. The Audit
Committee, in conjunction with the entire Board of Directors, will review the
results and scope of the audit and other services provided by the Company's
independent public accountant and will be comprised solely of the Company's
independent directors. The Options Committee will administer and interpret the
Stock Option Plan.
DIRECTOR COMPENSATION
The Company will reimburse each member of the Board of Directors for
expenses incurred in connection with attending Board and committee meetings.
Directors will receive $5,000 for attendance at each meeting of the Board,
unless attendance is via telephone. The Company will grant options to purchase
2,500 shares of Common Stock to non-employee directors upon their election and
re-election to the Board of Directors. The stock options will have a term of 10
years and the option price will be no less than the fair market value as of the
date of the grant.
EXECUTIVE COMPENSATION
The following table shows remuneration paid or accrued by the Company during
the fiscal year ended July 27, 1997 to the Chief Executive Officer and to each
of the other four most highly compensated executive officers of the Company
(together, the "Named Executive Officers") for services in all capacities while
they were employees of the Company, and the capacities in which the services
were rendered.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
SECURITIES UNDERLYING
ANNUAL COMPENSATION OPTIONS TO
PURCHASE COMMON STOCK
--------------------- OR CLASS A ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMMON STOCK COMPENSATION
- ---------------------------------------------- ----------- ---------- --------- ----------------------- ---------------
<S> <C> <C> <C> <C> <C>
Leslie B. Otten............................... 1997 $ 350,000 $ -- -- $ --
President and Chief Executive Officer
Thomas M. Richardson.......................... 1997 170,000 -- -- --
Senior Vice President, Chief Financial
Officer and Treasurer
Warren C. Cook................................ 1997 133,770 -- -- --
Senior Vice President-Resort Operations
Burton R. Mills............................... 1997 170,000 -- -- --
Senior Vice President--Mountain Operations
G. Christopher Brink.......................... 1997 170,000 -- -- --
Senior Vice President--Marketing
</TABLE>
STOCK OPTION PLAN
Under the Company's Stock Option Plan, 5,688,699 shares of Common Stock are
reserved for issuance upon the exercise of stock options. The Stock Option Plan
is designed to attract, retain and motivate directors and key employees. The
Options Committee of the Board of Directors of the Company (the "Options
Committee") will administer and interpret the Stock Option Plan.
Both incentive stock options and non-qualified stock options may be granted
under the Stock Option Plan on such terms and at such prices as determined by
the Options Committee pursuant to the requirements of applicable law. The per
share exercise price of incentive stock options may not be less than the fair
market value of the Common Stock on the date of grant. Each option is for a term
of not less than five years or more than 10 years, as determined by the Options
Committee. Options granted under the Stock Option Plan are not transferable
other than by will or by the laws of descent and distribution.
The Company has granted options to purchase an aggregate of 2,583,343 shares
of the Common Stock with exercise prices ranging from $2.00 per share to the
offering price of the Common Stock per share.
The Stock Option Plan provides that all of an employee's options will become
exercisable in full immediately upon termination of employment because of death
or permanent disability, and provides that the Options Committee in its
discretion may permit accelerated exercisability upon an employee's early
retirement (at age 55 or over or after five years of employment).
In the event of a "change in control" (as defined in the Stock Option Plan)
all outstanding options will be exercisable in full for 30 days prior to such
event and will terminate upon consummation of such event, unless assumed or
replaced by other options in connection with such event.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to the Named
Executive Officers as of the date hereof.
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF TOTAL VALUE OF UNEXERCISED
OF COMMON OPTIONS GRANTED IN-THE- MONEY OPTIONS
STOCK UNDERLYING TO AT JULY 27, 1997
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ---------------------------- ------------------ --------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Leslie B. Otten............. 1,853,197 shares 71.7% $ 18.50 08/01/07 -- --
Thomas M. Richardson........ 100,334 shares 3.9% $ 2.00 08/01/07 2,895,568 4,686,498
Burton R. Mills............. 80,243 shares 3.1% $ 2.00 08/01/07 2,315,756 3,748,068
G. Christopher Brink........ 80,243 shares 3.1% $ 2.00 08/01/07 2,315,756 3,748,068
Warren C. Cook.............. 40,121 shares 1.6% $ 2.00 08/01/07 1,157,863 1,874,010
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1996, Sunday River Skiway Corporation, a subsidiary of the Company
("SRSC"), issued an unsecured demand note to Mr. Otten obligating SRSC to pay to
Mr. Otten a total of $5.2 million. Interest on the note is calculated at 5.4%
per annum. The note was issued to Mr. Otten for an amount equal to the income
taxes to be paid by him in 1996 and 1997 with respect to SRSC's income as a
Subchapter S corporation which was converted to a C corporation. The remaining
principal amount of such note as of September 1, 1997 was approximately $1.9
million.
Christine Otten, Mr. Otten's spouse, is employed by the Company as its
director of retail buying and is principally responsible for its retail sales
activities. During fiscal years 1995, 1996 and 1997, Ms. Otten received total
compensation of $53,584, $54,577 and $51,600, respectively.
Western Maine Leasing Co., a corporation wholly owned by Mr. Otten,
presently leases items of heavy equipment to Sunday River under short-term
leases on terms believed by management to be comparable to those that could be
obtained by Sunday River from unaffiliated lessors of such equipment. In fiscal
1995, 1996 and 1997, payments under such leases totaled $34,000, $36,200 and
$36,700, respectively.
The Company provides lodging management services for Ski Dorm, Inc., a
corporation owned by Mr. Otten and his mother, which owns a ski dorm located
near the Sunday River resort, on terms believed by management to be comparable
to those that would be offered by the Company to unaffiliated entities. In
fiscal 1995, 1996 and 1997, payments by Ski Dorm, Inc. to Sunday River totaled
$83,000, $90,000 and $87,000, respectively. In addition, Ski Dorm, Inc. issued a
promissory note in 1995 in the principal amount of $265,000, of which $250,000
was outstanding at July 27, 1997. Such note is secured by a mortgage on land and
a building. Interest on the note is charged at the prime rate plus 1- 1/2% and
principal and any accrued interest are due in December 1999.
Sunday River Land Holdings, Inc., a company wholly owned by Mr. Otten,
leases the real estate upon which the Sunday River snow-making ponds are
located. The lease has a term of 30 years and rent at the rate of $100,000 per
year, subject to a Consumer Price Index inflation adjustment.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock and Class A Common as of September 1,
1997, and as adjusted to reflect the sale of the shares offered hereby (i) by
each person or entity known by the Company to own beneficially more than 5% of
the Company's capital stock, (ii) by each director of the Company, (iii) by each
of the Named Executive Officers and (iv) by all directors and executive officers
of the Company as a group. Each person or entity listed below maintains a
mailing address c/o American Skiing Company, P.O. Box 450, Sunday River Access
Road, Bethel, Maine 04217, and has sole voting and investment power over the
shares of Common Stock shown as beneficially owned, except to the extent
authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
COMMON STOCK CLASS A COMMON STOCK
COMMON STOCK BENEFICIALLY OWNED
BENEFICIALLY OWNED BENEFICIALLY OWNED BEFORE AND AFTER OFFERING
BEFORE OFFERING AFTER OFFERING
DIRECTORS, NAMED EXECUTIVE ----------------------- ------------------------- ---------------------------
OFFICERS AND FIVE PERCENT OF PERCENT OF PERCENT OF
PERCENT SHAREHOLDERS SHARES CLASS SHARES CLASS SHARES CLASS
- ------------------------------- ---------- ----------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Leslie B. Otten(1)............. 1,853,197(1) 75.1% 2,664,008(2) 9.2% 14,760,530 100%
Thomas M. Richardson(3)........ 100,334 14.0 100,334 * 0 --
Christopher E. Howard(3)....... 150,493 19.7 150,493 * 0 --
Burton R. Mills(3)............. 80,243 11.5 80,243 * 0 --
G. Christopher Brink(3)........ 80,243 11.5 80,243 * 0 --
Warren C. Cook(3).............. 40,121 6.1 40,121 * 0 --
Madeleine LLC(4)
c/o Cerberus
450 Park Ave.
New York, NY
10022........................ 2,110,518 12.1%
Directors and Executive
Officers as a Group
(8 persons)(5)............... 2,324,697 79.1 3,385,712 19.1% 14,760,530 100%
<CAPTION>
PERCENT OF
CLASS A COMMON
STOCK AND COMMON
DIRECTORS, NAMED EXECUTIVE STOCK BENEFICIALLY
OFFICERS AND FIVE OWNED AFTER
PERCENT SHAREHOLDERS OFFERING
- ------------------------------- -------------------
<S> <C>
Leslie B. Otten(1)............. 54.5%
Thomas M. Richardson(3)........ *
Christopher E. Howard(3)....... *
Burton R. Mills(3)............. *
G. Christopher Brink(3)........ *
Warren C. Cook(3).............. *
Madeleine LLC(4)
c/o Cerberus
450 Park Ave.
New York, NY
10022........................ 6.5%
Directors and Executive
Officers as a Group
(8 persons)(5)............... 55.1%
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes 1,853,197 shares of Common Stock issuable under exercisable options
granted under the Stock Option Plan.
(2) Includes 810,811 shares of Common Stock to be issued in the Concurrent
Offering.
(3) All shares of Common Stock beneficially owned by such person are issuable
under exercisable options granted under the Stock Option Plan.
(4) Includes 2,110,518 shares of Common Stock which is issuable upon the
conversion of such holder's shares of 6% Convertible Preferred.
(5) Includes 2,324,697 shares of Common Stock issuable under exercisable options
granted under the Stock Option Plan.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of the material terms of each instrument
governing the Company's indebtedness.
THE NEW CREDIT FACILITY
In connection with the Offering and the Acquisition, the Company has
accepted a proposal to provide the Company with a New Credit Facility of up to
$215 million. Amounts borrowed under the New Credit Facility will be available
(i) to finance the Acquisition, (ii) to repay approximately $60 million of
indebtedness of ASC East under the Existing Credit Facility, (iii) to pay
certain fees and expenses relating to the Acquisition and (iv) for ongoing
general corporate purposes and capital expenditures. The New Credit Facility
will be divided into two sub-facilities, $75 million will be available to be
loaned to ASC East and its subsidiaries ("East Facility") and $140 million will
be available to be loaned to the Company excluding ASC East and its subsidiaries
("West Facility"). The East Facility consists of a six-year revolving credit
facility in the amount of $45 million and an eight-year term facility in the
amount of $30 million. The West Facility consists of a six-year revolving
facility in the amount of $65 million and an eight-year term facility in the
amount of $75 million. The revolving facilities are subject to annual 30-day
clean down requirements to an outstanding balance of not more than $10 million
for the East Facility and not more than $25 million for the West Facility. The
maximum availability under the revolving facilities will reduce over the term of
the New Credit Facility by certain prescribed amounts. The term facilities
amortize at a rate of approximately 1.0% of the principal amount for the first
six years with the remaining portion of the principal due in two substantially
equal installments in years seven and eight. At the Company's option, interest
will be payable at an alternate base rate or LIBOR, each plus an applicable
margin that is dependent upon the ratio of the Company's total debt to EBITDA.
The New Credit Facility will require mandatory prepayments with the net
proceeds of any asset sales and new debt and equity offerings of the Company.
Beginning in July 1999, the New Credit Facility will require mandatory
prepayments of 50% of excess cash flows during any period in which the ratio of
the Company's total senior debt to EBITDA exceeds 3.50 to 1. In no event,
however, will such mandatory prepayments reduce either revolving facility
commitment below $35 million.
The East Facility will be secured by substantially all the assets of ASC
East and its subsidiaries, except Grand Summit Resort Properties, Inc., which is
not a borrower under the New Credit Facility. The West Facility is secured by
substantially all the assets of the Company and its subsidiaries, except ASC
East and its subsidiaries.
The New Credit Facility will contain various covenants that limit, among
other things, subject to certain exceptions, indebtedness, liens, transactions
with affiliates, restricted payments and investments, mergers, consolidations
and dissolutions, sales of assets, dividends and distributions and certain other
business activities. The New Credit Facility will contain financial covenants
customary for this type of senior credit facility. Compliance with financial
covenants will be determined on a consolidated basis notwithstanding the
bifurcation of the New Credit Facility into the East Facility and the West
Facility, with the exception of a leverage test. The financial covenants will
include maintenance of customary financial ratios.
An irrevocable commitment on the New Credit Facility is subject to the
approval of the lender's credit committee.
THE 12% NOTES
ASC East has outstanding $120 million aggregate principal amount of 12%
Notes which bear interest at a rate of 12% per annum, payable semi-annually in
arrears on each January 15 and July 15. The 12% Notes mature on July 15, 2006.
The 12% Notes represent senior subordinated unsecured obligations of
77
<PAGE>
ASC East. ASC East's payment obligations under the 12% Notes are guaranteed on a
subordinated basis by substantially all of ASC East's subsidiaries.
The 12% Notes may not be redeemed at the option of ASC East prior to July
15, 2001, except that prior to July 15, 1999 ASC East may redeem up to 25% of
the 12% Notes at a redemption price of 112% of the principal amount thereof,
plus accrued and unpaid interest, if any, with the net proceeds of a public or
private sale of common stock of ASC East. At any time on or after July 15, 2001,
the 12% Notes may be redeemed at the option of ASC East, in whole or in part, at
a premium declining ratably to par on July 15, 2005.
The 12% Note Indenture provides that in the event of a Change of Control,
ASC East is required to make an offer to purchase in cash all or any part of
outstanding 12% Notes at a price of 101% of the aggregate principal amount
thereof. Consummation of the Offering will constitute a Change in Control under
the 12% Note Indenture. See "The Transactions--Consent Solicitation" and "Risk
Factors-- Immediate and Substantial Debt Obligations Upon Consummation of the
Offering."
The 12% Note Indenture contains restrictive covenants that, among other
things, impose limitations on the ability of ASC East and certain of its
subsidiaries to (i) to incur additional indebtedness, (ii) merge, consolidate or
sell or dispose of all or substantially all of its assets, (iii) issue certain
preferred stock, pay dividends or make other distributions on account of ASC
East's equity interests, repurchase equity interests or subordinated
indebtedness, and make certain other Restricted Investments (as defined in the
12% Note Indenture), (iv) create certain liens, (v) enter into transactions with
affiliates and (vi) sell assets.
Such covenants prohibit ASC East and its subsidiaries from paying any
dividends or other distributions to the Company except for limited payments
permitted upon ASC East's meeting certain financial thresholds. ASC East is not
currently eligible to pay any dividends or distributions to the parent company
under these provisions. In addition, ASC East and its subsidiaries are
prohibited from entering into any transaction with the Company or its other
direct or indirect subsidiaries, except under certain conditions.
14% EXCHANGEABLE NOTES
Pursuant to the Securities Purchase Agreement, the Company issued $17.5
million aggregate principal amount of its 14% Exchangeable Notes in a private
offering to an institutional investor. The 14% Exchangeable Notes bear interest
at a rate of 14% per annum and mature on July 28, 2002. Interest on the 14%
Exchangeable Notes is payable in cash or additional 14% Exchangeable Notes, at
the option of the Company. The Company intends to offer to exchange all of the
14% Exchangeable Notes for shares of 6% Convertible Preferred Stock with an
aggregate liquidation preference of approximately $17.5 million. See "The
Transactions--Exchange Offers." Upon consummation of the Offering, the 6%
Convertible Preferred Stock will be convertible into an aggregate of 1,055,259
shares of Common Stock at the option of the holder thereof. If the holder of 14%
Exchangeable Notes does not exchange such securities for 6% Convertible
Preferred Stock issued in exchange for the 14% Exchangeable Notes, consummation
of the Offering will trigger a Change of Control under the Securities Purchase
Agreement. In such event, the Securities Purchase Agreement requires that the
Company offer to purchase the 14% Exchangeable Notes for cash at a redemption
price of 105.3% of the principal and liquidation amount outstanding on the date
of redemption. See "The Transactions--Exchange Offers," and "Description of
Capital Stock--6% Convertible Preferred Stock."
THE CANYONS SELLER NOTE
In connection with the acquisition of The Canyons on July 3, 1997, ASC Utah
executed a promissory note payable to Wolf Mountain Resorts, L.C. (the "Seller")
in an aggregate principal amount of $6.5 million (the "Canyons Seller Note").
Interest on the Canyons Seller Note accrues at the rate of 12% per annum and is
payable monthly in arrears. The principal is payable in two installments, $4.2
million upon
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the closing of the Offering and $2.3 million on January 31, 1998. The Company
has guaranteed the payment of the Canyons Seller Note.
TEXTRON FINANCING
On August 1, 1997, Grand Summit Resort Properties, Inc. ("GSRP"), a
subsidiary of the Company, entered into a construction loan facility (the
"Construction Loan Facility") with Textron Financial Corporation, as agent and
co-lender, and Green Tree Financial Servicing Corporation, as co-lender
(together, the "Lenders") to develop Grand Summit Hotels. Pursuant to the terms
of the Construction Loan Facility, the Lenders have agreed to make available to
GSRP, under certain circumstances, up to $55 million to develop Grand Summit
Hotels at Sunday River, Killington and Mount Snow/Haystack, and to refinance an
existing $3.9 million facility used to finance construction of the Attitash
Grand Summit Hotel. After an initial advance to refinance the Attitash Grand
Summit Hotel facility and to finance certain pre-construction costs, the loan is
to be funded in a series of advances through August 1999 as construction costs
are incurred. Each advance is subject to certain conditions, including GSRP
obtaining certain levels of preconstruction sales. Interest on the loan will
accrue at the prime rate established by Chase Manhattan Bank as of the first day
of each month, plus 1.5%, but will not accrue at less than 9.25% per annum. The
loan will be secured by (i) a first mortgage on the hotel resort properties,
(ii) any interests that the Company may have in purchased quartershare units,
including sales contracts, and (iii) other security interests granted by GSRP,
each on a cross-collateralized basis. The loan is non-recourse to the Company
and its other subsidiaries. Interest on the loan is due and payable monthly in
arrears, however, GSRP may take interest advances to pay such interest.
Principal will be repaid on the following basis: (i) as quartershare sales close
at the Attitash project, an amount equal to 85% of the sales proceeds payable in
connection with the sale, (ii) as quartershare sales close at The Jordan Bowl,
Killington and Mount Snow/ Haystack projects, an amount equal to 80% of the
sales proceeds payable in connection with the sale, (iii) an amount equal to the
rental payments received by GSRP from ASC East subsidiary for the lease of the
Grand Summit Hotels (aggregating $193,000 per month) and (iv) other amounts upon
the aggregate of original or outstanding advances exceeding certain construction
costs and quartershare sales levels; provided, however, that the Construction
Loan Facility will mature at the end of December 2000. The loan contains various
covenants that limit GSRP, subject to certain exceptions, with respect to
indebtedness, liens, sales of assets, consolidations or mergers, distributions,
transactions with affiliates and certain other business activities.
OTHER INDEBTEDNESS
In addition to the indebtedness described above, certain of the Company's
subsidiaries have other outstanding debt obligations pursuant to certain
promissory notes, bonds, capital leases and other instruments. A brief
description of certain material debt obligations is set forth below.
The Company's Killington, Ltd. subsidiary is an obligor under certain
subordinated debentures in multiple series due in various principal amounts from
1999 through 2016, with interest rates of 6% or 8%. The aggregate balance of the
subordinated debentures, as of July 27, 1997, was approximately $11.0 million.
The subordinated debentures contain certain covenants that limit, subject to
certain exceptions, the ability of Killington, Ltd. to incur indebtedness and to
make dividends and distributions.
The Company's Sugarbush Resort Holdings, Inc. subsidiary is an obligor under
a promissory note issued to Snowridge, Inc. with an outstanding balance as of
July 27, 1997 of approximately $5.1 million and an interest rate of 6.25%. The
outstanding principal and all accrued and unpaid interest outstanding is due on
December 31, 1999. The note is collateralized by certain assets of Sugarbush. As
a result of the Offering, the holders of the note may accelerate the maturity of
the note. In such an event, the Company intends to repay the note with the
proceeds of the Offering. See "Use of Proceeds."
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The Company's Mountain Wastewater Treatment, Inc. subsidiary is an obligor
under a promissory note issued to LHC Corporation due June 1, 2003, with an
outstanding balance as of July 27, 1997 of approximately $2.2 million. Interest
on the promissory note is payable at a rate equal to the lesser of (a) 9% per
annum or (b) the prime lending rate announced by The First National Bank of
Boston. Annual principal payments of $154,123 are due on each June 1 beginning
on June 1, 1997. The note is collateralized by a pledge of certain capital stock
and by a letter of credit. As a result of the Offering, the holders of the note
may accelerate the maturity of the note. In such an event, the Company intends
to repay the note with the proceeds of the Offering. See "Use of Proceeds."
DESCRIPTION OF CAPITAL STOCK
The following summarizes the material terms of the capital stock of the
Company.
GENERAL
Upon the closing of the Offering, the authorized capital stock of the
Company will consist of 100,000,000 shares of Common Stock, par value $.01 per
share, 32,236,071 of which will be issued and outstanding, 15,000,000 shares of
Class A Common Stock, par value $.01 per share, 14,760,530 of which will be
issued and outstanding, 70,179 Series A Exchangeable Preferred Stock, having a
liquidation preference of $1,000 per share (the "Series A Exchangeable Preferred
Stock"), no shares of which will be outstanding, approximately 100,000 shares of
6% Convertible Preferred Stock, having a liquidation preference of $1,000 per
share, approximately 38,100 shares of which will be outstanding, and
shares of undesignated Preferred Stock, par value $.01 per share, none of which
will be outstanding.
COMMON STOCK
The issued and outstanding shares of Common Stock and Class A Common Stock
are, and the shares of Common Stock being offered will be, upon payment
therefor, validly issued, fully paid and nonassessable. The rights of holders of
Class A Common Stock and Common Stock are identical, except that, while any
Class A Common Stock is outstanding, holders of Class A Common Stock elect a
class of directors that constitutes two-thirds of the Board of Directors and
holders of Common Stock elect a class of directors constituting one-third of the
Board of Directors. The Class A Common Stock is convertible into Common Stock
(i) at the option of the holder, (ii) automatically upon transfer to any person
who is not an affiliate of Leslie B. Otten and (iii) automatically if the number
of shares of Class A Common Stock outstanding at any time represent less than
20% of the combined voting power of Common Stock and Class A Common Stock
outstanding at such time. The Common Stock is not convertible. Subject to the
prior rights of the holders of any preferred stock, the holders of outstanding
shares of Common Stock and Class A Common Stock are entitled to received
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. See "Dividend
Policy." The shares of Common Stock and Class A Common Stock will have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding up of the Company, the holders of
Common Stock and Class A Common Stock are entitled to receive on a pro rata
basis the assets of the Company which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior rights
of any holders of preferred stock then outstanding. Each outstanding share of
Common Stock and Class A Common Stock is entitled to one vote on all matters
submitted to a vote of shareholders.
Under Maine law, the holders of any class of capital stock of a corporation,
including holders of Common Stock and Class A Common Stock will be entitled to
vote as a separate class on amendments to the Company's Articles of
Incorporation that affect the relative rights of such holder's capital stock.
Thus, the holders of Common Stock are entitled to vote as a class with respect
to, among other things, (i) changes in designations, preferences, limitations
and relative rights, (ii) changes in the aggregate number of authorized shares
or par value, (iii) exchanges, reclassifications or cancellations of the Common
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Stock into a different number or class, and (iv) the creation of new classes of
shares having rights and preferences prior and superior to the rights (or
increase the rights and preferences of any other class), in each instance, of
the Common Stock. For example, the holders of Common Stock will be entitled to
vote as a class on any merger in which the Company would be a party if the plan
of merger contains provisions affecting the rights of the Common Stock,
including a proposed exchange or reclassification of the Common Stock and on any
sale of all or substantially all of the assets of the Company. In these
circumstances the holders of the Class A Common Stock would not be able to
determine the outcome of the shareholder vote. On all other matters, holders of
Common Stock and Class A Common Stock will vote together as a single class.
PREFERRED STOCK
The Company's Board of Directors may, from time to time, without further
action by the Company's shareholders direct the issuance of shares of preferred
stock in series and may, at the time of issuance, determine the rights,
preferences and limitations of each such series. Satisfaction of any dividend
preferences of outstanding shares of preferred stock would reduce the amount of
funds available for the payment of dividends on shares of Common Stock and Class
A Common Stock. Holders of shares of preferred stock may be entitled to receive
a preference payment in the event of any liquidation, dissolution or winding-up
of the Company before any payment is made to the holders of shares of Common
Stock and Class A Common Stock. Under certain circumstances, the issuance of
shares of preferred stock may render more difficult or tend to discourage a
merger, tender offer or proxy contest, the assumption of control by a holder of
a large block of the Company's securities or the removal of incumbent
management. The Board of Directors of the Company, without shareholder approval,
may issue shares of preferred stock with voting and conversion rights which
could adversely affect the holders of shares of Common Stock and Class A Common
Stock.
SERIES A EXCHANGEABLE PREFERRED STOCK
Pursuant to the Securities Purchase Agreement, the Company issued 17,500
shares of its Series A Exchangeable Preferred Stock in a private offering to an
institutional investor. The liquidation preference is $1,000 per share and
cumulative dividends on the Series A Exchangeable Preferred Stock are payable,
at the option of the Company, in cash or in additional shares of Series A
Exchangeable Preferred Stock at a rate of 14% per annum. The Company is required
to redeem all shares of Series A Exchangeable Preferred Stock outstanding on
July 15, 2002. The Company intends to offer to exchange all or any part of the
Series A Exchangeable Preferred Stock for up to approximately 38,100 shares of
6% Convertible Preferred Stock. Upon consummation of the Offering, each share of
6% Convertible Preferred Stock initially will be convertible into approximately
2,100,000 shares of Common Stock. If the holder of Series A Exchangeable
Preferred Stock does not elect to exchange such securities for 6% Convertible
Preferred Stock or Common Stock, consummation of the Offering will trigger a
Change of Control (as defined under the Securities Purchase Agreement). In such
event, the Securities Purchase Agreement requires that the Company offer to
purchase the Series A Exchangeable Preferred Stock for cash at a redemption
price of 105.3% of the liquidation preference of such shares on the date of
redemption. See "Recent Developments--Exchange Offers."
6% CONVERTIBLE PREFERRED STOCK
At the time of Offering, the Company will have authorized 35,000 shares of
6% Convertible Preferred Stock. The initial liquidation preference of the 6%
Convertible Preferred Stock is $1,000 per share and cumulative dividends are
payable quarterly in cash at a rate of 6% per annum. The terms of the 6%
Convertible Preferred Stock prohibit the Company from paying cash dividends on
the Common Stock or Class A Common Stock unless the four preceding quarterly
dividends on the 6% Convertible Preferred
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Stock have been paid. In addition, the Company may not redeem any shares of
Common Stock or Class A Common Stock so long as any 6% Convertible Preferred
Stock remains outstanding.
Each share of 6% Convertible Preferred Stock is convertible at any time, at
the holder's option, into a number of shares of Common Stock initially equal to
the liquidation preference per share of 6% Convertible Preferred Stock divided
by the price per share of Common Stock offered to the public in the Offering
discounted by 5%, subject to antidilution adjustments for certain events,
including (i) stock splits, stock dividends or combinations of Common Stock into
a smaller number of shares, (ii) issuances of, or rights to acquire, Common
Stock to the holders of Common Stock at less than fair market value and (iii)
distributions of cash or property to holders of Common Stock.
The Company may, at its option, on any dividend payment date, exchange the
shares of 6% Convertible Preferred Stock, in whole but not in part, for 6%
Convertible Subordinated Debentures due five years from the date of issuance
thereof in a principal amount equal to $1,000 for each share of 6% Convertible
Preferred Stock, plus cash in an amount equal to all accrued but unpaid
dividends. The 6% Convertible Subordinated Debentures will bear interest at a
rate of 6% per annum payable in cash quarterly in arrears. The terms of the 6%
Convertible Subordinated Debentures as to conversion and redemption are
substantially similar to those contained in the 6% Convertible Preferred Stock.
If such shares are not previously converted into Common Stock, the Company
is required to redeem all outstanding shares of 6% Convertible Preferred Stock
on the fifth anniversary of the date of issuance at a price equal to $1,000 per
share plus any accrued and unpaid dividends thereon as of the date of redemption
(the "Redemption Price"). In addition, the Company may, at its option, redeem
the outstanding shares of 6% Convertible Preferred Stock at any time, at the
Redemption Price, provided that the closing price of the Common Stock exceeds
140% of the price per share offered to the public in the Offering.
The holders of 6% Convertible Preferred Stock have the right to vote on an
as-converted basis with the holders of the Common Stock. In addition, upon the
occurrence of certain defaults by the Company (including non-payment of
dividends for four quarters (whether or not consecutive), failure to redeem the
6% Convertible Preferred Stock as may be required, and defaults under any other
indebtedness of the Company in excess of $5.0 million), the Board of Directors
will be increased by two members and the holders of 6% Convertible Preferred
Stock will have the right to elect the two additional directors.
Pursuant to a Registration Rights Agreement dated as of July 2, 1997 between
the Company and the holder of the 14% Exchangeable Notes and the Series A
Exchangeable Preferred Stock, the Company may be required, simultaneous with the
Offering or at a future date, at the option of the holders, either (i) to
register the shares of 6% Convertible Preferred Stock or the shares of Common
Stock into which such securities are convertible or (ii) to include such shares
in any subsequent registered offering of securities by the Company.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
MAINE LAW
ARTICLES OF INCORPORATION AND BYLAWS. The Company's Articles of
Incorporation contain, among other things, provisions authorizing the issuance
of "blank check" preferred stock, 6% Convertible Preferred Stock with rights to
elect two directors upon the occurrence of certain events and two classes of
common stock. These provisions could delay, deter or prevent a merger,
consolidation, tender offer or other business combination or change of control
involving the Company. See "Risk Factors--Potential Anti-Takeover Provisions."
The Bylaws provide that any action required or permitted to be taken by the
shareholders of the Company at an annual meeting or special meeting of
shareholders may only be taken if it is properly brought before such meeting.
Under the Bylaws, in order for any matter to be considered "properly brought"
before a meeting, a shareholder must comply with certain requirements regarding
advance notice
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to the Company. The foregoing provisions could have the effect of delaying until
the next shareholders' meeting, shareholder actions which are favored by the
holders of a majority of the outstanding voting securities of the Company. See
"Risk Factors--Potential Anti-Takeover Provisions."
The Company is subject to certain provisions under the MBCA relating to the
personal liability of directors. The MBCA provides that a director shall not be
liable for monetary damages for a breach of fiduciary duty unless the director
is found not to have acted honestly or in the reasonable belief that the action
was in or not opposed to the best interests of the Company or its shareholders.
Further, the Bylaws provide in all cases that the Company shall indemnify the
Company's directors and officers to the fullest extent permitted by the MBCA.
The Company believes that these provisions will assist the Company in attracting
and retaining qualified individuals to serve as directors.
MAINE ANTITAKEOVER STATUTE. The Company is subject to the provisions of
Section 611-A of the MBCA (the "Antitakeover Law"). The Antitakeover Law
prohibits a Maine corporation from engaging in a "business combination" with an
"interested shareholder" for a period of five years after the date of the
transaction in which the person became an interested shareholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes generally, mergers, asset sales, certain types of stock
issuances, and other transactions resulting in a disproportionate financial
benefit to the interested shareholder. Subject to certain exceptions, an
"interested shareholder" is a person who owns, or within the preceding five
years owned, 25% or more of the corporation's voting stock. See "Risk
Factors--Potential Anti-Takeover Provisions."
The MBCA provides generally that an amendment of a corporation's articles of
incorporation must be adopted by the board of directors and approved by an
affirmative vote of a majority of the shares entitled to vote on any matter. The
MBCA provides generally that bylaws may be amended by a majority vote of the
board of directors or the shareholders. The MBCA provides, however, that any
Bylaws adopted or amended by the shareholders of the Company may not be amended
or repealed by the board of directors for two years thereafter.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding
20,058,883 shares of Common Stock (excluding all shares issuable upon the
exercise of options and assuming no exercise of the Underwriters' over-allotment
option and no conversion of the Class A Common Stock into Class A Common Stock)
and 14,760,530 shares of Class A Common Stock. All of the shares of Common Stock
sold in the Offering will be freely tradeable under the Securities Act, unless
purchased by "affiliates" of the Company as that term is defined under the
Securities Act. Upon the expiration of lock-up agreements between the Company,
certain shareholders of the Company, the executive officers and directors of the
Company and the Underwriters, which will occur 180 days after the Consummation
of the Offering (the "Closing Date") and exercise of all options granted under
the Stock Option Plan, 4,585,753 shares of Common Stock and 14,760,530 shares of
Class A Common Stock (collectively, the "Restricted Shares") will become
eligible for sale, subject to compliance with Rule 144 of the Securities Act as
described below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of: (i) 1% of the number of shares of
Common Stock then outstanding (approximately [201,000] shares immediately after
the Offering) or (ii) the average weekly trading volume of the Company's Common
Stock on the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which the notice of sale is filed with the Securities and
Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements
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relating to manner of sale, notice and availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not deemed to have been an affiliate of the Company at any time during
the three months immediately preceding the sale and who has beneficially owned
Restricted Shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations and requirements
described above.
Certain shareholders of the Company and the executive officers and directors
of the Company have agreed with the Underwriters that until 180 days after the
Closing Date not to directly or indirectly, offer, pledge, sell, contract to
sell, sell any option or contract to purchase or grant any option, right or
warrant to purchase or otherwise transfer or dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(including Class A Common Stock), or enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of the Common Stock, or cause a registration statement covering any
shares of Common Stock to be filed, without the prior written consent of DLJ,
subject to certain exceptions including pursuant to a foreclosure by a lender on
a loan to the Principal Shareholder for shares of Class A Common Stock and/or
Common Stock will be pledged as collateral. The Company has also agreed not to
directly or indirectly, offer, sell, pledge, contract to sell, sell any option
or contract to purchase or grant any option, right or warrant to purchase or
otherwise transfer or dispose of any Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (including Class A Common
Stock), or enter into any swap or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of the Common
Stock or cause a registration statement covering any shares of Common Stock to
be filed, for a period of 180 days after the Closing Date, without the prior
written consent of DLJ, subject to certain limited exceptions including issuance
of up to [3,213,444] shares of Common Stock under the Stock Option Plan. The
lock-up agreements may be released at any time as to all or any portion of the
shares subject to such agreements at the sole discretion of DLJ. See "Risk
Factors-- Shares Eligible for Future Sale."
The holder of the Company's 14% Exchangeable Notes and the Series A
Exchangeable Preferred Stock has certain rights to require the Company to
register shares of 6% Convertible Preferred Stock and Common Stock issuable upon
the exchange or conversion of such securities. See "Description of Capital
Stock--6% Convertible Preferred Stock."
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person who is not a "U.S. person" (a "Non-U.S. Holder"). For this
purpose, a "U.S. person" is any person who is, for United States federal income
tax purposes, (i) a citizen or resident of the United States,(ii) a corporation
or partnership created or organized in or under the laws of the United States or
of any State,(iii) an estate the income of which is subject to U.S. federal
income tax, regardless of its source, or (iv) a trust if (a) a court within the
United States is able to exercise primary supervision over the administration of
the trust and (b) one or more United States fiduciaries have the authority to
control all substantial decisions of the trust. This discussion does not address
all aspects of United States federal income and estate taxes and does not deal
with foreign, state and local consequences that may be relevant to such Non-U.S.
Holders in light of their personal circumstances. Furthermore, this discussion
is based on provisions of the United States Internal Revenue Code of 1986, as
amended, existing and proposed regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change (possibly with retroactive effect).
An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar year
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(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to U.S. federal tax as if they were U.S. citizens and, thus, are not Non-U.S.
Holders for purposes of this discussion.
THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. EACH PROSPECTIVE
PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO
CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING
OF COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF
ANY FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of United States federal income tax either at a rate of
30% of the gross amount of the dividends or at such lower rate as may be
specified by an applicable income tax treaty. However, dividends that are
effectively connected with the conduct of a trade or business by the Non-U.S.
Holder within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment of the Non-U.S. Holder,
are not subject to the withholding tax (provided the Non-U.S. Holder files
appropriate documentation, including, under current law, Form 4224, with the
payor of the dividend), but instead are subject to United States federal income
tax on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected dividends received by a Non-U.S. Holder that is a
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
In order to claim the benefit of an applicable tax treaty, a Non-U.S. Holder
of Common Stock may have to file with the Company or its dividend paying agent
an exemption or reduced treaty rate certificate or letter in accordance with the
terms of the treaty. Under current law, dividends paid to an address outside the
United States are presumed to be paid to a resident of such country (unless the
payor has knowledge to the contrary) for purposes of the withholding discussed
above and for purposes of determining the applicability of a tax treaty rate.
However, under proposed Treasury regulations not currently in effect, in the
case of dividends paid after December 31, 1997 (December 31, 1999 in the case of
dividends paid to accounts in existence on or before the date that is 60 days
after the proposed regulations are published as final regulations), a Non-U.S.
Holder of Common stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy applicable certification and other
requirements either directly or through an intermediary. In addition, backup
withholdings, as discussed below, may apply in certain circumstances if
applicable certification and other requirements are not met.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding on gains recognized upon the sale or other disposition
of Common Stock unless: (i) such gain is effectively connected with the conduct
in the United States of a trade or business of the Non-U.S. Holder, or if a tax
treaty applies, the gain is attributable to a United States permanent
establishment (in either case, the branch profits tax also may apply if the
Non-U.S. Holder is a corporation); (ii) in the case of a Non-U.S. Holder who is
a non-resident alien individual and holds the Common Stock as a capital asset,
such individual is present in the United States for 183 or more days in the
taxable year of disposition and certain other conditions are met; or (iii) the
Common Stock constitutes a United States real property interest by
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reason of the Company's status as a "United States real property holding
corporation" ("USRPHC") for federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or such Non-U.S.
Holder's holding period for such Common Stock. If a Non-U.S. Holder falls under
clause (i) or (iii) above, the holder will be taxed on the net gain derived from
the sale under the graduated United States federal income tax rates that are
applicable to United States citizens, resident aliens and domestic corporations,
as the case may be, and may be subject to withholding under certain
circumstances (and, with respect to corporate Non-U.S. Holders, may also be
subject to the branch profits tax described above.) If an individual Non-U.S.
Holder falls under clause (ii) above, the holder generally will be subject to
United States federal income tax at a rate of 30% on the gain derived from the
sale and may be subject to withholding under certain circumstances.
The Company will qualify as a USRPHC if the fair market value of its United
States real property interests equals 50 percent or more of the aggregate fair
market value of the Company's worldwide real property interests and any other
assets of the Company used or held for use in a trade or business. If the Common
Stock is regularly traded on an established securities market, however, it will
be treated as a United States real property interest only in the case of a
Non-U.S. Holder who owns 5 percent or more of the value of the outstanding
Common Stock during the five-year period preceding the holder's disposition of
such Common Stock or, if shorter, the Non-U.S. Holder's holding period for such
Common Stock. Generally, if the Company constitutes a USRPHC, gain realized from
the disposition of Common Stock by a Non-U.S. Holder will be subject to United
States withholding tax equal to 10 percent of the amount realized on the sale.
However, gain realized by a Non-U.S. Holder will not be subject to withholding
so long as during the calendar year in which the disposition occurs the Common
Stock of the Company is regularly traded on an established securities market.
Upon consummation of the Offering, the Company believes that the Common Stock
will be regularly traded on an established securities market.
FEDERAL ESTATE TAX
Common Stock held by an individual who is not a citizen or resident (as
specifically defined for United States federal estate tax purposes) of the
United States at the time of death will be included in such holder's gross
estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
United States backup withholding tax is imposed at the rate of 31% on
certain payments to persons not otherwise exempt that fail to furnish certain
identifying information to the payor. Under current law, backup withholdings
generally will not apply to dividends paid to a Non-U.S. Holder at an address
outside the United States (unless the payer has knowledge that the payee is a
U.S. person), but generally will apply to dividends paid on Common Stock at
addresses inside the United States to Non-U.S. Holders that fail to provide
certain identifying information in the manner required. However, under proposed
Treasury regulations not currently in effect, in the case of dividends paid
after December 31, 1997 (December 31, 1999 in the case of dividends paid to
accounts in existence on or before the date that is 60 days after the proposed
regulations are published as final regulations), a Non-U.S. Holder generally
would be subject to backup withholding at a 31% rate, unless certain
certification procedures, (or, in the case of payments made outside the United
States with respect to an offshore account, certain documentary evidence
procedures) are complied with, directly or through an intermediary or a Non-U.S.
Holder otherwise establishes an exemption from backup withholding.
86
<PAGE>
Payment of the proceeds of a sale of Common Stock or through a United States
office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payor with its name and
address and certifies under penalties of perjury that it is a Non-U.S. Holder,
or otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
Common Stock by or through a non-United States office of a non-United States
broker. If, however, such broker is, for United States federal income tax
purposes a U.S. person, a controlled foreign corporation, or a non-United States
person that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, such payments will be
subject to information reporting, but not backup withholding, unless (i) such
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. Holder and certain other conditions are met, or (ii) the beneficial
owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided that required information is furnished in a timely manner to
the IRS.
87
<PAGE>
UNDERWRITING
Subject to certain terms and conditions contained in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for whom
DLJ, Furman Selz LLC ("Furman"), Morgan Stanley & Co. Incorporated and Schroder
& Co. Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase the number of shares of Common Stock from the Company set
forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............................................
Furman Selz LLC................................................................................
Morgan Stanley & Co. Incorporated..............................................................
Schroder & Co. Inc.............................................................................
-----------------
Total.................................................................................. 14,750,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be so
purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the price
to the public set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
to exceed $ per share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other Underwriter
and certain other dealers.
At the request of the Company, up to an aggregate of shares of Common
Stock, representing approximately % of the shares offered hereby, have been
reserved for sale at the public offering price to certain employees of the
Company and other persons designated by the Company. The maximum investment of
any such person may be limited by the Company in its sole discretion. The number
of shares of Common Stock available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public on the same basis as the other shares offered hereby. This program will
be administered by DLJ.
The Company has granted to the Underwriters an option to purchase up to
2,090,878 additional shares of Common Stock at the initial public offering price
less underwriting discounts and commissions solely to cover over-allotments.
Such option may be exercised in whole or in part from time to time during the
30-day period after the date of this Prospectus. To the extent that the
Underwriters exercise such
88
<PAGE>
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
The Company, certain shareholders of the Company and the executive officers
and directors of the Company have agreed not to directly or indirectly offer,
pledge, sell, contract to sell, sell any option or contract to purchase or grant
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any swap or other arrangement that
transfers all or a portion of the economic consequences associated with the
ownership of such Common Stock, or to cause a registration statement covering
any shares of Common Stock to be filed, for 180 days after the closing of the
Offering without the prior written consent of DLJ, subject to certain limited
exceptions, and provided that the Company may issue shares of Common Stock upon
vesting of rights under the Stock Option Plan. See "Shares Eligible for Future
Sale."
Prior to the Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby will be determined by negotiation among the Company and the
Representatives. The factors to be considered in determining the initial price
to the public include the history of and the prospects for the industry in which
the Company competes, the ability of the Company's management, the past and
present operations of the Company, the historical results of operations of the
Company, the prospects for future earnings of the Company, the general condition
of the securities markets at the time of the Offering and the recent market
prices of securities of generally comparable companies. The Company intends to
apply for listing of the Common Stock on the New York Stock Exchange.
The Underwriters do not intend to make sales to accounts over which they
exercise discretionary authority in excess of 5% of the number of shares of
Common Stock offered hereby.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot the Offering, creating a syndicate
short position. Underwriters may bid for and purchase shares of Common Stock in
the open market to cover syndicate short positions. In addition, the
Underwriters may bid for and purchase shares of Common Stock in the open market
to stabilize the price of the Common Stock. These activities may stabilize or
maintain the market price of the Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
In addition to the shares of Common Stock to be sold by the Underwriters in
the Public Offering, the Company is offering between 810,811 shares and
2,162,162 shares of Common Stock directly to the Principal Shareholder of the
Company in the Concurrent Offering.
DLJ has provided financial advisory services to the Company in connection
with the Transactions and has acted as solicitation agent in connection with the
Consent Solicitation, for which DLJ will receive customary fees.
LEGAL MATTERS
Certain legal matters with respect to the shares of Common Stock offered by
the Company hereby will be passed upon for the Company by LeBoeuf, Lamb, Greene
& MacRae, L.L.P, a limited liability partnership including professional
corporations, Hartford, Connecticut and Pierce Atwood, Portland, Maine. Certain
legal matters will be passed upon for the Underwriters by Latham & Watkins, New
York, New York.
89
<PAGE>
EXPERTS
The consolidated balance sheet of the American Skiing Company as of July 28,
1996 and July 27, 1997 and the consolidated statements of operations, of changes
in shareholders' equity, and of cash flows of the Company for the three years
ended July 27, 1997 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The combined statements of income, of changes in shareholders' equity, and
of cash flows of American Skiing Company for the year ended July 31, 1994
included in this Prospectus have been so included in reliance on the report of
Berry, Dunn, McNeil & Parker, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated balance sheet of S-K-I Ltd. as of July 31, 1994 and 1995,
and the consolidated statements of income, of changes in shareholders' equity
and of cash flows of S-K-I Ltd. for each of the three years in the period ended
July 31, 1995 included in this Prospectus have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The combined balance sheets of the Kamori Combined Entities as of May 31,
1996 and 1997 and the combined statements of operations, stockholders' equity
and cash flows of the Kamori Combined Entities for each of the three years in
the period ended May 31, 1997 included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all amendments,
exhibits, schedules and supplements thereto) on Form S-1 under the Securities
Act with respect to the shares of Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement. The Registration
Statement and the exhibits thereto may be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMERICAN SKIING COMPANY
Report of Independent Accountants--July 28, 1996 and July 27, 1997 and for the three years in the period
ended July 27, 1997.................................................................................... F-2
Consolidated Balance Sheet--July 28, 1996 and July 27, 1997.............................................. F-3
Consolidated Statement of Operations--For the years ended July 30, 1995, July 28, 1996 and July 27,
1997................................................................................................... F-4
Consolidated Statement of Changes in Shareholders' Equity--For the years ended July 30, 1995, July 28,
1996 and July 27, 1997................................................................................. F-5
Consolidated Statement of Cash Flows--For the years ended July 30, 1995, July 28, 1996 and July 27,
1997................................................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-8
S-K-I LTD.
Report of Independent Accountants........................................................................ F-28
Consolidated Balance Sheet--July 31, 1994 and 1995....................................................... F-29
Consolidated Statement of Income--For the years ended July 31, 1993, 1994, and 1995...................... F-30
Consolidated Statement of Changes in Stockholders' Equity--For the three years ended July 31, 1995....... F-31
Consolidated Statement of Cash Flows--For the years ended July 31, 1993, 1994, and 1995.................. F-32
Notes to Consolidated Financial Statements............................................................... F-33
Consolidated Balance Sheet--April 28, 1996 (unaudited)................................................... F-41
Consolidated Statement of Income--For the nine months ended April 30, 1995 and April 28, 1996
(unaudited)............................................................................................ F-42
Consolidated Statement of Cash Flows--For the nine months ended April 30, 1995 and April 28, 1996
(unaudited)............................................................................................ F-43
Notes to (Unaudited) Condensed Consolidated Financial Statements......................................... F-44
KAMORI COMBINED ENTITIES
Report of Independent Public Accountants................................................................. F-47
Combined Balance Sheets as of May 31, 1996 and 1997...................................................... F-48
Combined Statements of Operations for the years ended May 31, 1995, 1996 and 1997........................ F-49
Combined Statements of Stockholders' Equity for the years ended May 31, 1995,
1996 and 1997.......................................................................................... F-50
Combined Statements of Cash Flows for the years ended May 31, 1995, 1996 and 1997........................ F-51
Notes to Combined Financial Statements................................................................... F-53
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of American Skiing Company
The 14.76 for 1 stock split and the authorization of additional shares of
Class A Common Stock and Common Stock described in Note 16 to the financial
statements has not been consummated at October 1, 1997. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
American Skiing Company and its subsidiaries at July 28, 1996 and July 27, 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended July 27, 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
Boston, MA
September 19, 1997
F-2
<PAGE>
AMERICAN SKIING COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................................................... $ 3,185 $ 15,558
Restricted cash..................................................................... 902 2,812
Investments held in escrow.......................................................... 14,497 --
Accounts receivable................................................................. 2,458 3,801
Inventory........................................................................... 5,025 7,282
Prepaid expenses.................................................................... 3,371 1,579
Deferred financing costs............................................................ 1,056 1,338
Real estate developed for sale...................................................... 1,331 537
Assets held for sale................................................................ 14,921 --
Deferred tax assets................................................................. 588 422
------------ ------------
Total current assets.............................................................. 47,334 33,329
Property and equipment, net........................................................... 227,470 252,346
Goodwill.............................................................................. 6,540 10,664
Deferred financing costs.............................................................. 7,911 8,093
Long-term investments................................................................. 4,343 3,507
Other assets.......................................................................... 3,378 6,398
Real estate developed for sale........................................................ -- 23,003
Assets held for sale.................................................................. 1,756 --
------------ ------------
Total assets...................................................................... $ 298,732 $ 337,340
------------ ------------
------------ ------------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities
Line of credit and current portion of long-term debt................................ $ 22,893 $ 39,748
Accounts payable and other current liabilities...................................... 17,403 25,738
Deposits and deferred revenue....................................................... 3,541 4,379
Demand note, shareholder............................................................ 5,200 1,933
------------ ------------
Total current liabilities......................................................... 49,037 71,798
Long-term debt, excluding current portion............................................. 41,035 46,833
Subordinated notes and debentures..................................................... 146,792 149,749
Other long-term liabilities........................................................... 6,778 7,898
Minority interest in subsidiary....................................................... 2,492 626
Deferred income taxes................................................................. 30,695 28,514
------------ ------------
Total liabilities................................................................. 276,829 305,418
Commitments, lease contingencies and contingent liabilities
Mandatorily redeemable preferred stock; Series A, par value $1,000 per share, 200,000
shares authorized; 17,500 shares issued and outstanding; net of unaccreted issuance
costs and including accretion of discount and cumulative dividends in arrears
(redemption value of $18,537)....................................................... -- 16,821
SHAREHOLDERS' EQUITY
Common stock, Class A, par value of $.01 per share; 15,000,000 shares authorized;
14,760,530 issued and outstanding................................................... -- 10
Common stock, par value of $.01 per share; 1,000,000 shares authorized; 978,300 shares
issued and outstanding.............................................................. 10 --
Additional paid-in capital............................................................ 3,762 2,786
Retained earnings..................................................................... 18,131 12,305
------------ ------------
Total shareholders' equity........................................................ 21,903 15,101
------------ ------------
Total liabilities, mandatorily redeemable preferred stock and shareholders'
equity............................................................................ $ 298,732 $ 337,340
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERICAN SKIING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 30, JULY 28, JULY 27,
1995 1996 1997
--------- ----------- -------------
<S> <C> <C> <C>
Net revenues:
Resort................................................................... $ 46,794 $ 63,489 $ 166,923
Real estate.............................................................. 7,953 9,933 8,468
--------- ----------- -------------
Total net revenues..................................................... 54,747 73,422 175,391
--------- ----------- -------------
Operating expenses:
Resort................................................................... 29,725 41,799 109,774
Real estate.............................................................. 3,994 5,844 6,813
Marketing, general and administrative.................................... 9,394 11,289 26,126
Depreciation and amortization............................................ 3,910 6,783 18,293
--------- ----------- -------------
Total operating expenses............................................... 47,023 65,715 161,006
--------- ----------- -------------
Income from operations..................................................... 7,724 7,707 14,385
--------- ----------- -------------
Other expenses:
Commitment fee........................................................... -- 1,447 --
Interest expense......................................................... 2,205 4,699 23,730
--------- ----------- -------------
Income (loss) before provision (benefit) for income taxes and minority
interest in loss of subsidiary........................................... 5,519 1,561 (9,345)
Provision (benefit) for income taxes....................................... 400 3,906 (3,613)
Minority interest in loss of subsidiary.................................... -- 108 250
--------- ----------- -------------
Net income (loss).......................................................... 5,119 (2,237) (5,482)
Accretion of discount and issuance costs and dividends accrued on
mandatorily redeemable preferred stock................................... -- -- (444)
--------- ----------- -------------
Net income (loss) available to common shareholders......................... $ 5,119 $ (2,237) $ (5,926)
--------- ----------- -------------
--------- ----------- -------------
Pro forma net loss per weighted average common share outstanding........... $ (.35)
-------------
-------------
Weighted average common shares outstanding................................. $ 16,871,048
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AMERICAN SKIING COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ----------- ------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994............. 116,737 $ 116 -- -- $ 1,635 $ 24,461 $ 26,212
Net income......................... -- -- -- -- -- 5,119 5,119
Distributions to shareholder....... -- -- -- -- -- (854) (854)
Contributions...................... -- -- -- -- 25 -- 25
----------- ----- ------------ ----- ----------- --------- ---------
Balance at July 30, 1995............. 116,737 116 -- -- 1,660 28,726 30,502
Net loss........................... -- -- -- -- -- (2,237) (2,237)
Distributions to shareholder....... -- -- -- -- -- (8,358) (8,358)
Contributions...................... -- -- -- -- 1,020 -- 1,020
Conversion of affiliate company
common stock to ASC common
stock............................ 822,431 (106) -- -- 106 -- --
Issuance of shares of common
stock............................ 39,132 -- -- -- 976 -- 976
----------- ----- ------------ ----- ----------- --------- ---------
Balance at July 28, 1996............. 978,300 10 -- -- 3,762 18,131 21,903
Exchange of the Shareholder's 96%
interest in ASC East for 100% of
the Common Stock of the
Company.......................... (939,168) (10) -- -- -- -- (10)
Restatement of beginning of the
year retained earnings for the
establishment of the 4% minority
interest in ASC East and share of
earnings since inception......... (39,132) -- -- -- (976) 100 (876)
Issuance of Common Stock of the
Company to the Shareholder....... 1,000,000 10 -- -- -- -- 10
Conversion of Common Stock to Class
A Common Stock................... (1,000,000) (10) 1,000,000 10 -- -- --
Stock split in October 1997,
accounted for retroactively to
the date of the exchange......... -- -- 13,760,530 -- -- -- --
Accretion of discount and issuance
costs and dividends accrued on
mandatorily redeemable preferred
stock............................ -- -- -- -- -- (444) (444)
Net loss........................... -- -- -- -- -- (5,482) (5,482)
----------- ----- ------------ ----- ----------- --------- ---------
Balance at July 27, 1997............. -- $ -- 14,760,530 $ 10 $ 2,786 $ 12,305 $ 15,101
----------- ----- ------------ ----- ----------- --------- ---------
----------- ----- ------------ ----- ----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AMERICAN SKIING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 30, JULY 28, JULY 27,
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................................... $ 5,119 $ (2,237) $ (5,482)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Minority interest in net loss of subsidiary............................ -- (108) (250)
Depreciation and amortization.......................................... 3,910 6,783 18,293
Amortization of discount on subordinated notes and debentures and other
liabilities.......................................................... -- 435 3,300
Income tax expense on conversion of S corporations to C corporations... -- 5,552 --
Deferred income taxes, net............................................. (488) (1,940) (3,332)
Decrease (increase) in assets:
Restricted cash and investments held in escrow..................... -- -- 12,587
Accounts receivable................................................ (684) 481 (1,343)
Inventory.......................................................... (876) (373) (2,257)
Prepaid expenses................................................... (324) (648) 1,792
Real estate developed for sale..................................... 3,377 2,523 (21,976)
Other assets....................................................... 54 (836) (872)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities..................... 2,460 (3,601) 6,794
Other liabilities.................................................. -- 490 (1,304)
Deposits and deferred revenue...................................... 45 944 838
---------- ----------- ----------
Net cash provided by operating activities.............................. 12,593 7,465 6,788
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of businesses, net of cash acquired................. (1,819) (97,079) (6,959)
Long-term investments...................................................... -- (450) 836
Capital expenditures....................................................... (12,024) (25,054) (23,267)
Proceeds from sale of property and equipment............................... -- -- 2,626
Cash payments on note receivable........................................... 250
Proceeds from sale of businesses........................................... -- -- 14,408
Cash flows from investing activities, other................................ -- -- (1,964)
---------- ----------- ----------
Net cash used in investing activities.................................. $ (13,843) $ (122,583) $ (14,070)
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
F-6
<PAGE>
AMERICAN SKIING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS) (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 30, JULY 28, JULY 27,
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from senior credit facility................................... $ -- $ 40,301 $ 14,766
Net proceeds from (payments of) line of credit............................. 2,820 (5,776) --
Net proceeds from (payments of) revolving credit loan...................... 1,150 (17,101) --
Proceeds from subordinated notes and debentures, net of investments held in
escrow................................................................... -- 121,126 --
Deferred financing costs................................................... -- (8,485) (1,567)
Proceeds from long-term debt............................................... 84 1,819 7,828
Payments of long-term debt................................................. (765) (13,625) (14,482)
Payments on Demand note, Shareholder....................................... -- -- (3,267)
Advances to Shareholder.................................................... (61) (156) --
Distributions to Shareholder............................................... (854) (3,158) --
Proceeds from issuance of mandatorily redeemable
preferred stock, net of issuance costs................................... -- -- 16,377
Capital contribution....................................................... 25 1,020 --
Issuance of shares of common stock......................................... -- 976 --
---------- ----------- ----------
Net cash provided by financing activities.............................. 2,399 116,941 19,655
---------- ----------- ----------
Net increase in cash and cash equivalents.............................. 1,149 1,823 12,373
Cash and cash equivalents, beginning of year................................. 213 1,362 3,185
---------- ----------- ----------
Cash and cash equivalents, end of year....................................... $ 1,362 $ 3,185 $ 15,558
---------- ----------- ----------
---------- ----------- ----------
Cash paid for interest....................................................... $ 1,056 $ 2,408 $ 20,998
Cash paid (refunded) for income taxes........................................ $ -- $ 15 $ (1,492)
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Property acquired under capitalized leases................................. $ 1,050 $ 435 $ 7,824
Liabilities assumed associated with purchased companies.................... $ 9,254 $ 58,497 $ 1,826
Deferred tax liability associated with purchased companies................. $ -- $ 28,372 $ --
Purchase price adjustments................................................. $ -- $ -- $ 1,541
Purchase price adjustments related to deferred taxes....................... $ -- $ -- $ 1,317
Note payable issued for distribution to Shareholder........................ $ -- $ 5,200 $ --
Note payable issued for purchase of a business............................. $ -- $ -- $ 6,500
Note receivable received for sale of businesses............................ $ -- $ -- $ 2,750
Recording of minority interest............................................. $ -- $ -- $ 626
Accretion of discount and issuance costs and dividends accrued on
mandatorily redeemable preferred stock................................... $ -- $ -- $ 444
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
American Skiing Company ("ASC") is organized as a holding company and
operates through various subsidiaries. ASC and its subsidiaries (collectively,
the "Company") operate primarily in a single business segment, which is the
operation and development of ski resorts.
ASC was originally formed on December 7, 1995. Through June 17, 1997,
American Skiing Company was a holding company and operated through various
subsidiaries. ASC Holdings, Inc. ('ASCH') was formed on June 17, 1997, when Les
Otten (the 'Shareholder') exchanged his 96% ownership interest in ASC for 100%
of the common stock of ASCH. In conjunction with the formation of ASCH, the
Company changed the name of ASC to ASC East and recorded the 4% minority
interest in ASC East. The minority interest in ASC East of $626,000 at July 27,
1997 is comprised of the fair market value of the stock when issued to the
minority shareholders of $976,000, less the minority interest in the fiscal 1996
and 1997 losses of $100,000 and $250,000, respectively. On September 9, 1997,
ASCH changed its name to American Skiing Company.
For periods prior to June 17, 1997, the term 'Company' refers to ASC East
and its subsidiaries, and after such date, to American Skiing Company (formerly
ASCH) and its subsidiaries (including ASC East). In conjunction with the
formation of ASCH, the Company formed ASC Utah, a wholly-owned subsidiary, for
the purpose of acquiring the Canyons resort, including the Wolf Mountain ski
areas in Utah. In August 1997, the Company formed ASC West for the purpose of
the anticipated acquisition of the Steamboat Ski Resort in Colorado and the
Heavenly Ski Resort in California.
Prior to June 28, 1996, the Company was a combined group of separate
entities which were wholly-owned by the Shareholder. The outstanding number of
shares at July 30, 1995 of 116,737 represented the total outstanding shares of
the companies within the combined group. On June 28, 1996, the Shareholder
exchanged all the outstanding shares of the combined group for 939,168 shares of
ASC common stock. Contemporaneously with the exchange, ASC purchased all the
outstanding shares of common stock of
S-K-I Limited, Inc. ('S-K-I') for $18.00 per share. Upon the acquisition of
S-K-I, the companies from the combined group and the S-K-I companies were formed
into a consolidated entity. In conjunction with the exchange and the acquisition
of S-K-I, ASC issued 39,132 shares of common stock, representing a 4% minority
interest in ASC, to an institutional investor in a private offering. The fair
market value of the common stock was $976,000 at the date of issuance and was
recorded as additional paid-in capital.
The Company owns and operates resort facilities, real estate development
companies, golf courses, ski and golf schools, retail shops and other related
companies at the following resorts:
VERMONT
Killington Resort
Pico Ski Resort
Mount Snow/Haystack Resort
Sugarbush Resort
MAINE
Sunday River Ski Resort
Sugarloaf Resort
NEW HAMPSHIRE
Attitash/Bear Peak Ski Resort
UTAH
The Canyons Resort (Wolf Mountain ski areas)
F-8
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
American Skiing Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
FISCAL YEAR
The Company's fiscal year is a fifty-two week or fifty-three week period
ending on the last Sunday of July. The periods for 1995, 1996 and 1997 consisted
of fifty-two weeks.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash represents amounts held in escrow for the buyers of
properties developed for sale. The cash will be available to the Company when
the properties are sold.
INVESTMENTS HELD IN ESCROW
Investments held in escrow at July 28, 1996 consisted of U. S. Treasury
Notes, the proceeds from the redemption of which were used for payment of
interest on the Subordinated Notes. These Treasury Notes were carried at cost
which approximated the quoted market values at July 28, 1996. At July 27, 1997,
the Company is no longer required to hold cash in escrow for payment of interest
on the Subordinated Notes.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market,
and consist primarily of retail goods, food and beverage products and mountain
operating supplies.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated by the
straight-line method over the assets' estimated useful lives which generally
range from 9 to 40 years for buildings, 3 to 12 years for machinery and
equipment and 10 to 50 years for leasehold improvements, lifts, lift lines and
trails. Assets under capital lease are amortized over the shorter of their
useful lives or the respective lease lives.
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
the net assets (including tax attributes) of companies acquired in purchase
transactions. Goodwill is being amortized using the straight-line method over 40
years. Goodwill is recorded net of accumulated amortization in the accompanying
consolidated balance sheet.
F-9
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Costs incurred in connection with the issuance of debt are included in
deferred financing costs, net of accumulated amortization. Amortization is
calculated using the straight-line method over the respective original lives of
the applicable issues and is included in depreciation and amortization in the
accompanying consolidated statement of operations. Amortization calculated using
the straight-line method is not materially different from amortization that
would have resulted from using the interest method.
LONG-TERM INVESTMENTS
Long-term investments are comprised of U.S. Government and Agency
obligations and corporate obligations. It is management's intent to hold these
securities until maturity. These securities are carried at amortized cost, which
approximates quoted market values at July 28, 1996 and July 27, 1997.
LONG-LIVED ASSETS
Effective July 29, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). In accordance
with SFAS 121, whenever events or circumstances indicate that the carrying value
of the long-lived assets, identifiable intangibles and real estate developed for
sale may not be recoverable, impairment losses are recorded and the related
assets are adjusted to their estimated fair market value, less selling costs. As
of July 27, 1997, management believes that there has not been any impairment of
the Company's long-lived assets, identifiable intangibles or real estate
developed for sale.
REVENUE RECOGNITION
Resort revenues include sales of lift tickets, tuition from ski schools,
sales from restaurants, bars and retail shops, and real estate rentals. These
revenues are recognized as the services are performed. Real estate revenues are
recognized when title has been transferred. Deposits from buyers of real estate
are recorded as deposits and deferred revenue in the accompanying balance sheet
until the revenue is recognized and the amount is applied to the selling price.
Original acquisition costs, direct construction and development costs,
interest incurred on costs related to land under development, and other related
costs (engineering, surveying, landscaping, etc.) are recorded in the
accompanying consolidated balance sheet as real estate developed for sale.
INTEREST
Interest is expensed as incurred except when it is capitalized in
conjunction with major capital additions and development of real estate for
sale. The amounts of interest capitalized are determined by applying current
interest rates to the funds required to finance the construction. During 1995,
1996 and 1997, the Company incurred total interest cost of $2.4 million, $5.1
million and $24.3 million, respectively of which $224,000, $444,000 and
$575,000, respectively, has been capitalized to property and equipment and real
estate developed for sale.
F-10
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EMPLOYEE BENEFITS
In August 1997, the Company established the ASC 401(k) Retirement Plan
pursuant to Section 401(k) of the Internal Revenue Code which allows all
eligible employees to defer up to 15% of their income. The Company's match of
participants' contributions is discretionary. As of July 27, 1997, the Company
maintained two profit sharing and two savings plans pursuant to Section 401(k)
of the Internal Revenue Code. There were no contributions to the profit sharing
plans for 1995, 1996 and 1997. Contributions to the savings plans for 1995, 1996
and 1997 totaled $107,000, $87,000 and $301,000, respectively. These four plans
were rolled into the ASC 401(k) Retirement Plan subsequent to year end.
ADVERTISING COSTS
Advertising costs are expensed the first time the advertising takes place.
At July 28, 1996 and July 27, 1997 advertising costs of $282,000 and $384,000,
respectively, were recorded as current assets in the accompanying consolidated
balance sheet. Advertising expense for the years ended July 30, 1995, July 28,
1996 and July 27, 1997 was $4.5 million, $5.7 million and $5.2 million,
respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts and disclosures reported in the accompanying
consolidated financial statements. Actual results could differ from those
estimates.
SEASONALITY
The occurrence of adverse weather conditions during key periods of the ski
season could adversely affect the Company's operating results. In addition, the
Company's revenues are highly seasonal in nature, with the majority of its
revenues historically being generated in the second and third fiscal quarters,
of which a significant portion is produced in two key weeks--the Christmas and
Presidents' Day vacation weeks.
EARNINGS PER SHARE
For the year ended July 27, 1997, the computation of net loss per common
share is based on the weighted average of shares outstanding during the year
plus the fully diluted earnings per share impact of the conversion of the
mandatorily redeemable preferred stock. Prior to June 28, 1996, all of the
Company's outstanding common stock was owned by the same individual, the
Stockholder, and, accordingly, earnings per share has not been presented for the
fiscal year ended 1995.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
This pronouncement will be effective for the Company's year ended July 28, 1998
financial statements. SFAS 128 will supersede the pronouncement of the
Accounting Principles Board Opinion No. 15. The statement eliminates the
calculation of primary earnings per share and requires the disclosure of Basic
Earnings Per Share and Diluted Earnings Per Share (formerly referred to as fully
diluted earnings per share), if applicable. As the Company has recorded net
losses for the years ended July 28, 1996 and July 27, 1997, any common stock
equivalents would be antidilutive; therefore, primary earnings per share after
accretion of the mandatorily
F-11
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
redeemable preferred stock issuance costs and discount and the mandatorily
redeemable preferred stock dividends as presented on the consolidated statements
of operations is equivalent to Basic Earnings Per Share and Diluted Earnings Per
Share under SFAS 128.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable and
accounts payable and other current liabilities approximate fair value due to the
short-term nature of these financial instruments. The fair values of amounts
outstanding under the Company's Senior Credit Facility and certain other debt
instruments approximates their book values in all material respects, as
determined by discounting future cash flows at current market interest rates as
of July 27, 1997. The fair value of the Company's Senior Subordinated Notes has
been estimated using quoted market values. The fair value of the Company's
Subordinated Discount Notes and the Subordinated debentures of Killington Ltd.
have been estimated using discounted cash flow analyses based on current
borrowing rates for debt with similar maturities and ratings.
The estimated fair values of the Senior Subordinated Notes, the Subordinated
Discount Notes and the Subordinated debentures of Killington Ltd. at July 27,
1997 are presented below (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
12% Senior Subordinated Notes due 2006................................ $ 116,678 $ 127,400
13.75% Subordinated Discount Notes due 2007........................... 22,121 22,121
Subordinated debentures of Killington Ltd............................. 10,950 9,286
---------- ----------
$ 149,749 $ 158,807
---------- ----------
---------- ----------
</TABLE>
INCOME TAXES
The Company utilizes the asset and liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax bases of assets
and liabilities, utilizing currently enacted tax rates. The effect of any future
change in tax rates is recognized in the period in which the change occurs.
As described in Note 13, certain of the Company's subsidiaries had
previously elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code of 1986, as amended, with income or loss and credits
passed through to the shareholder. Concurrent with the acquisition of S-K-I, the
subsidiaries' election to be treated as S corporations terminated.
3. BUSINESS ACQUISITIONS AND DIVESTMENTS
On June 28, 1996, the Company acquired S-K-I (the "Acquisition") for a total
purchase price, including direct costs, of $104.6 million including liabilities
assumed (excluding deferred taxes) of $58.5 million for all of the shares
outstanding of S-K-I common stock. Pursuant to the transaction, S-K-I became a
wholly-owned subsidiary of the Company. The acquisition was accounted for using
the purchase accounting method. The consolidated financial statements contained
herein reflect the results of
F-12
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS ACQUISITIONS AND DIVESTMENTS (CONTINUED)
operations of the acquired S-K-I entities subsequent to June 28, 1996 and
include the balance sheet accounts of the acquired S-K-I entities at July 28,
1996 and July 27, 1997.
The purchase price was allocated to the fair values of S-K-I's assets and
liabilities at the date of acquisition as follows (in thousands):
<TABLE>
<CAPTION>
FAIR VALUE OF
NET ASSETS
ACQUIRED
------------------
<S> <C>
Cash...................................................................... $ 7,540
Accounts receivable, net.................................................. 1,625
Inventory................................................................. 3,271
Prepaid expenses.......................................................... 2,153
Property and equipment, net............................................... 163,745
Long-term investments..................................................... 3,893
Goodwill.................................................................. 6,554
Other assets.............................................................. 2,156
--------
Total assets.......................................................... 190,937
--------
--------
Accounts payable and accrued expenses..................................... (16,567)
Other liabilities......................................................... (5,301)
Minority interest......................................................... (2,600)
Debt acquired............................................................. (34,029)
Deferred income taxes..................................................... (27,820)
--------
Total liabilities..................................................... (86,317)
--------
Total................................................................. $ 104,620
--------
--------
</TABLE>
During fiscal 1997, the Company recorded purchase price adjustments totaling
$4.3 million pertaining to the Acquisition.
Amortization of goodwill charged to depreciation and amortization amounted
to $14,000 and $217,000 for 1996 and 1997, respectively. Accumulated
amortization of goodwill amounted to $14,000 and $231,000 at July 28, 1996 and
July 27, 1997, respectively.
Pursuant to a consent decree with the U.S. Department of Justice in
connection with the Merger, the Company sold the assets constituting the Mt.
Cranmore and Waterville Valley resorts for $17.2 million on November 27, 1996.
The assets held for sale of the Mt. Cranmore resort included in the accompanying
consolidated balance sheet as of July 28, 1996 are approximately $4.4 million
and the net income for the year ended July 28, 1996 of the Mt. Cranmore resort
included in the accompanying consolidated statement of operations is
approximately $251,000. The assets held for sale of the Waterville resort
included in the accompanying consolidated balance sheet as of July 28, 1996 are
approximately $12.3 million.
In November 1996, the Company purchased the Pico Ski Resort for a total
purchase price of $5.0 million. The purchase price includes a cash payment of
$3.4 million and assumed liabilities of $1.6 million. In June 1997, the Company
purchased the Canyons, including the Wolf Mountain ski area, for a total
purchase price of $8.3 million. The purchase price includes a cash payment of
$1.6 million, assumed liabilities of $200,000 and the issuance of a note payable
in the amount of $6.5 million.
F-13
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS ACQUISITIONS AND DIVESTMENTS (CONTINUED)
On August 30, 1996, the Company purchased the remaining 49% minority
interest in Sugarloaf, with a carrying amount of $2.5 million, for $2.0 million
cash. In connection with the purchase, the Company recorded a liability in the
amount of $492,000 to provide for contingent consideration that may be paid
pursuant to the purchase agreement. The liability is included in other long-term
liabilities in the accompanying consolidated balance sheet at July 27, 1997.
Contemporaneously with the purchase of Sugarloaf, the Company paid certain debt
in advance of its maturity and incurred a prepayment penalty of $600,000. The
prepayment penalty is recorded in interest expense in the accompanying
consolidated statement of operations for the year ended July 27, 1997.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition of S-K-I, the divestitures of Mt. Cranmore
and Waterville Valley, the purchase of the minority interest of Sugarloaf, and
the termination of S corporation status of the S corporations (which reflects
the estimated results of operations as if Sunday River Skiway Corporation
("SRSC"), Sunday River Ltd. ("SRL"), Perfect Turn, Inc. ("PT") and Sunday River
Transportation Co. ("SRTC"), wholly-owned subsidiaries of the Company, had been
subject to corporate income taxes) had occurred on July 31, 1995 and July 29,
1996 (in thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 30, JULY 28,
1995 1996
----------- -----------
<S> <C> <C>
Revenues............................................................. $ 149,031 $ 171,666
Net loss............................................................. $ (8,133) $ (3,785)
Net loss per share................................................... -- $ (3.87)
</TABLE>
The pro forma financial information is not intended to be indicative of the
results of operations that actually would have occurred had the transactions
taken place at the beginning of the years presented or of future results of
operations.
4. REAL ESTATE OPERATIONS
In addition to its resort operations, the Company engages in various real
estate activities including rental services and the development of real estate
for sale. During development, real estate taxes, insurance, interest, planning
and permitting costs are capitalized. Profit is recognized from the sale of such
property at the time of closing, when the Company has no ongoing involvement in
the specific property sold. The carrying value of the property developed for
sale is reduced to net realizable value if the asset carrying value is
determined not to be recoverable through expected undiscounted future cash
flows.
Properties developed for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 27,
JULY 28, 1996 1997
------------- ------------
<S> <C> <C>
Summit hotel completed units and hotels under development............................. $ 36 $ 22,685
Locke mountain........................................................................ 603 --
Other................................................................................. 692 861
------ ------------
$ 1,331 $ 23,546
------ ------------
------ ------------
</TABLE>
F-14
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT
The following reflects the combination of both owned property and equipment
as well as assets acquired pursuant to capital leases (in thousands):
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
---------- ----------
<S> <C> <C>
Buildings and grounds................................................. $ 62,301 $ 69,635
Machinery and equipment............................................... 53,422 61,218
Lifts and lift lines.................................................. 56,370 60,769
Trails................................................................ 11,064 11,667
Land improvements..................................................... 10,819 18,096
---------- ----------
193,976 221,385
Less--accumulated depreciation and amortization....................... 20,737 36,940
---------- ----------
173,239 184,445
Land.................................................................. 50,685 49,160
Construction-in-process............................................... 3,546 18,741
---------- ----------
Net property and equipment............................................ $ 227,470 $ 252,346
---------- ----------
---------- ----------
</TABLE>
Property and equipment includes approximately $3.5 million and $10.7 million
of machinery and equipment held under capital leases at July 28, 1996 and July
27, 1997, respectively. Related accumulated amortization at July 28, 1996 and
July 27, 1997 on property and equipment under capital leases was approximately
$1.0 million and $2.3 million, respectively. Amortization expense for property
and equipment under capital leases and included in depreciation expense was
approximately $406,000, $493,000 and $1.6 million for 1995, 1996 and 1997,
respectively. Depreciation expense was $3.8 million, $6.7 million and $16.6
million for 1995, 1996 and 1997, respectively.
6. NOTE RECEIVABLE
In connection with the sale of Mt. Cranmore and Waterville Valley in
November 1996, the Company received a promissory note in the amount of $2.8
million. Interest on the note is charged at a rate of 12% per annum and is
payable semi-annually on December 31 and June 30. The note shall be paid in
annual installments of $250,000, $100,000, $150,000, $200,000, $250,000,
$300,000 and $350,000 beginning in January 1997 through January 2003, with the
remaining balance to be paid in June 2004. The balance of the note at July 27,
1997 of $2.5 million is included in other assets in the accompanying
consolidated balance sheet.
7. NOTE RECEIVABLE, AFFILIATE
The note receivable in the amount of $265,000 at July 28, 1996 and $250,000
at July 27, 1997 is from Ski Dorms, Inc., a company which is principally owned
by the Shareholder of the Company, and is secured by a mortgage on land and
building. Interest is charged at Fleet National Bank's prime rate plus 1 1/2%
and principal and any unpaid interest are due in December, 1999. Accrued
interest receivable on this note at July 28, 1996 and July 27, 1997 was $179,000
and $10,000, respectively. The balance of the note and the accrued interest
receivable are included in other assets.
F-15
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. DEMAND NOTE, SHAREHOLDER
In June 1996, prior to the Acquisition, Sunday River, now a wholly-owned
subsidiary of ASC East, delivered to the Shareholder a demand note in the
principal amount of $5.2 million for the amount expected to become payable by
the Shareholder in 1996 and 1997 for income taxes with respect to Sunday River's
income as an S corporation through the date of the Acquisition. The demand note
is unsecured and bears interest at 5.4% per annum, the applicable federal rate
in effect at the time of issuance.
9. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
--------- ---------
<S> <C> <C> <C>
Senior Credit Facility (see Note 11)..................................................... $ 40,301 $ 55,067
Subordinated debentures issued to the former shareholders of Mt. Attitash Lift
Corporation by LBO Holding, Inc. ("LBO"), with an original face value of $2,151 (a
discount has been reflected based on the Company's incremental borrowing rate at the date
of issuance). The initial coupon rate is 6% per annum, to be adjusted annually based on
the revenues of LBO, as defined in the agreement. Interest is payable annually on May 1,
beginning in 1995. LBO may prepay the outstanding principal balance from time to time.
Any prepayment prior to April 30, 1999 is subject to a discount, as described in the
agreement. Holders of the debentures have certain redemption rights prior to May 1 of
each year, subject to limitation and discount as described in the agreement.............. 1,709 1,777
Promissory note issued to Snowridge, Inc. by Sugarbush Resort Holdings, Inc.
("Sugarbush") with a face value of $6,120 (a discount has been reflected based on an
imputed interest rate of 9.5%) and an interest rate of 6.25%. Interest is payable
quarterly beginning June 30, 1995. A principal payment of $620 was made on November 1,
1995 and the remaining principal and accrued interest outstanding are due on December 31,
1999. The note is collateralized by certain assets (as defined in the loan agreement) of
Sugarbush................................................................................ 4,984 5,128
Promissory note in the amount of $2,311 issued to LHC Corporation (an affiliate of
Snowridge, Inc.) by Mountain Waste Water Co. ("MWWC", a wholly-owned company of
Sugarbush), which is secured by the stock of MWWC and Mountain Water Company (a
wholly-owned company of Sugarbush) as well as letters of credit in the amount of $100.
The note bears interest at 9% or prime plus 1%, which is due June 1 of each year
beginning in 1995. Principal payments of $154 are due each June 1, beginning in 1997,
with the balance due on June 1, 2003..................................................... 2,311 2,158
Vermont Industrial Development Bonds, fluctuating interest rates, 1996- 3.56% to 4.83%;
1997- 4.03% to 4.50% due in varying installments through 1999, secured by certain
machinery and equipment and real estate.................................................. 2,695 1,005
Town of Carrabassett Valley, Maine, $3,700 term loan due August 27, 2013 in serial
maturities, interest at rates ranging from 5.0% to 8.5%, secured by first mortgages on
property, plant and equipment............................................................ 3,515 --
</TABLE>
F-16
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C> <C>
9. LONG-TERM DEBT (CONTINUED)
<CAPTION>
JULY 28, JULY 27,
1996 1997
--------- ---------
<S> <C> <C> <C>
First National Bank of Boston, $1,600 revolving loan due August 31, 1996 interest at the
bank's prime plus .5% (8.75%) at July 28, 1996........................................... 1,600 --
Note payable to Wolf Mountain Resorts, L.L.C. in an aggregate principal amount of $6.5
million to finance the acquisition of the Canyons resort and Wolf Mountain Ski area. The
note bears interest at a rate of 12% per annum which is payable monthly. The principal is
payable in installments of $4.2 million upon the effective date of the offering for sale
of the Company's Common Stock to the public and $2.3 million in January 1998............. -- 6,500
Note payable by Grand Summit Resort Properties, Inc. (a wholly-owned subsidiary of the
Company) to Key Bank in the amount of $8.5 million to finance the acquisition of land for
a hotel at the Attitash/Bear Peak resort. The note matures on July 26, 1998.............. -- 4,250
OTHER
Obligations under capital leases......................................................... 1,301 7,840
Other notes payable...................................................................... 5,512 2,856
--------- ---------
63,928 86,581
Less: current portion.................................................................... 22,893 39,748
--------- ---------
Long-term debt, excluding current portion................................................ $ 41,035 $ 46,833
--------- ---------
--------- ---------
</TABLE>
The carrying values of the above debt instruments approximate their
respective fair values in all material respects, determined by discounting
future cash flows at current market interest rates as of July 27, 1997.
The non-current portion of long-term debt matures as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999............................................................................... $ 33,055
2000............................................................................... 7,576
2001............................................................................... 1,675
2002............................................................................... 3,527
2003 and thereafter................................................................ 2,975
Interest related to capitalized leases............................................. (1,263)
Debt discount...................................................................... (712)
---------
$ 46,833
---------
---------
</TABLE>
At July 27, 1997, the Company had letters of credit outstanding totaling
$3.0 million.
F-17
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SUBORDINATED NOTES AND DEBENTURES
On June 25, 1996, in connection with the Acquisition, ASC East issued $120.0
million of 12% Senior Subordinated Notes (the "Notes") and 39,132 units
consisting of $39.1 million of 13.75% Subordinated Discount Notes (the
"Subordinated Notes") and 39,132 shares of common stock in a private placement.
The Notes and Subordinated Notes are general unsecured obligations of ASC East,
subordinated in right of payment to all existing and future debt of ASC East,
including all borrowings of the Company under the Senior Credit Facility. The
Notes and Subordinated Notes mature July 15, 2006 and January 15, 2007,
respectively, and will be redeemable at the option of ASC East, in whole or in
part, at any time after July 15, 2001. ASC East incurred deferred financing
costs totaling $7.9 million in connection with the issuance of the Notes and
Subordinated Notes which are recorded as assets, net of accumulated
amortization, in the accompanying consolidated balance sheet. Amortization
expense included in the accompanying consolidated statement of operations for
the years ended July 28, 1996 and July 27, 1997 amounted to $58,000 and
$781,000, respectively. Pursuant to a registration rights agreement, ASC East
filed a registration statement with respect to an offer to exchange the Notes
and Subordinated Notes for a new issue of notes of ASC East registered under the
Securities Act of 1933, with identical terms. The registration statement became
effective in November 1996.
The Notes were issued with an original issue discount of $3.4 million and,
as a result, the effective interest rate exceeds the stated interest rate.
Interest on the Notes is payable semi-annually on January 15 and July 15 of each
year, commencing on January 15, 1997. Interest expense on the Notes amounted to
$1.1 million and $14.6 million in 1996 and 1997, respectively.
Upon issuance of the Notes, a portion of the proceeds were required to be
invested into a segregated pledge account (the "Pledge Account") to secure the
payment of the first year's interest on the Notes. At July 28, 1996, the balance
in the Pledge Account was $14,497 and was invested in U.S. Treasury obligations.
Following the July 15, 1997 interest payment, the amount remaining in the Pledge
Account was not material and was released to ASC East. The balance in the pledge
account at July 28, 1996 is reflected in Investments held in escrow in the
accompanying consolidated balance sheet.
The Subordinated Notes were issued with an original issue discount of $19.0
million. Interest on the Subordinated Notes will not accrue prior to July 15,
2001; thereafter, interest will accrue at the rate of 13.75% per annum and will
be payable semi-annually on January 15 and July 15 of each year, commencing on
January 15, 2002. Interest expense on the Subordinated Notes amounted to
$206,000 and $2.9 million in 1996 and 1997, respectively. The shares of common
stock issued with the Subordinated Notes represent 4% of the total common stock
outstanding of ASC East and were valued at $976,000 as of June 28, 1996.
F-18
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SUBORDINATED NOTES AND DEBENTURES (CONTINUED)
Subordinated debentures of Killington Ltd (a wholly-owned subsidiary of the
Company) amounted to $10,950,000 at July 27, 1997 and are due as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR INTEREST AMOUNT
- ------------------------------------------------------ ------------- ---------
<S> <C> <C>
1999.................................................. 6% $ 455
2000.................................................. 6% 673
2001.................................................. 8% 525
2002.................................................. 8% 549
2003.................................................. 8% 1,074
2004.................................................. 8% 1,466
2010.................................................. 8% 1,292
2012.................................................. 6% 1,155
2013.................................................. 6% 1,065
2015.................................................. 6% 1,500
2016.................................................. 6% 1,196
---------
$ 10,950
---------
---------
</TABLE>
11. SENIOR CREDIT FACILITY
On June 25, 1996, ASC East entered into the Senior Credit Facility (the
"Facility") with Fleet National Bank ("Fleet"). The Facility provides for a
$65.0 million revolving line of credit (which includes a $3.5 million
sub-facility for letters of credit). The ASC East obligations under the Facility
are guaranteed by substantially all of the assets of ASC East. Under the
Facility, ASC East may enter into LIBOR contracts which provide for a fixed rate
of interest on certain borrowings for a period of time not to exceed 90 days. At
July 28, 1996 and July 27, 1997, ASC East had outstanding borrowings of $37.0
million and $53.0 million, respectively under LIBOR contracts which bear
interest at a rate of 7.94% per annum at July 28, 1996 and at rates ranging from
8.17% to 8.19%, per annum at July 27, 1997. The balance of the borrowings
outstanding at July 28, 1996 and July 27, 1997 of $3.3 million and $2.1 million,
respectively, bear interest at Fleet's LIBOR rate plus 1.5% to 2.5% per annum on
Fleet's Base rate plus up to 1.5% per annum (9.75% and 10.0% at July 28, 1996
and July 27, 1997, respectively).
ASC East is required to pay a commitment fee of 0.5% per annum on unused
availability under the credit facility. Amounts available for borrowing under
the Senior Credit Facility will incrementally decline to $50.0 million over the
period ending July 1, 2000, and the Senior Credit Facility will mature on or
about December 31, 2001. ASC East is required to pay down the amounts
outstanding each year, commencing in 1996, for a 45-day period which must
include March 31, to an amount declining from $25.0 million in 1997 to $10.0
million in 2000 and 2001. In establishing the Facility, ASC East incurred
deferred financing costs totaling $1.5 million which are recorded as assets, net
of accumulated amortization, in the accompanying consolidated balance sheet.
Amortization expense included in the accompanying consolidated statement of
operations for the years ended July 28, 1996 and July 27, 1997 amounted to
$23,000 and $322,000, respectively.
F-19
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SENIOR CREDIT FACILITY (CONTINUED)
As of July 27, 1997, the Company was in violation of certain financial
covenants under the Facility. Subsequent to year end, the violations were waived
by Fleet and the financial covenants with respect to which the Company was in
default were amended.
12. INCOME TAXES
Prior to June 28, 1996, certain companies comprising ASC Holdings, Inc.,
SRSC, SRL, PT and SRTC (the "S Corporations") had elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code of 1986, as amended.
Accordingly, no income tax provision or liability has been made for these
companies for the year ended July 30, 1995 and the period from July 31, 1995 to
June 28, 1996. For federal and state income tax purposes, taxable income, losses
and tax credits are passed through to the Shareholder, who is individually
responsible for reporting his share of such items. The Company distributed to
the Shareholder amounts sufficient to pay his personal income taxes based on the
S Corporations' earnings.
In conjunction with the Acquisition, the S Corporations changed from S
corporation status to C corporation status. As a result, the income or loss of
the S Corporations subsequent to June 28, 1996 will be subject to corporate
income tax. The income tax provision described below for the years ended July
28, 1996 and July 27, 1997 includes the income taxes related to the S
Corporations since June 28, 1996.
At the time of conversion of the S Corporations to C corporation status, a
net deferred tax liability of $5.6 million was recorded through the income tax
provision. This deferred tax liability was primarily comprised of the tax effect
of the cumulative book and tax basis differences of property and equipment at
the time of conversion.
The provision (benefit) for income taxes charged to continuing operations
was as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JULY 28, JULY 27,
JULY 30, 1995 1996 1997
--------------- ------------ ------------
<S> <C> <C> <C>
Current tax expense
Federal.............................................................. $ 248 $ -- $ --
State................................................................ 55 -- --
----- ------------ ------------
303 -- --
----- ------------ ------------
Deferred tax expense
Federal.............................................................. 77 (1,330) (2,815)
State................................................................ 20 (316) (798)
----- ------------ ------------
97 (1,646) (3,613)
----- ------------ ------------
Change in tax status from S Corporation to C Corporation............... -- 5,552 --
----- ------------ ------------
Total provision (benefit).............................................. $ 400 $ 3,906 $ (3,613)
----- ------------ ------------
----- ------------ ------------
</TABLE>
Deferred income taxes reflect the tax impact of temporary differences between
the amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Under SFAS 109, the benefit
associated with future deductible temporary differences and operating loss or
credit carryforwards is recognized if it is more likely than not that a benefit
will be realized. Deferred tax expense (benefit) represents the change in the
net deferred tax asset or liability balance.
F-20
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following at July 28,
1996 and July 27, 1997 (in thousands):
<TABLE>
<CAPTION>
JULY 28, JULY 27,
1996 1997
---------- ----------
<S> <C> <C>
Property and equipment basis differential................................................ $ 36,917 $ 40,040
Other.................................................................................... 753 907
---------- ----------
Gross deferred tax liabilities........................................................... 37,670 40,947
---------- ----------
Tax loss and credit carryforwards........................................................ (11,414) (16,766)
Capitalized cost......................................................................... (1,473) (543)
Other.................................................................................... (1,764) (1,589)
Original issue discount on Subordinated Notes............................................ -- (1,212)
---------- ----------
Gross deferred tax assets................................................................ (14,651) (20,110)
---------- ----------
Valuation allowance...................................................................... 7,369 7,255
---------- ----------
30,388 28,092
---------- ----------
Less: Net deferred tax liability related to assets held for sale......................... 281 --
---------- ----------
$ 30,107 $ 28,092
---------- ----------
---------- ----------
</TABLE>
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
of 35% to income (loss) before provision (benefit) for income taxes and minority
interest in loss of subsidiary as a result of the following differences (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JULY 30, JULY 28, JULY 27,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax provision (benefit) at the statutory U.S. tax rates................... $ 1,932 $ 546 $ (3,271)
Increase (decrease) in rates resulting from:
Change in tax status from S Corporation to C Corporation..................... -- 5,552 --
Income from S Corporations not taxable for corporate income tax purposes..... (1,679) (2,371) --
State taxes, net............................................................. 115 -- (798)
Change in valuation allowance................................................ -- -- 71
Nondeductible items.......................................................... 32 41 243
Other........................................................................ -- 138 142
--------- --------- ---------
Income tax provision (benefit) at the effective tax rates........................ $ 400 $ 3,906 $ (3,613)
--------- --------- ---------
--------- --------- ---------
</TABLE>
At July 27, 1997, the Company has federal net operating loss ("NOL")
carryforwards of approximately $40.7 million which expire in varying amounts
through the year 2011. Under Section 382 of the Internal Revenue Code, future
use of NOL carryforwards generated prior to a change in ownership, as defined,
may be significantly limited. Approximately $16.0 million and $3.3 million of
Sugarloaf and LBO Holding, Inc.'s ("LBO"), a wholly-owned subsidiary of ASC
East, federal NOL carryforwards, respectively, are subject to an annual
limitation of $110,000 and $185,000, respectively, of the amount of their
separate
F-21
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
company taxable income that may be reduced by such carryforwards. Approximately
$178,000 and $168,000 of Sugarloaf and LBO's investment tax credit
carryforwards, respectively, are also subject to the annual limitation under
Section 382 of the amount of their tax that may be offset by such carryforwards.
The tax credit carryforwards expire in varying amounts through the year 2001.
Subsequent changes in ownership could further affect the limitations in future
years.
In addition to the limitations under Section 382, approximately $23.0
million of the federal NOL carryforwards are from the separate return years of
Sugarloaf ($16.0 million), LBO ($5.1 million) and Sugarbush ($1.9 million), and
may only be used to offset each company's contribution to consolidated taxable
income in future years.
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Management
believes that the valuation allowance of $7.3 million is appropriate because,
due to the change of ownership annual limitations, realization of the benefit of
the majority of the tax benefits of the Sugarloaf net operating loss, (some
portion of the LBO net operating loss and investment tax carryforwards) and all
investment tax credit carryforwards is not more likely than not.
13. MANDATORILY REDEEMABLE SECURITIES
Pursuant to a Securities Purchase Agreement (the "Agreement") dated July 2,
1997 (as amended July 16, 1997), the Company issued 17,500 shares of its Series
A Exchangeable Preferred Stock (the "Preferred Stock") in a private offering to
an institutional investor. The Company incurred $1.1 million in expenses in
connection with the issuance of the Preferred Stock. These amounts have been
recorded as a reduction of the carrying value of the mandatorily redeemable
preferred stock in the accompanying consolidated balance sheet at July 27, 1997.
The liquidation preference is $1,000 per share and cumulative dividends on the
Preferred Stock are payable, at the option of the Company, in cash or in
additional shares of Preferred Stock at a rate of 14% per annum. The Company is
required to redeem all shares of the Preferred Stock outstanding on July 15,
2002. The Company intends to offer to exchange all or any part of the Preferred
Stock for shares of the Company's common stock (the "Common Stock") or up to
17,500 shares of the Company's 6% Convertible Preferred Stock. Upon completion
of the anticipated initial offering of the Company's common stock to the public
(the "Offering"), each share of the 6% Convertible Preferred Stock will be
convertible into shares of Common Stock. If the holder of the Preferred Stock
does not elect to exchange such securities for 6% Convertible Preferred Stock or
Common Stock, consummation of the Offering will trigger a Change in Control as
defined under the Agreement. In such event, the Agreement requires that the
Company offer to purchase the Preferred Stock for cash at a redemption price of
105.3% of the liquidation preference of such shares at the date of redemption.
The difference in the face amount of the preferred stock and the redemption
price is being accreted over the period from issuance until the anticipated time
of the Offering. In the event of a default as defined in the Agreement, there
shall be a mandatory redemption of the Preferred Stock from funds legally
available to the Company unless the holders of the Preferred Stock elect instead
to have visitation rights with respect to meetings of the Company's board of
directors and meetings of the Company's management committees. At July 27, 1997,
the carrying amount of the Preferred Stock is $16.8 million which is comprised
of the original liquidation preference of $17.5 million less unaccreted issuance
costs of $922,000 plus accrued dividends and accretion of the discount of
$109,000 and $134,000, respectively.
Pursuant to the same agreement, the Company issued $17.5 million aggregate
principal amount of its 14% Senior Exchangeable Notes Due 2002 (the "Notes") in
a private offering to an institutional investor.
F-22
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. MANDATORILY REDEEMABLE SECURITIES (CONTINUED)
The Company incurred deferred financing costs totaling $1.1 million prior to
year end in connection with the issuance of the Notes. These costs have been
recorded as an asset in the accompanying consolidated balance sheet at July 27,
1997. The proceeds from the notes were received on July 30, 1997 and, therefore,
the cash and notes have not been reflected in the balance sheet at July 27,
1997. The Notes bear interest at a rate of 14% per annum and mature on July 28,
2002. Interest on the Notes is payable in cash or additional Notes, at the
option of the Company. The Company intends to offer to exchange all of the Notes
for shares of Common Stock or up to 17,500 shares of 6% Convertible Preferred
Stock with an aggregate liquidation preference of $17.5 million. Upon completion
of the Offering each share of 6% Convertible Preferred Stock will be convertible
into shares of Common Stock. If the holders of Notes do not elect to exchange
such securities for 6% Convertible Preferred Stock or Common Stock, consummation
of the Offering will trigger a Change of Control (as defined) under the
Agreement. In such event, the Agreement requires that the Company offer to
purchase the Notes for cash at a redemption price of 105.3% of the principal
amount outstanding on the date of redemption.
The holder of the Preferred Stock and the Notes (collectively, the
"Securities") has indicated its intention to exchange the Securities for the
Company's 6% Convertible Preferred Stock upon consummation of the Offering.
14. RELATED PARTY TRANSACTIONS
Sunday River Skiway Corporation has guaranteed amounts outstanding under
subordinated debentures due in 2002 that were issued by LBO Holdings, Inc., as
part of the acquisition of Mt. Attitash Lift Corporation. Payments under the
guarantee are subordinated to all secured indebtedness of Sunday River Skiway
Corporation to any bank, thrift institution or other institutional lender.
15. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES
The Company leases certain land and facilities used in the operations of its
resorts under several operating lease arrangements. These lease arrangements
expire at various times from the year 2010 through the year 2060. Lease payments
are generally based on a percentage of revenues. Total rent expense under these
operating leases as recorded in resort operating expenses in the accompanying
consolidated statement of operations for 1995, 1996 and 1997 were $619,000,
$744,000 and $2.2 million, respectively.
Significant portions of the land underlying certain of the Company's ski
resorts are leased or subleased by the Company or used pursuant to renewable
permits or licenses. If any such lease, sublease, permit or license were to be
terminated or not renewed upon expiration, or renewed on terms materially less
favorable to the Company, the Company's ability to possess and use the land
subject thereto and any improvements thereon would be adversly affected, perhaps
making it impossible for the Company to operate the affected resort. A
substantial portion of the land constituting skiable terrain at the Attitash/
Bear Peak Ski Resort, Sugarbush Resort and Mount Snow/Haystack Resort is located
on federal land that is used under the terms of the permits with the United
States Forest Service (the "Forest Service"). Generally, under the terms of such
permits, the Forest Service has the right to review and comment on the location,
design and construction of improvements in the permit area and on many
operational matters. The permits can be terminated or modified by the Forest
Service to serve the public interest. A termination or modification of any of
the Company's permits could have a material adverse effect on the results of
operations of the Company. The Company does not anticipate any limitations,
modifications, or non-renewals which would adversely affect the Company's
operations.
F-23
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES (CONTINUED)
In connection with the purchase of the Canyons, the Company entered into an
operating lease arrangement for the lease of certain land at the Wolf Mountain
Ski area to be used in the operation of the resort and for future real estate
development. The arrangment provides for an initial lease term of 50 years, with
the option to extend for three additional 50 year periods for an extension fee
of $1.0 million for each extension period. Lease payments are based on a
percentage of resort net revenues. The arrangement also provides for additional
one-time payments ranging from $250,000 to $2.0 million upon achievement of
annual skier visit levels ranging from 100,000 to 1,000,000. Under the
arrangement, the Company has the option to purchase parcels of land covered
under the operating lease for real estate development. Payments to exercise the
option total $14.6 million and are payable monthly, at the option of the
Company, in varying amounts through July 2001. The Company is not required to
make the option payments in order to develop and sell real estate on the land
covered under the lease. No option payments were made and no lease expense was
incurred under this arrangement as of and for the year ended July 27, 1997.
In addition to the leases described above, the Company is committed under
several operating and capital leases for various equipment. Rent expense under
all operating leases was $1.0 million, $994,000 and $4.2 million for the years
ended 1995, 1996 and 1997, respectively.
Future minimum lease payments for lease obligations at July 27, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1998.................................................................................... $ 2,564 $ 4,136
1999.................................................................................... 1,786 3,869
2000.................................................................................... 1,488 1,530
2001.................................................................................... 1,295 963
2002.................................................................................... 2,585 4,973
--------- -----------
Total payments...................................................................... 9,718 $ 15,471
--------- -----------
-----------
Less interest....................................................................... (1,878)
---------
Present value of net minimum payments............................................... 7,840
Less current portion................................................................ 1,876
---------
Long-term obligations............................................................... $ 5,964
---------
---------
</TABLE>
Certain claims, suits and complaints associated with the ordinary course of
business are pending or may arise against the Company, including all of its
direct and indirect subsidiaries. In the opinion of management, all matters are
adequately covered by insurance or, if not covered, are without merit or are of
such kind, or involve such amounts as would not have a material effect on the
financial position, results of operations and cash flows of the Company if
disposed of unfavorably.
16. SUBSEQUENT EVENTS (UNAUDITED)
ACQUISITIONS
On July 31, 1997, the Company entered into an agreement to purchase the
Steamboat and Heavenly resorts (the "Purchase"). As part of the Purchase, the
Company agreed to acquire the Sabal Point Golf Course in Orlando, Florida and a
residence in Denver, Colorado, both of which the Company intends to sell
following the closing of the Purchase. The aggregate consideration to be paid by
the Company for the
F-24
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
Purchase is approximately $290.0 million. The Purchase is subject to the
satisfaction of certain covenants and conditions and there can be no assurance
that the Purchase will be consummated.
INITIAL PUBLIC OFFERING OF COMMON STOCK
In August 1997, the Company filed a registration statement under the
Securities Act of 1933 with the Securities and Exchange Commission on Form S-1
for the purpose of registering its common stock for the initial offering for
sale to the public (the "Offering") at an estimated price of $18.50 per share
for a proposed maximum aggregate offering price of $339.3 million. The number of
shares to be sold and the price of those shares has not been determined. The
anticipated effective date of the Offering is October 1997.
Consummation of the Offering may trigger a Change of Control (as defined)
under the indenture (the "12% Note Indenture") relating to the Notes. The 12%
Note Indenture provides that upon the occurrence of a Change of Control, the
Company will be required to make an offer to repurchase the Notes at a price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the date of repurchase (the "Change of Control Offer"). The Company
is not able to determine at this time whether or not any or all holders of the
Notes will accept the Change of Control Offer. If all outstanding Notes are
tendered, the amount of funds necessary to consummate the Change of Control
Offer would be $121.2 million plus the amount of all accrued and unpaid
interest. The Company is currently negotiating a standby credit facility for up
to $125.0 million to fund the repurchase of the Notes in the event that any or
all of the Notes are tendered to the Company for repurchase.
ADDITIONAL FINANCING
In August 1997, the Company entered into a Loan and Security Agreement with
a lender to provide financing for the real estate construction activities of
Grand Summit Resort Properties, Inc., a wholly-owned subsidiary. The Loan and
Security Agreement provides for advances up to $55.0 million which bear interest
at a rate equal to the greater of 9.25% or the sum of the bank's prime rate plus
1.5%. All borrowings under the Loan and Security Agreement are collateralized by
substantially all assets of the Grand Summit Resort Properties, Inc.
CONVERTIBLE DEBT
On July 30, 1997, the Company issued $17.5 million aggregate principal
amount of its 14% Senior Exchangeable Notes due 2002 in a private offering to an
institutional investor (see Note 14).
STOCK OPTION PLAN
On August 1, 1997, the Company adopted a stock option plan (the "Plan") for
key executives. Under the Plan, the Company has granted 2,324,697 options for
the purchase of Common Stock.
STOCK SPLIT
In October 1997, the Board of Directors, approved (i) an increase in
authorized shares of Common Stock, (ii) a new issue of Class A Common Stock and
(iii) a 14.76 for 1 stock split of shares of Common Stock for shares of Class A
Common Stock.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of
Directors of S-K-I Ltd.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
S-K-I Ltd. and its subsidiaries at July 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Hartford, Connecticut
August 31, 1995
F-26
<PAGE>
S-K-I LTD.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments (at cost, which approximates market value).......... $2,704,302 $2,790,645
Accounts receivable, net (Note 1)................................................... 1,423,430 2,677,434
Notes receivable.................................................................... 371,739 244,775
Inventories......................................................................... 3,472,492 3,955,722
Prepaid expenses.................................................................... 1,456,222 1,360,460
------------ ------------
TOTAL CURRENT ASSETS.............................................................. 9,428,185 11,029,036
------------ ------------
Property and equipment, at cost:
Buildings and grounds............................................................... 32,730,561 41,557,838
Machinery and equipment............................................................. 71,690,813 73,123,058
Leasehold improvements.............................................................. 39,066,623 48,082,570
Lifts, liftlines and trails on corporate property................................... 16,162,939 33,787,212
------------ ------------
159,650,936 196,550,678
Less--accumulated depreciation and amortization....................................... 86,638,454 89,929,914
------------ ------------
73,012,482 106,620,764
Construction in progress.............................................................. 8,996,570 1,684,442
Land and development costs............................................................ 12,762,352 13,469,642
------------ ------------
NET PROPERTY AND EQUIPMENT........................................................ 94,771,404 121,774,848
------------ ------------
Long-term investments (Note 1)........................................................ 464,663 1,628,477
Other assets (Note 1)................................................................. 2,125,756 2,289,152
------------ ------------
TOTAL ASSETS...................................................................... 1$06,790,008 1$36,721,513
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and subordinated debentures (Note 3).............. $ 955,746 $3,858,184
Accounts payable.................................................................... 1,741,131 1,617,621
Income taxes payable (Note 5)....................................................... 257,684 272,252
Accrued lease payments--Vermont (Note 4)............................................ 1,171,865 1,039,366
Accrued wages, profit sharing and incentive compensation (Note 8)................... 464,907 529,874
Deposits and other unearned revenue................................................. 695,328 1,706,017
Other accrued expenses (Note 1)..................................................... 4,184,664 5,157,743
------------ ------------
TOTAL CURRENT LIABILITIES......................................................... 9,471,325 14,181,057
Long-term debt (Note 3)............................................................... 17,766,857 38,790,032
Subordinated debentures (Note 3)...................................................... 11,400,000 11,400,000
Deferred income taxes (Note 5)........................................................ 7,478,492 8,479,956
Other long-term liabilities (Note 1).................................................. 3,487,042 4,432,027
Minority interest..................................................................... -- 1,876,188
------------ ------------
TOTAL LIABILITIES................................................................. 49,603,716 79,159,260
------------ ------------
Commitments (Notes 3 and 4)
Stockholders' equity (Notes 3, 6 and 7):
Common stock $.10 par value (12,500,000 shares authorized,
5,785,932 shares in 1995, 5,781,432 shares in 1994)............................... 578,144 578,594
Paid-in capital....................................................................... 6,577,440 6,617,551
Retained earnings..................................................................... 50,030,708 50,366,108
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................................................ 57,186,292 57,562,253
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ 1$06,790,008 1$36,721,513
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
S-K-I LTD
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-------------------------------------------
<S> <C> <C> <C>
1993 1994 1995
------------- ------------- -------------
Revenues (Note 1):
Resort services................................................... $ 60,441,799 $ 62,532,813 $ 74,252,723
Sale of goods..................................................... 19,832,479 21,008,869 23,648,797
Rental and other income........................................... 16,434,113 15,365,537 16,058,192
------------- ------------- -------------
96,708,391 98,907,219 113,959,712
------------- ------------- -------------
Expenses:
Cost of operations including wages, maintenance and supplies:
Resort services................................................... 21,070,994 22,483,982 29,611,497
Sale of goods..................................................... 11,658,737 12,729,442 15,146,037
Rental and other expense.......................................... 7,173,101 7,346,163 6,799,809
Other taxes....................................................... 7,632,343 8,015,487 8,599,706
Utilities......................................................... 6,655,016 6,044,889 8,070,911
Insurance......................................................... 5,115,333 5,518,243 6,634,837
Selling, general and administrative expenses...................... 16,871,496 15,298,138 19,494,655
Interest.......................................................... 2,228,385 2,214,309 3,818,893
Depreciation and amortization (Note 1)............................ 10,941,869 11,440,122 14,055,796
------------- ------------- -------------
89,347,274 91,090,775 112,232,141
------------- ------------- -------------
Income before income taxes and minority interest.................... 7,361,117 7,816,444 1,727,571
Income taxes (Note 5)............................................... 2,952,310 3,169,956 997,123
------------- ------------- -------------
Net income before minority interest................................. 4,408,807 4,646,488 730,448
------------- ------------- -------------
Minority interest in loss of subsidiary............................. -- -- 298,949
------------- ------------- -------------
Net Income.......................................................... $ 4,408,807 $ 4,646,488 $ 1,029,397
------------- ------------- -------------
------------- ------------- -------------
Net income per common and common equivalent share: 5,783,480 in
1995, 5,764,663 in 1994, 5,728,908 in 1993 (Note 6)............... $ 0.77 $ 0.81 $ 0.18
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF PAID-IN RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
---------- ---------- ------------ ------------- -------------
BALANCE AT JULY 31, 1992.................... 5,724,856 $ 572,486 $ 6,433,263 $ 42,183,973 $ 49,189,722
Common stock options exercised.......... 6,251 625 20,751 21,376
Net income.............................. 4,408,807 4,408,807
Dividends ($.10 per share).............. (573,015) (573,015)
---------- ---------- ------------ ------------- -------------
BALANCE AT JULY 31, 1993.................... 5,731,107 573,111 6,454,014 46,019,765 53,046,890
Common stock options exercised.......... 50,325 5,033 123,426 128,459
Net income.............................. 4,646,488 4,646,488
Dividends ($.11 per share).............. (635,545) (635,545)
---------- ---------- ------------ ------------- -------------
BALANCE AT JULY 31, 1994.................... 5,781,432 578,144 6,577,440 50,030,708 57,186,292
Common stock options exercised.......... 4,500 450 40,111 40,561
Net income.............................. 1,029,397 1,029,397
Dividends ($.12 per share).............. (693,997) (693,997)
---------- ---------- ------------ ------------- -------------
BALANCE AT JULY 31, 1995.................... 5,785,932 $ 578,594 $ 6,617,551 $ 50,366,108 $ 57,562,253
---------- ---------- ------------ ------------- -------------
---------- ---------- ------------ ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------
<S> <C> <C> <C>
1993 1994 1995
------------- ------------- -------------
Cash flows from operating activities:
Net income......................................................... $ 4,408,807 $ 4,646,488 $ 1,029,397
Non-cash items included in net income:
Depreciation and amortization...................................... 10,941,869 11,440,122 14,055,796
Deferred income taxes.............................................. 613,451 154,084 1,001,464
Minority interest in net income of subsidiary...................... -- -- (298,949)
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES BEFORE CHANGES IN ASSETS AND
LIABILITIES........................................................ 15,964,127 16,240,694 15,787,708
------------- ------------- -------------
Changes in assets and liabilities:
(Increase) decrease in accounts receivable......................... 398,318 (429,547) (1,027,240)
Decrease (increase) in notes receivable............................ (9,458) 363,442 126,964
(Increase) in inventories.......................................... (154,437) (214,208) (33,885)
Decrease (increase) in non-current note receivable................. (1,847,480) 303,976 3,615
Decrease (increase) in prepaid expenses............................ (537,397) (543,475) 573,785
(Decrease) increase in accounts payable............................ (1,191,930) 974,380 (776,700)
Increase (decrease) in income taxes payable........................ (124,032) (63,132) 10,238
(Decrease) increase in accrued lease payments-Vermont.............. 120,378 49,837 (132,499)
Increase (decrease) in accrued wages, profit sharing and incentive
compensation..................................................... 517,897 (608,404) 64,967
Increase (decrease) in deposits and other unearned revenue......... (118,908) 186,707 264,499
(Decrease) increase in other accrued expenses...................... 585,544 761,857 (858,029)
Increase (decrease) in other long-term liabilities................. (128,174) 441,669 944,985
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................ 13,474,448 17,463,796 14,948,408
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property and equipment................................ (12,306,683) (22,682,582) (19,479,985)
Net book value of property and equipment sold...................... 79,036 178,177 2,377,685
Purchase of long-term investments.................................. -- (464,663) (1,163,814)
Business acquired less cash on hand from business acquired......... -- -- (12,552,020)
Other, net......................................................... 47,136 (138,772) (106,561)
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES................................ (12,180,511) (23,107,840) (30,924,695)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt--and subordinated
debentures....................................................... 12,123,500 592,804 --
Net proceeds from revolving credit agreement....................... -- 2,000,000 15,500,000
Reductions in long-term debt and subordinated debentures........... (10,807,391) (952,052) (2,279,178)
Increase in current portion of long-term debt and subordinated
debentures....................................................... 77,391 129,451 2,902,438
Proceeds from issuance of common stock............................. 21,376 128,459 40,563
Payment of dividends............................................... (573,015) (635,545) (693,997)
Other.............................................................. 125,910 177,648 --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............................ 967,771 847,961 16,062,630
------------- ------------- -------------
Net increase (decrease) in cash and short-term investments......... 2,261,708 (4,796,083) 86,343
Cash and short-term investments at beginning of year................. 5,238,677 7,500,385 2,704,302
------------- ------------- -------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR....................... $ 7,500,385 $ 2,704,302 $ 2,790,645
------------- ------------- -------------
------------- ------------- -------------
Interest paid........................................................ $ 2,443,456 $ 2,124,392 $ 3,096,486
Taxes paid, net of refunds........................................... $ 2,438,100 $ 3,636,581 $ 1,060,150
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated statements include the accounts of S-K-I Ltd. and its
subsidiaries, the most significant of which include Killington Ltd., Mount Snow
Ltd., Bear Mountain Ltd., Waterville Valley Ski Area Ltd., Sugarloaf Mountain
Corporation and Ski Insurance Company, collectively referred to as S-K-I. All
subsidiaries are wholly-owned, except for Sugarloaf Mountain Corporation which
is 51% owned. Sugarloaf's results since acquisition are consolidated in the
accompanying financial statements. All significant intercompany transactions
have been eliminated in consolidation.
In the consolidated statement of income, revenues from the sale of lift
tickets, ski schools, repair shops, golf and tennis fees have been included
under the heading of Resort services. Revenues from the sale from restaurants,
bars, retail shops and personal property have been included under the heading
Sale of goods. Revenues from ski, locker and real estate rentals, as well as
sales of real property have been included under the heading of Rental and other
income. Related costs, including property costs, are included in the respective
Cost of operations categories.
For financial reporting purposes, S-K-I provides for depreciation and
amortization of property, equipment and capital leases by the straight-line
method over estimated useful lives of the assets which generally range from 10
to 30 years for buildings, 3 to 20 years for machinery and equipment and 3 to 50
years for leasehold improvements, lifts, liftlines and trails. Accelerated cost
recovery and accelerated depreciation methods are used for tax purposes.
Management's intentions are to hold marketable securities, consisting of
U.S. Government and Agency obligations and corporate obligations, until
maturity, which does not exceed three years. These securities are carried at net
amortized cost, which approximates quoted market values at July 31, 1995 and
1994.
As part of its cash management policy, S-K-I invests cash in excess of
immediate requirements in highly liquid short-term investments having original
maturities of three months or less. Such investments are intended to minimize
exposure to principal fluctuation.
Profit on the sales of real estate are recognized in accordance with
Financial Accounting Standards Board Statement of Financial Accounting Standards
("SFAS") No. 66 "Accounting for the Sales of Real Estate". Revenues recognized
amounted to $8,000, $-0-, and $1,857,954, in 1995, 1994, and 1993, respectively.
Included in other assets at July 31, 1995 is a note receivable of $1,531,298,
relating to a sale of real estate. The note bears interest at the prime rate
plus 1.875%, payable in monthly installments through year 2007. The maturities
are as follows:
<TABLE>
<S> <C>
1996............................................................ $ 10,141
1997............................................................ 11,300
1998............................................................ 12,592
1999............................................................ 14,033
2000............................................................ 15,636
2001 and thereafter............................................. 1,467,596
---------
$1,531,298
---------
---------
</TABLE>
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
Allowances for doubtful accounts of $1,402 and $38,702 have been applied as
a reduction of current accounts receivable at July 31, 1994 and 1995,
respectively.
F-31
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Provision is made for the estimated costs under the deductible portion of
S-K-I's insurance policies, primarily general liability and workers'
compensation. The balance of such reserves at July 31, 1994 and 1995 were
$4,707,558 and $5,765,878, respectively. Of such amounts, $3,487,042 and
$4,454,728 are included in other long-term liabilities at July 31, 1994 and
1995, respectively, with the remaining balance included in other accrued
expenses. In fiscal 1993, S-K-I formed a wholly-owned Vermont captive insurance
company, Ski Insurance Company, to manage a portion of its insurance costs.
Advertising costs are expensed the first time the advertising takes place.
The total amount charged to advertising expense for the year ended July 31,
1995, 1994 and 1993 was $9,249,984, $7,809,332 and $7,607,704, respectively.
Bear Mountain Ltd.'s costs in excess of values assigned to the underlying
net assets, net of amortization, totaled $233,774 and $99,255 at July 31, 1995
and 1994, respectively, and are being amortized over 20 years. The 1995 and 1994
amortization totaled $19,481 and $7,635, respectively. The accumulated
amortization at July 31, 1995 and 1994 totaled $320,279 and $300,798,
respectively.
NOTE 2--BUSINESS DEVELOPMENT
In August 1994, the company acquired 51% of the outstanding shares of
Sugarloaf Mountain Corporation ("Sugarloaf"), a ski resort in Western Maine.
Also, additional cash consideration is due, not to exceed $1,500,000, if certain
profit objectives are achieved during the two years following acquisition. No
such amounts were paid relating to fiscal 1995.
The shareholders of Sugarloaf shall have the option to require S-K-I to
purchase their shares during the month of November in the years 1997 through
2002 in return for a cash payment, the amount of which is computed by applying a
formula to Sugarloaf Mountain Corporation's earnings per share over the previous
three year period. S-K-I has the option to purchase the minority shares of
Sugarloaf based upon the same exchange formula during the month of November in
any year beginning in 1999, subject to a minimum value of $2,000,000 less 49% of
any decline in the book value of Sugarloaf between the purchase date and the
date of acquisition.
The acquisition has been accounted for using the purchase method of
accounting. The fair value of the assets acquired was approximately $13,597,000
and the fair value of liabilities was $9,425,000. There is no recourse to S-K-I
for the Sugarloaf liabilities. The amounts in minority interest at July 31, 1995
represent the 49% ownership of Sugarloaf's outstanding capital stock held by the
minority shareholders.
In October 1994, the company acquired the ski-related assets only of the
Waterville Valley Ski Area ("Waterville") for approximately $10,038,000. The
acquisition was accounted for using the purchase method of accounting. The
results of operations of Waterville are included in the company's consolidated
financial statements since acquisition.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions of Sugarloaf and Waterville occurred at the
beginning of the years presented:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Revenues..................................................... $ 126,797,000 $ 114,554,000
Net income................................................... 4,279,000 782,000
Net income per common and common equivalent share............ $ .74 $ .14
</TABLE>
F-32
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--BUSINESS DEVELOPMENT (CONTINUED)
The pro forma financial information does not purport to be indicative of the
results of operations that would have occurred had the transaction taken place
at the beginning of the periods presented or of future results of operations.
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES
LONG-TERM DEBT AT JULY 31, 1995 AND 1994 SUMMARY:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Company, excluding Sugarloaf:
Revolving Credit Agreement....................................................... $ 2,000,000 $ 17,500,000
Teachers Insurance and Annuity Association of America, 8.12% senior promissory
notes due in varying installments through January 14, 2003..................... 12,000,000 12,000,000
Vermont Industrial Development Bonds, fluctuating interest rates,
1995--3.89% to 4.66%; 1994--3.13% to 3.73%; due in varying installments through
1999, secured by certain machinery and equipment and real estate............... 3,265,000 2,695,000
Deferred obligation in connection with acquisition of Bear Mountain Ltd.,
interest of 5%, due in 1995.................................................... 1,000,000 1,000,000
Obligation under capital lease................................................... 103,789 310,346
Other............................................................................ 7,314 180,356
------------- -------------
18,376,103 33,685,702
------------- -------------
Sugarloaf (non-recourse to the Company):
Town of Carrabassett Valley, Maine, note, $3,700,000, due in varying installments
through 2013, interest rates ranging from 4.5% to 8.5%, secured by Sugarloaf's
property, plant and equipment.................................................. -- 3,610,000
Sugarloaf Revolving Credit Agreement, $2,000,000, annual reduction of $200,000
beginning March 1995, due March 1998, interest at lender's base rate plus .5%
(9.25% at July 31, 1995), secured by Sugarloaf's property, plant and
equipment...................................................................... -- 1,800,000
Sugarloaf Line of Credit, $2,000,000 due May 1996, interest at lender's base rate
plus 2% (10.75% at July 31, 1995), secured by Sugarloaf's property, plant and
equipment...................................................................... -- 1,338,482
Sugarloaf Subordinated Notes, due July 1997, interest at 7.25%................... -- 584,934
Obligation under capital lease................................................... -- 549,989
Other............................................................................ -- 1,079,109
------------- -------------
-- 8,962,514
------------- -------------
Total.............................................................................. 18,376,103 42,648,216
Less: current portion.............................................................. 609,246 3,858,184
------------- -------------
$ 17,766,857 $ 38,790,032
------------- -------------
------------- -------------
</TABLE>
F-33
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED)
The non-current portion of long-term debt matures as follows:
<TABLE>
<S> <C>
1997.................................................................. $ 1,968,908
1998.................................................................. 4,591,625
1999.................................................................. 3,484,751
2000.................................................................. 5,637,317
2001 and thereafter................................................... 23,107,431
--------------
$ 38,790,032
--------------
--------------
</TABLE>
S-K-I maintains an unsecured revolving credit loan which allows S-K-I to
borrow funds up to the amount of the commitment. At July 31, 1995, the revolving
credit loan amount available was $30,600,000 with $17,500,000 outstanding. The
loan commitment is scheduled to be reduced annually by $3,400,000 on March 31 of
each consecutive year through March 31, 2000 with a final reduction of
$13,600,000 on March 30, 2001. Under the terms of the revolving credit
agreement, S-K-I may request that the interest rate, subject to certain
limitations, be at the adjusted prime rate or at an applicable margin above the
Eurodollar rate. The Eurodollar applicable margin was 1 1/4% at July 31, 1995.
The applicable margin varies between 3/4% to 1 1/4% based on specific financial
ratios on the previous July 31. The Agreement requires S-K-I to pay a commitment
fee of 3/8 % of the average daily unused portion of the loan. Commitment fees
assessed on unused portions of the revolving credit loan were approximately
$38,000, $63,000, and $48,000 in 1995, 1994, and 1993, respectively.
The following table summarizes the financial data relating to the revolving
credit loan agreement for 1995 and 1994:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Weighted average annual interest rate.......................... 4.61% 6.93%
Average amount outstanding during the year..................... $ 2,224,038 $ 16,274,038
Highest balance outstanding.................................... $ 13,500,000 $ 24,750,000
Amount available at year end................................... $ 14,000,000 $ 13,100,000
</TABLE>
In addition to the unsecured revolving credit loan agreement, S-K-I
maintained an unsecured short-term line of credit. Such line of credit allows
for borrowings of up to $12,000,000 and expires January 15, 1996. Under the
terms of the agreement S-K-I may request that the interest rate, subject to
certain limitations, be at the adjusted prime rate or at an applicable margin
above the Eurodollar rate. The Eurodollar applicable margin was 1 1/4% at July
31, 1995. The applicable margin varies between 3/4% to 1 1/4% based on specific
financial ratios on the previous July 31. During 1995, S-K-I borrowed a maximum
of $9,250,000 under this line of credit and did not borrow against the line of
credit during 1994. At July 31, 1995 and 1994, there were no borrowings under
the credit line.
Additionally, at July 31, 1995, S-K-I had outstanding a $1,000,000 letter of
credit relating to Ski Insurance, expiring December 3, 1995. The letter of
credit fee on this line was $6,250 for the year ended July 31, 1995.
F-34
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED)
Subordinated debentures of $11,400,000 at July 31, 1995 are due as follows:
<TABLE>
<CAPTION>
YEAR INTEREST AMOUNT
- --------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
1997................................................................. 6% $ 450,000
1999................................................................. 6% 455,000
2000................................................................. 6% 672,500
2001................................................................. 8% 525,000
2002................................................................. 8% 549,000
2003................................................................. 8% 1,074,000
2004................................................................. 8% 1,466,500
2010................................................................. 8% 1,292,000
2012................................................................. 6% 1,155,000
2013................................................................. 6% 1,065,000
2015................................................................. 6% 1,500,000
2016................................................................. 6% 1,196,000
-------------
$ 11,400,000
-------------
-------------
</TABLE>
The company's long-term debt and subordinated debenture agreements require
that the company satisfy various covenants including financial ratios,
limitations on payment of dividends and repurchase of stock. Included in other
accrued expenses is $687,414 and $703,656 of accrued interest at July 31, 1995
and 1994, respectively.
CAPITAL LEASES
The company leases certain machinery and equipment under long-term capital
leases. Obligations under machinery and equipment capital leases are due as
follows:
<TABLE>
<S> <C>
1996.............................................................. $ 407,000
1997.............................................................. 308,000
1998.............................................................. 246,000
1999.............................................................. 16,000
---------
977,000
Less: amounts representing interest............................... 117,000
---------
$ 860,000
---------
---------
</TABLE>
At July 31, 1995, the gross amount of machinery and equipment under capital
leases and related accumulated amortization was $1,409,000 and $486,000,
respectively.
NOTE 4--OPERATING LEASES AND PERMITS
Killington Ltd. leases from the State of Vermont certain portions of land
and facilities it uses known as the Killington section of the Calvin Coolidge
State Forest. The leases together with extensions run to the year 2060. All
installations affixed to the land become the property of the State.
Mount Snow Ltd., Bear Mountain Ltd. and Waterville Valley operate certain
portions of the skiing terrain under special use permits granted by the U.S.
Forest Service.
F-35
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4--OPERATING LEASES AND PERMITS (CONTINUED)
Amounts payable under these leases and permits are measured in terms of
percentages of revenues from certain activities. Charges for these leases and
permits are included in cost of operations.
In addition to the leases described above, the company was committed under
operating leases for certain machinery and equipment which expire at various
dates through 2018. Total rent expense under operating leases for 1995, 1994 and
1993 was $2,775,912, $2,526,991, and $2,485,435, respectively.
Minimum lease payments under non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
1996.................................................................. $ 3,433,832
1997.................................................................. 3,314,063
1998.................................................................. 3,004,033
1999.................................................................. 2,948,224
Beyond 2000........................................................... 1,889,827
--------------
Total minimum obligations............................................. $ 14,589,979
--------------
--------------
</TABLE>
NOTE 5--INCOME TAXES
In 1994 the company adopted, effective August 1, 1993, Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the liability method for recording differences in financial and
taxable income.
Income taxes consist of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ----------
<S> <C> <C> <C>
Current:
Federal................................................................ $ 1,803,884 $ 2,347,943 $ (1,210)
State.................................................................. 534,975 667,929 (3,131)
------------ ------------ ----------
2,338,859 3,015,872 (4,341)
Deferred................................................................. 613,451 154,084 1,001,464
------------ ------------ ----------
Total provision for income taxes..................................... $ 2,952,310 $ 3,169,956 $ 997,123
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
Differences between S-K-I's effective income tax rate and the statutory
federal income tax rate are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate....................................... 34.0% 34.0% 34.0%
State income taxes net of federal tax benefit........................... 4.8 5.6 5.7
Sugarloaf loss with no benefit.......................................... -- -- 12.0
Life insurance premiums................................................. -- -- 4.0
Other................................................................... 1.3 0.9 2.0
--- --- ---
Effective rate.......................................................... 40.1% 40.5% 57.7%
--- --- ---
--- --- ---
</TABLE>
At July 31, 1995, Bear Mountain Ltd. had net operating loss carryforwards
for federal income tax purposes of approximately $1,439,000, which expire in the
years 2000 through 2002. At July 31, 1995, Bear Mountain Ltd. had net operating
loss carryforwards for California income tax purposes of approximately
$1,214,000 which expire in the years 1996 through 1999. As of July 31, 1995,
Bear Mountain Ltd. had
F-36
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5--INCOME TAXES (CONTINUED)
investment tax credit carryforwards of approximately $225,000 which expire in
the years 1997 through 2000. The federal tax loss and tax credit carryforwards
relate to the operations of Bear Mountain Ltd. prior to the acquisition by S-K-I
and can only be realized against future taxable income from the operations of
Bear Mountain Ltd. The tax effect of these carryforwards and credits, when
realized, will be recognized as an adjustment of the purchase cost.
At July 31, 1995, Sugarloaf had net operating loss carryforwards for federal
and Maine income tax purposes of approximately $17,426,000, which expire in the
years 1999 through 2010. As of July 31, 1995, Sugarloaf had investment tax
credit carryforwards of approximately $209,000, which expire in the years 1997
through 2000. Approximately $16,442,000 of the federal and Maine net operating
loss carryforwards and all of the investment tax credit carryforwards relate to
the operation of Sugarloaf prior to the S-K-I acquisition. Such carryforwards
can only be realized against future taxable income from the operations of
Sugarloaf and will be limited as a result of certain ownership changes pursuant
to Section 382 of the Internal Revenue Code.
At July 31, 1995, the company had additional federal net operating loss
carryforwards of approximately $527,000 and additional state net operating loss
carryforwards of $1,010,000 which expire in the year 2010.
As of July 31, 1995, the company's gross deferred tax assets and liabilities
were comprised of the following:
<TABLE>
<S> <C>
Gross deferred tax assets:
Accrued liabilities and reserves.................................... $ 1,495,000
Operating loss carryforwards........................................ 7,638,000
Alternative minimum and investment tax credits...................... 860,000
--------------
$ 9,993,000
--------------
--------------
Gross deferred tax liabilities:
Depreciation........................................................ $ 10,516,000
Installment sales................................................... 659,000
--------------
$ 11,175,000
--------------
--------------
</TABLE>
At July 31, 1995, a valuation allowance of $7,298,000 has been recorded
which relates primarily to Sugarloaf's net operating loss and tax credit
carryforwards for which a tax benefit is not likely to be received. The net
change in the valuation allowance for deferred tax assets was an increase of
$7,056,000, primarily attributable to Sugarloaf net operating loss
carryforwards. Current and non-current deferred tax assets and liabilities
within the same tax jurisdiction are offset for presentation in the consolidated
balance sheet.
NOTE 6--EARNINGS PER SHARE
The computation of net income per common and common equivalent share amounts
are based on the weighted average of shares outstanding during the year. Shares
issuable upon the exercise of stock option grants (Note 7) have not been
included in the per share computation because they would not have a material
effect on earnings per share.
F-37
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7--STOCK OPTIONS
The company's 1988 Stock Option Plan for officers and key employees
authorized the granting of a maximum of 168,750 shares of common stock options.
On November 18, 1994, the stockholders approved an additional 100,000 shares to
be optioned. The Plan permits the grant of incentive stock options (as defined
in the Internal Revenue Code) and nonstatutory stock options. In the case of an
incentive stock option, the per share option price cannot be less than the fair
market value on the date on which the option is granted. There is no such
requirement in the case of a nonstatutory stock option.
The options become exercisable ratably over a 3-year period and expire in
April 1997, October 1999, July 2000, April 2002, July 2002, March 2004, October
2004, and January 2005.
<TABLE>
<CAPTION>
EXERCISE PRICE PER
1988 PLAN SHARES OPTION
- ------------------------------------------------------------------------------ --------- -----------------------
<S> <C> <C>
Outstanding at July 31, 1992.................................................. 154,417 $8.625 to $10.45
Exercised................................................................... 1,042 $8.625
Canceled or expired......................................................... 10,625 $8.625 to $9.50
Outstanding at July 31, 1993.................................................. 142,750 $8.625 to $10.45
Granted..................................................................... 2,500 $12.00
Exercised................................................................... 4,950 $8.625 to $9.50
Canceled or expired......................................................... 10,000 $8.625
Outstanding at July 31, 1994.................................................. 130,300 $8.625 to $12.00
Granted..................................................................... 48,250 $11.8125 to $15.25
Exercised................................................................... 4,500 $8.625 to $9.50
Canceled or expired......................................................... 2,500 $9.50
Outstanding at July 31, 1995.................................................. 171,550 $8.625 to $15.25
Exercisable at July 31, 1995................................................ 138,550 $8.625 to $15.25
</TABLE>
The company's 1982 Incentive Stock Option Plan authorized the granting to
key employees of similar options to purchase a maximum of 187,500 shares of
common stock. The options granted in 1992 become exercisable ratably over a
3-year period and expire in April 2002 and July 2002.
<TABLE>
<CAPTION>
EXERCISE PRICE PER
1982 PLAN SHARES OPTION
- ------------------------------------------------------------------------------- --------- -----------------------
<S> <C> <C>
Outstanding at July 31, 1992................................................... 80,625 $1.89 to $9.50
Exercised.................................................................... 5,209 $1.89 to $9.50
Canceled or expired.......................................................... 1,000 $8.625 to $9.50
Outstanding at July 31, 1993................................................... 74,416 $1.89 to $9.50
Exercised.................................................................... 45,375 $1.89
Canceled or expired.......................................................... 6,166 $9.50
Outstanding at July 31, 1994 and 1995.......................................... 22,875 $9.50
Exercisable at July 31, 1995................................................. 22,875 $9.50
</TABLE>
NOTE 8--EMPLOYEE BENEFIT PLANS
S-K-I has a trusteed noncontributory profit sharing retirement plan covering
substantially all of its full-time employees. There have been no contributions
made to the Plan and charged to income for 1995, 1994, and 1993.
S-K-I has a savings plan under Section 401(k) of the Internal Revenue Code.
The plan allows all full-time employees to defer up to 15% of their income up to
$9,240 on a pretax basis. The company made a matching contribution of 15% on the
first $1,500 deferred by each participating employee in 1995 and
F-38
<PAGE>
S-K-I LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8--EMPLOYEE BENEFIT PLANS (CONTINUED)
1994. In addition, S-K-I made a one time fully vested contribution to each
eligible participant as of February 1, 1995. The cost of this contribution was
$294,300.
Effective July 31, 1995, the profit-sharing portion of the S-K-I Ltd.
retirement plan was merged into the S-K-I Ltd. 401(k) savings plan. The name of
the newly merged plan is changed to the S-K-I Ltd. 401(k) Retirement Plan.
NOTE 9--BUSINESS OPERATIONS
S-K-I operates predominantly in a single industry segment--the development
and operation of ski areas. S-K-I provides ski recreation and related services
to skiers, a single customer group.
NOTE 10--SUBSEQUENT EVENTS
On October 23, 1995 the Company sold a majority of the ski resort related
and golf course assets of Bear Mountain to Fibreboard Corporation for
approximately $20,370,000.
F-39
<PAGE>
S-K-I LTD.
CONSOLIDATED BALANCE SHEET
APRIL 28, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and short-term investments (at cost, which approximates market value)......... $ 12,027,556
Accounts receivable................................................................ 2,068,022
Notes receivable................................................................... 242,128
Inventories........................................................................ 3,281,908
Prepaid expenses................................................................... 1,134,816
---------------
TOTAL CURRENT ASSETS............................................................. 18,754,430
---------------
Property and equipment, at cost:
Buildings and grounds.............................................................. 36,335,433
Machinery and equipment............................................................ 60,313,773
Leasehold improvements............................................................. 39,794,570
Lifts/liftlines and trails on corporate property................................... 32,085,284
---------------
168,529,060
Less--accumulated depreciation and amortization...................................... 83,933,510
---------------
84,595,550
Construction in progress............................................................. 772,749
Land and development costs........................................................... 8,359,837
---------------
NET PROPERTY AND EQUIPMENT....................................................... 93,728,136
---------------
Long-term investments................................................................ 3,588,798
Other assets......................................................................... 2,382,298
---------------
TOTAL ASSETS..................................................................... $ 118,453,662
---------------
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................................. $ 1,566,927
Accounts payable................................................................... 1,714,241
Income tax payable (Note 3)........................................................ 1,256,500
Accrued lease payments--Vermont.................................................... 1,108,254
Accrued wages...................................................................... 717,329
Deposits and other unearned revenue................................................ 1,044,614
Other accrued expenses (Note 7).................................................... 6,512,619
---------------
TOTAL CURRENT LIABILITIES........................................................ 13,920,484
---------------
Long-term debt....................................................................... 19,821,979
Subordinated debentures.............................................................. 11,400,000
Deferred income taxes (Note 3)....................................................... 7,238,102
Other long-term liabilities (Note 7)................................................. 5,107,358
Minority interest in consolidated subsidiary......................................... 2,402,716
---------------
TOTAL LIABILITIES................................................................ 59,890,639
---------------
Stockholders' equity:
Common stock....................................................................... 579,087
Paid-in capital.................................................................... 6,661,895
Retained earnings.................................................................. 51,322,041
---------------
TOTAL STOCKHOLDERS' EQUITY....................................................... 58,563,023
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $ 118,453,662
---------------
---------------
</TABLE>
See accompanying Notes to (Unaudited) Condensed Consolidated Financial
Statements.
F-40
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
<S> <C> <C>
APRIL 30, APRIL 28,
1995 1996
-------------- --------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues......................................................................... $ 106,681,987 $ 106,751,742
-------------- --------------
Expenses:
Cost of operations including wages, maintenance and supplies................... 45,309,840 47,885,150
Other taxes.................................................................... 7,544,162 7,540,537
Utilities...................................................................... 7,623,646 7,465,058
Insurance...................................................................... 6,220,257 5,692,399
Selling, general and administrative expenses................................... 16,376,818 17,060,771
Interest....................................................................... 3,017,626 2,561,289
Depreciation and amortization (Note 3)......................................... 13,842,977 10,146,199
Loss on sale of Bear Mountain (Note 2)......................................... -- 4,736,646
-------------- --------------
Total expenses............................................................... 99,935,326 103,088,049
-------------- --------------
Income before provision for income taxes......................................... 6,746,661 3,663,693
Provision for income taxes (Note 3).............................................. 2,724,258 1,428,840
-------------- --------------
Net income before minority interest.............................................. 4,022,403 2,234,853
Minority interest in net income of consolidated subsidiary....................... (193,486) (526,528)
-------------- --------------
Net income....................................................................... $ 3,828,917 $ 1,708,325
-------------- --------------
-------------- --------------
Net income per common share (Note 5)............................................. $ .66 $ .30
-------------- --------------
-------------- --------------
Retained earnings, beginning of period........................................... $ 50,030,708 $ 50,366,108
Add: net income.................................................................. 3,828,917 1,708,325
Less: Dividends paid on common stock (Note 9).................................... 693,997 752,392
-------------- --------------
Retained earnings, end of period................................................. $ 53,165,628 $ 51,322,041
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to (Unaudited) Condensed Consolidated Financial
Statements.
F-41
<PAGE>
S-K-I LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
------------------------
<S> <C> <C>
APRIL 30, APRIL 28,
1995 1996
----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................................... $ 3,828,917 $ 1,708,325
Non-cash items included in net income:
Loss on disposition of net assets of Bear Mountain Ltd. (Note 2)..................... -- 4,736,646
Minority interest in net income of subsidiary........................................ 193,486 526,528
Depreciation and amortization........................................................ 13,539,407 10,146,199
Deferred income taxes................................................................ -- (1,241,854)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN ASSETS AND LIABILITIES........... 17,561,810 15,875,844
----------- -----------
Changes in assets and liabilities:
Decrease (increase) in accounts receivable........................................... (724,565) 579,712
Decrease in notes receivable......................................................... 127,323 2,647
Decrease (increase) in inventories................................................... (540,996) 99,611
Decrease in prepaid expenses......................................................... 402,399 107,643
Increase (decrease) in accounts payable.............................................. (256,947) 96,620
Increase in income taxes payable..................................................... 2,517,977 984,248
Increase (decrease) in accrued lease payments-Vermont................................ (144,963) 68,888
Increase in accrued wages, profit sharing and incentive compensation................. 151,435 187,455
(Decrease) in deposits and other unearned revenue.................................... (383,618) (544,347)
Increase in other accrued expenses................................................... 296,736 954,876
Increase in other long-term liabilities.............................................. 934,010 675,332
----------- -----------
CASH FLOW PROVIDED BY OPERATING ACTIVITIES AFTER CHANGES IN ASSETS AND LIABILITIES..... 19,940,601 19,088,529
----------- -----------
Cash flows from investing activities:
Additions to property and equipment.................................................. (18,981,721) (6,019,657)
Net book value of property and equipment sold........................................ 41,067 86,899
Purchase of long-term investments.................................................... (1,778,704) (1,960,321)
Proceeds from disposition of net assets of Bear Mountain Ltd. (Note 2)............... -- 20,000,247
Businesses acquired less cash on hand from businesses acquired....................... (12,552,020) --
Other, net........................................................................... (230,632) 8,077
----------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES................................... (33,502,010) 12,115,245
----------- -----------
Cash flows from financing activities:
Net (reductions) proceeds in revolving credit agreement.............................. 12,250,000 (17,500,000)
Reductions in long-term debt......................................................... (1,949,327) (1,468,050)
(Decrease) increase in current portion of long-term debt............................. 2,560,405 (2,291,258)
Proceeds from issuance of common stock............................................... 16,172 44,837
Payment of dividends................................................................. (693,997) (752,392)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.................................... 12,183,253 (21,966,863)
----------- -----------
Net increase (decrease) in cash and short-term investments............................. (1,378,156) 9,236,911
Cash and short-term investments at beginning of year................................... 2,704,302 2,790,645
----------- -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD....................................... $ 1,326,146 $12,027,556
----------- -----------
----------- -----------
Interest paid.......................................................................... $ 2,229,834 $ 1,998,601
Income taxes paid, net of refunds...................................................... $ 281,350 $ 1,686,523
</TABLE>
See accompanying Notes to (Unaudited) Condensed Consolidated Financial
Statements.
F-42
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position as of April 28, 1996, the results of operations
for the nine months ended April 28, 1996 and April 30, 1995 and cash flows for
the nine months ended April 28, 1996 and April 30, 1995. All such adjustments
are of a normal recurring nature with the exception of the sale of the majority
of Bear Mountain assets. The unaudited condensed consolidated financial
statements should be read in conjunction with the following notes and the
consolidated financial statements in the 1995 Annual Report to the Securities
and Exchange Commission on Form 10-K.
2. BEAR MOUNTAIN SALE
On October 23, 1995 the Company sold a majority of the ski resort related
and golf course assets of Bear Mountain to Fibreboard Corporation for
approximately $20,370,000. The transaction had the following non-cash impact on
the balance sheet:
<TABLE>
<CAPTION>
<S> <C>
Increase in current assets..................................... $ 234,000
Decrease in property and equipment, net........................ (23,833,000)
Decrease in other assets, net.................................. (269,000)
Increase in current liabilities................................ 400,000
</TABLE>
3. INCOME TAXES
The provision for taxes on income is based on a projected annual effective
tax rate. The Company has reflected an effective tax rate through the third
quarter of approximately 39%.
Deferred income taxes include the cumulative reduction in current taxes
payable resulting principally from the excess of depreciation reported for tax
purposes over that reported for financial purposes. The reduction in the April
28, 1996 deferred income tax liability from July 31, 1995 is primarily
attributable to the October 1995 sale of Bear Mountain and other book-tax
differences, principally accelerated depreciation.
4. SEASONAL BUSINESS
Results for interim periods are not indicative of results to be expected for
the year, due to the seasonal nature of the business (skiing resorts).
5. NET INCOME PER COMMON SHARE
Net income per common share figures are based on the average shares
outstanding during year to date Fiscal 1996 of 5,788,592 (5,782,745 year to date
Fiscal 1995). Shares issuable upon the exercise of stock options grants have not
been included in the per share computation because they would not have a
material effect on earnings per share.
F-43
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS
The 1988 Stock Option Plan authorized 168,750 shares of common stock to be
optioned. On November 18, 1994 the stockholders approved an additional 100,000
shares. For the nine months ended April 28, 1996, 4,950 shares were exercised
and 5,550 shares were forfeited.
The 1982 Incentive Stock Option Plan authorized 187,500 shares of common
stock to be optioned. No shares were granted, exercised or forfeited under this
plan during Fiscal 1996.
7. GENERAL LIABILITY
Provision is made for the estimated costs under the deductible portion of
S-K-I's general liability insurance policies. The balance of such reserves at
April 28, 1996 was $5,594,666. Of such amount, $4,795,428 is included in other
long-term liabilities, with the remaining balance included in other accrued
expenses.
8. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company does not provide health care and life insurance benefits for
retired employees who reach normal retirement age. The adoption of SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, has no
effect on the Company's financial position or results of operations.
9. DIVIDEND PAID
During November 1995, the Board of Directors declared a $.13 per share
dividend on Common Stock payable to stockholders of record on December 8, 1995.
The dividend was paid on January 17, 1996.
10. AGREEMENT AND PLAN OF MERGER
S-K-I Ltd. announced that it has received, through its investment financial
advisor Schroder Wertheim & Co., an offer by LBO Resort Enterprises of Newry,
Maine, to purchase all of the approximately 6,000,000 shares of outstanding
stock of S-K-I Ltd. for $18.00 per share. The S-K-I Ltd. Board of Directors has
approved a definitive merger agreement with LBO Resort Enterprises. A meeting of
S-K-I Ltd. shareholders will be held on June 10, 1996 to consider the offer as
recommended by the S-K-I Ltd. Board of Directors. The total value of the offer
for the equity approximates $107,000,000. The transaction is subject to, among
other things, shareholder and regulatory approvals.
11. NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The standard
identifies indicators to determine whether an impairment of long-lived assets
has been incurred and provides guidance in determining the amount of the
impairment. The Company will adopt SFAS No. 121 in Fiscal 1997. The Company
expects that there will not be a
F-44
<PAGE>
S-K-I LTD.
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
11. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
material impact to the Company's financial position or results of operations as
a result of adopting this standard.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation." The Company does not intend to adopt the new compensation expense
provisions of FAS 123 but will adopt the disclosure provisions in Fiscal 1997.
12. SUBSEQUENT EVENTS (UNAUDITED)
On June 28, 1996, the Company consummated a transaction with American Skiing
Company in which the Company sold all of its approximately 6,000,000 shares of
outstanding common stock for $18.00 per share.
American Skiing Company has entered into a consent decree with the U.S.
Department of Justice in which American Skiing Company has agreed to divest the
assets constituting the Waterville Valley ski resort. The divestiture is
expected to be consummated no later than December 1, 1996. The unaudited
carrying value of the Waterville Valley ski resort assets to be divested
included in the accompanying S-K-I unaudited consolidated balance sheet as of
April 28, 1996, is approximately $11.1 million and the unaudited net income for
the nine months ended April 28, 1996 of the Waterville Valley ski resort
included in the accompanying S-K-I unaudited consolidated statement of income
for the nine months ended April 28, 1996, is approximately $863,000.
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO KAMORI INTERNATIONAL CORPORATION:
We have audited the accompanying combined balance sheets of the KAMORI
COMBINED ENTITIES (the combined entities listed in Note 1) as of May 31, 1996
and 1997, and the related combined statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended May 31,
1997. These financial statements are the responsibility of Kamori's management.
Our responsibility is to express an opinion on these combined 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 combined financial position of the Kamori Combined
Entities as of May 31, 1996 and 1997, and the combined results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
August 1, 1997
F-46
<PAGE>
KAMORI COMBINED ENTITIES (NOTE 1)
COMBINED BALANCE SHEETS
AS OF MAY 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 14,391,404 $ 15,653,936
Accounts receivable, net of allowance for doubtful accounts of $67,384 and
$15,551, respectively........................................................ 1,332,653 574,771
Inventory and supplies......................................................... 2,959,210 3,320,540
Receivable from Kamori International Corporation............................... 349,145 246,323
Prepaid expenses and other current assets...................................... 696,322 497,084
-------------- --------------
Total current assets......................................................... 19,728,734 20,292,654
-------------- --------------
PROPERTY AND EQUIPMENT, at cost:
Ski lifts and trails........................................................... 61,886,703 62,933,368
Buildings and parking structures............................................... 56,199,673 56,106,317
Machinery and equipment........................................................ 46,113,639 48,664,085
Land used in operations........................................................ 17,513,217 16,256,564
Construction in progress....................................................... 3,837,897 4,582,273
-------------- --------------
185,551,129 188,542,607
Less- Accumulated depreciation................................................... (83,810,102) (95,910,242)
-------------- --------------
101,741,027 92,632,365
-------------- --------------
LAND HELD FOR DEVELOPMENT AND SALE............................................... 28,327,824 27,381,613
-------------- --------------
INVESTMENT IN REAL ESTATE PARTNERSHIP (Note 1)................................... 5,536,758 4,894,087
-------------- --------------
OTHER ASSETS, net of accumulated amortization of $2,091,440 and $839,673,
respectively................................................................... 3,733,134 4,243,275
-------------- --------------
$ 159,067,477 $ 149,443,994
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................... $ 2,072,766 $ 2,228,956
Accrued property taxes......................................................... 420,034 442,643
Accrued salaries and benefits.................................................. 2,069,674 2,588,032
Other accrued expenses......................................................... 2,367,498 2,568,010
Accrued interest payable....................................................... 1,154,989 1,168,930
Accrued interest payable to Kamori International Corporation................... 431,052 35,159
Current portion of long-term debt (Notes 3 and 4).............................. 4,050,400 5,053,539
-------------- --------------
Total current liabilities...................................................... 12,566,413 14,085,269
-------------- --------------
LONG-TERM DEBT (Notes 3 and 4):
Collateralized notes payable to banks.......................................... 92,866,000 87,812,461
Notes payable to Kamori International Corporation.............................. 45,230,080 42,547,115
-------------- --------------
138,096,080 130,359,576
-------------- --------------
Total liabilities............................................................ 150,662,493 144,444,845
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 8 and 9)
STOCKHOLDERS' EQUITY (Note 11):
Common stock and additional paid-in capital.................................... 44,400,000 44,400,000
Accumulated deficit............................................................ (35,995,016) (39,400,851)
-------------- --------------
8,404,984 4,999,149
-------------- --------------
$ 159,067,477 $ 149,443,994
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these balance sheets.
F-47
<PAGE>
KAMORI COMBINED ENTITIES (NOTE 1)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Ski operations.................................................... $ 67,842,988 $ 64,966,616 $ 67,422,873
Retail and ski rental operations.................................. 11,848,262 11,279,791 11,905,843
Commercial leasing................................................ 1,779,339 1,943,583 1,889,300
Reservation services.............................................. 2,881,021 3,271,341 3,336,082
Golf operations................................................... 2,324,361 2,257,214 2,310,431
Land sales........................................................ 519,950 -- 1,199,097
------------- ------------- -------------
Other............................................................. 1,371,156 1,013,458 1,002,642
------------- ------------- -------------
88,567,077 84,732,003 89,066,268
COSTS AND EXPENSES:
Operating expenses--
Ski operations.................................................. 34,682,132 34,032,473 36,712,383
Retail and ski rental operations................................ 8,771,110 8,562,246 8,724,835
Commercial leasing.............................................. 312,430 350,935 310,351
Reservation services............................................ 2,552,523 2,497,808 2,548,538
Golf operations................................................. 1,874,812 1,930,483 1,880,543
Cost of land sales.............................................. 521,855 -- 962,506
Depreciation.................................................... 14,179,049 14,176,014 12,389,363
Amortization.................................................... 463,623 301,212 126,926
General, administrative and marketing............................. 16,468,101 16,511,590 17,238,072
(Gain) loss on disposition of property............................ 606,996 73,521 (60,181)
Writedown of assets (Note 2)...................................... -- -- 2,000,000
------------- ------------- -------------
80,432,631 78,436,282 82,833,336
------------- ------------- -------------
Operating income................................................ 8,134,446 6,295,721 6,232,932
------------- ------------- -------------
OTHER (INCOME) EXPENSES:
Interest expense.................................................. 12,047,155 11,970,893 10,658,465
Interest income................................................... (586,049) (738,639) (681,768)
------------- ------------- -------------
11,461,106 11,232,254 9,976,697
------------- ------------- -------------
Net loss before income taxes.................................... (3,326,660) (4,936,533) (3,743,765)
INCOME TAX (BENEFIT) PROVISION (Note 6)............................. 579,496 (398,267) (337,930)
------------- ------------- -------------
Net loss........................................................ $ (3,906,156) $ (4,538,266) $ (3,405,835)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-48
<PAGE>
KAMORI COMBINED ENTITIES (NOTE 1)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
AND ADDITIONAL
PAID-IN
CAPITAL (NOTE ACCUMULATED
11) DEFICIT TOTAL
---------------- -------------- -------------
<S> <C> <C> <C>
BALANCES, at May 31, 1994....................................... $ 40,900,000 $ (27,550,594) $ 13,349,406
Net loss...................................................... -- (3,906,156) (3,906,156)
---------------- -------------- -------------
BALANCES, at May 31, 1995....................................... 40,900,000 (31,456,750) 9,443,250
Issuance of common stock in exchange for the assumption of
debt by Kamori International Corporation.................... 3,500,000 -- 3,500,000
Net loss...................................................... -- (4,538,266) (4,538,266)
---------------- -------------- -------------
BALANCES, at May 31, 1996....................................... 44,400,000 (35,995,016) 8,404,984
Net loss...................................................... -- (3,405,835) (3,405,835)
---------------- -------------- -------------
BALANCES, at May 31, 1997....................................... $ 44,400,000 $ (39,400,851) $ 4,999,149
---------------- -------------- -------------
---------------- -------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-49
<PAGE>
KAMORI COMBINED ENTITIES (NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................... $ (3,906,156) $ (4,538,266) $ (3,405,835)
Adjustments to reconcile net loss to net cash provided by
operating activities-
Depreciation................................................. 14,179,049 14,176,014 12,389,363
Amortization................................................. 548,664 382,144 260,690
Cost of land sales........................................... 501,733 -- 946,211
Writedown of assets.......................................... -- -- 2,000,000
Equity in earnings from investee............................. (245,626) (178,141) (107,329)
Loss (gain) on disposition of property....................... 111,933 73,521 (60,181)
Changes in operating assets and liabilities-
(Increase) decrease in accounts receivable................... (482,951) (114,331) 757,882
(Increase) decrease in inventory and supplies................ (69,766) 135,639 (361,330)
Decrease (increase) in prepaid expenses and other current
assets..................................................... 330,851 (206,636) 199,238
Decrease (increase) in receivable from Kamori
International Corporation.................................. 862,718 (762,402) 102,822
Increase in other assets..................................... (459,290) (607,917) (770,836)
Increase (decrease) in accounts payable...................... 665,689 (23,276) 156,190
Increase (decrease) in accrued expenses...................... 592,145 (586,827) 741,479
Increase (decrease) in accrued interest payable.............. 873,584 (408,197) (381,952)
-------------- -------------- --------------
Net cash provided by operating activities.................... 13,502,577 7,341,325 12,466,412
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to ski lifts and trails.............................. (92,113) (335,359) (979,835)
Additions to machinery and equipment........................... (5,535,146) (3,596,219) (3,103,335)
Additions to buildings and parking structures.................. (440,458) (1,357,493) (516,821)
Net change in construction in progress......................... (857,376) (574,903) (744,376)
Proceeds from sale of property and equipment................... 3,107,677 226,273 123,852
Cash distribution from equity investee......................... -- -- 750,000
Other.......................................................... -- 81,881 --
-------------- -------------- --------------
Net cash used in investing activities.......................... (3,817,416) (5,555,820) (4,470,515)
-------------- -------------- --------------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-50
<PAGE>
KAMORI COMBINED ENTITIES (NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from seasonal lines of credit............................... 10,000,000 6,700,000 5,500,000
Payment of seasonal lines of credit.................................. (10,000,000) (6,700,000) (5,500,000)
Payments of collateralized notes payable to banks.................... (5,060,098) (4,054,600) (4,050,400)
Proceeds from collateralized notes payable to banks.................. -- 820,598 --
Proceeds from notes payable to Kamori International Corporation...... 12,689,782 15,095,218 15,827,347
Payments of note payable to Kamori International Corporation......... (14,120,000) (13,400,000) (18,510,312)
Capitalized loan fees................................................ -- (321,128) --
------------- ------------- -------------
Net cash used in financing activities............................ (6,490,316) (1,859,912) (6,733,365)
Net increase (decrease) in cash and cash equivalents............. 3,194,845 (74,407) 1,262,532
CASH AND CASH EQUIVALENTS, beginning of year......................... 11,270,966 14,465,811 14,391,404
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year............................... $ 14,465,811 $ 14,391,404 $ 15,653,936
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest, net of amounts
capitalized.................................................... $ 10,906,553 $ 11,968,488 $ 10,649,477
------------- ------------- -------------
------------- ------------- -------------
Cash paid to Kamori International Corporation during the year for
taxes.......................................................... $ -- $ -- $ --
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During fiscal 1995, Steamboat Ski & Resort Corporation refinanced a note
payable to a bank and applied the loan balance of $800,402 to the new note
payable.
On March 31, 1996, Orlando Resort Corporation had a $3.5 million note
payable in full to a bank. Kamori International Corporation refinanced the note
at the parent level and accepted 100 shares of common stock in exchange for the
assumption of the note payable.
The accompanying notes to combined financial statements are an integral part of
these statements.
F-51
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF MAY 31, 1996 AND 1997
(1) BUSINESS AND ORGANIZATION
The Kamori Combined Entities ("Kamori") are comprised of the five
wholly-owned subsidiaries of Kamori International Corporation ("KIC"). KIC is a
controlled subsidiary of Kamori Kanko Co., Ltd. ("KKCL"), a Japanese
corporation. The combined financial statements presented herein include the
financial position, results of operations and cash flows of Steamboat Ski &
Resort Corporation ("SSRC"), Steamboat Development Corporation ("SDC"), Heavenly
Valley Ski & Resort Corporation ("HVSRC"), Heavenly Corporation ("HC"), and
Orlando Resort Corporation ("ORC"), all Delaware corporations. Such financial
statements have been combined due to the pending sale of Kamori, as discussed
below.
SSRC owns and operates a major ski and recreation complex in Steamboat
Springs, Colorado (the "Steamboat Ski Resort"). SSRC also owns a majority
interest in a consolidated subsidiary, Walton Pond Apartments, Inc. ("WPA"). WPA
owns and operates an employee housing facility in Steamboat Springs primarily
for the use of SSRC seasonal employees. SDC owns a 50% general partnership
interest in Country Club Highlands Partnership ("CCHP"). CCHP is engaged in the
development and sale of residential real estate adjacent to the Steamboat Ski
Area. HVSRC and HC are the sole partners in Heavenly Valley, Limited Partnership
("HVLP"), which owns and operates the Heavenly Ski Resort, a major destination
ski resort located in South Lake Tahoe, California and Stateline, Nevada. ORC
owns and operates the Sabal Point Golf Course and Country Club ("Sabal Point"),
a golf, tennis and swimming club located in Orlando, Florida.
On August 1, 1997, KIC entered into a stock purchase agreement with ASC
Holdings, Inc. ("ASC"), an unaffiliated third party, wherein ASC will acquire
all of the issued and outstanding shares of Kamori upon the closing date of the
agreement in exchange for approximately $288 million in cash. Certain assets
reflected in the accompanying Kamori combined financial statements will be
distributed to KIC prior to the closing and consist of all Kamori cash and cash
equivalents and certain property with a net book value at May 31, 1997 of
approximately $16.4 million. Proceeds from the sale will be used to retire all
of the outstanding debt of Kamori. The ASC acquisition is subject to certain
significant terms and conditions. In order to consummate the acquisition and
fund the purchase price, ASC must successfully complete the initial public
offering of its common stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Kamori. All
significant intercompany accounts and transactions have been eliminated in
combination. The minority shareholder's interest and share in the profits and
losses of WPA have been reflected in accrued expenses in the accompanying
combined balance sheets.
REVENUE RECOGNITION
Resort revenue primarily consists of revenue from ski operations, lodging,
food and beverage operations and other recreational activities and is recognized
as services are performed or as goods are sold. Real estate revenue is
recognized when consideration has been received, title, possession and other
attributes of ownership have been transferred to the buyer and Kamori is not
obligated to perform significant additional activities after the sale.
F-52
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Kamori considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
LAND HELD FOR DEVELOPMENT AND SALE
Land held for development and sale is carried at the lower of cost or fair
value. Costs related to the development activities of Kamori, including
interest, are capitalized while such property is actively being prepared for its
intended use, until the property is ready for sale. Kamori's land development
and sales activities are impacted by a variety of factors, including local and
regional economic conditions, and local zoning and approval guidelines.
Management of Kamori monitors such conditions and the related effect on the
value of its real estate holdings and will develop, market and dispose of such
holdings at a rate which optimizes its value compared to its cost.
PROPERTY AND EQUIPMENT
Kamori owns substantially all of the base area land and facilities of the
Steamboat and Heavenly Ski Resorts. A significant portion of the ski trails,
lifts and related assets are on land leased from the United States Forest
Service ("USFS") under special use permits which expire in 2029. Kamori also
owns the land and facilities comprising the Sabal Point Country Club.
Property and equipment is carried at cost and is depreciated using the
straight-line method over the estimated useful lives of the related assets as
follows:
<TABLE>
<CAPTION>
ASSETS USEFUL LIVES
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Buildings, improvements and parking structures.............................. 10 to 30 years
Ski lifts and trails........................................................ 5 to 15 years
Machinery and equipment..................................................... 3 to 15 years
</TABLE>
HVLP has incurred approximately $3.2 million of project development costs
relating to the proposed expansion of the Heavenly Ski Resort. These costs have
been incurred since 1990 and are included in construction in progress in the
accompanying combined balance sheets. During fiscal 1997, HVLP obtained the
remaining required approvals relating to the proposed expansion. In management's
opinion, these costs will be realized through the future development, operation
and/or sale of the Heavenly Ski Resort.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the
years ended May 31, 1995, 1996 and 1997 totaled approximately $2.1 million, $2.3
million and $2.2 million, respectively.
INVENTORIES
Inventories consist primarily of retail clothing, ski equipment and food and
beverage inventories. Inventories are valued at the lower of cost or market
value, generally on the average cost method.
F-53
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED LOAN COSTS
Costs and fees incurred in connection with Kamori's financing activities
have been capitalized and are being amortized over the terms of the related
loans. Deferred loan costs are included in other assets in the accompanying
combined balance sheets.
GOODWILL
The excess of the purchase price over the fair market value of the assets
acquired in the Steamboat Ski Area acquisition is reflected as goodwill and is
being amortized on a straight-line basis over 40 years. Goodwill is included in
other assets in the accompanying combined balance sheets.
ORGANIZATION COSTS
Organization costs are included in other assets on the accompanying combined
balance sheets and are being amortized on a straight-line basis over five years.
INCOME TAXES
A consolidated federal income tax return is filed by KIC. Kamori
participates in an informal federal income tax sharing arrangement with KIC
whereby taxes paid by KIC are allocated to each individual entity who, on a
stand-alone basis, would have a tax liability. No payment for use of tax
benefits is made to those members generating tax operating losses until such
losses are utilized on a consolidated basis by KIC. Such payments are limited to
the amount of taxes that the loss generating entities paid in prior years.
Companies generating alternative minimum taxes are charged for those taxes on a
stand-alone basis. To the extent alternative minimum tax amounts have been paid,
they may benefit in future years if such benefit is realized by the consolidated
group.
Kamori accounts for income taxes on the liability method by recognizing
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets, liabilities and carryforwards.
Deferred tax assets are then reduced, if deemed necessary, by a valuation
allowance for the amount of any tax benefits which, more likely than not based
on current circumstances, are not expected to be realized (see Note 6).
EARNINGS PER SHARE
Due to the proposed acquisition of Kamori by ASC, Kamori's historical
capital structure is not indicative of its prospective structure upon the
closing of the anticipated purchase transaction. Accordingly, historical net
income or loss per common share is not considered meaningful and has not been
presented herein.
IMPAIRMENT OF LONG-LIVED ASSETS AND IDENTIFIABLE INTANGIBLES
Kamori reviews its long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Generally, the basis for making such
assessments is based on future cash flow projections.
F-54
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ORC has historically generated net cash flow deficits from operations which
have been funded by KIC. As a result, during fiscal 1997, ORC recorded an
impairment loss of $2,000,000 related to its land, buildings and equipment to
properly state these fixed assets at estimated fair values. Fair value was
determined by assessing the present value of estimated expected future cash
flows using a discount rate commensurate with the risks involved and based on
the stock purchase agreement discussed above.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-55
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(3) LONG-TERM DEBT
Long-term debt consists of the following as of May 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
SSRC-
Collateralized note payable to a bank, due May 28, 1999; annual principal
payments of $2,000,000 due March 31; secured by substantially all assets of
SSRC-
Fixed rate portion; interest payable quarterly at 8.05%...................... $ 15,000,000 $ 15,000,000
Variable rate portion; interest payable quarterly based on LIBOR at beginning
of quarter (6.5625% and 6.9375% at May 31, 1996 and 1997, respectively).... 33,350,000 31,350,000
Revolving loan agreement payable to KIC; interest at 6.9%, payable monthly;
principal due October 31, 2001............................................... 32,900,000 31,900,000
Line of credit payable to KIC; interest payable quarterly at prime rate plus 2%
(10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due
October 31, 2001............................................................. 8,457,149 6,487,174
WPA note payable to a bank, due October 1, 2002; interest at bank's prime rate
and reset annually (8.25% and 8.5% at May 31, 1996 and 1997, respectively);
secured by land, buildings, furniture and equipment of Walton Pond Apartment
Complex...................................................................... 1,566,400 1,516,000
HVLP-
Note payable to a bank, interest payable semiannually based on adjusted LIBOR
(6.8125% and 7.325% on May 31, 1996 and May 31, 1997, respectively); due
March 31, 2001; secured by substantially all assets of HVLP.................. 46,000,000 44,000,000
ORC-
Line of credit payable to KIC; interest payable quarterly at prime rate plus
2%, (10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due
October 31, 2001............................................................. 3,890,931 4,442,911
SDC-
Line of credit payable to KIC; interest payable quarterly at prime rate plus
2%, (10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due
October 31, 2001............................................................. 982,000 717,030
-------------- --------------
142,146,480 135,413,115
Less- current portion.......................................................... (4,050,400) (5,053,539)
-------------- --------------
Total long-term debt........................................................... $ 138,096,080 $ 130,359,576
-------------- --------------
-------------- --------------
</TABLE>
SSRC DEBT
At the beginning of each quarter, SSRC can elect to convert the variable
rate portion of the collateralized note payable into fixed rate debt under
certain circumstances. No such election was made by SSRC as of May 31, 1996 or
1997.
F-56
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(3) LONG-TERM DEBT (CONTINUED)
The collateralized note payable and the revolving credit facility (discussed
below) are secured by a first deed of trust covering all Steamboat Ski Area
assets, assignment of all rents, pledging by KIC of all of SSRC's and SDC's
common stock and an assignment of the USFS Permit covering the Steamboat Ski
Area. This note and the revolving credit facility are also secured by an
intercreditor agreement which provides that all other indebtedness or
obligations of SSRC are subordinate to this debt. Additionally, KKCL has
guaranteed all obligations of SSRC under these arrangements. Under terms of the
collateralized note agreement, SSRC is required to deposit Cash Flow, as
defined, into an interest bearing account beginning one year prior to the date
of the required principal payments. The deposit will then be applied to the
principal payment.
The WPA note payable is guaranteed by SSRC and requires, among other
restrictions, that WPA maintain a Debt Service Coverage ratio, as defined, of
1.15 times and provide additional collateral if the projects appraised value
falls below certain levels. On May 31, 1997, the note payable was refinanced
under similar terms with a maturity date of October 1, 2002.
SSRC also has a revolving credit facility with a bank which expires on May
31, 1999. Under this facility, the bank will provide a revolving line of credit
of up to $5 million to finance SSRC's seasonal cash flow needs. Amounts
outstanding under this facility bear interest at the prime interest rate and are
due and payable on the facility's expiration date. No amounts were outstanding
under this facility as of May 31, 1996 and 1997.
The SSRC line of credit amount available to draw upon is set by KIC and
fluctuates depending on SSRC's cash needs. Both the revolving loan and the line
of credit are subordinate to the collateralized note payable and revolving
credit facility with a bank discussed above. The revolving loan and the line of
credit were renewed during the year to mature on October 31, 2001. Each
agreement contains the same terms and provisions that existed in the original
agreements.
HVLP DEBT
The variable rate debt can be converted, at the election of HVLP, into
fixed-rate debt under certain circumstances. The note payable is secured by a
first deed of trust covering all HVLP assets, security and financing statements
and the USFS Permit covering the Heavenly Ski Resort. The note payable is
guaranteed by KKCL. HVLP is subject to various restrictive covenants in
connection with the loan which may be accelerated upon certain conditions.
The loan terms require HVLP to make a minimum payment of $1 million for the
year ended March 31, 1997 and is required to make another $1 million payment for
the year ended March 31, 1999. However, payments must total $4 million by March
31, 1998 and $8 million by March 31, 2000, in the aggregate. HVLP repaid $2
million of the outstanding note during September 1996.
LETTERS OF CREDIT
Under an agreement with an insurance carrier, SSRC had a $210,000 letter of
credit outstanding with a bank which guarantees payments of workers compensation
claims and expires in January, 1998. No amount was drawn under this letter of
credit as of May 31, 1997.
F-57
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(3) LONG-TERM DEBT (CONTINUED)
HVLP has an agreement with a bank to allow for $1.5 million in letters of
credit to be issued under certain circumstances when needed. Semi-annual fees
under the agreement include a letter of credit fee of .5% per annum on the
average amount of all letters of credit outstanding and a commitment fee of
.3125% per annum on the average amount of credit available. The letters of
credit are subordinate to the collateralized note payable and operating loan
described above. No letters of credit were outstanding as of May 31, 1997.
DEBT MATURITIES
Annual maturities for all long-term debt outstanding at May 31, 1997, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MAY 31-
- ------------------------------------------------------------------------------
<S> <C>
1998.......................................................................... $ 5,053,540
1999.......................................................................... 46,408,268
2000.......................................................................... 4,063,418
2001.......................................................................... 39,069,024
2002.......................................................................... 39,622,239
Thereafter.................................................................... 1,196,626
--------------
Total......................................................................... $ 135,413,115
--------------
--------------
</TABLE>
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS
The carrying amounts approximate fair value.
DEBT
An estimate of rates currently available to Kamori for debt with similar
terms was used to determine the fair value of Kamori's debt.
The carrying amounts and estimated fair values of Kamori's financial
instruments are as follows:
<TABLE>
<CAPTION>
MAY 31, 1996 MAY 31, 1997
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- -------------- -------------- --------------
Cash and cash equivalents...................... $ 14,391,404 $ 14,391,404 $ 15,653,936 $ 15,653,936
Long-term debt................................. $ 142,146,480 $ 142,330,452 $ 135,413,115 $ 134,457,681
</TABLE>
(5) RELATED PARTY TRANSACTIONS
SSRC, ORC and HVLP reimburse KIC and KKCL for certain services provided.
Such reimbursements for the years ended May 31, 1995, 1996 and 1997 totaled
$3,340,928, $3,302,107 and
F-58
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(5) RELATED PARTY TRANSACTIONS (CONTINUED)
$3,399,642, respectively, and are included in general, administrative and
marketing expense in the accompanying combined statements of operations.
(6) INCOME TAXES
The components of the income tax provision or benefit are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ----------- -----------
Current tax (benefit) provision............................................ $ 579,000 $ (398,000) $ (338,000)
Deferred tax (benefit) provision........................................... -- -- --
---------- ----------- -----------
Total tax (benefit) provision.............................................. $ 579,000 $ (398,000) $ (338,000)
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
A reconciliation of the income tax provision or benefit and the amount
computed by applying the U.S. federal statutory income tax rate to book income
before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------------------
<S> <C> <C> <C>
1995 1996 1997
------------- ------------- -------------
At U.S. federal income tax rate...................................... $ (1,131,000) $ (1,678,000) $ (1,273,000)
State income tax, net of federal benefit............................. (156,000) (131,000) (101,000)
Excess tax deductible amortization................................... (340,000) (340,000) (340,000)
Nondeductible portion of meals and entertainment..................... 55,000 58,000 72,000
Valuation allowance adjustment....................................... 2,064,000 1,647,000 1,280,000
Other................................................................ 87,000 46,000 24,000
------------- ------------- -------------
Income tax (benefit) provision....................................... $ 579,000 $ (398,000) $ (338,000)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-59
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(6) INCOME TAXES (CONTINUED)
The components of gross deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX
DEFERRED TAX ASSETS LIABILITIES
MAY 31, MAY 31,
------------------------------ ----------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
-------------- -------------- ---------- ----------
Current:
Insurance accruals..................................... $ 757,000 $ 661,000 $ -- $ --
Vacation accrual....................................... 133,000 136,000 -- --
Accrued expenses....................................... 88,000 160,000 -- --
AMT credit from parent................................. 370,000 -- -- --
-------------- -------------- ---------- ----------
Total current tax assets............................. 1,348,000 957,000 -- --
-------------- -------------- ---------- ----------
Noncurrent:
Fixed assets basis differences......................... -- 999,000 556,000 --
Intangible assets...................................... 69,000 54,000 -- --
AMT credit from parent................................. 823,000 823,000 -- --
Net operating loss carryover........................... 14,373,000 14,504,000 -- --
-------------- -------------- ---------- ----------
Total noncurrent tax asset............................. $ 15,265,000 16,380,000 556,000 --
-------------- -------------- ---------- ----------
Total deferred taxes................................... $ 16,613,000 $ 17,337,000 $ 556,000 $ --
-------------- -------------- ---------- ----------
-------------- -------------- ---------- ----------
Net deferred tax asset................................... $ 16,057,000 $ 17,337,000
Less -- valuation allowance.............................. (16,057,000) (17,337,000)
$ -- $ --
-------------- --------------
-------------- --------------
</TABLE>
As of May 31, 1996 and 1997, Kamori had an income tax receivable of $312,079
and $218,094, respectively, from KIC related to income taxes. These amounts are
included in receivable from KIC in the accompanying combined balance sheets.
At May 31, 1997, Kamori had approximately $36,828,000 of net operating loss
carryforwards for federal income tax purposes which expire in the years 2005
through 2012. Kamori also has alternative minimum tax credit carryforwards of
approximately $823,000. The alternative minimum tax paid can, in general, be
carried forward indefinitely to reduce future regular tax liabilities to the
amount of tentative minimum tax due.
(7) EMPLOYEE SAVINGS PLANS
SSRC has a tax deferred savings plan covering substantially all year-round
and certain seasonal employees. This plan provides for both employee and SSRC
contributions. Employees may contribute, on an annual basis, up to 16% of their
annual compensation. SSRC's contribution is determined by the board of directors
on an annual basis. SSRC's contribution for the fiscal years ended May 31, 1995,
1996 and 1997 was $213,233, $233,053 and $247,042, respectively.
HVLP has a tax deferred profit sharing plan covering certain year-round
employees. The plan contains an added 401(k) feature whereby participants can
elect to make tax deferred contributions to the plan. The plan also provides for
discretionary HVLP contributions. HVLP's cash contribution is
F-60
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(7) EMPLOYEE SAVINGS PLANS (CONTINUED)
determined by management on an annual basis and totaled $256,965, $262,892 and
$300,000 for the fiscal years ended May 31, 1995, 1996 and 1997, respectively.
(8) COMMITMENTS AND CONTINGENCIES
SSRC executed agreements with major airlines to provide direct flights into
the Yampa Valley Regional Airport. These agreements require SSRC to guarantee
specified minimum airline revenue and to fund start-up costs. SSRC did not meet
the specified minimum levels under these agreements in fiscal 1995, 1996 or 1997
and was required to fund the specified differences. Such amounts have been
expensed in the accompanying combined statements of operations.
Kamori leases certain space and equipment under long-term operating leases.
Aggregate future minimum annual rental commitments under noncancellable
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MAY 31-
- ------------------------------------------------------------------------------------
<S> <C>
1998................................................................................ $ 1,538,447
1999................................................................................ 1,202,523
2000................................................................................ 629,580
2001................................................................................ 163,122
2002................................................................................ 80,163
------------
$ 3,613,835
------------
------------
</TABLE>
Total rental expense for all operating leases for the years ended May 31,
1995, 1996 and 1997, was $2,365,555, $2,132,545 and $2,233,113, respectively.
As of May 31, 1997, Kamori had executed contracts for the acquisition of
equipment, construction of buildings and the expenditure of certain amounts
related to planning activities. These commitments total approximately
$5,045,000, including $4,909,000 that will be incurred during fiscal 1998 and
$136,000 in fiscal year 1999 and beyond.
(9) LITIGATION
Due to the nature of their operations, certain of the combined entities are
defendants in several lawsuits which are actively being contested. In
management's opinion, the effect of these disputes will not have a significant
effect on Kamori's combined financial position or results of operations.
F-61
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(10) RENTAL INCOME UNDER OPERATING LEASES
SSRC leases retail space to unaffiliated entities under noncancellable
leases expiring through 2004. Future minimum tenant rentals under the
noncancellable leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MAY 31-
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 1,353,098
1999............................................................................ 1,296,769
2000............................................................................ 1,105,754
2001............................................................................ 648,167
2002............................................................................ 442,396
Thereafter...................................................................... 677,521
------------
$ 5,523,705
------------
------------
</TABLE>
(11) STOCKHOLDERS' EQUITY
As of May 31, 1995, 1996 and 1997, the stockholders' equity for each of the
Kamori combined entities is as follows:
<TABLE>
<CAPTION>
STEAMBOAT ORLANDO STEAMBOAT
SKI & RESORT HEAVENLY RESORT DEVELOPMENT
CORPORATION VALLEY (1) CORPORATION CORPORATION TOTAL
------------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, at May 31, 1994................. $ (631,347) $ 9,973,703 $ 104,073 $ 3,902,977 $ 13,349,406
Net income (loss)...................... (2,721,345) (509,176) (808,019) 132,384 (3,906,156)
------------- ------------ ----------- ------------ -------------
BALANCE, at May 31, 1995................. (3,352,692) 9,464,527 (703,946) 4,035,361 9,443,250
Net income (loss)...................... (1,015,783) (2,640,120) (955,898) 73,535 (4,538,266)
Issuance of common stock in exchange
for the assumption of debt by the
parent............................... -- -- 3,500,000 -- 3,500,000
------------- ------------ ----------- ------------ -------------
BALANCE, at May 31, 1996................. (4,368,475) 6,824,407 1,840,156 4,108,896 8,404,984
Net income (loss)...................... 2,321,681 (3,121,328) (2,592,649) (13,539) (3,405,835)
------------- ------------ ----------- ------------ -------------
BALANCE, at May 31, 1997................. $ (2,046,794) $ 3,703,079 $ (752,493) $ 4,095,357 $ 4,999,149
------------- ------------ ----------- ------------ -------------
------------- ------------ ----------- ------------ -------------
</TABLE>
F-62
<PAGE>
KAMORI COMBINED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
AS OF MAY 31, 1996 AND 1997
(11) STOCKHOLDERS' EQUITY (CONTINUED)
As of May 31, 1997, the common stock components and additional paid-in
capital by entity are as follows:
<TABLE>
<CAPTION>
STEAMBOAT ORLANDO STEAMBOAT
SKI & RESORT HEAVENLY RESORT DEVELOPMENT
CORPORATION VALLEY (1) CORPORATION CORPORATION TOTAL
------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Par value, per share................... $ .01 $ .01 $ 1.00 $ .01
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Shares authorized...................... 22 200 10,000 100
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Shares outstanding..................... 18 100 200 20
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Common stock........................... $ -- $ 1 $ 200 $ -- $ 201
------------- ------------- ------------ ------------ -------------
------------- ------------- ------------ ------------ -------------
Additional paid-in capital............. $ 18,000,000 $ 16,999,999 $ 5,399,800 $ 4,000,000 $ 44,399,799
------------- ------------- ------------ ------------ -------------
------------- ------------- ------------ ------------ -------------
</TABLE>
The equity components above were outstanding as of May 31, 1995, 1996 and
1997 for each entity with the exception of ORC, which issued 100 shares of stock
to KIC in exchange for the assumption of a $3.5 million note payable on March
31, 1996.
(1) Includes HVSRC and HC.
F-63
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDER, ANY OF THE UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................... 3
Recent Developments.............................. 13
The Transactions................................. 14
Risk Factors..................................... 17
Use of Proceeds.................................. 25
Dilution......................................... 25
Dividend Policy.................................. 26
Capitalization................................... 27
Pro Forma Financial Data......................... 28
Selected Historical Consolidated Financial Data
of the Company................................. 40
Selected Combined Financial Data of the Acquired
Resorts........................................ 42
Management's Discussion and Analysis of Financial
Condition and Results of
Operations..................................... 43
Business......................................... 50
Management....................................... 72
Certain Relationships and Related Transactions... 75
Principal Shareholders........................... 76
Description of Certain Indebtedness.............. 77
Description of Capital Stock..................... 80
Shares Eligible for Future Sale.................. 83
Certain United States Federal Tax Considerations
For Non-United States Holders.................. 84
Underwriting..................................... 88
Legal Matters.................................... 89
Experts.......................................... 90
Additional Information........................... 90
Index to Financial Statements.................... F-1
</TABLE>
--------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
14,750,000 SHARES
LOGO
COMMON STOCK
--------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
MORGAN STANLEY DEAN WITTER
SCHRODER & CO. INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee.................................................. $ 102,803.00
NASD filing fee....................................................... 34,425.00
New York Stock Exchange listing fee...................................
Transfer agent fees...................................................
Accounting fees and expenses..........................................
Legal fees and expenses...............................................
Printing and mailing expenses.........................................
Miscellaneous.........................................................
--------------
Total......................................................... $
--------------
--------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Maine corporation. Section 719 of the Maine Business
Corporation Act (13-A M.R.S.A. ss. 101, et seq.) authorizes the indemnification
by a Maine corporation of any person who is a party or is threatened to be made
a party to any action, suit or proceeding by reason of that person's status as a
director, officer, employee or agent of the corporation; provided that no such
indemnification may be provided for any person if he or she shall have been
finally adjudicated (i) not to have acted honestly or in the reasonable belief
that his or her action was in or not opposed to the best interests of the
corporation or its shareholders, or (ii) in any criminal proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the case of
actions brought by or on behalf of the corporation, indemnification may only be
provided if the court determines that such person is fairly and reasonably
entitled to the requested indemnification. Indemnification must be provided to
the extent that a director, officer, employee or agent has been successful, on
the merits or otherwise, in defense of an action of the type described in the
second sentence of this paragraph.
The Bylaws of the Company provide that it shall indemnify any person who is
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company, and may indemnify any employee or agent of the Company in such
circumstances, against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. No indemnification may be
provided for any person who shall have been finally adjudicated not to have
acted honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the Company or who had reasonable cause to
believe that his or her conduct was unlawful. Indemnification must be provided
to any director, officer, employee or agent of the Company to the extent such
person has been successful, on the merits or otherwise, in defense of any action
or claim described above. Any indemnification under this provision of the
Bylaws, unless required under the Bylaws or ordered by a court, can be made only
as authorized in each specific case upon a determination by a majority of
disinterested directors or by independent legal counsel or by the shareholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding all securities
sold and employee stock options granted by the Registrant since July 1994.
Further included is the consideration, if any, received by the Registrant for
such securities, and information relating to the section of the Securities Act
of 1933, as amended (the "Securities Act"), and the rules of the Securities and
Exchange Commission under which
II-1
<PAGE>
exemption from registration was claimed. All awards of options did not involve
any sale under the Securities Act. None of these securities were registered
under the Securities Act. Except as described below, no sale of securities
involved the use of an underwriter and no commissions were paid in connection
with the sales of any securities. The information set forth in this Item 15
reflects the Company's 14.76-to-1 split in the Class A Common Stock to be
effected prior to the closing of the Offerings.
(1) On June 17, 1997, the Registrant issued 100 shares of common stock
to Leslie B. Otten in exchange for 978,300 shares of common stock ASC East
(formerly American Skiing Company), pursuant to the exemption contained in
Section 4(2) of the Securities Act.
(2) On July 12, 1997, the Registrant issued 17,500 shares of Series A
Exchangeable Preferred Stock at a price of $1,000 per share to one
institutional investor pursuant to the exemption under Section 4(2) of the
Securities Act.
(3) On July 28, 1997, the Registrant issued $17.0 million principal
amount of its 14% Senior Exchangeable Notes due 2002 to one institutional
investor pursuant to the exemption under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Stock Purchase Agreement dated as of August 1, 1997, among Kamori International Corporation, ASC West and
the Registrant.*
2.2 Escrow Agreement dated as of August 1, 1997, among ASC West, Kamori International Corporation and the
LTCB Trust Company.*
3.1 Articles of Incorporation of the Registrant, as amended.**
3.2 By-Laws of the Registrant.*
4.1 Specimen Certificate for shares of Common Stock, $.01 par value, of the Registrant.**
5.1 Opinion of Pierce Atwood with respect to the validity of the securities being offered.**
10.1 Credit Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Fleet National Bank,
BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent (incorporated by
reference to Exhibit 10.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.2 Security Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National
Bank, as Agent (incorporated by reference to Exhibit 10.2 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.3 Revolving Credit Notes dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National
Bank, BankBoston, N.A. and KeyBank National Association in the aggregate principal amount of $65,000,000
(incorporated by reference to Exhibit 10.3 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.4 Swing Line Note dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank
in the aggregate principal amount of $5,000,000 (incorporated by reference to Exhibit 10.4 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement
dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent
(representative of substantially similar agreements of even date by each of Sunday River, Ltd., L.B.O.
Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain
Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. to
Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.5 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.6 Collateral Assignments of Leases and Rents dated as of June 28, 1996, by Sunday River Skiway Corporation
to Fleet National Bank, as Agent (representative of substantially similar assignments of even date by
each of Sunday River, Ltd., L.B.O. Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc.,
Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and
Waterville Valley Ski Area Ltd. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit
10.6 to ASC East's Registration Statement of Form S-4, Registration No. 333-9763).
10.7 Development Agreement dated September 18, 1997, among ASC Utah, Iron Mountain Associates, LLC, WPA, Ltd.,
Iron Mountain Holding Group, LC and Iron Mountain Alliance, Inc.*
10.8 Assignment in Trust dated as of June 28, 1996, from L.B.O. Holding, Inc. to Fleet National Bank, as Agent
(incorporated by reference to Exhibit 10.8 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.9 Assignment of Agreements, Permits and Contracts dated as of June 28, 1996, by Sunday River Skiway
Corporation to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.9 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.10 Assignment of Trademarks and Service Marks (U.S.) dated as of June 28, 1996, by ASC East and certain
Subsidiaries to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.10 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.11 Hazardous Materials Indemnification Agreement dated as of June 28, 1996, among ASC East, certain
Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.11 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.12 Unlimited Guaranty dated as of June 28, 1996, by LBO Hotel Co. in favor of Fleet National Bank, as Agent
(incorporated by reference to Exhibit 10.12 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.13 Unlimited Guaranty dated as of June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet
National Bank, as Agent (incorporated by reference to Exhibit 10.13 to ASC East's Registration Statement
on Form S-4, Registration No. 333-9763).
10.14 Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and ASC Utah.*
10.15 Intercreditor Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Snowridge, Inc.
and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.15 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.16 Loan and Security Agreement dated as of October 1, 1984, among the State of Vermont (acting by and
through the Vermont Industrial Development Authority), Sherburne Corporation, Proctor Bank and
BankBoston, N.A. (incorporated by reference to Exhibit 10.16 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.17 Loan and Security Agreement dated as of October 1, 1984, among the State of Vermont (acting by and
through the Vermont Industrial Development Authority), Mount Snow Ltd., Proctor Bank and BankBoston,
N.A.**
10.18 Lease Agreement dated April 2, 1997, between Grand Summit Resort Properties, Inc. and L.B.O. Holding,
Inc.**
10.19 Indenture dated October 24, 1990, between Killington Ltd. and The Howard Bank, as trustee (representative
of indentures with respect to similar indebtedness aggregating approximately $2,995,000 in original
principal amount and maturing at various times from 2015 to 2016) (incorporated by reference to Exhibit
10.19 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.20 Indenture dated September 25, 1986, between Killington Ltd. and The Howard Bank, as trustee
(representative of indentures with respect to similar indebtedness aggregating approximately $10,873,500
in original principal amount and maturing at various times from 1997 to 2013) (incorporated by reference
to Exhibit 10.20 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.21 Restated Concession Agreement dated as of April 30, 1992, between Sugarloaf Mountain Corporation and
Boston Concessions Group, Inc., together with Amendment thereto, Loan Agreement, and $150,000 Promissory
Notes, each dated July 31, 1995 (incorporated by reference to Exhibit 10.21 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.22 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company
of New York, relating to Series A and Series B 12% Senior Subordinated Notes Due 2006 (incorporated by
reference to Exhibit 4.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.23 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company
of New York, relating to the Series A and Series B 13 3/4% Subordinated Discount Notes Due 2007
(incorporated by reference to Exhibit 4.2 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.24 Registration Rights Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Bear,
Stearns & Co., Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.3 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.25 Purchase Agreement dated as of June 25, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co.,
Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.4 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.26 Registration Rights Agreement dated June 28, 1996, among ASC East, certain Subsidiaries and Bear, Stearns
& Co. Inc. (incorporated by reference to Exhibit 4.5 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.27 Pledge and Disbursement Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and
United States Trust Company of New York (incorporated by reference to Exhibit 4.6 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.28 Shareholders Agreement dated as of June 28, 1996, among Leslie B. Otten, ASC East and Bear Stearns & Co.
Inc. (incorporated by reference to Exhibit 4.7 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.29 $2,311,838.00 Promissory Note from Mountain Wastewater Treatment, Inc. to LHC Corporation dated May 16,
1995 (incorporated by reference to Exhibit 10.32 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.30 $6,120,000.00 Promissory Note, Senior Commercial Mortgage Deed, Junior Commercial Mortgage Deed, and
Senior Collateral Assignment of Income, Revenue and Rentals from Sugarbush Resort Holdings, Inc. to
Snowridge, Inc. and Sugarbush Inn Corporation dated May 16, 1995 and attachments thereto (incorporated by
reference to Exhibit 10.33 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.31 Form of Subordinated Debenture Due 2002 from L.B.O. Holding, Inc. to former shareholders of Mt. Attitash
Lift Corporation (incorporated by reference to Exhibit 10.34 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.32 Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift Corporation, certain of its
shareholders and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.35 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.33 Stock Purchase Agreement dated August 17, 1994, between Sugarloaf Mountain Corporation and S-K-I Ltd.
(incorporated by reference to Exhibit 10.36 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.34 Acquisition Agreement dated May 16, 1995, among Sugarbush Resort Holdings, Inc., Sugarbush Resort
Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush Inn Corporation and Bev Ridge, Inc.
(incorporated by reference to Exhibit 10.38 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.35 Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River
Skiway Corporation (incorporated by reference to Exhibit 10.40 to ASC East's Registration Statement on
Form S-4, Registration No. 333-9763).
10.36 Lease/Option dated July 19, 1984, between John Blake and L.B.O. Holding, Inc. (incorporated by reference
to Exhibit 10.41 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.37 Lease Agreement dated as of July 1, 1993, between Snowridge, Inc. and Mountain Water Company
(incorporated by reference to Exhibit 10.42 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.38 Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment,
Inc. (incorporated by reference to Exhibit 10.43 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.39 Lease dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to
Killington Ltd.) (incorporated by reference to Exhibit 10.44 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.40 Lease Agreement dated as of February 20, 1990, between Pico Pond Associates and Killington Ltd.
(incorporated by reference to Exhibit 10.45 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.41 Lease Agreement dated as of June 21, 1994, between the Town of Wilmington and Mount Snow, Ltd.
(incorporated by reference to Exhibit 10.46 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.42 Lease Agreement dated April 24, 1995, between Sargent, Inc. and Mount Snow, Ltd. (incorporated by
reference to Exhibit 10.47 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.43 United States Forest Service Special Use Permit No. 4040/01, issued November 29, 1989 to Mount Snow Ltd.
(incorporated by reference to Exhibit 10.48 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.44 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994 to L.B.O. Holding, Inc.
and Amendment 1 thereto (incorporated by reference to Exhibit 10.49 to ASC East's Registration Statement
on Form S-4, Registration No. 333-9763).
10.45 United States Forest Service Special Use Permit No. 4041 issued May 17, 1995, to Sugarbush Resort
Holdings, Inc. (incorporated by reference to Exhibit 10.51 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.46 Agreement between Sugarloaf Mountain Corporation and the Inhabitants of the Town of Carrabassett Valley,
Maine, concerning the Sugarloaf Golf Course dated June 3, 1987 (incorporated by reference to Exhibit
10.52 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.47 Commercial Lease dated August 7, 1997, between L.B.O. Holding, Inc. and Grand Summit Hotel Condominium
Unit Owners Association, Inc.**
10.48 Agreement dated July 26, 1995, among Bombardier Corporation, Killington, Ltd., Mount Snow, Ltd.,
Waterville Valley Ski Area, Ltd., Bear Mountain Ltd., and Sugarloaf Mountain Corporation (incorporated by
reference to Exhibit 10.55 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.49 Agreement dated June 3, 1996, between ASC East and Eastern Resorts Company, LLC (incorporated by
reference to Exhibit 10.56 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.50 Employment Agreement dated as of August 24, 1994, among Warren C. Cook, Sugarloaf Mountain Corporation
and S-K-I Ltd. (incorporated by reference to Exhibit 10.57 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.51 Christopher E. Howard Employment Terms (Agreement) dated August 22, 1996, between Christopher E. Howard
and ASC East.*
10.52 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company,
Warren C. Cook, Linwood E. Doble, Inc., H&S Land, Inc. and Loaf Land Inc. relating to Sugarloaf Land
Partners I (incorporated by reference to Exhibit 10.58 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.53 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company,
Warren C. Cook, H&S Land, Inc., Loaf Land, Inc. and Clement Begin relating to Sugarloaf Land Partners II
(incorporated by reference to Exhibit 10.59 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.54 First Amendment to Credit Agreement dated as of November 27, 1996, among ASC East, certain Subsidiaries,
Fleet National Bank, BankBoston N.A., KeyBank National Association and Fleet National Bank, as Agent.*
10.55 Second Amendment to Credit Agreement dated as of May 30, 1997, among ASC East, certain Subsidiaries,
Fleet National Bank, BankBoston N.A., KeyBank National Association of Maine and Fleet National Bank, as
Agent.*
10.56 Third Amendment to Credit Agreement dated as of July 1997, among ASC East, certain Subsidiaries, Fleet
National Bank, Bank Boston, N.A., KeyBank National Association and Fleet National Bank, as Agent.*
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.57 Limited Guaranty of Payment and Performance dated as of October 3, 1996 from ASC East to Key Bank of
Maine (incorporated by reference to Exhibit 10.60 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.58 Purchase and Sale Agreement dated as of August 30, 1996, among Waterville Valley Ski Area, Ltd.,
Cranmore, Inc., ASC East and Booth Creek Ski Acquisition Corp. (incorporated by reference to Exhibit
10.61 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.59 Purchase and Sale Agreement dated as of October 16, 1996, among Sherburne Pass Mountain Properties, LLC,
Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert, and
Pico Ski Area Management Company (incorporated by reference to Exhibit 10.62 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.60 Fourth Amendment to Credit Agreement dated as of September 25, 1997, among ASC East, certain
Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National
Bank, as Agent.*
10.61 $2,500,000.00 Promissory Note from the Registrant to Madeleine LLC dated June 18, 1997.*
10.62 $6,500,000.00 Promissory Note from ASC Utah to Wolf Mountain Resorts, L.C. dated July 3, 1997.*
10.63 Guaranty dated as of July 3, 1997 by the Registrant to Wolf Mountain Resorts, L.C.*
10.64 Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf Mountain Resorts, L.C.*
10.65 Ground Lease Guaranty dated July 3, 1997, from the Registrant to Wolf Mountain Resorts, L.C.*
10.66 Securities Purchase Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.*
10.67 $17,500,000.00 14% Senior Exchangeable Note Due 2002 dated July 28, 1997, from the Registrant to
Madeleine LLC.*
10.68 First Amendment to Securities Purchase Agreement dated as of July 25, 1997, between the Registrant and
Madeleine LLC.*
10.69 Registration Rights Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.*
10.70 Form of Repriced Converts Indenture between the Registrant and trustee.*
10.71 Loan and Security Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., the
lenders listed therein and Textron Financial Corporation, as Administrative Agent for the lenders.*
10.72 $2,750,000 Promissory Note dated November, 1996 by Booth Creek Ski Acquisition Corp., Waterville Valley
Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc. to ASC East.*
10.73 Management Agreement dated August 7, 1997, between Grand Summit Hotel Condominium Unit Owners
Association, Inc. and L.B.O. Holding, Inc.**
10.74 Purchase and Sale Agreement dated July 3, 1997, between Wolf Mountain Resorts, L.C., and ASC Utah.*
10.75 Second Mortgage Deed, Security Agreement and Financing Statement from Waterville Valley Ski Resort, Inc.
to ASC East, dated November 27, 1996.*
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.76 Promissory Note Dated August 15, 1997, in the principal amount of $30,000,000 issued by Grand Summit
Resort Properties, Inc. to Textron Financial Corporation.*
10.77 Agreement in Trust dated as of November 27, 1996, by Waterville Valley Ski Resort, Inc. to ASC East.**
10.78 Second Mortgage Deed, Security Agreement and Financing Statement from Mt. Cranmore Ski Resort, Inc. to
ASC East dated November 27, 1996.*
10.79 Promissory Note dated August 15, 1997, in the principal amount of $25,000,000 issued by Grand Summit
Resort Properties, Inc. to Green Tree Financial Servicing Corporation.*
10.80 Subscription Agreement dated June 27, 1997, between Leslie B. Otten and ASC East.*
10.81 Joinder of Sugarloaf Mountain Corporation, Sugartech and Mountainside dated August 30, 1996, among Fleet
National Bank, as Agent on behalf of the lenders, Sugarloaf Mountain Corporation, Sugartech, Mountainside
and certain Subsidiaries.*
10.82 Mortgage, Assignment of Rents and Security Agreement (Attitash) dated as of August 1, 1997, by Grand
Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.*
10.83 Letter Agreement dated August 30, 1996, among Fleet National Bank, as Agent, Fleet National Bank,
BankBoston, N.A., and KeyBank National Association of Maine and ASC East and certain Subsidiaries
amending the Credit Agreement dated as of June 28, 1996.*
10.84 Security Agreement dated as of August 30, 1996, among Sugarloaf Mountain Corporation, Mountainside and
Sugartech and Fleet National Bank, as Agent.*
10.85 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement
dated as of August 27, 1996, from Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.*
10.86 Collateral Assignment of Leases and Rents dated August 27, 1996, by Sugarloaf Mountain Corporation to
Fleet National Bank, as Agent.*
10.87 Hazardous Materials Indemnification Agreement dated as of August 30, 1996, among ASC East, certain
Subsidiaries and Fleet National Bank, as Agent.*
10.88 Assignment of Agreements, Permits and Contracts dated as of August 30, 1996, by Sugarloaf Mountain
Corporation to Fleet National Bank, as Agent.*
10.89 Stock Option Plan.*
10.90 Form of Stock Non-Qualified Option Agreement (Five-Year Vesting Schedule).*
10.91 Form of Non-Qualified Stock Option Agreement (Fully-Vested).*
10.92 Form of Incentive Stock Option Agreement.*
10.93 Assignment of Rents and Leases (Attitash Project) dated as of August 1, 1997, by Grand Summit Resort
Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.*
10.94 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., L.B.O.
Holding, Inc. and Textron Financial Corporation, as Administrative Agent.*
10.95 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., ASC East
and Textron Financial Corporation, as Administrative Agent.*
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.96 Assignment of Property-Related Contracts dated as of August 1, 1997, by Grand Summit Resort Properties,
Inc. in favor of Textron Financial Corporation, as Administrative Agent.**
10.97 Collateral Assignment of Declarant's Rights dated as of August 1, 1997 between Grand Summit Resort
Properties, Inc. and Textron Financial Corporation.*
10.98 Letter Agreement dated August 27, 1996, among S.K.I. Ltd. and certain shareholders of Sugarloaf Mountain
Corporation (incorporated by reference to Exhibit 10.63 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.99 Ski Lease dated September 18, 1997, between ASC Utah and Iron Mountain, LLC.*
10.100 Agreement concerning American Skiing Company for Holder of Special Use Permit No. 4002.01 dated January
2, 1997, among the United States Department of Agriculture Forest Service, ASC East and Waterville Valley
Ski Resort, Inc.**
11.1 Computation of pro forma earnings per share.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.**
23.2 Consent of Pierce Atwood.**
23.3 Consent of Price Waterhouse LLP.*
23.4 Consent of Arthur Andersen LLP.*
23.5 Consent of Berry, Dunn, McNeil & Parker.*
24.1 Power of Attorney.***
27.1 Financial Data Schedule.***
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
*** Previously filed.
All schedules have been omitted because they are not required or because the
required information is given in the Consolidated Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Articles of
Incorporation, as amended, and By-Laws, as amended, of the Registrant and the
laws of the State of Maine or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matters have been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
II-9
<PAGE>
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bethel,
State of Maine, on this 1st day of October, 1997.
<TABLE>
<S> <C> <C>
AMERICAN SKIING COMPANY
By: /s/ LESLIE B. OTTEN
-----------------------------------------
Leslie B. Otten
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
/s/ LESLIE B. OTTEN Chairman of the Board of
------------------------------------------- Directors, President and
Leslie B. Otten Chief Executive Officer October 1, 1997
(Principal Executive Officer)
/s/ THOMAS M. RICHARDSON Chief Financial Officer,
------------------------------------------- Senior Vice President,
Thomas M. Richardson Treasurer and Director October 1, 1997
(Principal Financial and
Accounting Officer)
/s/ CHRISTOPHER E. HOWARD Senior Vice President, Chief
------------------------------------------- Administrative Officer,
Christopher E. Howard General Counsel, Clerk and October 1, 1997
Director
</TABLE>
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Stock Purchase Agreement dated as of August 1, 1997, among Kamori International Corporation, ASC West and
the Registrant.*
2.2 Escrow Agreement dated as of August 1, 1997, among ASC West, Kamori International Corporation and the
LTCB Trust Company.*
3.1 Articles of Incorporation of the Registrant, as amended.**
3.2 By-Laws of the Registrant.*
4.1 Specimen Certificate for shares of Common Stock, $.01 par value, of the Registrant.**
5.1 Opinion of Pierce Atwood with respect to the validity of the securities being offered.**
10.1 Credit Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Fleet National Bank,
BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent (incorporated by
reference to Exhibit 10.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.2 Security Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National
Bank, as Agent (incorporated by reference to Exhibit 10.2 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.3 Revolving Credit Notes dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National
Bank, BankBoston, N.A. and KeyBank National Association in the aggregate principal amount of $65,000,000
(incorporated by reference to Exhibit 10.3 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.4 Swing Line Note dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank
in the aggregate principal amount of $5,000,000 (incorporated by reference to Exhibit 10.4 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement
dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent
(representative of substantially similar agreements of even date by each of Sunday River, Ltd., L.B.O.
Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain
Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. to
Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.5 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.6 Collateral Assignments of Leases and Rents dated as of June 28, 1996, by Sunday River Skiway Corporation
to Fleet National Bank, as Agent (representative of substantially similar assignments of even date by
each of Sunday River, Ltd., L.B.O. Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc.,
Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and
Waterville Valley Ski Area Ltd. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit
10.6 to ASC East's Registration Statement of Form S-4, Registration No. 333-9763).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.7 Development Agreement dated September 18, 1997, among ASC Utah, Iron Mountain Associates, LLC, WPA, Ltd.,
Iron Mountain Holding Group, LC and Iron Mountain Alliance, Inc.*
10.8 Assignment in Trust dated as of June 28, 1996, from L.B.O. Holding, Inc. to Fleet National Bank, as Agent
(incorporated by reference to Exhibit 10.8 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.9 Assignment of Agreements, Permits and Contracts dated as of June 28, 1996, by Sunday River Skiway
Corporation to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.9 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.10 Assignment of Trademarks and Service Marks (U.S.) dated as of June 28, 1996, by ASC East and certain
Subsidiaries to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.10 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.11 Hazardous Materials Indemnification Agreement dated as of June 28, 1996, among ASC East, certain
Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.11 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.12 Unlimited Guaranty dated as of June 28, 1996, by LBO Hotel Co. in favor of Fleet National Bank, as Agent
(incorporated by reference to Exhibit 10.12 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.13 Unlimited Guaranty dated as of June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet
National Bank, as Agent (incorporated by reference to Exhibit 10.13 to ASC East's Registration Statement
on Form S-4, Registration No. 333-9763).
10.14 Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and ASC Utah.*
10.15 Intercreditor Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Snowridge, Inc.
and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.15 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.16 Loan and Security Agreement dated as of October 1, 1984, among the State of Vermont (acting by and
through the Vermont Industrial Development Authority), Sherburne Corporation, Proctor Bank and
BankBoston, N.A. (incorporated by reference to Exhibit 10.16 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.17 Loan and Security Agreement dated as of October 1, 1984, among the State of Vermont (acting by and
through the Vermont Industrial Development Authority), Mount Snow Ltd., Proctor Bank and BankBoston,
N.A.**
10.18 Lease Agreement dated April 2, 1997, between Grand Summit Resort Properties, Inc. and L.B.O. Holding,
Inc.**
10.19 Indenture dated October 24, 1990, between Killington Ltd. and The Howard Bank, as trustee (representative
of indentures with respect to similar indebtedness aggregating approximately $2,995,000 in original
principal amount and maturing at various times from 2015 to 2016) (incorporated by reference to Exhibit
10.19 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.20 Indenture dated September 25, 1986, between Killington Ltd. and The Howard Bank, as trustee
(representative of indentures with respect to similar indebtedness aggregating approximately $10,873,500
in original principal amount and maturing at various times from 1997 to 2013) (incorporated by reference
to Exhibit 10.20 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.21 Restated Concession Agreement dated as of April 30, 1992, between Sugarloaf Mountain Corporation and
Boston Concessions Group, Inc., together with Amendment thereto, Loan Agreement, and $150,000 Promissory
Notes, each dated July 31, 1995 (incorporated by reference to Exhibit 10.21 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.22 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company
of New York, relating to Series A and Series B 12% Senior Subordinated Notes Due 2006 (incorporated by
reference to Exhibit 4.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.23 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company
of New York, relating to the Series A and Series B 13 3/4% Subordinated Discount Notes Due 2007
(incorporated by reference to Exhibit 4.2 to ASC East's Registration Statement on Form S-4, Registration
No. 333-9763).
10.24 Registration Rights Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Bear,
Stearns & Co. Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.3 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.25 Purchase Agreement dated June 25, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co. Inc.
and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.4 to ASC East's Registration Statement
on Form S-4, Registration No. 333-9763).
10.26 Registration Rights Agreement dated June 28, 1996, among ASC East, certain Subsidiaries and Bear, Stearns
& Co. Inc. (incorporated by reference to Exhibit 4.5 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.27 Pledge and Disbursement Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and
United States Trust Company of New York (incorporated by reference to Exhibit 4.6 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.28 Shareholders Agreement dated as of June 28, 1996, among Leslie B. Otten, ASC East and Bear, Stearns & Co.
Inc. (incorporated by reference to Exhibit 4.7 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.29 $2,311,838.00 Promissory Note dated May 16, 1995, from Mountain Wastewater Treatment, Inc. to LHC
Corporation (incorporated by reference to Exhibit 10.32 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.30 $6,120,000.00 Promissory Note, Senior Commercial Mortgage Deed, Junior Commercial Mortgage Deed, and
Senior Collateral Assignment of Income, Revenue and Rentals from Sugarbush Resort Holdings, Inc. to
Snowridge, Inc. and Sugarbush Inn Corporation dated May 16, 1995 and attachments thereto (incorporated by
reference to Exhibit 10.33 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.31 Form of Subordinated Debenture Due 2002 from L.B.O. Holding, Inc. to former shareholders of Mt. Attitash
Lift Corporation (incorporated by reference to Exhibit 10.34 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.32 Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift Corporation, certain of its
shareholders and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.35 to ASC East's
Registration Statement on Form S-4, Registration No. 333-9763).
10.33 Stock Purchase Agreement dated August 17, 1994, between Sugarloaf Mountain Corporation and S-K-I Ltd.
(incorporated by reference to Exhibit 10.36 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.34 Acquisition Agreement dated May 16, 1995, among Sugarbush Resort Holdings, Inc., Sugarbush Resort
Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush Inn Corporation and Bev Ridge, Inc.
(incorporated by reference to Exhibit 10.38 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.35 Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River
Skiway Corporation (incorporated by reference to Exhibit 10.40 to ASC East's Registration Statement on
Form S-4, Registration No. 333-9763).
10.36 Lease/Option dated July 19, 1984, between John Blake and L.B.O. Holding, Inc. (incorporated by reference
to Exhibit 10.41 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.37 Lease Agreement dated as of July 1, 1993, between Snowridge, Inc. and Mountain Water Company
(incorporated by reference to Exhibit 10.42 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.38 Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment,
Inc. (incorporated by reference to Exhibit 10.43 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.39 Lease dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to
Killington Ltd.) (incorporated by reference to Exhibit 10.44 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.40 Lease Agreement dated as of February 20, 1990, between Pico Pond Associates and Killington Ltd.
(incorporated by reference to Exhibit 10.45 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.41 Lease Agreement dated as of June 21, 1994, between the Town of Wilmington and Mount Snow, Ltd.
(incorporated by reference to Exhibit 10.46 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.42 Lease Agreement dated April 24, 1995, between Sargent, Inc. and Mount Snow, Ltd. (incorporated by
reference to Exhibit 10.47 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.43 United States Forest Service Special Use Permit No. 4040/01, issued November 29, 1989 to Mount Snow Ltd.
(incorporated by reference to Exhibit 10.48 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.44 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994 to L.B.O. Holding, Inc.
and Amendment 1 thereto (incorporated by reference to Exhibit 10.49 to ASC East's Registration Statement
on Form S-4, Registration No. 333-9763).
10.45 United States Forest Service Special Use Permit No. 4041 issued May 17, 1995, to Sugarbush Resort
Holdings, Inc. (incorporated by reference to Exhibit 10.51 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.46 Agreement between Sugarloaf Mountain Corporation and the Inhabitants of the Town of Carrabassett Valley,
Maine, concerning the Sugarloaf Golf Course dated June 3, 1987 (incorporated by reference to Exhibit
10.52 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.47 Commercial Lease dated August 7, 1997, between L.B.O. Holding, Inc. and Grand Summit Hotel Condominium
Unit Owners Association, Inc.**
10.48 Agreement dated July 26, 1995, among Bombardier Corporation, Killington, Ltd., Mount Snow, Ltd.,
Waterville Valley Ski Area, Ltd., Bear Mountain Ltd., and Sugarloaf Mountain Corporation (incorporated by
reference to Exhibit 10.55 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.49 Agreement dated June 3, 1996, between ASC East and Eastern Resorts Company, LLC (incorporated by
reference to Exhibit 10.56 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
10.50 Employment Agreement dated as of August 24, 1994, among Warren C. Cook, Sugarloaf Mountain Corporation
and S-K-I Ltd. (incorporated by reference to Exhibit 10.57 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.51 Christopher E. Howard Employment Terms (Agreement) dated August 22, 1996, between Christopher E. Howard
and ASC East.*
10.52 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company,
Warren C. Cook, Linwood E. Doble, Inc., H&S Land, Inc. and Loaf Land Inc. relating to Sugarloaf Land
Partners I (incorporated by reference to Exhibit 10.58 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.53 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company,
Warren C. Cook, H&S Land, Inc., Loaf Land, Inc. and Clement Begin relating to Sugarloaf Land Partners II
(incorporated by reference to Exhibit 10.59 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.54 First Amendment to Credit Agreement dated as of November 27, 1996, among ASC East, certain Subsidiaries,
Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.*
10.55 Second Amendment to Credit Agreement dated as of May 30, 1997, among ASC East, certain Subsidiaries,
Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.*
10.56 Third Amendment to Credit Agreement dated as of July 1997, among ASC East, certain Subsidiaries, Fleet
National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.*
10.57 Limited Guaranty of Payment and Performance dated as of October 3, 1996 from ASC East to KeyBank of Maine
(incorporated by reference to Exhibit 10.60 to ASC East's Registration Statement of Form S-4,
Registration No. 333-9763).
10.58 Purchase and Sale Agreement dated as of August 30, 1996, among Waterville Valley Ski Area, Ltd.,
Cranmore, Inc., ASC East and Booth Creek Ski Acquisition Corp. (incorporated by reference to Exhibit
10.61 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.59 Purchase and Sale Agreement dated as of October 16, 1996, among Sherburne Pass Mountain Properties, LLC,
Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert, and
Pico Ski Area Management Company (incorporated by reference to Exhibit 10.62 to ASC East's Registration
Statement on Form S-4, Registration No. 333-9763).
10.60 Fourth Amendment to Credit Agreement dated as of September 25, 1997, among ASC East, certain
Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National
Bank, as Agent.*
10.61 $2,500,000.00 Promissory Note from the Registrant to Madeleine LLC dated June 18, 1997.*
10.62 $6,500,000.00 Promissory Note from ASC Utah to Wolf Mountain Resorts, L.C. dated July 3, 1997.*
10.63 Guaranty dated as of July 3, 1997 by the Registrant to Wolf Mountain Resorts, L.C.*
10.64 Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf Mountain Resorts, L.C.*
10.65 Ground Lease Guaranty dated July 3, 1997, from the Registrant to Wolf Mountain Resorts, L.C.*
10.66 Securities Purchase Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.*
10.67 $17,500,000.00 14% Senior Exchangeable Note Due 2002 dated July 28, 1997, from the Registrant to
Madeleine LLC.*
10.68 First Amendment to Securities Purchase Agreement dated as of July 25, 1997, between the Registrant and
Madeleine LLC.*
10.69 Registration Rights Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.*
10.70 Form of Repriced Converts Indenture between the Registrant and trustee.*
10.71 Loan and Security Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., the
lenders listed therein and Textron Financial Corporation as Administrative Agent for the lenders.*
10.72 $2,750,000 Promissory Note dated November, 1996, by Booth Creek Ski Acquisition Corp., Waterville Valley
Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc. to ASC East.*
10.73 Management Agreement dated as of August 7, 1997, between Grand Summit Hotel Condominium Unit Owners
Association, Inc. and L.B.O. Holding, Inc.**
10.74 Purchase and Sale Agreement dated July 3, 1997, between Wolf Mountain Resorts, L.C., and ASC Utah.*
10.75 Second Mortgage Deed, Security Agreement and Financing Statement from Waterville Valley Ski Resort, Inc.
to ASC East dated November 27, 1996.*
10.76 Promissory Note dated August 15, 1997, in the principal amount of $30,000,000 issued by Grand Summit
Resort Properties, Inc. to Textron Financial Corporation.*
10.77 Agreement in Trust dated as of November 27, 1996, by Waterville Valley Ski Resort, Inc. to ASC East.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.78 Second Mortgage Deed, Security Agreement and Financing Statement from Mt. Cranmore Ski Resort, Inc. to
ASC East dated November 27, 1996.*
10.79 Promissory Note dated August 15, 1997, in the principal amount of $25,000,000 issued by Grand Summit
Resort Properties, Inc. to Green Tree Financial Servicing Corporation.*
10.80 Subscription Agreement dated June 27, 1997, between Leslie B. Otten and ASC East.*
10.81 Joinder of Sugarloaf Mountain Corporation, Sugartech and Mountainside dated August 30, 1996, among Fleet
National Bank as Agent on behalf of the lenders, Sugarloaf Mountain Corporation, Sugartech, Mountainside
and certain Subsidiaries.*
10.82 Mortgage, Assignment of Rents and Security Agreement (Attitash) dated as of August 1, 1997, by Grand
Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.*
10.83 Letter Agreement dated August 30, 1996, among Fleet National Bank, as Agent, Fleet National Bank,
BankBoston, N.A., and KeyBank National Association and ASC East and certain Subsidiaries amending the
Credit Agreement dated as of June 28, 1996.*
10.84 Security Agreement dated as of August 30, 1996, among Sugarloaf Mountain Corporation, Mountainside and
Sugartech and Fleet National Bank, as Agent.*
10.85 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement
dated as of August 27, 1996, from Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.*
10.86 Collateral Assignment of Leases and Rents dated August 27, 1996, by Sugarloaf Mountain Corporation to
Fleet National Bank, as Agent.*
10.87 Hazardous Materials Indemnification Agreement dated as of August 30, 1996, among ASC East, certain
Subsidiaries and Fleet National Bank, as Agent.*
10.88 Assignment of Agreements, Permits and Contracts dated as of August 30, 1996, by Sugarloaf Mountain
Corporation to Fleet National Bank, as Agent.*
10.89 Stock Option Plan.*
10.90 Form of Non-Qualified Stock Option Agreement (Five-Year Vesting Schedule).*
10.91 Form of Non-Qualified Stock Option Agreement (Fully-Vested).*
10.92 Form of Incentive Stock Option Agreement.*
10.93 Assignment of Rents and Leases (Attitash Project) dated as of August 1, 1997, by Grand Summit Resort
Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.*
10.94 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., L.B.O.
Holding, Inc. and Textron Financial Corporation, as Administrative Agent.*
10.95 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., ASC East
and Textron Financial Corporation, as Administrative Agent.*
10.96 Assignment of Contracts dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of
Textron Financial Corporation, as Administrative Agent.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<C> <S>
10.97 Collateral Assignment of Declarant's Rights dated as of August 1, 1997 between Grand Summit Resort
Properties, Inc. and Textron Financial Corporation, as Administrative Agent.*
10.98 Letter Agreement dated August 27, 1996, among S-K-I Ltd. and certain shareholders of Sugarloaf Mountain
Corporation (incorporated by reference to Exhibit 10.63 to ASC East's Registration Statement on Form S-4,
Registration No. 333-9763).
10.99 Ski Lease dated September 18, 1997, between ASC Utah and Iron Mountain Associates, LLC.*
10.100 Agreement Concerning American Skiing Company for Holder of Special Use Permit No. 4002-01 dated January
2, 1997, among the United States Department of Agriculture Forest Service, ASC East and Waterville Valley
Ski Resort, Inc.**
11.1 Computation of pro forma earnings per share.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.**
23.2 Consent of Pierce Atwood.**
23.3 Consent of Price Waterhouse LLP.*
23.4 Consent of Arthur Andersen LLP.*
23.5 Consent of Berry, Dunn, McNeil & Parker.*
24.1 Power of Attorney.***
27.1 Financial Data Schedule.***
</TABLE>
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* Filed herewith.
** To be filed by amendment.
*** Previously filed.
<PAGE>
EXHIBIT 1.1
__________ Shares
ASC Holdings, Inc.
Common Stock
UNDERWRITING AGREEMENT
__________, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ LLC
MORGAN STANLEY & CO. INCORPORATED
SCHRODER & CO. INC.
As representatives of the several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
ASC Holdings, Inc., a Maine corporation (the "Company"), proposes to
issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of _______________ shares (the "Firm Shares") of
the common stock, $.01 par value per share, of the Company (the "Common Stock").
The Company and Leslie B. Otten (the "Selling Stockholder") also propose to
issue and sell to the several Underwriters not more than an additional _______
shares (the "Additional Shares") of Common Stock, $.01 per value per share, of
which _____________ shares are to be issued and sold by the Company and
_____________ shares are to be sold by the Selling Stockholder, if requested by
the Underwriters as provided in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter referred to collectively as the "Shares". The
Company and the Selling Stockholder are hereinafter sometimes referred to
collectively as the "Sellers."
The offering of the Shares is being made in connection with (i) an
acquisition (the "Acquisition") of, among other things, the Steamboat and
Heavenly ski resorts pursuant to an agreement (the "Acquisition Agreement"),
dated July 31, 1997, between the Company and Kamori International Corporation
("Kamori"), and (ii) the entering into of a
<PAGE>
senior secured credit facility (the "New Credit Facility") providing for
borrowings of up to $210 million.
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "Registration Statement";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "Prospectus". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements.
On the basis of the representations and warranties contained in this Agreement,
and subject to its terms and conditions, the Company agrees to issue and sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a price per Share of $______ (the "Purchase
Price"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Company agrees to
issue and sell, and the Underwriters shall have the right to purchase, severally
and not jointly, up to _______ Additional Shares from the Company at the
Purchase Price and (ii) the Selling Stockholder agrees to sell, and the
Underwriters shall have the right to purchase, severally and not jointly, up to
_______ Additional Shares from the Selling Stockholder at the Purchase Price.
Additional Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole or
in part from time to time by giving written notice thereof to the Company and
the Selling Stockholder within 30 days after the date of this Agreement. You
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, (i) the Company and the
Selling Stockholder agree to sell to the Underwriters the number of Additional
Shares (subject to such adjustment to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares with respect to which the Underwriters
2
<PAGE>
shall have provided notice as the total number of Additional Shares that such
Seller has made available for sale to the Underwriters bears to the total number
of Additional Shares that both Sellers have made available for sale to the
Underwriters and (ii) each Underwriter, severally and not jointly, agrees to
purchase from the Company and the Selling Stockholder the number of Additional
Shares (subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company and the Selling Stockholder as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I bears to the total number of Firm Shares.
Each Seller hereby agrees not to (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also agrees
not to file any registration statement with respect to any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock for a period of 180 days after the date of the Prospectus, without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, the Selling Stockholder agrees that, for a period of
180 days after the date of the Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, it will not make any demand
for, or exercise any right with respect to, the registration of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock. The Company shall, prior to or concurrently with the execution
of this Agreement, deliver an agreement executed by (i) each of the directors
and officers of the Company other than the Selling Stockholder and (ii) each
stockholder listed on Annex I hereto to the effect that such person will not,
during the period commencing on the date such person signs such agreement and
ending 180 days after the date of the Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in
any of the transactions described in the first sentence of this paragraph or (B)
make any demand for, or exercise any right with respect to, the registration of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Sellers are advised by you
that the Underwriters propose (i) to make a public offering of the Shares as
soon after the
3
<PAGE>
execution and delivery of this Agreement as in your judgment is advisable and
(ii) initially to offer the Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at 9:00 A.M., New York City time, on
October __, 1997 (the "Closing Date") at such place as you shall designate. The
Closing Date and the location of delivery of and payment for the Firm Shares may
be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as you
shall designate at 9:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of and
payment for such Additional Shares may be varied by agreement between you, the
Selling Stockholder and the Company.
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date or an Option Closing Date, as the
case may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be.
Certificates in definitive form evidencing the Shares shall be delivered to you
on the Closing Date or the applicable Option Closing Date, as the case may be,
with any transfer taxes thereon duly paid by the respective Sellers, for the
respective accounts of the several Underwriters, against payment to the Sellers
of the Purchase Price therefor by wire transfer of Federal or other funds
immediately available in New York City.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
4
<PAGE>
(b) To furnish to you five signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits, and to furnish to you and each Underwriter designated by
you such number of conformed copies of the Registration Statement as so filed
and of each amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the Act;
during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
or to which you shall reasonably object after being so advised; and, during such
period, to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or amendment or supplement
to the Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business
day after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish to each Underwriter and any dealer as many copies of the
Prospectus (and of any amendment or supplement to the Prospectus) as such
Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in
5
<PAGE>
which it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters and
transactions relating to the Prospectus, the Registration Statement, any
preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon
as practicable an earnings statement covering the twelve-month period ending
October 31, 1998 that shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel, the Company's accountants and the Selling Stockholder's counsel (in
addition to the Company's counsel) in connection with the registration and
delivery of the Shares under the Act and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to the listing of the Shares on
the Nasdaq National Market, (vii) the cost of printing certificates representing
the Shares, (viii) the costs and charges of any transfer agent, registrar and/or
depositary, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company and the Selling Stockholder hereunder for which
provision is not otherwise made in this Section. The provisions of this Section
shall not supersede or
6
<PAGE>
otherwise affect any agreement that the Company and the Selling Stockholder may
otherwise have for allocation of such expenses between themselves.
(j) To use its best efforts to list the Shares on the Nasdaq
National Market and to maintain the listing of the Shares on the Nasdaq National
Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will become effective no later than
10:00 P.M., New York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b)(i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if applicable,
7
<PAGE>
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(d) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
(e) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens granted or
issued by the Company or any of its subsidiaries relating to or entitling any
person to purchase or otherwise to acquire any shares of the capital stock of
the Company or any of its subsidiaries, except as otherwise disclosed in the
Registration Statement.
(f) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholder) have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights; and the Shares to be issued and sold by the
Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and, except as described in the Prospectus, are
owned by the Company,
8
<PAGE>
directly or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby and in the Prospectus will
not (i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various states), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of its subsidiaries
or any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their respective
property or (iv) result in the suspension, termination or revocation of any
Authorization (as defined below) of the Company or any of its subsidiaries or
any other impairment of the rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject that
are required to be described in the Registration Statement or the Prospectus and
are not so described; nor are there any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws") or any provisions of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
and regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a
9
<PAGE>
material adverse effect on the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Each such Authorization is valid and in full
force and effect and each of the Company and its subsidiaries is in compliance
with all the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction would not, singly or
in the aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
(o) This Agreement has been duly authorized, executed and delivered
by the Company.
(p) Price Waterhouse LLP are the independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the
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basis stated therein at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in accordance with generally accepted accounting
principles the information required to be stated therein; and the other
financial and statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) are, in
all material respects, accurately presented and prepared (i) on a basis
consistent with such financial statements and the books and records of the
Company and (ii) in good faith on the basis of the assumptions described in the
Registration Statement and such assumptions are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in
the Prospectus, other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its subsidiaries
and (iii) neither the Company nor any of its subsidiaries has incurred any
material liability or obligation, direct or contingent.
(u) All of the representations and warranties of the Company and
Kamori in the Acquisition Agreement are true and correct as if made on and as of
the date hereof.
(v) All of the representations and warranties of the Company in the
New Credit Facility are true and correct as if made on and as of the date
hereof.
(w) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case
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free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each case except
as described in the Prospectus.
(x) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its subsidiaries
on the other hand, which is required by the Act to be described in the
Registration Statement or the Prospectus which is not so described.
(y) The pro forma financial statements of the Company and its
subsidiaries and the related notes thereto set forth in the Registration
Statement and the Prospectus (and any supplement or amendment thereto) have been
prepared on a basis consistent with the historical financial statements of the
Company and its subsidiaries, give effect to the assumptions used in the
preparation thereof on a reasonable basis and in good faith and present fairly
the historical and proposed transactions contemplated by the Registration
Statement and the Prospectus. Such pro forma financial statements have been
prepared in accordance with the applicable requirements of Rule 11-02 of
Regulation S-X promulgated by the Commission. The other pro forma financial and
statistical information and data set forth in the Registration Statement and the
Prospectus (and any supplement or amendment thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements.
(z) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(aa) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company or
any of its subsidiaries before the National Labor Relations Board or any state
or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of its subsidiaries or (iii)
union representation question existing with respect to the employees of the
Company and its subsidiaries, except for such actions specified above, which,
singly or in the aggregate, would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole. To the best of the Company's knowledge,
no collective bargaining organizing activities are taking place with respect to
the Company or any of its subsidiaries.
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(ab) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ac) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; and neither the Company nor any of its subsidiaries (i) has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be made in
order to continue such insurance or (ii) has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers at a cost that would
not have a material adverse effect on the business, prospects, financial
conditions or results of operations of the Company and its subsidiaries, taken
as a whole.
(ad) The Company has delivered to the Underwriters true and correct
copies of all documents and agreements related to the Acquisition, including all
amendments, alterations, modifications or waivers and all exhibits or schedules.
(ae) The Company has delivered to the Underwriters true and correct
copies of all documents and agreements related to the Securities Purchase
Agreement, dated as of July 2, 1997, between the Company and Madeleine LLC, and
all capital stock, preferred stock or debt instruments issued or to be, or
proposed to be, issued in connection therewith, including all amendments,
alterations, modifications or waivers and all exhibits or schedule.
(af) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be deemed to
be a representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
For the purpose of the foregoing representations, after giving
effect to the Acquisition, the term "subsidiaries" shall be deemed to include
the entities acquired from Kamori pursuant to the Acquisition Agreement.
SECTION 7. Representations and Warranties of the Selling
Stockholder. The Selling Stockholder represents and warrants to each Underwriter
that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on each
Option
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Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) The Shares to be sold by such Selling Stockholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(c) Such Selling Stockholder has, and on each Option Closing Date
will have, full legal right, power and authority, and all authorization and
approval required by law, to enter into this Agreement, and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Stockholder in the
manner provided herein and therein.
(d) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder.
(e) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever.
(f) The execution, delivery and performance of this Agreement, the
compliance by such Selling Stockholder with all the provisions hereof and the
consummation of the transactions contemplated hereby and thereby will not (i)
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (ii) conflict with
or constitute a breach of any of the terms or provisions of, or as a default
under any indenture, loan agreement, mortgage, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder or any property of such Selling Stockholder is bound or (iii)
violate or conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over such Selling Stockholder or any property of such Selling
Stockholder.
(g) The information in the Registration Statement under the caption
"Principal and Selling Shareholders" which specifically relates to such Selling
Stockholder does not, and will not on the Closing Date or any Option Closing
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(h) At any time during the period described in Section 5(d), if
there is any change in the information referred to in Section 7(i), such Selling
Stockholder will immediately notify you of such change.
(i) Each certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel for the Underwriters
shall be deemed to be a
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representation and warranty by such Selling Stockholder to the Underwriters as
to the matters covered thereby.
SECTION 8. Indemnification. (a) The Sellers, jointly and severally,
agree to indemnify and hold harmless each Underwriter, its directors, its
officers and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use therein. Notwithstanding the
foregoing, the aggregate liability of the Selling Stockholder pursuant to this
Section 8(a) shall be limited to an amount equal to the total proceeds (before
deducting expenses) received by such Selling Stockholder from the Underwriters
for the sale of the Shares sold by such Selling Stockholder hereunder.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, who controls such Selling Stockholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Sellers to such Underwriter
but only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of
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such counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for (i) the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all Underwriters, their officers and
directors and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (ii)
the fees and expenses of more than one separate firm of attorneys (in addition
to any local counsel) for the Company, its directors, its officers who sign the
Registration Statement and all persons, if any, who control the Company within
the meaning of either such Section and (iii) the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for the
Selling Stockholder, and all such fees and expenses shall be reimbursed as they
are incurred. In the case of any such separate firm for the Underwriters, their
officers and directors and such control persons of any Underwriters, such firm
shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation. In the case of any such separate firm for the Company and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate firm for
the Selling Stockholder, such firm shall be designated in writing by the
Attorneys. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and
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(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Sellers on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Sellers on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Sellers, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Sellers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholder on the one hand or the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The
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Underwriters' obligations to contribute pursuant to this Section 8(d) are
several in proportion to the respective number of Shares purchased by each of
the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The Selling Stockholder hereby designates the Company as its
authorized agent, upon which process may be served in any action which may be
instituted in any state or federal court in the State of New York by any
Underwriter, any director or officer of any Underwriter or any person
controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and the Selling Stockholder
will accept the jurisdiction of such court in such action, and waives, to the
fullest extent permitted by applicable law, any defense based upon lack of
personal jurisdiction or venue. A copy of any such process shall be sent or
given to such Selling Stockholder, at the address for notices specified in
Section 12 hereof.
SECTION 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date (after giving
effect to the Acquisition) with the same force and effect as if made on and as
of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Thomas M. Richardson and Christopher E. Howard, in
their capacities as Senior Vice Presidents of the Company, confirming the
matters set forth in Sections 6(t), 9(a) and 9(b) and that the Company has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company on or
prior to the Closing Date.
(d) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company
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and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described above, in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(e) All the representations and warranties of the Selling
Stockholder contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date and
you shall have received on the Closing Date a certificate dated the Closing Date
from the Selling Stockholder to such effect and to the effect that such Selling
Stockholder has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
such Selling Stockholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Pierce Atwood, counsel for the Company and the Selling Stockholder, to the
effect that:
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described
in the Prospectus and to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly
qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of the
Company (including the Shares to be sold by the Selling Stockholder)
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iv) all of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries,
free and clear of any security interest, claim, lien, encumbrance or
adverse interest of any nature;
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(v) the statement under the caption "Description of Capital
Stock-Antitakeover Effects of Provisions of the Articles of
Incorporation, Bylaws and Maine Law" in the Prospectus and Item 14
of Part II of the Registration Statement, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings; and
(vi) (A) such counsel has no reason to believe that at the
time the Registration Statement became effective or on the date of
this Agreement, the Registration Statement and the Prospectus
included therein (except for the financial statements and other
financial data as to which such counsel need not express any belief)
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) such counsel has
no reason to believe that the Prospectus, as amended or
supplemented, if applicable (except for the financial statements and
other financial data, as aforesaid) contains any untrue statement of
a material fact or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of LeBoeuf, Lamb, Greene & MacRae, LLP, counsel for the Company, to the effect
that:
(i) the Shares to be issued and sold by the Company hereunder
have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement,
will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or
similar rights;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the statements under the captions "Description of Certain
Indebtedness," "Shares Eligible for Future Sale," "Business-Leased
Properties," "Certain United States Federal Tax Considerations for
NonUnited States Holders," "Management-Stock Option Plans,"
"Description of Capital Stock" and "Underwriting" in the Prospectus
and Item 15 of Part II of the Registration Statement, insofar as
such statements constitute a summary of the legal matters, documents
or proceedings referred to therein,
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fairly present the information called for with respect to such legal
matters, documents and proceedings;
(v) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or their
respective property is bound;
(vi) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and
no proceedings for that purpose are, to the best of such counsel's
knowledge after due inquiry, pending before or contemplated by the
Commission;
(vii) the execution, delivery and performance of this
Agreement by the Company, the compliance by the Company with all the
provisions hereof and the consummation of the transactions
contemplated hereby and in the Prospectus will not (A) require any
consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various
states), (B) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws
of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property
is bound, (C) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company,
any of its subsidiaries or their respective property or (D) result
in the suspension, termination or revocation of any Authorization of
the Company or any of its subsidiaries or any other impairment of
the rights of the holder of any such Authorization;
(viii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as
21
<PAGE>
exhibits to the Registration Statement that are not so described or
filed as required;
(ix) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not so
described or filed as required;
(x) neither the Company nor any of its subsidiaries has
violated any Environmental Law or any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a material adverse
effect on the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole;
(xi) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are
necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole;
each such Authorization is valid and in full force and effect and
each of the Company and its subsidiaries is in compliance with all
the terms and conditions thereof and with the rules and regulations
of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of
any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or
in the aggregate, have a material
22
<PAGE>
adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as
a whole;
(xii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xiii) to the best of such counsel's knowledge after due
inquiry, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company or to require the
Company to include such securities with the Shares registered
pursuant to the Registration Statement, except as otherwise
disclosed in the Registration Statement;
(xiv) (A) the Registration Statement and the Prospectus and
any supplement or amendment thereto (except for the financial
statements and other financial data included therein as to which no
opinion need be expressed) comply as to form with the Act, (B) such
counsel has no reason to believe that at the time the Registration
Statement became effective or on the date of this Agreement, the
Registration Statement and the prospectus included therein (except
for the financial statements and other financial data as to which
such counsel need not express any belief) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (C) such counsel has no reason to believe
that the Prospectus, as amended or supplemented, if applicable
(except for the financial statements and other financial data, as
aforesaid) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading;
(xv) the Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement
and has good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests,
equities and claims whatsoever;
(xvi) the Selling Stockholder has full legal right, power and
authority, and all authorization and approval required by law, to
enter into this Agreement and to sell, assign, transfer and deliver
the Shares to be sold by such Selling Stockholder in the manner
provided herein and therein;
(xvii) upon delivery of and payment for the Shares to be sold
by the Selling Stockholder pursuant to this Agreement, good and
clear title to such
23
<PAGE>
Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and
claims whatsoever;
(xviii) the execution, delivery and performance of this
Agreement by such Selling Stockholder, the compliance by such
Selling Stockholder with all the provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby
will not (A) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or
agency (except such as may be required under the securities or Blue
Sky laws of the various states), (B) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, any
indenture, loan agreement, mortgage, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which
any property of such Selling Stockholder is bound or (C) violate or
conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency
having jurisdiction over such Selling Stockholder or any property of
such Selling Stockholder;
(xix) the Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in
the Prospectus;
(xx) no relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries on the one hand, and
the directors, officers, stockholders, customers or suppliers of the
Company or any of its subsidiaries on the other hand, which is
required by the Act to be described in the Registration Statement or
the Prospectus which is not so described;
(xxi) all material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been
filed, other than those filings being contested in good faith, and
all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such
returns or pursuant to any assessment received by the Company or any
of its subsidiaries have been paid, other than those being
24
<PAGE>
contested in good faith and for which adequate reserves have been
provided; and
(xxii) there is no (i) significant unfair labor practice
complaint, grievance or arbitration proceeding pending or threatened
against the Company or any of its subsidiaries before the National
Labor Relations Board or any state or local labor relations board,
(ii) strike, labor dispute, slowdown or stoppage pending or
threatened against the Company or any of its subsidiaries or (iii)
union representation question existing with respect to the employees
of the Company and its subsidiaries, except for such actions
specified above, which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole. To the best of such counsel's
knowledge, no collective bargaining organizing activities are taking
place with respect to the Company or any of its subsidiaries.
The opinions of Pierce Atwood and LeBoeuf, Lamb, Greene & MacRae,
LLP described in Section 9(f) and (g) above shall be rendered to you at the
request of the Company and the Selling Stockholder, as applicable, and shall so
state therein.
(h) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Latham & Watkins, counsel for the Underwriters, as to the
matters referred to in Sections 9(g)(i), 9(g)(ii), 9(g)(iv) (but only with
respect to the statements under the caption "Description of Capital Stock" and
"Underwriting") and 9(g)(xiv).
In giving such opinions with respect to the matters covered by
Sections 9(f)(vi) and 9(g)(xiv), Leboeuf, Lamb, Greene & Macrae LLP, Pierce
Atwood and Latham & Watkins may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(i) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from Price Waterhouse LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(j) The Company shall have delivered to you the agreements specified
in Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(k) The Shares shall have been duly listed on the Nasdaq National
Market.
25
<PAGE>
(l) You shall have received a certificate of the Company, dated as
of the Closing Date, in form and substance satisfactory to you and counsel for
the Underwriters, as to the solvency of the Company following consummation of
the Acquisition.
(m) The Acquisition and the New Credit Facility shall be consummated
prior to, or simultaneously with, the Underwriters purchase of the Shares on
substantially the terms described in the Prospectus and as otherwise disclosed
to you, and you shall have received counterparts, conformed as executed, of the
Acquisition Agreement and the New Credit Facility and such other documentation
as you deem necessary to evidence consummation thereof.
(n) All of the opinions to be delivered by the Company pursuant to
the New Credit Facility and the Acquisition Agreement shall be addressed and
delivered to you.
(o) You shall have received from the Company, prior to the Closing
Date, such further information, certificates and documents as you may reasonably
request.
(p) The Company and the Selling Stockholder shall not have failed on
or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Company or
the Selling Stockholder, as the case may be, on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any
Additional Shares hereunder are subject to the delivery to you on the applicable
Option Closing Date of such documents as you may reasonably request from the
Company and the Selling Stockholder with respect to the good standing of the
Company, the due authorization and issuance of such Additional Shares and other
matters related to the issuance of such Additional Shares.
SECTION 10. Effectiveness of Agreement and Termination. This
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) suspension
of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the
26
<PAGE>
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of Shares to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule I bears to the total number of Firm
Shares which all the non-defaulting Underwriters, as the case may be, have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Firm Shares
or Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If,
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you,
the Company and the Selling Stockholder for purchase of such Firm Shares are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholder. In any such case which does not result in termination of
this Agreement, either you or the Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased on such date, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
such Additional Shares or (ii) purchase not less than the number of Additional
Shares that such non-defaulting Underwriters would have been obligated to
purchase on such date in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
27
<PAGE>
SECTION 11. Agreements of the Selling Stockholder. The Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and performed by such
Selling Stockholder under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares to be sold by
such Selling Stockholder pursuant to this Agreement.
SECTION 12. Miscellaneous. Notices given pursuant to any provision
of this Agreement shall be addressed as follows: (i) if to the Company, to ASC
Holdings, Inc., P.O. Box 450, Sunday River Access Road, Bethel, ME 04217 Attn:
Christopher E. Howard, (ii) if to the Selling Stockholder, to such Selling
Stockholder c/o ASC Holdings, Inc., P.O. Box 450, Sunday River Access Road,
Bethel, ME 04217 and (iii) if to any Underwriter or to you, to you c/o
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Selling
Stockholder and the several Underwriters set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Shares, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter,
the officers or directors of any Underwriter, any person controlling any
Underwriter, the Company, the officers or directors of the Company, any person
controlling the Company, or the Selling Stockholder, (ii) acceptance of the
Shares and payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of
any Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also
agree, jointly and severally, to reimburse the several Underwriters, their
directors and officers and any persons controlling any of the Underwriters for
any and all fees and expenses (including, without limitation, the fees
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholder, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to
28
<PAGE>
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
29
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholder and the several Underwriters.
Very truly yours,
ASC HOLDINGS, INC.
By:______________________________
Title:
LESLIE B. OTTEN
_________________________________
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ LLC
MORGAN STANLEY & CO. INCORPORATED
SCHRODER & CO. INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_______________________________
30
<PAGE>
SCHEDULE I
Number of Firm Shares
Underwriters to be Purchased
------------ ---------------
Donaldson, Lufkin & Jenrette Securities
Corporation
Furman Selz LLC
Morgan Stanley & Co. Incorporated
Schroder & Co. Inc.
Total ______________
<PAGE>
Annex I
[Insert names of stockholders of the Company who will be required to
sign lock ups]
2
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
AMONG
KAMORI INTERNATIONAL CORPORATION, as the Seller
ASC WEST, as the Buyer
AND
ASC HOLDINGS, INC.
August 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions.......................................................... 1
2. Purchase and Sale of Shares.......................................... 7
(a) Basic Transaction.............................................. 7
(b) Purchase Price................................................. 7
(c) Working Capital Adjustment..................................... 8
(d) Additional Payment............................................. 9
(e) Operating Losses............................................... 9
(f) The Closing.................................................... 11
(g) Deliveries at the Closing...................................... 11
(h) Excluded Assets................................................ 11
3. Additional Agreements by the Seller, the Buyer and ASC............... 11
(a) Planned Capital Expenditure Program............................ 11
(b) Sales and Transfer Taxes and Fees.............................. 13
4. Representations and Warranties Concerning the Transac tion........... 13
(a) Representations and Warranties of the Seller................... 13
(b) Representations and Warranties of the Buyer and ASC............ 15
5. Representations and Warranties Concerning the Companies.............. 16
(a) Organization, Qualification, and Corporate Power............... 16
(b) Capitalization................................................. 16
(c) Noncontravention............................................... 17
(d) Brokers' Fees.................................................. 17
(e) Title to Tangible Assets....................................... 18
(f) Financial Statements........................................... 18
(g) Events Subsequent to Most Recent Fiscal Month End.............. 18
(h) Legal Compliance............................................... 18
(i) Tax Matters.................................................... 19
(j) Real Property.................................................. 19
(k) Intellectual Property.......................................... 21
(l) Contracts...................................................... 21
(m) Powers of Attorney............................................. 22
(n) Litigation..................................................... 22
(o) Employee Benefits.............................................. 22
(p) USFS Permits................................................... 23
(q) Labor Matters.................................................. 23
(r) Books and Records.............................................. 24
(s) Insurance...................................................... 24
(t) Environment, Health, and Safety................................ 24
(u) Water Rights................................................... 25
(v) Condition and Sufficiency of Assets............................ 25
(w) Relationships with Affiliates.................................. 26
(x) Guarantees..................................................... 26
i
<PAGE>
Page
----
6. Pre-closing Covenants................................................ 26
(a) General........................................................ 26
(b) Notices to and Consents by Government.......................... 26
(c) Operation of Business.......................................... 27
(d) Maintenance of Assets.......................................... 27
(e) Full Access, Disclosure, Press Release......................... 27
(f) Notice of Developments......................................... 28
(g) Payment of Indebtedness........................................ 28
(h) USFS Permit.................................................... 28
(i) Cooperation.................................................... 28
(j) Qualification of the Buyer to Secure Permits, Licenses
and Other Approvals............................................ 28
(k) Escrow Agreement............................................... 29
(l) Financial Statements........................................... 29
(m) No Shop........................................................ 29
7. Post-Closing Covenants............................................... 29
(a) General........................................................ 29
(b) Litigation Support............................................. 29
(c) Perpetual Lift and Golf Passes................................. 30
(d) Employment..................................................... 31
(e) Bonus.......................................................... 31
8. Conditions to Obligation to Close.................................... 31
(a) Conditions to Obligation of the Buyer and ASC.................. 31
(b) Conditions to Obligation of the Seller......................... 32
9. Tax Matters.......................................................... 33
(a) Tax Sharing Agreements......................................... 33
(b) Returns for Periods Through the Closing Date................... 33
(c) Audits......................................................... 34
(d) Section 338(h)(10) Election.................................... 34
10. Remedies for Breaches of This Agreement.............................. 35
(a) Survival of Representations and Warranties..................... 35
(b) Indemnification Provisions for Benefit of the Buyer............ 35
(c) Indemnification Provisions for Benefit of the Seller........... 36
(d) Matters Involving Third Parties................................ 37
(e) Determination of Adverse Consequences.......................... 37
(f) Exclusive Remedy............................................... 37
(g) Liquidated Damages............................................. 37
11. Termination.......................................................... 38
(a) Termination of Agreement....................................... 38
(b) Effect of Termination.......................................... 39
12. Miscellaneous........................................................ 39
(a) Arbitration.................................................... 39
(b) No Third Party Beneficiaries................................... 40
ii
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Page
----
(c) Entire Agreement............................................... 40
(d) Succession and Assignment...................................... 40
(e) Counterparts................................................... 40
(f) Headings....................................................... 40
(g) Notices........................................................ 40
(h) Governing Law.................................................. 41
(i) Amendments and Waivers......................................... 42
(j) Severability................................................... 42
(k) Expenses....................................................... 42
(l) Construction................................................... 42
(m) Incorporation of Exhibits, Annexes, and Schedules.............. 42
(n) Joint and Several Obligations of the Buyer and ASC............. 42
Exhibit A -- Financial Statements
Exhibit B -- USFS Permits
Exhibit C -- Residence Purchase Agreement
Exhibit D -- Computer Software Licensing Agreement
Exhibit E -- Trademark Licensing Agreement
Exhibit F -- Capital Improvements
Exhibit G -- Escrow Agreement
Annex I -- Exceptions to the Seller's Representations and
Warranties Concerning the Transaction
Annex II -- Exceptions to the Buyer's Representations and
Warranties Concerning the Transaction
Schedule 2(h)(ii) -- Excluded Assets
Schedule 6(g) -- Indebtedness
Schedule 7(c)(i) -- Ski Passes
Schedule 7(e) -- Bonuses
Schedule 9(k) -- Allocation Schedule
Disclosure Schedule -- Exceptions to Representations and Warranties
Concerning the Companies
iii
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into as of August, 1, 1997, by and among ASC West,
a Maine corporation (the "Buyer"), Kamori International Corporation, a Delaware
corporation (the "Seller"), and ASC Holdings, Inc., a Maine corporation ("ASC").
The Buyer, the Seller and ASC are referred to herein collectively as the
"Parties" and individually as a "Party."
The Seller owns all of the outstanding capital stock (the "Shares")
of Steamboat Ski & Resort Corporation, a Delaware corporation ("SSRC"),
Steamboat Development Corporation, a Delaware corporation ("SDC"), Orlando
Resort Corporation, a Delaware corporation ("ORC"), Heavenly Valley Ski & Resort
Corporation, a Delaware corporation ("HVSRC"), and Heavenly Corporation, a
Delaware corporation ("HC"). HVSRC and HC collectively own all of the
partnership interests in Heavenly Valley, Limited Partnership, a Nevada limited
partnership ("HVLP" and, collectively with SSRC, SDC, ORC, HVSRC and HC, the
"Companies").
This Agreement contemplates a transaction in which ASC will purchase
through the Buyer, its direct wholly-owned subsidiary, from the Seller, and the
Seller will sell to the Buyer, all of the outstanding capital stock of each of
the Companies in return for cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adjusted Amount" has the meaning set forth in ss. 2(b) below.
"Adverse Consequences" means, whether or not involving a third party
claim, all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, diminution in monetary value, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
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"Affiliated Group" means any affiliated group within the meaning of Code
ss. 1504.
"Applicable Federal Rate" means the short term applicable Federal Rate as
published from time to time by the Internal Revenue Service in accordance with
the Code.
"ASC" has the meaning set forth in the preface above.
"Banking Day" means any day other than a Saturday, Sunday or a day when
banks are authorized or required by law to close in New York, New York.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss. 2(f) below.
"Closing Date" has the meaning set forth in ss. 2(f) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the businesses
and affairs of the Companies and their subsidiaries that is not already
generally available to the public.
"Contract Deposit" has the meaning set forth in ss. 6(k) below.
"Disclosure Schedule" has the meaning set forth in ss. 5 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.
3(1).
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"Environmental Laws" means all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of human
health or the environment, including, without limitation, laws relating to
releases or threatened releases of Hazardous Substances into the indoor or
outdoor environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the LTCB Trust Company.
"Expedited Arbitration" has the meaning set forth in ss. 12(b) below.
"Financial Statements" has the meaning set forth in ss. 5(f) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any
court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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"Hazardous Substances" means all substances defined as such in the
National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss.
300.5, or defined as such by, or regulated as such under, any Environmental Law,
including, but not limited to, petroleum, asbestos, or polychlorinated
biphenyls.
"Income Tax" means any Tax or measured by net income.
"Income Tax Return" means any return, declaration, report or information
return or statement relating to Income Taxes, including any schedule or
attachment thereto.
"Indebtedness" means, with respect to any Person, without duplication any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing capital lease obligations or the balance deferred
and unpaid of the purchase price of any property or representing any hedging
obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and hedging obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP and any
guarantee by such Person of any Indebtedness of any other Person.
"Indemnified Party" has the meaning set forth in ss. 10(d) below.
"Indemnifying Party" has the meaning set forth in ss. 10(d) below.
"Knowledge" -- the Seller will be deemed to have "Knowledge" of a
particular fact or other matter if any executive officer of any of the Companies
is actually aware of such fact or other matter or should reasonably be expected
to discover or otherwise become aware of such fact or matter in the Ordinary
Course of Business.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Management" means persons employed by either SSRC, HVSRC, HC or HVLP as
President or Vice President as of the date of this Agreement.
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"Material Adverse Effect" means a material adverse effect upon the
business, properties, results of operations or financial position of the
Companies as a whole.
"Most Recent Financial Statements" has the meaning set forth in ss. 5(f)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss. 5(f)
below.
"New USFS Permits" has the meaning set forth in ss. 6(h) below.
"Net Working Capital" means the value of trade receivables determined on
an aged basis in accordance with GAAP, minus (x) the amount of trade payables
(excluding from this amount payables associated with the capital expenditures
indicated on Exhibit F attached hereto), and (y) deposits and other amounts
constituting prepayments for goods or services to be provided by any of the
Companies following the Closing, including without limitation, amounts paid for
the 1997-1998 ski passes or other pre-season or discount ticket sales, all as
reflected on the September 30 Balance Sheets, as determined in accordance with
GAAP and excluding items relating to transactions among the Companies and its
Affiliates.
"Operating Cash Flow Deficit" has the meaning set forth in ss. 2(e)(i)
below.
"Operating Cash Flow Deficit Reimbursement" has the meaning set forth in
ss. 2(e)(i) below.
"Ordinary Course of Business" means, with respect to the Companies, the
ordinary course of business consistent with past custom and practice, taking
into account the seasonality of their businesses.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the limited partnership
agreement and the certificate of limited partnership of a limited partnership;
(c) any charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person; and (d) any amendment to any
of the foregoing.
"Parties" has the meaning set forth in the preface above.
"Permitted Liens" shall mean (A) mechanics' carriers', workmens',
repairmens' and other like liens for work performed for, or services rendered or
supplies furnished to, any of the Companies in the ordinary course of business
(but excluding Security Interests), (B) liens for real estate taxes, assessments
and other
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governmental charges that are not yet due and payable or that may thereafter by
paid without penalty, or that are being contested in good faith by appropriate
proceedings, (C) imperfections of title that are not substantial in character,
(D) easements, covenants, rights-of-way, claims and other encumbrances (but
excluding any Security Interests), (E) zoning, building and other similar
restrictions, and (F) any conditions that may be shown by a current, accurate
survey or physical inspection of any of the real property of the Companies made
prior to Closing, none of which items set forth in clauses (a) through (f)
above, individually or in the aggregate, have, had or would reasonably be
expected to have a Material Adverse Effect.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Preliminary September 30 Balance Sheets" has the meaning set forth in ss.
2(c)(ii) below.
"Proceeding" has the meaning set forth in ss. 5(n) below.
"Reportable Event" has the meaning set forth in ERISA ss. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens securing trade payables or capital expenditures pursuant to ss.
3(c), (b) liens for taxes not yet due and payable or for taxes that the taxpayer
is contesting in good faith through appropriate proceedings and for which
adequate reserves are made in the Financial Statements, (c) purchase money liens
securing trade payables or capital expenditures pursuant to ss.3 (c), and (d)
other liens arising in the Ordinary Course of Business.
"Seller" has the meaning set forth in the preface above.
"September 30 Balance Sheets" has the meaning set forth in ss. 2(c)(iv)
below.
"September 30 Net Working Capital" has the meaning set forth in ss.
2(c)(i) below.
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"Shares" means all of the outstanding shares of the Common Stock of each
of SSRC, SDC, ORC, HVSRC and HC.
"Tax and Taxes" any taxes imposed by the United States or any state, local
or foreign Governmental Body.
"Tax Returns" means any return, declaration, report or information return
or statement relating to Taxes, including any schedule or attachment thereto.
"Third Party Claim" has the meaning set forth in ss. 10(d) below.
"Threatened" --a claim, proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any written statement has been made or
any written notice has been given, that would lead a prudent Person to conclude
that such a claim, proceeding, dispute, action or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"Unadjusted Purchase Price" has the meaning set forth in ss. 2(b) below.
"USFS" means the United States Forest Service.
2. Purchase and Sale of Shares.
(a) Basic Transaction. On the terms and subject to the conditions of
this Agreement, the ASC and the Buyer jointly and severally agree to purchase
from the Seller, and the Seller agrees to sell to the Buyer, all of the Shares
for the consideration specified below in this ss. 2.
(b) Purchase Price. The Buyer shall pay to the Seller $288.3 million
(the "Unadjusted Purchase Price") plus or minus, as the case may be, an
Adjustment Amount. The Adjustment Amount shall be the sum of (i) the Net Working
Capital calculated pursuant to ss. 2(c) below; (ii) the Additional Payment
calculated pursuant to ss. 2(d) below; and (iii) the Operating Cash Flow Deficit
Reimbursement calculated pursuant to ss. 2(e) below.
Upon execution of this Agreement, the Buyer shall deposit with the
Escrow Agent the Contract Deposit. Such Contract Deposit shall be a check made
payable to the order of the Escrow Agent and shall be partial payment of the
Unadjusted Purchase Price. On the Closing Date, the Buyer shall pay, in cash
payable by wire transfer or delivery of other immediately available funds: (i)
the balance of the Unadjusted Purchase Price and (ii) the Additional Payment.
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The positive Net Working Capital and the Operating Cash Flow Deficit
Reimbursement shall be paid in cash payable by wire transfer or delivery of
other immediately available funds as promptly as practicable and in accordance
with ss. 2(c) and ss. 2(e) below.
Upon consummation of the transactions contemplated hereby, the
Seller shall retain the Contract Deposit. The Unadjusted Purchase Price shall be
allocated to the capital stock of each of the Companies based on an appraisal by
a firm or firms through a procedure mutually acceptable to the Parties to this
Agreement promptly after execution of this Agreement but prior to the Closing.
(c) Working Capital Adjustment.
(i) The Buyer shall pay all positive Net Working Capital as
calculated from the September 30 Balance Sheets (the "September 30 Net
Working Capital") to the Seller. If the September Net Working Capital is
negative then the Seller shall deliver to the Buyer the amount of such
September 30 Net Working Capital. Payments must be made in immediately
available funds and to such accounts as the receiving party will specify.
(ii) Within sixty (60) days following the Closing Date, the Seller
shall cause its Certified Public Accountant (currently Arthur Andersen
LLP) to prepare and deliver to the Buyer audited balance sheets of the
Companies as of September 30, 1997 (the "Preliminary September 30 Balance
Sheets"). The Preliminary September 30 Balance Sheets shall be accompanied
by an opinion of the Certified Public Accountant to the following effect;
the Preliminary September 30 Balance Sheets will present fairly the
consolidated financial position of the Companies as of September 30, 1997
and will be in conformity with GAAP. The Buyer shall, and shall cause the
Companies to, fully cooperate in good faith with the Seller in the
preparation of the Preliminary September 30 Balance Sheets, such
cooperation to include, without limiting the generality of the foregoing,
full access to the books and records of the Companies for such purpose.
The Seller and the Buyer shall each pay 50% of the fees and expenses of
the Certified Public Accountant.
(iii) Upon receipt of the Preliminary September 30 Balance Sheets,
the Buyer and its accountants shall have the right during the succeeding
thirty (30)-day period to examine, at the Buyer's expense, the Preliminary
September 30 Balance Sheets and all records used to prepare such
Preliminary September 30 Balance Sheets. The Buyer shall notify the
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Seller in writing, on or before the last day of the thirty (30)-day
period, of any good faith objections to the Preliminary September 30
Balance Sheets, setting forth a detailed description of the Buyer's
objections and the dollar amount of each objection. If the Buyer does not
deliver such notice within such thirty (30)-day period, the Preliminary
September 30 Balance Sheets shall be deemed to have been accepted by the
Buyer.
(iv) If the Buyer in good faith objects to the Preliminary September
30 Balance Sheets, the Seller and the Buyer shall attempt to resolve any
such objections within ten (10) days of the Seller's receipt of the
Buyer's objections. If the Parties agree upon the resolution of their
dispute, such resolution shall be conclusive and binding upon the Parties.
If the Parties are unable to resolve the matter within such ten (10) day
period, then the Parties shall submit such dispute for final resolution in
accordance with the procedures set forth in ss. 12(b). The Preliminary
September 30 Balance Sheets after the acceptance thereof by the Buyer or
the resolution of all disputes in connection therewith pursuant to ss.
12(b) hereof is referred to herein as the "September 30 Balance Sheets."
(d) Additional Payment. The Buyer agrees to pay to the seller an
additional amount (the "Additional Payment") equal to the Unadjusted Purchase
Price multiplied by the short-term Applicable Federal Rate for October, 1997 as
published by the Internal Revenue Service and a fraction, the numerator of which
is the number of days from and including October 1, 1997 and to and excluding
the Closing Date, and the denominator of which is 360.
(e) Operating Losses.
(i) The Buyer shall reimburse the Seller for the sum of operating
cash flow deficits (the "Operating Cash Flow Deficit Reimbursement") of
each of the Companies' operations realized by the Companies for the period
from and including October 1, 1997 to the Closing as provided below. The
Operating Cash Flow Deficit for a Company during this period shall be
defined as the loss before income taxes, computed on the accrual basis of
accounting in accordance with GAAP, minus (a) depreciation expense, (b)
amortization expense related to deferred loan costs, (c) interest expense,
(d) bad debt expense related to accounts and mortgages receivable, and (e)
cash received by the Companies during the period from October 1, 1997 to
the Closing Date related to the sale of ski passes for the 1997-98 ski
season (or any subsequent ski season) of such Company; provided, however,
without duplication, any amount paid in respect of trade payables on the
September 30 Balance Sheets
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paid between September 30, 1997 and the Closing shall be added to the
Operating Cash Flow Deficit. For example, if the loss before income taxes
computed on the accrual basis of accounting in accordance with GAAP were
$100, and depreciation expenses were $25 then the Operating Cash Flow
Deficit would be $75. Payments must be made in immediately available funds
and to such account as the Seller will specify and shall be made together
with interest at the Applicable Federal Rate for the month of October 1997
compounded daily beginning on the Closing Date and ending on the date of
payment.
(ii) Within sixty (60) days following the Closing, the Seller shall
cause its Certified Public Accountant to determine the actual amount of
the Operating Cash Flow Deficit Reimbursement and to give notice thereof
to the Buyer which notice (the "Cash Flow Notice") shall include said
Certified Public Accountant's documentation of such final determination.
The Buyer shall, and shall cause the Companies to, fully cooperate in good
faith with the Seller in such determination, such cooperation to include,
without limiting the generality of the foregoing, full access to the books
and records of the Companies for such purpose. The Seller and the Buyer
shall each pay 50% of the fees and expenses of the Certified Public
Accountant.
(iii) Upon receipt of the Cash Flow Notice, the Buyer and its
accountants shall have the right during the succeeding thirty (30)-day
period to examine, at the Buyer's expense, the Cash Flow Notice and all
records used to prepare such. The Buyer shall notify the Seller in
writing, on or before the last day of the thirty (30)-day period, of any
good faith objections to the Cash Flow Notice, setting forth a detailed
description of the Buyer's objections and the dollar amount of each
objection. If the Buyer does not deliver such notice within such thirty
(30)-day period, the Cash Flow Notice shall be deemed to have been
accepted by the Buyer.
(iv) If the Buyer in good faith objects to the Cash Flow Notice, the
Seller and the Buyer shall attempt to resolve any such objections within
ten (10) days of the Seller's receipt of the Buyer's objections. If the
Parties agree upon the resolution of their dispute, such resolution shall
be conclusive and binding upon the Parties. If the Parties are unable to
resolve the matter within such ten (10) day period, then the Parties shall
submit such dispute for final resolution in accordance with the procedures
set forth in ss. 12(b).
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(f) The Closing.
(i) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022 commencing at
9:00 a.m. local time on the second Banking Day following the satisfaction
or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions
with respect to actions the respective Parties will take at the Closing
itself) or such other Banking Day as the Buyer and the Seller may mutually
determine (the "Closing Date"); provided, however, that the Closing Date
shall be no earlier than October 15, 1997; provided, further, that the
Buyer may accelerate the Closing Date with 15 days' written notice to the
Seller.
(ii) Time shall be of the essence with respect to the Closing Date
and all other periods of time set forth herein.
(g) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss. 8(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in ss. 8(b) below,
(iii) the Seller will deliver to the Buyer stock certificates representing all
of the Shares, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) the Buyer will deliver to the Seller the consideration
specified in ss. 2(b) above.
(h) Excluded Assets. Notwithstanding anything contained in this
Agreement to the contrary, the Seller has not agreed to sell to the Buyer and is
not obligated to transfer to the Buyer and the Buyer has not agreed to purchase
and is not entitled to acquire from the Seller (i) Cash, and (ii) any of the
assets set forth in Schedule 2(h)(ii) attached hereto, and all of which shall
remain the sole and exclusive property of the Seller, and all of which shall be
distributable pursuant to ss. 6(d) herein.
3. Additional Agreements by the Seller, the Buyer and ASC.
(a) Planned Capital Expenditure Program.
(i) The Seller shall cause the Companies, prior to the Closing
Date, to proceed diligently with the capital improvements to the assets
which are described on Exhibit F hereto (each a "Capital Improvement").
Said Exhibit F sets forth the estimated cost of performing each Capital
Improvement. Unless the Seller otherwise agrees in writing, the aggregate
estimated cost of performing all Capital Improve-
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ments by the Companies shall not exceed the aggregate amount of performing
all Capital Improvements set forth in Exhibit F attached hereto.
(ii) The Seller agrees that all work to be done in connection
with performing any or all such Capital Improvements shall, if and when
commenced, be performed with due diligence in a good and workmanlike
manner and in compliance with all laws in conformity with the standard
observed by prudent owners of comparable facilities and all applicable
legal and insurance requirements.
(iii) On the Closing Date, the Seller shall pay to the Buyer
an amount equal to 85% ("Pre-Closing Capital Expenditure Payment") of the
excess of (i) the aggregate amount indicated on Exhibit F attached hereto
over (ii) the Seller's estimate of the aggregate amount ("Pre-Closing
Capital Expenditures") the Seller has paid in connection with the capital
expenditures in Exhibit F as of the Closing Date.
(iv) Within sixty (60) days following the Closing, the Buyer
shall cause its Certified Public Accountant to determine the actual amount
of the Pre-Closing Capital Expenditures ("Actual Pre-Closing Capital
Expenditures") and to give notice thereof to the Seller which notice (the
"Capital Expenditure Notice") shall include said Certified Public
Accountant's documentation of such final determination. The Capital
Expenditure Notice shall also set forth the excess of (i) the aggregate
amount indicated on Exhibit F attached hereto over (ii) the sum of (A) the
Pre-Closing Capital Expenditures Payment and (B) Actual Pre-Closing
Capital Expenditures ("Capital Expenditure Adjustment"). The Seller shall
pay the Buyer the Capital Expenditure Adjustment pursuant to the
procedures set forth below. The Buyer shall pay the fees and expenses of
the Certified Public Accountant.
(v) Upon receipt of the Capital Expenditure Notice, the Seller
and its accountants shall have the right during the succeeding thirty
(30)-day period to examine, at the Seller's expense, the Capital
Expenditure Notice and all records used to prepare such. The Seller shall
notify the Buyer in writing, on or before the last day of the thirty
(30)-day period, of any good faith objections to the Capital Expenditure
Notice, setting forth a detailed description of the Seller's objections
and the dollar amount of each objection. If the Seller does not deliver
such notice within such thirty (30)-day period, the Capital Expenditure
Notice shall be deemed to have been accepted by the Seller.
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(vi) If the Seller in good faith objects to the Capital
Expenditure Notice, the Buyer and the Seller shall attempt to resolve any
such objections within ten (10) days of the Buyer's receipt of the
Seller's objections. If the Parties agree upon the resolution of their
dispute, such resolution shall be conclusive and binding upon the Parties.
If the Parties are unable to resolve the matter within such ten (10)-day
period, then the Parties shall submit such dispute for final resolution in
accordance with the procedures set forth in ss. 12(b).
(vii) No later than 10 days after May 31, 1998, the Buyer
shall deliver to the Seller an invoice itemizing, in the same manner as
set forth in Exhibit F, all expenditures incurred in connection with
performing the Capital Improvements for the period from and including the
Closing Date to and including May 31, 1998 ("Post-Closing Capital
Expenditures"). The Buyer shall pay the Seller an amount equal to 49% of
the excess of (i) the aggregate amount of capital expenditures set forth
in Exhibit F over the (ii) the sum of (A) the Pre-Closing Capital
Expenditures and (B) the Post-Closing Capital Expenditures.
(b) Sales and Transfer Taxes and Fees. The Buyer shall pay all state
and local taxes, other than franchise taxes or Income Taxes or taxes in the
nature thereof, with respect to the transactions contemplated by this Agreement,
including documentary fees and sales and transfer taxes.
4. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer and ASC that the statements contained in
this ss. 4(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss. 4(a)) with respect to itself, except as set forth in Annex I
attached hereto.
(i) Organization. The Seller is a corporation duly organized and
validly existing under the laws of Delaware. The Seller is duly authorized
to execute, deliver and perform this Agreement. Subject to obtaining the
consents set forth in ss. 5(c) of the Disclosure Schedule, upon execution
and delivery, and assuming the due authorization, execution and delivery
by the Buyer, this Agreement will constitute the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance
with its terms, except
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as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting creditor's
rights generally and (ii) the general principles of equity, regardless of
whether asserted in a proceeding in equity or at law. The execution,
delivery and performance of this Agreement by the Seller will not violate
any law or regulation applicable to it, or its Certificate of
Incorporation or by-laws, and will not constitute or result in a breach or
default under any written agreement or other written instrument to which
it is a party or by which it is bound or which affects any of its assets.
(ii) No Conflict. Except as otherwise consented to, and subject to
obtaining the consents listed in ss. 5(c) of the Disclosure Schedule, the
execution and delivery of this Agreement by the Seller, the performance or
compliance by the Seller of and with the terms and conditions hereof to be
performed and complied with by the Seller, and the consummation by the
Seller of the transactions contemplated hereby will not violate, conflict
with or constitute a breach of (i) the terms, conditions or provisions of,
or constitute a default under, any contract or agreement to which the
Seller is a party or by which the Seller or its assets are bound or
affected, that will be in effect at the Closing, or (ii) any law or
regulation or any order, writ, injunction, or decree of any federal,
state, local, or foreign court, department, agency, or instrumentally to
which the Seller is subject or any or its assets is bound.
(iii) Brokers' Fees. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement, for which the Buyer
could become liable or obligated except for such obligations to the
Long-Term Credit Bank of Japan, Ltd., and any such fees or commissions
payable to the Long-Term Credit Bank of Japan, Ltd. shall be the
obligations of the Seller.
(iv) Shares. The Seller holds of record and owns beneficially the
number of Shares set forth next to its name in ss. 5(b) of the Disclosure
Schedule, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), taxes,
Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a party to
any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Companies (other than this Agreement). The Seller is
not a party to any voting trust, proxy, or other agreement or
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understanding with respect to the voting of any capital stock of the
Companies.
(b) Representations and Warranties of the Buyer and ASC. The Buyer
and ASC jointly and severally represent and warrant to the Seller that the
statements contained in this ss. 4(b) are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss. 4(b)), except as set forth in Annex II
attached hereto.
(i) Organization. The Buyer and ASC are corporations duly organized
and validly existing under the laws of Maine. The Buyer is a direct
wholly-owned subsidiary of ASC. ASC owns all the capital stock of American
Skiing Company. The Buyer and ASC are duly authorized to execute, deliver
and perform this Agreement. Upon execution and delivery, this Agreement
will constitute the legal, valid and binding obligations of the Buyer and
ASC, enforceable against the Buyer and ASC in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditor's rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. The
execution, delivery and performance of this Agreement by the Buyer and ASC
will not violate any law or regulation applicable to them, or their
respective Certificate of Incorporation or by-laws, and will not
constitute or result in a breach or default under any written agreement or
other written instrument to which any of them is a party or by which any
of them is bound or which affects any of their assets.
(ii) No Conflict. The execution and delivery of this Agreement by
the Buyer and ASC, the performance or compliance by the Buyer and ASC of
and with the terms and conditions hereof to be performed and complied with
the Buyer and ASC, and the consummation by the Buyer and ASC of the
transactions contemplated hereby will not violate, conflict with or
constitute a breach of the terms, conditions or provisions of, or
constitute a default under any contract or agreement to which either the
Buyer or ASC is a party or by which either the Buyer or ASC or any of
their assets are bound or affected, or (ii) any law or regulation or any
order, writ, injunction, or decree of any federal, state, local, or
foreign court, department, agency, or instrumentally to which either the
buyer or ASC is subject or any or any of their assets is bound. Mr. Les
Otten owns a majority of the issued and outstanding capital stock of ASC.
None of Mr. Otten, ASC or
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the Buyer is party to any contract or agreement that limits, restricts or
prohibits the ability of the Buyer or ASC to issue, or Mr. Otten to
approve the issuance of, capital stock of the Buyer or ASC to finance the
transactions contemplated hereby.
(iii) Brokers' Fees. None of the Buyer, ASC, or American Skiing
Company has any liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated
by this Agreement.
(iv) Investment. Neither the Buyer nor ASC is acquiring the Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(v) Management. Neither the Buyer nor ASC has any current plan or
intention to reshuffle, layoff or reassign one or more of the Management
as of the Closing. The Buyer and ASC reserve the right to assess the
Management's performance on a going forward basis after the Closing.
5. Representations and Warranties Concerning the Companies. The Seller
represents and warrants to the Buyer and ASC that the statements contained in
this ss. 5 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss. 5), except as set forth in the disclosure schedule delivered by the Seller
to the Buyer on the date hereof and initialed by the Parties (the "Disclosure
Schedule").
(a) Organization, Qualification, and Corporate Power. Each of the
Companies is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Companies is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required. Each of the
Companies has full corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it. ss.
5(a) of the Disclosure Schedule lists the name, jurisdictions in which it is
authorized to do business and directors and officers of each of the Companies.
The Seller has delivered to the Buyer copies of the Organizational Documents of
each of the Companies, as currently in effect.
(b) Capitalization. The entire authorized capital stock of SSRC
consists of 22 shares, of which 18 shares are issued and outstanding. The entire
authorized capital stock of SDC consists of 100 shares, of which 20 shares are
issued and outstanding. The entire authorized capital stock of ORC consists of
10,000 shares,
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of which 200 shares are issued and outstanding. The entire authorized capital
stock of HVSRC consists of 100 shares, of which 69 shares are issued and
outstanding. The entire authorized capital stock of HC consists of 100 shares,
of which 31 shares are issued and outstanding. All of the issued and outstanding
shares of each of SSRC, SDC, ORC, HVSRC and HC have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
Seller as set forth in ss. 5(b) of the Disclosure Schedule. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Companies to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Companies.
(c) Noncontravention. To the Knowledge of the Seller, except as set
forth in ss. 5(c) of the Disclosure Schedule, neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Companies
is subject or any provision of the charter or bylaws of any of the Companies or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which any of the
Companies is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Except for the consents set forth in ss. 5(c) of the Disclosure
Schedule, to the Knowledge of the Seller, none of the Companies needs to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Body in order for the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in ss. 5(c) of
the Disclosure Schedule, to the Knowledge of the Seller, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, directly or indirectly (with or without notice or
lapse of time), give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by any of the Companies or that otherwise relates to the business of, or
any of the assets owned or used by, any of the Companies.
(d) Brokers' Fees. None of the Companies has any liability or
obligation to pay any fees or commissions to any
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broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Tangible Assets. Except as set forth in ss. 5(e) of the
Disclosure Schedule, to the Knowledge of the Seller, the Companies have good
title to, or a valid leasehold interest in, the tangible assets they use in the
conduct of their respective businesses or which are reflected in the Financial
Statements, true and clear of all Security Interests. This section does not
cover real estate, which is covered exclusively by ss. 5(j), intellectual
property, which is covered exclusively by ss. 5(k) or contracts, which are
covered by ss. 5(l).
(f) Financial Statements. Attached hereto as Exhibit A are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended May 31,
1994, 1995, and 1996 for the Companies; and (ii) unaudited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the twelve months ended
May 31, 1997 (the "Most Recent Fiscal Month End") for the Companies. The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Companies as
of such dates and the results of operations of the Companies for such periods;
provided, however, that the Most Recent Financial Statements are subject to
normal year-end adjustments and lack footnotes and other presentation items.
(g) Events Subsequent to Most Recent Fiscal Month End. Except as
provided in ss. 5(g) in the Disclosure Schedule, since the Most Recent Fiscal
Month End, there has not been any change that has resulted, and to the Knowledge
of the Seller, there has not been any event that is very likely to result, in a
Material Adverse Effect compared with the comparable prior period. Without
limiting the generality of the foregoing, since that date none of the Companies
has engaged in any practice, taken any action, or entered into any transaction
outside the Ordinary Course of Business.
(h) Legal Compliance. To the Knowledge of the Seller, each of the
Companies is in compliance with all Legal Requirements and Governmental
Authorizations. To the Knowledge of the Seller, none of the Companies has
received any written notice or written communication from any Governmental Body
or any other Person which are currently not remedied in full or pending
regarding (A) any actual, alleged,
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possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of any of the Companies to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. This section does not cover
environmental matters which are covered exclusively by ss. 5(t) below.
(i) Tax Matters.
(i) Each of the Companies has filed all Tax Returns that it was
required to file, such Tax Returns are true, accurate and complete, and
each of the Companies has paid all Taxes due. Each of the Companies has
complied with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes.
(ii) ss. 5(i)(ii) of the Disclosure Schedule lists all Income Tax
Returns filed with respect to any of the Companies for taxable periods
ended on or after May 31, 1994, indicates those Income Tax Returns that
have been audited, and indicates those Income Tax Returns that currently
are the subject of audit. The Seller shall deliver to the Buyer correct
and complete copies of all federal Income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
any of the Companies since the tax year ended May 31, 1994.
(iii) The Affiliated Group with Seller as parent and the Companies
as subsidiary members has filed all Income Tax Returns that it was
required to file for each taxable period during which any of the Companies
was a member of the group, such Income Tax Returns are true, accurate and
complete, and the Affiliated Group has paid all Income Taxes shown thereon
as owing.
(iv) The charges, accruals and reserves with respect to Taxes on the
respective books of each of the Companies are adequate (determined in
accordance with GAAP). There exists no proposed tax assessment against any
of the Companies except as disclosed in the Financial Statements or in ss.
5(i)(iv) of the Disclosure Schedule.
(j) Real Property.
(i) Except as provided in ss. 5(j)(i) of the Disclosure Schedule,
ss. 5(j)(i) of the Disclosure Schedule lists all real property that any of
the Companies owns, which constitutes all owned real property used in the
operations of the Companies' business or otherwise occupied in connection
with the operations by the Companies, and/or reflected on the Financial
Statements or acquired since the date thereof. Neither the
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Seller nor its Affiliates own any real property located in the States of
California, Colorado, Florida or Nevada other than those described in
Schedule ss. 2(h)(ii) herein. The Seller has delivered or made available
to the Buyer copies of the deeds and other instruments (as recorded) by
which the Companies acquired such real property interests, and copies of
all title insurance policies, opinions, abstracts, and surveys in the
possession of the Seller or the Companies and relating to such real
property interests. With respect to each such parcel of owned real
property:
(A) The identified owner has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for Permitted
Liens;
(B) Except as set forth in ss. 5(j)(i)(B) of the Disclosure
Schedule there are no leases, licenses, concessions, or other
agreements pursuant to which any of the Companies has granted to any
other party or parties the right of use or occupancy of any portion
of the parcel of real property described in ss. 5(j)(i) of the
Disclosure Schedule; and
(C) Except as may be provided in the instruments referred to
in ss. 5(j)(i)(A) of the Disclosure Schedule, there are no
outstanding options or rights of first refusal to purchase the
parcel of real property described in ss. 5(j)(i) of the Disclosure
Schedule, or any portion thereof or interest therein.
(ii) ss. 5(j)(ii) of the Disclosure Schedule lists all real property
leased or subleased to any of the Companies which constitutes all of the
real property leased or subleased to any of the Companies for the regular
use in the operation of their respective businesses, otherwise occupied by
the Companies and/or reflected on the Financial Statements or acquired or
disposed of in the Ordinary Course of Business since the date of the
Financial Statements. The Seller has delivered to the Buyer correct and
complete copies of the leases and subleases listed in ss. 5(j)(ii) of the
Disclosure Schedule (as amended to date). To the Knowledge of the Seller,
each lease and sublease listed in ss. 5(j)(ii) of the Disclosure Schedule
is in full force and effect, each Company is in full compliance therewith
and there exists no defaults, or events which with the passage of time or
giving of notice, could constitute a default.
(iii) Except as provided in ss. 5(j)(i) or (ii) of the Disclosure
Schedule, ss. 5(j)(i) and (ii) of the Disclosure
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Schedule lists all real property that the Company owns, regularly uses or
occupies in connection with the operation of the Companies' respective
businesses.
(k) Intellectual Property. Except as disclosed in ss. 5(k) of the
Disclosure Schedule, to the Knowledge of the Companies, the Companies own or
possess adequate licenses or other valid rights to use or operate within the
scope of all Untied States and foreign patents, trademarks, trade names,
copyrights, service marks, all applications therefor and registrations thereof,
confidential or proprietary technical and business information, know-how and
trade secrets, and computer software (collectively, "Intellectual Property")
which are material to the operations of the Companies, as currently conducted.
ss. 5(k) of the Disclosure Schedule sets forth a full and complete list of the
service marks, trademarks, and copyrights owned by any of the Companies. Except
as disclosed in ss. 5(k) of the Disclosure Schedule, such Intellectual Property
that is owned by the Companies is not subject to any Security Interest. To the
Knowledge of the Companies, there are no infringements or other violations or
conflicts with the rights of others with respect to the use of or other conduct
by the Companies within the scope of, ownership of, validity or enforceability
of any Intellectual Property owned by the Companies.
(l) Contracts. ss. 5(l) of the Disclosure Schedule lists, other than
agreements for Indebtedness which the Seller or any of the Companies is
obligated to pay prior to or at Closing, (i) all written contracts currently in
effect and other written agreements currently in effect to which any of the
Companies is a party the performance of which will involve consideration in
excess of $100,000 or is otherwise material to the operation of the business,
and each licensing agreement or other contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property; (ii)
each collective bargaining agreement and other contract to or with any labor
union or other employee representative of a group of employees; (iii) each joint
venture and partnership agreement involving a sharing of profits, losses, costs,
or liabilities by any of the Companies with any other Person; and (iv) each
contract containing covenants that in any way purport to restrict the business
activity of any of the Companies or any Affiliate of any of the Companies or
limit the freedom of any of the Companies or any Affiliate of any of the
Companies to engage in any line of business or to compete with any Person. The
Seller has delivered to the Buyer a correct and complete copy of each contract
or other agreement listed in 5(l) of the Disclosure Schedule (as amended to
date).
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To the Seller's Knowledge, all the contracts listed in ss. 5(l) of
the Disclosure Schedule are in full force and effect and neither the Seller nor
any of the Companies has received any written notice of breach, violation or
other default of any nature, or any event which with the passage of time or
giving of notice or both, would constitute an event of default, breach or other
violation with respect to any such contracts.
(m) Powers of Attorney. As of the completion of the Closing, there
will be no outstanding powers of attorney executed on behalf of any of the
Companies.
(n) Litigation. ss. 5(n) of the Disclosure Schedule sets forth each
instance in which any of the Companies (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction (the "Proceeding"), except where such Proceeding would
relate to matters with respect to which the Companies are fully insured and the
defense is being provided by the insurer or (iii) has any Knowledge that any
such Proceeding has been Threatened by written correspondence to any of the
Companies since January 1, 1995.
(o) Employee Benefits.
(i) ss. 5(o) of the Disclosure Schedule lists each Employee Benefit
Plan that any of the Companies maintains or to which any of the Companies
contributes. No Employee Company Benefit Plans are subject to Title IV of
ERISA.
(A) To the Knowledge of the Seller, each such Employee Benefit
Plan (and each related trust, insurance contract, or fund) complies
in form and in operation in all respects with the applicable
requirements of ERISA and the Code.
(B) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(C) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the
requirements of Code ss. 401(a).
(D) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary
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plan descriptions, the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit
Plan.
(ii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
Employee Benefit Plan that any of the Companies maintains or ever has
maintained or to which any of them contributes, ever has contributed, or
ever has been required to contribute (other than routine claims for
benefits) is pending or to the Knowledge of the Companies has been
Threatened since January 1, 1995.
(p) USFS Permits. Annexed hereto as Exhibit B are true, complete and
correct copies of the existing USFS permits (including all amendments thereto).
The existing USFS Permits are in full force and effect and, to the best of its
knowledge, there are no defaults or amounts owing to USFS thereunder.
(q) Labor Matters. Since January 1, 1994, none of the Companies has
been or is a party to any collective bargaining or other labor contract. Since
January 1, 1994, to the Knowledge of the Seller, there has not been, there is
not presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or union grievances, (b) any proceeding
against or affecting any of the Companies relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body or organizational activity, against or
affecting any of the Companies or their premises, or (c) any application for
certification of a collective bargaining agent. There is no lockout of any
employees by any of the Companies, and no such action is contemplated by any of
the Companies. Each of the Companies has complied with all Legal Requirements
relating to employment, equal employment opportunity, discrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing.
To the Seller's Knowledge, ss.5(q) of the Disclosure Schedule
contains a complete and accurate list of the following information for each
employee or director of the Companies, including each employee on leave of
absence or layoff status; employer; name; job title; current compensation paid
or payable;
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and any enforceable employment contracts of any of the Companies, if any.
(r) Books and Records. The books of account, minute books, stock
record books, and other records of the Companies, all of which have been made
available to the Buyer, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Companies contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the boards of directors, and committees of the
boards of directors of the Companies, and no meeting of any such stockholders,
board of directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Companies.
(s) Insurance. ss. 5(s) of the Disclosure Schedule sets forth a
complete and correct list and summary description of all insurance policies
maintained by or on behalf of any of the Companies as of the date hereof. Such
policies are in full force and effect, and all premiums due thereon have been
paid. The Companies have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
believed by each of the Companies to be suitable for the respective business and
operations of each of the Companies.
(t) Environment, Health, and Safety.
To the Knowledge of Seller:
(i) Each of the Companies is in compliance with, and there has been
no violation by the Companies of, since the respective date the Seller
acquired each of the Companies, all applicable Environmental Laws. Such
compliance includes, but is not limited to, the possession by each of the
Companies of all permits and other governmental authorizations required
under applicable Environmental Laws;
(ii) There is no pending or Threatened claim, lawsuit, or
administrative proceeding against any of the Companies under any
Environmental Law. Neither Seller nor any of the Companies has received
written notice or written communication from any federal, state, or local
governmental agency, having jurisdiction since the respective date the
Seller acquired each of the Companies, alleging that any of the Companies
are in violation of any applicable Environmental Law or otherwise
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may be in liable under any applicable Environmental Law, which violation
or liability is unresolved; and
(iii) There have been no releases, spills or discharges of Hazardous
Substances on or underneath any of the real property currently owned or
leased by any of the Companies (the "Real Property") since the respective
date the Seller acquired each of the Companies;
(iv) The Seller and the Companies have made available to the Buyer
for the Buyer's review, true and complete records of (A) all reports
assessing the Companies' compliance with Environmental Laws or the
environmental condition of the properties that have been prepared within
the last five years from the date hereof, to the extent that such reports
are within the possession of Seller or the Companies; (B) all test results
relating to whether any of the Properties have been impacted by Hazardous
Substances, to the extent such test results are within the possession of
Seller or the Companies on the date of this Agreement; and (C) any written
notices of violation, administrative or judicial complaints, or
administrative or judicial orders (collectively, "Environmental
Documents"), relating to (1) violations or alleged violations of
Environmental Law or (2) releases, spills or discharges of Hazardous
Substances, to the extent, in both cases, that such Environmental
Documents relate to the Properties, are within the possession of Seller or
the Companies, and involve pending matters or were issued within the last
three years.
(v) The representations and warranties in this Section 5(u) are the
sole and exclusive representations and warranties in this Agreement
related to environmental matters.
(u) Water Rights. ss. 5(u) of the Disclosure Schedule contains a
list of all of the water rights (whether decreed or undecreed, tributary,
non-tributary, surface, underground or water authority or company stock) owned
by, used in connection with the businesses of the Companies or appurtenant to
real property owned by the Companies (the "Water Rights"). ss. 5(u) of the
Disclosure Schedule also identifies all sources of water (other than natural
snowfall) used by the Companies for snowmaking purposes during the 1996-1997 ski
season setting forth the estimated annual amounts used from each source. For
each of the fiscal years ended May 31, 1994, 1995, 1996 and 1997, each of the
Companies had all necessary right, title, and interest in and to sufficient
water rights to operate their respective businesses.
(v) Condition and Sufficiency of Assets. To the Knowledge of the
Seller, the buildings, plants, structures, and equipment, including all lifts,
snow-making and associated
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equipment of the Companies are adequate for the uses to which they were being
put as of the end of the 1996-1997 ski season.
(w) Relationships with Affiliates. To the Knowledge of the Seller,
neither the Seller nor the Companies or any Affiliates of the Seller or of any
of the Companies has, or since May 31, 1996 has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Companies' businesses in the United States (except
for property that is owned or leased by any of the Companies or their
subsidiaries). To the Knowledge of the Seller, except as set forth in ss. 5(w)
of the Disclosure Schedule, neither the Seller or any Affiliates of the Seller
or of any of the Companies is a party to any contract with or has any claim or
right against, any of the Companies.
(x) Guarantees. Except as set forth in ss. 5(y) of the Disclosure
Schedule, (i) there is no Indebtedness of Persons other than the Companies
secured by a lien or other Security Interest on or in any assets of the
Companies (whether or not such indebtedness is assumed by the Companies), (ii)
the Companies do not have any preferred stock outstanding and (iii) the
Companies have not guaranteed any Indebtedness or other obligations of any
Persons other than the Companies.
6. Pre-closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss. 8 below).
(b) Notices to and Consents by Government. Each of the Parties will
(and the Seller will cause each of the Companies to) give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss. 4(a)(ii), ss. 4(b)(ii) and ss.
5(c) above. Without limiting the generality of the foregoing, each of the
Parties will file (and the Seller will cause each of the Companies to file) any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use his or
its reasonable best efforts to obtain (and the Seller will cause each of the
Companies to use its reasonable best efforts to obtain) a
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waiver from the applicable waiting period, and will make (and the Seller will
cause each of the Companies to make) any further filings pursuant thereto that
may be necessary, proper, or advisable in connection therewith.
(c) Operation of Business. Except as otherwise specifically
permitted under this agreement, including ss. 6(d) below, the Seller will not
cause or permit any of the Companies to engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business. The
Seller will cause the Companies to use their reasonable efforts to preserve
intact their respective business organization and their respective relationship
with suppliers, distributors, employees, customers and others having business
relationships with the Companies, except as may otherwise be agreed in writing
by the Buyer.
(d) Maintenance of Assets. The Seller shall cause the Companies to
maintain their respective assets consistent with their respective current
practices until the Closing; provided however, on or prior to the Closing Date,
the Seller may retain certain assets pursuant to ss. 2(h) herein and cause the
Companies to distribute such assets set forth in Schedule 2(h)(ii) attached
hereto.
(e) Full Access, Disclosure, Press Release. The Seller will permit
the Buyer, and the Seller will cause each of the Companies to permit the Buyer,
representatives of the Buyer, the Buyer's financing sources and their
representatives to have full access at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the Companies, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of the Companies, whether in
the Companies' possession or in the possession of its independent public
accountants, subject to the rights of any tenants therein. The Buyer will treat
and hold as such any Confidential Information it receives from the Seller and
any of the Companies in the course of the reviews contemplated by this ss. 6(e),
will not use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever, will
return to the Seller and the Companies all tangible embodiments (and all copies)
of the Confidential Information which are in its possession. The Parties shall
make a mutually agreeable joint press release upon execution and delivery of
this Agreement. No Party shall issue any other press release or make any public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the Buyer and the Seller, which
will not be unreasonably withheld or delayed; provided, however, that any Party
may make any public disclosure (in the case of information of a primarily
financial nature concerning the Seller or the Compa-
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nies, limited to historical financial information) that in the opinion of
counsel to such Party is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities or which may be necessary or
desirable in connection with the Buyer's obtaining financing, including without
limitation in complying with the provisions of federal and state securities laws
and regulations and in conducting related underwriting and solicitation
activities, in which case the disclosing Party will use its reasonable best
efforts to advise the other Parties prior to making the disclosure.
(f) Notice of Developments. Each Party will give prompt written
notice to the others of any material adverse development causing a breach of any
of its own representations and warranties in this Agreement. No disclosure by
any Party pursuant to this ss. 6(f), however, shall be deemed to amend or
supplement Annex I, Annex II, or the Disclosure Schedule or to prevent or cure
any misrepresentation or breach of warranty.
(g) Payment of Indebtedness. On or prior to the Closing Date, the
Seller shall pay or assume full and complete liability for all Indebtedness for
borrowed money (including capital leases, if any) of the Companies existing at
the Closing Date, which Indebtedness for borrowed money, to the extent in
existence on the date hereof, is set forth on Schedule 6(g), and the Seller
shall deliver at Closing evidence satisfactory to the Buyer that the Companies
have been released of any and all liability or obligation therefor.
(h) USFS Permit. Each of ASC and the Buyer shall use its best
efforts to obtain (x) either (i) consents related to the transfer of ownership
interests in the Steamboat and Heavenly ski areas (the "USFS Consents") or (ii)
new USFS permits (the "New USFS Permits") and (y) any consents or agreements
which may be required in connection therewith, and the Seller shall cooperate
with the Buyer and furnish the Buyer such information as is in its possession
and is necessary to obtain such USFS Consents and New USFS Permits. Each of ASC
and the Buyer shall regularly inform the Seller of any developments with respect
to the process of obtaining such consents and agreements or New USFS Permits and
shall promptly respond to all inquiries of the Seller with respect thereto.
(i) Cooperation. The Buyer, ASC and the Seller each covenant to use
diligent efforts to cause all conditions to Closing to be met on or prior to the
Closing Date.
(j) Qualification of the Buyer to Secure Permits, Licenses and Other
Approvals. Each of ASC and the Buyer or its permitted assignee, shall take such
action as may reasonably be required to qualify itself under all applicable laws
and regula-
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tions in order to consummate the transactions contemplated hereunder including
without limitation, obtaining the USFS Consents and the New USFS Permits. Each
of ASC and the Buyer shall timely and diligently proceed with such action so as
to be able to perform its obligations in accordance with the provisions of this
Agreement.
(k) Escrow Agreement. Upon execution of this Agreement, the Parties
shall enter into an escrow agreement in form and substance as set forth in
Exhibit G attached hereto, pursuant to which the Buyer agrees to deposit with
the Escrow Agent $11 million (the "Contract Deposit").
(l) Financial Statements. The Seller shall provide to the Buyer,
immediately upon receipt thereof, a full and complete copy of the Companies'
audited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows as of, and for the twelve months ended on,
May 31, 1997, including all notes, together with the report of the Seller's
independent public accountants thereon.
(m) No Shop. The Seller shall not solicit, initiate, or encourage
any proposals from, or negotiate with, any Person other than the Buyer or ASC
with respect to the sale of any or all portion of its stock, any stock of any of
the Companies, or any assets of any of the Companies, except in the Ordinary
Course of Business, subject to the provisions of ss.ss. 6(c) and 6(d) hereof
until this Agreement is terminated. The Seller shall inform any prospective
purchasers that have contacted the Seller of the existence of this provision and
shall terminate any discussions with such prospective purchasers as promptly as
reasonably possible following any contact. Upon the Buyer's request, the Seller
will cooperate with the Buyer in informing any potential purchasers of this
provision.
7. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under ss.
10 below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim,
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or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving any of the Companies,
each of the other Parties shall cooperate with him or it and his or its counsel
in the defense or contest, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under ss. 10 below).
(c) Perpetual Lift and Golf Passes.
(i) The Buyer shall honor the currently outstanding perpetual
ski-lift passes and golf passes for the Companies previously issued by the
Seller or its Affiliates or their respective predecessors, which passes
are listed on Schedule 7(c)(i) hereof, if and to the extent permitted
under federal law and by the USFS.
(ii) At the Closing, the Buyer shall issue ten new perpetual
ski-lift passes for each of the Steamboat and Heavenly resorts to and in
the name of the Seller, and shall have the ongoing obligation to issue ten
new perpetual ski- lift passes for each of the ski resorts other than the
Steamboat and Heavenly resorts which the Buyer will directly or indirectly
own on or after the Closing Date. All such passes shall be assignable to
any Affiliate of Kamori Kanko Co., Ltd., a Japanese corporation, the
majority owner of the Seller and each of the passes described in this ss.
7 may be used by any person designated by the recipient of such pass.
(iii) For so long as ASC directly or indirectly through its
Affiliates holds the concession from the USFS to operate the ski areas to
which such ski passes relate, ASC shall on an annual basis prior to
November 15th of each year hereafter issue or cause such Affiliates to
issue such new ski passes for the coming ski season to each of the persons
entitled to receive such new ski passes pursuant to the terms of this
Section. ASC further agrees that they shall require as a condition
precedent to the transfer of its interests in the Companies holding such
concession that the person or entity obtaining the succeeding concession
to operate such ski area (i) assume in all respects ASC's continuing
obligation to provide such new ski passes, and (ii) agrees to require any
succeeding transferee of the ski area concession to assume such
obligations as a condition precedent to such succeeding transfer.
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(d) Employment. The Buyer and ASC shall not effectuate, or cause any
of the Companies to effectuate, a "plant closing" or "mass layoff" with respect
to either SSRC or HVLP within 60 days after the Closing within the meaning of
the Worker Adjustment and Restraining Notification Act.
(e) Bonus. The Buyer and ASC agree to make bonus payments in
December of 1997 to certain employees of HVLP as indicated in Schedule 7(e)
attached hereto. The bonus payments shall be, in the aggregate, $250,000.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer and ASC. The obligations
of each of the Buyer and ASC to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in ss.4(a) and ss.5
above shall be true and correct in all material respects on the date
hereof and at and as of the Closing Date, subject only to such exceptions
as are not, individually or in the aggregate, materially adverse to the
business, properties, results of operations or financial position of the
Companies as a whole; provided that solely for such purpose such
representations and warranties shall be construed without any Knowledge
qualification contained therein, if any;
(ii) the Seller shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in ss.
8(a)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties and the Companies shall have received all other
authorizations, consents, and approvals of Governmental Bodies and other
third parties referred to in ss. 4(a)(ii), ss. 5(c) and including, without
limitation, ss. 5(c) of the Disclosure Schedule, subject only to such
conditions that would not cause a Material Adverse Effect; except where
failure to receive such authorizations, consents, and approvals of
Governmental Bodies and other third parties would not have a Material
Adverse Effect;
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(vi) The Buyer shall have obtained the New USFS Permits in the name
of the Buyer, or an assignment of the existing USFS Permits which shall be
accompanied by an appropriate instrument of assignment or transfer to the
Buyer, and all required consents to such assignment or transfer, if any;
(vii) the Buyer shall have received from counsel to the Seller an
opinion addressed to the Buyer in form and substance reasonably
satisfactory to the Buyer's counsel, and dated as of the Closing Date; and
(viii) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer.
The Buyer or ASC may waive any condition specified in this ss. 8(a) if it
executes a writing so stating at or prior to the Closing. The availability of
financing is not a condition to the obligation of the Buyer and ASC to
consummate the transactions to be performed by them in connection with the
Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss. 4(b) above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer and ASC shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) the Buyer and ASC shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
ss. 8(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties and the Companies shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in ss. 4(a)(ii), ss. 4(b)(ii), and ss. 5(c) above
including, without limitation, ss. 5(c) of the Disclosure Schedule;
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(vi) the Buyer and the Seller shall have entered into a licensing
agreement with respect to certain software owned by SSRC and a licensing
agreement with respect to certain trademarks, logos, service marks,
symbols or trade names as set forth in Exhibits D and E attached hereto
and the same shall be in full force and effect;
(vii) the Buyer shall have entered into a purchase agreement for Mr.
Kimihito Kamori's residence at Polo Place, 2423 East Exposition Avenue,
Denver, Colorado 80209 in form and substance as set forth in Exhibit C
attached hereto and the same shall be in full force and effect;
(viii) the Seller shall have received from counsel to the Buyer an
opinion addressed to the Seller in form and substance reasonably
satisfactory to the Seller's counsel, and dated as of the Closing Date;
and
(ix) all actions to be taken by the Buyer and ASC in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this ss. 8(b) if it executes a
writing so stating at or prior to the Closing.
9. Tax Matters
(a) Tax Sharing Agreements. Any tax sharing agreement between the
Seller and any of the Companies is terminated as of the Closing Date and will
have no further effect for any taxable year (whether the current year, a future
year, or a past year).
(b) Returns for Periods Through the Closing Date. Seller's
Responsibility. The Seller shall be responsible for paying, and shall indemnify
and hold the Buyer and the Companies harmless, from and after the Closing Date,
from and against any liabilities in respect of (i) any Taxes of the Seller and
the Companies for any taxable periods ending on or before the Closing Date
("Pre-Closing Tax Periods") and (ii) any liability arising from the breach of
the Seller's representations and warranties contained in ss. 5(i) hereof;
provided, however, that the Seller shall not be responsible for any taxes
described in ss. 3(b) hereof. The Seller shall duly prepare, or cause to be
prepared, and file, or cause to be filed, on a timely basis all Tax Returns
including any consolidated, combined or similar Tax Return with respect to the
Companies for all Pre-Closing Tax Periods.
Buyer Responsibility. The Buyer and the Companies shall be
responsible for paying, and shall indemnify and hold the Seller harmless from,
against, and in respect of any Taxes of the Buyer
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and of the Companies for (i) any Post-Closing Tax Periods and (ii) any taxes
described in ss. 3(b) hereof. The Buyer shall duly prepare, or cause to be
prepared, and file, or cause to be filed, on a timely basis all Tax Returns with
respect to the Companies for any taxable periods ending after the Closing Date
("Post-Closing Tax Periods"). Neither the Buyer nor the Companies shall file any
amended Tax Returns for any periods for or in respect of the Companies with
respect to which the Buyer is not obligated to prepare or cause to be prepared
pursuant to this ss. 9 without the prior written consent of the Seller. With
respect to the Closing Date, the Buyer and ASC shall not cause the Companies to
engage in any transaction that is not in each Company's Ordinary Course of
Business except as otherwise provided in this Agreement.
(c) Audits. With respect to any audits relating to taxes with
respect to taxable periods ending on or before the Closing Date, the Seller
shall control all proceedings and may make all decisions taken in connection
with such audit. With respect to any tax claim relating to taxable periods
ending after the Closing Date, the Buyer shall control all proceedings and may
make all decisions taken in connection with such audit. The Buyer and the Seller
shall cooperate in contesting any tax claim, which cooperation shall include the
retention and (upon request) the provision to the requesting party of records
and information which are reasonably relevant to such tax claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such tax claim.
(d) Section 338(h)(10) ElectThe Seller will join with the Buyer in
making an election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local, or foreign tax law) (collectively a "Section
338(h)(10) Election") with respect to the purchase and sale of the Shares
hereunder. The Seller will pay any tax attributable to the making of the Section
338(h)(10) Election as soon as practicable following the Closing Date, but in no
event later than thirty days prior to the date such ss. 338 forms are required
to be filed, the Buyer and the Seller shall prepare and agree upon the
computation of the Modified Aggregate Deemed Sale Price (as defined under
applicable Treasury Regulations) of the assets of the Companies in accordance
with the terms hereof and the allocation of such Modified Aggregate Deemed Sale
Price among such assets. This allocation of the Modified Aggregate Deemed Sale
Price shall be based upon the fair market value of the assets of the Companies
as determined by an appraisal conducted by a firm or firms through procedures as
the Buyer and the Seller mutually agree upon. The Buyer shall bear the cost of
all fees and expenses of the appraisal. All values contained in the allocation
shall be consistently reported for tax purposes in accordance with the
procedures reflected herein. The Buyer and the Seller shall report the purchase
and sale under this Agreement consistent with such ss. 338(h)(10) Election. The
Buyer and the Seller shall not take a position or any action contrary thereto
unless re-
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quired to do so by applicable tax laws pursuant to a determination as defined in
ss. 1313(a) of the Code. The Seller shall execute and deliver to Buyer such
documents or forms as are reasonably requested and are required by any tax laws
in order to properly complete the ss. 338 forms at least twenty days prior to
the date such ss. 338 forms are required to be filed.
10. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Seller contained in
ss. 5 above (other than ss. 5(t)) shall survive the Closing hereunder (unless
the damaged Party knew of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect until May 31, 1998;
provided, however, the representations and warranties contained in ss. 5(t)
shall survive the Closing hereunder (unless the damaged Party knew of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect until September 30, 1998. All of the representations and
warranties of the Parties contained in ss. 4 above shall survive the Closing
(unless the damaged Party knew of any misrepresentation or breach of warranty at
the time of Closing) and continue in full force and effect for five (5) years
thereafter (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
In the event the Seller breaches any of its representations,
warranties, and covenants contained herein and, if there is an applicable
survival period pursuant to ss. 10(a) above, provided that the Buyer makes a
written claim for indemnification against the Seller pursuant to ss. 12(h) below
within such survival period, then the Seller agrees to indemnify the Buyer from
and against any Adverse Consequences the Buyer shall suffer through and after
the date of the claim for indemnification caused by the breach; provided,
however, that the Seller shall not have any obligation to indemnify the Buyer
from and against any Adverse Consequences caused by the breach of any
representation or warranty of the Seller contained in ss. 5 above (other than
ss. 5(e), (t), and (u)): (A) until the Buyer has suffered Adverse Consequences
by reason of all such breaches in excess of a $100,000 aggregate deductible
(after which point the Seller will be obligated only to indemnify the Buyer from
and against further such Adverse Consequences) or thereafter (B) to the extent
the Adverse Consequences the Buyer has suffered by reason of all such breaches
exceeds a one (1) million dollars aggregate ceiling (after which point the
Seller will have no obligation to indemnify the Buyer from and against further
such Adverse Consequences); provided further that the Seller shall not have any
obligation to indemnify the Buyer from and against any Adverse Consequences by
the breach of any representation or warranty of the Seller:
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(1) contained in ss. 5(e): (A) until the Buyer has suffered Adverse
Consequences by reason of such breaches in excess of $100,000 aggregate
deductible (after which point the Seller will be obligated only to
indemnify the Buyer from and against further such Adverse Consequences) or
thereafter (B) to the extent the Adverse Consequences the Buyer has
suffered by reason of such breaches exceed a one (1) million dollars
aggregate ceiling (after which point the Seller will have no obligation to
indemnify the Buyer from and against further such Adverse Consequences);
(2) contained in ss. 5(t): (A) until the Buyer has suffered Adverse
Consequences by reason of such breaches in excess of $500,000 aggregate
deductible (after which point the Seller will be obligated only to
indemnify the Buyer from and against further such Adverse Consequences) or
thereafter (B) to the extent the Adverse Consequences the Buyer has
suffered by reason of such breaches exceed a five (5) million dollars
aggregate ceiling (after which point the Seller will have no obligation to
indemnify the Buyer from and against further such Adverse Consequences);
(3) contained in ss. 5(u): (A) until the Buyer has suffered Adverse
Consequences by reason of such breaches in excess of $250,000 aggregate
deductible (after which point the Seller will be obligated only to
indemnify the Buyer from and against further such Adverse Consequences) or
thereafter (B) to the extent the Adverse Consequences the Buyer has
suffered by such breaches exceed a two (2) million dollars aggregate
ceiling (after which point the Seller will have no obligation to indemnify
the Buyer from and against further such Adverse Consequences;
provided further that, the Seller shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences caused by the breach of any
representation or warranty of the Seller contained in ss. 5 (e), (t) and (u): to
the extent the Adverse Consequences the buyer has suffered by reason of all such
breaches of ss. 5 (e), (t) and (u) exceed a five (5) million dollars aggregate
ceiling (after which point the Seller will have no obligation to indemnify the
Buyer from and against further such Adverse Consequences).
(c) Indemnification Provisions for Benefit of the Seller. In the
event the Buyer or ASC breaches any of their respective representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to ss. 10(a) above, provided that the Seller makes a
written claim for indemnification against the Buyer pursuant to ss. 12(h) below
within such survival period, then the Buyer and ASC agree to indemnify jointly
and severally the Seller from and against the entirety of any Adverse
Consequences the Seller shall suffer through and after the date of the claim for
indemnification caused by the breach.
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(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss. 10, then the Indemnified Party shall
promptly (and in any event within [five business days] after receiving
notice of the Third Party Claim) notify each Indemnifying Party thereof in
writing.
(ii) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of
his or its choice reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages and does not impose
an injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the defense of
the Third Party Claim as provided in ss. 10(d)(ii) above, however, the
Indemnified Party may defend against the Third Party Claim in any manner
he or it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of each of the Indemnifying
Parties (not to be withheld unreasonably).
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage in determining
Adverse Consequences for purposes of this ss. 10. All indemnification payments
under this ss. 10 shall be deemed adjustments to the Unadjusted Purchase Price.
(f) Exclusive Remedy. The Parties agree that the remedies provided
in this Agreement shall constitute the sole and exclusive remedy available to
the Parties.
(g) Liquidated Damages. In the event the Buyer or ASC breaches any
of its representations, warranties, and covenants contained herein in any
material respect (including the Buyer's failure to purchase from the Seller the
Shares pursuant to this Agreement or if the closing condition with respect to
the Hart- Scott-Rodino Act set forth in ss. 8(a)(v) shall not have been
satisfied prior to October 31, 1997, each of which shall be deemed such a
material breach), the Seller shall retain the Contract
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Deposit as liquidated damages; provided, however, that the Seller shall not
retain the Contract Deposit if the transactions contemplated hereby are not
consummated because the Seller has breached any one or more of its
representations, warranties or covenants contained in this Agreement, which
breach, individually or in the aggregate, is materially adverse to the business,
properties, results of operations or financial position of the Companies taken
as a whole, and the Buyer has notified the Seller of the breach, and the breach
has continued without cure and has remained materially adverse in the manner
described immediately above for a period of 30 days after the notice of breach.
If the Buyer and ASC breach their obligations hereunder in any material respect,
the Seller's damages would be impossible to ascertain and the Contract Deposit
constitutes a fair and reasonable amount of compensation. Notwithstanding the
foregoing, the Seller shall retain the Contract Deposit as liquidated damages if
ASC directly or through its subsidiary will not have issued stock publicly in a
recognized United States securities market and raised at least $200 million or
otherwise provided for full funding of the purchase price for the Shares in a
manner satisfactory to the Seller on or prior to October 31, 1997;
provided,however, that the Seller shall not retain the Contract Deposit if (i)
the transactions contemplated hereby are not consummated because the Seller has
breached any one or more representations, warranties or covenants contained in
this Agreement, which breach, individually or in the aggregate, is materially
adverse to the business, properties, results of operations or financial position
of the Companies taken as a whole (a "Breach"), and the Buyer has notified the
Seller of the Breach on or prior to October 31, 1997, and (ii) the Breach has
continued without cure and has remain materially adverse in the manner described
immediately above for a period of 30 days after the notice of breach. Upon the
cure of such a Breach, the Seller shall be entitled to and to retain the
Contract Deposit. Any such Breach by the Seller after October 31, 1997 shall not
impair the right of the Seller to retain the Contract Deposit. Notwithstanding
the foregoing sentences in this ss. 10(g), the Seller will apply the Contract
Deposit to the Unadjusted Purchase Price if the Closing takes place on or prior
to December 1, 1997.
11. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer, ASC and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing (A) in the event the Seller
has breached any one or more representations, warranties, or covenants
contained in this Agreement, which breaches, individually or in the
aggregate,
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are materially adverse to the business, properties, results of operations
or financial position of the Companies taken as a whole, the Buyer has
notified the Seller of the breach, and the breach has remained materially
adverse to the business, properties, results of operations and financial
condition of the Companies taken as a whole for a period of 30 days after
the notice of breach or (B) if the Closing shall not have occurred on or
before December 1, 1997, by reason of the failure of any condition
precedent under ss. 8(a) hereof (unless the failure results primarily from
the Buyer itself or ASC breaching any representation, warranty, or
covenant contained in this Agreement); and
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer or ASC at any time prior to the Closing (A) in the
event the Buyer or ASC, as the case may be, has breached any one or more
representations or warranties contained in this Agreement, which breaches,
individually or in the aggregate, result in a failure or refusal of USFS
to issue the USFS Consents or New USFS Permits or are otherwise materially
adverse to the business, properties, results of operations or financial
position of the Companies taken as a whole or if the Buyer or ASC has
breached any covenants contained in this Agreement, the Seller has
notified the Buyer or ASC, as the case may be, of the breach, and the
breach has continued without cure for a period of 30 days after the notice
of breach or (B) if the Closing shall not have occurred on or before
December 1, 1997.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss. 11(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in ss. 6(d) and liquidated damages
provisions contained in ss. 10(g) above shall survive termination.
12. Miscellaneous.
(a) Arbitration. Any dispute required to be resolved pursuant to
Section 2(c) or Section 2(e) of this Agreement shall be finally settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") then in effect as modified herein (the "Rules").
The arbitration shall be held in New York, New York, For the purposes of any
arbitration hereunder, ASC and the Buyer shall be deemed to be one Party. There
shall be three arbitrators, of whom each party shall select one. The claimant
shall name its arbitrators in its demand. The respondent shall name its
arbitrator in its answering statement, or, at the latest, within ten (10) days
of its notification by the AAA of the claimant's demand. The party-appointed
arbitrators shall select the third arbitrator within fifteen days of the
appointment of the second arbitrator. The hearing shall commence
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no later than thirty days and the award shall be rendered no later than sixty
days following the appointment of the last of the three arbitrators. The
arbitration shall be governed by the U.S. Arbitration Act, 9 U.S.C. ss. ss.
1-16. Judgment upon the arbitrators' award may be entered in any court of
competent jurisdiction.
(b) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Seller; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
Kimihito Kamori
Kamori International Corporation
2305 Mt. Werner Circle,
Steamboat Springs, CO 80487
Tel: (970) 879-6111
Fax: (970) 879-7463
40
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Copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Kenju Watanabe, Esq.
Tel: (212) 735-3476
Fax: (212) 735-2000
If to the Buyer and ASC:
ASC Holdings, Inc.
P.O. Box 450
Attn: Chris Howard, Esq.
Bethel, ME 04217
Tel: (207) 824-5151
Fax: (207) 824-5158
Copy to:
Pierce Atwood
1 Monument Square
Bethel, ME 04101
Attn: David Champoux, Esq.
Tel: (207) 791-1364
Fax: (207) 791-1350
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer, ASC and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in
41
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any way any rights arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Except as otherwise specifically provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
(i) all costs and expenses incurred by the Buyer in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Buyer or
ASC, as the case may be, and (ii) all costs and expenses incurred by the Seller
and the Companies in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Seller or the Companies, as the case
may be. It is agreed that the Buyer shall pay the cost of all surveyors and
title companies in connection with the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) Joint and Several Obligations of the Buyer and ASC. ASC and the
Buyer shall be jointly and severally liable with respect to any of the
representations, warranties, covenants and other agreements of either or both of
them contained herein.
42
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
on the date first above written.
ASC WEST
By: /s/ Leslie B. Otten
Title:_________________________________
ASC HOLDINGS, INC.
By: /s/ Leslie B. Otten
Title:_________________________________
KAMORI INTERNATIONAL
CORPORATION
By: /s/ Kimihito Kamori
Title:_________________________________
43
<PAGE>
Exhibit 2.2
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of August 1, 1997 among Kamori
International Corporation (the "Seller"), ASC West ("Purchaser"), and LTCB Trust
Company ("Escrowee").
Background
The Seller and Purchaser are parties to that certain Purchase and
Sale Agreement dated as of the date hereof (the "Purchase Agreement") pursuant
to which the Seller has agreed to sell and Purchaser has agreed to purchase the
Property in accordance with the terms set forth in the Purchase Agreement.
Capitalized terms used in this Agreement and not defined shall have the meanings
specified in the Purchase Agreement.
Pursuant to the Purchase Agreement, Purchaser shall deliver to
Escrowee the Initial Deposit and the Additional Deposit to be held by Escrowee
in accordance with the terms hereof.
Agreement
1. In accordance with the terms of the Purchase Agreement, within
one business day following the date hereof, Purchaser is hereby delivering to
Escrowee by federal wire transfer the sum of $11,000,000 (the "Deposit"), to be
held by Escrowee in escrow pursuant to the terms of this Agreement. The executed
Purchase Agreement shall be held in escrow by counsel for each party and
released only upon (a) receipt of confirmation by the Escrowee of receipt of the
Deposit and (b) receipt of confirmation by Donaldson, Lufkin & Jenrette
Securities Corporation that the Purchase Agreement is acceptable to it.
2. The Deposit shall be invested by Escrowee in shares in any money
market mutual fund of Federated Investors rated at least AAA by Standard & Poor
or Aaa by Moody's Investors Service Inc. or Eurodollar time deposits with the
Long-Term Credit Bank of Japan, Ltd. by Escrowee. Escrowee shall have no
liability for the loss of principal or interest on the deposited funds by any
depository or the failure of a depository to return the principal of, or pay
interest on, the deposited funds when requested, or for any other default,
action or inaction on the part of such depository. The Seller and Purchaser
understand that it may take some time to deposit the funds and some time to
withdraw the funds and that the funds will earn no interest
<PAGE>
during such times. Funds received by the Escrowee, at or prior to 11:00 am. New
York City Time, will be invested on the day of receipt. Funds received after
11:00 a.m. will be invested on the following business day. The term "Deposit" as
used herein shall, unless otherwise provided, be deemed to include any and all
interest earned on the Deposit pursuant to this Agreement.
3. The Deposit shall be released by Escrowee only as follows:
(a) In accordance with the joint written request and instruction
of the Seller and Purchaser;
(b) To Purchaser upon the written request of Purchaser stating
that the Agreement has terminated and that Purchaser is
entitled to the delivery of the Deposit, which delivery shall
be made not sooner than ten (10) days after written notice of
Purchaser's request has been delivered to the Seller and the
Seller has failed to timely deliver to Escrowee the Notice of
Dispute provided for hereinafter;
(c) To the Seller upon the written request of the Seller stating
that the Agreement has terminated and that the Seller is
entitled to the delivery of the Deposit, which delivery shall
be made no sooner than ten (10) days after written notice of
the Seller's request has been delivered to Purchaser and
Purchaser has failed to timely deliver to Escrowee the Notice
of Dispute provided for hereinafter; or
(d) To the Seller upon the written request of the Seller stating
that the Buyer has failed to fund fully the purchase price for
the Shares in a manner satisfactory to the Seller on or prior
to October 31, 1997 in accordance to ss. 10(g) of the Purchase
Agreement and that the Seller is entitled to the Delivery of
the Deposit.
In the event of the delivery by either Purchaser or the Seller of a unilateral
request for disbursement as provided in subparagraphs (b) or (c) above, Escrowee
shall promptly deliver written notice of such request to the other party to the
Agreement. The party receiving notice of such request shall have a period of ten
(10) days after its receipt of such notice within which to deliver to Escrowee
and the other party to the Agreement a notice (the "Notice of Dispute")
disputing the other party's entitlement to delivery of the Deposit and failure
to deliver such Notice of Dispute shall be conclusively presumed to indicate
such party's acquiescence in the request for disbursement of which it has had
notice. Upon receipt of a Notice of Dispute, Escrowee shall give
2
<PAGE>
prompt notice thereof to the party initially requesting delivery of the Deposit
and shall take no further action thereafter except upon the joint written
instruction of the Seller and Purchaser, or the order of a court of competent
jurisdiction.
4. (a) The duties and responsibilities of Escrowee shall be limited
to those expressly set forth herein, being purely ministerial in nature, and
Escrowee shall incur no liability whatsoever hereunder except for willful
misconduct or gross negligence.
(b) Escrowee shall not be personally liable for any act taken
or omitted hereunder if taken or omitted by it in good faith and in the exercise
of its own best judgment and without willful misconduct or gross negligence.
Escrowee shall also be fully protected in relying upon any written notice,
demand, certificate, or document which it in good faith believes to be genuine
and signed by the proper parties.
(c) Escrowee shall be under no responsibility in respect of
the amounts deposited with it other than faithfully to follow the instructions
contained herein. It may obtain advice of counsel and shall be fully protected
in any action taken in good faith, in accordance with such advice. It shall not
be required to defend any legal proceedings that may be instituted against it in
respect of the subject matter of these instructions unless requested so to do by
the Seller and shall be indemnified by the Seller to its satisfaction against
the cost and expense of such defense. It shall have no responsibility for the
genuineness or validity of any document or other item deposited with it.
(d) Escrowee shall have no liability to Purchaser and the
Seller for any loss to the Deposit resulting from the failure of a bank in which
the Deposit is deposited.
5. Both parties promise and agree to indemnify and save Escrowee
harmless from any claims, liabilities, judgments, attorneys' fees, and other
expenses of every kind and nature (other than those arising from Escrowee's
willful misconduct or gross negligence and other than the normal de minimis
costs of retaining the Deposit in accordance with paragraph 2 above) that may be
incurred by Escrowee by reason of its acceptance of, and its performance under,
this instrument; provided, however, that Purchaser shall not be obligated to
indemnify Escrowee for attorneys fees for which Seller is obligated for under
Section 4(c) hereof.
6. All of the terms and conditions in connection with Escrowee's
duties and responsibilities are contained in this instrument and Escrowee is not
expected to be required to be familiar with the provisions of any other
instrument or agreement and shall not be charged with any responsibility or
liability in
3
<PAGE>
connection with the observance or non observance by any one of the provisions of
any such instrument or agreement.
7. In the event of a dispute between any parties hereto, Escrowee
shall be entitled, but shall not be required so to do, to deposit the Deposit in
the Supreme Court of the State of New York located in New York County and
thereupon be relieved of all responsibilities hereunder.
8. All notices, consents, approvals and other communications under
this Escrow Agreement shall be in writing and shall be given in accordance with
Section 12(h) of the Purchase Agreement.
9. The tax identification numbers of Seller and Purchaser are as
follows:
The Seller: 84-114-4087
Purchaser:
10. The Escrowee shall receive an up front flat fee of $10,000
payable by the Purchaser for their services hereunder.
11. This Agreement shall be construed and enforced in accordance
with the laws of the State of New York and shall be binding upon and inure to
the benefit of Purchaser and the Seller and their respective successors and
permitted assigns, and Escrowee.
12. This Escrow Agreement shall terminate and be of no further force
and effect from and after the date that final distribution has been made
hereunder.
4
<PAGE>
Escrowee, the Seller and Purchaser have executed this Agreement as
of the day and year first above written.
LTCB TRUST COMPANY.
By:
-------------------------------------
Name:
Title:
KAMORI INTERNATIONAL CORPORATION
By: /s/ Kimihito Kamori
-------------------------------------
Name:
Title:
ASC WEST
By: /s/ Leslie B. Otten
-------------------------------------
Name:
Title:
5
<PAGE>
Exhibit 3.2
BYLAWS
OF
ASC HOLDINGS, INC.
Adopted: May 29, 1997
ARTICLE I
Name
Section 1. Name. The name of this corporation is stated in the Articles of
Incorporation.
ARTICLE II
References, Locations and Seal
Section 1. References. References in these Bylaws to the Articles of
Incorporation shall mean this corporation's Articles of Incorporation as amended
from time to time as on file with the Secretary of State of Maine. References in
these Bylaws to the Maine Business Corporation Act and to particular sections of
said Act are to said Act and said sections as amended from time to time. The
headings of Articles and Sections in these Bylaws are for convenience only, and
shall not be taken into account in construing these Bylaws.
Section 2. Office and Location. The registered office of this corporation
in Maine and the municipality or other place in Maine where it is located are
set forth in the Articles of Incorporation. The principal office and place of
business of this corporation, within or without Maine, shall be at such place as
the Board of Directors shall from time to time fix.
Section 3. Seal. The seal of this corporation shall be circular in form
with the name of the corporation, the word "Maine" and the year of its
incorporation so engraved on its face that it may be embossed on paper by
pressure, provided that the Board of Directors may adopt a wafer seal in any
form in respect of any particular document, in which case such wafer seal
affixed to such document shall be the corporate seal of this corporation thereon
for all purposes provided by law. The Clerk shall have custody of the corporate
seal and he or the Secretary may affix the same to documents requiring it and
attest the same. The Clerk may permit the President or Secretary to keep a
duplicate of the corporate seal.
ARTICLE III
Meetings of Shareholders
Section 1. Place. All meetings of shareholders shall be held at the
registered office of the corporation or at such other place within Maine (or
outside Maine if permitted by the Articles of Incorporation) as shall be fixed
(i) by the Board of Directors, (ii) by the person or persons calling the
meeting, or (iii) in waivers of notice of the meeting signed by all persons
entitled to notice thereof.
Section 2. Date of Annual Meeting. The annual meeting of shareholders
shall be held on the third Tuesday of April in each year, if not a legal
holiday, and if a legal holiday, then on the next business day following, at
10:00 A.M., Local Time, or at such other hour as may be fixed by the President
or Board of Directors, for the election of a Board of Directors, and for the
transaction of such other business as may properly come before the meeting. The
annual meeting of shareholders may likewise be held at any date and time fixed
by the President or Board of Directors during a period of 30 days after the date
hereinabove specified. If there shall be a failure for whatever reason to hold
the annual meeting for a period of 30 days after the date hereinbefore
specified, a substitute annual meeting of shareholders may be called by any
person or persons entitled to call a special meeting
<PAGE>
of shareholders.
Section 3. Call of Special Meetings. Special meetings of shareholders for
any purpose or purposes may be called to be held at the date and time fixed in
the call by the President, the Chairman of the Board of Directors (if any), a
majority of the Board of Directors, or the holders of not less than 50% of the
shares entitled to vote at the meeting.
Section 4. Notice. Unless waived in the manner prescribed by law, written
notice stating the place, day and time of the meeting and, in case of a special
meeting or when otherwise required by the Maine Business Corporation Act, the
purpose or purposes for which the meeting is called, shall be delivered within
the time period prescribed in ss. 604(1) of the Maine Business Corporation Act,
either personally or by mail, by or at the direction of the President,
Secretary, Clerk, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting, and to shareholders of
record not entitled to vote when required by the Maine Business Corporation Act.
ARTICLE IV
Quorum and Voting of Shares
Section 1. Quorum. The holders of a majority of the shares entitled to
vote thereat shall constitute a quorum at a meeting of shareholders.
Section 2. Votes. Except as otherwise provided by the Maine Business
Corporation Act, any corporate action shall be authorized by a majority of the
votes cast at the meeting by the holders of shares entitled to vote on the
subject matter. In elections of Directors, those candidates who receive the
greatest number of votes cast at the meeting by the holders of shares entitled
to vote to elect Directors, even though not receiving a majority of the votes
cast, shall be deemed elected.
ARTICLE V
Directors
Section 1. Number and Term. The number of Directors shall be fixed by
resolution of the shareholders or the Board of Directors within the limits
specified in the Articles of Incorporation. The Directors shall be elected at
the annual meeting of the shareholders, and each Director so elected shall hold
office for one year and until the next succeeding annual meeting and until his
successor shall have been elected and qualified, or until his earlier
resignation, removal from office, death or incapacity.
Section 2. Vacancies, Resignation and Removal. Any vacancy in the Board of
Directors, including newly created directorships created by an increase in the
number of Directors, may be filled by a majority of the remaining Directors or
by the sole remaining Director. Any Director may resign his office by delivering
a written resignation to the President or Clerk.
Section 3. Powers. In the management and control of the business, property
and affairs of the corporation, the Board of Directors is hereby vested with the
power to authorize any and all corporate action, except when shareholder action
is specifically required by the Maine Business Corporation Act, the Articles of
Incorporation or these Bylaws, or except when otherwise required by a written
agreement pursuant to ss. 618 of the Maine Business Corporation Act.
ARTICLE VI
Meetings of the Board of Directors
Section 1. Annual Meeting. The first meeting of each newly elected Board
of Directors, which shall be
<PAGE>
the Annual Meeting of the Board of Directors, shall be held at such time and
place as shall be fixed by the shareholders at their meeting electing them, or
if no such time and place are so fixed, said first meeting shall be held at the
place of and immediately following such meeting of shareholders. In either
event, no notice of such meeting shall be necessary. Such meeting of the Board
of Directors may also convene at such place and time as shall be fixed by the
consent in writing of all the Directors.
Section 2. Regular Meetings. Regular meetings of the Board of Directors
may be held at such time and place as shall from time to time be fixed by the
Board of Directors. Unless action is to be taken with respect to the Articles of
Incorporation or Bylaws, no notice of such regular meetings shall be necessary.
Section 3. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors (if any), President,
Clerk, Secretary or any other person or persons authorized byss.709(6) of the
Maine Business Corporation Act. The person or persons calling the special
meeting shall fix the time and place thereof.
Section 4. Notice; Generally. Notice of each special meeting of the Board
of Directors shall be given to each Director who has not signed a waiver of
notice before or after the meeting. Notices of meetings of the Board of
Directors shall be given by the Clerk or Secretary or the person or persons
calling the meeting. Neither the business to be transacted at nor the purpose of
the meeting need be specified in the notice unless the Maine Business
Corporation Act shall otherwise require. The giving of notice of a special
meeting of the Board of Directors by or at the direction of the person or
persons authorized to call the same shall constitute the call thereof.
Section 5. Notice; When and How Given. Notice of meetings of the Board of
Directors may be given by any of the following methods within the time period
specified for that method:
(a) by depositing a copy of the notice in the United States mail, first
class postage prepaid, addressed to the Director at his usual or last
known business or residence address, at least 3 business days before the
meeting;
(b) by delivering a copy of the notice to a recognized overnight delivery
or express service addressed to the Director at his usual or last known
business or residence address, including street or the like in the
address, at least 2 business days before the meeting;
(c) by delivering a copy of the notice in hand to the Director at least 24
hours before the meeting;
(d) by reading or causing to be read the notice over the telephone to the
Director at least 24 hours before the meeting;
(e) by sending a telegram containing the contents of the notice addressed
to the Director at his usual or last known business or residence address
at least 2 business days before the meeting;
(f) by transmitting the contents of the notice by telecopy, fax or any
other electronic means for the simultaneous or substantially simultaneous
transmission of data to a telephone or other number held out by the
Director as a number maintained by him for the receipt of the means of
transmission selected at least 24 hours before the meeting; or
(g) by sending a copy of the notice by any usual means of communication
addressed to the Director at his usual or last known business or residence
address, including street or the like in the address, at least 3 business
days before the meeting.
Notice to any Director actually received by him at least 24 hours before the
meeting shall be deemed sufficient, notwithstanding the method or means of
communication selected or the time when sent. For the purposes of this Section,
a "business day" is any day other than a Saturday, Sunday or legal holiday in
Maine.
<PAGE>
ARTICLE VII
Executive and Other Committees
Section 1. Establishment; Authority. The Board of Directors, by a
resolution adopted by a majority of the Directors then in office, may designate
from among its members an executive committee and other committees, each
consisting of 2 or more Directors, and may delegate to such committee or
committees any part or all of the authority of the Board of Directors, except as
otherwise provided by ss. 713 of the Maine Business Corporation Act relating to
certain amendments, mergers, certain sales, dissolutions,certain distributions
and the like.
Section 2. Procedures. Vacancies in the membership of a committee shall be
filled by resolution adopted by a majority of the Directors then in office.
Committees shall keep minutes of their proceedings and report the same to the
Board of Directors. Members of a committee may be removed from office, with or
without cause, by resolution adopted by a majority of the Directors then in
office. Any person or persons authorized to call a meeting of the Board of
Directors, as well as the chairman of a committee or the committee itself, may
call a meeting of a committee. Except as hereinbefore otherwise provided, so far
as applicable, the provisions of these Bylaws relating to the calling, noticing
and conduct of meetings of the Board of Directors shall govern the calling,
noticing and conduct of meetings of committees.
ARTICLE VIII
Officers
Section 1. Number. The officers of the corporation shall be elected by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors may also elect one or more Vice Presidents (one of whom may
be designated by the Board of Directors as the Executive Vice President), and
one or more Assistant Secretaries and Assistant Treasurers. The corporation
shall also have a Clerk who shall not be an officer by reason of such position.
Section 2. When Chosen; Qualifications; Term. The Board of Directors at
its initial meeting after the incorporation of the corporation and at each
Annual Meeting thereafter shall elect said officers, who shall hold office until
the next Annual Meeting of the Board of Directors and thereafter until their
successors are chosen and have qualified, or until their earlier death,
resignation or removal from office; provided that the Clerk shall not be elected
annually and shall hold office until his death or a change of Clerk is made
pursuant to ss. 304 of the Maine Business Corporation Act. No officer must also
be a Director.
Section 3. Authority and Duties. Each officer shall have such authority
and perform such duties as are set forth in the Maine Business Corporation Act
or in these Bylaws, and as shall be determined from time to time by the Board of
Directors. Each officer shall also have such authority and perform such duties
as are usually incumbent upon his office except as the same may be limited from
time to time by the Board of Directors.
Section 4. Compensation of Officers. The compensation of all officers of
the corporation shall be fixed by the Board of Directors.
Section 5. President. The President shall be the chief executive officer
of the corporation, shall preside at all meetings of the shareholders and of the
Board of Directors at which he is present, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 6. Vice President. The Vice President, if any, or if there shall
be more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in case of the absence or disability of the President, have
the authority and perform the duties of the President. If the Board of Directors
shall elect an Executive Vice President, it shall be presumed that he is the
Vice President determined by the Board of Directors first to act in case of the
absence or disability of the President.
<PAGE>
Section 7. Secretary. The Secretary or the Clerk shall attend all meetings
of the Board of Directors and record all the proceedings of the Board of
Directors in a book kept for that purpose. The Secretary shall perform like
duties for the executive committee. In case of the absence or disability of the
Secretary, or if the corporation shall have no Secretary, all of the powers of
the Secretary may be exercised by the Clerk. The Clerk, Secretary or an
Assistant Secretary may certify all votes, resolutions and actions of the
shareholders and the Board of Directors and its committees.
Section 8. Assistant Secretaries. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries, in the order determined by the Board
of Directors, shall, in case of the absence or disability of the Secretary, have
the authority and perform the duties of the Secretary.
Section 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, and shall deposit all such funds in the name and
to the credit of the corporation in such depositories as may be designated by
the Board of Directors. The Treasurer shall keep or cause to be kept all books
and records of account and shall prepare or cause to be prepared all financial
statements required by ss. 625 of the Maine Business Corporation Act, the Board
of Directors or good accounting practices. The Treasurer shall render to the
Board of Directors, whenever required, accounts of all corporate financial
transactions and of the financial condition of the corporation.
Section 10. Assistant Treasurers. Except as hereinbefore provided, the
Assistant Treasurer, or, if there shall be more than one, the Assistant
Treasurers, in the order determined by the Board of Directors, shall, in case of
the absence or disability of the Treasurer, have the authority and perform the
duties of the Treasurer.
ARTICLE IX
Voting Shares of Other Corporations
Section 1. Voting Shares of Other Corporations. The Chairman of the Board
of Directors, if any, the President, any Vice President, the Secretary, the
Treasurer and the Clerk of this corporation, in that order, shall have authority
to vote shares of other corporations standing in the name of this corporation,
and the President, Secretary or Clerk is authorized to execute and deliver in
the name and on behalf of this corporation proxies appointing any one or more of
the foregoing officers as the proxy agents of this corporation.
ARTICLE X
Lost Stock Certificates
Section 1. Lost Stock Certificates. The Board of Directors may authorize,
generally or in a specific case, the appropriate officers to execute and deliver
a replacement certificate for shares of this corporation in substitution for any
certificate for shares theretofore issued alleged to have been lost, destroyed
or stolen. Unless waived by the Board of Directors, the officers executing the
replacement certificate shall require the registered holder thereof to sign and
swear to an affidavit of loss and indemnity agreement in such form as shall be
prescribed by the Clerk. In addition, the Board of Directors may prescribe such
other terms and conditions precedent to the issuance of replacement
certificates, including without limitation the requirement of further
indemnities and surety bonds or insurance policies, as it deems appropriate to
protect the corporation and its officers and agents from any claim that may be
made against it or them with respect to any such certificate alleged to have
been lost, destroyed or stolen. The powers and duties of the Board of Directors
prescribed in this ARTICLE X may be delegated in whole or in part to any
registrar or transfer agent for this corporation.
ARTICLE XI
Transfers and Registration of Shares
<PAGE>
Section 1. Stock Transfer Books. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction recorded in the
original stock transfer books of the corporation, provided that the provisions
of Article XV of these Bylaws respecting restrictions on transfers of shares
have been complied with. The original issue of shares of this corporation shall
likewise be recorded in the original stock transfer books of the corporation.
Section 2. Registered Shareholders. The corporation shall be entitled to
recognize the person or persons shown on its original stock transfer books as
the owner of shares as the exclusive and only owner thereof for all purposes,
including without limitation the right to (i) receive dividends and other
distributions; (ii) vote (except as otherwise provided in ss. 613 of the Maine
Business Corporation Act); and (iii) examine lists, books, minutes or other
materials relating to the corporation. The corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person not noted in its original stock transfer books, whether or
not it shall have express or other notice thereof.
ARTICLE XII
Indemnification
Section 1. Definitions. For all purposes of this Article, (i) the term
"Officer" (when capitalized, but not otherwise) shall mean any person who is or
was a Director, the President, the Treasurer, the Secretary or the Clerk of this
corporation; (ii) the term "Employee" (when capitalized, but not otherwise)
shall mean any other person (whether or not a common law employee) who is or was
an officer, employee or agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan, or other enterprise; and (iii) the term
"Claimant" (when capitalized, but not otherwise) shall mean any Officer or
Employee seeking indemnification under this Article.
Section 2. Indemnification. This corporation shall in all cases indemnify
any Officer, and shall have power exercisable by its Board of Directors as
provided in Section 5 hereof to indemnify any Employee, who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that the Claimant is or was an Officer or Employee, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement to the extent actually and reasonably incurred by the Claimant in
connection with such action, suit or proceeding; provided that no
indemnification may be provided for any Claimant with respect to any matter as
to which the Claimant shall have been finally adjudicated:
A. Not to have acted honestly or in the reasonable belief that the
Claimant's action was in or not opposed to the best interests of this
corporation or its shareholders or, in the case of a Claimant serving as a
fiduciary of an employee benefit plan or trust, in or not opposed to the
best interests of that plan or trust, or its participants or
beneficiaries; or
B. With respect to any criminal action or proceeding, to have had
reasonable cause to believe that the Claimant's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order or
conviction adverse to the Claimant, or by settlement or plea of nolo contendere
or its equivalent, shall not of itself create a presumption that the Claimant
did not act honestly or in the reasonable belief that the Claimant's action was
in or not opposed to the best interests of this corporation or its shareholders
or, in the case of a person serving as a fiduciary of an employee benefit plan
or trust, in or not opposed to the best interests of that plan or trust or its
participants or beneficiaries and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the Claimant's conduct was
unlawful.
<PAGE>
Section 3. Derivative Actions. Notwithstanding any provision of Section 2
hereof, this corporation shall not indemnify any person with respect to any
claim, issue or matter asserted by or in the right of this corporation as to
which the Claimant is finally adjudicated to be liable to this corporation
unless the court in which the action, suit or proceeding was brought shall
determine that, in view of all the circumstances of the case, the Claimant is
fairly and reasonably entitled to indemnity for such amounts as the court shall
deem reasonable.
Section 4. When Defense Successful. Any provisions of Sections 2, 3 or 5
hereof to the contrary notwithstanding, to the extent that a Claimant has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 2 or 3, or in defense of any claim, issue or
matter therein, the Claimant shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred in connection therewith.
Section 5. Determination in Specific Cases. Any indemnification of an
Employee under Section 2 hereof, unless ordered by a court or required by
Section 4 hereof, shall be made by this corporation only as authorized in the
specific case upon a determination that indemnification of the Claimant is
proper in the circumstances and in the best interests of this corporation. Where
such a case specific determination is required, that determination shall be made
by the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to the action, suit or proceeding, or if such a quorum is
not obtainable, or even if obtainable if so directed by a majority vote of a
quorum of disinterested Directors, by independent legal counsel in a written
opinion, or by the shareholders. Such a determination once made may not be
revoked and, upon the making of that determination, the Employee may enforce the
indemnification against this corporation by a separate action notwithstanding
any attempted or actual subsequent action by the Board of Directors.
Section 6. Advances of Expenses. Expenses incurred by or in behalf of an
Employee in defending a civil, criminal, administrative or investigative action,
suit or proceeding may be authorized and paid by this corporation in advance of
the final disposition of that action, suit or proceeding upon a determination
made in accordance with the procedure established in Section 5 hereof that,
based solely on the facts then known to those making the determination and
without further investigation, the Claimant satisfies the standard of conduct
prescribed by Section 2 hereof.
Expenses incurred by or in behalf of an Officer in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall in
all cases be paid, as reasonably requested from time to time by the Officer, by
this corporation in advance of the final disposition of the action, suit or
proceeding upon receipt by this corporation, at the time of the initial advance,
of:
A. A written undertaking by or on behalf of the Officer to repay all
amounts advanced if the Officer is finally adjudicated:
(1) Not to have acted honestly or in the reasonable belief that his
action was in or not opposed to the best interests of this
corporation or its shareholders, or, in the case of a Claimant
serving as a fiduciary of an employee benefit plan or trust, in or
not opposed to the best interests of that plan or trust, or its
participants or beneficiaries;
(2) With respect to any criminal action or proceeding, to have had
reasonable cause to believe that his conduct was unlawful; or
(3) With respect to any claim, issue or matter asserted in any
action, suit or proceeding brought by or in the right of this
corporation, to be liable to this corporation, unless the court in
which the action, suit or proceeding was brought permits
indemnification in accordance with Section 3 hereof; and
B. A written affirmation by the Officer that he has met the standard of
conduct necessary for indemnification by this corporation as authorized in
this Article.
The undertaking required by paragraph A shall be an unlimited general
obligation of the Officer seeking
<PAGE>
the advance, but need not be secured and may be accepted without reference to
financial ability to make the repayment.
Section 7. Indemnification Not Exclusive. The indemnification and
entitlement to advances of expenses provided by this Article shall not be deemed
exclusive of any other rights to which a Claimant may be entitled under any
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in the Claimant's official capacity and as to action in another
capacity while holding an office with this corporation, and shall continue as to
a person who has ceased to be a director, officer, employee, agent, trustee,
partner or fiduciary and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of such a person.
Section 8. Enforceable By Separate Action. A right to indemnification
required by this Article or established pursuant to the provisions of this
Article may be enforced by a separate action against this corporation, if an
order for indemnification has not been entered by a court in any action, suit or
proceeding in respect to which indemnification is sought.
Section 9. Miscellaneous. For purposes of this Article, (i) references to
this "corporation" shall include, in addition to the surviving corporation or
new corporation, any participating corporation in a consolidation or merger;
(ii) this corporation shall be deemed to have requested a person to serve an
employee benefit plan whenever the performance by him of his duties to this
corporation also imposes duties on, or otherwise involves services by, him to
the plan or participants or beneficiaries of the plan; and (iii) excise taxes
assessed on a person seeking indemnification with respect to an employee benefit
plan pursuant to applicable law shall be deemed "fines".
Section 10. Amendment. Any amendment, modification or repeal of this
Article shall not deny, diminish or otherwise limit the rights of any Claimant
to indemnification or advances hereunder with respect to any action, suit or
proceeding arising out of any conduct, act or omission occurring or allegedly
occurring at any time prior to the date of such amendment, modification or
repeal.
ARTICLE XIII
Fiscal Year
Section 1. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XIV
Execution of Documents
Section 1. Execution of Documents. Unless the Board of Directors,
Executive Committee or shareholders shall otherwise generally or in any specific
instance provide:
A. Any bill, note or negotiable instrument may be signed or endorsed in
the name and on behalf of this corporation in the ordinary course of
business by the President or Treasurer, acting singly;
B. The President or Treasurer, acting singly, shall in the ordinary course
of business have authority to sign or endorse in the name and on behalf of
this corporation all checks and other orders for the payment of money
drawn on any bank or trust company;
C. The President or Treasurer, acting singly, shall have authority to
make, in the name and on behalf of this corporation, all contracts in the
ordinary course of business; and
D. Any other instrument, document, deed, bill of sale or other writing of
whatever nature to be executed in the ordinary course of business may be
executed in the name and on behalf of this corporation by
<PAGE>
the President or Treasurer, acting singly, and either officer may seal,
acknowledge and deliver the same.
Section 2. Assistants. Vice Presidents and Assistant Treasurers shall not
have the authority provided in Section 1 unless granted by the Board of
Directors generally or in any specific instance.
ARTICLE XV
Restrictions on Transfers of Shares
Section 1. Restrictions on Sales of Shares. If any shareholder of this
corporation, his personal representative, executor, administrator or any person,
firm or corporation claiming by, through or under him, including without
limitation any assignee for the benefit of creditors or trustee in bankruptcy or
receiver, however appointed, of a shareholder (said shareholder or any other
such person being hereinafter called the "transferring party") desires to sell
for a sum or sums of money all or any part of the shares of this corporation
owned by said shareholder or his legal representatives, and has received a bona
fide offer therefor, the transferring party shall first give written notice of
proposed sale to the Treasurer of this corporation, which notice shall state the
number of shares desired to be sold, the amount of the bona fide offer, and the
name of the person to whom he desires to sell the same, and for a period of
forty-five (45) days following receipt of such notice by the Treasurer, this
corporation or any person or persons specified by the Board of Directors (this
corporation or any such person or persons being hereinafter called the
"optionee") shall have an option to purchase such shares for the amount of the
bona fide offer so stated. The option may be exercised by the optionee by
depositing a written notice of election to exercise signed by the optionee in
the United States mails, first class postage prepaid, addressed to the
transferring party at his usual residence or business address, or by delivery of
said signed notice of election to exercise to the transferring party, in either
case within said forty-five (45) day period.
If the optionee does not exercise said option within said forty-five (45)
day period, the transferring party may sell and assign the number of shares
stated in the notice of proposed sale to the person named therein at the price
therein stated, provided said sale is made within seventy-five (75) days
following the Treasurer's receipt of the notice of proposed sale.
The Board of Directors may by resolution waive the option herein granted
and authorize the sale of shares specified in their resolution to a person named
therein, whether or not the Treasurer has received a notice of proposed sale.
Section 2. Restrictions on Gifts and Other Transfers. If the transferring
party desires to make a transfer or other disposition (including without
limitation gifts, transfers for a consideration other than money, sales not
pursuant to bona fide offers, exchanges or dispositions by way of distribution
pursuant to the terms of any will or trust) of all or any part of the shares of
this corporation owned by said shareholder or his legal representatives, and
such proposed transfer or other disposition is not controlled by Section 1
hereof for any reason, the transferring party shall first give written notice of
proposed transfer to the Treasurer of this corporation, which notice shall state
the number of shares desired to be transferred or otherwise disposed of and the
name of the person to whom the same are to be transferred or disposed of, and
the manner of and reason for the transfer or disposition, and the consideration
(if any) to be received, and the optionee shall have the option to purchase such
shares at the fair value thereof. In the event the transferring party and the
optionee are unable to agree on the amount of the fair value of such shares
within forty-five (45) days after receipt of the notice of proposed transfer by
the Treasurer, the fair value shall be determined by three appraisers, one to be
chosen and compensated by the transferring party (such choice to be made and
announced in writing to the Treasurer within sixty (60) days after his receipt
of the notice of proposed transfer), one to be chosen by the President or Board
of Directors of this corporation (within 30 days after announcement of the
choice of the first appraiser) and compensated by the optionee, and the third to
be chosen by the two appraisers so chosen (within 15 days after the choice of
the second appraiser) and compensated equally by the transferring party and the
optionee. If the transferring party fails to choose an appraiser within the time
set forth in the preceding sentence, the fair value of the shares shall be
determined by two appraisers, the first to be chosen by the President or Board
of Directors of this corporation and the second to be disinterested and chosen
by the first; the compensation of both such appraisers shall be borne equally by
the transferring party and
<PAGE>
the optionee. In either such event, the decision of said appraisers or a
majority thereof as to fair value shall be final, binding and conclusive upon
all parties. In either such event, the appraisers in determining fair value of
the shares shall take into account appropriate control premiums or minority
discounts, and shall take into account the nonmarketability of the shares, and
shall take into account the going concern value of this corporation's business,
but shall not take into account the value of any proceeds of any life insurance
policies on the life of the transferring party (or the shareholder represented
by the transferring party) in excess of cash surrender value. The optionee's
option pursuant to this Section 2 shall not expire until the expiration of a
period of sixty (60) days after the determination of fair value by agreement or
by the appraisers or a majority of them, or until thirty (30) days after any
judgment with respect to appraisal hereunder or fair value in an action
commenced during or before said 60-day period has become final, whichever is
later.
The option may be exercised by the optionee by depositing a written notice
of election to exercise signed by the optionee in the United States mails, first
class postage prepaid, addressed to the transferring party at his usual
residence or business address, or by delivery of said signed notice of election
to exercise to the transferring party, in either case within the later of said
periods.
If the optionee does not exercise said option within the later of said two
periods, the transferring party may transfer or dispose of the number of shares
stated in the notice of proposed transfer to the person named therein in the
manner and for the consideration (if any) stated therein, provided that the
transfer or other disposition is made within thirty (30) days following the
expiration of the later of said two periods. The Board of Directors may by
resolution waive the option herein granted and authorize the transfer or other
disposition of shares specified in their resolution to a person named therein,
whether or not the Treasurer has received a notice of proposed transfer.
Section 3. Provisions Binding. Notwithstanding any other provisions of
these Bylaws, no shares of this corporation shall be sold, transferred or
otherwise disposed of, nor transferred upon the original stock transfer books of
this corporation, nor shall any purported purchaser, transferee or assignee
thereof have any right to demand and require transfer of any shares of this
corporation attempted to be sold or transferred to him, nor have or exercise any
of the rights of a shareholder of this corporation, until after notice given in
accordance with Sections 1 or 2 of this Article and until after expiration of
the option of the optionee or express waiver thereof by the Board of Directors
as therein provided.
All certificates for shares issued by this corporation shall have the
following legend conspicuously printed, typewritten or stamped thereon:
"Transfers of the shares represented by this certificate are subject to
and may be made only upon compliance with the provisions of Article XV of
the Bylaws of this corporation relating to restrictions on sales or
transfers of shares."
Section 4. Pledges. Nothing in Sections 1 or 2 of this Article shall in
any way limit or restrict the right of the owner of shares of this corporation
to pledge the same as security; provided, however, that any pledgee of shares of
this corporation shall be subject to and shall comply with the provisions of
said Sections 1 or 2 prior to making any sale, transfer or other disposition of
the pledged shares to any person (including without limitation vesting
beneficial or record ownership in the pledgee) other than the pledgor or his
legal representatives.
Article XVI
Amendments to Bylaws
Section 1. Amendments. The Board of Directors shall have the power to
alter, amend or repeal these Bylaws, and to adopt new Bylaws, provided that the
notice, unless notice shall be duly waived, of any regular or special meeting at
which such action is to be taken shall either set out the text of the proposed
new Bylaw or
<PAGE>
amendment or Bylaw to be repealed, or shall summarize the changes to be effected
by such adoption, amendment or repeal, and provided further that the
shareholders may amend or repeal a Bylaw provision adopted by the Board of
Directors and in such case the Board of Directors may not, for two years
thereafter, amend or readopt the Bylaw provision thus amended or repealed by the
shareholders.
<PAGE>
EXHIBIT 10.7
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT
BETWEEN
ASC UTAH
AND
IRON MOUNTAIN ASSOCIATES, LLC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
RECITALS.......................................................................1
AGREEMENT......................................................................2
ARTICLE I: COOPERATIVE PLANNING EFFORTS......................................2
1.01 IMA Project ..............................................................2
1.02 ASC Project ..............................................................2
1.03 Cooperative Efforts ......................................................3
1.04 Government Approvals ...................................................3-4
1.05 Separate Approval and Permitting .........................................4
1.06 Costs and Expenses .......................................................4
ARTICLE II: DENSITY CREDIT EXCHANGE ..........................................4
2.01 Basic Exchange .........................................................4-5
2.02 Definitions ..............................................................5
2.03 Additional Buildings in IMA Project ......................................5
2.04 Conditional Rights in Leased Lands.......................................6
2.05 IMA Development Rights ..................................................6
2.06 Failure to Deliver 100 Units.............................................6
ARTICLE III: CONSENT TO INCLUSION OF PROPERTY.................................7
3.01 Consent to Inclusion Defined ............................................7
3.02 ASC Consent to Inclusion.................................................7
3.03 Limitations to ASC Consent to Inclusion..................................7
3.04 Consent to Inclusion of Others...........................................7
3.05 Planning and Design Control of IMA Project.............................7-8
ARTICLE IV.....................................................................8
4.01 Participation Ratio....................................................8-9
a. ASC Participation Ratio................................................8
b. Net Proceeds Defined...................................................8
c. Verification of Net Percent..........................................8-9
d. Affiliates of IMA......................................................9
4.02 ASC Payments.............................................................9
4.03 Deferment of Payments....................................................9
4.04 Lot Releases for Development Purposes.................................9-10
ii
<PAGE>
ARTICLE V: RIGHT OF WAY EASEMENTS............................................10
5.01 Right of Way Easements To and Across ASC and IMA Fee Properties..........10
5.02 Right of Way Easements To and Across the ASC Lease Property..............10
5.03 Right of Way Easements To and Across Osguthorpe Lands....................10
5.04 Nature of Right of Way Easements......................................10-11
ARTICLE VI: SKI LEASE........................................................11
6.01 Lease Established.......................................................11
ARTICLE VII: CLARIFICATION AND CONSTRUCTION OF ROW EASEMENTS AND SKI
IMPROVEMENTS..................................................................11
7.01 Initial and Final Locations...........................................11-12
7.02 Construction of ROW Easements and Ski Improvements.......................12
7.03 Cost of Construction..................................................12-13
ARTICLE VIII: DEVELOPMENT COSTS AND MARKETING................................13
8.01 Development Costs.......................................................13
8.02 Allocation of Development Costs.........................................13
8.03 Marketing...............................................................14
ARTICLE IX: IRON MOUNTAIN....................................................14
9.01 Limitations on Skiing...................................................14
ARTICLE X: WATER RIGHTS.....................................................14
10.01 Cooperative Efforts....................................................14
10.02 IMA Water Agreement.................................................14-15
10.03 ASC Water Commitment...................................................15
10.04 Water for the 100 Units................................................15
ARTICLE XI: REPRESENTATIONS, WARRANTIES and COVENANTS........................15
11.01 IMA Representations, Warranties and Covenants..........................15
11.02 ASC Representations, Warranties and Covenants.......................15-16
11.03 Mutual Representations, Warranties and Covenants...................16-17
ARTICLE XII: ARBITRATION....................................................17
ARTICLE XIII: DEFAULT.......................................................17
iii
<PAGE>
13.01 Default.................................................................18
13.02 13.02 Notice of Default.............................................18-19
13.03 Time to Cure............................................................19
13.04 Default Under Lease Agreement...........................................19
13.05 Rights and Remedies.....................................................19
ARTICLE XIV: MISCELLANEOUS...................................................19
14.01 Force Majeure...........................................................19
14.02 Certificates.........................................................19-20
14.03 Governing Law...........................................................20
14.04 Partial Invalidity......................................................20
14.05 Gender..................................................................20
14.06 Interpretations.........................................................20
14.07 Counterparts............................................................20
14.08 Parties.................................................................20
14.09 Entire Agreement........................................................20
14.10 Amendments..............................................................20
14.11 Successors and Assigns..................................................20
14.12 No Warranties...........................................................21
14.13 Construction of Agreement...............................................21
14.14 Headings................................................................21
14.15 Time is of the Essence..................................................21
14.16 Further Assurances......................................................21
14.17 No Waiver...............................................................21
14.18 Survival of Covenants...................................................21
14.19 Attorneys Fees.......................................................21-22
14.20 Notices.................................................................22
iv
<PAGE>
SCHEDULES
A IMA Property
- IMA Fee Property
- IMA Lease Property
B. ASC Property
- ASC Fee Property
- ASC Lease Property
C. Preliminary Development Plan
D. Lease
E. IMA Disclosures
F. ASC Disclosures
v
<PAGE>
This Development Agreement (the "Agreement") is entered into this ___ day
of ________, 1997 between ASC Utah, a Maine corporation, ("ASC"), Iron Mountain
Associates, LLC , a Utah limited liability company ("IMA"), WPA, LTD. , a Utah
limited partnership ("WPA"), Iron Mountain Holding Group, LC , a Utah limited
liability company ("IMHG") and Iron Mountain Alliance, Inc., a Utah corporation
("IMAI"), WPA, IMHG and IMAI being collectively referred to as the "Members of
IMA," and all collectively referred to as the "Parties."
RECITALS
1. ASC, with a principal place of business in Newry, Maine, is qualified
to do business in the State of Utah. All of the issued and outstanding common
stock of ASC is owned beneficially and of record by ASC Holdings, Inc., a Maine
corporation. All of the outstanding voting stock of ASC Holdings, Inc. is
owned beneficially and of record by Leslie B. Otten. American Skiing Company, a
Maine corporation, is a subsidiary of ASC Holdings, Inc.
2. IMA, with a principal place of business in Summit County, Utah
("Summit County"), conducts business pursuant to an Operating Agreement dated
September 14, 1995, and is qualified to do business in the State of Utah.
3. The Members of IMA own the real property interests in Summit County
described in Schedule A attached hereto and incorporated herein by reference
(the "IMA Property"). The IMA Property consists of real estate owned in fee by
IMHG and certain leasehold interests owned by IMAI. The portion of the IMA
Property owned in fee is separately identified in Schedule A and is referred to
herein as the "IMA Fee Property." The portion of the IMA Property consisting of
a leasehold interest with State of Utah School and Institutional Trust Lands
Administration ("Trust Lands"), Lessor is separately identified in Schedule A
and is referred to herein as the "IMA Lease Property."
4. ASC owns the real property interests described in Schedule B attached
hereto and incorporated herein by reference (the "ASC Property"). The ASC
Property consists of both real estate owned in fee and certain leasehold
interests. The portion of the ASC Property owned in fee is separately
identified in Schedule B and is referred to herein as the "ASC Fee Property."
The portion of the ASC Property consisting of a sub-leasehold interest in lands
owned by Trust Lands is separately identified in Schedule B and is referred to
herein as the "ASC Lease Property."
5. IMA and ASC each contemplate the development of their respective
properties as generally shown on the Preliminary Development Plan shown in
Schedule C attached hereto and incorporated herein by reference ("Preliminary
Development Plan").
6. ASC and IMA previously executed a letter of intent dated May 14, 1997,
as well as that certain Ski Lift and Trail Lease Agreement and ASC Utah
Commitment Regarding Tombstone Ski Easement dated July 24, 1997, and now desire
to enter into this Agreement to definitively set forth in legally binding form
certain agreements regarding the development of their respective properties, as
generally contemplated by the letter of intent.
<PAGE>
AGREEMENT
Now, therefore, in furtherance of the foregoing and in consideration of the
recitals, mutual promises, covenants, conditions, and agreements hereinafter set
forth, the Parties to this Agreement, intending to be legally bound, agree as
follows:
ARTICLE I
COOPERATIVE PLANNING EFFORTS
1.01 IMA PROJECT. IMA is in the process of planning the development of a
low density, large lot residential subdivision on the IMA Property (the "IMA
Project"). IMA intends that the IMA Project will be located upon the IMHG Fee
Property and the IMAI Lease Property, and the following additional properties:
(a) that portion of the ASC Fee Property consisting of the 650
acres in White Pine Canyon recently acquired by ASC from the George and
John Condas Family, identified in Schedule A and referred to herein as
"The ASC/Condas Property."
(b) that portion of the ASC Lease Property consisting of
approximately 240 acres in Section 2 which generally lies south and east of
the ridgeline between Red Pine and White Pine Canyons identified in
Schedule A and referred to herein as "The ASC/Section 2 Property," the
development of which as part of the IMA Project shall be pursuant to a
separate development lease to be established between IMA and Trust Lands;
and
(c) the two parcels in White Pine Canyon consisting of 200 acres
in Sections 10 and 13 currently owned by the Bureau of Land Management (the
"BLM") which are the subject of an exchange between the BLM and Trust
Lands, which are intended to be included in the IMA Lease Property by
future agreement with Trust Lands and which are identified in Schedule A
and referred to herein as "The BLM Lands."
1.02 ASC PROJECT. ASC is in the process of planning a commercial alpine
ski resort (the "ASC Project"). ASC has recently acquired, and is in the
process of developing and expanding, the so-called Wolf Mountain Ski Resort, a
portion of which is located on the ASC Property. ASC intends that the
development and expansion should include not only the ASC Property and the ASC
Lease Property, but also the following additional properties:
(a) portions of the IMA Property consisting of an as yet
undetermined number of acres in Sections 1, 6, 7, 11, 12 and 13 which are
identified in Schedule B and referenced to herein as "The IMA Ski Lease
Property."
2
<PAGE>
(b) portions of the property owned by the Osguthorpe Family
which consist of approximately 550 acres in Sections 1 and 3 and which
are identified in Schedule B and referred to herein as "The Osguthorpe
Property."
1.03 COOPERATIVE EFFORTS. IMA and ASC recognize and agree that
development of the IMA Project and the ASC Project must occur in an environment
of mutual cooperation in which the needs and requirements of the respective
developments must be integrated and accommodated. To assist in accomplishing
that goal, IMA and ASC hereby agree to engage in a collaborative decision-making
process to implement the Preliminary Development Plan using the following
"General Principles" as a basis for the collaborative decision-making:
(a) The Parties recognize that the Preliminary Development Plan is
intended to serve as the initial depiction of the easement locations, the
IMA Ski Lease Property and the boundaries of the IMA and ASC Projects, and
the Parties agree that the planning, permitting and development process
will require mutual cooperation in making the necessary adjustments and
alterations to the Preliminary Development Plan to accommodate the needs of
the IMA Project and the ASC Project.
(b) The Parties recognize and agree that it is their mutual objective
to maximize the value of the IMA Project and the ASC Project and that the
projects shall be designed to complement one another without adversely
impacting the value of either project.
(c) The Parties agree that their projects will be designed so as to
preserve and enhance the scenic, aesthetic and environmental qualities of
the area, to the maximum extent reasonably possible consistent with the
essential nature of both projects and their commercial viability.
(d) The Parties will, to the maximum extent reasonably possible,
integrate their design and planning so as to produce a combined residential
and resort experience that functions in a complementary fashion, and will
provide to each other, the opportunity to review and comment upon their
respective development programs prior to the submittal of applications, or
amendments to existing applications, to governmental authorities.
(e) The Parties will, consistent with the independent nature of the
projects, approach the planning and permitting process on a coordinated
basis in an effort to minimize the demands on regulatory authorities and
portray to regulatory authorities as cohesive a development plan for the
area as reasonably possible.
(f) The Parties each will exercise their best efforts to foster a
cooperative working environment in the planning, permitting and development
process with all landowners adjoining the ASC Project and the IMA Project,
and to coordinate, to the greatest extent possible, the development of real
estate development projects on adjoining property with the IMA Project and
the ASC Project.
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1.04 GOVERNMENTAL APPROVALS. The Parties covenant and agree to cooperate
fully with each other in any and all applications, proceedings and appeals made
or prosecuted by the other in connection with obtaining any necessary permits,
licenses, approvals or consents under the zoning, land use, environmental and/or
building regulations, ordinances, codes, laws and directives of all of the
federal, state, county and other authorities having jurisdiction over the
development, including without limitation, the Snyderville Basin Planning
Commission and the Summit County Board of County Commissioners, provided such
applications, proceedings or appeals are consistent with the Preliminary
Development Plan, as amended or revised pursuant to Section 7.01. Each party
shall execute any and all documents, instruments, consents and authorizations
requested by the other which shall reasonably be necessary or desirable with
respect thereto. Either party reasonably may prosecute such applications,
proceedings and appeals through counsel of its choice, but shall do so at its
own cost and expense.
1.05 SEPARATE APPROVAL AND PERMITTING. Notwithstanding the provisions of
Sections 1.01 and 1.02 above, IMA and ASC reserve the right to make legally
separate applications for all necessary permits and approvals for their
respective developments. Any such applications may proceed independently from
each other as to the timeline for approval; however, the parties will exercise
their best efforts to coordinate their independent applications. As regards the
timing of applications, the parties will coordinate timing to the extent
necessary to maintain IMA's status as a Base Density project, as provided in
Section 2.01(b) below.
1.06 COSTS AND EXPENSES. Except as specifically provided herein, or as
provided in a separate written agreement executed by ASC and IMA subsequent to
the date hereof, each party shall bear its own costs and expenses associated
with the planning and permitting of its projects and any reviews provided for
hereunder.
ARTICLE II
DENSITY CREDIT EXCHANGE
2.01 BASIC EXCHANGE. As part of their cooperative effort, ASC and IMA
agree to the following exchange:
(a) ASC shall grant to IMA fee simple title to land within the
ASC Project on which ASC has received approval from Summit County for
one-hundred (100) permanent whole ownership residential units and for
which, pursuant to said approval, ASC has recorded a final plat (the
"100 Units"). IMA shall have the right to construct, own, market and
sell the 100 Units, subject to the conditions specified below. The
100 Units shall be located within the mountain village in Section 2 of
the ASC Lease Property if that area is developed as such by ASC. The
100 Units and the land upon which the 100 Units are located shall be
conveyed to IMA free and clear of any encumbrances, liens, and/or
obligations of any kind whatsoever. ASC agrees to exercise
commercially reasonable efforts to obtain approvals for the 100 Units
within sixty (60) months of the date hereof. In the event such
approvals are not obtained within that period, IMA's obligation to
repay the $1m Line of Credit under Section 8(f) of the Lease Agreement
shall be forgiven.
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(b) IMA shall grant to ASC the sole and exclusive right and
authority (to the exclusion of all parties including IMA) to apply
for, negotiate, obtain and use for purposes of increasing density
allowed on the ASC Property, any and all Density Credits (as defined
below) resulting from or associated with the development of the IMA
Property which Summit County authorities may be willing to grant over
and above the Base Density as defined below. IMA shall develop the
IMA Project consistent with the guidelines described below at Base
Density (as defined herein) in a manner that maximizes Density Credits
(as defined herein) associated with the IMA Project. ASC shall have
the right to transfer, use and apply to the ASC Project all Density
Credits it may attain by negotiation with Summit County relating to
IMA Project , including without limitation any Density Credits from
the IMHG Fee Property, the ASC/Condas Property, the ASC/Section 2
Property, the IMAI Lease Property and any portions of the BLM Lands
which may come under the ownership of Trust Lands and which
subsequently are leased to IMAI and become part of the IMA Project.
ASC agrees that it shall not seek any definition or quantification of
Density Credits relative to Phase 1 of the IMA Project to the extent
that seeking any such information would adversely impact the timing of
approvals for Phase 1 of the IMA Project.
2.02 DEFINITIONS. The Parties recognize and acknowledge that the terms
"Base Density" and "Density Credits" have not been fully defined in the Summit
County zoning process. Thus, the provisions of this Article II are intended as
conceptual descriptions of provisions anticipated to be incorporated into final
zoning for the area by Summit County. The commitment described in Section 2.01
above shall remain conceptual in nature and shall be interpreted broadly so as
to effect the intent of the Parties. Implementation of the final zoning by
Summit County may alter the definitions in this Section and shall affect this
Section only, and shall not act to alter the remainder of this Agreement or the
intent of the Parties. The intent of the Parties is that IMA shall plan and
develop the IMA Project as a large lot residential subdivision at Base Density.
For the purposes of this Agreement, "Base Density" is defined as (a) the minimum
development density permitted by Summit County in the proposed Snyderville Basin
General Plan for the property included within the IMA Project, provided the lot
yield resulting from the minimum development density is not less that 1 unit per
20 acres on property with slopes under 30% and 1 unit per 40 acres on property
with slopes of 30% or greater; and (b) any additional units which may be
required by Summit County planning authorities as a condition of approval of the
IMA Project to satisfy requirements for neighborhood centers, affordable and/or
employee housing, and the like. Consistent with the foregoing minimum
development density, the development of the IMA Project in this manner would
maximize the Density Credits associated with the IMA Project. For the purposes
of this Agreement, "Density Credits" means any and all credits, benefits,
transfers or other allowances, by whatever name or nature, created by or
associated with limiting development to Base Density, whether formally or
informally, in the IMA Project; including, without limitation, Density Credits
for the preservation of excess open space, environmental and wildlife
enhancements, public trails or public access, transfers of density, and the
like. The nature and extent of Density Credits, and the means of transferring
or crediting Density Credits to the ASC Project is currently uncertain. In
accordance with the terms of Section 2.01, ASC shall have the lead in working
with Summit County authorities to establish
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these concepts; provided however, ASC shall have no authority to bind IMA to any
commitment to Summit County.
2.03 ADDITIONAL BUILDINGS ON IMA PROPERTY . Any units, buildings or other
structures which IMA may wish to add to the IMA Project which are not included
in the "Base Density" as defined herein shall be considered "discretionary" and
shall be deducted, at IMA's option, either from the IMA "Base Density" or from
the 100 Units ; provided, however, that IMA shall work in concert with ASC to
assure that any "discretionary" additions to the IMA Project will not adversely
impact the nature of the project so as to materially impair ASC's ability to
maximize Density Credits through negotiation with Summit County authorities.
2.04 CONDITIONAL RIGHTS IN LEASED LANDS. The Parties acknowledge that
their ability to meet their obligations under certain provisions of this
Agreement is conditioned on the resolution of issues with Trust Lands on the IMA
Lease Property and the ASC Lease Property. ASC's ownership and use of Density
Credits derived from the IMA Lease Property and the BLM Lands is subject to the
resolution of the issues between Trust Lands and IMA, and the grant by ASC to
IMA of the 100 Units located in the ASC Lease Property is subject to the
resolution of the issues between Trust Lands and ASC. ASC acknowledges and
agrees that it is "at risk" as to the ownership and use of Density Credits which
may be derived from the IMA Lease Property and the BLM Lands if Trust Lands and
IMA cannot resolve the issues between them. As it relates to the ASC Lease
Property, the Parties agree that the grant by ASC to IMA of the 100 Units is of
central importance to this Agreement. ASC agrees, therefore, that if ASC and
Trust Lands cannot resolve the issues between them on the ASC Lease Property,
ASC shall not be relieved of its obligation to grant the 100 Units to IMA. In
that event, and subject to IMA's approval, ASC then shall grant to IMA the 100
Units on another portion of the ASC Property or, on a portion of the land
within the IMA Ski Lease Property approved by IMA for such use.
2.05 PLANNING AND DESIGN CONTROL. ASC shall determine the planning,
design, configuration, and location of the 100 Units within the ASC Project.
The 100 Units in the ASC Project developed and owned by IMA shall be built in
conformance with the ASC Project development program and design criteria, except
that if the 100 Units are located within the IMA Ski Lease Property then they
shall not be subject to this restriction and IMA shall have final design
approval. The 100 Units shall have access to amenities established by ASC for
the other residences and commercial rental units in that portion of the ASC
Project.
The 100 Units shall be permanent full-time residential units representative
of the entire mix of multi-family and/or single family units in the mountain
village in Section 2 of the ASC Lease Property, excluding conference facilities,
hotels, time-shares and other commercial rental units. More specifically, the
100 Units shall be a mix of units of various sizes and types and which, when all
aspects of a residential unit such as floor area, amenities, location and
similar attributes material to each unit's value are taken into account,
represent a cross section of the mix in the mountain village. If the 100 Units
are located within the IMA Ski Lease Property then the 100 Units shall not be
constrained or limited in size by the foregoing provision unless a limitation is
imposed by Summit County as a general planning condition and provided there is
no adverse impact upon Density Credits available to ASC.
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2.06 FAILURE TO DELIVER 100 UNITS. In the event ASC has not received
planning approval from Summit County for the 100 units and delivered same to IMA
as provided herein within sixty (60) months of the date hereof, IMA's obligation
to repay the One-million Dollar ($1,000,000) Line of Credit established under
Section 8(f) of the Lease Agreement (as defined below) shall be forgiven. In
the event ASC has not received planning approval for the 100 Units and delivered
same to IMA within seventy-two (72) months of the date hereof, then at IMA's
option and in lieu of the delivery of 100 Units, ASC shall execute and deliver
to IMA a promissory note in the principal amount of $10,000,000 with interest at
the rate of ten percent (10%) per annum, payable in ten (10) equal annual
installments of principal plus accrued interest.
ARTICLE III
CONSENT TO INCLUSION OF PROPERTY
3.01 CONSENT TO INCLUSION DEFINED. For the purposes of this Agreement,
"consent to inclusion of property" shall be defined as the consent of a property
owner (a) to include the land which it owns in the common development plan of
the IMA Project as described herein , and (b) to share proportionately all costs
and revenues of the development on the terms and conditions as set forth in this
Agreement ("Consent to Inclusion").
3.02 ASC CONSENT TO INCLUSION: ASC hereby Consents to Inclusion of the
ASC/Condas Property. Further, ASC hereby Consents to Inclusion of the
ASC/Section 2 Property and the BLM Lands, subject to (a) the revision of the
IMA/Trust Lands lease to include these properties, and (b) the release of the
ASC/Section 2 Property from the ASC/Trust Lands sub-lease. ASC hereby consents
to the release of the ASC/Section 2 Property from the ASC/Trust Lands sub-lease
and any future lease between ASC and Trust Lands. The ASC Consent to Inclusion
shall be subject to the terms and conditions related to the respective
properties as set forth below in this Agreement. ASC agrees that it shall not
negotiate with Trust Lands, directly or indirectly, for any development rights
on the ASC/Section 2 Property and the BLM Lands, except that ASC shall have the
right, as provided in Section 6.03 below, to separately negotiate and establish
a ski lease with Trust Lands for the ASC/Section 2 Property and the BLM Lands.
IMA hereby consents to such ski lease.
3.03 LIMITATIONS TO ASC CONSENT TO INCLUSION. The Consent to Inclusion of
the ASC/Condas Property shall not prevent or prohibit the use and development of
that property by ASC as part of its ski resort development, provided such use
and development, including the design of any structures:
(a) shall not be inconsistent with the use, development and overall
design of the IMA Project; and
(b) shall not require public access to the ski resort development on
the road, except for maintenance; and
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(c) shall have been approved by IMA based upon the General Principles
which approval shall not be unreasonably withheld.
3.04 CONSENT TO INCLUSION BY OTHERS. In addition to IMA and ASC, other
property owners who may Consent to Inclusion may include, but may not be limited
to, Trust Lands, United Park City Mines, Park City Mountain Resort, Silver King
Mining Company, and Mines Venture Company, all of which have property interests
in White Pine Canyon and the master plan area of the IMA Project. Consistent
with Section 1.01(f), IMA and ASC agree that they shall not oppose a Consent to
Inclusion of these property owners.
3.05 PLANNING AND DESIGN CONTROL OF IMA PROJECT. IMA shall
determine the planning, design, configuration, and location of all lots,
units and structures within the IMA Project. Any structures built within the
IMA Project shall be built in conformance with the program, design criteria,
covenants, conditions and restrictions established by IMA for the IMA
Project. All lots and units within the IMA Project shall have access to all
amenities established by IMA for the IMA Project generally and/or for the
specific phase in which the lot or unit is located.
ARTICLE IV
PAYMENTS TO PROPERTY OWNERS
4.01 THE PARTICIPATION RATIO. As consideration for its Consent to
Inclusion of property in the IMA Project, ASC and any additional property owner
shall participate in the IMA Project by sharing in the net proceeds of the sale
of all IMA Project lots according to a participation ratio. In order to
maximize value, density within the IMA Project will be clustered; lots will be
sited in the very best locations without regard to property ownership
boundaries. In order to avoid potential disputes between property owners as to
which property owner should receive which lots, each participating property
owner shall receive a proportionate payment from the net proceeds (as defined
below) of each and every lot sold in the IMA Project. The proportionate payment
to each property owner shall be calculated by multiplying the net proceeds of
each and every lot sale by a fraction, the numerator of which is the Base
Density attributable to the land contributed by that property owner and the
denominator of which is the total Base Density attributable to all the land
contributed to the IMA Project. The fraction shall constitute the participation
ratio (the "Participation Ratio").
(a) THE ASC PARTICIPATION RATIO. The Base Density of the ASC/Condas
Property is currently estimated at 20 lots. The Base Density of the entire
IMA Project is currently estimated at 155 lots. These quantities are
estimates only and will be adjusted once the Base Density of each property
within the IMA Project has been calculated. Based on current estimates,
the ASC Participation Ratio would be 20/155 or 12.90% (the "ASC
Participation Ratio"). The final ASC Participation Ratio will be based
upon the Base Density determinations as set forth in Section 2.02.
(b) NET PROCEEDS DEFINED. For the purposes of this Agreement, "Net
Proceeds" shall be defined as the value of all consideration, whether paid
in cash or by note, derived
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from the sale of each lot in the IMA Project or any amenities, memberships,
privileges or services associated therewith, less a proportionate share,
equal for each lot, of (i) the cost of goods sold which shall include all
development costs; (ii) the cost and expenses of sale (including marketing
costs); and (iii) the cost of financing the development costs of the IMA
Project, all determined in accordance with Generally Accepted Accounting
Principles (the "Net Proceeds"), provided that any development costs of the
IMA Project paid by ASC shall be excluded from all costs in applying ASC's
participation ratio to Net Proceeds. For the purposes of this Agreement,
"development costs" are defined in Section 8.01 below.
(c) VERIFICATION OF NET PROCEEDS. The calculation of Net Proceeds
shall be subject to verification by any one or more of the participating
property owners by audit of IMA's books of account. The full cost of the
audit shall be paid by the property owner(s) requesting the audit. IMA,
when requested, shall make its books, records and personnel (including its
outside accountants, agents or consultants) available to any participating
owner(s) for the purpose of conducting the audit.
(d) AFFILIATES OF IMA. The cost of any transactions with, or
payments to, affiliates of IMA, IMHG or IMAI shall be adjusted to the
market rate for such transactions which prevails in the area. Affiliates
of IMA, IMHG or IMAI shall include any persons or organizations (including
corporations, partnerships, limited partnerships, limited liability
companies and limited liability partnerships) that control, are controlled
by or are under common control of IMA, IMHG or IMAI or any combination
thereof. Control means either holding a majority of the capital, equity,
cash flow, profits, residuals or voting interests in the entity or
otherwise exercising or having the ability or right to directly or
indirectly, individually or collectively exercise effective management and
control of the entity.
4.02 ASC PAYMENTS. ASC shall be entitled to receive from IMA payments
equal to the sum of the Net Proceeds received by IMA from the sale of all lots
in the IMA Project multiplied by the ASC Participation Ratio. IMA shall remit
payments to ASC within 30 days of receipt of any cash by IMA, together with a
statement certified by IMA's chief financial officer setting forth the
calculation of Net Proceeds in sufficient detail to provide an independent
public accounting firm with an adequate basis to verify the calculation upon
audit.
4.03 DEFERMENT OF PAYMENTS. Notwithstanding any provision herein to
the contrary, IMA shall have the right, in its sole and absolute discretion, to
establish a development reserve funded by the deferral of payments to
participating property owners from any phase in order to provide a reserve in
an amount reasonably sufficient to adequately provide for the financing of
projected infrastructure costs of the ensuing phase. IMA shall not defer the
payments of one or more property owner(s) to establish such a reserve fund
unless it defers the payments of all property owners, including IMA and any
affiliates, in which case the amount of the deferment for each property owner
shall be calculated on a proportional basis as determined by the Participation
Ratio.
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4.04 LOT RELEASES FOR DEVELOPMENT PURPOSES. Any property owner who
participates in the IMA Project shall have the right at any time to obtain the
release of any lot for development purposes (the "Lot Release"). So as not to
disadvantage any other property owner(s), a lot release may be obtained only by
agreeing to pay the price at which the lot is then being marketed (the "Release
Consideration"). The Release Consideration shall be paid as follows:
(a) At the time of the lot release (the "Release Date"), the
participant requesting the Lot Release, shall, as part of the Release
Consideration, pay to IMA in cash, the pro-rata share of the Development
Costs for that lot (as defined in Article VIII below).
(b) The balance of the Release Consideration shall become a first
lien on the released lot (the "Release Lien") and shall be paid as follows:
(i) interest shall accrue at 10% on the principal amount of
the Release Lien and shall be paid annually;
(ii) all principal and interest accrued on the Release Lien
shall be due and payable twenty-four (24) months from the Release
Date; and
(iii) the Release Lien shall not be subordinated to any
development loan unless secured by a takeout commitment.
A Lot Release shall not affect or reduce the Participation Ratio or the
share of Net Proceeds of the property owner obtaining the Lot Release.
ARTICLE V
RIGHT OF WAY EASEMENTS
5.01 RIGHT OF WAY EASEMENTS TO AND ACROSS ASC AND IMA FEE PROPERTIES: The
Parties hereby grant transferable ROW Easements to and across the IMA Fee
Property and the ASC Fee Property in the general locations depicted on the
Preliminary Development Plan ("the ROW Easements)". On the Preliminary
Development Plan, the ROW Easements granted to IMA by ASC are identified as
the "IMA ROW #1" and the ROW Easements granted to ASC by IMA are identified as
the "ASC ROW #1." The ROW Easements shall be granted by ROW Easement Deeds
(the "ROW Deeds") in form and substance acceptable to the Parties. The ROW
Deeds shall be executed, delivered and recorded as soon as definitive locations
for the ROW Easements have been agreed upon by the parties.
5.02 RIGHT OF WAY EASEMENTS TO AND ACROSS THE ASC LEASE PROPERTY: The
Parties shall grant ROW Easements to and across the ASC Lease Property in the
general locations depicted on the Preliminary Development Plan. On the
Preliminary Development Plan, the ROW Easement which shall be granted to IMA is
identified and referred to herein as "IMA
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ROW #2" and the right of way easement which shall be granted to ASC is
identified and referred to herein as "ASC ROW #2." The ROW Deeds shall be in
the same form approved by the Parties as the ROW Deeds referred to in Section
5.01 above. The ROW Deeds for IMA ROW #2 and ASC ROW #2 shall be executed,
delivered and recorded after the execution of agreements with Trust Lands for
the development of the ASC Lease Property, provided none of the Parties is then
in default of the provisions of this Agreement.
5.03 ROW EASEMENTS TO AND ACROSS OSGUTHORPE PROPERTY: The Parties shall
grant the ROW Easements across the Osguthorpe Property in the general locations
depicted on the Preliminary Development Plan. On the Preliminary Development
Plan, the ROW Easement which shall be granted to IMA is identified and referred
to herein as "IMA ROW #3" and the ROW Easement which shall be granted to ASC is
identified on Schedule D and referred to herein as "ASC ROW #3." The ROW Deeds
shall be in the same form approved by the Parties as the ROW Deeds referred to
in Section 5.01 above. The ROW Deeds for IMA ROW #3 and ASC ROW #3 shall be
executed, delivered and recorded after the execution of an agreement with the
Osguthorpe Family provided none of the Parties is then in default of the
provisions of this Agreement.
5.04 NATURE OF RIGHT OF WAY EASEMENTS. The Parties agree that the ROW
Easements described in this Article IV shall be sufficient in width to meet the
requirements of the Summit County Development Code for the purposes intended and
shall be granted for the purpose of providing access by vehicle and on foot
over and across the respective properties, and to provide a possible underground
location for utility lines including sewer, water, gas, electric, telephone,
communications, and the like. The ROW Deeds, in conformance with adjustments or
refinements subsequently made by the Parties pursuant to Article VI, shall
provide INTER ALIA that the ROW Easements, or portions thereof, are intended
for use by the Parties, their successors and assigns, including without
limitation the purchasers or lessees of property developed within the IMA and
ASC Projects and their invitees; provided, however, that use of ASC ROW #1 and
IMA ROW #1 by the general public or ASC's day skier traffic shall be prohibited
and shall be limited in use to ASC, IMA and its members, and purchasers of lots
in the IMA Project.
ARTICLE VI
CONSENT TO SKI LEASE
6.01 LEASE ESTABLISHED. The Parties shall execute and deliver concurrently
herewith (a) a separate lease agreement (the "Lease" or "Lease Agreement"), and
(b) a short form "Notice of Lease" in recordable form, all in substantial
conformance with the terms set forth in Exhibit D attached hereto and
incorporated herein by this reference.
ARTICLE VII
CLARIFICATION AND CONSTRUCTION OF ROW EASEMENTS
AND SKI IMPROVEMENTS
7.01 INITIAL AND FINAL LOCATIONS. The ROW Easements granted in Article V
and the boundaries of the Leased Premises as granted in Article VI and the Lease
Agreement shall be
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identified through a two step process.
(a) INITIAL LOCATION. ROW Easements depicted in the Preliminary
Development Plan shall constitute the initial locations of such rights of
way, and the land area depicted as sites for Ski Improvements on the
Preliminary Development Plan shall constitute the initial Leased Premises.
The Preliminary Development Plan contains only an initial depiction of the
ROW Easements and a general ski lift and skiing pod plan for the Leased
Premises. ASC and IMA shall work cooperatively to refine the plan to
include a general layout of easement locations and lifts, trails, defined
skier boundary and related improvements, which elements may be adjusted
through further analysis, design, and agreement between IMA and ASC using
as a guide the "General Principles" set forth in Section 1.01 above.
(b) FINAL LOCATION. The final location of the ROW Easements and
the boundaries of the Leased Premises are subject to (a) final design of
the developments contemplated to occur within the IMA Project and ASC
Project, (b) agreement of the Parties as to location and boundaries, and
(c) receipt of all necessary approvals by planning authorities for the
design and location of the ROW Easements and boundaries. Therefore,
consistent with the provisions of Section 1.01 hereof, the Parties agree to
work together in good faith to establish final locations and boundaries as
rapidly as reasonably possible and to accommodate the needs of both Parties
and their respective developments. Upon approval of final plat design by
planning authorities, but prior to recordation of the final plats, the
Parties shall execute, deliver and record with the appropriate recording
offices final definitive descriptions of the ROW Easement locations and
boundaries of the Leased Premises in form acceptable to the Parties based
upon the designs reflected in the final plat. The Leased Premises shall
include not only the actual location of Ski Improvements, but also a
reasonable buffer area in and around the Ski Improvements to allow for
nominal relocation, improvement and use of the Ski Improvements in a
fashion consistent with first class ski resort operations. ASC and IMA
will negotiate in good faith the location and extent of any buffer area
reasonably necessary for such Ski Improvements.
7.02 CONSTRUCTION OF ROW EASEMENTS AND SKI IMPROVEMENTS.
(a) Each Party shall have the right, subject to the provisions of
Section 8.01, to construct improvements within the ROW Easements and the
Ski Improvements as are permitted hereunder subject to the following:
(i) The General Plan, zoning and Development Code of Summit
County shall permit the construction and operation of the ROW
Easements and Ski Improvements contemplated.
(ii) Adequate utilities (including sewer, water and necessary
energy utilities) shall be available to serve the uses contemplated.
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(iii) There shall be no easement, covenant or restriction
affecting the property to be improved or any restriction under any
state, county, or local laws or ordinances, which would prohibit the
ROW Easements and Ski Improvements and the uses contemplated thereby.
(iv) There shall be no easement, covenant or restriction
affecting the property to be improved which, in the opinion of the
Parties, would adversely affect the construction or operation thereon
of the ROW Easements and Ski Improvements.
(v) The Party undertaking the construction shall be in receipt
of all necessary permits, licenses and approvals from the appropriate
governmental authorities for the construction and operation of the
contemplated ROW Easements and Ski Improvements in a manner and
location, and under such conditions, as are acceptable to the Parties
as provided herein.
7.03 COST OF CONSTRUCTION. The costs of constructing and maintaining the
Ski Improvements and the roads within the ROW Easements and Ski Improvements
shall be as follows:
(a) ASC alone shall be responsible for construction of the Ski
Improvements, at its own expense, and maintaining the ROW Easements and Ski
Improvements located on, or at any time erected on, the IMA Ski Lease
Property, and IMA shall not be required to furnish any services or
facilities or to make any repairs or alterations to any Ski Improvements in
or to the IMA Ski Lease Property, or any other improvements thereon, during
the term of the Lease.
(b) Each Party shall be responsible for construction and maintenance
of the roads within the ROW Easements within their respective projects and
shall bear the expense in the same manner as Development Costs as provided
in Section 8.02 below.
ARTICLE VIII
DEVELOPMENT COSTS AND MARKETING
8.01 DEVELOPMENT COSTS. For the purposes of this Agreement, development
costs shall be defined as all costs related to the planning, engineering,
subdivision and improvement of the IMA and ASC Projects, including all
infrastructure costs and the cost of any community, common area, or association
based amenities, within the IMA Project or the ASC Project (the "Development
Costs"). Development Costs shall not include the cost of acquisition of
property or the cost of constructing residential or commercial structures within
either project.
8.02 ALLOCATION OF DEVELOPMENT COSTS: Development Costs for each
project shall be allocated between the Parties as follows:
(a) ASC shall bear all Development Costs relating to the ASC Project,
including the Section 2 alpine resort village and the bringing
infrastructure to the
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boundary of the Section 2 parcel conveyed to IMA for the 100 Units, and any
development within the IMA Ski Lease Property. However, should IMA request
that a portion of the 100 Units be developed as a separate development of
single family, detached dwellings adjacent to the area shown on the
Preliminary Development Plan identified as and referred to herein as the
"Tombstone Lift Base," then in that event IMA shall pay and ASC shall not
be required to pay the Development Costs related to such separate
development of that portion of the 100 Units and the Participation Ratio
provided for in Section 4.01 shall not apply to that separate development.
(b) IMA and ASC shall share the Development Costs relating to the IMA
Project according to the Participation Ratio calculated for each party, as
provided for in Sections 4.01 and 4.02 above. Each lot within the IMA
Project shall bear an equal share of all the Development Costs, including
infrastructure costs, of the IMA Project. ASC's share of the Development
Costs shall be the total Development Costs of the IMA Project multiplied by
the ASC Participation Ratio. ASC's liability for Development Costs shall
be limited to the net proceeds payable to or realized by ASC under Article
IV hereof.
(c) IMA shall not bear any cost of constructing any structures, which
may include INTER ALIA bridges, tunnels, culverts, and the like, where ski
trails cross roadways at any point within the IMA Project.
(d) ASC's liability for infrastructure costs shall be limited to the
Net Proceeds payable to or realized by ASC under Section 4.03 hereof. ASC
shall have no obligation to pay infrastructure costs from its own funds in
advance of sales of lots in the IMA Project, except as provided in Section
7.03.
8.03 MARKETING. ASC and IMA shall retain marketing control over their
respective projects. Any interests of IMA or ASC in units within the other
party's project shall not be independently marketed without the consent of the
party in control of marketing for that project. The costs of inclusion in a
marketing program will be allocated to each party based upon a specific
identification of those costs. Those costs shall be reasonable based upon the
generally applicable market for such activities.
ARTICLE IX
IRON MOUNTAIN
9.01 LIMITATION ON SKIING. The Parties agree that neither of them shall,
without the prior written approval of the other, offer, discuss in detail or
commit to any limitations regarding the potential development of ski terrain on
the northwest face of Iron Mountain identified as and referred to on the
Preliminary Development Plan as the "Northwest Face." Approval of the Parties
shall be required only as its relates to the following issues:
(a) The nature and extent of the limitations;
(b) The time the consideration of any such limitations should be
introduced into the public permitting or planning processes; and
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(c) The consideration to be paid or provided for such limitations.
ASC's right to develop ski terrain on Iron Mountain will be limited to the
area on the Preliminary Development Plan identified as and referred to herein as
the "Western Pod." ASC commits to submit an application for Ski Improvements
in the Western Pod on or before December 31, 1999, and to construct the Ski
Improvements in the Western Pod as reflected on the Preliminary Development Plan
on or before December 31, 2000, subject to receipt of all necessary permits and
approvals.
ARTICLE X
WATER RIGHTS
10.01 COOPERATIVE EFFORTS. ASC and IMA will work on a cooperative basis
to identify and secure adequate water sources for their respective projects.
This cooperative effort shall include:
(a) Full disclosure of all existing and potential water sources on a
continuing basis;
(b) Prompt disclosure of all communications relating to possible
water sources and consultation prior to any substantive communications or
negotiations with third parties regarding the same.
10.02 IMA WATER AGREEMENT. IMA currently is negotiating a (a) Land
Development and Water Service Agreement and (b) Agreement for Grant of Open
Space Easement and Purchase and Sale Agreement and Escrow Instructions with Park
City Municipal Corporation for water service to the IMA Project (the "IMA Water
Agreement"). IMA shall exercise its best and most diligent efforts to
consummate the IMA Water Agreement and shall keep ASC fully informed regarding
that transaction.
10.03 ASC WATER COMMITMENT. In the event that IMA, despite its best and
most diligent efforts, fails to consummate the IMA Water Agreement, then ASC
shall provide to IMA, at ASC expense, the following: (a) a connection to an
identifiable source of wet water acceptable to IMA with approved points of
diversion, and (b) water rights sufficient to serve the IMA Project.
10.04 WATER FOR THE 100 UNITS. ASC shall provide the water rights
necessary for the 100 Units and access to a water system developed and paid for
by ASC for that portion of the ASC Project in which the 100 Units are located.
As provided for in subsection 8.02(a), IMA shall not be responsible for the cost
of the acquisition of water rights for the 100 Units or for the cost of a
pipeline for delivering water to the boundary of the parcel conveyed as a site
for the 100 Units.
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS
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11.01 IMA REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as described
in Schedule E, attached hereto and incorporated herein by this reference, IMA
warrants, represents and covenants to ASC, upon which warranty, representation
and covenants ASC has relied in the execution of the Agreement, and shall
warrant, represent and covenant in the ROW Easements and the Lease, and any
other documents which implement the provisions of this Agreement, the following:
(a) IMA is a limited liability company duly organized and existing
under the laws of the State of Utah and has full power and authority to
carry on its business as now conducted;
(b) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions under the IMA Operating
Agreement and this Agreement constitutes a valid, binding obligation of IMA
enforceable in accordance with its terms, except as limited by equitable
principles and any applicable bankruptcy or creditors' rights, laws,
rulings and regulations;
(c) IMHG has good, marketable fee simple title to the Leased Premises
and the IMA Fee Property , free and clear of all encumbrances, liens,
defects in title, leases, tenancies, easements, restrictions and
agreements, none of which to IMA's knowledge would materially impair the
operation of the Leased Premises as a ski resort or will prevent or
prohibit the development of the premises as a ski resort, provided,
however, IMA is not a knowledgeable ski resort operator and therefore may
not be fully cognizant of what may prevent or prohibit the development and
operation of a ski resort.
11.02 ASC REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
described in Schedule F attached hereto and incorporated herein by this
reference, ASC warrants, represents, and covenants, upon which warranty,
representation and covenants IMA and its members have relied in the execution of
this Agreement, and shall warrant, represent and covenant in the ROW Easements,
the conveyance of the 100 Units, the Lease and any other documents which
implement the provisions of this Agreement, the following:
(a) ASC is a corporation duly organized and existing under the laws
of the State of Maine and has full power and authority to carry on its
business as now conducted;
(b) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions by ASC and its affiliates and
this Agreement constitutes a valid, binding obligation of ASC enforceable
in accordance with its terms, except as limited by equitable principles and
any applicable bankruptcy or creditors' rights, laws, rulings and
regulations;
(c) ASC has good, marketable fee simple title to the ASC Fee Property
and the ASC/Condas Property, free and clear of all encumbrances, liens,
defects in title, leases, tenancies, easements, restrictions, and
agreements, none of which would materially impair the ability of ASC to
grant the ROW Easements or prevent or prohibit the
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development of the IMA Project, or prevent or prohibit the development of
the 100 Units on the ASC Fee Property should it be necessary to do so.
11.03 MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS: Except as
described in Schedules E and F, each party mutually warrants, represents and
covenants to the other, upon which warranty, representation and covenants each
of them has relied in the execution of this Agreement, and shall warrant,
represent and covenant in any document which implements this Agreement, the
following:
(a) This Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (1) conflict with, or
result in a breach of, or default under, or permit acceleration of any
obligation under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, material agreement or other material
instrument or obligation to which it is a party, or by which it or any of
its properties or assets may be bound or affected or (2) violate any order,
writ, injunction, decree or statute, or any rule, regulation, permit,
license or conditions thereto, or (3) result in the creation or imposition
of any lien, charge or encumbrance of any nature upon any of the
properties;
(b) This Agreement is a valid and binding obligation enforceable in
accordance with its terms, subject to equitable principles and applicable
bankruptcy and other creditors' rights laws, regulations and rulings.
(c) There are no permits, licenses, approvals, clearances or other
governmental consents which are required either for the execution and
delivery of this Agreement or the initial ROW Easements or the Lease.
(d) There is no action, suit, proceeding at law or in equity by any
person or entity, or any arbitration or any administrative or other
proceeding by or before any governmental or other instrumentality or
agency, pending, or, to its knowledge, threatened, against it with respect
to any portion of its property or that would affect its ability to enter
into and perform this Agreement.
(e) It is not in violation of any applicable federal, state and local
laws, rules, regulations, ordinances, codes or orders ("Laws") governing
its property, and has not received written notification of any asserted
material failure, past or present, to maintain its property in accordance
with any such law, ordinance or regulation and no event has occurred which
with notice or the passage of time would constitute such a default.
(f) It has no knowledge of any outstanding or threatened (i) actions,
claims, proceedings, determinations or judgments by any party, including,
but not limited to, any governmental authority or agency, against or
involving ASC, arising under the Clear Air Act, the Federal Water Pollution
Control Act of 1972, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Solid Waste Disposal Act, the Resource
Conservation and Recovery Act and the Toxic Substances Control Act, and any
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amendments or extensions of the foregoing statutes, and all other
applicable environmental requirements or any other federal, state, local or
other environmental, health or safety law, regulation, order or requirement
requiring the remediation or removal of an existing condition or substance;
or(ii) orders, determinations or notices of violation issued by any
federal, state, local or other governmental authority administering
environmental or health and safety laws in connection with the its property
which have not been complied with or resolved to the satisfaction of such
governmental authority.
(g) It has read the disclosures contained in Schedules E and F, have
had adequate opportunity to ask questions regarding the disclosures, and
hereby approve same.
ARTICLE XII
ARBITRATION
Any dispute arising in connection with or in any way involving this
Agreement shall be resolved by submission of the dispute to binding arbitration
under the following provisions. Unless otherwise agreed by the parties in
writing, the arbitration shall take place in Salt Lake City, Utah, and shall be
conducted according to the rules for commercial arbitration of the American
Arbitration Association. If the parties cannot agree on an arbitrator, each
party shall select one arbitrator and the two arbitrators so chosen shall choose
a third arbitrator. Unless otherwise specified herein, the parties shall
jointly bear all costs of arbitration. All arbitration shall be binding.
ARTICLE XIII
DEFAULT
13.01 DEFAULT. A default in the terms of this Agreement shall be deemed
to have occurred by the party identified below in the event of any one or more
of the following events shall have occurred and shall not have been remedied as
hereinafter provided.
(a) A default by ASC shall have occurred upon:
(i) ASC's failure to pay any Rent in accordance with the Lease
Agreement when the same shall be due and payable and the continuance
of such failure for a period of thirty (30) days after receipt by ASC
of notice in writing from IMA specifying in detail the nature of such
failure; or
(ii) ASC's failure to perform any of, or conduct operations on a
basis consistent with, the other covenants, conditions and agreements
herein contained, or contained in the Lease Agreement, on ASC's part
to be kept or performed and the continuance of such failure without
the securing of same for a period of sixty (60) days after receipt by
ASC of notice in writing from IMA specifying in detail the nature of
such failure, and provided ASC shall not cure said failure as provided
herein below;
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(iii) ASC's abandonment of the operation of the ski resort;
(iv) ASC's failure to include the ASC/Condas Property as part of
the IMA Project under the terms and conditions set forth in Section
3.02;
(v) ASC's execution of an agreement with Trust Lands on the ASC
Lease Property which fails to provide for a separate lease of the
ASC/Section 2 Property to IMA for inclusion in the IMA Project as
provided in Section 3.02, which fails to provide for the grant the 100
Units free and clear of any encumbrances, covenants, conditions or
restrictions as provided for in Section 2.01, and/or which fails to
provide for the grant of IMA ROW #2 without cost to IMA as provided
for in Section 5.02 ; or
(vi) ASC's execution of an agreement with the Osguthorpe Family
regarding access across the Osguthorpe Lands to the Section 2 Property
which fails to provide for the grant of IMA ROW #3 without cost to IMA
as provided in Section 5.03.
(b) A default by IMA shall have occurred upon any failure of IMA to
perform, observe or satisfy any of its obligations hereunder within a
period of 60 days following written notice of such failure from ASC.
13.02 NOTICE OF DEFAULT. In the event of a default by any Party, the
non-defaulting Party may, at its option, give to the defaulting Party a notice
of election to terminate the Agreement upon a date specified in such notice,
which date shall be not less than thirty (30) business days (Saturdays, Sundays
and legal holidays excluded) after the date of receipt of such notice if the
default has not been cured, and upon the date specified in said notice, the
Agreement and any and all other right, title and interest hereunder shall cease
without further notice or lapse of time. Simultaneously with the sending of the
notice to the defaulting Party, hereinabove provided for, the non-defaulting
Party shall send a copy of such notice to any leasehold Mortgagee(s) and to any
persons or parties having an interest in the Agreement provided the defaulting
Party, prior to the date of the notice, has provided the non-defaulting Party
with a written list of all such leasehold Mortgagees, persons or parties having
such an interest. The curing of any default(s) within the above time limits by
any of the aforesaid persons or parties or combinations thereof, shall
constitute a curing of any default(s) hereunder with like effect as if the
defaulting Party had cured the same hereunder.
13.03 TIME TO CURE. Only in the event that ASC gives notice of a default
by IMA pursuant to subsection 13.01(b) above or in the event that IMA gives
notice of a default by ASC pursuant to subsection 13.02 above, and the default
is of such a nature that it cannot be cured within the sixty (60) day period as
provided for in said subsections, then such default shall not be deemed to
continue so long as the defaulting Party, after receiving such notice, proceeds
to cure the default as soon as reasonably possible and continues to take all
steps necessary to complete the same within a period of time which, under all
prevailing circumstances, shall be reasonable. No default shall be deemed to
continue if and so long as the defaulting Party shall be so
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proceeding to cure the same in good faith or be prevented from curing the same
by any of the causes constituting Force Majeure as defined in Section 14.01
below.
13.04 DEFAULT UNDER LEASE AGREEMENT. Any default under the Lease
Agreement shall constitute a default hereunder for which the Parties shall have
all of the rights and remedies specified in Section 13.05 below..
13.05 RIGHTS AND REMEDIES. In the event of a default by either party,
the non-defaulting party shall have all rights and remedies provided at law and
in equity for breach of this Agreement, including, without limitation, the right
to specific performance.
ARTICLE XIV
MISCELLANEOUS
14.01 FORCE MAJEURE. In the event that IMA or ASC shall be delayed,
hindered in or prevented from the performance of any act (except for the payment
of Rent) required hereunder by reason of strikes, lock-outs, labor troubles,
inability to procure materials, failure of power, restrictive governmental laws
or regulations, riots, insurrection, the act, failure to act or default of the
other party, war, economic depression, civil strife or other reason beyond their
control, then performance of such act shall be excused for the period of the
delay and the proof for the performance of any such act shall be extended for a
period equivalent to the period of such delay.
14.02 CERTIFICATES. Either party shall, without charge, at any time
and from time to time hereafter, within thirty (30) days after written request
of the other, certify by written instrument duly executed and acknowledged to
any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any
other person, firm or corporation specified in such request: (a) as to whether
the Lease has been supplemented or amended, and if so, the substance and manner
of such supplement or amendment; (b) as to the validity and force and effect of
the Lease, in accordance with its tenor as then constituted; (c) as to the
existence of any default thereunder; (d) as to the existence of any offsets,
counterclaims or defense thereto on the part of such other party; (e) as to the
commencement and expiration dates of the term of the Lease; and (f) as to any
other matters as may reasonably be so requested. Any such certificate may be
relied upon by the party requesting it and any other person, firm or corporation
to whom the same may be exhibited or delivered, and the contents of such
certificate shall be binding on the party executing same.
14.03 GOVERNING LAW: This Agreement and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the State of Utah.
14.04 PARTIAL INVALIDITY. If any term, covenant, condition or provision
of this Agreement or the application thereof to any person or circumstance
shall, at any time or to any extent, be invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant, condition and provision
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
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14.05 GENDER. Wherever herein the singular number is used, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders, and vice versa, as the context shall require.
14.06 INTERPRETATIONS. The section headings used herein are for reference
and convenience only, and shall not enter into the interpretation hereof.
14.07 COUNTERPARTS. The Lease may be executed in several counterparts,
each of which shall be an original, but all of which shall constitute one and
the same instrument.
14.08 PARTIES. The terms "IMA" and "ASC" whenever used herein shall mean
only the owner for the time being of IMA's or ASC's interest herein, and upon
any sale or assignment of the interest of either IMA or ASC herein, their
respective successors in interest and/or assigns shall, during the term of their
ownership of their respective estates herein, be deemed to be IMA or ASC, as the
case may be.
14.09 ENTIRE AGREEMENT. No oral statements or prior written matter shall
have any force or effect. The Parties agree that they are not relying on any
representations or agreements other than those contained in this Agreement.
14.10 AMENDMENTS. This Agreement shall not be modified or canceled except
in writing and subscribed to by the Parties.
14.11 SUCCESSORS AND ASSIGNS. Except as herein otherwise expressly
provided, the covenants, conditions and agreements contained in this Agreement
shall bind and inure to the benefit of IMA and ASC and their respective heirs,
successors, administrators representatives and assigns.
14.12 NO WARRANTIES. Except as otherwise specifically provided herein,
neither party has made representations, warranties or agreements by or on behalf
of either party as to any matters. No agreements, warranties or representations
not expressly contained herein shall bind either party.
14.13 CONSTRUCTION OF AGREEMENT. The agreements contained herein shall
not be construed in favor of or against either party, but shall be construed as
if both parties prepared this Agreement.
14.14 HEADINGS. The paragraph headings herein are used only for the
purpose of convenience and shall not be deemed to limit the subject of the
paragraphs of this Agreement or to be considered in their construction.
14.15 TIME IS OF THE ESSENCE. Time is of the essence of each and every
provision of this Agreement.
14.16 FURTHER ASSURANCES. Each of the parties shall execute and deliver
any and all additional papers, documents and other assurances, and shall do any
and all acts and things
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reasonably necessary in connection with the performance of their obligations
hereunder and to carry out the intent of the parties.
14.17 NO WAIVER. No waiver by any party of a breach of any of the terms,
covenants or conditions of this Agreement by the other party shall be construed
or held to be a waiver of any succeeding or preceding breach of the same or any
other term, covenant or condition contained herein. No waiver of any default by
a party hereunder shall be implied from any omission by such party to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect a default other than as specified is such waiver.
The consent or approval by a party to or any act by the other party requiring
such party's consent or approval shall not be deemed to waive or render
unnecessary such party's consent or approval to or of any subsequent similar
acts by the other party.
14.18 SURVIVAL OF COVENANTS. All covenants, representations, warranties,
obligations and agreements contained in this Agreement shall survive the
execution and delivery of this Agreement and the delivery and recordation of all
documents or instruments in connection therewith.
14.19 ATTORNEYS FEES. In any action, arbitration proceeding or other
litigation ("Litigation") between the parties to declare the rights granted in
this Agreement or to enforce the provisions of this Agreement, the party
prevailing in the Litigation, whether at trial or on appeal, shall be entitled
to its costs and expenses of suit, including, without limitation, a reasonable
sum as and for attorneys' fees incurred in such Litigation. The term
"prevailing party" as used in this paragraph shall not be limited to a
prevailing plaintiff, but shall also include, without limitation, any party who
is made a defendant in Litigation in which damages or other relief or both may
be sought against such party and a final judgment or dismissal or decree is
entered in such Litigation in favor of such party defendant.
Attorneys' fees incurred in enforcing any judgment rendered in connection
with the interpretation or enforcement of this Agreement ("Judgment") are
recoverable by the party in whose favor such Judgment is rendered, as a separate
item of damages. The provisions of this paragraph are severable from the other
provisions of this Agreement and shall survive any such Judgment, and the
provisions of this paragraph shall not be deemed merged into any such Judgment.
14.20 NOTICES. Any and all notices and other communications required
or permitted by this Agreement or by law to be given to either party shall be in
writing and shall be deemed duly served and delivered (a) when personally
delivered to the other party or an officer of such party, (b) forty-eight (48)
hours following deposit into the United States mail, first-class postage
prepaid, registered or certified, return receipt requested, addressed to the
other party at the address indicated below, or (c) when received when sent by
facsimile at the address and number set forth below (provided, however, that
notices given by facsimile shall not be effective unless either (i) a duplicate
notice of such facsimile notice is promptly given by depositing the same in the
United States mail as provided above, (ii) the receiving party delivered a
written confirmation of receipt for such notice either by facsimile or any other
method permitted under this section.
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Additionally, any notice given by facsimile shall be deemed received on the next
business day if such notice is received after 5:00 p.m. (recipient's time) or on
a non-business day.
ASC: Chris Howard, CAO IMA: WPA, LTD., Its Manager
American Skiing Company c/o Keith R. Kelley
P.O. Box 450 P.O. Box 681690
Bethel, ME 0445 Park City, UT 84068
Fax: (207) 824-5158 Fax: (435) 658-0049
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have executed and delivered this Development
Agreement as of the day and year first set forth above.
ASC UTAH
By: /s/ Christopher E. Howard
-----------------------------------------
Christopher E. Howard Chief Administrative Officer
IRON MOUNTAIN ASSOCIATES, LLC.
By: WPA, LTD.
Its Manager
By: White Pine Associates, Inc.
Its General Partner
By: /s/ Keith R. Kelley
-------------------------------------
Keith R. Kelley
Vice-President/Secretary
WPA, LTD.
By: White Pine Associates, Inc.
Its General Partner
By: /s/ Keith R. Kelley
-------------------------------------
Keith R. Kelley
Vice-President and Secretary
IRON MOUNTAIN HOLDING GROUP, LC.
By: /s/ Alexandra C. Ockey
----------------------------------------
Alexandra C. Ockey
Chairman, Managing Committee
IRON MOUNTAIN ALLIANCE, INC.
24
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By: /s/ Alexandra C. Ockey
------------------------------------
Alexandra C. Ockey
President
25
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EXHIBIT 10.14
ASSIGNMENT
THIS ASSIGNMENT is made this 30th day of May, 1997, by and between WOLF
MOUNTAIN RESORTS, L.C., a Utah limited liability company with a principal
place of business in Park City, Utah ("Wolf Mountain"), and ASC Utah, a Maine
corporation with a principal place of business in Newry, Maine.
WITNESSETH
WHEREAS, on or about January 28, 1997, Wolf Mountain and Harry P. Condas,
John P. Condas, George P. Condas, Tessie P. Condas, Margarita C. Ellis, and
Jack W. Ellis (collectively "Condas") entered into an Irrevocable Option and
Real Estate Purchase Agreement Upon Exercise of Option (the "Agreement"), a
copy of which is attached as Exhibit A and is incorporated herein by
reference, pursuant to which Wolf Mountain purchased the irrevocable option to
purchase certain real property as described in the Agreement; and
WHEREAS, on or about May 27, 1997, Wolf Mountain and Condas entered into
a Modification of Irrevocable Option and Real Estate Purchase Agreement Upon
Exercise of Option Dated January 28, 1997 (the "Modification"), a copy of
which is attached hereto as Exhibit B and the terms of which are incorporated
herein by reference, pursuant to which the parties extended the date upon
which the option referred to in the Agreement may be exercised and modified
certain other terms of the Agreement; and
WHEREAS, Wolf Mountain desires to assign its rights under the Agreement
and the Modification to ASC.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, Wolf Mountain and ASC Utah hereby agree as follows:
1. Wolf Mountain hereby assigns and transfers to ASC all of Wolf Mountain's
right, title, and interest in and to the option to purchase from Condas
the real property described in the Agreement ("Option"). Upon the closing
of the transaction contemplated by the Purchase and Sale Agreement between
ASC Utah and Wolf dated May 30,1997, ASC shall pay to Wolf the amount of
$100,000 to reimburse it for the initial deposit made by Wolf under the
Condas Option.
2. In the event that Wolf Mountain and ASC Utah do not consummate the
transaction contemplated in the Letter of Intent between those parties
executed April 9, 1997, or some other transaction pursuant to which
American Skiing Company acquires an interest in or control over the Wolf
Mountain Ski Resort on or before July 31, 1997, then Wolf Mountain shall
repurchase the Option and ASC's interest in the escrow agreement
contemplated by the Modification within 15 business days following demand
by ASC for a purchase price equal to $900,000.
<PAGE>
3. Wolf Mountain's obligation to repurchase the option set forth in Section
3 above is hereby personally guaranteed in full by Michael A. Baker.
IN WITNESS WHEREOF, the parties have caused this Assignment to be
executed as of the date first set forth above.
WOLF MOUNTAIN RESORTS, L.C.
By: /s/ Kenneth Griswald
-------------------------
Its: Managing Member
ASC UTAH
By: /s/ Christopher E. Howard
--------------------------
Christopher E. Howard
Its: Chief Administrative Officer
STATE OF UTAH
COUNTY OF SUMMIT, SS
On the 30th day of May, 1997, personally appeared before me Kenneth
Griswald and made oath that he is the Managing Member of Wolf Mountain
Resorts, L.C., a Utah limited liability company, and that the foregoing
instrument was signed by him on behalf of said limited liability company by
authority of its Operating Agreement.
/s/ Susan L. Tolliver
----------------------------
NOTARY PUBLIC
Residing at: Park City, Utah
---------------
My Commission expires:
June 7, 2000
[SEAL] Notary Public
SUSAN L. TOLLIVER
1745 Sidewinder Drive
P.O. Box 1814
Park City, Utah 84068
My Commission Expires
June 7, 2000
State of Utah
<PAGE>
STATE OF UTAH
COUNTY OF SUMMIT, SS
On the 30th day of May, 1997, personally appeared before me Christopher
E. Howard and made oath that he is the Chief Administrative Officer of ASC
Utah, a Maine corporation, and that the foregoing instrument was signed by
him on behalf of said limited liability company by authority of its bylaws.
/s/ Susan L. Tolliver
-------------------------
NOTARY PUBLIC
Residing at: Park City, Utah
---------------
My Commission expires:
June 7, 2000
[SEAL] Notary Public
SUSAN L. TOLLIVER
1745 Sidewinder Drive
P.O. Box 1814
Park City, Utah 84068
My Commission Expires
June 7, 2000
State of Utah
<PAGE>
EXHIBIT 10.51
Christopher E. Howard
Employment Terms
August 22, 1996
Position and Employer: Chief Administrative Officer and General Counsel of
American Skiing Company.
Base Annual Salary: $150,000, with minimum annual increase equal to
inflationary adjustment based on relevant annual
increase in Consumer Price Index.
Annual Bonus: Minimum annual bonus equal to greater of (a) $50,000,
with minimum annual increase equal to inflationary
adjustment based on relevant annual increase in Consumer
Price Index or (b) .1875% of combined ski & lodging and
real estate EBITDA. Minimum bonus will be paid as salary
during the course of each year. The excess over the
minimum will be paid within 10 days following delivery
of ASC's audited financials each year. Any bonus earned
in one year will not affect base salary or bonus amounts
to be provided in any subsequent year.
Participation with key management group in bonus pool,
to the extent the pool share exceeds guaranteed bonus.
Key management group will initially consist of the
following officers of the company:
Chief Administrative Officer
Chief Financial Officer
Vice President-Operations
Vice President-Marketing
Pool participants may be added with advance notice and a
commensurate increase in pool funding. The pool will
consist of a pool of funds equal to a minimum of .5% of
combined ski & lodging and real estate EBITDA to be
determined based on annual audited statements. Actual
bonus amounts will be determined based upon performance
of the company compared to budget. Prior to the
commencement of each fiscal year the key management
group and the president shall mutually agree on a
reasonably
<PAGE>
achievable budget for the ensuing fiscal year. Bonus
shall be awarded based upon the actual EBITDA for the
fiscal year compared to budgeted EBITDA using the
following scale:
- Over 115% of budget = 150% of bonus pool earned
- 106% of 115% of budget = 110% of bonus pool
earned
- 95% to 105% of budget = 100% of bonus pool
earned
- Under 95% of budget = discretionary bonus pool as
determined by president
The pool shall be divided among the members as agreed
among the members. In the absence of unanimous agreement
the shares shall be equal.
Shadow Stock/ISO Plan: Participation in equity participation plans
substantially as described in the attached materials on
a basis providing a minimum participation level of .75%
of the growth in equity of the Company measured in the
manner described in the plans attached. The incentive
comp plan shall be fully implemented within 30 days.
Educational Benefit: The company shall pay for, or otherwise provide fully
for, the cost of 4 years of secondary education for C.
Howard's two sons (Andrew and Tanner) at Gould Academy
in Bethel, Maine, at no cost to C. Howard.
Moving Expenses: Fully reimbursed upon submission of verified invoices.
Expenses include all out-of-pocket costs associated with
any move to the Bethel area, including all closing costs
and brokers commissions associated with purchase and
sale of principal residence. No move to Bethel area is
required as a condition of employment.
Severance Benefit: In the event of involuntary termination: 1 x annual
compensation (including both salary and bonus).
In the event of termination in connection with a "Sale
of the Company" as described in the attached incentive
comp plan: 2 x annual compensation (including both
salary and bonus).
2
<PAGE>
Benefits: Full participation in all benefits programs. Commitment
to restructure retirement program to allow maximum
voluntary contribution by key management group through
top hat program and provide group life insurance program
for management group.
Job Location
and Schedule: Employee will be present at Sunday River offices a
minimum of 3 days per week. Employee shall be entitled
to work from a Portland, Maine office maintained at ASC
expense 2 days per week. Employee will regularly be
expected to have Saturday afternoons and Sundays off.
This is a base case with which both sides must have
flexibility to accommodate needs and schedules.
Vacation and Holidays: 4 weeks mandatory vacation per year. In addition to
other regular holidays employee shall be entitled to
holidays at Thanksgiving and Christmas.
SEEN AND AGREED
/s/ Leslie B. Otten
----------------------------
President of
American Skiing Company
/s/ Christopher E. Howard
----------------------------
3
<PAGE>
EXHIBIT 10.54
================================================================================
FIRST AMENDMENT TO
CREDIT AGREEMENT
Dated as of November 27, 1996
Among
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORT TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
the Borrowers
and
FLEET NATIONAL BANK
THE FIRST NATIONAL BANK OF BOSTON
KEYBANK OF MAINE
the Banks
and
FLEET NATIONAL BANK, AS AGENT
the Agent
================================================================================
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT is entered into as of November
27, 1996 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION,
SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO
HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING
COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I
LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO
SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON
RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD
OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH
(each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK, THE
FIRST NATIONAL BANK OF BOSTON and KEYBANK OF MAINE as the Banks parties to the
Credit Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as
Agent (the "Agent") under the Credit Agreement referred to below.
Recitals
The Borrower, the Lenders and the Agent are parties to a Credit Agreement
dated as of June 28, 1996, as supplemented by a Joinder dated as of August 30,
1996 (the "Credit Agreement"). All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
Pursuant to the Divestiture Consent Decree, American Ski has entered into an
agreement to sell all of the assets comprising the Mt. Cranmore and Waterville
Valley Ski Resorts and desires to release the assets of Cranmore and Waterville
from the Collateral held by the Agent. American Ski also desires, through Pico,
to acquire the real and personal property used in the operation of the Pico
Mountain Ski Resort, including certain capital stock of Upland Water Company,
Inc. and certain capital stock and wastewater disposal units issued by Alpine
Pipeline Company. The Borrower also desire to amend the Credit Agreement in
certain other respects. The Lenders and the Agent are willing to amend the
Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 7, the Borrower, the Lenders and the Agent
hereby agree as follows:
Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby
amended as follows:
(a) The definition of "Maximum Revolving Credit Agreement" is hereby
deleted in its entirety and a new definition substituted therefor as
follows:
"Maximum Revolving Credit Amount" shall mean
as of any date of determination, the lesser of
<PAGE>
(a)(i)(A) $65,000,000 from November 27, 1996 through January
15, 1997, (B) $57,500,000 from January 16, 1997 through June
30, 1999, (C) $50,000,000 from July 1, 1999 through June 30,
2000, and (D) $42,500,000 from July 1, 2000 through maturity,
less (ii) in each case the Asset Sale Reserve, or (b) the
amount to which the Maximum Revolving Credit Amount may have
been reduced pursuant to Section 2.10 or Section 2.15 hereof;
provided that if the obligation of the Lenders to make further
Loans is terminated upon the occurrence of an Event of
Default, the Maximum Revolving Credit Amount as of any date of
determination thereafter shall be deemed to be $0.
(b) The definition of "Security Agreements" is hereby amended by
adding the following new paragraphs (h), (i), (j) and (k) at the end
thereof:
(h) The Security Agreement; the Fee and Leasehold
Mortgage, Assignment of Rents and Security Agreement; the
Collateral Assignment of Leases and Rents; the Trademark and
Tradename Security Agreements; and the Assignment of Licenses,
Contracts and Permits; each dated as of August 30, 1996
pursuant to which Sugarloaf, Mountainside and Sugartech
granted to the Agent a first perfected lien on and security
interest in all of its assets.
(i) The Fee and Leasehold Mortgage, Assignment of Leases
and Rents, Financing Statement and Security Agreement, each
dated October 15, 1996 pursuant to which Sugarloaf granted to
the Agent a first perfected lien on and security interest in
the assets described therein.
(j) The Fee and Leasehold Mortgage, Assignment of Rents
and Security Agreement; the Collateral Assignment of Leases
and Rents; and the Assignment of Licenses, Contracts and
Permits, each of even date with the First Amendment pursuant
to which Pico has granted
2
<PAGE>
the Agent a first perfected lien on and security interest in
the assets described therein.
(k) All other security agreements, pledge agreements,
mortgages, assignments and other instruments by which one or
more Borrowers grants or pledges to the Agent a lien on,
security interest in, or pledge or mortgage or assignment of
any of its assets.
(c) New definitions of "Alpine Pipeline," "Asset Sale Permanent
Reduction Date", "Asset Sale Reserve", "Booth Creek Acquisition
Agreement," "Booth Creek Note," "First Amendment," "Mountainside," "Pico
Acquisition Agreement," "Pico Assets," "Pico Mortgage," "Sugartech," and
"Upland Water" shall be added in alphabetical order, as follows:
"Alpine Pipeline" shall mean Alpine Pipeline Company, a
Vermont corporation.
"Asset Sale Permanent Reduction Date" shall mean the
date on or before November 21, 1997 on which the Borrowers
permanently reduce the Maximum Revolving Credit Amount
pursuant to Section 2.10(b).
"Asset Sale Reserve" shall mean (a) $6,500,000 from
November 27, 1996 through December 31, 1996, and (b)
$7,500,000 from January 1, 1997 through the Asset Sale
Permanent Reduction Date.
"Booth Creek Acquisition Agreement" means the Purchase
and Sale Agreement dated as of August 30, 1996 by and among
American Ski, Waterville, Cranmore and Booth Creek Ski
Acquisition Corp.
"Booth Creek Note" shall mean the promissory note of
Booth Creek Acquisition Corp. to the order of American Ski in
the original principal amount of $2,750,000 issued pursuant to
the Booth Creek Acquisition Agreement.
"First Amendment" shall mean the First Amendment to
Credit Agreement among the Borrowers, the Lenders and the
Agent dated as of November 27, 1996.
3
<PAGE>
"Mountainside" shall mean Mountainside, a Maine
corporation.
"Pico Assets" shall mean the real, personal and
intangible property to be purchased by Pico pursuant to the
Pico Acquisition Agreement.
"Pico Mortgage" shall mean the Fee and Leasehold
Mortgage, Assignment of Leases and Rents, Financing Statement
and Security Agreement of even date with the First Amendment
executed by Pico in favor of the Agent and encumbering the
Pico Assets.
"Pico Acquisition Agreement" shall mean the Purchase and
Sale Agreement dated as of October 16, 1996 by and between
Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports
Center, LLC, Pico Mountain Operating Company, LLC, Harold L.
and Edith Herbert and Pico.
"Sugartech" shall mean Sugartech, a Maine
corporation.
"Upland Water" shall mean Upland Water Company, Inc., a
Vermont corporation.
Section 2. Release of Assets of Cranmore and Waterville; Release of Otten
Guaranty; Mandatory Permanent Reduction.
(a) The Agent and the Lenders hereby release all Collateral consisting of
the assets of Cranmore and Waterville to be conveyed pursuant to the Booth Creek
Acquisition Agreement. On request of American Ski, the Agent will execute any
confirmatory releases, discharges and terminations as may be necessary to
confirm such releases of record. The Agent and the Lenders hereby further
release Leslie B. Otten from all obligations under the Otten Guaranty and
acknowledge and agree that the Otten Guaranty is hereby terminated.
(b) Article 2 of the Credit Agreement is hereby amended by deleting
Section 2.10 thereof in its entirety and substituting therefor the following:
Section 2.10 Reduction of Commitment by the Borrowers.
(a) The Borrowers at their option may, at any time and from
time to time, (i) irrevocably reduce in part (in integral multiples
of $1,000,000) the
4
<PAGE>
unused portion of the Available Revolving Credit Amount or (ii)
terminate the entire unused portion of the Available Revolving
Credit Amount, in each case on not less than five (5) Business Days'
prior written notice to the Agent and upon payment of any amounts
due under Section 4.2. No such reduction may be reinstated by the
Borrowers.
(b) On or before November 21, 1997, the Borrower shall
permanently reduce the amounts set forth in clauses (a)(i)(A),
(a)(i)(B), (a)(i)(C) and (a)(i)(D) of the definition of Maximum
Revolving Credit Amount by the amount of the Asset Sale Reserve;
provided, however, that American Ski will not be required to make
such permanent reductions if (i) American Ski is not required to
permanently reduce such amounts pursuant to the provisions of the
Senior Subordinated Notes Indenture and the Junior Subordinated
Notes Indenture and (ii) the Banks consent thereto in writing.
Section 3. Amendment of Covenants.
(a) Article 6 of the Credit Agreement is hereby amended by
adding a new Section 6.14 at the end thereof as follows:
6.14 Notices under Booth Creek Acquisition Agreement and
Pico Acquisition Agreements. American Ski will provide the
Agent copies of all written notices given or received by
American Ski, Waterville or Cranmore under the Booth Creek
Acquisition Agreement or by Pico under the Pico Acquisition
Agreement at the time given or promptly following receipt
thereof.
(b) Section 8.5 of the Credit Agreement is hereby amended by
deleting the last sentence thereof in its entirety and substituting
therefor the following:
The sale of the assets of Cranmore and Waterville pursuant to
the terms thereof satisfies in full the requirements of the
Divestiture Consent Decree.
(c) Section 9.1 of the Credit Agreement is hereby amended by adding
at the end thereof a new clause (i), as follows:
(i) Indebtedness of Pico under the Pico Acquisition
Agreement in an aggregate amount not to exceed $3,350,000 plus
$500,000 in consulting fees payable to the principals of the
sellers of the Pico Assets.
5
<PAGE>
(d) Section 9.3 of the Credit Agreement is hereby amended by adding
at the end thereof new clauses (g) and (h), as follows:
(g) An Investment consisting of the Booth Creek Note so
long as such note has been pledged as Collateral and delivered
to the Agent.
(h) Investments consisting of Pico's ownership of (i)
2001 shares of the capital stock of Upland Water, constituting
approximately 95% of the issued and outstanding capital stock
thereof and (ii) 61 shares of the capital stock of Alpine
Pipeline and all related wastewater disposal units, in each
case so long as such Investments have been pledged as
Collateral and delivered to the Agent.
Section 4. Consent to Ski Resort Acquisition. The Agent and the Lenders
hereby consent to Pico undertaking a Ski Resort Acquisition pursuant to the Pico
Acquisition Agreement and hereby waive the restrictions of Section 9.6 of the
Credit Agreement to permit such Ski Resort Acquisition.
Section 5. Amendment of Schedule 5.4(a). Schedule 5.4(a) to the Credit
Agreement is hereby deleted in its entirety and the new Schedule 5.4(a) attached
hereto is substituted therefor.
Section 6. Representations and Warranties. Article 5 of the Credit
Agreement is hereby amended by adding at the end thereof a new Section 5.32, as
follows:
Section 5.32. Sale of Mt. Cranmore and Waterville Valley;
Acquisition of Pico. Attached as Exhibits A and B to the First
Amendment, respectively, are true, complete and correct copies of
the Booth Creek Acquisition Agreement and the Pico Acquisition
Agreement, neither of which has been modified, amended or
supplemented in any respect. On or about the date of the execution
and delivery of the First Amendment, the sale of the assets
comprising the Mt. Cranmore and Waterville Valley ski areas was
consummated pursuant to the Booth Creek Acquisition Agreement. It is
anticipated that the purchase of the assets comprising the Pico
Mountain ski area will be consummated pursuant to the Pico
Acquisition Agreement prior to December 15, 1996. As the holder of
the shares of capital stock of Alpine Pipeline acquired under the
Pico Acquisition Agreement, Pico has rights to access the Alpine
Pipeline wastewater pipe for sewage disposal, consisting of 61
6
<PAGE>
"Equivalent Units" ("EUs") giving it the right to discharge 27,450
gallons per day of disposal capacity. Not more than 20 of these EUs,
or not more than 9,000 gallons per day, is utilized by existing
development at Pico. Pico will be entitled to use the remaining EUs
to service development at Killington Mountain, subject to the
receipt of state and local permits and approvals for the placement
of pipe and pumping stations necessary to connect such development
to Alpine Pipeline's pipe. In addition, Alpine Pipeline has
approximately 368,000 gallons per day of excess disposal capacity
currently committed from the City of Rutland (the "City") wastewater
treatment plant. The City has substantial excess capacity and
American Ski has met with the City concerning the possibility of
allocating additional capacity to the Town of Sherburne and Alpine
Pipeline Company for sale to Pico.
Section 7. Effectiveness; Conditions to Effectiveness. This First
Amendment to Credit Agreement shall become effective as of November 27, 1996
upon execution hereof by the Borrowers, the Lenders and the Agent and
satisfaction of the following conditions:
(a) Resolutions. Copies of the resolutions of the Board of Directors
of the Borrowers authorizing the execution, delivery and performance of
this Third Amendment, the Booth Creek Acquisition Agreement, the Pico
Acquisition Agreement and the other Lender Agreements executed in
connection herewith to which any Borrower is a party, certified by the
Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each
Borrower (which certificate shall state that such resolutions are in full
force and effect).
(b) Officers' Certificate. A certificate of the Secretary or an
Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower
certifying (i) the name and signatures of the officers of such Borrower
authorized to sign this Third Amendment, the Booth Creek Acquisition
Agreement, the Pico Acquisition Agreement and the other Lender Agreements
executed in connection herewith to which any Borrower is a party and (ii)
as to no change in the charter documents or By-laws of the Borrowers
previously certified to the Agent.
(c) Booth Creek Sale Proceeds. Evidence of the receipt by American
Ski of $17,500,000 in consideration of the sale of assets of Cranmore and
Waterville Valley in the form described in the Booth Creek Acquisition
Agreement.
(d) Booth Creek Note. Delivery to the Agent of the Booth Creek Note,
together with a separate endorsement thereof to the Agent and an
acknowledgment thereof by Booth Creek Acquisition Corp.
7
<PAGE>
Section 8. Closing of Acquisition of Pico Assets. Contemporaneously with
the closing of the acquisition of the Pico Assets, the Borrower shall satisfy
the following conditions:
(a) Upland Water Shares. Delivery to the Agent of 2001 shares of the
issued and outstanding capital stock of Upland Water, together with stock
powers executed in blank.
(b) Alpine Pipeline Shares. Delivery to the Agent of 61 the issued
and outstanding capital stock of Alpine Pipeline, together with stock
powers executed in blank.
(c) Recording of Mortgages, Financing Statements, Etc. All actions
necessary or appropriate to perfect the Agent's liens and security
interests in the Pico Assets shall have been fully performed including
without limitation:
(i) the due and proper recording and filing of the Pico
Mortgage and a Collateral Assignment of Leases and Rents
executed by Pico in favor of the Agent;
(ii) Uniform Commercial Code financing statements necessary
to perfect the security interests of the Agent in the
Pico Assets; and
(iii) the receipt by the Agent of a commitment from Lawyer's
Title Insurance Corporation to issue an ALTA standard
form title insurance policy insuring the first priority
of the Pico Mortgage, subject only to Permitted Liens,
covering all of the Pico Assets, such policy to be in
form and substance satisfactory to the Agent, including
without limitation, such endorsements and affirmative
insurance as the Agent shall require with the standard
tenant's and mechanic's liens exceptions deleted and
with such portions of the survey coverage deleted as the
Agent may require, and the receipt by the Agent shall
also have received proof of full payment of all fees and
premiums for said policies and copies of all documents
listed as exceptions on Schedule B to each such policy.
(iv) Pico shall have executed and delivered to the Agent a
Collateral Assignment of Licenses, Contracts and Permits
assigning all rights in contracts, licenses and permits
used in connection with the Pico Assets in form and
substance satisfactory to the Agent.
(d) Insurance. The Agent shall have received (i) certificates of
insurance as to the liability hazard and other insurance maintained by
Pico on the Pico Assets in
8
<PAGE>
conformity with the insurance requirements contained in the Security
Agreements (including flood insurance if necessary) from the insurer or an
independent insurance broker dated as of the date hereof, identifying
insurers, types of insurance, insurance limits, and policy terms all in
accordance with the provisions of the Security Agreements; (ii) certified
copies of all policies evidencing such insurance (or certificates therefor
signed by the insurer or an agent authorized to bind the insurer); and
(iii) such further information and certificates from the Borrowers, their
insurers and insurance brokers as the Agent may request.
(e) Surveys. Pico shall have provided the Agent with site plans or
other maps acceptable to the Agent showing the real property subject to
the Pico Mortgage, the dimensions and the area thereof, together with a
licensed surveyor's or civil engineer's certificate in a form acceptable
to the Agent, certifying that all existing improvements necessary for the
operation of the Pico Assets as presently operated in all material
respects (the "Pico Material Improvements"), including without limitation
all utilities, sewer and water systems, snowmaking equipment (including
necessary water delivery systems), lodges, ski-lifts, parking areas,
driveways and any other material improvements are located within the
boundaries of the real property owned by Pico. Pico shall provide the
Agent with a list of Pico Material Improvements acceptable to Agent
together with a certificate of the Borrowers in form acceptable to the
Agent certifying that the Pico Material Improvements constitute all of the
improvements necessary to fully operate the Pico Assets as currently
operated and as contemplated to be operated during the 1996-97 ski season.
The certificate shall also indicate those portions of the Pico Assets, if
any, falling within a federally designated flood hazard area; if any
portion falls within such area, flood hazard insurance will be required by
federal regulations.
(f) Compliance with Zoning and Other Laws. Prior to the
effectiveness of this First Amendment, the Borrowers shall submit opinions
of counsel or other evidence in form and substance satisfactory to the
Agent's counsel that the Pico Assets, all existing and proposed
improvements thereon and the use or proposed use thereof, are in
compliance in all material respects with all zoning laws, building codes,
environmental laws and other laws and regulations applicable to the Pico
Assets and the use and proposed use thereof, and that all licenses,
permits and certificates of occupancy or building permits have been issued
to permit the lawful use or improvement of the Pico Assets as contemplated
by the Borrowers.
(g) Environmental Assessments. The Agent shall have received site
assessment reports concerning the Pico Assets, dated as of a recent date,
from environmental engineers acceptable to the Agent, such reports to be
in form and substance satisfactory to the Agent.
(h) Permit Assurances. The Agent shall have received evidence
satisfactory to the Agent that all activities being conducted on the Pico
Assets which require
9
<PAGE>
federal, state or local licenses or permits have been duly licensed except
where the absence of any such license would not have a Material Adverse
Effect and that such licenses or permits are in full force and effect and
have been assigned to the Agent pursuant to the Security Agreements.
(i) Leases/Service Contracts. The Agent shall have received copies
of all material service contracts and leases affecting any portion of the
Pico Assets.
(j) Flood Insurance. The Agent shall have received evidence of flood
hazard insurance for the Mortgaged Properties as required pursuant to the
Credit Agreement and federal regulations.
(k) Opinion of Counsel. The Borrowers shall have delivered to the
Agent (i) an opinion of general counsel to the Borrowers and (ii) an
opinion of Reiberg, Kenlan, Schwiebert, Hall & Facey, P.C., all in form
and substance satisfactory to the Agent.
Section 9. Confirmation of Representations and Warranties; No Default. The
Borrowers hereby confirm to the Agent and the Lenders the representations and
warranties of the Borrowers set forth in Article 5 of the Credit Agreement (as
amended hereby) as of the date hereof, as if set forth herein in full. The
Borrowers hereby certify that no Default exists under the Credit Agreement.
Section 10. Environmental Action Plan. The Environmental Action Plan
included with the Credit Agreement as Exhibit 8.16 is amended by addition of the
Pico Environmental Action Plan attached hereto.
Section 11. Miscellaneous. The Borrowers agree, jointly and severally, to
pay on demand all the Agent's reasonable expenses in preparing, executing and
delivering this First Amendment to Credit Agreement, and all related instruments
and documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar
LLP. This First Amendment to Credit Agreement shall be a Lender Agreement and
shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts.
10
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused
this First Amendment to Credit Agreement to be executed by their duly authorized
officers as of the date first set forth above.
AMERICAN SKIING COMPANY
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUNDAY RIVER SKIWAY CORPORATION
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUNDAY RIVER LTD.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
PERFECT TURN, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
CRANMORE, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUGARBUSH RESORT HOLDINGS INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
11
<PAGE>
SUGARBUSH LEASING COMPANY
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUGARBUSH RESTAURANTS, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
MOUNTAIN WASTEWATER TREATMENT,
INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
S-K-I LTD.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
KILLINGTON, LTD.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
MOUNT SNOW LTD.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
WATERVILLE VALLEY SKI AREA LTD.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
PICO SKI AREA MANAGEMENT COMPANY
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
12
<PAGE>
RESORTS SOFTWARE SERVICES, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
KILLINGTON RESTAURANTS, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
RESORT TECHNOLOGIES, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
DOVER RESTAURANTS, INC.
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
DEERFIELD OPERATING COMPANY
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUGARLOAF MOUNTAIN CORPORATION
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
MOUNTAINSIDE
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
SUGARTECH
By: /s/ [Illegible]
------------------------------------
Senior Vice President/Chief Administrative Officer
13
<PAGE>
FLEET NATIONAL BANK
By: /s/ David B. Henderson
------------------------------------
Name: David B. Henderson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ [Illegible]
------------------------------------
Name:
Title: Vice President
KEYBANK OF MAINE
By: /s/ Jane Roundy
------------------------------------
Name: Jane Roundy
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By: /s/ David B. Henderson
------------------------------------
Name: David B. Henderson
Title: Vice President
14
<PAGE>
EXHIBIT 10.55
================================================================================
SECOND AMENDMENT TO
CREDIT AGREEMENT
Dated as of May 30, 1997
Among
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORT TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
the Borrowers
and
FLEET NATIONAL BANK
BANKBOSTON, N.A.
KEYBANK NATIONAL ASSOCIATION
the Banks
and
FLEET NATIONAL BANK, AS AGENT
the Agent
================================================================================
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT is entered into as of May 30,
1997 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION,
SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO
HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING
COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I
LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO
SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON
RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD
OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH
(each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK,
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and KEYBANK NATIONAL
ASSOCIATION (f/k/a KeyBank of Maine) as the Banks parties to the Credit
Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent
(the "Agent") under the Credit Agreement referred to below.
Recitals
The Borrowers, the Lenders and the Agent are parties to a Credit Agreement
dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreement. The Borrowers desire to (a) increase the
Maximum Revolving Credit Amount under the Credit Agreement and (b) amend the
Credit Agreement in certain other respects. The Lenders and the Agent are
willing to amend the Credit Agreement on the terms and conditions set forth
herein.
NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 6, the Borrowers, the Lenders and the Agent
hereby agree as follows:
Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby
amended as follows:
(a) The definitions of "Consolidated Adjusted Cash Flow", "Hotel
Subsidiary" and "Maximum Revolving Credit Agreement" are hereby deleted in their
entirety and new definitions substituted therefor, as follows:
"Consolidated Adjusted Cash Flow" shall mean (a) Consolidated
EBITDA (before any adjustments to reflect acquisitions, sales and
exchanges of property during such period) for each fiscal year of
the Borrowers and their Restricted Subsidiaries less (b) the sum of
(i) $6,000,000, representing the Borrowers' and their Restricted
Subsidiaries estimated Capital
1
<PAGE>
Expenditures required to maintain their existing ski resorts, and
(ii) cash taxes paid.
"Hotel Subsidiary" shall mean Grand Summit Resort
Properties, Inc.
"Maximum Revolving Credit Amount" shall mean as of any date of
determination, the lesser of (a)(i) $65,000,000 from May __, 1997
through April 30, 1998, (ii) $57,500,000 from May 1, 1998 through
April 30, 1999, (iii) $50,000,000 from May 1, 1999 through June 30,
2000, and (iv) $42,500,000 from July 1, 2000 through the Revolving
Credit Termination Date, or (b) the amount to which the Maximum
Revolving Credit Amount may have been reduced pursuant to Section
2.10; provided that if the obligation of the Lenders to make further
Loans is terminated upon the occurrence of an Event of Default, the
Maximum Revolving Credit Amount as of any date of determination
thereafter shall be deemed to be $0.
(b) The definitions of "Asset Sale Permanent Reduction Date" and
"Asset Sale Reserve" are hereby deleted in their entirety.
(c) New definitions of "Capital Expenditure Test Period," "Second
Amendment" and "Wolf Mountain Development" shall be added in alphabetical order,
as follows:
"Capital Expenditure Test Period" shall mean each period
commencing April 1 of any year and ending March 31 of the following
year.
"Second Amendment" shall mean the Second Amendment to Credit
Agreement among the Borrowers, the Lenders and the Agent dated as of
May 30, 1997.
"Wolf Mountain Development" shall mean the acquisition and
development of Wolf Mountain ski resort in Park City, Utah by any
Borrower.
Section 2. Amendment of Article 2.
(a) Section 2.1 of the Credit Agreement is hereby amended by
deleting paragraphs (b) and (c) thereof in their entirety and substituting
therefor the following:
(b) Subject to the foregoing limitations and the provisions of
Section 4.2, the Borrowers shall have the right to make prepayments
reducing the outstanding
2
<PAGE>
balance of Revolving Credit Advances and to request further Revolving
Credit Advances, all in accordance with Section 2.2, without other
restrictions hereunder; provided that the Lenders shall have the absolute
right to refuse to make any Revolving Credit Advances for so long as there
exists any Default or any other condition which would constitute a Default
upon the making of such a Revolving Credit Advance; and provided further
that during each fiscal year of the Borrowers, commencing with the fiscal
year ending July, 1997, there shall be a period of 45 consecutive days,
including March 31 of each year, during which the outstanding principal
amount of all Revolving Credit Advances shall not exceed the amounts set
forth below:
-----------------------------------------
Maximum Outstanding
Clean-Down Period Revolving Credit
Including March 31 Advances
-----------------------------------------
1997 $25,000,000
-----------------------------------------
1998 $30,000,000
-----------------------------------------
1999 $25,000,000
-----------------------------------------
2000 $20,000,000
-----------------------------------------
2001 $15,000,000
-----------------------------------------
Promptly following the commencement of each clean-down period, American
Ski will notify the Agent that the clean-down period has begun.
(b) Article 2 of the Credit Agreement is hereby further amended by
deleting Section 2.10 thereof in its entirety and substituting therefor the
following:
Section 2.10 Reduction of Commitment by the Borrowers. The
Borrowers at their option may, at any time and from time to time,
(a) irrevocably reduce in part (in integral multiples of $1,000,000)
the unused portion of the Available Revolving Credit Amount or (b)
terminate the entire unused portion of the Available Revolving
Credit Amount, in each case on not less than five (5) Business Days'
prior written notice to the Agent and upon payment of any amounts
due under Section 4.2. No such reduction may be reinstated by the
Borrowers.
(c) Section 2.13 of the Credit Agreement is hereby amended to permit
the Borrowers to use the up to $1,320,000 of proceeds of Revolving Credit
Advances to fund certain costs relating to the Wolf Mountain Development,
consisting of (i) $1,000,000 as an installment of the purchase price of the
so-called "Condas parcel", (ii) $200,000 earnest
3
<PAGE>
money, (iii) $75,000 for acquisition of the Gorgoza Water Option, and (iv)
$45,000 for filing fees under the Hart-Scott-Rodino Anti-Trust Improvement Act
of 1976, as amended.
Section 3. Amendment of Covenants.
(a) Section 4.2(c) of the Credit Agreement is hereby amended by
deleting the last sentence thereof in its entirety and substituting therefor the
following: "For purposes of this Section 4.2(c), the Maximum Revolving Credit
Amount shall be deemed to be $65,000,000."
(b) Section 6.1 of the Credit Agreement is hereby amended by adding
the following new paragraph (c) thereto:
(c) Not more than seven (7) days after the end of each
month, the Borrowers shall furnish to the Agent and each
Lender its internally prepared, unaudited profit plan report
in the form currently prepared by the Borrowers.
(c) Article 6 of the Credit Agreement is hereby amended by deleting
Section 6.2 thereof in its entirety and substituting therefor the following:
Section 6.2. Annual Financial Statements. As soon as
available, but in any event within ninety (90) days after the end of
each fiscal year of the Borrowers, the Borrowers shall furnish to
the Agent and each Lender: (a) audited consolidated and
consolidating balance sheets of (i) the Borrowers and their
Restricted Subsidiaries and (ii) the Borrowers and their
Subsidiaries, as of the end of such fiscal year, and consolidated
and consolidating statements of income, shareholders' equity and
cash flow of (i) the Borrowers and their Restricted Subsidiaries and
(ii) the Borrowers and their Subsidiaries, for such fiscal year, in
each case (other than the consolidating statements) reported on by
Price Waterhouse LLP, or other independent certified public
accountants of recognized national standing acceptable to the Agent,
which report shall express, without reliance upon others, a positive
opinion regarding the fairness of the presentation of such financial
statements in accordance with generally accepted accounting
principles consistently applied, said report to be without
qualification, except in cases of unresolved litigation and
accounting changes with which such accountants concur, together with
the statement of such accountants that they have caused the
provisions of this Agreement and the other Lender Agreements to be
reviewed and that nothing has come to their attention to lead them
to believe that any Default exists hereunder or specifying
4
<PAGE>
any Default and the nature thereof; (b) a Compliance Certificate;
and (c) unconsolidated audited financial statements of the Hotel
Subsidiary and the Insurance Subsidiary similar to the financial
statements described in clause (a) above. At the time of delivery of
the annual audited financial statements, the Borrowers shall furnish
to the Agent and each Lender copies of the written recommendations
concerning the management, finances, financial controls, or
operations of any Borrower or any Restricted Subsidiary received
from the Borrowers' independent public accountants.
(d) Section 6.5 of the Credit Agreement is hereby amended by adding
the words "paid skier visits and unpaid" before the words "skier visits" in
clause (i) thereof.
(e) Article 7 of the Credit Agreement is hereby amended by deleting
Sections 7.3 and 7.4 thereof in their entirety and substituting therefor the
following:
Section 7.3. Ratio of Consolidated Adjusted Cash Flow to
Consolidated Debt Service. The Borrowers and their Restricted
Subsidiaries shall maintain as of the end of each fiscal quarter
commencing with the fourth fiscal quarter of the Borrowers' fiscal
year 1997 for the four-quarter period ending on such date a ratio of
(a) Consolidated Adjusted Cash Flow to (b) Consolidated Debt Service
of not less than the following levels as of the end of any fiscal
quarter during the year indicated:
Fiscal Year
Ending July Ratio
----------- -----
1997 1.20-to-1.00
1998 1.40-to-1.00
1999 1.50-to-1.00
2000 1.40-to-1.00
2001 1.75-to-1.00
Section 7.4. Minimum Consolidated Tangible Net Worth. The
Borrowers and their Restricted Subsidiaries shall maintain minimum
Consolidated Tangible Net Worth as of the last day of each fiscal
year of the Borrowers of not less than the sum of (a) $10,000,000
plus (b) 50% of cumulative Consolidated Net Income (without
deduction for any losses) for each fiscal year, commencing with the
fiscal year ending July 1997 plus (c) all amounts received by the
Borrowers after June 28, 1996 from the issuance of equity interests.
5
<PAGE>
(f) Section 8.11 of the Credit Agreement is hereby amended by adding
the following sentence at the end thereof: "The Borrowers and their Restricted
Subsidiaries will conduct their business and operations separately from that of
the Unrestricted Subsidiaries, and will cause the Unrestricted Subsidiaries to
conduct their business and operations separately from that of the Borrowers and
their Restricted Subsidiaries, including without limitation (i) not commingling
funds or other assets, (ii) maintaining separate corporate and financial records
and observing all corporate formalities, (iii) paying their respective
liabilities from their respective assets, except pursuant to any guarantees
extended by the Borrowers and their Restricted Subsidiaries of obligations of
Unrestricted Subsidiaries with the approval of the Lenders, (iv) maintaining
capitalization adequate to meet their respective business needs, and (v)
conducting dealings with third parties in their respective names and as separate
and independent entities."
(g) Article 9 of the Credit Agreement is hereby amended by deleting
Section 9.12 thereof in its entirety and substituting therefor the following:
Section 9.12. Limitations on Real Estate Operations. Engage in
any real estate development, or similar activities, including
acquisition of land intended for resale or development of
residential subdivisions, condominium units, golf courses, tennis
courts, hotels or related infrastructure and utilities, except
through the Development Subsidiary, the Hotel Subsidiary and any
Unrestricted Subsidiary and except for the completion of the Locke
Mountain development at Sunday River; provided, however, that from
the date hereof through July 31, 1997, the Borrowers may conduct
pre-development activities, excluding construction costs, related to
the development of hotels so long as all costs incurred for such
activities (the "Pre-Construction Expenditures") do not exceed
$4,000,000 and all such expenditures will be repaid to the
Borrowers.
(h) Article 9 of the Credit Agreement is hereby further amended by
deleting Section 9.14 thereof in its entirety and substituting therefor the
following:
Section 9.14. Capital Expenditures. Make any Capital
Expenditure except that (a) for the fifteen-month period from May 1,
1996 through February 28, 1997, the Borrowers and their Restricted
Subsidiaries may make Capital Expenditures of not more than
$21,000,000, of which not less than $9,500,000 shall be funded from
the proceeds of Capital Asset Financing, (b) for the Capital
Expenditure Test Period commencing April 1, 1997, the Borrowers and
their Restricted Subsidiaries may make Capital Expenditures of not
more than the sum of (i) (A) $27,500,000 less (B) the aggregate
amount of Pre-Construction Expenditures
6
<PAGE>
(as defined in Section 9.12) which have not been repaid to the
Borrowers on or before July 31, 1997, less (C) all amounts expended
by the Borrowers, directly or indirectly, in connection with the
acquisition and development of Wolf Mountain in Park City, Utah,
which have not been repaid to the Borrowers on or before July 31,
1997, plus (ii) up to $5,000,000 for Capital Expenditures for the
Killington/Pico interconnect project, or such other projects as may
be approved by the Lenders in writing and (c) during each Capital
Expenditure Test Period thereafter, the Borrowers and their
Subsidiaries may make Capital Expenditures not to exceed the sum of
(i) $6,000,000, which amount is intended to be used for maintenance
Capital Expenditures, plus (ii) the Discretionary Capital
Expenditure Allowance, to be used for discretionary Capital
Expenditures in accordance with the Capital Expenditure budget
delivered under Section 6.4 hereof. Attached as Exhibit A to the
Second Amendment is a description of the Borrowers' proposed capital
expenditures for the Capital Expenditure Test Period commencing
April 1, 1997 and those expenditures which will not be made if the
deductions referred to in clauses (b)(i)(B) and (C) above are
required to be made.
Section 4. Treatment of Asset Sales under Subordinated Notes Indentures.
The Borrowers hereby represent and warrant that (a) the aggregate amount of Net
Proceeds received from Asset Sales (each as defined in the Subordinated Notes
Indentures) from June 25, 1996 through the date hereof, including without
limitation the DOJ Divestiture, does not exceed $16,500,000; (b) since the
receipt of such Net Proceeds from each such Asset Sale, the Borrowers have
applied such Net Proceeds to the making of capital expenditures or the
acquisition of long-term assets in the same line of business as any Borrower was
engaged immediately prior to such Asset Sale, in an aggregate amount not less
than $17,900,000; and (c) in the absence of any further such Asset Sale, the
Borrowers will have no obligation under the Subordinated Notes Indenture to
permanently reduce Senior Debt (as defined in the Subordinated Notes Indentures)
of the Borrowers.
Section 5. Security Interest in Utah Assets. Promptly following the
acquisition by any Borrower of any assets, real or personal, tangible or
intangible, relating to or in connection with the Wolf Mountain Development,
including without limitation the so-called "Condas parcel," such Borrower will
grant to the Agent, upon the Agent's request, a first priority mortgage on or
security interest in all such assets so acquired, and in connection therewith
such Borrower shall execute and deliver to the Agent such agreements,
instruments, certificates, opinions, title insurance policies, and other
documents reasonably requested by the Agent.
7
<PAGE>
Section 6. Effectiveness; Conditions to Effectiveness. This Second
Amendment to Credit Agreement shall become effective as of May 30, 1997 upon
execution hereof by the Borrowers, the Lenders and the Agent and satisfaction of
the following conditions:
(a) Resolutions. Copies of the resolutions of the Board of Directors
of the Borrowers authorizing the execution, delivery and performance of this
Third Amendment and the other Lender Agreements executed in connection herewith
to which any Borrower is a party, certified by the Secretary or an Assistant
Secretary (or Clerk or Assistant Clerk) of each Borrower (which certificate
shall state that such resolutions are in full force and effect).
(b) Officers' Certificate. A certificate of the Secretary or an
Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower certifying
(i) the name and signatures of the officers of such Borrower authorized to sign
this Second Amendment and the other Lender Agreements executed in connection
herewith to which any Borrower is a party and (ii) as to no change in the
charter documents or By-laws of the Borrowers previously certified to the Agent.
(c) Opinion of Counsel. The Agent shall have received an opinion of
Pierce Atwood, general counsel to the Borrowers, with respect to such matters as
the Agent may request.
(d) Amendment Fee. The Agent shall have received for the benefit of
the Lenders pro rata, an amendment fee of $50,000, which shall be deemed earned
in full by the Lenders upon their execution and delivery hereof.
Section 7. Representations and Warranties; No Default. The Borrowers
hereby confirm to the Agent and the Lenders the representations and warranties
of the Borrowers set forth in Article 5 of the Credit Agreement (as amended
hereby) as of the date hereof, as if set forth herein in full. The Borrowers
hereby further represent and warrant that the activities of the Borrowers with
respect to the Wolf Mountain Development, taken prior hereto and all such
activities expected to be undertaken after the date hereof and financed,
directly or indirectly, with proceeds of Revolving Credit Advances, including
without limitation the acquisition of the Condas parcel, the payment of earnest
money and the acquisition of the Gorgoza Water option, do not constitute a
default under the Senior Subordinated Notes Indenture and, to the extent they
constitute the incurrence of Indebtedness (as defined under the Senior
Subordinated Notes Indenture), such Indebtedness is permitted purchase money
Indebtedness. The Borrowers hereby certify that no Default exists under the
Credit Agreement.
Section 8. Miscellaneous. The Borrowers agree, jointly and severally, to
pay on demand all the Agent's reasonable expenses in preparing, executing and
delivering this Second Amendment to Credit Agreement, and all related
instruments and documents, including, without limitation, the reasonable fees
and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter &
Hoar LLP. This Second Amendment to Credit Agreement shall
8
<PAGE>
be a Lender Agreement and shall be governed by and construed and enforced under
the laws of The Commonwealth of Massachusetts.
9
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused
this Second Amendment to Credit Agreement to be executed by their duly
authorized officers as of the date first set forth above.
AMERICAN SKIING COMPANY
By: /s/ [Illegible]
---------------------------------
SUNDAY RIVER SKIWAY CORPORATION
By: /s/ [Illegible]
---------------------------------
SUNDAY RIVER LTD.
By: /s/ [Illegible]
---------------------------------
PERFECT TURN, INC.
By: /s/ [Illegible]
---------------------------------
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
By: /s/ [Illegible]
---------------------------------
CRANMORE, INC.
By: /s/ [Illegible]
---------------------------------
SUGARBUSH RESORT HOLDINGS INC.
By: /s/ [Illegible]
---------------------------------
10
<PAGE>
SUGARBUSH LEASING COMPANY
By: /s/ [Illegible]
---------------------------------
SUGARBUSH RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
MOUNTAIN WASTEWATER TREATMENT,
INC.
By: /s/ [Illegible]
---------------------------------
S-K-I LTD.
By: /s/ [Illegible]
---------------------------------
KILLINGTON, LTD.
By: /s/ [Illegible]
---------------------------------
MOUNT SNOW LTD.
By: /s/ [Illegible]
---------------------------------
WATERVILLE VALLEY SKI AREA LTD.
By: /s/ [Illegible]
---------------------------------
PICO SKI AREA MANAGEMENT COMPANY
By: /s/ [Illegible]
---------------------------------
11
<PAGE>
RESORTS SOFTWARE SERVICES, INC.
By: /s/ [Illegible]
---------------------------------
KILLINGTON RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
RESORT TECHNOLOGIES, INC.
By: /s/ [Illegible]
---------------------------------
DOVER RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
DEERFIELD OPERATING COMPANY
By: /s/ [Illegible]
---------------------------------
SUGARLOAF MOUNTAIN CORPORATION
By: /s/ [Illegible]
---------------------------------
MOUNTAINSIDE
By: /s/ [Illegible]
---------------------------------
SUGARTECH
By: /s/ [Illegible]
---------------------------------
12
<PAGE>
FLEET NATIONAL BANK
By: /s/ David A. Splaine
------------------------------------
Name: David A. Splaine
Title: Senior Vice President
BANKBOSTON, N.A.
By:
------------------------------------
Name: Matthew A. Ross
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By:
------------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By: /s/ David A. Splaine
------------------------------------
Name: David A. Splaine
Title: Senior Vice President
13
<PAGE>
FLEET NATIONAL BANK
By:
------------------------------------
Name: David B. Henderson
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Matthew A. Ross
------------------------------------
Name: Matthew A. Ross
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By:
------------------------------------
Name: Jane Roundy
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By:
------------------------------------
Name: David B. Henderson
Title: Vice President
13
<PAGE>
FLEET NATIONAL BANK
By:
------------------------------------
Name: David A. Splaine
Title: Senior Vice President
BANKBOSTON, N.A.
By:
------------------------------------
Name: Matthew A. Ross
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Stephen P. Lubelczyk
------------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By:
------------------------------------
Name: David A. Splaine
Title: Senior Vice President
13
<PAGE>
EXHIBIT 10.56
================================================================================
THIRD AMENDMENT TO
CREDIT AGREEMENT
Dated as of July __, 1997
Among
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORT TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
the Borrowers
and
FLEET NATIONAL BANK
BANKBOSTON, N.A.
KEYBANK NATIONAL ASSOCIATION
the Banks
and
FLEET NATIONAL BANK, AS AGENT
the Agent
================================================================================
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT is entered into as of July __,
1997 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION,
SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO
HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING
COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I
LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO
SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON
RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD
OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH
(each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK,
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and KEYBANK NATIONAL
ASSOCIATION (f/k/a KeyBank of Maine) as the Banks parties to the Credit
Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent
(the "Agent") under the Credit Agreement referred to below.
Recitals
The Borrowers, the Lenders and the Agent are parties to a Credit Agreement
dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreement. Leslie B. Otten desires to transfer the stock
of American Ski owned by him to a newly formed holding company, ASC Holdings,
Inc., a Maine corporation. Such transfer is not permitted under the Credit
Agreement, and the Borrowers desire to amend the Credit Agreement to permit such
transfer. The Lenders and the Agent are willing to amend the Credit Agreement on
the terms and conditions set forth herein.
NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as
follows:
Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby
amended by adding new definitions of "Holdings" and "Holdings Securities
Purchase Agreement", as follows:
"Holdings" shall mean ASC Holdings, Inc., a Maine corporation.
"Holdings Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of July 2, 1997 relating to Holdings' Series A
Exchangeable Preferred Stock and 14% Senior Exchangeable Notes Due 2000.
Section 2. Amendment of Article 5.
<PAGE>
(a) Article 5 of the Credit Agreement is hereby amended by deleting
Section 5.11 thereof in its entirety and substituting therefor the
following:
Section 5.11 Stock. There are presently issued by Holdings,
the Borrowers and their Subsidiaries and outstanding the shares of capital
stock indicated on Schedule 5.4(a). Holdings, the Borrowers and their
Subsidiaries have received the consideration for which such stock was
authorized to be issued and have otherwise complied with all legal
requirements relating to the authorization and issuance of shares of stock
and all such shares are validly issued, fully paid and non-assessable.
Holdings, the Borrowers and their subsidiaries have no other capital stock
of any class outstanding.
(b) Article 5 of the Credit Agreement is hereby further amended by
deleting Schedule 5.4 thereof in its entirety and substituting therefor
the Schedule 5.4 attached hereto.
Section 3. Amendment of Article 10.
(a) Article 10 of the Credit Agreement is hereby amended by deleting
clauses (i) and (j) thereof and substituting therefor the following:
(i) At any time that none of the stock of Holdings or of any
Borrower is publicly traded, (i) Holdings shall cease to own of
record and beneficially at least 96% of the issued and outstanding
stock of American Ski, on a fully diluted basis, or (ii) Leslie B.
Otten, his spouse and children, and trusts established for his or
their benefit (collectively the "Otten Shareholders") shall cease to
own of record and beneficially at least 65% of the issued and
outstanding capital stock of Holdings, on a fully diluted basis.
(j) At any time at any of the stock of Holdings or any
Borrower is traded publicly, any person or group of persons within
the meaning of Section 13 or 14 of the Securities Exchange Act of
1934, other than the Otten Shareholders, shall own of record or
beneficially more than 35% of the issued and outstanding capital
stock of Holdings.
(b) Article 10 of the Credit Agreement is hereby further amended by adding
a new subclause (s) as follows:
(s) After July 2, 1997, Holdings shall incur any Indebtedness
for borrowed money or shall issue any preferred stock, in either
case on terms and conditions which impose any limitations or
restrictions applicable to any Borrower, directly or indirectly,
which are more onerous than the terms and conditions to which such
Borrower is subject under the Lender Agreements.
2
<PAGE>
Section 4. Representations and Warranties; No Default. The Borrowers
hereby confirm to the Agent and the Lenders the representations and warranties
of the Borrowers set forth in Article 5 of the Credit Agreement (as amended
hereby) as of the date hereof, as if set forth herein in full. The Borrowers
hereby further represent and warrant that the execution and delivery by Holdings
of the Holdings Securities Purchase Agreement does not constitute a Default
under the Subordinated Notes Indentures. The Borrowers hereby certify that,
after giving effect to this Third Amendment to Credit Agreement and the Holdings
Securities Purchase Agreement, no Default exists under the Credit Agreement.
Section 5. Miscellaneous. The Borrowers agree, jointly and severally, to
pay on demand all the Agent's reasonable expenses in preparing, executing and
delivering this Third Amendment to Credit Agreement, and all related instruments
and documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar
LLP. This Third Amendment to Credit Agreement shall be a Lender Agreement and
shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts.
3
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused
this Third Amendment to Credit Agreement to be executed by their duly authorized
officers as of the date first set forth above.
AMERICAN SKIING COMPANY
By: /s/ [Illegible]
---------------------------------
Its Senior Vice President ("SVP")
SUNDAY RIVER SKIWAY CORPORATION
By: /s/ [Illegible]
---------------------------------
Its SVP
SUNDAY RIVER LTD.
By: /s/ [Illegible]
---------------------------------
Its SVP
PERFECT TURN, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
CRANMORE, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
SUGARBUSH RESORT HOLDINGS INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
4
<PAGE>
SUGARBUSH LEASING COMPANY
By: /s/ [Illegible]
---------------------------------
Its SVP
SUGARBUSH RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
MOUNTAIN WASTEWATER TREATMENT,
INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
S-K-I LTD.
By: /s/ [Illegible]
---------------------------------
Its SVP
KILLINGTON, LTD.
By: /s/ [Illegible]
---------------------------------
Its SVP
MOUNT SNOW LTD.
By: /s/ [Illegible]
---------------------------------
Its SVP
WATERVILLE VALLEY SKI AREA LTD.
By: /s/ [Illegible]
---------------------------------
Its SVP
PICO SKI AREA MANAGEMENT COMPANY
By: /s/ [Illegible]
---------------------------------
Its SVP
5
<PAGE>
RESORTS SOFTWARE SERVICES, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
KILLINGTON RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
RESORT TECHNOLOGIES, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
DOVER RESTAURANTS, INC.
By: /s/ [Illegible]
---------------------------------
Its SVP
DEERFIELD OPERATING COMPANY
By: /s/ [Illegible]
---------------------------------
Its SVP
SUGARLOAF MOUNTAIN CORPORATION
By: /s/ [Illegible]
---------------------------------
Its SVP
MOUNTAINSIDE
By: /s/ [Illegible]
---------------------------------
Its SVP
SUGARTECH
By: /s/ [Illegible]
---------------------------------
Its SVP
6
<PAGE>
FLEET NATIONAL BANK
By: /s/ Richard A. Meringolo
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
BANKBOSTON, N.A.
By:
-----------------------------------
Name: Matthew A. Ross
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By: /s/ Richard A. Meringolo
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
7
<PAGE>
FLEET NATIONAL BANK
By:
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
BANKBOSTON, N.A.
By: /s/ [Illegible]
-----------------------------------
Name: [Illegible]
Title: Director
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By:
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
7
<PAGE>
FLEET NATIONAL BANK
By:
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
BANKBOSTON, N.A.
By:
-----------------------------------
Name: Matthew A. Ross
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Stephen P. Lubelczyk
-----------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By:
-----------------------------------
Name: Richard A. Meringolo
Title: Senior Vice President
7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOURTH AMENDMENT TO
CREDIT AGREEMENT
Dated as of September 24, 1997
Among
ASC EAST
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
MOUNTAIN WASTEWATER TREATMENT, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORTS SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORT TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
the Borrowers
and
FLEET NATIONAL BANK
BANKBOSTON, N.A.
KEYBANK NATIONAL ASSOCIATION
the Banks
and
FLEET NATIONAL BANK, AS AGENT
the Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT is entered into as of September
24, 1997 by and among ASC EAST (f/k/a American Skiing Company), SUNDAY RIVER
SKIWAY CORPORATION, SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER
TRANSPORTATION INC., LBO HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT
HOLDINGS INC., SUGARBUSH LEASING COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN
WASTEWATER TREATMENT, INC., S-K-I LTD., KILLINGTON, LTD., MOUNT SNOW LTD.,
WATERVILLE VALLEY SKI AREA LTD., PICO SKI AREA MANAGEMENT COMPANY, RESORTS
SOFTWARE SERVICES, INC., KILLINGTON RESTAURANTS, INC., RESORT TECHNOLOGIES,
INC., DOVER RESTAURANTS, INC., DEERFIELD OPERATING COMPANY, SUGARLOAF MOUNTAIN
CORPORATION, MOUNTAINSIDE and SUGARTECH (each a "Borrower" and collectively the
"Borrowers"), FLEET NATIONAL BANK, BANKBOSTON, N.A. (f/k/a The First National
Bank of Boston) and KEYBANK NATIONAL ASSOCIATION (f/k/a KeyBank of Maine) as the
Banks parties to the Credit Agreement referred to below (the "Lenders"), and
FLEET NATIONAL BANK, as Agent (the "Agent") under the Credit Agreement referred
to below.
RECITALS
The Borrowers, the Lenders and the Agent are parties to a Credit Agreement
dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreement. Events of Default have occurred and are
continuing under the Credit Agreement, and the Borrowers desire to amend the
Credit Agreement in certain respects and to have outstanding Events of Default
waived. The Lenders and the Agent are willing to amend the Credit Agreement and
waive such Events of Default on the terms and conditions set forth herein.
NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as
follows:
Section 1. AMENDMENT OF ARTICLE 6. Article 6 of the Credit Agreement
is hereby amended by adding a new Section 6.14 as follows:
Section 6.14 WEEKLY REPORTS. As soon as practicable, and in any
event by Wednesday of each week, the Borrowers shall furnish, from the date
hereof through October 30, 1997, to the Agent and each Lender weekly cash
flow reports showing receipts and disbursements in such detail as the
Lenders may reasonably request.
Section 2. AMENDMENT OF ARTICLE 9.
<PAGE>
(a) Section 9.12 of the Credit Agreement is hereby amended by
deleting Section 9.12 thereof in its entirety and substituting therefor the
following:
Section 9.12. LIMITATIONS ON REAL ESTATE OPERATIONS. Engage in any
real estate development, or similar activities, including acquisition of
land intended for resale or development of residential subdivisions,
condominium units, golf courses, tennis courts, hotels or related
infrastructure and utilities, except through the Development Subsidiary,
the Hotel Subsidiary and any Unrestricted Subsidiary and except for the
completion of the Locke Mountain development at Sunday River; provided,
however, the Borrowers may engage in such development activities relating
to the development of hotels at the Sunday River, Killington, Sugarbush and
Mount Snow resorts so long as all costs incurred for such activities (the
"Development Expenditures") do not exceed (a) $12,000,000 at any time from
May 30, 1997 through August 31, 1997, and (b) $8,000,000 at any time from
August 31, 1997 through October 10, 1997; and provided, further, that the
Development Expenditures relating to the hotels at Sunday River, Killington
and Mount Snow will be repaid (with the exception of unreimburseable
capital costs for marketing) to the Borrowers on or before October 10,
1997. It is understood that the Development Expenditures for Sugarbush and
that operational marketing expenses for all hotels will not be repaid on or
before October 10, 1997 and that those amounts will not exceed $4,000,000
at any time.
(b) Article 9 of the Credit Agreement is hereby further amended by
deleting Section 9.14 thereof in its entirety and substituting therefor the
following:
Section 9.14. CAPITAL EXPENDITURES. Make any Capital
Expenditure except that (a) for the fifteen-month period from May 1,
1996 through February 28, 1997, the Borrowers and their Restricted
Subsidiaries may make Capital Expenditures of not more than
$21,000,000, of which not less than $9,500,000 shall be funded from
the proceeds of Capital Asset Financing, (b) for the Capital
Expenditure Test Period commencing April 1, 1997, the Borrowers and
their Restricted Subsidiaries may make Capital Expenditures of not
more than the sum of (i) (A) $27,500,000 LESS (B) the aggregate amount
of Development Expenditures (as defined in Section 9.12) which have
not been repaid to the Borrowers on or before October 10, 1997, LESS
(C) all amounts expended by the Borrowers, directly or indirectly, in
connection with the acquisition and development of Wolf Mountain in
Park City, Utah, which have not been repaid to the Borrowers on or
before October 10, 1997, PLUS (ii) up to $5,000,000 for Capital
Expenditures for the Killington/Pico interconnect project, or such
other projects as may be approved by the Lenders in writing and (c)
during each Capital Expenditure Test Period thereafter, the Borrowers
and their Subsidiaries may make Capital Expenditures not to exceed the
sum of (i) $6,000,000, which amount is intended to be used for
maintenance Capital Expenditures, PLUS (ii) the Discretionary Capital
Expenditure Allowance, to be used for discretionary Capital
Expenditures in accordance with the Capital Expenditure budget
2
<PAGE>
delivered under Section 6.4 hereof. Attached as Exhibit A to the Second
Amendment is a description of the Borrowers' proposed capital expenditures
for the Capital Expenditure Test Period commencing April 1, 1997 and those
expenditures which will not be made if the deductions referred to in
clauses (b)(i)(B) and (C) above are required to be made.
Section 3. AMENDMENT OF ARTICLE 10. Section 10.1 of the Credit
Agreement is hereby amended by adding a new subclause (t) and (u) as follows:
(t) Holdings shall have failed to receive not less than $250,000,000
in gross proceeds from the sale of its common stock in an initial public
offering on or before November 30, 1997.
(u) The Borrowers shall fail to deliver to the Agent by October 10,
1997 satisfactory written evidence of a lending commitment to the Borrowers
in an amount sufficient to repay the obligations under or in connection
with this Credit Agreement by a date certain (the "Commitment Letter") and
further, the Borrowers shall fail to close the transaction proposed in the
Commitment Letter by December 15, 1997.
Section 4. AMENDMENT OF ARTICLE 11. Section 11.1 of the Credit
Agreement is hereby amended by adding a new subclause (vii) as follows:
(vii) no waiver of an Event of Default under the Credit Agreement
as a result of the occurrence of either of the events set forth in Section
10.1(t) and Section 10.1(u) shall be made.
Section 5. WAIVER OF DEFAULTS.
(a) The Lenders and the Agent hereby waive the Events of Default existing
under the Credit Agreement as of July 31, 1997 as a result of the Borrowers'
failure to maintain (i) the ratio of Consolidated Total Debt to Consolidated
EBITDA required under Section 7.1 of the Credit Agreement for the four fiscal
period ending July 31, 1997, (ii) the ratio of Consolidated Adjusted Cash Flow
to Consolidated Debt Service required under Section 7.3 of the Credit Agreement
as of the end of the fiscal quarter ending July 31, 1997, and (iii) Consolidated
Tangible Net Worth required under Section 7.4 of the Credit Agreement as of the
last day of fiscal year 1997. The Borrowers hereby represent and warrant that
(i) Consolidated EBITDA as determined under Section 7.1 of the Credit Agreement
for the four-quarter period ending July 31, 1997 was not less than $32,094,552,
(ii) Consolidated Debt Service as determined under Section 7.3 of the Credit
Agreement as of the end of the fiscal quarter ending July 31, 1997 was not less
than $35,663,994, and (iii) Consolidated Tangible Net Worth as of the last date
of fiscal year 1997 was not less than $2,906,095.
(b) The Lenders and the Agent hereby waive the Events of Default existing
under the Credit Agreement as of July 31, 1997 as a result of the Borrowers'
failure to comply with:
3
<PAGE>
(i) the notice requirement set forth in Section 6.6 relating to notice of
defaults described in paragraph (a) hereof and clause (ii) below, and (ii) the
covenants set forth in Section 9.12 and 9.14.
Section 6. EFFECTIVENESS; CONDITIONS TO EFFECTIVENESS. This Fourth
Amendment to Credit Agreement shall become effective upon execution hereof by
the Lenders, the Agent and the Borrowers and satisfaction of the following
conditions:
(a) TEXTRON. The Borrowers shall have delivered to the Agent a letter from
Textron Financial Corp. ("Textron") confirming that the financial arrangement
between the Borrowers and Textron will close on or before September 30, 1997.
(b) DLJ. The Borrowers shall have delivered to the Agent a letter from
Donaldson, Lufkin & Jenrette ("DLJ") confirming that the proposed initial public
offering of the common stock of Holdings is proceeding and DLJ is not aware of
any circumstance or reason that would prevent the initial public offering from
closing on or about November 30, 1997.
(c) PRICE WATERHOUSE. The Borrowers shall have delivered to the Agent a
letter from Price Waterhouse confirming that this Fourth Amendment is sufficient
to allow Price Waterhouse to render an unqualified opinion with respect to the
Borrowers' financial statements for their fiscal year ending July 31, 1997.
(d) AMENDMENT FEE. An amendment fee in an amount equal to $60,000 will be
payable to the Agent, for the account of each Lender, on the date of execution
of this Fourth Amendment.
(e) COUNSEL FEES. All fees and expenses of the Agent's special counsel,
Goodwin, Procter & Hoar LLP, will be paid on the date of execution of this
Fourth Amendment which fees and expenses consist of (i) outstanding invoices in
the amount of $26,167.38, and (ii) fees and expenses incurred through the date
hereof in the amount of $6,698.58.
Section 7. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrowers
hereby confirm to the Agent and the Lenders the representations and warranties
of the Borrowers set forth in Article 5 of the Credit Agreement (as amended
hereby) as of the date hereof, as if set forth herein in full. The Borrowers
hereby certify that, after giving effect to this Fourth Amendment to Credit
Agreement, no Default exists under the Credit Agreement.
Section 8. MISCELLANEOUS. The Borrowers agree, jointly and severally,
to pay on demand all the Agent's reasonable expenses in preparing, executing and
delivering this Fourth Amendment to Credit Agreement, and all related
instruments and documents, including, without limitation, the reasonable fees
and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter &
Hoar LLP. This Fourth Amendment to Credit Agreement shall be a Lender
Agreement and shall be governed by and construed and enforced under the laws of
The Commonwealth of Massachusetts.
4
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused
this Fourth Amendment to Credit Agreement to be executed by their duly
authorized officers as of the date first set forth above.
ASC EAST
By: /s/ Thomas Richardson
-------------------------------------
SUNDAY RIVER SKIWAY CORPORATION
By: /s/ Thomas Richardson
-------------------------------------
SUNDAY RIVER LTD.
By: /s/ Thomas Richardson
-------------------------------------
PERFECT TURN, INC.
By: /s/ Thomas Richardson
-------------------------------------
SUNDAY RIVER TRANSPORTATION INC. LBO
HOLDING, INC.
By: /s/ Thomas Richardson
-------------------------------------
CRANMORE, INC.
By: /s/ Thomas Richardson
-------------------------------------
SUGARBUSH RESORT HOLDINGS INC.
By: /s/ Thomas Richardson
-------------------------------------
SUGARBUSH LEASING COMPANY
By: /s/ Thomas Richardson
-------------------------------------
5
<PAGE>
SUGARBUSH RESTAURANTS, INC.
By: /s/ Thomas Richardson
-------------------------------------
MOUNTAIN WASTEWATER TREATMENT, INC.
By: /s/ Thomas Richardson
-------------------------------------
S-K-I LTD.
By: /s/ Thomas Richardson
-------------------------------------
KILLINGTON, LTD.
By: /s/ Thomas Richardson
-------------------------------------
MOUNT SNOW LTD.
By: /s/ Thomas Richardson
-------------------------------------
WATERVILLE VALLEY SKI AREA LTD.
By: /s/ Thomas Richardson
-------------------------------------
PICO SKI AREA MANAGEMENT COMPANY
By: /s/ Thomas Richardson
-------------------------------------
6
<PAGE>
RESORTS SOFTWARE SERVICES, INC.
By: /s/ Thomas Richardson
-------------------------------------
KILLINGTON RESTAURANTS, INC.
By: /s/ Thomas Richardson
-------------------------------------
RESORT TECHNOLOGIES, INC.
By: /s/ Thomas Richardson
-------------------------------------
DOVER RESTAURANTS, INC.
By: /s/ Thomas Richardson
-------------------------------------
DEERFIELD OPERATING COMPANY
By: /s/ Thomas Richardson
-------------------------------------
SUGARLOAF MOUNTAIN CORPORATION
By: /s/ Thomas Richardson
-------------------------------------
MOUNTAINSIDE
By: /s/ Thomas Richardson
-------------------------------------
SUGARTECH
By: /s/ Thomas Richardson
-------------------------------------
7
<PAGE>
FLEET NATIONAL BANK
By: /s/ Patrick F. McAvliffe
-------------------------------------
Name: Patrick F. McAvliffe
Title: Executive Vice President
BANKBOSTON, N.A.
By: /s/ Carlton F. Williams
-------------------------------------
Name: Carlton F. Williams
Title: Director
KEYBANK NATIONAL ASSOCIATION
By: /s/ Stephen P. Lubelczyk
-------------------------------------
Name: Stephen P. Lubelczyk
Title: Senior Vice President
FLEET NATIONAL BANK, AS AGENT
By: /s/ Patrick F. McAvliffe
-------------------------------------
Name: Patrick F. McAvliffe
Title: Executive Vice President
8
<PAGE>
EXHIBIT 10.61
PROMISSORY NOTE
$2,500,000.00 New York, New York
June 18, 1997
FOR VALUE RECEIVED, the undersigned, ASC Holdings, Inc., a Maine
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Madeleine
LLC (the "Lender"), (i) the principal sum of TWO MILLION FIVE HUNDRED THOUSAND
Dollars ($2,500,000.00) or, if less, the aggregate unpaid principal amount of
the Loan (as hereinafter defined) made by the Lender to the Borrower, such
principal amount to be paid on July 31, 1997 (the "Maturity Date"), and (ii)
interest on any and all principal amounts remaining unpaid hereunder from time
to time outstanding, from the date hereof until the Maturity Date, payable on
the Maturity Date together with any principal amount unpaid hereunder at an
interest rate per annum equal to 14% per annum, compounded monthly (the
"Applicable Interest Rate").
I. (a) Any amount of principal of and (to the extent permitted by law) interest
on the Loan that is not paid when due shall bear interest from the day when due
until such amount is paid in full, payable on demand, at an interest rate of 19%
per annum, compounded daily (the "Default Rate"). All interest shall be computed
on the basis of a year of 360 days for the actual number of days (including the
first day but excluding the last day) elapsed. Notwithstanding any other
provision of this Note, interest paid or becoming due hereunder shall in no
event exceed the maximum rate permitted by applicable law.
(b) This Note evidences a loan (the "Loan") that the Lender has made to
the Borrower. Such Loan is conclusively presumed to have been made to, and for
the benefit of, the Borrower in accordance with its request.
(c) The Lender shall maintain an account on its books in the name of the
Borrower (the "Loan Account") on which the Borrower will be charged with all
amounts owing hereunder, including all accrued interest, all fees, all expenses
(including legal expenses) incurred by the Lender in connection with this Note,
and any other obligations of the Borrower to the Lender. The Borrower authorizes
the Lender to charge the Loan Account with such interest, fees, expenses and
other obligations and acknowledges that such charges shall be properly added to
the principal amount of the Loan to the Borrower.
(d) If any amount payable hereunder shall be due on a Saturday, Sunday or
other day on which national banks are required or authorized to close (any other
day being a "Business Day"), such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest payable hereon.
(e) Both principal and interest are payable in lawful money of the United
States and in immediately available funds at the offices of the Lender located
at 450 Park Avenue, 28th
<PAGE>
Floor, New York, NY 10022, Attention: Robert Davenport or as directed by the
Lender pursuant to written notice to the Borrower. Payments received by the
Lender or its designee after 2:00 p.m. Eastern Standard Time on a Business Day
will be deemed to be received on the next Business Day.
(f) The Borrower may, at its option, prepay the Loan evidenced by this
Note, in whole, at any time or in part from time to time, without penalty or
premium, such prepayment to be accompanied by the payment of accrued interest to
the date of such prepayment.
II. The Borrower represents and warrants as follows: (a) the Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maine; (b) the execution, delivery and performance by the
Borrower of this Note and each other instrument, agreement and other document
delivered by the Borrower to the Lender in connection with this Note (the Note,
together with all such other agreements, instruments and other documents, are
hereinafter referred to individually as a "Document" and collectively as the
"Documents") are within the Borrower's powers, have been duly authorized by all
necessary action, and do not contravene the Borrower's charter or by-laws; (c)
no authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due
execution, delivery and performance by the Borrower of any Document; (d) each
Document constitutes the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms; (e) the Borrower
has no directly owned first tier Subsidiaries other than as set forth on Exhibit
A annexed hereto, which exhibit accurately sets forth the issued and outstanding
shares of capital stock of each such Subsidiary; (f) as of the date hereof, the
Borrower has conducted no business, other than the holding of the shares of the
Subsidiaries listed on Exhibit A, and has incurred no liabilities, other than
the obligations represented by this Note; (g) the Borrower is the shareholder of
record and beneficial owner of the shares of common stock (the "Shares") of
American Skiing Company ("ASC"), a Maine corporation, identified on Exhibit A
annexed hereto; (h) the Shares represent ninety-six percent (96%) of the issued
and outstanding capital stock of ASC as of the date hereof; and (i) the Shares
are owned by the Borrower free and clear of all liens, claims and encumbrances,
and free of any adverse claim, any lien in favor of the issuer, and any
restrictions on transfer imposed by the issuer except as imposed under a
Shareholders Agreement between Leslie B. Otten, ASC and Bear Stearns Co., Inc.
dated June 28, 1996.
III. The proceeds of the Loan shall be used by the Borrower to acquire certain
real estate associated with the Borrower's intended development of a
recreational skiing property currently referred to as the Wolf Mountain Resort
located in Summit County, Utah (the "Wolf Purchase").
IV. If any of the following shall occur (each a "Default"): (a) the Borrower
shall fail to pay any principal of or interest on this Note when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise); or
(b) any representation or warranty made by the Borrower in this Note, in any
other Document or in any document or certificate executed in connection with
this Note shall have been incorrect in any material respect when made; or (c)
the Borrower shall fail to pay any debt for borrowed money or other similar
obligation or liability of the Borrower (excluding such amounts as evidenced by
this Note), or any interest or premium
-2-
<PAGE>
thereon, when due; or (d) one or more judgments or orders for the payment of
money exceeding any applicable insurance coverage shall be rendered against the
Borrower, or (e) the Borrower shall be generally not paying its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any such person seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for such person or for any substantial part of its property; or the
Borrower shall take any action to authorize or effect any of the actions set
forth above in this clause (e); or (f) any provision of this Note or any other
Document shall at any time for any reason be declared to be null and void by a
court of competent jurisdiction, or the validity or enforceability thereof shall
be contested by the Borrower or any other person, or a proceeding shall be
commenced by the Borrower or any other person seeking to establish the
invalidity or unenforceability thereof, or the Borrower shall deny that it has
any liability or obligation hereunder or thereunder; or (g) a material adverse
change in the condition or operations, financial or otherwise, of the Borrower,
as determined by the Lender in its sole discretion, shall occur and written
notice thereof shall have been given to the Borrower by the Lender;
then the Lender may (i) declare the outstanding principal amount of this Note
and all other amounts due hereunder or under any other Document to be
immediately due and payable, whereupon the outstanding principal amount of this
Note and all such other amounts shall become and shall be forthwith due and
payable, without diligence, presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, and (ii) exercise any and all of
its other rights under applicable law, hereunder and under the other Documents.
V. So long as any principal or interest on the Loan remains unpaid, the Borrower
will not, without the prior written consent of the Lender:
(i) Create, incur, assume, or suffer to exist, any mortgage, deed of
trust, pledge, lien, security interest, hypothecation or other preferential
arrangement, charge or encumbrance (including, without limitation, any
conditional sale, or other title retention agreement, or finance lease) of any
nature, upon or with respect to any of its properties (including, but not
limited to, the Shares and the contract rights in connection with the Wolf
Purchase), now owned or hereafter acquired, or sign or file under the Uniform
Commercial Code of any jurisdiction a financing statement which names the
Borrower as a debtor, or sign, any security agreement authorizing any secured
party thereunder to file such financing statement.
(ii) Create, incur, assume or suffer to exist, any Debt. "Debt" means (1)
indebtedness or liability for borrowed money; (2) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (3) obligations for the
deferred purchase price of property or services (including trade obligations);
(4) obligations as lessee under any capital or operating leases; (5) obligations
under letters of credit; (6) obligations under acceptance facilities; (7) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to
-3-
<PAGE>
invest in any Person or entity, or otherwise to assure a creditor against loss;
and (8) obligations secured by any mortgage, lien, pledge, or security interest
or other charge or encumbrance on property, whether or not the obligations have
been assumed.
(iii) (a) Merge or consolidate with, or permit any of its Subsidiaries to
merge or consolidate with, any Person, (b) sell, assign or otherwise transfer or
dispose of, or permit any of its Subsidiaries to sell, assign or otherwise
transfer or dispose of, all or any substantial part of its assets or properties,
whether now owned or hereafter acquired to any Person, except in the ordinary
course of business or (c) wind up, liquidate, reorganize or dissolve itself.
(iv) Declare or pay any cash dividends, return any capital to its
shareholders as such, or make any other distribution or payment on account of or
in redemption, retirement or purchase of any capital stock now or hereafter
outstanding.
(v) Convey, lease, transfer or otherwise dispose of all or any part of its
business, properties or other assets.
(vi) Make any loan or advance to any Person, or purchase or otherwise
acquire, any capital stock, assets, obligations, or other securities of, make
any capital contribution to, or otherwise invest in or acquire any interest in
any Person, or participate as a partner or joint venturer with any other Person
other than the purchase of stock or assets in connection with the purchase of
Wolf Mountain.
(vii) Assume, guaranty, endorse, or otherwise be or become directly or
contingently responsible or liable, (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services or to supply or
advance any funds, assets, goods, or services, or an agreement to maintain or
cause such Person to maintain a minimum working capital or net worth, or
otherwise to assure the creditors of any Person against loss) for the
obligations of any Person.
(viii) Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, "Affiliate" means any Person which directly or indirectly
controls, or is controlled by, or is under common control with the Borrower. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
As used in this Note, the terms Subsidiary and Person are defined,
respectively, as follows:
"Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which more than 50% of the outstanding shares of capital stock
or other ownership interest having (in the absence of contingencies) ordinary
voting power to elect directors, managers or Persons performing similar
functions of such corporation, partnership or other entity is, at the time of
determination, owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, by such Person.
-4-
<PAGE>
"Person" means an individual, sole proprietorship, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, limited liability company or other business entity.
VI. All payments made by the Borrower under this Note will be made without
setoff, counterclaim or other defense.
VII. (a) All notices or other communications provided for hereunder shall be in
writing (including telecommunications) and shall be mailed, telecopied, telexed,
telegraphed or delivered to the Borrower at the address set forth below next to
the signature of its authorized officer, or at such other address as may
hereafter be specified by the Borrower to the Lender (at its address set forth
herein) in writing. All notices and communications shall be effective (i) if
mailed, when received or three days after mailing, whichever is earlier, (ii) if
telecopied, when transmitted, and (iii) if delivered, upon delivery.
(b) No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power, privilege or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof by the Lender
preclude any other or further exercise thereof or the exercise of any other
right, power, privilege or remedy of the Lender. No amendment or waiver of any
provision of this Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(c) Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) The Borrower hereby agrees to pay on the Maturity Date all costs and
expenses (including, without limitation, all fees, expenses and other client
charges of counsel to the Lender) incurred by the Lender in connection with (i)
the preparation, execution, delivery, administration and amendment of this Note
and the Documents, and (ii) the enforcement of the Lender's rights, and the
collection of all amounts due, hereunder.
-5-
<PAGE>
(e) This Note shall be governed by, and construed in accordance with, the
laws of the State of New York.
ASC HOLDINGS, INC.
By: /s/ Christopher E. Howard
--------------------------
Name: Christopher E. Howard
Title: Chief Administrative Officer
Maine
----------------------
State of Incorporation
Address:
P.O. Box 450
Bethel, Maine 04217
Attention:
Christopher E. Howard
Telephone:
207-824-5196
Telex:
-------------------------------
Telecopier:
207-824-5158
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<PAGE>
SCHEDULE TO
PROMISSORY NOTE
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Amount of Principal Unpaid Principal Amount Notation
Date Amount of Loan Paid of Note Made By
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-7-
<PAGE>
EXHIBIT A
Number of Shares
Name of Subsidiary Issued and Outstanding
------------------ ----------------------
American Skiing Company 939,168
ASC Utah 100
-8-
<PAGE>
Exhibit 10.62
PROMISSORY NOTE
$ 6,500,000.00 Summit County, Utah July 3, 1997
FOR VALUE RECEIVED, ASC UTAH, INC., a Maine corporation ("Maker") with a
mailing address of Sunday River Road, P.O. Box 450, Bethel, Maine 04217, hereby
promises to pay to the order of WOLF MOUNTAIN, L.C., a Utah limited liability
company ("Lender"), and its successors and assigns, at 4000 Parkwest Drive, Park
City, Utah, 84098 the principal sum of Six Million Five Hundred Thousand and
No/100 Dollars ($6,500,000.00), together with interest on the unpaid principal
balance of this Note from time to time outstanding at a rate of twelve (12%) per
annum, which interest shall be paid as of the first day of each and every month
during the term hereof.
The principal balance of this Note shall be paid in two installments as
follows:
(a) On January 31, 1998, Maker shall make a principal payment of
$2,300,000 to Lender; and
(b) On the earlier of (1) the effective date of any public offering by
Maker, Guarantor (defined below) or American Skiing Company, a Maine
corporation, or (2) April 15, 2005 (the "Maturity Date"), Maker
shall pay the entire remaining unpaid balance of this Note and any
unpaid accrued interest thereon.
This Note is guaranteed by ASC Holdings, Inc., a Maine corporation
("Guarantor"), as set forth in that certain Guaranty of even date herewith,
executed by Guarantor in favor of Lender.
Any principal of, and to the extent permitted by applicable law any
interest on, this Note which is not paid when due shall bear interest, from the
date due and payable until paid, at a rate equal to the lesser of (a) fifteen
percent (15%) per annum or (b) the maximum rate allowed by applicable law.
Whenever any payment shall be due under this Note on a day which is not a
Business Day, the date on which such payment is due shall be extended to the
next succeeding Business Day, and such extension of time shall be included in
the computation of the amount of interest then payable. "Business Day" means a
day other than a Saturday, Sunday or other day on which national banks in Salt
Lake City, Utah are closed.
Maker may at any time pay the full amount or any part of this Note without
payment of any premium or fee. All prepayment shall be accompanied by payment of
all accrued but unpaid interest on the amount prepaid.
All payments made as scheduled on this Note shall be applied, to the
extent thereof, first to accrued but unpaid interest and the balance to unpaid
principal. All prepayments on this Note
<PAGE>
shall be applied, to the extent thereof, first to accrued but unpaid interest
and the balance to the remaining principal installments in inverse order of
their maturity.
If any principal, interest, or other amount of money due under this Note
is not paid in full within ten (10) days after written notice from the holder
hereof to Maker that a payment is past due for the first two (2) such
occurrences in any calendar year and thereafter within ten (10) days of the date
when due, regardless of how such amount may have become due, then such
occurrence shall be a default under this Note ("Default"). Upon occurrence of a
Default, the holder hereof shall have the right to declare the unpaid principal
balance and accrued but unpaid interest on this Note at once due and payable
(and upon such declaration, the same shall be at once due and payable) and to
exercise any of its other rights, powers, and remedies under this Note or at law
or in equity.
Neither the failure by the holder hereof to exercise, nor delay by the
holder hereof in exercising, the right to accelerate the maturity of this Note
or any other right, power or remedy upon any default shall be construed as a
waiver of such default or as a waiver of the right to exercise any such right,
power or remedy at any time. No single or partial exercise by the holder hereof
of any right, power or remedy shall exhaust the same or shall preclude any other
or further exercise thereof, and every such right, power or remedy may be
exercised at any time and from time to time. All rights and remedies provided
for in this Note are cumulative of each other and of any and all other rights
and remedies existing at law or in equity, and the holder hereof shall, in
addition to the rights and remedies provided herein, be entitled to avail itself
of all such other rights and remedies as may now or hereafter exist at law or in
equity for the collection of the indebtedness owing hereunder. The resort to any
right or remedy provided for hereunder or provided for by law or in equity shall
not prevent the concurrent or subsequent employment of any other appropriate
rights or remedies. Without limiting the generality of the foregoing provisions,
the acceptance by the holder hereof from time to time of any payment under this
Note which is past due or which is less than the payment in full of all amounts
due and payable at the time of such payment, shall not (i) constitute a waiver
of or impair or extinguish the rights of the holder hereof to accelerate the
maturity of this Note or to exercise any other right, power or remedy at the
time or at any subsequent time, or nullify any prior exercise of any such right,
power or remedy, or (ii) constitute a waiver of the requirement of punctual
payment and performance, or a novation in any respect.
If any holder of this Note retains an attorney in connection with any
default or at maturity or to collect, enforce or defend this Note in any lawsuit
or in any probate, reorganization, bankruptcy or other proceeding, or if Maker
sues any holder in connection with this Note and does not prevail, then Maker
agrees to pay to each such holder, in addition to principal and interest, all
reasonable costs and expenses incurred by such holder in trying to collect this
Note or in any such suit or proceeding, including reasonable attorneys' fees
It is the intent of Lender and Maker to conform to and contract in strict
compliance with applicable usury law from time to time in effect. All agreements
between Lender or any other holder hereof and Maker (or any other party liable
with respect to any indebtedness under the Note) are hereby limited by the
provisions of this paragraph which shall override and control all
2
<PAGE>
agreements, whether now existing or hereafter arising and whether written or
oral. In no way, nor in any event or contingency (including but not limited to
prepayment, default, demand for payment, or acceleration of the maturity of any
obligation), shall the interest taken, reserved, contracted for, charged or
received under this Note or otherwise, exceed the maximum nonusurious amount
permissible under applicable law. If, from any possible construction of any
document, interest would otherwise be payable in excess of the maximum
nonusurious amount, any such construction shall be subject to the provisions of
this paragraph and such document shall be automatically reformed and the
interest payable shall be automatically reduced to the maximum nonusurious
amount permitted under applicable law, without the necessity of execution of any
amendment or new document. If the holder hereof shall ever receive anything of
value which is characterized as interest under applicable law and which would
apart from this provision be in excess of the maximum lawful amount, an amount
equal to the amount which would have been excessive interest shall, without
penalty, be applied to the reduction of the principal amount owing on the
indebtedness evidenced hereby in the inverse order of its maturity and not to
the payment of interest, or refunded to Maker or the other payor thereof if and
to the extent such amount which would have been excessive exceeds such unpaid
principal. As used in this paragraph, the term "applicable law" shall mean the
laws of the State of Utah or the federal laws of the United States, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Maker and all sureties, endorsers, guarantors and any other party now or
hereafter liable for the payment of this Note in whole or in part, hereby
severally (i) waive demand, presentment for payment, notice of dishonor and of
nonpayment, protest, notice of protest, notice of intent to accelerate, notice
of acceleration and all other notices (except for those notices expressly
provided for herein); (ii) agree to the release of any party primarily or
secondarily liable hereon; (iii) agree that the holder hereof shall not be
required first to institute suit or exhaust its remedies hereon against Maker or
others liable or to become liable hereon or to enforce its rights against them
or any security herefor; (iv) consent to any extension or postponement of time
of payment of this Note for any period or periods of time and to any partial
payments, before or after maturity, and to any other indulgences with respect
hereto, without notice thereof to any of them; and (v) submit (and waive all
rights to object) to personal jurisdiction in the State of Utah, and venue in
Summit County, Utah, for the enforcement of any and all obligations under the
Note.
This Note may not be changed, amended or modified except in a writing
expressly intended for such purpose and executed by the party against whom
enforcement of the change, amendment or modification is sought.
The loan evidenced by this Note is made solely for business and commercial
purposes and is not for personal, family, household or agricultural purposes.
Maker acknowledges and agrees that the holder of this Note may, from time
to time, sell or offer to sell interests in the loan evidenced by this Note to
one or more participants.
3
<PAGE>
This Note, and its validity, enforcement and interpretation, shall be
governed by Utah law (without regard to any conflict of laws principles) and
applicable United States Federal law.
Time shall be of the essence in this Note with respect to all of Maker's
obligations hereunder.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the date first
above written.
MAKER:
ASC UTAH, INC., a Maine corporation
By: /s/ Julianne Cloutier
Name: Julianne Cloutier
Title: Vice President
4
<PAGE>
EXHIBIT 10.63
GUARANTY
THIS GUARANTY, dated as of July 3, 1997 ("Guaranty"), is made by ASC
HOLDINGS, INC., a Maine corporation (together with its successors and assigns,
the "Guarantor"), in favor of WOLF MOUNTAIN RESORTS, L.C., a Utah limited
liability company ("Lender"), and its successors and assigns, in connection with
the Promissory Note dated as of the date hereof, given by ASC UTAH, INC., a
Maine corporation ("Maker"), to Lender (the "Note").
W I T N E S S E T H:
WHEREAS, Maker is a wholly-owned subsidiary of Guarantor; and
WHEREAS, Lender has agreed to sell to Maker and Maker has agreed to
purchase from Lender those certain buildings, improvements and personal property
constituting a portion of, or used in connection with, the Wolf Mountain Ski
Resort and described more fully in that Purchase and Sale Agreement by and
between Maker and Lender and dated as of the date of hereof ("Purchase and Sale
Agreement"); and
WHEREAS, the execution and delivery of the Note by the Maker and the
Guaranty by the Guarantor are conditions to the obligation of Lender to close
the transactions contemplated by the Purchase and Sale Agreement;
NOW, THEREFORE, in consideration of the premises and other valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the Guarantor hereby agrees as follows:
ARTICLE I
GUARANTY
SECTION 1.1 The Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees to Lender (a) the timely, complete and full performance by Maker of
all of the obligations of Maker under the terms of the Note, and (b) the due,
complete and punctual payment of all sums now or hereafter required to be paid
to Lender by Maker under the Note (to the extent not theretofore paid by
Guarantor or Maker) as and when the same shall become due and payable according
to the terms thereof. The obligations of the Guarantor under this Guaranty are
independent of the obligations of Lender and Maker under the Note, the Purchase
and Sale Agreement and the Ground Lease Agreement of even date herewith by and
between Maker and Lender, and Lender may proceed directly to enforce all of its
rights under this Guaranty without proceeding against or joining Maker or any
other person; provided, that the Guarantor shall have the same defenses to
performance hereunder that Maker has under any obligations guaranteed hereby,
except that Guarantor shall have no defense to performance based on the
bankruptcy, insolvency, moratorium, reorganization or other similar proceeding
affecting generally the enforcement of creditors' rights of Lender.
<PAGE>
SECTION 1.2 Guaranty Unconditional. This Guaranty is a guaranty of
payment, not collection. The obligations of the Guarantor under this Article I
(the "Obligations") shall be unconditional, absolute, and irrevocable and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of Lender or Maker under the Note or any other
document;
(b) any modification or amendment of or supplement to the Note or any
other document;
(c) any change in the corporate existence, structure or ownership of the
Guarantor, Lender or Maker or any insolvency, bankruptcy, moratorium,
reorganization or other similar proceeding affecting generally the enforcement
of creditors' rights of Lender or Maker;
(d) any failure, omission or delay to enforce, assert, or exercise any
right, power, privilege or remedy conferred on Lender by the terms of the Note
or any other document or the waiver of any default thereunder; or
(e) any other occurrence, circumstance, happening or event whatsoever,
whether foreseen or unforeseen, and any other circumstance which might otherwise
constitute a legal or equitable defense, release or discharge of the liabilities
of the Guarantor or which might otherwise limit recourse against the Guarantor.
SECTION 1.3 Continuing Guaranty. This Guaranty shall be a continuing
guaranty and shall cover and secure any ultimate balance owing to Lender in
respect of the Obligations, including all costs, charges and any expenses which
they or any one or more of them may incur in enforcing or obtaining performance
or the payment of the sums of money due to them hereunder, but no such party
shall be obliged to seek any recourse against Maker or other persons or the
collateral it may hold, if any, for the Obligations before being entitled to
payment from the Guarantor. Lender may compromise or otherwise change the terms
of any of the Obligations hereby guaranteed to it, in each case without consent
of the Guarantor and without exonerating in whole or in part the Guarantor. The
Guarantor acknowledges that this Guaranty has been delivered free of any
conditions other than those set forth herein.
ARTICLE II
MISCELLANEOUS
SECTION 2.1 Notices. All notices, requests, demands and other
communications required or permitted to be given under this Guaranty shall be
deemed to have been duly given if in writing and delivered personally, or five
(5) business days after being mailed first class, postage prepaid, registered or
certified mail, or the next business day after being delivered to a nationally
recognized overnight courier service that keeps receipts of delivery or upon
delivery of a telecopy (provided it is later confirmed by one of the preceding
methods), as follows:
2
<PAGE>
If to Lender:
WOLF MOUNTAIN RESORTS, L.C.
4000 Parkwest Drive
Part City, Utah 84098
With a copy to:
Bracewell & Patterson, L.L.P.
South Tower, Pennzoil Place
711 Louisiana St., Suite 2800
Houston, Texas 77002-2781
Attn: Clark G. Thompson, Jr.
If to Guarantor:
ASC HOLDINGS, INC.
c/o American Skiing Company
Sunday River Road
P. O. Box 450
Bethel, Maine 04217
Any party may change the address to which such communications are to be
directed to it by giving written notice to the other in the manner specified in
this Section 3.1.
SECTION 2.2 Amendments and Waivers. Any provision of this Guaranty may be
amended or waived if, and only if, such amendment or waiver is in writing and is
signed by Lender and the Guarantor.
SECTION 2.3 Applicable Law. This Guaranty shall be construed in accordance
with and governed by the laws of the State of Utah without regard to any choice
of law provisions existing thereunder.
SECTION 2.4 Successors and Assigns. All of the provisions of this Guaranty
shall be binding upon the Guarantor and its permitted successors and assigns.
None of the interests, rights or obligations of the Guarantor hereunder shall be
assignable (whether by operation of law or otherwise) without the consent of
Lender, which shall not be unreasonably withheld.
SECTION 2.5 Remedies. (a) Upon any failure by the Guarantor to comply with
its Obligations, Lender shall be authorized to demand specific performance of
such provisions upon five (5) days' prior written notice to the Guarantor. The
Guarantor hereby waives, to the extent permitted by applicable law, any defense
based on the adequacy of a remedy at law which might be asserted as a bar to the
remedy of specific performance of the Obligations in any action brought therefor
by Lender.
3
<PAGE>
(b) The Guarantor hereby waives presentment, demands for performance,
notices of nonperformance, and any other notice of any kind in connection with
the Guaranty, other than the notice provided by Section 2.5 above.
SECTION 2.6 Expenses. If the Guarantor shall default in any of its
obligations hereunder, the Guarantor shall also pay the reasonable out-of-pocket
costs of Lender (including reasonable fees and expenses of legal counsel)
incurred in connection with the enforcement of this Guaranty against it.
SECTION 2.7 Waiver of Subrogation. Notwithstanding any payment or payments
made by the Guarantor hereunder, the Guarantor shall not be entitled to, and
shall not be subrogated to, any of the rights of Lender against Maker for the
payment of the Obligations. If, notwithstanding the preceding sentence, any
amount shall be paid to the Guarantor on account of such subrogation rights at
any time when any of the Obligations shall not have been paid in full, such
amount shall be held by the Guarantor in trust for Lender, as the case may be,
segregated from other funds of the Guarantor and, if payment of the Obligations
by Guarantor is otherwise due, be turned over to Lender in the exact form
received by the Guarantor (duly endorsed by the Guarantor to Lender if
required), to be applied against the Obligations.
SECTION 2.8 Reliance, Etc. All liabilities to which this Guaranty applies
or may apply under the terms hereof shall be conclusively presumed to have been
created in reliance hereon. No failure or delay on the part of Lender in
exercising any right, power or privilege hereunder and no course of dealing
between the Guarantor or Lender shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege. The rights, powers
and remedies herein expressly provided are cumulative and not exclusive of any
rights, powers or remedies which Lender would otherwise have. No notice to or
demand on the Guarantor in any case shall entitle the Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of Lender to any other or further action in any
circumstances without notice or demand.
SECTION 2.9 Delivery of Documents. The Guarantor acknowledges that
executed (or conformed) copies of the Note and the Purchase and Sale Agreement
have been delivered to it.
SECTION 2.10 Judgments. If claim is ever made upon Lender for repayment or
recovery of any amount or amounts received from or on behalf of Maker or the
Guarantor in payment or on account of any of the Obligations and Lender repays
all or part of said amount by reason of (a) any judgment, decree or order of any
court or administrative body having jurisdiction over Lender or any of Lender's
property or (b) any settlement or compromise of any such claim effected by
Lender with any such claimant (including Guarantor and Maker), then and in such
event the Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon it, notwithstanding any revocation hereof and
the Guarantor shall be and remain liable to Lender hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by Lender.
4
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed by its authorized officer as of the date first above written.
ASC HOLDING, INC.
By: /s/ Julianne Cloutier
-----------------------------
Name: Julianne Cloutier
---------------------------
Title: Vice President
--------------------------
5
<PAGE>
EXHIBIT 10.64
================================================================================
GROUND LEASE AGREEMENT
by and between
WOLF MOUNTAIN RESORTS, L.C.
("Landlord")
and
ASC UTAH
("Tenant")
dated as of
July 3, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
RECITALS.......................................................................1
AGREEMENT......................................................................1
ARTICLE I......................................................................1
1.01 Premises.........................................................1
1.02 Lease Attributes.................................................1
ARTICLE II.....................................................................2
2.01 Initial Term.....................................................2
2.02 Extended Term....................................................2
2.03 Grace Period.....................................................2
ARTICLE III....................................................................2
3.01 Rent.............................................................2
3.02 Rent to be Net to Landlord.......................................5
ARTICLE IV.....................................................................5
4.01 Taxes and Utility Expenses.......................................5
ARTICLE V......................................................................7
ARTICLE VI.....................................................................7
6.01 Improvements.....................................................7
6.02 Improvement Conditions...........................................7
6.03 Maintenance......................................................8
6.04 Demolition.......................................................8
6.05 Improvement Ownership............................................8
6.06 Disposition at Lease Termination.................................8
ARTICLE VII....................................................................8
7.01 Requirements of Public Authority.................................8
ARTICLE VIII...................................................................9
ARTICLE IX....................................................................10
ARTICLE X.....................................................................10
10.01 Subletting.....................................................10
10.02 Assignment.....................................................10
ARTICLE XI....................................................................10
ARTICLE XII...................................................................11
12.01 Liability Insurance............................................11
12.02 Property Insurance.............................................11
12.03 Blanket Policy.................................................11
12.04 Waiver of Subrogation..........................................12
i
<PAGE>
TABLE OF CONTENTS
(Cont'd)
Page
12.05 Adjustment.....................................................12
ARTICLE XIII..................................................................12
13.01 Casualty.......................................................12
13.02 Demolition.....................................................12
13.03 No Abatement...................................................12
ARTICLE XIV...................................................................13
14.01 Condemnation...................................................13
14.02 Prosecuting Takings Claims.....................................13
ARTICLE XV....................................................................14
ARTICLE XVI...................................................................14
16.01 Mortgage.......................................................14
16.02 Further Agreement..............................................16
ARTICLE XVII..................................................................17
17.01 Quiet Enjoyment................................................17
17.02 Representations, Warranties and Covenants......................17
17.03 Remedies.......................................................20
17.04 General Provisions.............................................20
ARTICLE XVIII.................................................................20
18.01 Defaults.......................................................20
18.02 Cure...........................................................21
18.03 Remedies.......................................................22
ARTICLE XIX...................................................................22
ARTICLE XX....................................................................23
ARTICLE XXI...................................................................23
ARTICLE XXII..................................................................23
ARTICLE XXIII.................................................................24
ARTICLE XXIV..................................................................24
ARTICLE XXV...................................................................25
25.01 Grant of Option................................................25
25.02 Option Payments................................................25
25.03 Mandatory Exercise of Option...................................27
25.04 Option Price...................................................27
25.05 Option Price Payment...........................................27
25.06 Owned Property.................................................27
25.07 Development Commitment.........................................28
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TABLE OF CONTENTS
(Cont'd)
Page
25.08 Closing........................................................28
25.09 Restrictions Against Encumbrance...............................28
ARTICLE XXVI..................................................................28
26.01 Governing Law..................................................28
26.02 Partial Invalidity.............................................28
26.03 Short Form Lease...............................................28
26.04 Interpretations................................................29
26.05 entire Agreement...............................................29
26.06 Parties........................................................29
26.07 Restriction on use of Landlord's Adjacent Land.................29
GUARANTY COMMITMENT...........................................................31
SCHEDULE A....................................................................32
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This Ground Lease Agreement is made and entered into by and between Wolf
Mountain Resorts, L.C., a limited liability company organized under the law of
the State of Utah with a principal place of business in Summit County, Utah
("Landlord"), and ASC Utah, a corporation organized and existing under the laws
of the State of Maine with its principal place of business at Bethel, Maine
("Tenant").
RECITALS
1. Landlord owns and leases certain land and other interests in real
property located in Summit and Salt Lake Counties, Utah more particularly
described in Article I of this Lease known generally as the Wolf Mountain Ski
Resort.
2. Contemporaneously herewith, Landlord is selling all of Seller's assets
constituting the Wolf Mountain Ski Resort, except the property leased or
subleased hereunder, to Tenant pursuant to a Purchase and Sale Agreement dated
of even date herewith ("Purchase and Sale Agreement").
3. Landlord desires to maintain its fee or leasehold interests in the
leased premises described in Article I and lease the same to Tenant on a ground
lease basis.
4. Landlord and Tenant desire to provide a mechanism whereby Landlord
could sell to Tenant and Tenant could purchase from Landlord its fee interest in
certain parcels within the leased premises for development by Tenant as more
particularly described in Article XXV hereof.
AGREEMENT
NOW, THEREFORE, it is mutually agreed by and between the parties hereto as
follows:
ARTICLE I
PREMISES
1.01 Premises. Landlord hereby leases and lets to Tenant, and Tenant
hereby takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, all of the tracts, pieces and parcels of land,
situated in Summit County, Utah, more particularly described in Schedule A
annexed hereto and made a part hereof, together with any and all appurtenances,
rights, privileges and easements benefiting, belonging or pertaining thereto
(all of the foregoing hereinafter sometimes referred to as the "demised
premises", "leased premises" or the "premises").
1.02 Lease Attributes. The leased premises consists of two different types
of property interests, land owned in fee by Landlord ("Fee Land") and land
leased by Landlord ("Leased Land"). The Fee Land and Leased Land are separately
identified in Schedule A as such. This lease shall constitute a direct lease of
all Fee Land and a sublease of all Leased Land, subject to the terms and
conditions of the prime leases.
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ARTICLE II
TERM
2.01 Initial Term. The initial term of this Lease shall commence on the
date hereof (hereinafter referred to as the "Commencement Date") and shall
continue for a period of Fifty (50) years.
2.02 Extended Term. Tenant may by right extend the term of this Lease on
the same terms and conditions as provided herein for up to three (3) additional
periods of fifty (50) years each by sending Landlord written notice of the
exercise of each extension right not less than 12 months prior to expiration of
the then current term, together with a payment of an extension fee of One
Million Dollars ($1,000,000) for each 50-year extension right exercised. Upon
such receipt of the written notice and payment of the fee, the Lease term shall
be automatically extended.
2.03 Grace Period. In the event Tenant fails to exercise an extension
option pursuant to Section 2.02, Tenant shall not be deemed to have lost its
right to exercise such option until thirty (30) days following written notice
thereof from Landlord, during which period Tenant shall retain its right to
exercise such extension option in accordance with Section 2.02 above. If no such
notice shall have been given by Landlord prior to the expiration of the initial
term or any extended term of this Lease (other than an expiration by virtue of
the exercise by Landlord of its remedies pursuant to Article XVIII below), this
Lease shall not terminate, but rather shall become a tenancy at will on the same
terms and conditions set forth herein, subject to termination by Landlord after
expiration of such thirty (30) days written notice to Tenant.
ARTICLE III
RENT
3.01 Rent. Tenant covenants and agrees to pay Landlord, for the demised
premises, rent at the following rates and times:
(a) Tenant shall pay to Landlord the sum of four percent (4%) of
Gross S&L Revenues, as hereinafter defined. Said sums shall be payable on
or before September 15 of each year during the term of this Lease and
shall be determined with reference to the Gross S&L Revenues actually
received by Tenant for its preceding 12-month fiscal year ended July 31.
Rent shall be prorated for any partial year included in the term.
(b) The payment by Tenant to Landlord shall be accompanied by a
statement of Tenant's Chief Financial Officer setting forth the Gross S&L
Revenues actually received by Tenant for the period involved and the
method of computing the amount, if any, simultaneously being paid by
Tenant to Landlord in such detail as Landlord and Tenant shall from time
to time reasonably agree. The term "Gross S&L Revenues" shall mean any and
all revenues determined in accordance with generally accepted accounting
principles attributable to the use or ownership of the leased premises and
any additional property owned by the Tenant, or its successors or assigns
or any affiliates of any such parties, now or at any time in the future
used and operated on an integrated basis as a part
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of what is now known as the Wolf Mountain Ski Resort or any successor
thereto (including without limitation, any of the land included in Section
25.06 below and any of the property designated on the Parcel Maps as [UPC
Mines, Lehmer, BLM, Sun Peak, L. Clifford, UWSP and Hi Ute Ranch]), or
from any buildings, lodges, restaurants, sports facilities, condominium
units, lifts or other structures located thereon, including without
limitation, any sales, charges, dues, rentals, concessions, fees, or other
revenues relating thereto, excluding only:
(i) sales or excise taxes; and
(ii) proceeds of sales of real property interests, with the term
"sales" to include any lease of real estate for a term
exceeding ten (10) years, that are conveyed to Tenant pursuant
to Article XXV below.
Gross S&L Revenues includes such revenues generated through
operations of any business enterprises or person affiliated with Tenant.
Affiliated parties shall mean any persons or business organizations that
control, are controlled by, or are under common control with the Tenant,
whether directly or indirectly through one or more intermediaries. Control
shall mean the ability to control the management or operations of the
person or organization whether through voting or capital interests or
through any management contracts or other arrangements that provide for
effective control. Gross S&L Revenues shall include any revenues or the
value of any other consideration that are diverted from what is now known
as the Wolf Mountain Ski Resort operations to some other location or
source within the Tenant's or any affiliated party's organization through
establishing a contract, agreement or other business arrangement at what
is now known as the Wolf Mountain Ski Resort that is less favorable than
would be established on an independent arm's length basis.
(c) Tenant shall pay the following additional rent based upon the
volume of paid skier visits achieved at the demised premises. Beginning
with the 1997-98 ski season, a one-time rent payment shall be made within
45 days following the close of any fiscal year of Tenant in which the ski
resort of which the demised premises are included achieves, for the first
time, the paid skier visit volumes set forth below. Each such payment
shall be accompanied by a statement of Tenant's Chief Financial Officer
setting forth the skier visits during such period in accordance with the
terms of this subsection in such detail as Landlord and Tenant shall from
time to time reasonably agree. Paid skier visits shall be determined by
Tenant using the same methodology employed by American Skiing Company and
its affiliated parties at all of their ski resorts, which shall be
consistent in all material respects with the methodologies employed
generally within the industry.
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Skier Visits One-Time Rent Payment
------------ ---------------------
100,000 $ 250,000
200,000 $ 500,000
300,000 $ 750,000
400,000 $1,000,000
500,000 $2,000,000
600,000 $3,000,000
700,000 $2,000,000
800,000 $2,000,000
900,000 $2,000,000
1,000,000 $2,000,000
The following example is provided for illustrative purposes:
If 1997 - 1998 skier visits equal 300,000, Tenant shall pay $250,000 and
$500,000 and $750,000 (for a total of $1,500,000) to Landlord prior to September
15, 1998. If 1998 - 1999 skier visits equal 400,000 skier visits, Tenant shall
pay $1,000,000 to Landlord on or before September 15, 1999.
d) It is expressly understood and agreed that nothing in this Lease
contained shall be deemed or construed to grant or otherwise provide
Landlord with any authority over, or other rights to control or direct,
the operation of the resort at the demised premises.
e) All rent hereunder shall be paid either at the address of
Landlord set forth below with regard to notices, or at such other places
of which Landlord shall have given Tenant written notice at least thirty
(30) days in advance, or in the case of Section 25.02, as therein
provided.
f) As hereinafter used the term "rent" shall be deemed for reference
purposes to include all rent covered by this Article III, the Additional
Rent described in Article IV, if any, payable by Tenant to Landlord
hereunder and all Option Payments described in Section 25.02 below.
g) Tenant shall prepare and retain true and accurate books of
account and records, relating to the demised premises conforming to
generally accepted accounting principals consistently applied to the
extent applicable, including but not limited to, Gross S&L Revenues and a
record of skier visits sufficient to comply with the foregoing
requirements of this Article III.
h) Landlord shall have the right, at any time, upon reasonable
advance notice (and not more often than once per quarter) to audit or
inspect all of Tenant's books and records relating to Gross S&L Revenues,
skier visits and any of the other obligations of Tenant under this Lease,
which shall be maintained and made available at Tenant's offices in Summit
County, Utah. Tenant shall make all such books and records available for
such examination. Landlord's right to conduct an audit or inspection
includes the
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right to do whatever is reasonably necessary to complete the audit or
inspection. If the audit or inspection reveals an underpayment of rent,
Tenant shall pay the amount of same, together with interest on such amount
at 18% from the date due until paid. If Landlord conducts an audit or
inspection and the audit or inspection reveals an understatement of Gross
S&L Revenues or skier visits for a particular calendar year by more than
five percent (5%), Tenant shall pay all reasonable costs of the audit or
inspection. If the audit or inspection reveals an overpayment of
percentage rent, Landlord shall refund same, plus interest at the rate
specified above. Any audits and inspections may be made by Landlord's
employees or by any certified public accountant selected by Landlord.
3.02 Rent to be Net to Landlord. It is the intention of the parties that
the rent payable by Tenant to Landlord pursuant to this Article III shall be net
to Landlord so that this Lease shall yield to Landlord the net annual rent
specified in Article III herein during the term of this Lease, and that all
costs, expenses and obligations of every kind and nature whatsoever relating to
the demised premises shall be paid by Tenant, except as otherwise expressly
provided herein. Without limiting the generality of the foregoing, Landlord and
Tenant hereby agree that Tenant shall be responsible for paying and shall pay
all of the payments due under the leases covering the portion of the land
described as the Leased Land in Schedule A attached hereto, including any
modifications or amendments thereto with Tenant's prior consent. Except as
specifically provided herein, in no event shall Tenant be entitled to any
abatement, reduction, set off, counterclaim, defense or reduction with respect
to the payment of any rent hereunder.
ARTICLE IV
ADDITIONAL RENT
4.01 Taxes and Utility Expenses.
(a) (1) Tenant shall, during the term of this Lease, as additional
rent, pay and discharge punctually, as and when the same shall become due
and payable, all taxes, special and general assessments, water rents,
rates and charges, sewer rents and other governmental impositions and
charges of every kind and nature whatsoever, extraordinary as well as
ordinary, (hereinafter referred to as "Taxes"), and each and every
installment thereof which shall or may during the term of this Lease be
charged, levied, laid, assessed imposed, become due and payable, or a lien
upon, or for, or with respect to, the demised premises or any part
thereof, or any buildings, appurtenances or equipment owned by Tenant
thereon or therein or any part thereof, together with all interest and
penalties thereon, under or by virtue of all present or future laws,
ordinances, requirements, orders, directives, rules or regulations of the
federal, sate, county and municipal governments and of all other
governmental authorities whatsoever (all of which shall also be included
in the term "Taxes" as heretofore defined); and all sewer rents and
charges for water, steam, gas, heat, hot water, electricity, light and
power, and other services or services furnished to the demised premises or
the occupants thereof during the term of this Lease (hereinafter referred
to as "Utility Expenses").
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(2) To the extent that the same may be permitted by law,
Tenant or its designees shall have the right to apply for the conversion
of any assessment for local improvements assessed during the term of this
Lease in order to cause the same to be payable in annual installment, and
upon such conversion, Tenant shall pay and discharge punctually said
installments as they shall become due and payable during the term of this
Lease. Landlord agrees to permit the application for the foregoing
conversion to be filed in Landlord's name, if necessary, and shall execute
any and all documents requested by Tenant to accomplish the foregoing
result.
(3) Tenant shall be deemed to have complied with the covenants
of this paragraph (a) if payment of such Taxes shall have been made either
within any period allowed by law or by the governmental authority imposing
the same during which payment is permitted without penalty or interest or
before the same shall become a lien upon the demised premises, and Tenant
shall produce and exhibit to Landlord satisfactory evidence of such
payment, if Landlord shall demand the same in writing.
(b) All such Taxes, including assessments which have been converted
into installments as set forth in the preceding paragraph (a), which shall
become payable during each of the calendar or fiscal tax years, as the
case may be, in which the term of this Lease commences or terminates,
shall be apportioned pro rata between Landlord and Tenant in accordance
with the respective portions of such year during which such term shall be
in effect.
(c) (1) Tenant or its designee shall have the right to contest or
review all such Taxes by legal proceedings, or in such other manner as it
may deem suitable (which, if instituted, Tenant or its designees shall
conduct promptly at its own cost and expense, and, if necessary, in the
name of Landlord with the cooperation of Landlord and Landlord shall
execute all documents reasonable necessary to accomplish the foregoing).
Notwithstanding the foregoing, Tenant shall promptly pay all such taxes if
at any time the demised premises or any part thereof shall then be
immediately subject to forfeiture, or if Landlord shall be subject to any
criminal liability arising out of the nonpayment thereof.
(2) The legal proceedings referred to in the preceding
subparagraph (1) shall include appropriate certiorari proceedings, and
appeals from orders therein and appeals from any judgments, decrees, or
orders. In the event of any reduction, cancellation or discharge, Tenant
shall pay the amount finally levied or assessed against the demised
premises or adjudicated to be due and payable on any such contested Taxes.
(d) Landlord covenants and agrees that if there shall be any refunds
or rebates on account of the Taxes paid by Tenant under the provisions of
this Lease, such refund or rebate shall belong to Tenant. Any refunds
received by Landlord shall be deemed trust funds and as such are to be
received by Landlord in trust and paid to Tenant forthwith. Landlord will,
upon the written request of Tenant, sign any receipts which may be
necessary to secure the payment of any such refund or rebate, and will pay
over to Tenant such refund or rebate as received by Landlord. Landlord
further covenants and agrees on
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request of Tenant at any time, and from time to time, but without cost to
Landlord, to make application individually (if legally required) or to
join in Tenant's application (if legally required) for separate tax
assessments for such portions of the demised premises as Tenant shall at
any time, and from time to time, designate. Landlord hereby agrees upon
reasonable request of Tenant to execute such instruments and to give
Tenant such assistance in connection with such applications as shall be
required by Tenant.
(e) Nothing herein or in this Lease otherwise contained shall
require or be construed to require Tenant to pay any sales, rent,
inheritance, estate, succession, transfer, gift, franchise, income or
profit taxes, by whatever name the same may be called, that are or may be
imposed upon Landlord, its successor or assigns.
ARTICLE V
USE
The demised premises may be used for any lawful purpose consistent with
existing covenants, conditions and restrictions of record applicable to the
premises. The premises shall not be used for commercial timbering operations
except in connection with development and construction of ski terrain and other
improvements at the premises.
ARTICLE VI
MAINTENANCE, REPAIRS AND IMPROVEMENTS
6.01 Improvements. Subject to the provisions of Section 6.02 below, Tenant
shall have the right, at its own cost and expense, to construct on the demised
premises such buildings, improvements and other facilities as Tenant may desire
and determine appropriate in connection with its operations at the premises.
6.02 Improvement Conditions. The rights of Tenant set forth in Section
6.01 are subject to the following conditions:
(a) The premises being zoned by Summit County so as to permit the
construction and operation of the improvements contemplated by Tenant.
(b) Adequate utilities (including sewer, water and necessary energy
utilities) being located on the premises or in property immediately
adjoining the premises and being available for use on the premises.
(c) There being no covenant or restriction affecting the property or
any restriction under any state, county, or local laws or ordinances,
which would prohibit the improvements and the use of the premises
contemplated thereby.
(d) There being no easement, covenant or restriction on the portion
of the premises to be improved which, in the opinion of Tenant, would
adversely affect the construction or operation thereon of the
improvements.
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(e) The receipt of all necessary permits, licenses and approvals of
the appropriate governmental authorities for the construction and
operation of the contemplated improvements in a manner and location, and
under such conditions, as are acceptable to Tenant in its sole judgment.
6.03 Maintenance. Tenant alone shall be responsible for maintaining and
shall maintain, the buildings and improvements currently located on, or at any
time erected on, the demised premises in good condition comparable to conditions
maintained at other American Skiing Company ("ASC") resorts. Landlord shall not
be required to furnish any services or facilities or to make any improvements,
repairs or alterations in or to the demised premises during the term of this
Lease.
6.04 Demolition. Tenant may, at its option and at its own cost and
expense, at any time and from time to time, make such alterations, changes,
replacements, improvements and additions in and to the buildings and
improvements currently located on the demised premises, subject to the
conditions specified in Section 6.02, as it may deem desirable, including the
removal or demolition of any building(s) and improvement(s) and/or structure(s)
that now or hereafter may be situated or erected on the demised premises.
6.05 Improvement Ownership. Until the expiration or sooner termination of
this Lease (subject, however, to the rights of the holder of any leasehold
Mortgagee(s) to obtain a new lease as set forth in Section 16 hereof), title to
any building or buildings or improvements situate or erected on the demised
premises and the building equipment and other items installed thereon and any
alterations, changes or additions thereto shall remain solely in Tenant; and
Tenant alone shall be entitled to deduct all depreciation on Tenant's income tax
returns for any such building or buildings, building equipment and/or other
items, improvements, additions, changes or alterations.
6.06 Disposition at Lease Termination. On the last day or sooner
termination of the term of this Lease, Tenant shall quit and surrender to
Landlord the demised premise, and any buildings and permanent improvements then
located thereon, provided, however, that notwithstanding anything in this Lease
to the contrary, Tenant shall have the right, but not the obligation, at the end
of the term, to remove any buildings or other improvements made, constructed or
installed by Tenant upon the premises, provided that such removal shall be
accomplished within sixty (60) days following the end of the term.
ARTICLE VII
GOVERNMENTAL REQUIREMENTS
7.01 Requirements of Public Authority.
(a) During the term of this Lease, Tenant shall, at its own cost and
expense, promptly observe and comply with all present and future laws,
ordinances, requirements, orders, directives, rules and regulations of the
federal, state, county, municipal governments and of all other
governmental authorities affecting the demised premises or appurtenances
thereto or any part thereof whether the same are in force at the
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commencement of the term of this Lease or may in the future be passed,
enacted or directed.
(b) Tenant shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Tenant,
or Landlord (if legally required), or both (if legally required), without
cost or expense to Landlord, the validity or application of any law,
ordinance, rule, regulation or requirement of the nature referred to in
paragraph (a) of this Section and, if by the terms of any such law,
ordinance, order, rule, regulation or requirement, compliance therewith
may legally be delayed pending the prosecution of any such proceeding,
Tenant may delay such compliance therewith until the final determination
of such proceeding.
(c) Landlord agrees to execute and deliver any appropriate papers or
other instruments which may be necessary or proper to permit Tenant so to
contest the validity or application of any such law, ordinance, order,
rule, regulation or requirement and to fully cooperate with Tenant in such
contest.
ARTICLE VIII
COVENANT AGAINST LIENS
If, because of any act or omission of Tenant, any mechanic's lien shall be
filed against Landlord or any portion of the demised premises, Tenant shall, at
its own cost and expense, cause the same to be discharged of record or bonded
within one hundred twenty (120) days (or such earlier date as may be necessary
to prevent the claimant hereunder from exercising its rights thereunder) after
written notice from Landlord to Tenant, of the filing thereof; and Tenant shall
indemnify and save harmless Landlord against and from all costs, liabilities,
suits, penalties, claims and demands resulting therefrom.
Nothing contained herein shall constitute any consent or request by
Landlord, express or implied, to or for the performance of any labor or services
or the furnishing of any materials or other property in respect of the premises,
nor as giving Tenant any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Landlord in respect thereof. NOTICE IS HEREBY GIVEN THAT LANDLORD WILL NOT,
UNDER ANY CIRCUMSTANCES, BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED TO TENANT OR TO ANYONE HAVING AN INTEREST IN THE PREMISES OR ANY PART
THEREOF THROUGH OR UNDER TENANT, AND NO MECHANIC'S OR OTHER LIEN FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE REVERSIONARY OR OTHER
INTEREST OF LANDLORD IN AND TO THE PREMISES, OR IN AND TO ANY ALTERATIONS,
ADDITIONS OR IMPROVEMENTS TO BE MADE OR ERECTED THEREON.
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ARTICLE IX
ACCESS TO PREMISES
Landlord shall have the right to enter upon the demised premises at all
reasonable times to examine the same provided such entry shall not interfere
with the business then being conducted on the demised premises.
ARTICLE X
ASSIGNMENT AND SUBLETTING
10.01 Subletting. Tenant shall be entitled to sublease any portion of the
premises to an affiliated party or to anyone else for a period of ten (10) years
or less without the consent or approval of Landlord. Any sublease in excess of
ten (10) years to a party not affiliated with Tenant shall require the prior
written consent of Landlord, not to be unreasonably withheld or delayed. Tenant
and Holdings shall remain fully liable to perform their respective obligations
under this Lease and the related Guaranty with respect to any subleased portion
of the premises.
10.02 Assignment. Tenant shall not assign all or any portion of the Lease
without obtaining the prior written consent of Landlord to any such assignment,
which consent Landlord may not unreasonably withhold or delay. Notwithstanding
the foregoing, Tenant shall not be prohibited from assigning all or any portion
of its interest hereunder to any entity affiliated with Tenant. Except as
provided below, Tenant and Holdings shall remain fully liable to perform their
respective obligations under this Lease and the related Guaranty,
notwithstanding any assignment permitted hereunder.
A sale of all or substantially all Tenant's assets, or a transfer of
record or beneficial ownership of more than 50% of the voting stock of Tenant to
a party unaffiliated with Tenant, whether by merger, consolidation, or other
reorganization, shall constitute an "assignment" for purposes of this Section
10.02. In such event, Landlord may not unreasonably withhold or delay its
consent provided that the proposed successor or assign of Tenant shall be a
person or business organization with financial condition and operating
capability and expense reasonably adequate to operate the premises in a manner
consistent with other comparably sized ski resorts throughout the United States.
ARTICLE XI
INDEMNITY
Tenant shall indemnify and save harmless Landlord from and against any and
all liability, damage, penalties or judgments arising from injury to person or
property sustained by anyone in and about the demised premises resulting from
any act or acts or omission or omissions of Tenant, or Tenant's officers,
agents, servants, employees or contractors. Tenant shall, at its own cost and
expense, defend any and all suits or actions which may be brought against
Landlord or in which Landlord may be impleaded with others upon any such
above-mentioned matter, claim or claims, except as may result from the
Landlord's gross negligence or the gross negligence of its officers, agents,
servants, employees or contractors. Excepting such acts, Landlord shall not be
responsible or liable for any damage or injury to any property, fixtures,
buildings or other
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improvements, or to any person or persons, at any time on the demised premises,
including any damage or injury to Tenant or to any of Tenant's officers, agents,
servants, employees, contractors, customers or sublessees.
ARTICLE XII
INSURANCE
12.01 Liability Insurance. Tenant shall provide at its expense, and keep
in force during the term of this Lease, general liability insurance in a good
and solvent insurance company or companies licensed to do business in the State
of Utah, selected by Tenant, and reasonably satisfactory to Landlord, or through
a self insurance program approved by all necessary governmental authorities, in
the amount of at least Ten Million Dollars ($10,000,000) with respect to injury
to or death of any one person and Five Million Dollars ($5,000,000) with respect
to injury to or death of more than one person in any one accident or other
occurrence, and One Million Dollars ($1,000,000) with respect to damages to
property. Such policy, policies or programs shall include Landlord as an
additional insured. Tenant agrees to deliver certificates of such insurance to
Landlord at the beginning of the term of this Lease and thereafter not less than
ten (10) days prior to the expiration of any such policy. Such insurance shall
be noncancellable without ten (10) days' written notice to Landlord.
12.02 Property Insurance. During the term of this Lease, Tenant shall keep
all buildings and improvements presently at the premises or hereafter erected by
Tenant on the demised premises at any time insured for the benefit of Landlord
and Tenant and the holder of any leasehold mortgage permitted pursuant to
Section 16 hereof, as their respective interests may appear, against loss or
damage by fire, and those casualties covered by the customary extended coverage
endorsements, in a minimum amount necessary to avoid the effect of coinsurance
provisions of the applicable policies. All proceeds payable at any time and from
time to time by any insurance company under such policies shall be payable to
such leasehold mortgagee, if any, or, if none, to Tenant. Any proceeds paid to
Tenant shall be retained by Tenant and Landlord shall not be entitled to, and
shall have no interest in, such proceeds or any part thereof, EXCEPT THAT Gross
S&L Revenues shall include any proceeds of business interruption insurance
received by Tenant with respect thereto. Landlord shall, at Tenant's cost and
expense, cooperate fully with Tenant in order to obtain consents and other
instruments and take all other actions necessary or desirable in order to
effectuate the same and to cause such proceeds to be paid as hereinbefore
provided and Landlord shall not carry any insurance concurrent in coverage and
contributing in the event of loss with any insurance required to be furnished by
Tenant hereunder if the effect of such separate insurance would be to reduce the
protection or the payment to be made under Tenant's insurance.
12.03 Blanket Policy. Any insurance required to be provided by Tenant
pursuant to this Lease may be provided by blanket insurance covering the demised
premises and other locations of Tenant provided such blanket insurance complies
with all of the other requirements of this Lease with respect to the insurance
involved.
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12.04 Waiver of Subrogation. All insurance policies carried by either
party covering the demised premises, including but not limited to contents, fire
and casualty insurance, shall expressly waive any right on the part of the
insurer against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same shall be
obtainable without extra cost, or if extra cost shall be charged therefor, so
long as the other party pays such extra cost. If extra cost shall be chargeable
therefor, each party shall advise the other thereof and of the amount of the
extra cost, and the other party, as its election, may pay the same, but shall
not be obligated to do so.
12.05 Adjustment. Every ten (10) years during the term, Landlord and
Tenant shall review the nature and levels of insurance coverage to update the
insurance requirements of this lease to the type, coverages and levels of
insurance customarily being maintained by comparable ski resorts located in the
United States.
ARTICLE XIII
DESTRUCTION
13.01 Casualty.
(a) In the event that, at any time during the term of this Lease,
any one or more of the buildings on the demised premises shall be
destroyed or damaged in whole or in part by fire or other cause within the
extended coverage of the Lease, then, Tenant, at its own cost and expense,
shall, subject to the provisions of paragraph (b) of this Section cause
the same to be repaired, replaced or rebuilt within a period of time
which, under all prevailing circumstances, shall be reasonable, but Tenant
shall not be required hereby to expend any sums in excess of the insurance
proceeds recovered by Tenant by reason of such destruction or damage.
(b) In the event that at any time during the term of this Lease any
one or more of the buildings on the demised premises shall have been
damaged or destroyed by fire or any other cause whatsoever, and such
damage or destruction shall amount to fifteen percent (15%) or more of the
sound insurable value of said building or buildings, or if such damage or
destruction shall occur during the last ten (10) years of the term or any
extended term hereof, Tenant shall have the right, but not the obligation,
to elect not to repair, replace or rebuild such building or improvements.
13.02 Demolition. If Tenant shall elect not to restore any damaged
property pursuant to the provisions of Section 13.01 (b) hereof, it shall, prior
to, or immediately commence and diligently prosecute to completion, the
demolition and removal of any damaged buildings or structures which are upon the
demised premises, and shall remove all rubble.
13.03 No Abatement. Tenant shall not be entitled to any suspension or
abatement of rent by reason of any destruction or damage to the demised
premises.
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ARTICLE XIV
EMINENT DOMAIN
14.01 Condemnation. If the whole or any part of the demised premises shall
be taken for any public or quasi-public use under any statute or by right of
eminent domain or by private purchase in lieu thereof, then this Lease shall
continue and the taking shall be administered in the manner specified in Section
14.02 below.
14.02 Prosecuting Takings Claims. In the event of a taking (or purchase)
the parties hereto agree to cooperate in applying for and in prosecuting any
claim for such taking and further agree, that the aggregate net award pertaining
to the demised premises, after deducting all expenses and costs, including
attorney's fees, incurred in connection therewith, payable to both Landlord and
Tenant (herein called the "Fund") shall be paid and distributed as follows:
(a) Landlord shall be paid an amount out of the Fund equal to the
value of Landlord's continuing fee interest in the land after taking into
account the remaining term of this Lease, including the extended terms,
plus net present value of the rent and additional rent to be paid to
Landlord hereunder over the remaining term, including the extended terms,
of this Lease, all determined as of the date of taking (or purchase),
together with interest thereon from the date of taking (or purchase) to
the date of payment at the rate paid on said award, and if such value
shall be officially determined and stated in the condemnation proceedings,
then the amount thereof shall control for the purposes hereof, otherwise
the same, unless agreed upon by the parties to this Lease, shall be
determined by arbitration.
(b) Any part of the Fund then remaining after the payment to
Landlord specified in subparagraph (a) hereinabove shall be paid to the
holder of any leasehold Mortgage permitted under the provisions of Section
16 hereof, to be applied in accordance with the terms of such Mortgage,
and if no such Mortgage, or there remains any excess after payment of all
amounts due under the mortgage, then to Tenant.
(c) (1) In the event of a partial taking (or purchase) Tenant shall,
at its own cost and expense, make all repairs to the buildings and
improvements on the demised premises affected by such taking (or purchase)
to the extent necessary to restore the same to a complete architectural
unit (to the extent permitted, however, taking into consideration the
amount of land remaining after any such takings or purchase), provided,
however, that Tenant shall not be obligated to expend an amount in excess
of the proceeds of the net award available to Tenant for such purposes, as
hereinafter provided.
(2) All compensation available or paid to Landlord and Tenant
upon such a partial taking (or purchase), shall be paid to Tenant for the
purpose of paying towards the cost of such restoration, or, in the event
that the parties hereto agree that only a portion of the aggregate award
is sufficient to so restore, then only such portion as agreed upon shall
be paid to Tenant for such purpose and the balance shall be distributed
pursuant to subparagraph (3) below.
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(3) All compensation available or paid to Landlord and Tenant
upon such a partial taking (or purchase) in excess of the amount thereof
needed by Tenant to repair and restore the buildings and improvements
shall be distributed in the same manner as is provided in subparagraphs
(a) and (b) this Section 14.02, except that all compensation for any
temporary taking of five (5) years or less shall be distributed to Tenant
without participation by Landlord.
ARTICLE XV
UTILITY EASEMENTS AND HIGHWAY ALIGNMENT
Tenant shall have the right to enter into agreements with utility
companies and/or public authorities which provide necessary utilities, creating
easements, subleases or other necessary property interests in favor of such
companies and/or authorities as are required in order to service the occupants
of the buildings and the improvements on the demised premises, and Landlord
covenants and agrees to provide any reasonably required consent thereto and to
execute any and all documents, agreements and instruments, and to take all other
actions, in order to effectuate such consent all at Tenant's cost and expense.
Landlord further covenants and agrees, upon request of Tenant to convey without
compensation therefor, insubstantial portions of the demised premises for
highway, roadway or utility purposes to any applicable governmental body.
ARTICLE XVI
LEASEHOLD MORTGAGES
16.01 Mortgage. Tenant and every successor and assign of Tenant is hereby
given the right by Landlord in addition to any other rights herein granted,
without Landlord's prior written consent, but only with prior written notice to
Landlord, to mortgage Tenant's interests in this Lease, or any part or parts
thereof, under one or more leasehold Mortgage(s), and to assign this Lease, or
any part or parts thereof, and any subleases, or parts thereof, as collateral
security for such Mortgage(s), upon the condition that all rights acquired under
such Mortgage(s) shall be subject to each and every one of the covenants,
conditions and restrictions set forth in this Lease, and to all rights and
interests of Landlord herein, none of which covenants, conditions or
restrictions is or shall be waived by Landlord by reason of the right given so
to mortgage such interest in this Lease, except as expressly provided herein.
Notwithstanding the foregoing, Tenant is prohibited from mortgaging the
leasehold solely for the purposes of effecting a transfer of its leasehold
interest to a third party in any transaction that does not involve a
contemporaneous exchange of equivalent value determined on independent, arm's
length basis. If Tenant and/or Tenant's successors and assigns shall mortgage
this leasehold or any part or parts thereof, and if the holder(s) of such
Mortgage(s) shall send to Landlord written notice of such Mortgage(s) specifying
the name and address of the Mortgagee(s) and the pertinent recording data with
respect to such Mortgage(s), Landlord agrees that so long as any such leasehold
Mortgage(s) shall remain unsatisfied of record or until written notice of
satisfaction is given by the holder(s) to Landlord, the following provisions
shall apply.
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(a) There shall be no cancellation, surrender or material
modification of this Lease by joint action of Landlord and Tenant without
at least ten (10) days advance written notice to the leasehold Mortgagee
given in accordance with Section XXIII below.
(b) Landlord shall, upon serving Tenant with any notice of default,
simultaneously serve a copy of such notice upon the holder(s) of such
leasehold Mortgagee(s), and no such notice of default to Tenant shall be
effective unless and until a copy of such notice is served upon each such
holder. The leasehold Mortgagee(s) shall thereupon have the same period,
after service of such notice upon it, to remedy or cause to be remedied
the defaults complained of, and Landlord shall accept such performance by
or at the instigation of such leasehold Mortgagee(s) as if the same had
been done by Tenant.
(c) If the Landlord shall elect to terminate this Lease by reason of
any default of Tenant, the leasehold Mortgagee(s) shall have the right by
delivering written notice thereof to Landlord prior to the effective date
of such termination, to postpone and extend the specified date for the
termination of this Lease as fixed by Landlord in its notice of
termination, for a period reasonably sufficient to allow the leasehold
Mortgagee to conduct a foreclosure of its mortgage, but in no event more
than six (6) months from the date of Landlord's termination notice,
provided that such leasehold Mortgagee(s) shall cure or cause to be cured
any then existing monetary defaults and meanwhile pay all rent, additional
rent and other monetary payments due hereunder, and comply with and
perform all of the other terms, conditions and provisions of this Lease on
Tenant's part to be complied with or performed, other than past
non-monetary defaults which cannot reasonably be cured by such Mortgagee,
and provided further, that the leasehold Mortgagee(s) shall forthwith take
steps to acquire or sell Tenant's interest in this Lease by foreclosure of
the Mortgage(s) or otherwise and shall prosecute the same to completion
with all due diligence. If, during said six (6) month period, the
leasehold Mortgagee(s) shall have promptly commenced and shall have
actively engaged in steps to acquire or sell Tenant's interest herein, but
shall not have acquired or sold such interest at the end of such period,
the time of said Mortgagee to comply with the provisions of this Section
16.01 shall be extended for such period as shall be reasonably necessary
to complete such steps with reasonable diligence and continuity.
(d) Landlord agrees that in the event of foreclosure by such
mortgagee on this Lease by reason of any default by Tenant that Landlord
will enter into a new lease of the demised premises directly with the
leasehold Mortgagee(s) or its nominee(s), for the remainder of the term,
effective as of the date of such termination, at the rent and additional
rent and upon the terms, provisions, covenants and agreements as herein
contained and subject only to all matters of record and all rights, if
any, of the parties then in possession of any part of the demised
premises, provided:
(i) Said Mortgagee(s) or its nominee(s) shall make written
request upon Landlord for such new lease within fifteen
(15) days after the date of such foreclosure and such
written request is accompanied
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by payment to Landlord of all sums then due to Landlord
under this Lease.
(ii) Said Mortgagee(s) or its nominee(s) shall pay to
Landlord at the time of the execution and delivery of
said new lease, any and all sums which would at the time
of the execution and delivery thereof, be due pursuant
to this Lease but for such termination, and in addition
thereto, any expenses, including reasonable attorney's
fees, to which Landlord shall have been subjected by
reason of such default.
(iii) Said Mortgagee(s) or its nominee(s) shall perform and
observe all covenants herein contained on Tenant's part
to be performed and shall further remedy any other
conditions which Tenant under the terminated lease was
obligated to perform under the terms of this Lease.
(iv) Landlord shall not warrant possession of the demised
premises to the Tenant under the new lease.
(v) Such new lease shall be expressly made subject to the
rights, if any, of Tenant under the terminated lease.
(vi) The Tenant under such new lease shall have the same
right, title and interest in and to the buildings and
improvements on the demised premises as Tenant had under
the terminated lease.
(vii) Nothing herein contained shall require the leasehold
Mortgagee(s) or its nominee(s) to cure any default of
Tenant referred to in Article XIX hereof.
(viii) The proceeds from any insurance policies or arising from
a condemnation are to be held by any leasehold
Mortgagee(s) and distributed pursuant to the provisions
of this Lease, but the leasehold Mortgagee(s) may
reserve its right to apply to the mortgage debt all, or
any part, of Tenant's share of such proceeds pursuant to
such mortgage(s).
16.02 Further Agreement. Landlord shall upon request, execute, acknowledge
an deliver to each leasehold Mortgagee(s), an agreement prepared at the sole
cost and expense of Tenant in form satisfactory to Landlord and such leasehold
Mortgagee(s) between Landlord, Tenant and the leasehold Mortgagee(s), agreeing
to (a) all of the provisions of Section 16.01 and (b) such other provisions as
are reasonably customary in mortgaging long-term leaseholds in connection with
large commercial development projects.
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ARTICLE XVII
LANDLORD'S WARRANTIES
17.01 Quiet Enjoyment. Tenant, upon paying the rent and additional rent
and all other sums and charges to be paid by it as herein provided, and
observing and keeping all covenants, warranties, agreements and conditions of
this Lease on its part to be kept, shall quietly have and enjoy the demised
premises during the term of this Lease, without hindrance or molestations,
subject to encumbrances listed in Schedule B.
17.02 Representations, Warranties and Covenants. Landlord warrants,
represents and covenants to Tenant, upon which warranty representation and
covenants Tenant has relied in the execution of this Lease and in the payment of
the initial installments of rent hereunder.
(a) That it has and will maintain good and marketable fee simple
title to the demised premises constituting Fee Land, free and clear of all
encumbrances, liens, defects in title, leases, tenancies, easements,
restrictions and agreements, except for this Lease and the restrictions
set forth in Schedule B, none of which materially impair the current
operation of the demised premises as a ski resort.
(b) Landlord represents, warrants and covenants as follows with
respect to the sublease of Leased Land:
(i) Each underlying lease of Leased Land is in full force
and effect as of the date hereof. A true, accurate and
correct copy of each lease is attached hereto as a part
of Schedule A, and such leases have not been amended or
revised except as shown in Schedule A. Except as set
forth in Schedule 17.02(b), there are no material
defaults, breaches or violations of such leases by
lessee or, to Landlord's Knowledge, by the lessor
existing as of the date hereof, and there have occurred
no events which with the passage of time, giving of
notice, or both, would constitute a default, breach or
violation of any such leases by Landlord or, to
Landlord's Knowledge, by any such lessor.
(ii) Landlord shall timely perform all its obligations under
such leases in accordance with the terms thereof, and
shall undertake all such actions as may be necessary or
appropriate to maintain such leases in full force and
effect, in accordance with their terms.
(iii) Landlord hereby grants to Tenant the right, power and
authority to enter into independent negotiations with
each owner of Leased Land to change, revise, amend,
restate or otherwise alter the underlying leases. Tenant
shall not enter into any change, revision, amendment,
alteration or restatement without the Landlord's prior
written consent, which shall not be unreasonably
withheld or delayed.
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Landlord shall obtain from each owner of Leased Land and
deliver to Tenant a Landlord's Consent and Estoppel in
the form attached hereto as Schedule C.
(d) The execution and delivery of this Lease by Landlord and the
performance by Landlord of the obligations to be performed hereunder have
been duly authorized by all necessary and appropriate action by Landlord
under its Operating Agreement. Except as listed in Schedule 17.02(d), the
consummation of the transactions contemplated hereby and thereby do not
and will not (i) conflict with, or result in a breach of, or default
under, or permit acceleration of any obligation under, any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
material agreement or other material instrument or obligation to which
Landlord is a party, or by which it or any of its properties or assets may
be bound or affected or (ii) violate any order, writ, injunction, decree
or statute, or any rule, regulation, permit, license or conditions
thereto, or (iii) result in the creation or imposition of any lien, charge
or encumbrance of any nature upon any of the demised premises. This Lease
is a valid and binding obligation of Landlord enforceable in accordance
with its terms, subject to equitable principles and applicable bankruptcy
and other creditors' rights laws, regulations and rulings.
(e) Except as set forth in Schedule 17.02(e) Landlord does not have
any Landlord's Knowledge of any violation of any applicable federal, state
and local laws, rules, regulations, ordinances, codes or orders ("Laws")
governing the demised premises and the operation of the Wolf Mountain Ski
Resort business, including without limitation environmental and health and
safety laws rules and regulations, and will not knowingly violate any such
laws during the term hereof, and (b) has not received written notification
of any asserted material past or present failure to operate the demised
premises and the Wolf Mountain Ski Resort business in accordance with any
such law, ordinance or regulation, or of any event that has occurred which
with notice or the passage of time would constitute any such failure.
(f) (i) No permits, licenses, approvals, clearances or other
governmental consents are required for the execution and
delivery of this Lease, except for the transfer or
reissuance of the governmental licenses, permits,
authorizations, approvals and certificates identified in
Section 17.02(f).
(ii) The Landlord has not disposed of or permitted to lapse
any license, permit or other authorization from any
federal, state or local authorities related to the
demised premises that is currently required for the
operation of the Wolf Mountain Ski Resort business.
(iii) Except as reported in Schedule 17.02(f), the Licenses
and Permits listed on Schedule 17.02(f) are all of the
governmental licenses, permits, authorizations,
approvals and certificates which are, to
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Landlord's Knowledge, required for the current use of
the demised premises.
(g) The existing uses of the demised premises by Landlord are
permitted uses within the zoning districts in which they are located and
otherwise permitted under applicable federal, state and local laws, rules
and regulations and under the permits identified in Section 17.02(g).
(h) Except as provided in Schedule 17.02(h) there is, to Landlord's
Knowledge, no action, suit, proceeding at law or in equity by any person
or entity, or any arbitration or any administrative or other proceeding by
or before any governmental or other instrumentality or agency, pending,
threatened, against Landlord with respect to the Wolf Mountain Ski Resort
business or any portion of the demised premises.
(i) Except as provided in Schedule 17.02(i), Landlord (i) has timely
filed all tax returns, tax information returns and other tax reports
required to be filed with any applicable governmental authorities through
the date hereof which relate to the demised premises and, the Wolf
Mountain Ski Resort business, and has paid all taxes and other charges
which have become due pursuant to such returns and reports, or pursuant to
any assessment received by it, except for any taxes the validity of which
Landlord may be contesting in good faith in appropriate proceedings, and
(ii) shall continue to timely file all such returns and reports and pay
all such taxes relating to Landlord, but not those relating to the demised
premises, the Wolf Mountain Ski Resort or that Tenant is otherwise
obligated to file or pay hereunder. Landlord is not delinquent in the
payment of any tax assessment or governmental charge which relates to any
of the demised premises, no written notices asserting deficiencies for any
taxes which relate to any of the demised premises have been received by
Landlord, and no requests for waivers of the time to assess or pay any
such tax are pending. There are no tax liens upon any fee portion of the
demised premises and, to Landlord's Knowledge, no tax liens upon any
leased portion of the demised premises and no such liens will arise as a
result of the transaction contemplated hereby except as listed in Schedule
17.02(i) or that will be paid and discharged at Closing. For the purposes
of this Lease, the term "tax" shall include all federal, state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever.
(j) Except as disclosed in Schedule 17.02(j), there are to
Landlord's Knowledge, no outstanding or threatened actions, claims,
proceedings, determinations or judgments by any party, including, but not
limited to, any governmental authority or agency, against or involving the
Landlord, arising under the Clear Air Act, the Federal Water Pollution
Control Act of 1972, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Solid Waste Disposal Act, the
Resource Conservation and Recovery Act and the Toxic Substances Control
Act, and any amendments or extensions of the foregoing statutes, and all
other applicable environmental requirements or any other federal, state,
local or other environmental, health or safety law, regulation, order or
requirement, requiring the remediation or
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removal of an existing environmentally contaminated condition or
substance. Except as listed in Schedule 17.02(j), there are, to Landlord's
Knowledge, no outstanding or threatened orders, determinations or notices
of violation issued by any federal, state, local or other governmental
authority administering environmental or health and safety laws in
connection with operation of the demised premises or the Wolf Mountain Ski
Resort business, which have not been complied with or resolved to the
satisfaction of such governmental authority.
17.03 Remedies. In the event Landlord fails to undertake the actions, or
refrain from taking action, required pursuant to subparagraph 17.02 (b) above,
then Tenant shall have the right, but not the obligation, to perform all such
acts and pay all sums of money necessary, on behalf of Landlord, to maintain the
lease in full force and effect, and Landlord hereby appoints Tenant as its true
and lawful attorney in fact for purposes of undertaking all such action on
behalf of and in the name of Landlord as Tenant deems necessary or appropriate
to maintain any or all underlying leases in full force and effect. The power of
attorney herein granted is coupled with an interest and is therefore irrevocable
during the term of this Lease. Tenant may offset against any and all amounts due
hereunder any cost and expense incurred by Tenant in exercising its rights under
this subsection 17.03. Prior to offsetting against rent due hereunder Tenant
shall provide Landlord with notice of its intent to offset and Landlord shall
have a period of 30 days to advise Tenant that it objects to or disputes the
offset, in which case any such dispute shall be submitted to arbitration in
accordance with the provisions hereof. Tenant shall use reasonable efforts to
mitigate any damages resulting from Landlord's breach or default.
17.04 General Provisions. The term "Landlord's Knowledge" shall have the
same meaning as the term "Seller's Knowledge" under Section 6.17(c) of the
Purchase and Sale Agreement. Seller expressly disclaims any express or implied
warranties not specifically set forth in this Lease, the Purchase and Sale
Agreement, or any other agreement entered into by and between Landlord and
Tenant.
ARTICLE XVIII
DEFAULT
18.01 Defaults. In the event of any one or more of the following events
("Events of Default") shall have occurred and shall not have been remedied as
hereinafter provided: (1) the occurrence of any event set forth in Article XIX
hereof, without the curing of same as therein provided; (2) Tenant's failure to
pay any installment of basic rent, additional rent or any other monetary
payments when the same shall be due and payable and the continuance of such
failure for a period of ten (10) days after receipt by Tenant of notice in
writing from Landlord specifying in detail the nature of such failure, provided,
however that Tenant shall pay interest at the rate of 18% per annum during any
period in which any payment is delinquent; (3) Tenant's failure to pay any
option payments pursuant to Section 25.02 hereof when the same shall be due and
payable and the continuance of such failure for a period of 10 days after
receipt by Tenant of notice in writing from Landlord of such failure; provided,
however, that Tenant shall be entitled to only two such notices during any 360
day period, after which no such notice shall be required, and provided further
that Tenant shall pay interest on any delinquent payment at the rate of 18%
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per annum during the period of any such delinquency; (4) a material default by
Tenant, and the expiration of any grace, notice or cure period required thereby,
under any of the other agreements then existing between Landlord and Tenant,
including without limitation, the promissory notes referred to in Section 25.05
below and the Promissory Note referred to in Section 4.01(c) of the Purchase and
Sale Agreement; and (5) Tenant's failure to perform any of the other covenants,
conditions and agreements herein contained on Tenant's part to be kept or
performed and the continuance of such failure for a period of sixty (60) days
after receipt by Tenant of notice in writing from Landlord specifying in detail
the nature of such failure, and provided Tenant shall not cure said failure as
provided in Section 18.02 hereof; then, Landlord may, at its option, give to
Tenant a notice of election to end the term of this Lease upon a date specified
in such notice, which date shall be not less than thirty (30) business days
(Saturdays, Sundays and legal holidays excluded) after the date of receipt by
Tenant of such notice from Landlord, and upon the date specified in said notice,
the term and estate hereby vested in Tenant shall cease and any and all other
right, title and interest of Tenant hereunder shall likewise cease without
further notice or lapse of time, as fully and with like effect as if the entire
term of this Lease had elapsed, but Tenant shall continue to be liable to
Landlord as hereinafter provided. Simultaneously with the sending of the notice
to Tenant, hereinabove provided for, Landlord shall send a copy of such notice
to any leasehold Mortgagee(s) as to which Landlord has received written notice.
The curing of any default(s) in the manner provided hereinabove by any of the
aforesaid parties or combinations thereof, shall constitute a curing of any
default(s) hereunder with like effect as if Tenant had cured the same hereunder.
18.02 Cure.
(a) In the event that Landlord gives notice of a default of such a
nature that it cannot reasonably be cured within such sixty (60) day
period, then such cure period shall be deemed to continue so long as
Tenant, after receiving such notice, proceeds to cure the default as soon
as reasonably possible and continues to take all steps necessary to
complete the same within a period of time which, under all prevailing
circumstances, shall be reasonable; provided that, in no event shall any
cure period extend for a period longer than 180 days after the Landlord's
notice of default under Section 18.01. No cure period shall be deemed to
end if and so long as Tenant shall be prevented from curing the same by
any of the causes constituting Force Majeure.
(b) Notwithstanding anything to the contrary contained in this
Article XVIII, in the event that any default(s) of Tenant shall be cured
in any manner hereinabove provided, Tenant's right hereunder shall
continue unaffected by such default(s).
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18.03 Remedies.
(a) Upon any Event of Default pursuant to Section 18.01, or at any
time thereafter, Landlord may, in addition to and without prejudice to any
other rights and remedies Landlord shall have at law or in equity,
including termination, reenter the demised premises, and recover
possession thereof and dispossess any or all occupants of the demised
premises in the manner prescribed by the applicable laws relating to
summary proceedings, or similar laws; but Tenant in such case shall remain
liable to Landlord as hereinafter provided.
(b) In case of any such default, reentry, expiration and/or
dispossess by Landlord: (1) the rent shall become due thereupon and be
paid up to the time of such reentry, expiration and/or dispossess; (2)
Landlord may relet the demised premises or any part or parts thereof,
either in the name of Landlord or otherwise, for a term or terms which
may, at Landlord's option, be less than or exceed the period which would
otherwise have constituted the balance of the term of this Lease and (3)
Landlord may pursue any and all other remedies allowed to Landlord under
applicable law, including without limitation, the collection of all future
rent and other monetary payments provided for hereunder. Landlord, at
Landlord's option and Tenant's expense, may make such alteration, repairs,
and/or replacements in the demised premises as are reasonably necessary
for the purpose of reletting and premises; and the making of such
alterations, repairs, replacements and/or decorations shall not operate or
be construed to release Tenant from liability hereunder as aforesaid.
Landlord agrees to use reasonable efforts to mitigate all damages and to
relet the demised premises in the event of any default specified herein.
ARTICLE XIX
BANKRUPTCY AND INSOLVENCY
If, after the commencement of the term of this Lease: (a) the Tenant then
having the title to the leasehold estate created hereunder shall while having
such title be adjudicated a bankrupt or adjudged to be insolvent; (b) a receiver
or trustee shall be appointed for the aforesaid Tenant's property and affairs;
(c) the aforesaid Tenant shall make an assignment for the benefit of creditors
or shall file a petition in bankruptcy or insolvency or for reorganization or
shall make application for the appointment of a receiver; or (d) any execution
or attachment shall be issued against the aforesaid Tenant or any of the
aforesaid Tenant's property, whereby the demised premises or any building or
buildings or any improvements thereon shall be taken or occupied or attempted to
be taken or occupied by someone other than the aforesaid Tenant, except as may
herein be permitted, and such adjudication, appointment, assignment, petition,
execution or attachment shall not be set aside, vacated, discharged or bonded
within ninety (90) days after the issuance of the same, then an Event of a
Default hereunder shall be deemed to have occurred. Notwithstanding anything to
the contrary hereinabove contained, upon the occurrence of a default pursuant to
this Article, if the rent and other monetary payments due and payable hereunder
shall continue to be paid and the other covenants, conditions and agreements of
this
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Lease on Tenant's part to be kept and performed shall continue to be kept
and performed, no event of default shall have been deemed to have occurred.
ARTICLE XX
WAIVERS
Failure of Landlord or Tenant to complain of any act or omission on the
part of the other party no matter how long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder. No waiver by
Landlord or Tenant at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. No acceptance by Landlord of any partial payment shall
constitute an accord or satisfaction but shall only be deemed a part payment on
account.
ARTICLE XXI
GOVERNMENT APPROVALS
Landlord covenants and agrees to cooperate fully with Tenant in any and
all applications and proceedings and appeals made or prosecuted by Tenant in
connection with obtaining any necessary permits, licenses, approvals or consents
under the zoning, land use, environmental and/or building regulations,
ordinances, codes, laws and directives of all of the federal, state county and
other authorities having jurisdiction over the development and use of the
demised premises, including without limitation, the Summit County Planning
Board. Landlord shall execute any and all documents, instruments, consents and
authorizations requested by Tenant which shall be reasonably necessary or
desirable with respect thereto. Tenant may prosecute such applications,
proceedings and appeals in its own name and through counsel of its choice, but
shall do so at its own cost and expense and shall reimburse Landlord for
Landlord's reasonable expenses incurred in such cooperative efforts.
ARTICLE XXII
FORCE MAJEURE
In the event that Landlord or Tenant shall be delayed, hindered in or
prevented from the performance of any act (except for monetary payments)
required hereunder by reason of strikes, lock-outs, organized labor disputes,
unavailability of materials, extended failure of power, governmental laws or
regulations prohibiting performance of any obligation hereunder, riots,
insurrection, war or civil strife, or other reason beyond such party's
reasonable control, then performance of such act shall be excused for the period
of the delay and the proof for the performance of any such act shall be extended
for a period equivalent to the period of such delay.
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ARTICLE XXIII
NOTICES
Every notice, approval, consent or other communication authorized or
required by this Lease shall not be effective unless the same shall be in
writing and sent postage prepaid by United States registered or certified mail,
return receipt requested, directed to the other party at its address set forth
hereinbelow, or such other address as either party may designate by notice given
form time to time in accordance with this Article. Unless otherwise directed by
Landlord, rent payable by Tenant hereunder shall be paid to Landlord at the same
place where a notice to Landlord is herein required to be directed. All such
notices and other communications initially shall be addressed as follows:
Tenant:
Christopher E. Howard, Esq.
Chief Administrative Officer and General Counsel
American Skiing Company
P.O. Box 450
Access Road
Bethel, Maine 04217
Landlord:
Kenneth Griswold
Michael Baker
c/o Bracewell & Patterson LLP
2900 South Tower, Penzoil Place
Houston, TX 77002-2781
Attn: Clark Thompson
All such notices shall be deemed to have been given and received as of the
date of deposit of such notice in a depository of the U.S. Postal Service.
ARTICLE XXIV
CERTIFICATES
Either party shall, without charge, at any time and from time to time
hereafter, within thirty (30) days after written request of the other, certify
by written instrument duly executed and acknowledged to any mortgagee or
purchaser, or proposed mortgagee or proposed purchaser, or any other person,
firm or corporation specified in such request: (a) as to whether this Lease has
been supplemented or amended, and if so, the substance and manner of such
supplement or amendment; (b) as to the validity and force and effect of this
Lease, in accordance with its tenor as then constituted; (c) as to the existence
of any known default thereunder; (d) as to the existence of any offsets,
counterclaims or defense thereto on the part of such other party; (e) as to the
commencement and expiration dates of the term of this lease; and (f) as to any
other matters as may reasonably be so requested. Any such certificate may be
relied upon by the party
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requesting it and any other person, firm or corporation to whom the same may be
exhibited or delivered, and the contents of such certificate shall be binding on
the party executing same.
ARTICLE XXV
DEVELOPMENT RIGHTS
25.01 Grant of Option. Landlord hereby gives and grants to Tenant, its
successors and assigns, an exclusive option to purchase any portion of the
demised premises now or hereafter owned in fee by Landlord upon which Tenant
desires to construct any buildings or improvements of any nature, at any time
during the term of this Lease , or any extended term.
25.02 Option Payments. As consideration for the option granted pursuant to
Section 25.01 above, Tenant shall pay to Landlord the following amounts on first
day of each of the months specified below:
Amount Due Payment Date
---------- ------------
3,532,340 June, 1997
47,007 July, 1997
157,340 August, 1997
32,340 September, 1997
47,007 October, 1997
157,340 November, 1997
1,232,340 December, 1997
180,340 January, 1998
157,340 February, 1998
32,340 March, 1998
47,007 April, 1998
15,167 May, 1998
15,167 June, 1998
29,834 July, 1998
140,167 August, 1998
15,167 September, 1998
29,834 October, 1998
140,167 November, 1998
15,167 December, 1998
2,748,000 January, 1999
125,000 February, 1999
0 March, 1999
14,667 April, 1999
875,000 May, 1999
0 June, 1999
14,667 July, 1999
125,000 August, 1999
0 September, 1999
14,667 October, 1999
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Amount Due Payment Date
---------- ------------
125,000 November, 1999
0 December, 1999
148,000 January, 2000
125,000 February, 2000
0 March, 2000
14,667 April, 2000
125,000 May, 2000
0 June, 2000
14,667 July, 2000
125,000 August, 2000
0 September, 2000
14,667 October, 2000
125,000 November, 2000
0 December, 2000
548,000 January, 2001
125,000 February, 2001
0 March, 2001
0 April, 2001
125,000 May, 2001
0 June, 2001
0 July, 2001
Tenant shall have the right to accelerate payment of any or all of
such amounts, in which case Tenant shall pay to Landlord the net present
value of any payments made on an accelerated basis. Net present value of
such payments shall be determined in a manner and at a discount rate
reasonably acceptable to both Tenant and Landlord.
(b) All option payments made by Tenant shall be placed in a
segregated bank account established at a banking institution acceptable to
both parties ("Option Escrow Account") in the name of both Landlord and
Tenant. Amounts shall be disbursed from the account under signature of
authorized representatives of both Landlord and Tenant solely and
exclusively for purposes of satisfying the following obligations of
Landlord (the "Underlying Obligations"):
Obligation Date Principal Amount
---------- ---- ----------------
Nine Star Development Note February 2, 1995 2,600,000
Snyderville Land Co. Purchase June 16, 1997 3,500,000
and Sale Agreements
Roberts Retirement Trust Note February 2, 1995 750,000
Kimball Note January 18, 1995 533,333
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Obligation Date Principal Amount
---------- ---- ----------------
Vitesse Ski Properties Note March 8, 1994 2,194,000
(or substitute Note to be
identified by Landlord upon
refinancing Vitesse)
Wasatch Capital Corp. Note Even date herewith 5,000,000
Songbird Note December 12, 1996 1,200,000
In the event, and to the extent Tenant accelerates its option payments
hereunder, Landlord shall exercise reasonable efforts to accelerate a
corresponding amount of the Underlying Obligations so as to minimize the
amounts on deposit from time to time in the Option Escrow Account.
25.03 Mandatory Exercise of Option. Tenant shall not be permitted to
exercise its option until such time, from time to time, as Tenant has received
all necessary permits, licenses and approvals for any real estate development
project to be located upon the portion of the demised premises to be released by
Landlord involving the construction of any buildings constituting residential or
commercial real estate being developed with the intent to resell any material
portion of such building(s), as evidenced by the description of such real estate
development project(s) in the application(s) for necessary permits and
approvals. Said option shall be exercised by Tenant, its successors or assigns,
by giving written notice of the election to exercise said option to purchase to
Landlord, addressed to the place then provided for the sending of notices under
this Lease, which notice shall specify a date, time and place of closing which
shall take no more than one hundred twenty (120) days after the posting of said
notice.
25.04 Option Price. The purchase price for the portion of the demised
premises purchased by Tenant shall be an amount equal to eleven percent (11%) of
the full capitalized cost of construction of buildings or improvements on the
option parcel (less any capitalized interest on financing for the improvements
and less up to 5% of such capitalized costs attributable to any internal
overhead costs capitalized by Tenant) as reflected upon Tenant's books of
account maintained in accordance with generally accepted accounting principles,
consistently applied.
25.05 Option Price Payment. The purchase price shall be paid at closing by
a promissory note in the full amount of the purchase price, bearing interest at
a rate equal to the prime rate in effect as of the date of the closing as
reported in The Wall Street Journal under the heading "Money Rates - Prime
Rate," and maturing upon the issuance of a certificate of occupancy for the
development project. The note shall be secured by a mortgage or deed of trust
with priority subordinate only to Tenant's financing for the construction cost
of the improvements, which mortgage or deed of trust and form of subordination
shall be in form reasonably acceptable to Landlord.
25.06 Owned Property. As additional consideration for the options granted
pursuant to Section 25.01 above, Tenant hereby agrees to deliver to Landlord
additional option payments at the time development is commenced on the property
more particularly described in Schedule
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25.06 hereto in the same amount and in the same manner as if such property were
covered by this Lease and the options described in Section 25.01, and Tenant was
otherwise purchasing such property in accordance with terms of Section 25.04 and
25.05.
25.07 Development Commitment. Tenant agrees to produce and submit to
Summit County for approval, and exercise its best efforts to maintain in place,
a master plan for the demised premises (which may be a continuation of the
master plan submitted by Landlord in April, 1997, or a derivation thereof) that
contemplates a minimum of three million (3,000,000) square feet of residential
and commercial real estate development on that portion of the demised premises
denominated the base area as reflected on the Landlord's current master plan and
two million (2,000,000) square feet of residential and commercial development on
that portion of the demised premises denominated the mid-mountain village as
reflected on the Landlord's current master plan. The master plan may not alter
the designation of Willow Draw as a subdivision for single family detached
dwellings without Landlord's prior written consent.
25.08 Closing. At closing, Tenant shall deliver the required promissory
note against delivery by Landlord of a warranty deed in form acceptable to
Tenant conveying good and marketable title to the development parcel free an
clear of all liens, encumbrances, restrictions, defects in title, leases,
tenancies easements and agreements, except as set forth in Schedule A, and
except any which may arise by reason of this Lease.
25.09 Restrictions Against Encumbrance. Landlord, its successors and
assigns covenants and agrees that during the term hereof it shall not,
voluntarily or by operation of law, place or allow placement of any liens,
encumbrances or restrictions of any nature on the Landlord's interest in the
demised premises, including without limitation, mortgage liens, trust deeds,
mechanics liens, judgment liens or any other liens or encumbrances similar or
dissimilar to the foregoing.
ARTICLE XXVI
MISCELLANEOUS
26.01 Governing Law. This Lease and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the State of Utah.
26.02 Partial Invalidity. If any term, covenant, condition or provision of
this Lease or the application thereof to any person or circumstance shall, at
any time or to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant, condition and provision of this Lease
shall be valid and enforceable to the fullest extent permitted by law.
26.03 Short Form Lease. The parties will at any time, at the request of
either one, promptly execute duplicate originals of an instrument, in recordable
form reasonably satisfactory to both parties, which will constitute a short form
of lease, setting forth a description of the demised premises, the term of this
Lease and any other portions thereof, excepting the rental provisions, as either
party may request.
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26.04 Interpretations. Wherever herein the singular number is used, the
same shall include the plural, and the masculine gander shall include the
feminine and neuter genders, and vice versa, as the context shall require. The
section headings used herein are for reference and covenance only, and shall not
enter into the interpretation hereof. This Lease may be executed in several
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument. The terms "Landlord" and "Tenant"
whenever used herein shall mean only the owner for the time being of Landlord's
or Tenant's interest herein, and upon any sale or assignment of the interest of
either Landlord or Tenant herein, their respective successors in interest and/or
assigns shall, during the term of their ownership of their respective estates
herein, be deemed to be Landlord or Tenant, as the case may be.
26.05 Entire Agreement. No oral statements or prior written matter shall
have any force or effect. Tenant agrees that it is not relying on any
representations or agreements other than those contained in this Lease. This
Agreement shall not be modified or canceled except by writing subscribed by all
parties.
26.06 Parties. Except as herein otherwise expressly provided, the
covenants, conditions and agreements contained in this lease shall bind and
inure to the benefit of Landlord and Tenant and their respective heirs,
successors, administrators and assigns.
26.07 Restriction on use of Landlord's Adjacent Land. Attached as Schedule
26.07 is a list of all real estate owned beneficially or of record by Landlord,
by Michael Baker or Kenneth Griswold or by any entities in which Baker or
Griswold own any interest, located within a five mile radius of the leased
premises. Landlord hereby agrees that during the term of this Lease, with the
exception of the A-2 and Cox and Muller parcels described in such Schedule
26.07, none of the Landlord, Baker or Griswold, or entities in which they have a
controlling interest shall use the restricted property designated in such
Schedule 26.07 for a motel, hotel, inn, restaurant or other type of place of
lodging or guest entertainment (other than single family residences). The
restriction imposed hereby for the benefit of Tenant is intended to run with the
land and be enforceable against Landlord's successors in title to such land.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease under seal
as of the day and year first above written.
WOLF MOUNTAIN RESORTS, L.C.
By: /s/ Kenneth Griswold
-------------------------------
Kenneth Griswold
Its Managing Member
ASC UTAH
By: /s/ Julianne Cloutter
-------------------------------
Its Vice President
30
<PAGE>
GUARANTY COMMITMENT
ASC Holdings, Inc., a Maine corporation with a principal place of business
at Newry, Maine ("ASC"), does hereby agree to execute the guaranty described in
Exhibit ____ attached hereto. In connection therewith, ASC covenants and agrees
as follows:
ASC is a corporation duly organized, validly existing and in good standing
under the laws of Maine with full power and authority to own or lease its
property and to carry on its businesses as now conducted.
The execution and delivery of this Agreement and the Related Agreements by
ASC and the performance by ASC of the obligations to be performed hereunder and
thereunder have been duly authorized by all necessary and appropriate action by
the directors of ASC and no shareholder approval is required in connection
therewith. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby do not and will not conflict with or result in a breach of, or
constitute a default under, the terms and conditions of ASC's Certificate of
Incorporation, By-Laws, any court or administrative order or process by which
ASC is bound, or any agreement or instrument to which ASC is a party or is
bound. This Agreement and the Related Agreements are the valid and binding
obligations of ASC, enforceable in accordance with their terms, subject to
equitable principles and applicable bankruptcy and other creditors' rights,
laws, regulations and rulings.
ASC HOLDINGS, INC.
By: /s/ Julianne Cloutter
-------------------------------
Its: Vice President
31
<PAGE>
EXHIBIT 10.65
GROUND LEASE GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement
to, Wolf Mountain Resorts, L.C., a Utah limited liability company ("Landlord"),
to enter into that certain Ground Lease Agreement dated July 3, 1997 (the
"Lease"), by and between Landlord and ASC Utah, Inc., a Maine corporation
("Tenant"), the undersigned hereby unconditionally guarantees to Landlord, its
successors and assigns, the payment of the rent, additional rental and all other
payments to be made by Tenant under the Lease and the full performance and
observance by Tenant of all the other terms, covenants, conditions and
agreements as and when therein provided to be performed and observed by Tenant,
for which the undersigned shall be jointly and severally liable with Tenant,
without requiring any notice of nonpayment, nonperformance or nonobservance
other than any notices required to be provided to Tenant under the terms of the
Lease, all of which the undersigned hereby expressly waives, and the undersigned
expressly agrees that Landlord may proceed against the undersigned separately or
jointly before or after or simultaneously with proceeding against Tenant for
default and that this Guaranty shall not be terminated, affected or impaired in
any way or manner whatsoever by reason of the assertion by Landlord against
Tenant of any of the rights or remedies reserved to Landlord pursuant to the
provisions of said Lease, or by reason of summary or other proceedings against
Tenant or by reason of any extension of time or indulgence granted by Landlord
to Tenant. The undersigned further covenants and agrees (1) that the undersigned
will be bound by all the provisions, terms, conditions, restrictions and
limitations contained in the Lease, the same as though the undersigned was named
therein as Tenant; and (2) that this Guaranty shall be absolute and
unconditional and shall remain and continue in full force and effect as to any
renewal, extension, amendment, addition, assignment, sublease, transfer, or
other modification of the Lease, whether or not the undersigned shall have
knowledge or have been notified of or agreed or consented to any such renewal,
extension, amendment, addition, assignment, sublease, transfer, or other
modification of the Lease. If Landlord at any time is compelled to take any
action or proceeding in court or otherwise to enforce or compel compliance with
the terms of this Guaranty, the undersigned shall, in addition to any other
rights or remedies to which Landlord may be entitled hereunder or a matter of
law or in equity, be obligated to pay all costs, including attorneys' fees,
incurred or expended by Landlord in connection therewith. Further, the
undersigned hereby covenants and agrees to assume the Lease and to perform all
of the terms and conditions thereunder for the balance of the original term of
the Lease should the Lease be disaffirmed by any Trustee in bankruptcy for
Tenant, or at the option of Landlord, the undersigned shall, in the event of
Tenant's bankruptcy make and enter into a new lease for the balance of the
original term, which the new lease shall be in form and substance identical to
the Lease. All obligations and liabilities of the undersigned pursuant to this
Guaranty shall be binding upon the heirs, legal representatives, successors and
assigns of the undersigned. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Utah.
DATED: July 3, 1997.
ASC HOLDINGS, INC.
By: /s/ Julianne Cloutier
---------------------------
Name: Julianne Cloutier
-------------------------
Title: Vice President
------------------------
<PAGE>
EXHIBIT 10.66
================================================================================
ASC Holdings, Inc.
-----------------------
SECURITIES PURCHASE AGREEMENT
------------------------
Dated as of July 2, 1997
Re:
Series A Exchangeable Preferred Stock
14% Senior Exchangeable Notes Due 2002
================================================================================
<PAGE>
ASC Holdings, Inc.
c/o American Skiing Company
P.O. Box 450
Bethel, Maine 04217
SECURITIES PURCHASE AGREEMENT
Series A Exchangeable Preferred Stock
14% Senior Exchangeable Notes Due 2002
Dated as of July 2, 1997
To the Purchaser which is a signatory to this Agreement
Gentlemen:
The undersigned, ASC Holdings, Inc., a Maine corporation (the
"Company"), hereby agrees with you as follows:
SECTION 1. DEFINITIONS
For all purposes of this Agreement the following terms shall have
the meanings set forth herein or elsewhere in the provisions hereof:
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquiring Person" has the meaning set forth in Section 6.15(e).
"Acquisition Documents" mean the documents to be executed and
delivered by ASCU and its Affiliates in connection with the acquisition of the
assets of Wolf Mountain Corporation.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common
-1-
<PAGE>
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 25% or more of the voting securities of a Person shall be deemed to
be control.
"Agreement" means the Securities Purchase Agreement, as amended from
time to time.
"Applicable Common Stock" means the common stock of the IPO Entity
or the Acquiring Person, as the case may be.
"Applicable Company" means the IPO Entity or the Acquiring Person,
as the case may be.
"Articles of Incorporation" shall mean the articles or certificate
of incorporation, statute, constitution, joint venture or partnership agreement
or articles or other organizational document of any Person other than an
individual, each as from time to time amended or modified.
"ASC" means American Skiing Company, a Maine corporation.
"ASCU" means ASC Utah, a Maine corporation.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any rights, property or assets (including, without limitation, by
way of a sale and leaseback), other than sales of inventory (including real
property inventory held for resale in the ordinary course of business), sales of
obsolete or unused equipment and sales by Real Estate Subsidiaries of hotel,
condominium, interval ownership, timeshares or other units, in each case, in the
ordinary course of business or (ii) the issue or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$1.0 million, or (b) for net proceeds in excess of $1.0 million. Notwithstanding
the foregoing: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary, and (iii) Restricted Payments that are
permitted by the provisions of Section 6.9 hereof will not be deemed to be Asset
Sales.
"Bank Credit Agreement" means (i) the Credit Agreement dated as of
June 28, 1996 among various Subsidiaries of the Company, Fleet National Bank, as
Agent, and the lenders party thereto, (ii) any other credit, loan, reimbursement
or other similar agreements among the Company, any Restricted Subsidiary (other
than Real Estate Subsidiaries) and any bank, insurance company, finance company
or other institutional
2
<PAGE>
lender, and (iii) each instrument securing any Indebtedness under any agreements
described in (i) or (ii) above, in each case, as of the date hereof.
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA and subject to Title IV of ERISA (other than a
Multiemployer Plan) in respect of which any of the Company, its Subsidiaries or
any ERISA Affiliate is or within the immediately preceding six (6) years was an
"employer" as defined in Section 3(5) of ERISA.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Board Resolution" means a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks are authorized to be closed in the State of New York.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within one year after the date of
acquisition.
"Cash Flow" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus
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<PAGE>
any net loss realized in connection with an Asset Sale, (ii) provision for taxes
based on income or profits of such Person and its Subsidiaries for such period,
(iii) consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of creditor bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Subsidiaries for such period, in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in same proportion) that
the Net Income of such Subsidiary was included in calculating the Consolidated
Net Income of such Person and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"Certificate of Designation" shall have the meaning set forth in
Section 2.2 hereof.
"Certificated Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that the Permitted Holders cease to be the "beneficial owners" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of an aggregate
of at least 51% of the common stock of the Company and at least 51% of the
voting power of the Capital Stock of the Company, (iv) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), other than the Permitted Holders, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 35% of the Common Stock of the
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Company or more than 35% of the voting power of the Capital Stock of the Company
and (v) the first day on which more than one-third of the members of the board
of directors of the Company are not Continuing Directors.
"Closing" shall have the meaning given to such term in Section 2.6
hereof.
"Closing Date" shall have the meaning given to such term in Section
2.6 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Common Stock" shall mean the common stock of any Person, together
with any other Capital Stock of such Person, which stock participates in the
profits of such Person without limitation provided, that in connection with an
IPO, Common Stock means the class of stock to be issued to the public, as such
Common Stock may be constituted from time to time.
"Company" shall mean ASC Holdings, Inc.
"Consolidated" or "consolidated" shall mean, with reference to any
term used herein, that term as applied to the accounts of the Company and its
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate of the Net Income of the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) the Net Income (but not loss) of Real
Estate Subsidiaries, Unrestricted Subsidiaries and Subsidiaries that are
accounted for by the equity method of accounting shall each be included only to
the extent of the amount of dividends or distributions paid in cash to the
Company or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of
any Restricted Subsidiary of ASC that is not a guarantor of ASC shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Restricted Subsidiary or its
stockholders, (iii) the Net Income of the Company acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Continuing Directors" means, as of any date of determination, any
member of the board of directors of the Company who (i) was a member of the
board of directors on the date of this Agreement or (ii) was nominated for
election to the board of
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directors with the approval of at least two-thirds of the Continuing Directors
who were members of the board of directors at the time of such nomination or
election.
"Control" means the direct or indirect power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of Capital Stock, other securities, by contract or otherwise.
"Conversion Discount Percentage" means, with respect to Common Stock
of an IPO Entity or the Company, the discount percentage from the IPO Price or
Market Valuation, as applicable to such Common Stock, equal to the following
percentages:
Period % Discount
------ ----------
7/15/97 -7/14/98 5%
7/15/98 to 10/14/98 6.25%
10/15/98 to 1/14/99 7.50%
1/15/99 to 4/14/99 8.75%
4/15/99 to 7/14/99 10.00%
7/15/99 to 10/14/99 11.25%
10/15/99 to 1/14/00 12.50%
1/15/00 to 4/14/00 13.75%
4/15/00 to 7/14/00 15.00%
7/15/00 to 10/14/00 16.25%
10/15/00 to 1/14/01 17.50%
1/15/01 to 4/14/01 18.75%
4/15/01 to 7/14/01 20.00%
4/15/01 to 10/14/01 21.25%
10/15/01 to 1/14/02 22.50%
1/15/02 to 4/14/02 23.75%
4/15/02 to 7/15/02 25.00%
"Conversion Event" shall mean an Initial Public Offering of the
Common Stock of an IPO Entity or a Change of Control.
"Conversion Shares" shall mean Common Stock of any IPO Entity or any
Designated Acquiring Person.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Designated Acquiring Person" means an Acquiring Person in which,
following the acquisition (by merger, consolidation, sale of stock, sale of
assets or otherwise) of the businesses and operations of the Company, the
stockholders of the Company beneficially own (as defined in Regulation 13d-5
under the Securities Exchange Act of 1934, as amended) 30% or more of the Common
Stock of such Acquiring Person or Control the management of such Acquiring
Person.
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"Distribution" shall mean, with respect to any Person, (a) the
declaration or payment of any dividend on or in respect of any shares of any
class of capital stock of such Person, other than dividends payable solely in
shares of the capital stock of the payor; (b) the purchase, redemption or other
retirement of any shares of any class of capital stock of such Person, directly
or indirectly or otherwise; or (c) any other distribution on or in respect of
any shares of any class of capital stock of such Person.
"EBITDA" means, for any period, with respect to any Person, the sum
of Net Income plus in each case, without repetition, to the extent deducted in
determining Net Income, the sum of (i) Interest Expense, plus (ii) amounts
relating to non-cash charges for depreciation and amortization, plus (iii)
expenses relating to income taxes, plus (iv) all other non-cash charges of any
nature whatsoever, all as determined for such Person and its Subsidiaries for
such period on a consolidated basis and in accordance with GAAP.
"Environmental Laws" means all federal, provincial or local laws,
statutes, regulations, ordinances, rules, guidelines, orders, directives and
other requirements of any government or political subdivision, agency or
instrumentality or of any court, tribunal or other similar body, relating to the
protection of the environment, occupational health and safety or the
manufacture, processing, distribution, use, treatment, storage, disposal,
discharge, transport or handling of any pollutants, contaminants, chemicals or
industrial, toxic or hazardous wastes or substances; and "Environmental Law"
means any of the foregoing.
"Environmental Matter" means any claim, investigation, litigation or
administrative proceeding, whether pending or threatened, or judgment or Order,
asserted, arising or entered under or pursuant to any Environmental Law, or
relating to any Hazardous Materials, in each case against or pertaining to the
Company or any of its Subsidiaries, the respective operations of such Persons,
or any Properties owned, leased or used by such Persons, which if adversely
determined would have a Material Adverse Effect.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock (and, in the case of the
Company, excluding the Preferred Stock).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company or its Subsidiaries, (ii) partnership or
other trade or business (whether or not incorporated) under common control
(within the meaning of Section
7
<PAGE>
414(c) of the Code) with the Company or its Subsidiaries, or (iii) member of the
same affiliated service group (within the meaning of Section 414(m) of the Code)
as the Company or its Subsidiaries, or any corporation described in clause (i)
above or any partnership or trade or business described in clause (ii) above.
"Event of Default" shall have the meaning given to such term in
Section 7.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means Indebtedness of the Company (inclusive
of any Indebtedness incurred under this Agreement), its Subsidiaries and Wolf
Mountain Corporation, which is in existence on the date of this Agreement or
incurred to finance the initial acquisition of the assets of Wolf Mountain
Corporation and is set forth on Schedule 4.15(a).
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the Consolidated Interest Expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) and (ii) the Consolidated Interest
Expense of such Person and its Restricted Subsidiaries that was capitalized
during such period and (iii) any Interest Expense on Indebtedness of another
Person to the extent that such Indebtedness is Guaranteed by such Person or one
of its Restricted Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all PIK Dividends and cash dividend
payments or other distributions (and non-cash dividend payments in the case of a
Person that is a Restricted Subsidiary) on any series of preferred equity of
such Person, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving a pro forma effect to such incurrence, assumption, Guarantee or
8
<PAGE>
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (a) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through consolidations and including any
related financing transactions, during the four-quarter reference periods or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (b) the Consolidated Cash Flow attributable to
Real Estate Subsidiaries, Unrestricted Subsidiaries, discontinued operations (as
determined in accordance with GAAP) and operations or businesses disposed of
prior to the Calculation Date shall be included only to the extent included in
Consolidated Net Income, and (c) the Fixed Charges attributable to Real Estate
Subsidiaries, Unrestricted Subsidiaries, discontinued operations (as determined
in accordance with GAAP) and operations or businesses disposed of prior to the
Calculation Date shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries (other than Real Estate Subsidiaries)
following the Calculation Date and, in the case of Real Estate Subsidiaries,
only to the extent that the obligations giving rise to such Fixed Charges
consist of Non-Recourse Real Estate Debt.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other energy as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hazardous Materials" shall mean any substance or material that is
prohibited, controlled or regulated under any Environmental Laws; or any
contaminants, pollutants, dangerous substances, including liquid waste, special
waste, toxic substances, hazardous or toxic chemicals and hazardous materials or
substances, as defined in or pursuant to any Environmental Laws. Without
limiting the generality of the foregoing, the term "Hazardous Material"
includes, but is not limited to, any material, waste or substance that is or
contains petroleum or any fractions thereof, urea formaldehyde foam
9
<PAGE>
insulation, asbestos, or polychlorinated biphenyls, or that is flammable,
explosive or radioactive.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest and currency rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest or currency exchange rates.
"Holder" means a Person in whose name a Security is registered.
"Holding Company Affiliate" means any Person created to own or hold
Holdings Common Stock or which exercises Control over the Company.
"Holdings Common Stock" means the Common Stock of the Company.
"Indebtedness" means, with respect to any Person, without
duplication, (i) any indebtedness of such Person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, (ii) all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person), (iii)
preferred stock of any Restricted Subsidiary of such Person (other than
Preferred Stock held by such Person or any of its Wholly Owned Restricted
Subsidiaries) and (iv) to the extent not otherwise included, the Guarantee by
such Person of any indebtedness of any other Person.
"Independent Director" means a member of the Board of Directors of
the Company who is neither an officer nor an employee of the Company or any of
its Subsidiaries or Affiliates.
"Initial Closing" means the Closing of the purchase of the Preferred
Stock occurring on July 2, 1997.
"Initial Public Offering" or "IPO" shall mean the first to occur of
(i) an underwritten public offering of any class of Common Stock of an IPO
Entity, the gross proceeds of which shall be at least $30 Million, pursuant to a
registration statement (other than on Form S-8 or S-4 or successor forms) filed
with, and declared effective by, the SEC or (ii) the issuance to equity holders
of a Person pursuant to a merger, exchange, acquisition or otherwise of Common
Stock having a public float of at least $30 million.
10
<PAGE>
"Interest Expense" shall mean, with respect to any Person for any
period, the interest expense of such Person during such period determined on a
consolidated basis with its Restricted Subsidiaries in accordance with GAAP, and
shall in any event include, without limitation, (i) the amortization of debt
discounts, (ii) the amortization of all fees payable in connection with the
incurrence of Indebtedness (as defined in the Bank Credit Agreement) to the
extent included in interest expense, (iii) the portion of any Capitalized Lease
Obligation allocable to interest expense, (iv) all fixed or calculable dividend
payments on preferred stock, including dividend payments-in-kind, and (v)
payments of interest expense in kind.
"Interest Payment Date" shall have the meaning given to such term in
Section 2.3(d) hereof.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees. made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company or
any of its Subsidiaries for consideration consisting solely of Holdings Common
Stock shall not be deemed to be an Investment.
"IPO Common Stock" means Common Stock of an IPO Entity issued
pursuant to an Initial Public Offering of shares in such IPO Entity.
"IPO Entity" means the Company or any Holding Company Affiliate, in
the event that either of such entities is the subject of an Initial Public
Offering, any Designated Acquiring Person that consummates an IPO within the 12
month period contemplated by Section 2.3(b)(ii) hereof, or any Designated
Acquiring Person that is a Public Company.
"IPO Price" means (a) in an underwritten public offering, the
initial price at which IPO Common Stock is offered to the public and (b) in any
other public offering, the market price of the IPO Common Stock as of the date
of the applicable registration statement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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<PAGE>
"Liquidation Preference" means the $1000 per share liquidation
preference of the Preferred Stock, plus all accrued and unpaid dividends,
including PIK Dividends.
"Management Committee" shall mean any committee bestowed with
management authority with respect to the Company or any of its Subsidiaries.
"Market Valuation" means the market value of the Common Stock of a
Designated Acquiring Person that is a Public Company, determined as follows: The
Market Valuation shall be the average of the daily closing prices of such Common
Stock for the 30 consecutive Trading Days preceding the effective date of a
Change of Control. The closing price for each day shall be the last reported
sales price, or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices in either case on the
NASDAQ National Market System or, if such Common Stock is not listed or admitted
to trading on the NASDAQ National Market System, on the principal national
securities exchange on which such Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the closing sales price of such Common Stock as quoted by NASDAQ, or, in case no
reported sales takes place, the average of the closing bid and asked prices as
quoted by NASDAQ or, in any comparable system, the closing sales price or, in
case no reported sale takes place, the average of the closing bid and asked
price, as furnished by any two members of the National Association of Securities
Dealers, Inc. selected from time to time by the Purchaser for that purpose.
"Material Adverse Effect" means any occurrence, action or event the
result of which causes or has, or is reasonably likely to cause or have, a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company any of its
direct or indirect Subsidiaries, or on the ability of such Persons to carry out
their respective Obligations under this Agreement or the Acquisition Documents.
"Material Contract" means any supply agreement, requirements
contract, customer agreement, services agreement, lease, license agreement,
franchise agreement, royalty agreement, distribution agreement, marketing
agreement, advertising agreement, joint venture agreement, partnership
agreement, stockholders agreement, asset purchase agreement, stock purchase
agreement, merger agreement, escrow agreement, tax sharing agreement, agency
agreement, investment banking agreement, fidelity or surety contract, power of
attorney, non-competition agreement or other agreement limiting the freedom of
the Company or any of its Subsidiaries to do business or compete in any line of
business or with any Person or in any area, or any credit agreement, loan
agreement, note purchase agreement, security agreement, mortgage, trust deed,
trust indenture, promissory note, bond, debenture, Guarantee, letter of credit,
reimbursement agreement or other agreement or instrument relating to the
borrowing of money or the extension of credit (excluding this Agreement, the
Notes and the other Note Documents), or any bonus, deferred compensation,
thrift, incentive compensation, stock purchase, stock option, employment,
consulting, severance or termination pay, hospitalization or other medical, life
or other
12
<PAGE>
insurance, or retirement plan, program, agreement or arrangement, or other Plan
maintained or contributed to by any Person with respect to employees of the
Company or its Subsidiaries, or any other contract, agreement, purchase order or
other commitment, in each case to which the Company or any of its Subsidiaries
is a party and which involves aggregate payments or obligations in excess of
$1,000,000 or is otherwise material to the business of the Company and its
Subsidiaries taken as a whole or the breach of which would result in a Material
Adverse Effect.
"Maturity Date" means July 15, 2002.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or within
the immediately preceding six (6) years was, contributed to by the Company, its
Subsidiaries or any ERISA Affiliate.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person for such period, determined in accordance with
GAAP, excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities (not including
the sale of interval ownerships, time shares or purchaser notes issued in
connection with the sale of time shares or interval ownership units) by such
Person or any of its Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Subsidiaries and (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate net cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), any relocation expenses
incurred as a result thereof, any taxes paid or payable by the Company or any of
its Subsidiaries as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support
requiring any financial obligation of the Company of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes
the lender, (ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder
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<PAGE>
of any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-Recourse Real Estate Debt" means Indebtedness (i) as to which
neither the Company nor any of its Subsidiaries, other than Real Estate
Subsidiaries, (a) provides credit support requiring any financial obligation of
the Company of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender, (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against a Real Estate Subsidiary) would permit (upon notice,
lapse of time or both) any holder of any other Indebtedness of the Company or
any of its Subsidiaries, other than Real Estate Subsidiaries, to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Subsidiaries, other than Real
Estate Subsidiaries, except, in each case, to the extent permitted by the
provisions of Section 6.10 hereof.
"Notes" shall have the meaning given to such term in Section 2.2.
"Obligations" with respect to any instrument or agreement means any
and all principal, interest (including Post-Petition Interest), penalties,
premiums, fees (including without limitation, to the extent provided for in such
instrument or agreement, fees and expenses of counsel), indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
from time to time under such instrument or agreement, whether direct or
indirect, joint or several, actual, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, including any obligations or
liabilities to repay, redeem, repurchase, retire, acquire or defease any
Indebtedness under such instrument or agreement, or any obligation to establish
a sinking fund for any such purpose.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice President of such
Person.
"Officers' Certificate" means, with respect to the Company, a
certificate signed on behalf of the Company by two Officers of the Company, one
of whom must be the principal executive officer, the principal financial
officer, the treasurer or the principal accounting officer of the Company, that
meets the requirements of Section 5.4 hereof.
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"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
governmental body.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Holders" means Leslie B. Otten (or, in the event of his
incompetence or death, his estate and his and his estate's heirs, executor,
administrator, committee or other representative (collectively, "Heirs")) and
any Person in which Leslie B. Otten and his Heirs, directly or indirectly, have
an 80% controlling interest.
"Permitted Indebtedness" shall have the meaning given to such term
in Section 6.10.
"Permitted Investments" means: (i) any Investment in the Company;
(ii) any Investment in Cash Equivalents; and (iii) any Investment by the Company
or any of its Subsidiaries in a Person if, as a result of such Investment, (a)
such Person becomes a Wholly Owned Restricted Subsidiary of the Company or (b)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Restricted Subsidiary of the Company.
"Permitted Liens" means: (i) Liens securing Permitted Indebtedness;
(ii) Liens in favor of the Company or any of its Subsidiaries; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any of its Subsidiaries, provided that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company or any such Subsidiary; (iv) Liens
on property existing at the time of acquisition thereof by the Company or any of
its Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness permitted by Section 6.10 hereof covering only the
assets acquired with such Indebtedness; (vii) Liens securing Existing
Indebtedness; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; and (ix) Liens on assets of
Real Estate Subsidiaries securing Non-Recourse Real Estate Debt. Notwithstanding
the foregoing, Permitted Liens shall not include liens on the Capital Stock of
the Company, ASC, ASCU and Wolf Mountain Corporation as described in Section
6.18 hereof.
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"Permitted Refinancing Debt" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any such Subsidiary, or any Permitted
Indebtedness; provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Debt does not exceed the principal
amount (or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Debt has a final maturity date no earlier than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Principal Amount or the Liquidation
Preference, as the case may be, of the Securities, such Permitted Refinancing
Debt has a final maturity date no earlier than the final maturity date of, and
is subordinated in right of payment to the Principal Amount or Liquidation
Preference, as the case may be, of the Securities on terms at least as favorable
to the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"PIK Dividends" means dividends on any Preferred Shares and PIK
Shares paid in additional Preferred Shares.
"PIK Interest" means interest on any Notes and any additional
outstanding PIK Notes paid in additional Notes.
"PIK Notes" means promissory notes, delivered by the Company in
respect of interest payable on the Notes and any additional outstanding PIK
Notes.
"PIK Shares" means Preferred Shares, delivered by the Company in
respect of dividends payable on the Preferred Shares.
"Plan" shall mean an employee benefit plan defined in Section 3(3)
of ERISA in respect of which the Borrowers, the Guarantors or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Preferred Shares" shall have the meaning given to such term in
Section 2.2 hereof.
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"Preferred Stock" shall have the meaning given to such term in
Section 2.2 hereof.
"preferred stock" of any Person means any Capital Stock of such
Person which has a preference in liquidation or preference with respect to the
payment of dividends and having a fixed dividend rate or floating dividend rate
based on an established index.
"Principal Amount" means the face value of the Notes, plus all
accrued and unpaid interest, including PIK Interest.
"Property" means with respect to any Person, any interest in any
kind of property or asset, whether real, personal or mixed, movable or
immovable, tangible or intangible, corporeal or incorporeal, of such Person.
"Public Company" means a Person the Common Stock of which is traded
on the New York Stock Exchange, the American Stock Exchange, the NASDAQ National
Market System or in the over-the-counter markets.
"Purchaser" shall mean Madeleine LLC, or any subsequent transferee
or Holder of the Notes.
"Real Estate Subsidiary" means a Restricted Subsidiary of the
Company that was formed for the purpose of developing, constructing and
marketing hotel, condominium, interval ownership and other residential real
estate projects, together with commercial and other space functionally related
or complementary thereto, and that is designated by the Board of Directors of
the Company as a Real Estate Subsidiary.
"Redemption Price" equals the Liquidation Preference or Principal
Amount on the date of redemption multiplied by the applicable Redemption Premium
on the date of redemption.
"Redemption Premium" means one (1) divided by: (a) one (1) minus (b)
the Redemption Premium Discount Percentage.
"Redemption Premium Discount Percentage" means the following
percentages in effect during the applicable period:
Period Percentage
------ ----------
7/15/97 to 7/14/98 5%
7/15/98 to 10/14/98 6.25%
10/15/98 to 1/14/99 7.50%
1/15/99 to 4/14/99 8.75%
4/15/99 to 7/14/99 10.00%
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7/15/99 to 10/14/99 11.25%
10/15/99 to 1/14/00 12.50%
1/15/00 to 4/14/00 13.75%
4/15/00 to 7/14/00 15.00%
7/15/00 to 10/14/00 16.25%
10/15/00 to 1/14/01 17.50%
1/15/01 to 4/14/01 18.75%
4/15/01 to 7/14/01 20.00%
7/15/01 to 10/14/01 21.25%
10/15/01 to 1/14/02 22.50%
1/15/02 to 4/14/02 23.75%
4/15/02 to 7/15/02 25.00%
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the
Purchaser as such agreement may be amended, modified or supplemented from time
to time.
"Reportable Event" shall mean any of the events described in
Sections 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
"Repriced Converts" shall mean the 6% Convertible Subordinated
Debentures or 6% Convertible Preferred Stock of the Company, a Designated
Acquiring Person or IPO Entity, as determined by the Company or the Designated
Acquiring Person, as the case may be, in its sole discretion, issued pursuant to
the Repriced Converts Indenture or Repriced Converts Certificate of Designation,
with dividends or interest payable quarterly at a rate per annum equal to 6%,
Convertible into Conversion Shares and with a maturity or mandatory redemption
date on the fifth anniversary of their date of issuance.
"Repriced Converts Certificate of Designation" shall mean the
Certificate of Designations, Rights and Preferences for the Repriced Converts
issued in the form of preferred stock of the Company, an Acquiring Person or an
IPO Entity substantially in the form of Exhibit C attached hereto.
"Repriced Converts Indenture" shall mean the Indenture for the
Repriced Converts issued in the form of subordinated debentures of the Company,
an Acquiring Person or an IPO Entity substantially in the form of Exhibit D
attached hereto.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary that is not an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
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"Securities" means, together, the Preferred Shares and the Notes.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Skiing and Lodging EBITDA" means, for any period, with respect to
any Person, the sum of Consolidated Net Income plus in each case, without
repetition, to the extent deducted in determining Adjusted Net Income, the sum
of (i) Interest Expense, plus (ii) amounts relating to non-cash charges for
depreciation and amortization, plus (iii) expenses relating to income taxes,
plus (iv) all other non-cash charges, all as determined for such Person and its
Subsidiaries for such period on a consolidated basis in accordance with GAAP.
"Statute" means any statute, ordinance, code, treaty, directive,
law, rule or regulation of any governmental body.
"Subordinated Obligations" shall mean any Obligations in respect of
any Equity Interests of the Company and all Indebtedness of the Company other
than Permitted Indebtedness.
"Subsequent Closing" means the Closing of the purchase of the Notes,
which shall occur on or before July 28, 1997.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which 50% or more of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole, general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Termination Event" shall mean (i) a Reportable Event with respect
to any Benefit Plan, (ii) the withdrawal of the Company, any Subsidiary or any
ERISA Affiliate from a Benefit Plan during a plan year in which the Company, any
Subsidiary or any ERISA Affiliate was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (iii) the imposition of an obligation on the
Company, any Subsidiary or any ERISA Affiliate under Section 4041 of ERISA to
provide affected parties written notice of intent to terminate a Benefit Plan in
a distress termination described in Section 4041(c) of ERISA, (iv) the
institution by the PBGC of proceedings to terminate a Benefit Plan, or
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<PAGE>
(v) the partial or complete withdrawal of the Company, any Subsidiary or any
ERISA Affiliate from a Multiemployer Plan.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 4.6 hereof.
"Unrestricted Subsidiary" means any Subsidiary (i) that is
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary (for purposes of this Agreement) pursuant to a board resolution, but
only to the extent that such Subsidiary (a) has no Indebtedness other than
Non-Recourse Debt and Obligations with respect to Guarantees that are
subordinated to the Company's Obligations under the Securities, (b) is not party
to any agreement, contract, arrangement or understanding with the Company or any
of its Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company, (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results (except, in the case of Ski
Insurance Company, for the indirect obligation to maintain adequate reserves and
capital as required by any state in which it is licensed as an insurer), and (d)
has not guaranteed or otherwise directly or indirectly provided financial credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors of the Company
shall be evidenced to the Purchaser by delivering to the Purchaser a certified
copy of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Agreement and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 6.10 hereof, the Company
shall be in default of such covenant). The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary,
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted by Section 6.10 hereof and (ii)
no Default or Event of Default would be in existence following such designation.
"Utah Subsidiary" means ASCU and any Subsidiary acquired or created
in connection with the Wolf Mountain Acquisition.
"Utah Subsidiary Guarantee" shall have the meaning given to such
term in Section 6.10 hereof.
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment of final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person and the Wholly Owned Restricted
Subsidiaries of such Person.
"Wolf Mountain Acquisition" shall have the meaning given to such
term in Section 2.8 hereof.
"Wolf Mountain Corporation" means Wolf Mountain Resorts L.C., a
[Utah] [Corporation/Limited Company].
1.2 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined shall be construed in
accordance with GAAP;
(3) words in the singular include the plural, and the plural include
the singular;
(4) provisions apply to successive events and transactions; and
(5) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time.
SECTION 2. PURCHASE AND SALE OF THE SECURITIES
2.1 Purchase and Sale of the Securities. Subject to all of the terms
and conditions hereof and in reliance on the representations and warranties set
forth or referred to herein, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase Preferred Shares and Notes in
the respective amounts set forth on Schedule 2.1 attached hereto, in the
aggregate initial Principal Amount and Liquidation Preference of $35,000,000.
2.2 Authorization of Notes and Repriced Converts. The Company has
duly authorized the issue, sale and delivery of:
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<PAGE>
(a) 17,500 shares of Series A Exchangeable Preferred Stock
(the "Preferred Stock"). The terms, limitations and relative rights and
preferences of the Preferred Stock are set forth in the Certificate of
Designation, Number, Voting Powers, Preferences and Rights of Series A
Exchangeable Preferred Stock of the Company (the "Certificate of Designation"),
substantially in the form of Exhibit A attached hereto. The initial Liquidation
Preference of the Preferred Shares is $1,000 per share, and dividends on the
Preferred Shares shall be payable, at the option of the Company, in cash or in
PIK Shares quarterly in arrears at the rate of 14% per annum, compounded
monthly. The Preferred Shares shall be exchangeable in accordance with the
provisions set forth in Sections 6.15 and 8.1 hereof.
(b) 14% Senior Exchangeable Notes Due 2002 (the "Notes") in an
aggregate principal amount of up to U.S. $17,500,000. Each Note will bear
interest on the unpaid principal thereof from its date of issuance (calculated
on the basis of a 360-day year and actual days elapsed) at the rate of 14% per
annum payable quarterly in arrears and compounded monthly, and will mature and
be due in full five (5) years after the date of issuance. Interest on the Notes
will be payable in cash or in PIK Notes, at the option of the Company. The Notes
will be issued in denominations of $1,000 each and in multiple integrals
thereof, and will be evidenced by an instrument issued by the Company in the
form of Exhibit B attached hereto. The Notes shall be exchangeable in accordance
with the provisions set forth in Section 6.15 and 8.1 hereof.
2.3 Payment of Principal and Interest.
(a) Mandatory Redemption. On the Maturity Date, the Company will
redeem all of the Securities for an amount equal to the Redemption Price fixed
as of the Maturity Date. Upon the occurrence of a Change of Control, the Company
shall offer to redeem the Securities, in whole or in part, for an amount equal
to the Redemption Price fixed as of the effective date of the Change of Control.
If Mandatory Redemption is triggered by a Change of Control or an Event of
Default, then the procedures of redemption shall be in accordance with the
procedures described in Section 6.15 hereof.
(b) Optional Redemption. (i) At any time subsequent to the issuance
of the Securities, the Company may at its option, redeem the Securities, in
whole or in part, on a pro rata basis as between the Notes and the Preferred
Shares, for an amount per Security equal to the Redemption Price fixed as of the
date of such redemption. If less than all of the Securities are to be redeemed,
than the amount of Notes and Preferred Shares to be redeemed will be in
proportion to the relative Principal Amounts and Liquidation Preferences of the
Securities then outstanding.
(ii) If the Company, any of its Affiliates, or a
Designated Acquiring Person shall propose, within 12 months following an
optional redemption of all or part of the Securities pursuant to Section 2.3(b)
hereof or a redemption of all or part of the Securities triggered by a Change of
Control pursuant to the second sentence of Section 2.3(a) hereof, to effect an
IPO, the Company shall (or
22
<PAGE>
shall cause the IPO Entity or Designated Acquiring Person to) provide an
Offering Notice of the type contemplated by Section 8.1(a), and the Purchaser
shall have the right, within 20 days of receipt of an Offering Notice, to
deliver a Response Notice also in accordance with Section 8.1(a), in each case
as if such Securities had not been optionally redeemed; provided that in lieu of
exchanging Securities the Purchaser shall pay cash for the Repriced Converts or
IPO Common Stock being purchased (as the case may be), and provided further the
purchase price for the Conversion Shares and the initial conversion price for
the Conversion Shares issuable upon conversion of the Repriced Converts shall be
determined by reference to the Conversion Discount Percentage in effect on the
date of the original optional or mandatory redemption, the Principal Amount or
Liquidation Preference of the Repriced Converts shall be equal to the Principal
Amount or Liquidation Preference of the Securities redeemed as of such original
optional or mandatory redemption date, and the number of Conversion Shares or
Repriced Converts issued shall be equal to such Principal Amount or Liquidation
Preference divided by the IPO Price multiplied by the difference between one (1)
minus the then applicable Conversion Discount Percentage.
(c) No Other Prepayments. Except as expressly permitted by Section
2.3, Section 6.11, and Section 6.15 hereof, the Preferred Shares may not be
redeemed, and the principal of the Notes may not be repaid or prepaid.
(d) Interest and Dividend Payments. Interest and dividends shall be
calculated on the basis of the actual number of days elapsed and a 360-day year,
shall be compounded monthly and shall be payable in cash, PIK Shares or PIK
Notes (as the case may be), at the option of the Company, quarterly in arrears
on each January 15, April 15, July 15, and October 15 (commencing October 15,
1997) and at the maturity of the Securities (each such date, an "Interest
Payment Date").
(ii) In the event of a Default, if the Company fails to make
Mandatory Redemption on the date required, the Securities shall bear interest
and dividends at a rate equal to 19% per annum, compounded daily, and shall be
payable on demand.
(iii) It is not intended by the Holders of the Securities, and
nothing contained in this Agreement or any Security shall be deemed, to
establish or require the payment of a rate of interest in excess of the maximum
rate permitted by applicable federal, state or other law (the "Maximum Rate")
and, to prevent such an occurrence, any agreement which may now or hereafter be
in effect between the Company and the Holders of the Securities regarding the
payment of fees or interest to such holders is hereby limited by the provisions
of this Section 2.3(d). If, in any month, the effective interest rate applicable
to the Securities, absent the Maximum Rate limitation contained herein, would
have exceeded the Maximum Rate, then the effective interest rate for that month
shall be the Maximum Rate, and, if in any subsequent month, the effective
interest rate would otherwise be less than the Maximum Rate, then the effective
interest rate for such month shall be increased to the Maximum Rate until such
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time as the amount of interest paid hereunder equals the amount of interest
which would have been paid if the same had not been limited by the Maximum Rate.
In the event that, upon payment in full of the Securities, the total amount of
interest paid or accrued under the terms of this Agreement is less than the
total amount of interest which would have been paid or accrued had the interest
not been limited hereby to the Maximum Rate, then the Company shall, to the
extent permitted by such applicable federal, state or other law, pay to the
Holder of the Securities an amount equal to the excess, if any, of (i) the
lesser of (A) the amount of interest which would have been charged if the
Maximum Rate had, at all times, been in effect with respect to the Securities
and (B) the amount of interest which would have accrued had the effective
interest rate applicable with respect to the Securities at all times not been
limited hereunder by the Maximum Rate over (ii) the amount of interest actually
paid or accrued under this Agreement. In the event that the holders of the
Securities receive, collect or apply as interest any sum in excess of the
Maximum Rate, such excess amount shall be applied to the reduction of principal
outstanding under the Notes or the redemption of the Preferred Shares, as the
case may be, and if no such principal or Preferred Shares are then outstanding,
such excess or part thereof remaining shall be paid to the Company.
2.4 Conversion Rights. The Securities shall be convertible and
exchangeable in the manner, and on the terms and conditions set forth in Section
6.15 and Section 8.1 hereof.
2.5 Seniority. The Preferred Shares shall be senior, with respect to
dividends and liquidation, to all Equity Interests of the Company. The Notes
shall be general unsecured obligations of the Company and shall be senior in
right of payment to all Subordinated Obligations.
2.6 Closings. (a) The closings of the purchase and sale of the
Securities will take place at the offices of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022 at such time and on the date on which all
definitive legal documentation satisfactory to the parties is executed by the
Company and the Purchaser, and on which all conditions to the Closings
contemplated in Section 5 hereof shall have been satisfied or waived, or at such
other time and date as the parties shall agree (the date of each such Closing,
the "Closing Date"). The Initial Closing hereunder shall take place with respect
to the Preferred Shares. The Subsequent Closing (together with the Initial
Closing, the "Closings") hereunder shall take place with respect to the Notes.
At each of the Closings, the Company will deliver certificates representing the
applicable Securities purchased hereunder against payment by the Purchaser of
$17,500,000. Such payments shall be made by wire transfer on each Closing Date
in immediately available funds to such accounts as are designated by the Company
in accordance with Section 5.10 hereof. The Securities will be issued to the
Purchaser on the Closing Date and registered in the name of the Purchaser or the
Purchaser's nominee, as applicable.
(b) Without the prior written consent of the Purchaser, the Company
will not issue (i) any additional Notes in excess of the $17,500,000 principal
amount of
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the Notes issued hereunder (other than PIK Notes), or (ii) any additional
Preferred Shares in excess of the $17,500,000 liquidation preference of the
Preferred Shares issued hereunder (other than PIK Shares). The parties hereto
agree that the Purchaser and its Affiliates shall have a right of first refusal
to purchase any Securities, the issuance for which the Purchaser has given its
consent pursuant to this Section 2.6(b). In the event the Company determines to
issue additional Securities to finance additional acquisitions of ski
properties, the Company shall mail a notice to the Purchaser stating: (i) the
amount of Securities it intends to offer, which shall, in every case, be a
minimum of $5 million, (ii) the combination of Preferred Shares and Notes
contemplated for such issuance, (iii) the date of the planned issuance of the
Securities, and (iv) that the purpose for which the funds are being raised is to
purchase additional ski properties. Not later than fifteen (15) Business Days
after the Purchaser receives such notice, the Purchaser will advise the Company
of (i) its intention to either purchase (a) all of the Securities being issued,
(b) a specified amount of the Securities being issued, or (c) none of the
Securities being issued, and (ii) whether it grants or withholds consent with
respect to the additional issuance of Securities to parties other than the
Purchaser.
2.7 Use of Proceeds. The proceeds from the Initial Closing shall be
used as follows: (a) to pay in full all amounts outstanding under the $2.5
million Promissory Note, dated June 18, 1997, made by the Company in favor of
the Purchaser, including all interest accrued and unpaid thereunder; (b) to pay
the Closing Fee; (c) to pay the fees and expenses of the Purchaser incurred in
connection with this Agreement, including attorneys fees and expenses; (d) up to
$5 million to be retained by the Company for general working capital purposes;
or retained by the Company for the purpose of being contributed as capital to
ASC to fund the general working capital requirements of ASC and capital
expenditures by its Subsidiaries, provided, however, that the Company shall not
contribute any of the $5 million as capital to ASC except on terms no less
favorable to ASC than those that would have been obtained in a comparable
transaction with an unrelated Person and otherwise in accordance with Section
4.12 of the ASC Indenture (as defined in Section 6.9 hereof); and (e) an amount
up to the balance to be contributed as capital to ASCU, a Wholly Owned
Restricted Subsidiary of the Company, which will, in turn, be directed to use
such proceeds to pay or otherwise retire the obligations of ASCU with respect to
the purchase of the assets of Wolf Mountain Resorts LC (the "Wolf Mountain
Acquisition"), as set forth on Schedule 2.7A hereof. The proceeds from the
Subsequent Closing shall be used as follows: (a) to pay the fees and expenses of
the Purchaser incurred subsequent to the Initial Closing in connection with this
Agreement; (b) up to $17.5 million to be contributed as capital to ASCU which
will, in turn, be directed to use such proceeds to pay any balance remaining on
the obligations of ASCU with respect to the Wolf Mountain Acquisition as set
forth on Schedule 2.7B hereof and for the continued development and investment
of Wolf Mountain.
2.8 Replacement Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of, and the loss, theft,
destruction or mutilation of, certificates representing any Security or Repriced
Convert and
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(a) in the case of loss, theft or destruction, of an indemnity
reasonably satisfactory to it (provided, if the holder of the Security or
Repriced Convert is an original holder thereof, its own agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof to the Company,
the Company at its expense will execute and deliver in lieu thereof, a new
certificate representing such Security or Repriced Convert of like tenor and
principal amount, dated and bearing interest from the date to which interest has
been paid on such lost, stolen, destroyed or mutilated Security or Repriced
Convert, or dated the date of such lost, stolen, destroyed or mutilated Security
or Repriced Convert if no interest has been paid thereon.
2.9 Delivery Expenses. If the Purchaser surrenders any Security to
the Company for conversion pursuant to this Agreement (other than the initial
exchange of Notes to Preferred Shares, which shall be at the Purchaser's sole
expense), the Company will pay the cost of delivery from the Purchaser's office,
insured to the Purchaser's satisfaction, the surrendered Securities and the
certificates representing Repriced Converts or Conversion Shares.
2.10 Issue Taxes. The Company will pay all taxes in connection with
the issuance and sale of the Securities and the issue of the Repriced Converts
and Conversion Shares and in connection with any modification of the Notes and
will save the Purchaser harmless without limitation as to time against any and
all liabilities with respect to all such taxes (other than any income taxes
assessed on your income). The obligations of the Company under this Section 2.10
shall survive the payment or repayment of the Securities or the Repriced
Converts and the termination of this Agreement.
2.11 Closing Fee. The Purchaser shall receive a fee upon Closing
(the "Closing Fee") equal to two percent (2%) of the gross proceeds to the
Company (prior to deducting the Closing Fee) from the sale of the Securities.
2.12 Transfer Restrictions. The Purchaser shall not sell, transfer
or assign any Security other than to: (i) an Affiliate of the Purchaser, or (ii)
a Qualified Institutional Buyer or Accredited Investor (as such terms are
defined in the Securities Act). The Purchaser shall not sell, transfer or assign
any Security in an initial aggregate Liquidation Preference or initial Principal
Amount, as applicable, of less than $2.5 million, or any Repriced Converts in
denominations of less than $1,000. The foregoing restrictions on transfer shall
not apply to any participations in the Securities granted to third parties.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
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The Purchaser hereby represents and warrants to and for the benefit
of the Company as follows:
3.1 Organization and Qualification. The Purchaser is a limited
liability company duly authorized and validly existing under the laws of the
state of New York and has the requisite power to carry on its business as it is
now being conducted and currently proposed to be conducted. The Purchaser is
duly qualified to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities make such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on its business, properties, assets, condition
(financial or otherwise), liabilities or operations.
3.2 Authority Relative to this Agreement. The Purchaser has the
requisite power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the Registration
Rights Agreement between the Company and the Purchaser to be entered into on the
Closing Date (the "Registration Rights Agreement"), substantially in the form of
Exhibit E attached hereto, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary actions on the
part of the Purchaser. This Agreement and the Registration Rights Agreement,
upon its execution, each constitute a valid and binding obligation of the
Purchaser, enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought. No other
proceedings on the part of the Purchaser are necessary to authorize this
Agreement or the Registration Rights Agreement and the transactions contemplated
hereby and thereby.
3.3 Financing Arrangements. The Purchaser has funds available to it
sufficient to effect the transactions contemplated by this Agreement.
3.4 Investment Intent. The Purchaser is acquiring the Securities for
investment for its own (or an Affiliate's) account, not as a nominee or agent
and not with a view to the distribution of any part thereof in violation of law.
The Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the Securities, other than to its Affiliates.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants that:
4.1 Corporate Organization And Authority Of The Company And
Subsidiaries. The Company (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maine; (b) has all requisite
power and authority and all necessary licenses and permits to own and operate
its Properties and to
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carry on its business as now conducted and as presently proposed to be
conducted, except as would not have a material adverse effect on the Company;
and (c) is duly licensed or qualified and is authorized to do business and is in
good standing as a foreign corporation in each jurisdiction where the character
of its Properties or the nature of its activities makes such licensing or
qualification necessary, except as would not have a Material Adverse Effect on
the Company.
4.2 Authorized Capital Stock. As of the date hereof, the authorized
and outstanding Capital Stock of the Company is as set out on Schedule 4.2
hereto, and all of the issued shares of Capital Stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable.
All of the outstanding shares of Capital Stock of the Subsidiaries have been
duly and validly authorized and issued and are fully paid and non-assessable.
The shares of Capital Stock of each Subsidiary listed on Schedule 4.2(i) hereto
are owned directly by the Company free and clear of any Liens. The Shares of
Capital Stock of each Subsidiary listed on Schedule 4.2(ii) hereto are owned
indirectly by the Company free and clear of any Liens. The Company does not own,
directly or indirectly, any equity or debt securities of any other company,
corporation, partnership, joint venture or other entity which are material to
the business or operations of the Company. All of the outstanding Capital Stock
of the Company is owned by Leslie B. Otten, free and clear of any Liens.
4.3 Sale Is Legal And Authorized. (a) The offer, issuance, sale and
delivery of the Securities and the Repriced Converts and the Conversion Shares
and compliance by the Company with all of the provisions of this Agreement, the
Certificate of Designation, the Notes and the Repriced Converts: (i) are within
the corporate powers of the Company; (ii) are legal and will not violate,
conflict with, result in any breach of any of the provisions of, constitute a
default under (upon notice or lapse of time or both), or result in the creation
of any Lien upon any Property of the Company or any of its Subsidiaries under
the provisions of, any charter instrument, by-law, or any order of any court,
governmental authority or arbitration board or tribunal, or any provision of any
indenture, mortgage, contract, instrument or other agreement to which the
Company or any of its Subsidiaries is a party or by which it may be bound,
except with respect to such consents, approvals, releases or amendments thereof
as are necessary and/or appropriate to permit such sale and compliance that have
been obtained by the Company on the Closing Date; and (iii) have been duly
authorized by all necessary corporate action on the part of the Company (no
action by the stockholders of the Company or of any other Person being required
by law, by the Articles of Incorporation or By-laws of the Company or otherwise
except as has already been taken by the Company);
(b) This Agreement has been duly and validly executed and delivered
by the Company (and the officers or agents executing this Agreement on behalf of
the Company are duly authorized to do so). This Agreement constitutes the legal,
valid and binding obligation, contract and agreement of the Company, enforceable
in accordance with its terms, except as enforcement of such terms may be limited
by any applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the
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enforcement of creditors' rights generally and by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(c) The Preferred Shares conform to the terms of the Preferred
Shares contained in the Company's Articles of Incorporation. The Certificate of
Designation sets forth the rights preferences and priorities of the Preferred
Stock. The Conversion Shares conform to the terms of the Holdings Common Stock
contained in the Company's Articles of Incorporation.
(d) As of the date hereof, the Preferred Shares, and the issuance
thereof, have been duly authorized by the Board of Directors of the Company. On
or prior to the Closing Date, the holders of the Holdings Common Stock approved
all amendments to the Company's Articles of Incorporation necessary to authorize
the creation of the new series of Preferred Stock. The Notes have been duly and
validly executed, issued and delivered by the Company (and the officers
executing the Notes have been duly authorized to do so), and constitute the
legal, valid and binding obligations, contracts and agreements of the Company,
enforceable in accordance with their respective terms, except as enforcement may
be limited by any applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditor's rights, generally
and by general equitable principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
4.4 No Defaults. No event has occurred and no condition exists
which, with the giving of Notice or passage of time or both, would constitute a
Default or an Event of Default pursuant to any agreement to which the Company or
its Subsidiaries are a party, or as a result of the issue of the Preferred
Shares or the Notes. Neither the Company nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any indenture, mortgage, contract,
instrument or other agreement to which it is a party, where such default could,
singularly or in the aggregate, have a material adverse effect on the condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole or
on the ability of the Company to perform its obligations contained in this
Agreement, the Certificate of Designation, the Notes or the Repriced Converts.
4.5 Governmental Consent. Neither the nature of the Company or of
any Subsidiary, or of any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the execution and delivery of this Agreement or
the offer, issue, sale or delivery of the Securities and Repriced Converts or
the Conversion Shares is such as to require a consent, approval or authorization
of, or filing, registration (other than registration of the Repriced Converts
under the Securities Act), or qualification with, any governmental authority on
the part of the Company as a condition to the execution and delivery of this
Agreement or the offer, issue, sale or delivery of the Securities or the
issuance of Conversion Shares pursuant to conversion of the Securities.
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4.6 Conversion Shares, Legends. (a) The Conversion Shares, as and
when issued by the Company from time to time pursuant to conversion of the
Securities or Repriced Converts, will be validly issued and outstanding, fully
paid and non-assessable and will not be subject to any pre-emptive or similar
right, and the holder of each Security or Repriced Convert will receive good and
valid title to the Conversion Shares upon conversion of such Security or
Repriced Convert, free and clear of any Lien, except such as may have been
created by the Purchaser and such restrictions on transfer as may be imposed
under United States federal or state securities or blue sky laws. No consent or
approval by the stockholders of the Company or any other Person is required to
be obtained by the Company for the consummation of the issuance of the
Conversion Shares by the Company pursuant to conversion of the Securities.
(b) Each of the Company's certificates representing the
Securities, Repriced Converts or Conversion Shares (prior to registration, and
any certificates issued in exchange therefor or substitution thereof) shall bear
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION
FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES.
4.7 Legal Proceedings. There are no actions, suits, investigations
or proceedings pending to which the Company or any Subsidiary is a party before
or by any court or governmental agency or body, which would result, individually
or in the aggregate, in any material adverse change in the financial condition
or results of operations of the Company and its Subsidiaries, taken as a whole,
or which would have a Material Adverse Effect upon the Properties or assets of
the Company and its Subsidiaries, taken as a whole, and to the knowledge of the
Company, no such actions, suits, investigations or proceedings are threatened by
any Person.
4.8 Full Disclosure. Neither this Agreement, nor any written
statement furnished by the Company or its agents to you in connection with the
negotiation of the sale of the Securities, to the best knowledge of the Company,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein or herein, in light of
the circumstances under which they were made, not misleading. There is no fact
known to the Company or any of its Subsidiaries (or which, after due inquiry,
should have been known) which the Company has not disclosed to you in writing
which materially affects adversely, nor, so far as the Company can foresee,
could materially affect adversely, the Properties, business,
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prospects, profits or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or the ability of the Company, its Subsidiaries or
any of its Affiliates to perform its respective obligations contained in this
Agreement, the Certificate of Designation, the Notes or the Repriced Converts.
4.9 Use Of Proceeds. The Company will use, and will cause ASCU to
use, the proceeds from the sale of the Securities solely for the purposes
described in Section 2.7 hereof.
4.10 Certain Laws. (a) Neither the Company nor any of its
Subsidiaries is, directly or indirectly, controlled by, or acting on behalf of
any Person which is, an "investment company" or an "affiliated person" of,
"promoter" or "principal" of an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(b) Neither the Company nor any of its Subsidiaries is a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended or a "public utility" within the meaning of the Federal Power Act, as
amended.
4.11 Capital Stock. There are no securities outstanding, other than
the Preferred Shares and the Notes, that are convertible into or exchangeable
for any shares of Capital Stock of the Company or any Subsidiary, nor are there
outstanding any rights to subscribe for or purchase, or any options or warrants
for the purchase of, or any agreements (contingent or otherwise) providing for
the issuance of, or any calls, commitments or claims of any character relating
to, any shares of Capital Stock of the Company or any Subsidiary, or any
securities convertible into or exchangeable for any such shares.
4.12 Business Operations and Other Information: Financial Condition.
(a) Except as set forth in Schedule 4.12, ASC has filed all reports required to
be filed with the SEC, pursuant to the Exchange Act, since November 22, 1996
(collectively, the "SEC Reports"). ASC has heretofore delivered or made
available to the Purchaser, in the form filed with SEC, all such SEC Reports.
The SEC Reports were prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be; none of such SEC
Reports, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Financial
Statements (as defined below) included in the SEC Reports present fairly the
financial position of ASC and its Subsidiaries as of the respective dates
thereof, and the results of their operations, changes in stockholders equity and
their cash flows for the respective periods set forth therein, all in conformity
with GAAP consistently applied during the periods involved. As used in this
Agreement, the term "Financial Statements" when used with respect to any Person
means the consolidated balance sheets of the Person and its consolidated
Subsidiaries as of the respective dates thereof, and the related consolidated
statements of income,
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changes in stockholders equity and cash flows of that Person and its
Subsidiaries for the respective periods set forth therein.
(b) Projections of the consolidated net income and cash flow of the
Company and its Subsidiaries (assuming completion of the sale of the Securities
and the consummation of the Wolf Mountain Acquisition) for each of the fiscal
years of the Company in the period from the Closing Date through June 30, 2002
have been delivered to the Purchaser. Such projections have been prepared by
management of the Company and Wolf Mountain Corporation on the basis of
assumptions, set forth in Schedule 4.12(b) hereto, which such management
believes, as of the Closing Date, are fair and reasonable in light of (i) the
historical financial performance of the Company, (ii) to the best knowledge of
management, after reasonable inquiry, the projected financial performance of
Wolf Mountain Corporation and (iii) current and reasonably foreseeable business
conditions. Actual results may vary materially and significantly from the
projections of financial performance.
(c) A true and complete copy of a consolidated pro forma balance
sheet for the Company prepared by management of the Company on the basis of the
historical unaudited balance sheet of each of the Company as of April 30, 1997,
as though the sale of the Securities had been completed immediately prior to
such date, has been delivered to the Purchaser. Such pro forma balance sheet
fairly presents in all material respects the consolidated financial position of
the Company as of the close of business on such date on a pro forma basis as if
the sale of the Securities had been completed immediately prior to such date,
and contains all material pro forma adjustments necessary in order to fairly
reflect such assumption.
(d) A true and complete copy of a consolidated pro forma balance
sheet for the Company prepared by management of the Company on the basis of the
historical unaudited balance sheet of the company as of April 30, 1997, as
though the sale of the Securities and the Wolf Mountain Acquisition had been
completed immediately prior to such date, has been delivered to the Purchaser.
(e) As of the date of each of the balance sheets included in the
Financial Statements, the Company had no Indebtedness or liability, absolute or
contingent, liquidated or unliquidated, except Indebtedness and liabilities
reflected or reserved against on such respective balance sheets or described in
the notes thereto. Since April 30, 1997, no Material Adverse Effect has
occurred.
(f) The Company was incorporated on May 28, 1997; ASCU was
incorporated on January 4, 1995; and since their respective dates of
incorporation to the Closing Date neither the Company nor ASCU has engaged in
any business or activity other than activities relating to the ownership of the
stock of ASCU (for the Company only) and the Wolf Mountain Acquisition. The
capitalization of each of the Company and ASCU as of the date hereof, before
giving effect to the sale of the Securities, are as set forth on Schedule 4.12
(g) hereto. As of the date hereof, the date of the Initial Closing
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and the date of the Subsequent Closing, Leslie B. Otten owns and will continue
to own 100% of the Holdings Common Stock and the Company owns and will continue
to own (a) 100% of the Common Stock of ASCU and (b) 96% of the Common Stock of
ASC. Neither the Company nor ASCU has incurred or will incur Indebtedness in
connection with the Wolf Mountain Acquisition other than Indebtedness incurred
with respect to the issuance of the Securities or Permitted Indebtedness.
4.13 Subsidiaries. Other than as set forth on Schedule 4.2(i)
hereto, the Company does not own any shares of Capital Stock of, and does not
have any direct or indirect equity interest in, any other Person.
4.14 No Conflicts with Agreements, Statutes, Orders, Etc. Neither
the execution and delivery by the Company of this Agreement or any other
documents executed and delivered in connection with this Agreement, nor the
offering, issuance or sale of the Securities, the Repriced Converts or the
Conversion Shares, nor the fulfillment of or compliance with the terms and
provisions hereof or thereof, will conflict with, or result in a breach or
violation of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of, any Lien on any Properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Subsidiaries, or any contract, agreement (other than as
listed and briefly described on Schedule 4.14 hereto), mortgage, indenture,
lease or instrument to which either of them is a party or by which any of them
is bound or to which any of their respective assets are subject, or any Order or
Statute to which any of them or any of their respective assets are subject.
4.15 Intentionally Omitted.
4.16 Assets and Properties (a) The Company has good and marketable
title to all of its Properties (other than Properties leased from others,
licensed or consigned), subject to Liens, restrictions and encumbrances of
record.
(b) The Properties owned by, leased to or used by the Company and
its Subsidiaries, taken as a whole, are sufficient for operation of their
businesses as currently contemplated, are in good operating condition and
repair, ordinary wear and tear excepted, are free and clear of any known defects
except such defects as do not materially interfere with the continued use
thereof in the conduct of normal operations of the Company, and are able to
serve the function for which they are currently being used in all material
respects. The Properties owned by, leased to or used by the Company and its
Subsidiaries constitute all of the material assets used in the conduct of their
business and neither this Agreement nor the Notes, nor any transaction
contemplated under any such agreement or document, will materially adversely
affect any right, title or interest of the Company or its Subsidiaries in and to
any of such assets.
(c) As of the Closing Date, the Company and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all leases, whether of realty
or personalty, to which it is a party, and all such leases are valid and
subsisting and in full
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force and effect except, in each case, for matters that would not in the
aggregate have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in breach or violation of the terms of any such lease, and the
Company does not know of any breach or violation of any of such leases by any
third party, except, in each case, for matters that would not in the aggregate
have a Material Adverse Effect.
4.17 Taxes. The Company and all of its Subsidiaries have filed, or
on behalf of each of them there have been filed, all tax returns, informational
returns and excise and sales tax returns which are required to have been filed
prior to the date of this Agreement by or on behalf of them under the laws of
the United States of America or any state or local jurisdiction therein, or any
other jurisdiction located outside of the United States of America, and there
have been paid all taxes shown to be due and payable on such returns and all
other material taxes and assessments payable by any of them, unless such tax
liability is being diligently contested in good faith and the Company or any of
its Subsidiaries as the case may be, and has adequately reserved against such
tax liability on its books and financial statements in accordance with GAAP. No
material tax liens have been filed and no material claims are being asserted
with respect to any such taxes as of the date hereof. No material tax assessment
against the Company or any of its Subsidiaries has been proposed as of the date
hereof and all of their respective tax liabilities are adequately provided for
on their respective books and financial statements in accordance with GAAP.
4.18 Intentionally Omitted.
4.19 Offering of Securities. None of the Company or their respective
representatives has, directly or indirectly, offered any of the Securities or
the Repriced Converts or any security similar to any of them for sale to, or
solicited any offers to buy any of the Securities or the Repriced Converts or
any security similar to any of them from, or otherwise approached or negotiated
with respect thereto with, more than 10 Persons including the Purchaser, and
none of the Company or their respective representatives has taken or will take
any action which would subject the issuance or sale of any of the Securities or
Repriced Converts to the provisions of Section 5 of the Securities Act or
violate the provisions of any securities or Blue Sky laws of any applicable
jurisdiction.
4.20 Broker's or Finder's Commissions. Except for the fee of
Berenson Minella, no broker's or finder's fee or commission will be payable by
the Company with respect to the issuance and sale of the Securities. The Company
agrees to indemnify the Purchaser and hold it harmless against any loss, cost,
claim or liability (including, without limitation, reasonable attorneys' fees
and disbursements for the investigation and defense of claims) asserted against
Purchaser arising out of or relating to any such actual or alleged fee or
commission including any such fee or commission owed to Berenson Minella.
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4.21 Environmental Matters. Except as set forth in Schedule [4.21],
there is no pending, or to the knowledge of the Company, threatened
Environmental Matter relating to the Properties of the Company or its
Subsidiaries, and after due inquiry, the Company is aware of no facts that could
result in any such Environmental Matter. The Company has not agreed to assume by
contract or otherwise any liability of any other Person for cleanup, compliance,
or required Capital Expenditures in connection with any Environmental Matter
arising prior to the date hereof.
4.22 ERISA. Schedule 4.22 sets forth a true, complete list of all
Benefit Plans and Multiemployer Plans of the Company and its Subsidiaries.
Neither the Company, its Subsidiaries nor any ERISA Affiliate nor any fiduciary
of any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code or
(ii) has taken any action which would constitute or result in a Termination
Event which in each case would have a Material Adverse Effect on or before the
Termination Date. Neither the Company, its Subsidiaries nor any ERISA Affiliate
has made a complete or partial withdrawal under Section 4203 or 4205 of ERISA
from a Multiemployer Plan in either case which would have a Material Adverse
Effect on or before the Termination Date. Except as required by Section 4980B of
the Code, no welfare benefit plan (as defined in Section 3(1) of ERISA) provides
benefits or coverage beyond an employee's termination of employment other than
severance or plans that would not have a Material Adverse Effect on or before
the Termination Date. The contributions required under Section 412 of the Code
for each Benefit Plan have been made when due and no event has occurred which
could result in the imposition of a Lien under Section 412(n) of the Code.
Neither the Company, its Subsidiaries nor any ERISA Affiliate has any
outstanding waivers or variances from the minimum funding requirements under
Section 412 of the Code with respect to any Benefit Plan. The Parent has
heretofore furnished to the Agent copies of the most recent Annual Report (Form
5500) with respect to each Benefit Plan.
4.23 Material Contracts. The exhibits to the SEC Reports and
Schedule 4.23 contain a list of all Material Contracts to which the Company or
any of its Subsidiaries is a party as of the Closing Date. True and complete
copies as of the Closing Date of each of the Material Contracts to which the
Company is a party, with all amendments, modifications and supplements thereto
to the date hereof, have previously been furnished by the Company to the
purchaser or its representatives. Each of the Material Contracts is valid,
subsisting and in full force and effect except to the extent that, after the
Closing Date, the failure to be valid, subsisting and in full force and effect
would not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in breach or violation of any of the terms, conditions or
provisions of any of the Material Contracts, and, to the best knowledge of the
Company, no other party to any of the Material Contracts is in breach or
violation of any of the terms, conditions or provisions thereof, except for such
breaches and violations as in the aggregate would not result in a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has transferred
or subordinated any of its rights or interests in any of the Material Contracts,
and such rights and interests are subject to no Liens except Permitted Liens.
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4.24 Insurance. The Company has purchased policies (or has
self-insured in accordance with state regulatory requirements) of workers
compensation, general liability, fire, property, casualty, business
interruption, flood, earthquake and other insurance carried by the Company and
its Subsidiaries as of the Closing Date. Such policies are in full force and
effect, and the Company has not received notice of cancellation with respect to
any such policy. All premiums payable with respect to such policies have been or
will then have been paid in respect of the coverage periods specified therein.
4.25 Related Documents The Company has delivered to the Purchaser
true and correct copies of the Acquisition Documents as in effect on the Closing
Date, including all amendments, modifications and supplements thereto, and of
each document, certificate or statement required to be executed or delivered by
any party thereunder (there being no amendments or modifications to such
documents, and no waiver of any rights thereunder by the Company, nor of any
condition to the obligations of such Persons under any thereof, except as
heretofore disclosed to the Purchaser in writing).
4.26 Solvency The Company, ASC, ASCU and Wolf Mountain Corporation
will be solvent both before and after giving effect to the Wolf Mountain
Acquisition to be effected on the Closing Date and the application of the net
proceeds of the issuance and sale of the Securities to be issued on the Closing
Date.
4.27 Consents and Approvals All consents, permits and approvals,
including approval required under the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended, necessary to the consummation of the Wolf Mountain
Acquisition, have been received by the Company; and all transactions necessary
to complete the Wolf Mountain Acquisition will be completed prior to or on the
Closing Date.
SECTION 5. CLOSING CONDITIONS.
The Purchaser's obligation to purchase and pay for the Securities on
each Closing Date pursuant to Section 2 of this Agreement shall be subject to
the following conditions precedent:
5.1 [Intentionally Omitted]
5.2 Representations And Warranties True. The representations and
warranties of the Company contained in Section 4 shall be true in all material
respects on the Closing Date with the same effect as though made on and as of
that date.
5.3 Compliance With This Agreement. The Company shall have performed
and complied with all agreements and conditions contained herein which are
required to be performed or complied with by the Company on or before the
Closing Date.
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5.4 Officers' Certificate. The Company shall have delivered to the
Purchaser a certificate dated the Closing Date and signed by the Chairman of the
Board, the President or any Vice President and by the chief financial officer of
the Company, certifying that the conditions specified in Sections 5.2 and 5.3
have been fulfilled.
5.5 Corporate Existence And Authority. The Purchaser shall have
received, in form and substance reasonably satisfactory to the Purchaser, such
documents and evidence with respect to the Company and its Subsidiaries as the
Purchaser may reasonably request in order to establish the existence and good
standing of the Company and its Subsidiaries and the authorization of the
transactions contemplated by this Agreement.
5.6 Consent Of Holders Of Other Securities. Any consents or
approvals required to be obtained from any holder or holders of any outstanding
security of the Company and any amendments of agreements pursuant to which any
securities may have been issued which shall be necessary to permit the
consummation of the transactions contemplated hereby on each Closing Date shall
have been obtained by the Company and all such consents or amendments shall be
reasonably satisfactory in form and substance to the Purchaser.
5.7 Proceedings Satisfactory. All proceedings taken in connection
with the sale of the Securities to be sold by the Company to the Purchaser and
all documents and papers relating thereto shall be reasonably satisfactory to
the Purchaser and the Purchaser shall have received copies of such documents and
papers as the Purchaser may reasonably request in connection therewith all in
form and substance reasonably satisfactory to the Purchaser.
5.8 Absence of Material Adverse Effect Since April 30, 1997, no
event resulting in, or which could result in, a Material Adverse Effect has
occurred. Since June 12, 1997, no event resulting in or which could result in a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of Wolf Mountain Corporation
has occurred.
5.9 Fees. The fees required to be paid on each Closing Date pursuant
to Section 2.12 of this Agreement and the fees and expenses incurred by Schulte
Roth & Zabel LLP in connection with the preparation of this Agreement and
related documents shall be paid concurrently with the issuance and sale of
Securities to be sold on each Closing Date.
5.10 Wire Instructions The Purchaser shall have received not less
than two Business Days prior to each Closing Date wire instructions prepared by
the Company as to all wire transfers or other payments to be effected on such
Closing Date in connection with the transactions to be consummated on such
Closing Date pursuant to this Agreement, which wire instructions shall identify
the payor and payee of such wire transfer or payment, shall describe the manner
of transfer or payment, shall direct that all funds be transferred to a bank
chartered under the laws of the United States of America or
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any state thereof located within the United States of America, and shall
otherwise be satisfactory in form and substance to the Purchaser.
5.11 Solvency Letter The Purchaser shall have received a solvency
letter relating to the Company, signed by its chief financial officer and dated
the Closing Date, in form and substance satisfactory to the Purchaser.
5.12 Real Estate Appraisals The Purchaser shall have received real
estate appraisals, in form and substance satisfactory to the Purchaser, with
respect to the real Property of the Company and its Subsidiaries, and the real
Property to be acquired in connection with the Wolf Mountain Acquisition.
SECTION 6. COMPANY COVENANTS.
From and after each Closing Date and continuing so long as any
amount remains unpaid on any Security:
6.1 Financial Reports. So long as any of the Securities remain
outstanding, the Company will provide the following reports to the Purchaser:
(a) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of operations, stockholders' equity and
cash flows of the Company and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such quarterly period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year, and certified by the
chief financial officer of the Company, subject to changes resulting from
year-end adjustments, all in the form of the certificate attached hereto as
Exhibit J;
(b) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidated statements of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries for such year, and the
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such year, setting forth in each case in comparative form corresponding
consolidated figures from the preceding annual audit, all in form of the
certificate attached hereto as Exhibit G and certified to the Company by
independent public accountants of recognized national standing selected by the
Company;
(c) as soon as practicable and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, a
certificate in form of that attached hereto as Exhibit H and certified by the
chief financial officer of the Company as to compliance with Section 6.17
hereof, and as soon as practicable and in any event within 60 days after the end
of each fiscal year, a certificate in form of that attached hereto as Exhibit I
and certified by the chief financial officer of the Company as to compliance
with Section 6.17 hereof;
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(d) promptly after their becoming available, copies of all
registration statements and reports which the Company or any of its Subsidiaries
shall have filed with the Securities and Exchange Commission or any national
securities exchange or quotation system;
(e) promptly after the mailing thereof to the Holders of the
Securities of the Company, copies of all financial statements, reports and proxy
statements so mailed;
(f) promptly after their becoming available, copies of all reports
and compliance certificates filed in connection with the Bank Credit Agreements,
provided, that if there is an amendment to the reporting requirements for the
Bank Credit Agreements, the Purchaser shall receive monthly unaudited
consolidated and consolidating (a) balance sheets, (b) income statements and (c)
statements of cash flow for the Company and its Subsidiaries; and
(g) annually, and prior to the beginning of each fiscal year, the
Company's annual budget for such fiscal year as approved by the Company's Board
of Directors and Management Committees, within thirty (30) days of such
approval, or, in any case, if the annual budget has not been approved, such
budget shall be delivered in whatever form it exists as of the beginning of such
fiscal year.
The Holder of any Security may obtain a copy of any of the foregoing
reports and certificates.
Upon the occurrence of a Change of Control or an Initial Public
Offering, the Obligation of the Company to provide the Purchaser with reports in
accordance with this Section 6.1 shall cease, and the Purchaser shall be
entitled to receive, promptly after their becoming available, copies of all
registration statements and reports filed by the Applicable Company with the
Securities and Exchange Commission or any national securities exchange or
quotation system.
6.2 Restrictions On Charter Amendments. Neither the Company nor any
of its Restricted Subsidiaries shall amend its charter documents except as
required by law or except to the extent that such amendment would not have a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement or the Securities or the rights of the holders of the
Securities.
6.3 Payment of Securities Obligations. (a) The Company shall pay or
cause to be paid, the Redemption Price and dividends on the Preferred Shares in
the manner provided in the Certificate of Designation. The Redemption Price and
dividends shall be considered paid on the due date if the Purchaser receives, as
of 2:00 p.m. Eastern Time on the due date, money deposited by the Company in
immediately available funds (or, in the case of PIK Dividends, PIK Shares)
designated for and sufficient to pay all Liquidation Preference, premium, if
any, and dividends then due.
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(b) The Company shall pay or cause to be paid the Redemption Price
and interest on the Notes on the dates and in the manner provided in the Notes.
The Redemption Price and interest shall be considered paid on the date due if
the Purchaser receives, as of 2:00 p.m. Eastern Time on the due date, money
deposited by the Company in immediately available funds (or, in the case of PIK
Interest, PIK Notes) designated for and sufficient to pay all principal,
premium, if any, and interest then due.
6.4 Maintenance of Office or Agency. (a) The Company shall maintain
an office or agency where Securities may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company in
respect of the Securities may be served. The Company shall give prompt written
notice to the Purchaser of the location, and any change in the location, of such
office or agency.
(b) The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
for such purposes. The Company shall give prompt written notice to the Purchaser
of and such designation or rescission and of any change in the location of any
such other office or agency.
6.5 Use of Proceeds The Company shall use the proceeds of the sale
of the Securities solely in accordance with the provisions of Section 2.7
hereof.
6.6 Compliance Certificate. (a) The Company shall deliver to the
Purchaser, within 45 days after the end of each fiscal quarter, an Officers'
Certificate stating that a review of the activities of the Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Agreement, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Agreement and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Agreement (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of (i) the principal of, or interest on, the Notes or (ii)
the Liquidation Preference of, or dividends on, the Preferred Shares, are
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute Of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 6.1 above shall be accompanied by a
written statement of
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the Company's independent public accountants (who shall be a firm of established
national reputation) that in making the examination necessary for certification
of such financial statements, nothing has come to their attention that would
lead them to believe that the Company has violated any provisions of Section
6.17 hereof, or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation; and provided, that the obligation of the
Company to provide such a written statement from its independent public
accountant shall cease upon the occurrence of an Initial Public Offering of the
Common Stock of an IPO Entity or a Change of Control.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Purchaser, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
6.7 Taxes. The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Securities.
6.8 Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Agreement;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Holder, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
6.9 Restricted Payments. The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Subsidiaries) or to any direct or indirect holder of the Company's Equity
Interests; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary or other Affiliate of the
Company; (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, or create any sinking funds or set asides
for, any Indebtedness that is subordinated to the Securities; (iv) make any
Restricted Investment; or (v) make an Investment in an Unrestricted Subsidiary
(all such payments and other actions set forth in clauses (i) through (v) above
being collectively referred to as "Restricted Payments"); provided, however,
that the Restricted Subsidiaries shall be
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permitted to make Restricted Payments if at the time of and after giving effect
to such Restricted Payment no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; and, either
(A) the Restricted Subsidiary would be permitted by virtue
of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such Restricted
Payment, to incur at least $1.00 of additional Permitted
Indebtedness; or
(B) such Restricted Subsidiary is able to make the
Restricted Payment under the terms of the Indenture
dated as of June 28, 1996 among ASC, the Persons party
thereto, and United States Trust Company of New York
(the "ASC Indenture"), regardless of whether the ASC
Indenture remains in effect at the time of such
Restricted Payment.
For purposes of the test in clause (A) above, Indebtedness shall not include any
Indebtedness incurred under items (i) through (x) listed in Section 6.10 hereof.
The foregoing restrictions regarding Restricted Payments shall not apply to
transactions among Restricted Subsidiaries.
6.10 Incurrence of Indebtedness and Issuance of Preferred Stock.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, cause, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt), and the Company shall not, and shall not permit any of its
Restricted Subsidiaries to issue any preferred stock; provided, however, that,
so long as no Default or Event of Default has occurred and is continuing, the
Company and its Subsidiaries may incur Indebtedness (including Acquired Debt),
and may issue preferred stock (collectively, with items (i) through (x) below,
the "Permitted Indebtedness"), if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
quarterly financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such additional preferred
stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the additional preferred stock
had been issued at the beginning of such four-quarter period the "Debt
Incurrence Test".
The foregoing restrictions on the incurrence by the Company and its
Subsidiaries of Indebtedness and issuance of preferred stock shall not apply to:
(x) Indebtedness of the Utah Subsidiaries arising under term loan
and revolving credit facilities (or any refinancing thereof) (the "Utah
Subsidiary Guarantee");
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provided, however, that such credit facilities shall be senior secured
obligations of the Utah Subsidiaries and the liability of the Company in respect
of the Utah Subsidiary Guarantee shall not exceed the aggregate amount of $10
million; (y) Indebtedness of ASCU arising under the $6.5 million Promissory
Note, dated as of July 3, 1997 (the "Seller Note") made by ASCU in favor of Wolf
Mountain, L.C.; provided, however, that the liability of the Company in respect
of the Seller Note shall not exceed the aggregate amount of $6.5 million
pursuant to the Guaranty dated July 3, 1997 given by the Company in favor of
Wolf Mountain, L.C.; and (z) Indebtedness of ASCU arising under the Ground Lease
Agreement dated July 3, 1997 (the "Ground Lease") between Wolf Mountain, L.C.
and ASCU pursuant to the Ground Lease Guaranty dated July 3, 1997 given by the
Company in favor of Wolf Mountain, L.C.
(ii) the incurrence by the Company and its Restricted Subsidiaries
of Existing Indebtedness and the incurrence of Indebtedness by ASC and its
Restricted Subsidiaries permitted under the ASC Indenture;
(iii) the incurrence by the Company and any of its Restricted
Subsidiaries of Indebtedness, and the issuance by the Company or any of its
Restricted Subsidiaries of any preferred stock, to the Purchaser;
(iv) the assumption and incurrence by the Utah Subsidiaries of
Indebtedness of Wolf Mountain Corporation in connection with the Wolf Mountain
Acquisition.
(v) the incurrence by Real Estate Subsidiaries of Non-Recourse Real
Estate Debt, provided that if any such Indebtedness ceases to be Non-Recourse
Real Estate Debt of a Real Estate Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that is not a Real Estate Subsidiary;
(vi) the incurrence by ASCU and any Unrestricted Subsidiaries of the
Company of Non-Recourse Debt, provided that if any such Indebtedness ceases to
be Non-Recourse Debt of such Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company;
(vii) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund Permitted
Indebtedness;
(viii) the incurrence by ASCU and its Subsidiaries of Indebtedness
in connection with Capital Lease Obligations or purchase money Indebtedness
incurred for the acquisition of equipment;
(ix) the incurrence by the Subsidiaries of Indebtedness for vendor
accounts payable in the ordinary course of business; and
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(x) the incurrence by the Company or any Restricted Subsidiary
(other than the Utah Subsidiaries) of Indebtedness in connection with the
acquisition of additional ski properties ("Acquisition Debt"); provided, that
the sum of (i) the amount of Permitted Investment by the Company or any
Restricted Subsidiary in any Subsidiary which acquires additional ski properties
and (ii) such Indebtedness incurred in connection with the acquisition of such
properties, including Acquired Debt, does not exceed six times the historical
Skiing and Lodging EBITDA of the acquired property.
(xi) the incurrence by any new Subsidiary of Indebtedness which is
recourse to the Company and its Subsidiaries solely due to a Guarantee by the
Company which is subordinated to the Company's Obligations under the Securities
and shall provide that no payment shall be made on such Guarantee until the
Securities have been indefeasably paid for in full.
(b) The Notes may be exchanged into Preferred Stock by the Company,
so long as there is no Indebtedness of the Company outstanding on the exchange
date, other than the Utah Subsidiary Guarantee, and provided that subsequent to
such exchange the Company shall not be permitted to incur Permitted Indebtedness
unless such Indebtedness is incurred through the issuance of preferred stock
junior in terms of liquidation preference to the Preferred Stock, and with
dividends payable only in-kind (so long as the Company pays dividends on the
Preferred Shares only in-kind) and a mandatory redemption date (including by
mandatory offer to purchase) no earlier than the Maturity Date of the Preferred
Stock.
6.11 Asset Sales. The Company shall not, and shall not permit any of
its Subsidiaries to, engage in an Asset Sale; provided, however, that (i) the
Company may sell the Common Stock of ASC or the Common Stock of ASCU, in an
arm's length transaction for fair market value, so long as the Net Proceeds from
such Asset Sale are first applied to redeem all outstanding Securities, on a
pro-rata basis with respect to Preferred Shares and Notes, for an amount per
Security equal to the Redemption Price, fixed as of the date of the Asset Sale;
(ii) an Asset Sale by the Company or any Restricted Subsidiary, other than the
sale of the Common Stock of ASC or ASCU, shall be permitted if it is an arm's
length transaction for fair market value, and the Net Proceeds from such Asset
Sale is applied to the making of capital expenditures or the acquisition of
long-term assets in the same line of business that the Company or such
Restricted Subsidiary was engaged in immediately prior to such Asset Sale; and
(iii) an Asset Sale by ASC shall be permitted if it is an arm's length
transaction for fair market value, and provided that it is permitted under the
terms of the ASC Indenture, regardless of whether the ASC Indenture remains in
effect.
6.12 Transactions with Affiliates. The Company shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any
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Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction with an unrelated Person and (ii) the Company delivers to
the Purchaser (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1
million, a resolution of the Board of Directors of the Company certified to in
an Officers' Certificate certifying also that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the members of the Board of Directors of the Company
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Company of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided that (1) any employment agreement or
arrangement in existence on the date hereof or entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary;
(2) Restricted Payments and Permitted Investments that are permitted by the
provisions of Section 6.9 hereof, and (iii) transactions among Restricted
Subsidiaries, in each case, shall not be deemed Affiliate Transactions.
6.13 Liens. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom, or assign or convey any right to receive income
therefrom, except Permitted Liens.
6.14 Corporate Existence. The Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its respective Restricted Subsidiaries.
6.15 Offer to Repurchase Or Exchange Upon Change of Control. (a)
Upon a Change of Control, the Company shall (or shall cause the Acquiring Person
to), in accordance with the procedures set forth in this Section 6.15, (i) offer
to repurchase all or any part of the Purchaser's Securities pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to the Redemption Price fixed as of the date of the Change of Control (the
"Change of Control Payment"), and (ii) in the event the Change of Control is of
the type specified in clauses (i), (ii), (iii), or (iv) of the definition
thereof, and the Acquiring Person is a Designated Acquiring Person and a Public
Company, offer to exchange all or any part of the Securities for Repriced
Converts or Common Stock of the Acquiring Person on the terms specified in
Section 6.15(c) (the "Exchange"). Not later than 30 days prior to any Change of
Control, the Company shall
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(or shall cause the Acquiring Person to) mail a notice (a "Change of Control
Notice") to the Purchaser stating: (1) that a Change of Control is to occur,
describing the terms thereof in reasonable detail, including the identity of the
Acquiring Person, and its capitalization; (2) that the Change of Control Offer
is being made pursuant to this Section 6.15 and that all Securities (including
PIK Notes and PIK Shares issued thereon) tendered shall be accepted for payment
or Exchange; (3) the purchase price and the purchase date, if the Purchaser
elects the repurchase option, or the date of Exchange, if the Purchaser elects
the Exchange option, which in either which shall be no later than the date the
Change of Control shall occur (the "Change of Control Payment Date"); (4) the
material terms of the offering of the Repriced Converts per $1,000 Principal
Amount or Liquidation Preference of Securities exchanged (including the number
of shares of Common Stock of the Acquiring Person into which they are
convertible and the Applicable Conversion Price per share of Common Stock) and
the material terms of the offering of the Common Stock, including the Market
Value per share of Common Stock of the Acquiring Person, (5) that the Repriced
Converts will be issued pursuant to the Repriced Converts Indenture or the
Repriced Converts Certificate of Designation, that the Repriced Converts have
been duly authorized by the Acquiring Person, and upon issuance thereof, will be
legal, valid and binding obligations of the Acquiring Person enforceable in
accordance with their terms, and that the Conversion Shares of the Acquiring
Person will be, upon consummation of the Exchange or conversion of the Repriced
Converts, as the case may be, legally and validly issued, fully paid and
non-assessable, free of pre-emptive rights, (6) that any Security not tendered
or Exchanged shall continue to accrue dividends or interest, as applicable; (7)
that, unless the Company defaults in the payment of the Change of Control
Payment or the Exchange, all Securities accepted for payment pursuant to the
Change of Control Offer shall cease to accrue dividends or interest, as
applicable after the Change of Control Payment Date; (8) the Purchaser shall be
required to surrender the Securities sold or exchanged pursuant to a Change of
Control Offer to the Company by close of business on the Business Day preceding
the Change of Control Payment Date; (9) that the Purchaser is entitled to
withdraw or change its election if the Company receives, not later than the
close of business on the fifth Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter including a
statement that the Purchaser is withdrawing or changing its election to have the
Securities purchased or exchanged (specifying in detail the nature of such
change); and (10) that in the event Securities are being purchased or exchanged
only in part, the Purchaser shall be issued new Securities of the same type
equal in Principal Amount or Liquidation Preference to the unpurchased portion
of the Securities surrendered. The Company and the Acquiring Person shall comply
with the applicable securities laws and regulations thereunder to the extent
such laws and regulations are applicable to the repurchase or exchange of
Securities in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, or
shall cause the Acquiring Person to, accept for payment or exchange all
Securities or portions thereof properly tendered pursuant to the Change of
Control Offer and promptly mail to the Purchaser the Change of Control Payment
or the Repriced Converts or
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Common Stock of the Acquiring Person issued in exchange for such Securities. The
Company shall promptly deliver to the Purchaser a new Security of the same
series equal in Liquidation Preference or Principal Amount, as applicable, to
any unpurchased or unexchanged portion of the Securities surrendered.
(c) If the Purchaser elects the option to exchange pursuant to the
Change of Control Offer, the Securities shall be exchanged for (i) a number of
shares of Common Stock of the Designated Acquiring Person that is a Public
Company determined by dividing the Redemption Price on the date of exchange for
Securities being exchanged by the Market Valuation per share of Common Stock of
the Acquiring Person, or (ii) Repriced Converts in a Principal Amount or
Liquidation Preference for the Securities being exchanged, which shall be
convertible into Common Stock of the Designated Acquiring Person that is a
Public Company. The Repriced Converts may be issued in the form of debentures or
preferred stock, as the Company or any Designated Acquiring Person that is a
Public Company may specify in the Change of Control Notice. Any Repriced
Converts shall be issued pursuant to an indenture substantially in the form of
the Repriced Converts Indenture, or pursuant to a Certificate of Designation
substantially in the form of the Repriced Converts Certificate of Designations.
The Repriced Converts shall be convertible into Common Stock of the Designated
Acquiring Person that is a Public Company at an initial conversion price
(subject to adjustment as provided in the Repriced Converts Indenture or the
Repriced Converts Certificate of Designations) per share of Common Stock of such
Designated Acquiring Person at a price equal to the Market Valuation thereof on
the date of the Change of Control, multiplied by the difference between one (1)
minus the Conversion Discount Percentage. The Common Stock of the Designated
Acquiring Person that is a Pubic Company, the Repriced Converts of such
Designated Acquiring Person and the Common Stock of such Designated Acquiring
Person issuable upon conversion thereof shall be, at the Change of Control
Closing Date, fully registered under the Securities Act in accordance with the
Registration Rights Agreement, and freely saleable by the Purchaser under the
Securities Act.
(d) If the Purchaser elects to retain the Securities and permits the
Change of Control Offer to expire, the Securities shall no longer be
exchangeable into Repriced Converts or Common Stock of any Person provided,
however, that (i) thereafter the Securities will be redeemable at any time, at
the option of the Company, at a price equal to the Redemption Price as of the
date of the Change of Control, plus accrued and unpaid interest and dividends to
the date of redemption, (ii) the foregoing limitation shall not be applicable to
a Change of Control of a type specified in clause (v) of the definition thereof
and (iii) the provisions of this clause (d) shall not apply if the Acquiring
Person is a Designated Acquiring Person that is not a Public Company on the date
of the Change of Control.
(e) "Acquiring Person" shall mean (i) in the case of a transaction
described in clause (i) or (ii) of the definition of "Change of Control", the
Person that is the party receiving the greatest portion of the assets or earning
power transferred pursuant
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to such transaction or transactions, and (ii) in the case of a transaction
described in clause (iii) or (iv) of the definition of "Change of Control", the
Person that is the issuer of any securities into which shares of Holdings Common
Stock are converted in any merger or consolidation, and if no securities are so
issued, the Person that is the other party to the merger or consolidation
(including, if applicable, the Company, if it is the surviving corporation),
provided that if the Change of Control is not pursuant to a merger or
consolidation the Acquiring Person shall be the party holding the greatest
number of shares of Common Stock immediately following such Change of Control;
provided, further, that in any such case, (1) if the Common Stock of any of the
foregoing Acquiring Persons is not at the time registered under Section 12 of
the Exchange Act, and such Person is a direct or indirect subsidiary of
Affiliate of another Person the Common Stock of which is and has been so
registered, "Acquiring Person" shall refer to such other Person; (2) in case
such Person is a subsidiary, directly or indirectly, or Affiliate of more than
one Person, the shares of Common Stock of two or more of which are and have been
so registered, "Acquiring Person" shall refer to whichever of such Persons is
the issuer of the Common Stock having the greatest aggregate market value; and
(3) in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint ventures and the Acquiring
Persons in each such chain shall bear the obligations set forth in this Section
6.15 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(f) The Company shall not permit a Change of Control to occur unless
prior thereto the Company and each Acquiring Person and each other Person who
may become an Acquiring Person as a result of such Change of Control shall have
executed and delivered to the Purchaser a supplemental agreement providing for
the terms set forth in this Section 6.15 and agreeing to be bound by the
Registration Rights Agreement.
6.16 Pension Plans
(i) Each of the Company, its Subsidiaries and each ERISA
Affiliate will furnish to the Agent forthwith upon filing or receipt, as the
case may be, a copy of (A) any notice by the Company, its Subsidiaries, or any
ERISA Affiliate of a Benefit Plan termination sent to the PBGC under Section
4041 of ERISA, or (B) any notice sent or received by the Company, its
Subsidiaries or any ERISA Affiliate under Section 4041, 4042, 4043, 4063, 4065,
4066 or 4068 of ERISA.
(ii) Each of the Company and its Subsidiaries shall notify the
Agent within ten (10) Business Days after receipt by any of the Company, its
Subsidiaries or any ERISA Affiliate of a notice from a Multiemployer Plan
regarding the imposition of withdrawal liability and shall send copies of each
such notice.
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(iii) Each of the Company, its Subsidiaries and each ERISA
Affiliate will furnish to the Agent as soon as practicable upon filing a copy of
each Annual Report (Form 5500) in respect of each Benefit Plan.
6.17 Financial Covenants. (a) Indebtedness to Consolidated Cash
Flow. The Company shall not permit the ratio of its Consolidated Indebtedness as
of each date set forth below to Consolidated Cash Flow for the four consecutive
fiscal quarters ended on such date, to exceed the corresponding amount set forth
opposite such date. For purposes of this Section 6.17(a) only, Indebtedness
shall not include (i) Indebtedness incurred through the issuance of the
Securities, (ii) the Utah Subsidiary Guarantee and (iii) Non-Recourse Real
Estate Debt.
Fiscal Quarter Ended Ratio
-------------------- -----
April 1998 6.0
July 1998 5.75
October 1998 5.75
January 1999 5.75
April 1999 5.75
July 1999 5.25
October 1999 5.25
January 2000 5.25
April 2000 5.25
July 2000 5.25
October 2000 5.00
January 2001 5.00
April 2001 5.00
July 2001 5.00
October 2001 5.00
January 2002 5.00
April 2002 5.00
(b) Minimum Consolidated Cash Flow. The Company shall not permit its
Consolidated Cash Flow, measured as of each date set forth below for the period
of four consecutive fiscal quarters of the Company ended on such date, to be
less then the corresponding amount set forth opposite such date.
Measurement Date Minimum Consolidated Cash Flow
---------------- ------------------------------
First Quarter 1998 28 Million
Second Quarter 1998 $32 Million
Third Quarter 1998 $38 Million
Fourth Quarter 1998 $42 Million
First Quarter 1999 $42 Million
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Second Quarter 1999 $42 Million
Third Quarter 1999 $43 Million
Fourth Quarter 1999 $44 Million
First Quarter 2000 $44 Million
Second Quarter 2000 $44 Million
Third Quarter 2000 $45 Million
Fourth Quarter 2000 $46 Million
First Quarter 2001 $46 Million
Second Quarter 2001 $46 Million
Third Quarter 2001 $47 Million
Fourth Quarter 2001 $48 Million
First Quarter 2002 $48 Million
Second Quarter 2002 $48 Million
Third Quarter 2002 $49 Million
Fourth Quarter 2002 $50 Million
(c) Maintenance of Interest Coverage. The Company will not permit
the ratio of (i) Consolidated Cash Flow, to (ii) Consolidated Interest Expense
(excluding (i) any interest or dividends paid in respect of the Securities and
(ii) any interest accrued and unpaid or payable on the Subordinated Indebtedness
which is not paid in cash), measured as of each date set forth below for the
period of four consecutive full fiscal quarters of the Company ended on such
date, to be less than the ratio set forth opposite such date; provided, however,
that in the case of any such measuring date which is earlier than April, 1998,
the applicable measuring period shall be the period from the Closing Date to and
including such measuring date:
Fiscal Quarter Ended Ratio
-------------------- -----
April 1998 1.6
July 1998 1.6
October 1998 1.6
January 1998 1.6
April 1999 1.7
July 1999 1.7
October 1999 1.7
January 1999 1.7
April 2000 1.8
July 2000 1.8
October 2000 1.8
January 2000 1.8
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6.18 Negative Pledge (a) The Company will not create, incur, assume
or suffer to exist, any mortgage, deed of trust, pledge, lien, security
interest, hypothecation or other preferential arrangement, charge or encumbrance
(including, without limitation, any conditional sale, or other title retention
agreement, or finance lease) of any nature, upon or with respect to all of the
Company's Capital Stock, as well as all of the Company's owned or hereafter
acquired (i) Capital Stock of ASC, (ii) Capital Stock of ASCU, and (iii) Capital
Stock of Wolf Mountain Company.
6.19 Governmental Consent. The Company shall, and shall cause its
Subsidiaries and Affiliates to, obtain all consents, permits and approvals, and
shall make all filings, required under applicable law or regulations of any
governmental authority or regulatory body in connection with the exercise of any
exchange or conversion rights with respect to the Securities and the Repriced
Converts.
6.20 Wolf Mountain Acquisition. The consummation of the Wolf
Mountain Acquisition shall occur contemporaneously with the Closings hereunder.
6.21 No Further Issuance Without the prior written consent of the
Purchaser, neither ASC nor ASCU shall issue any instruments, other than the
Securities and Repriced Converts, that are convertible into or exchangeable for
any shares of Capital Stock of ASC or ASCU, nor shall it issue or authorize any
rights to subscribe for or purchase, or any options or warrants for the purchase
of, or any agreements (contingent or otherwise) providing for the issuance of,
or any calls, commitments or claims of any character relating to, any shares of
Capital Stock of ASC or ASCU, or any securities convertible into or exchangeable
for any such shares, provided, however, that subsequent to the occurrence of a
Change of Control or IPO, or if all of the Securities have been exchanged into
Repriced Converts, then the limitations upon ASC or ASCU under this Section 6.21
shall no longer have effect.
6.22 Undertakings The Company and any IPO Entity shall undertake to
reserve for issuance prior to the exercise of the conversion privileges in the
Securities or Repriced Converts, (a) Conversion Shares which, when issued and
delivered against payment, will be duly authorized, validly issued, fully paid
and non-assessable and subject to no Liens in respect of the issuance thereof,
or (b) Repriced Converts, each in an amount sufficient to meet the obligations
under all the outstanding Securities in the event the conversion options therein
are exercised.
6.23 Representations and Warranties. The Company, the Acquiring
Person or the IPO Entity shall cause the representations and warranties
contained in Section 4.3 to continue to be true until the Maturity Date.
6.24 Limitations on IPO For as long as any Securities remain
outstanding, the Company shall not permit any of its Subsidiaries, or any
Affiliates over which it exercises Control, to be the subject of an Initial
Public Offering of the Common Stock of such Person.
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6.25 Holding Company Formation. The Company will not permit any
Holding Company Affiliate to be formed unless such Holding Company Affiliate
agrees to be bound by Section 6.15 and Section 8.1 hereof and by the
Registration Rights Agreement as if they were a party thereto.
SECTION 7. EVENTS OF DEFAULT.
7.1 Events Of Default. An "Event of Default" shall exist if any of
the following occurs:
(a) The Company fails to (i) redeem the Preferred Stock or (ii) make
any payment of principal on any Note on the date such payment is due, whether at
maturity or otherwise;
(b) The Company breaches any of its covenants or fails to fulfill
its obligations hereunder contained in any subsection of Section 6 hereof;
(c) The Company fails to make any financial report required to be
made by it under Section 6.1 of this Agreement and such Default shall continue
for a period of thirty (30) Business Days;
(d) The Company or any of its Subsidiaries fails to comply with any
provision of this Agreement or the Securities, other than the covenants
specified in subparagraphs (a) and (c) above, and such failure continues for
more than 30 days after the earlier of (1) the receipt of notice thereof by the
Company from the Purchaser or (2) the day on which such failure shall first
become known to any executive officer of the Company;
(e) Any warranty, representation or other statement by or on behalf
of the Company contained in this Agreement, the Securities or in any certificate
or instrument furnished in compliance with this Agreement or the Securities
shall fail to be true and correct in any material respect when made and such
failure has had, or is reasonably likely to have, a Material Adverse Effect;
(f) A custodian, receiver, liquidator or trustee of the Company, or
any of its Subsidiaries which holds a substantial part of the Properties of the
Company and its Subsidiaries (taken as a whole), is appointed by court order and
such order remains in effect for more than 90 days; or the Company, or any of
its Subsidiaries which holds a substantial part of the Company and its
Subsidiaries (taken as a whole), is adjudicated bankrupt or insolvent; or any
substantial part of the Properties of the Company and its Subsidiaries (taken as
a whole), is sequestered by court order and such order remains in effect for
more than 90 days; or petition is filed against the Company or any of its
Subsidiaries which holds a substantial part of the Properties under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter in
effect, and is not dismissed or stayed within 90 days after such filing;
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(g) The Company or any of its Restricted Subsidiaries files a
petition in voluntary bankruptcy or seeking relief under provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law or regulation, whether now or hereafter in
effect, or consents to the filing of any petition against it under such law;
(h) The Company or any of its Restricted Subsidiaries fails
generally to pay its debts as such debts become due except for debts which the
Company or such Restricted Subsidiary may contest in good faith, or becomes
insolvent or bankrupt, consents to the entry of an order for relief against it
in an involuntary bankruptcy case, or the Company or any of its Restricted
Subsidiaries makes any assignment for the benefit of its creditors, or consents
to the appointment of a custodian (including, without limitation, a receiver,
liquidator or trustee) of the Company or any Restricted Subsidiary;
(i) The Company or any Restricted Subsidiary (whether as primary
obligor or as guarantor or other surety) shall fail, after the expiration of any
applicable grace period, to make any payment due on, or to otherwise redeem,
when due, any Indebtedness of such Person, provided that the amount of the
overdue payment exceeds $1 million;
(j) The Company or any Restricted Subsidiary shall fail to perform
or observe any agreement, term or condition contained in any agreement under
which an Indebtedness is created (or if any other event thereunder or under any
other agreement shall occur and be continuing) and the holders of such
Indebtedness shall have elected as a result thereof to cause such Indebtedness
to become due (or to be repurchased by the Company or such other Restricted
Subsidiary) prior to the stated maturity thereof (provided that the amount of
Indebtedness which becomes due exceeds $1 million);
(k) any final judgment or judgments for the payment of money is or
are outstanding against the Company or any Restricted Subsidiary (provided that
the aggregate amount payable under such judgments exceeds $1 million) and has
been outstanding for more than sixty (60) days from the date of its entry and
shall not have been discharged in full or stayed by appeal, bond or otherwise;
(l) The Purchaser shall not have received, on or before July 28,
1997, from the law firm of Pierce Atwood, special counsel to the Company, a
favorable legal opinion dated as of the date of the Initial Closing and
addressed to the Purchaser, covering the matters specified in the attached
Exhibit F and such other matters incident to the transactions contemplated
herein as the Purchaser may request; or
(m) The Subsequent Closing shall not have occurred on or before July
28, 1997.
7.2 Default Remedies. (a) If any Event of Default described in
subparagraph (a) through (m) of Section 7.1 (other than an Event of Default
under subparagraph (b), of Section 7.1 if such Event of Default is with respect
to the covenants
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in Section 6.17) occurs and is continuing, there shall be a Mandatory Redemption
of the Securities by the Company unless the Purchaser shall, in its sole
discretion, elect instead to have visitation rights with respect to (A) meetings
of the Board of Directors of each of the Company, ASC, and any of the Utah
Subsidiaries, as such may occur, and (B) meetings of the Management Committees
of each of the Company, ASC and any of the Utah Subsidiaries, as such may occur.
Such visitation rights shall continue until the Event of Default is cured.
b) If an Event of Default occurs and is continuing due to a breach
of the covenants of Section 6.17, the Purchaser shall only be entitled to
visitation rights with respect to (A) meetings of the Board of Directors of each
of the Company, ASC, and any of the Utah Subsidiaries, as such may occur, and
(B) meetings of the Management Committees of each of the Company, ASC and any of
the Utah Subsidiaries, as such may occur until the Event of Default is cured.
7.3 Annulment Of Event of Default. The Purchaser may, by written
instrument filed with the Company, rescind and annul any declaration of an Event
of Default made by it and the consequences thereof, if all existing Events of
Default have been cured or waived by it; provided, however, that such rescission
and annulment shall not serve as a waiver of any subsequent declaration of an
Event of Default.
SECTION 8. OFFER TO EXCHANGE IN IPO
8.1 Conversion And Exchange of Securities. (a) In connection with an
IPO, the Company shall offer (or shall cause the IPO Entity to Offer) to
exchange pursuant to the offer described below (the "IPO Offer") all or any part
of the Securities into Repriced Converts or Common Stock of the IPO Entity on
the terms specified in this Section (the "IPO Exchange"). At least 45 days prior
to the filing of a registration statement in connection with an IPO, the Company
shall (or shall cause the IPO Entity to) provide written notice (an "Offering
Notice") to the Purchaser relating to the proposed IPO stating: (1) The identity
of the IPO Entity and a brief description thereof, including the capitalization
thereof, the estimated price range (the "IPO Price Range") for the IPO Common
Stock proposed to be offered, if such offering is an underwritten public
offering, with the breadth of such range not to exceed 10% of the lower price of
such estimated range, and including a pro-forma balance sheet giving effect to
such offering, (3) the material terms of the Repriced Converts per $1,000
Principal Amount of Liquidation Preference of Securities exchanged (including
the number of shares of Common Stock of the IPO Entity into which they are
convertible and the Applicable Conversion Price per share of Common Stock of the
IPO Entity) and the material terms of the offering, including the size of the
offering (in $US), (the "Offering Amount") of the IPO Common Stock, including
the number of Conversion Shares which the Purchaser may include for sale in the
IPO, and (4) that the Repriced Converts will be issued pursuant to the Repriced
Converts Indenture or Repriced Converts Certificate of Designation, that the
Repriced Converts have been duly authorized by the IPO Entity and, upon issuance
thereof, will be legal, valid and binding obligations of the IPO Entity
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enforceable in accordance with their terms, and that the Conversion Shares of
the IPO Entity will be, upon consummation of the IPO Exchange or conversion of
the Repriced Converts, legally and validly issued, fully-paid and
non-assessable, free of pre-emptive rights. The Offering Notice shall be
accompanied by a reasonably complete draft of the Registration Statement for the
IPO. The Purchaser may accept the IPO Offer, in whole or in part, by delivering
to the Company, within 20 days of its receipt of an Offering Notice and such
draft registration statement, a written notice (an "Offering Response Notice")
specifying the Principal Amount or Liquidation Preference of Securities which it
intends to exchange for Conversion Shares or Repriced Converts, and the number
of Conversion Shares, if any, it intends to include for sale in the IPO. In the
event that Purchaser fails to deliver to the Company an Offering Response Notice
within the 20 day period specified above, the Purchaser shall be deemed to have
irrevocably waived any continuing right to convert the Securities into
Conversion Shares or Repriced Converts unless the IPO, on the terms specified in
the Offering Notice, is not consummated within 180 days of the expiration of
such 20-day period. The Purchaser's acceptance or failure to accept the IPO
Offer shall be irrevocable unless (i) the actual price to the public of the IPO
Common Stock proposed by the underwriters, as notified to the Purchaser in
writing, differs from the IPO Range (at either the high or low end of the range)
by more than 10%, or (ii) the actual size (in $US) of the offering differs from
the Offering Amount by 15% or more, in either which case the Purchaser shall
have the right to provide the Company with a revised response to the Offering
Notice (a "Revised Response Notice"), given within three (3) business days of
receipt of such notice, regarding its revised election to exchange, or not
exchange, Securities into Conversion Shares or Repriced Converts. The Company
and the IPO Entity shall comply with the applicable securities laws and
regulations thereunder to the extent that such laws or regulations are
applicable to the exchange of securities in connection with an Offering Notice.
(b) On the effective date of the Registration Statement for the IPO,
or if later, the date of the underwriting agreement with respect thereto is
executed, if the Securities specified in the Response Notice or Revised Response
Notice, as the case may be, are to be exchanged for Conversion Shares or
Repriced Converts of the IPO Entity, the number of Conversion Shares shall be
determined by dividing the Redemption Price of the Securities by the IPO Price.
The Repriced Converts may be issued in the form of debentures or preferred
stock, as the Company or the IPO Entity may specify in the Offering Notice. Any
Repriced Converts shall be issued pursuant to an indenture substantially in the
form of the Repriced Convert Indenture or pursuant to a Certificate of
Designation substantially in the form of the Repriced Convert Certificate of
Designations and shall be in a Principal Amount or Liquidation Preference of the
Securities being exchanged. The Repriced Converts shall be convertible into IPO
Common Stock at an initial conversion price (subject to adjustment as provided
in the Repriced Converts Indenture or the Repriced Converts Certificate of
Designations) per share of IPO Common Stock equal to the IPO Price multiplied by
the difference between one (1) minus the Conversion Discount Percentage. As
promptly as practicable thereafter, the Company or IPO Entity shall issue and
deliver to the Purchaser new Securities in a Principal Amount or Liquidation
Preference equal to the portions of the Securities not
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being exchanged and certificates for the Conversion Shares or the Repriced
Converts of the IPO Entity being issued. The Conversion Shares of the IPO
Entity, the Repriced Converts of the IPO Entity and the Conversion Shares
issuable upon conversion thereof shall, at the closing of the IPO, be fully
registered under the Securities Act in accordance with the provisions of the
Registration Rights Agreement and freely saleable by the Purchaser under the
Securities Act.
(c) The Company shall not, and shall cause any Holding Company
Affiliate or Designated Acquiring Person not to, initiate an IPO unless the
Company and any proposed IPO Entity shall have complied with the provisions of
this Section and, if the IPO Entity is not already a party to the Registration
Rights Agreement, unless such entity shall have executed a supplemental
agreement agreeing to be bound by the Registration Rights Agreement. The Company
shall not permit any direct or indirect Subsidiary of the Company to initiate or
consummate an IPO.
(d) If the Purchaser elects to retain the Securities and permits the
IPO Offer to expire, subject to the provisions of the fifth and sixth sentences
of Section 8.1(a), the Securities shall no longer be exchangeable into Repriced
Converts or Common Stock of any Person provided, that thereafter the Securities
will be redeemable at any time, at the option of the Company, at a price equal
to the Redemption Price of the Securities as of the date of the IPO, plus
dividends and interest accrued thereon.
SECTION 9. MISCELLANEOUS.
9.1 Notices; Payments. (a) All notices and other communications
under this Agreement or in respect of the Securities shall be given or made in
writing and telecopied or mailed by registered airmail, return receipt
requested, postage prepaid, air courier, or delivered personally to the intended
recipient,
(1) if to the Purchaser, to:
Madeleine LLC
c/o Cerberus Partners
450 Park Avenue, 28th Floor
New York, NY 10022
Attn: Mr. Robert Davenport
Tel: 212-891-2118
Fax: 212-758-5305
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attn: Mark A. Neporent, Esq.
Stuart D. Freedman, Esq.
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, or
(2) if to the Company, to:
ASC Holdings, Inc.
Sunday River Access Road
P.O. Box 450
Bethal, Maine 04217
Att: Mr. Chris Howard
Tel: 207-824-8100
Fax: 207-824-5158
(b) All such notices and other communication shall be deemed to have
been duly given when transmitted by telecopy, subject to telephone confirmation
of receipt, or when personally delivered or, in the case of a mailed notice, ten
days after being duly deposited in the mails, in each case given or addressed as
aforesaid.
(c) All payments of principal and interest due on any Note,
dividends on Preferred Shares or any other amount due under this Agreement shall
be made in strict compliance with the written payment instructions as such
Purchaser or any subsequent holder of such Notes or Preferred Shares may provide
to the Company in accordance with this Section 9.1.
9.2 Governing Law. This Agreement and the Notes and all other
documents contemplated hereby (except for the Certificate of Designation and the
Preferred Shares) shall be deemed to be contracts made under, and shall be
construed in accordance with and governed by the laws of the State of New York
(without reference to the conflicts of laws principles thereof) and the laws of
the United States of America. The Certificate of Designation and Preferred
Shares shall be deemed to be contracts made under, and shall be construed in
accordance with and governed by, the laws of the State of Maine (without
reference to conflicts of law principles) and the laws of the United States of
America.
9.3 Severability. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remainder of this Agreement shall not be affected by such
judgment, and the Agreement shall be carried out as nearly as possible according
to its original terms and intent.
9.4 Survival. All representations, warranties and covenants made by
the Company herein or in any certificate or other instrument delivered or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the Purchaser and shall survive the
delivery of the Securities and the Conversion Shares regardless of any
investigation made by the Purchaser or on the Purchaser's behalf. All statements
in any such certificate or other instrument shall constitute warranties and
representations by the Company hereunder.
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9.5 Successors And Assigns. (a) This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
and holders of the Securities. The provisions of this Agreement are for the
benefit of, and shall be binding upon, each successive holder, from time to
time, of any of the Securities issued under this Agreement, and shall be
enforceable by and against any such holder, whether or not any express
assignment to such holder of rights, or delegation and assumption or acceptance
by a subsequent holder of rights, or delegation and assumption or acceptance by
a subsequent holder of the Securities or obligations and limitations, under this
Agreement has been made by you or your successor or assign of any holder of
Securities.
(b) The Company shall not consolidate with or merge into, or
transfer or lease all or substantially all of its Properties or assets to, any
Person unless:
(i) the Person is a corporation;
(ii) the Person assumes by supplemental agreement(s) all of
the obligations of the Company under the Securities and the
conversion right of each holder of the Securities; and
(iii) immediately after the transaction, no Event of Default
exits and is continuing.
The surviving, transferee or lessee corporation shall be the
successor Company, but the predecessor Company in the case of a transfer or
lease shall not be released from the obligation to pay the principal of and
interest on the Securities. The Company shall provide to the Purchaser a legal
opinion from the Company's counsel as conclusive evidence that any such
consolidation, merger, transfer or lease complies with the applicable provisions
of this Agreement.
9.6 Amendment. (a) Prior to the Closing, this Agreement may be
amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Purchaser. Subsequent
to the Closing, the Agreement may be amended, and the observance of any term of
this Agreement may be waived, with (and only with) the written consent of a
majority of the Holders of the Notes and a majority of the Holders of the
Preferred Stock.
(b) So long as any Securities are outstanding, the Company will not
solicit, request or negotiate for or with respect to any proposed waiver or
amendment of any of the provisions of this Agreement or the Securities unless
each holder of the Securities (irrespective of the amount of Securities then
owned by it) shall be informed thereof by the Company and shall be afforded the
opportunity of considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision with respect
thereto. Executed or true and correct copies of any waiver or consent effected
pursuant to the provisions of this Section 9.6 shall be delivered by the Company
to each holder of outstanding Securities forthwith following the date on which
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the same shall have been executed and delivered by the holder or holders of the
outstanding Securities. The Company will not, directly or indirectly, pay or
cause to be paid nay remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of the Securities as consideration for
or as an inducement to the entering into by any holder of the Securities of any
waiver or amendment of any of the terms and provisions of this Agreement unless
such remuneration is concurrently paid on the same terms, ratably to the holders
of the notes the outstanding.
(c) Any such amendment or waiver shall apply equally to all the
holders of the Securities and shall be binding upon them and upon each future
holder of any Security and upon the Company whether or not such Security shall
have been marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or affect any obligation not expressly amended or waived
or impair any right consequent thereon.
(d) Prior to the issuance of the Repriced Converts, the Repriced
Converts Certificate of Designation may be amended with the approval of a
majority of the Holders of Preferred Shares and a majority of the Holders of the
Notes.
9.7 Counterparts. This Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together only one Agreement.
9.8 Specific Performance. The parties hereto recognize and agree
that if for any reason any of the material provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money damages
would not be an adequate remedy. Accordingly, each party agrees that, in
addition to any other available remedies, the other party shall be entitled to
an injunction restraining any violation or threatened violation of the
provisions of this Agreement. In the event that any action should be brought in
equity to enforce the provisions of the Agreement, no party will allege, and
each party hereby waives the defense, that there is an adequate remedy at law
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9.9 Headings And Table Of Contents. The headings of the sections of
this Agreement and the Table of Contents are inserted for purposes of
convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
The execution by the parties below shall constitute a contract
between such parties for the uses and purposes herein above set forth.
Dated as of the day and year first above written.
ASC HOLDINGS, INC. MADELEINE LLC
By: /s/ Christopher E. Howard By: /s/ Bob Davenport
------------------------- -----------------
Name: Christopher E. Howard Name:_________________________________
Title: Chief Administrative Title:________________________________
Officer
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TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS ................................................. 1
1.2 Rules of Construction ........................................ 21
SECTION 2. PURCHASE AND SALE OF THE SECURITIES ......................... 21
2.1 Purchase and Sale of the Securities .......................... 21
2.2 Authorization of Notes and Repriced Converts ................. 21
2.3 Payment of Principal and Interest ............................ 22
2.4 Conversion Rights ............................................ 24
2.5 Seniority .................................................... 24
2.6 Closings ..................................................... 24
2.7 Use of Proceeds .............................................. 25
2.8 Replacement Certificates ..................................... 25
2.9 Delivery Expenses ............................................ 26
2.10 Issue Taxes .................................................. 26
2.11 Closing Fee .................................................. 26
2.12 Transfer Restrictions ........................................ 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............. 26
3.1 Organization and Qualification ............................... 27
3.2 Authority Relative to this Agreement ......................... 27
3.3 Financing Arrangements ....................................... 27
3.4 Investment Intent ............................................ 27
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 27
4.1 Corporate Organization And Authority Of The
Company And Subsidiaries ................................... 27
4.2 Authorized Capital Stock ..................................... 28
4.3 Sale Is Legal And Authorized ................................. 28
4.4 No Defaults .................................................. 29
4.5 Governmental Consent ......................................... 29
4.6 Conversion Shares, Legends ................................... 30
4.7 Legal Proceedings ............................................ 30
4.8 Full Disclosure .............................................. 30
4.9 Use Of Proceeds .............................................. 31
4.10 Certain Laws ................................................. 31
4.11 Capital Stock ................................................ 31
4.12 Business Operations and Other Information: Financial
Condition .................................................. 31
4.13 Subsidiaries ................................................. 33
-i-
<PAGE>
4.14 No Conflicts with Agreements, Statutes, Orders, Etc. ......... 33
4.15 Intentionally Omitted ........................................ 33
4.16 Assets and Properties ........................................ 33
4.17 Taxes ........................................................ 34
4.18 Intentionally Omitted ........................................ 34
4.19 Offering of Securities ....................................... 34
4.20 Broker's or Finder's Commissions ............................. 34
4.21 Environmental Matters ........................................ 35
4.22 ERISA ........................................................ 35
4.23 Material Contracts ........................................... 35
4.24 Insurance .................................................... 36
4.25 Related Documents ............................................ 36
4.26 Solvency ..................................................... 36
4.27 Consents and Approvals ....................................... 36
SECTION 5. CLOSING CONDITIONS .......................................... 36
5.1 [Intentionally Omitted] ...................................... 36
5.2 Representations And Warranties True .......................... 36
5.3 Compliance With This Agreement ............................... 36
5.4 Officers' Certificate ........................................ 37
5.5 Corporate Existence And Authority ............................ 37
5.6 Consent Of Holders Of Other Securities ....................... 37
5.7 Proceedings Satisfactory ..................................... 37
5.8 Absence of Material Adverse Effect ........................... 37
5.9 Fees ......................................................... 37
5.10 Wire Instructions ............................................ 37
5.11 Solvency Letter .............................................. 38
5.12 Real Estate Appraisals ....................................... 38
SECTION 6. COMPANY COVENANTS ........................................... 38
6.1 Financial Reports ............................................ 38
6.2 Restrictions On Charter Amendments ........................... 39
6.3 Payment of Securities Obligations ............................ 39
6.4 Maintenance of Office or Agency .............................. 40
6.5 Use of Proceeds .............................................. 40
6.6 Compliance Certificate ....................................... 40
6.7 Taxes ........................................................ 41
6.8 Stay, Extension and Usury Laws ............................... 41
6.9 Restricted Payments .......................................... 41
6.10 Incurrence of Indebtedness and Issuance of
Preferred Stock .............................................. 42
6.11 Asset Sales .................................................. 44
6.12 Transactions with Affiliates ................................. 45
6.13 Liens ........................................................ 45
6.14 Corporate Existence .......................................... 45
6.15 Offer to Repurchase Or Exchange Upon Change of
Control ...................................................... 45
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<PAGE>
6.16 Pension Plans ................................................ 48
6.17 Financial Covenants .......................................... 49
6.18 Negative Pledge .............................................. 51
6.19 Governmental Consent ......................................... 51
6.20 Wolf Mountain Acquisition .................................... 51
6.21 No Further Issuance .......................................... 51
6.22 Undertakings ................................................. 51
6.23 Representations and Warranties ............................... 51
6.24 Limitations on IPO ........................................... 51
6.25 Holding Company Formation .................................... 52
SECTION 7. EVENTS OF DEFAULT ........................................... 52
7.1 Events Of Default ............................................ 52
7.2 Default Remedies ............................................. 53
7.3 Annulment Of Event of Default ................................ 54
SECTION 8. OFFER TO EXCHANGE IN IPO .................................... 54
8.1 Conversion And Exchange of Securities ........................ 54
SECTION 9. MISCELLANEOUS ............................................... 56
9.1 Notices; Payments ............................................ 56
9.2 Governing Law ................................................ 57
9.3 Severability ................................................. 57
9.4 Survival ..................................................... 57
9.5 Successors And Assigns ....................................... 58
9.6 Amendment .................................................... 58
9.7 Counterparts ................................................. 59
9.8 Specific Performance ......................................... 59
9.9 Headings And Table Of Contents ............................... 60
EXHIBITS
Exhibit A - Form of Preferred Shares Certificate of Designation
Exhibit B - Form of Note
Exhibit C - Form of Repriced Converts Certificate of Designation
Exhibit D - Form of Repriced Converts Indenture
Exhibit E - Form of Registration Rights Agreement
Exhibit F - Form of Opinion of Company Counsel
Exhibit G - Form of Certificate of Independent Accountant
Exhibit H - Form of Officer's Certificate (Quarterly)
Exhibit I - Form of Officer's Certificate (Annual)
Exhibit J - Form of Chief Financial Officer's Certificate
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<PAGE>
EXHIBIT 10.67
EXHIBIT B
[FORM OF FACE OF SECURITY]
#1 ASC HOLDINGS, INC. $17,500,000.00
14% Senior Exchangeable Note Due 2002
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION
FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES.
ASC Holdings, Inc.
promises to pay to Madeleine, LLC
-----------------------------------
or registered assigns
the principal sum of Seventeen Million Five Hundred Thousand Dollars on
July 15, 2002 -----------------------------------------------
INTEREST
Payment Dates: January 15, April 15, July 15 and October 15
Record Dates: December 30, March 30, June 30 and September 30
This Note is exchangeable and convertible as set forth in, inter
alia, Sections 6.15 and 8.1 of the ASC Holdings, Inc. Securities Purchase
Agreement (the "Agreement"), dated as of July 2, 1997, Re: Series A Exchangeable
Preferred Stock, 14% Senior Exchangeable Notes Due 2002. Additional provisions
of this Note are set forth on the other side of this Note.
IN WITNESS THEREOF, ASC Holdings, Inc. has caused this instrument to
be duly executed in its corporate name and the facsimile of its corporate seal
to be affixed hereunto or imprinted hereon.
ASC HOLDINGS, INC.
By /s/ Christopher E. Howard
-----------------------------
July 28, 1997 Name: Christopher E. Howard
Title: Chief Administrative Officer
and General Counsel
[SEAL]
Attest:
B-1
<PAGE>
(REVERSE OF SECURITY)
ASC HOLDINGS, INC.
14% SENIOR EXCHANGEABLE NOTE DUE 2002
1. Interest. ASC Holdings, Inc. (the "Company"), a Maine
corporation, promises to pay interest on the principal amount of this Note at
the rate per annum, compounded monthly, of fourteen (14%) percent. The Company
will pay interest in cash or PIK Notes quarterly, in arrears, on January 15,
April 15, July 15 and October 15 of each year, beginning October 15, 1997.
Interest on this Note will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from October 15, 1997. Interest
will be computed on the basis of a 360-day year of twelve 30-day months, and
shall be compounded monthly.
In the event that (a) the holder of this Note is not permitted to
convert or exchange this Note in accordance with the terms of the Agreement, (b)
an Event of Default occurs and is continuing or (c) the Company fails to make
any Mandatory Redemption on the date required, then, in such event, this Note
shall bear interest at the rate of nineteen (19%) percent per annum, compounded
daily, and shall be payable on demand.
2. Method of Payment. The Company will pay interest on this Note
(except defaulted interest) to the Persons who are registered holders of Notes
as of the close of business on the December 30, March 30, June 30 and September
30 next preceding each Interest Payment Date. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts or, at the Company's option, in
PIK Notes. The Company may, however, pay principal and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Agreement. The Company issued this Note under the Agreement. The
terms of this Note are included in the Agreement and this Note is subject to all
such terms. This Note is a senior general unsecured obligation of the Company
limited to the principal amount set forth above, except as otherwise provided
herein or in the Agreement. The Agreement limits other Indebtedness as provided
in Section 2.5 of the Agreement.
4. Optional Redemption. This Note may be redeemed, at the option of
the Company, in accordance with Section 2.3(b) of the Agreement.
5. Exchange, Conversion and Offer to Purchase. The Holder shall have
the right to exchange, convert or require the Company to purchase this Note in
accordance with the provisions of Sections 6.15 and 8.1 of the Agreement.
6. Denominations, Transfer. This Note will be issued in the
denominations set forth in Section 2.2(b) of the Agreement. Transfer of this
Note is limited in the manner set forth in Section 2.12 of the Agreement.
B-2
<PAGE>
7. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Agreement or this Note may be amended or supplemented with (and only with) the
written consent of the Holders of at least a majority of the outstanding
Securities, and any past default or noncompliance with any provision may be
waived with the consent of the Holders of a majority of the outstanding
Securities. Any and all such amendments, supplements or waivers shall be in
accordance with the provisions of Section 9.6 of the Agreement.
8. Defaults and Remedies. Events of Default under this Note shall be
those set forth in Section 7.1 of the Agreement, and the Holder's remedies upon
the occurrence of any such Event of Default shall be as set forth in Section 7.2
of the Agreement.
9. Definitions. All capitalized terms used herein shall have the
meanings ascribed to them in the Agreement, unless otherwise defined herein.
The Company will furnish to any holder of this Note upon written
request and without charge a copy of the Agreement.
B-3
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(print or type assignee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: Your signature:
--------------------- -------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
Signature Guarantee:
------------------------------------------------------------
B-4
<PAGE>
EXCHANGE OR CONVERSION NOTICE
A. If you the Holder want to convert or exchange this Note into Conversion
Shares, check the Box and state the amount:
|_| Amount: $____________
B. If you the Holder want to convert this Note into Repriced Converts, check
the Box and state the amount:
|_| Amount: $____________
If you want the certificate for such Conversion Shares or Repriced
Converts made out in another Person's name, fill in the form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert other Person's social security or tax ID number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other Person's name, address and zip code)
Date: Your signature:
--------------------- -------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
Signature Guarantee:
------------------------------------------------------------
B-5
<PAGE>
EXHIBIT 10.68
FIRST AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
FIRST AMENDMENT, dated as of July 25, 1997, to the SECURITIES
PURCHASE AGREEMENT, dated as of July 2,1997 (as amended, supplemented or
otherwise modified from time to time the "Agreement"), among ASC Holdings, Inc.,
a Maine corporation (the "Company"), and MADELEINE LLC, a New York limited
liability company, as Purchaser (the "Purchaser").
Preamble
The Company and the Purchaser desire to amend the Agreement to
provide, inter alia, (i) that $11 million of the proceeds from the sale of the
Securities (as defined in the Agreement) may, subject to certain conditions, be
used to pay a deposit with respect to the proposed acquisition by the Company of
the Steamboat Ski Resort and the Heavenly Valley Ski Resort, (ii) for the
payment of certain fees to the Purchaser in connection with the First Amendment
and (iii) the Purchaser with certain rights with respect to future financings by
the Company or its Subsidiaries.
Accordingly, the Company and the Purchaser hereby agree as follows:
1. Definitions. All terms used herein which are defined in the
Agreement and not otherwise defined herein are used herein as defined therein.
2. New Definition. The following definitions are hereby added to
Section 1.01 of the Agreement in their appropriate alphabetical place:
"Deposit" shall mean $11 million of the proceeds of the Initial
Closing used by the Company to make a deposit with respect to the
Second Acquisition.
"First Amendment" shall mean the First Amendment, dated as of July
25, 1997, to the Agreement.
"Second Acquisition" shall mean the proposed acquisition by the
Company of the Steamboat Ski Resort and the Heavenly Valley Ski
Resort.
3. Use of Proceeds. (a) Subclause (d) of the first sentence of
Section 2.7 of the Loan Agreement is hereby amended to insert the following
after "(d)" and before "up to $5 million":
<PAGE>
"(i) $11 million to be used by the Company to pay the Deposit or
(ii) if the Company does not pay the Deposit, "
4. Fees. The Agreement is hereby amended by adding the following
Section 2.13 after Section 2.12 thereof:
"2.13 Amendment Fee. The Company shall pay to the Purchaser on the
earlier of (A) October 31, 1997 or (B) the date of consummation of
an Initial Public Offering or the Second Acquisition either (i)
$150,000 in the event that either (w) an Initial Public Offering is
consummated on or prior to October 31, 1997 or (x) the Second
Acquisition is consummated on or prior to October 31, 1997, or (ii)
$350,000 in the event that neither (y) an Initial Public Offering is
consummated prior to October 31, 1997 nor (z) the Second Acquisition
is consummated on or prior to October 31, 1997.
5. Covenants. Section 6 of the Agreement is hereby amended to
include the following additional covenants:
"6.26 Deposit Forfeit. If the Second Acquisition is not consummated
by the Company, and the Deposit is forfeited, then within twelve
(12) months from the date the Deposit is forfeited the Company
shall, or shall cause ASC to, raise $11 million to be contributed as
capital to the Company's Utah Subsidiaries for the development of
the properties acquired in the Wolf Mountain Acquisition."
"6.27 Right of First Refusal. The Purchaser shall have the right of
first refusal to participate, in whole or in part, in all financings
by the Company or any of its Subsidiaries involving capital
contributions or borrowed moneys in excess of $5,000,000 proposed
during the twelve (12) months following the date of the First
Amendment, upon the same terms and conditions as other participants
therein, or if there are no other participants upon terms and
conditions available to the Company from other sources, other than:
(i) an Initial Public Offering, (ii) Non-Recourse Real Estate Debt
and (iii) refinancing of Existing Indebtedness with TFC Textron,
(iv) senior secured borrowings provided by financial institutions or
(v) purchase money borrowing from traditional purchase money
lenders."
6. Conditions to Effectiveness. This First Amendment shall be deemed
effective as of July 25, 1997, subject to the satisfaction in full, or the
waiver by the Purchaser, of the following conditions precedent (such date being
herein called the "Effective Date"):
(a) The Purchaser shall have received a counterpart of this
First Amendment executed by the Company.
(b) The Purchaser shall have received from Pierce Atwood,
special counsel to ASCH, a favorable legal opinion dated as of the date
hereof and addressed to the Purchaser, covering the matters specified in
the attached Exhibit A and such other matters incident to the transactions
contemplated herein as the Purchaser may request.
-2-
<PAGE>
(c) The representations and warranties contained in this First
Amendment and in Section 4 of the Agreement shall be correct in all
material respects on and as of the Effective Date as though made on and as
of such date (except where such representations and warranties relate to
an earlier date in which case such representations and warranties shall be
true and correct as of such earlier date); no Default or Event of Default
shall have occurred and be continuing on the Effective Date or result from
this First Amendment becoming effective in accordance with its terms.
7. Representations and Warranties. The Company hereby represents and
warrants to the Purchaser as follows:
(a) The execution and delivery and performance by the Company
of this First Amendment and the performance by the Company of the
Agreement as amended hereby (A) have been duly authorized by all necessary
corporate action, and (B) do not and will not contravene its
organizational documents or any applicable law.
(b) This First Amendment and the Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) The representations and warranties contained in Section 4
of the Agreement are correct on and as of the Effective Date as though
made on and as of the Effective Date (except to the extent such
representations and warranties expressly relate to an earlier date), and
no Event of Default has occurred and is continuing on and as of the
Effective Date.
8. Continued Effectiveness of Agreement. The Company hereby (i)
confirms and agrees that the Agreement to which it is a party is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects except that on and after the Effective Date of this First Amendment
all references in any related document to "the Agreement", the "Securities
Purchase Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Agreement shall mean the Agreement as amended by this First
Amendment.
9. Miscellaneous.
(a) This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
-3-
<PAGE>
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this First
Amendment for any other purpose.
(c) This First Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York (without reference to
conflicts of laws principles thereof) and the laws of the United States of
America.
(d) The Company will pay on demand all reasonable fees, costs
and expenses of the Purchaser in connection with the preparation, execution and
delivery of this First Amendment, including, without limitation, reasonable
legal fees and disbursements.
COMPANY
ASC HOLDINGS, INC.
By /s/ Christopher E. Howard
-------------------------
Name: Christopher E. Howard
Title: Senior Vice President and
Chief Executive Officer
PURCHASER
MADELEINE LLC
By /s/ Bob Davenport
-----------------
Name:
Title:
-4-
<PAGE>
EXHIBIT 10.69
REGISTRATION RIGHTS AGREEMENT
by and between
ASC HOLDINGS, INC.
and
MADELEINE L.L.C.
Dated as of July 2, 1997
<PAGE>
REGISTRATION RIGHTS AGREEMENT (this or the "Agreement") dated as of
July 2, 1997, by ASC Holdings, Inc., a Maine corporation (the "Company"), and
Madeleine L.L.C. (the "Initial Holder").
W I T N E S S E T H :
WHEREAS, simultaneously herewith, the Company and the Initial Holder
are entering into a Securities Purchase Agreement (its "Purchase Agreement"),
pursuant to which the Company is issuing, and the Initial Holder is purchasing,
certain securities of the Company; and
WHEREAS, in order to induce the Initial Holder to enter into the
Purchase Agreement, the Company and its Subsidiaries have agreed to provide
certain registration rights on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
"Acquiring Person" has the meaning specified in the Purchase
Agreement.
"Affiliate" shall mean with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Certificate of Designation" shall mean the Certificate of
Designation, Number, Voting Powers, Preferences and Rights of the Preferred
Stock of the Company and Rights of the Convertible Preferred Stock, as filed
with the Secretary of State of the State of Maine.
"Change of Control" shall have the meaning set forth in the Purchase
Agreement.
"Common Shares" shall mean shares of Common Stock, of an IPO Entity.
<PAGE>
"Common Stock" shall mean the class of Common Stock to be issued to
the public, as such Common Stock may be constituted from time to time.
"Company" shall have the meaning set forth in the preamble.
"Conversion Shares" shall mean the Common Shares or other equity
securities issued or issuable upon conversion of the Convertible Securities.
"Convertible Securities" shall mean the Notes, Preferred Stock and
Repriced Converts.
"Demand Registration" shall mean a registration required to be
effected by an IPO Entity pursuant to Section 2.1.
"Demand Registration Statement" shall mean a registration statement
of an IPO Entity which covers the Registrable Securities requested to be
included therein pursuant to the provisions of Section 2.1 and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
similar or successor statute.
"Holders" shall mean the Initial Holder for so long as it owns any
Registrable Securities and such of its respective heirs, successors and
permitted assigns (including any permitted transferees of Registrable
Securities) who acquire or are otherwise the transferee of Registrable
Securities, directly or indirectly, from such Initial Holder (or any subsequent
Holder), for so long as such heirs, successors and permitted assigns own any
Registrable Securities. For purposes of this Agreement, a Person will be deemed
to be a Holder whenever such Person holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities,
whether or not such purchase, conversion, exercise or exchange has actually been
effected and disregarding any legal restrictions upon the exercise of such
rights. Registrable Securities issuable upon exercise of an option or upon
conversion, exchange or exercise of another security shall be deemed outstanding
for the purposes of this Agreement.
"Holders' Counsel" shall mean one firm of counsel (per registration)
to the Holders of Registrable Securities participating in such registration,
which counsel shall be selected (i) in the case of a Demand Registration or an
S-3 Registration, by the Initiating Holders holding a majority of the
Registrable Securities for which registration was requested in the Request, and
(ii) in all other cases, by the Majority Holders of the Registration.
-2-
<PAGE>
"Incidental Registration" shall mean a registration required to be
effected by the Company pursuant to Section 2.2.
"Incidental Registration Statement" shall mean a registration
statement of an IPO Entity which covers the Registrable Securities requested to
be included therein pursuant to the provisions of Section 2.2 and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Initial Holder" shall mean [Madeleine L.L.C.].
"Initial Public Offering" has the meaning specified in the Purchase
Agreement.
"Initiating Holders" shall mean, with respect to a particular
registration, the Holders who initiated the Request for Registration.
"Inspectors" shall have the meaning set forth in Section 4.1(g).
"IPO Entity" has the meaning specified in the Purchase Agreement.
"Majority Holders" shall mean one or more Holders of Registrable
Securities who would hold a majority of the Registrable Securities then
outstanding.
"Majority Holders of the Registration" shall mean, with respect to a
particular registration, one or more Holders of Registrable Securities who would
hold a majority of the Registrable Securities to be included in such
registration.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Notes" shall have the meaning set forth in the Purchase Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
any other entity or organization, including a government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business), and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" shall have the meaning set forth in the Purchase
Agreement.
"Prospectus" shall mean the prospectus included in a Registration
Statement (including, without limitation, any preliminary prospectus and any
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the
-3-
<PAGE>
Securities Act), and any such Prospectus as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to such
Prospectus, including post-effective amendments, and in each case including all
material incorporated by reference (or deemed to be incorporated by reference)
therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registrable Securities" shall mean (i) any Conversion Shares issued
or issuable upon conversion of the Convertible Securities issued to the Initial
Holder pursuant to the Purchase Agreement, (ii) Repriced Converts, and (iii) any
other securities of an IPO Entity (or any successor or assign of the IPO Entity,
whether by merger, consolidation, sale of assets or otherwise) which may be
issued or issuable with respect to, in exchange for, or in substitution of,
Registrable Securities referenced in clauses (i) and (ii) above by reason of any
dividend or stock split, combination of shares, merger, consolidation,
recapitalization, reclassification, reorganization, sale of assets or similar
transaction. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (A) a registration statement with
respect to the sale of such securities shall have been declared effective under
the Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (B) such securities are sold pursuant to Rule
144 (or any similar provisions then in force) under the Securities Act, (C) such
securities have been otherwise transferred, a new certificate or other evidence
of ownership for them not bearing the legend restricting further transfer shall
have been delivered by the relevant IPO Entity and subsequent public
distribution of them shall not require registration under the Securities Act,
(D) such securities shall have ceased to be outstanding or (E) such securities
are freely tradable under the Securities Act. A Holder of Convertible Securities
shall be deemed to be a holder of Registrable Securities unless the right to
exchange such Convertible Securities into Registrable Securities shall have
terminated pursuant to Section 6.15 or 8.1 of the Purchase Agreement.
"Registration Expenses" shall mean any and all expenses incident to
the performance of or compliance with this Agreement by each IPO Entity,
including, without limitation (i) all SEC, stock exchange, NASD and other
registration, listing and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws and compliance
with the rules of any stock exchange (including fees and disbursements of
counsel in connection with such compliance and the preparation of a blue sky
memorandum and legal investment survey), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing, distributing,
mailing and delivering any Registration Statement, any Prospectus, any
underwriting agreements, transmittal letters, securities sales agreements,
securities certificates and other documents relating to the performance of or
compliance with this Agreement, (iv) the fees and disbursements of counsel for
the IPO Entity, (v) the fees and disbursements of Holders' Counsel, (vi) the
fees and disbursements of all independent public accountants (including the
expenses of any audit and/or "cold comfort" letters) and the fees and expenses
of other Persons, including experts, retained by an IPO Entity, (vii) the
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expenses incurred in connection with making road show presentations and holding
meetings with potential investors to facilitate the distribution and sale of
Registrable Securities which are customarily borne by the issuer, (viii) any
fees and disbursements of underwriters customarily paid by issuers or sellers of
securities, (ix) premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered and (x) discounts and commissions payable to underwriters,
selling brokers, dealer managers or other similar Persons engaged in the
distribution of any of the Registrable Securities; provided, however, that in
any case where Registration Expenses are not to be borne by an IPO Entity, such
expenses shall not include salaries of such IPO Entity's personnel or general
overhead expenses of such IPO Entity, auditing fees, premiums or other expenses
relating to liability insurance required by underwriters of such IPO Entity or
other expenses for the preparation of financial statements or other data
normally prepared by such IPO Entity in the ordinary course of its business or
which such IPO Entity would have incurred in any event; and provided, further,
that in the event such IPO Entity shall, in accordance with Section 2.2 or
Section 2.6 hereof, not register any securities with respect to which it had
given written notice of its intention to register to Holders, notwithstanding
anything to the contrary in the foregoing, all of the costs incurred by the
Holders in connection with such registration shall be deemed to be Registration
Expenses.
"Registration Statement" shall mean any registration statement of an
IPO Entity which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Repriced Converts" shall have the meaning set forth in the Purchase
Agreement.
"Request" shall have the meaning set forth in Section 2.1(a).
"S-3 Registration" shall mean a registration required to be effected
by the Company pursuant to Section 2.3(a).
"SEC" shall mean the Securities and Exchange Commission, or any
successor agency having jurisdiction to enforce the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder, or any similar or
successor statute.
"Shelf Registration" shall have the meaning set forth in Section
2.1(a).
"Underwriters" shall mean the underwriters, if any, of the offering
being registered under the Securities Act.
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"Underwritten Offering" shall mean a sale of securities of an IPO
Entity to an Underwriter or Underwriters for reoffering to the public.
"Withdrawn Demand Registration" shall have the meaning set forth in
Section 2.1(a).
"Withdrawn Request" shall have the meaning set forth in Section
2.1(a).
2. REGISTRATION UNDER THE SECURITIES ACT.
2.1 Demand Registrations.
(a) In the event that any Holder shall receive an Offering Notice in
accordance with Section 8.1 of the Purchase Agreement, an Offering Notice in
accordance with Section 2.3(b)(ii) of the Purchase Agreement or a Change of
Control Offer in which Conversion Shares or Repriced Converts of a Designated
Acquiring Person that is a Public Company are being offered to the Holders in
accordance with Section 6.15(a)(ii), then the IPO Entity or Designated Acquiring
Person either, as elected by the Holders of the Majority of Registrable
Securities, (i) include all of the Repriced Converts and Conversion Shares in
the IPO of the IPO Entity or Designated Acquiring Entity as an Incidental
Registration in accordance with the provisions of Section 2.2 hereof, or (ii)
cause the registration of all of the Repriced Converts and Conversion Shares in
a registration by the IPO Entity or Designated Acquiring Entity separate from
the registration of the IPO as a Demand Registration in accordance with the
provisions of Section 2.1(b) hereof, such Demand Registration to become
effective at the same time as the date on which the IPO of the IPO Entity or
Designated Acquiring Person, or the Change of Control, as the case may be, is
consummated.
(b) (i) In connection with a Demand Registration contemplated by
Section 2.1(a) or (ii) in the event that, in their sole discretion, the Holders
have consented to receiving on the closing date of the IPO or Change of Control
Conversion Shares or Repriced Converts (including Conversion Shares issuable
upon conversion thereof) that are registered and freely tradable under the
Securities Act, the Holders shall have the right to request in writing that an
IPO Entity register all or part of such Holders' Registrable Securities (a
"Request") (which Request shall specify the amount of Registrable Securities
intended to be disposed of by such Holders and the intended method of
disposition thereof) by filing with the SEC a Demand Registration Statement. As
promptly as practicable, but no later than 10 days after receipt of a Request,
the relevant IPO Entity shall give written notice of such requested registration
to all Holders of Registrable Securities. Subject to Section 2.1(b), the
relevant IPO Entity shall include in a Demand Registration (i) the Registrable
Securities intended to be disposed of by the Initiating Holders and (ii) the
Registrable Securities intended to be disposed of by any other Holder which
shall have made a written request (which request shall specify the amount of
Registrable Securities to be registered and the intended method of disposition
thereof) to the relevant IPO Entity for inclusion thereof in such registration
within 20 days after the receipt of such written notice from such IPO Entity.
The IPO Entity
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shall, as expeditiously as possible following a Request, cause to be filed with
the SEC a Demand Registration Statement providing for the registration under the
Securities Act of the Registrable Securities which the relevant IPO Entity has
been so requested to register by all such Holders, to the extent necessary to
permit the disposition of such Registrable Securities so to be registered in
accordance with the intended methods of disposition thereof specified in such
Request or further requests (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act (a "Shelf
Registration") if so requested and if such IPO Entity is then eligible to use
such a registration). The Company shall cause such Demand Registration Statement
to be declared effective by the SEC as soon as practicable thereafter and to
keep such Demand Registration Statement continuously effective for the period
specified in Section 3.1(b).
Notwithstanding anything contained herein to the contrary
pursuant to clause (ii) of Section 2.1(b), if a Request is made within 90 days
of the effective date (the "Applicable Effective Date") of a Registration
Statement for an Initial Public Offering, the Company shall cause the applicable
Demand Registration Statement to be declared effective (and the associated
offering to be consummated), at the earliest possible time, and as soon as
market conditions permit, but no later than six months following the Applicable
Effective Date.
A Request may be withdrawn prior to the filing of the Demand
Registration Statement by the Majority Holders of the Registration (a "Withdrawn
Request") and a Demand Registration Statement may be withdrawn prior to the
effectiveness thereof by the Majority Holders of the Registration (a "Withdrawn
Demand Registration"), and such withdrawals shall be treated as a Demand
Registration which shall have been effected pursuant to this Section 2.1, unless
the Holders of Registrable Securities to be included in such Registration
Statement reimburse the Company for its reasonable out-of-pocket Registration
Expenses relating to the preparation and filing of such Demand Registration
Statement (to the extent actually incurred); provided, however, that if a
Withdrawn Request or Withdrawn Registration Statement is made (A) because of a
material adverse change in the business, financial condition or prospects of the
relevant IPO Entity or (B) because the sole or lead managing Underwriter advises
that the amount of Registrable Securities to be sold in such offering be reduced
pursuant to Section 2.1(b) by more than 15% of the Registrable Securities to be
included in such Registration Statement, then such withdrawal shall not be
treated as a Demand Registration effected pursuant to this Section 2.1 and such
IPO Entity shall pay all Registration Expenses in connection therewith. Any
Holder requesting inclusion in a Demand Registration may, at any time prior to
the effective date of the Demand Registration Statement (and for any reason)
revoke such request by delivering written notice to such IPO Entity revoking
such requested inclusion.
(c) Priority in Demand Registrations. If a Demand Registration
involves an Underwritten Offering, and the sole or lead managing Underwriter, as
the case may be, of such Underwritten Offering shall advise the relevant IPO
Entity in writing (with a copy to each Holder requesting registration) on or
before the date five
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days prior to the date then scheduled for such offering that, in its opinion,
the amount of Registrable Securities requested to be included in such Demand
Registration exceeds the number which can be sold in such offering within a
price range acceptable to the Majority Holders of the Registration (such writing
to state the basis of such opinion and the approximate number of Registrable
Securities which may be included in such offering) such IPO Entity shall include
in such Demand Registration, to the extent of the number which the Company is so
advised may be included in such offering or separate registration, the
Registrable Securities requested to be included in the Demand Registration by
the Holders allocated pro rata in proportion to the number of Registrable
Securities requested to be included in such Demand Registration by each of them.
In the event the IPO Entity shall not, by virtue of this Section 2.1(b), include
in any Demand Registration all of the Registrable Securities of any Holder
requesting to be included in such Demand Registration, such Holder may, upon
written notice to such IPO Entity given within five days of the time such Holder
first is notified of such matter, reduce the amount of Registrable Securities it
desires to have included in such Demand Registration, whereupon only the
Registrable Securities, if any, it desires to have included will be so included
and the Holders not so reducing shall be entitled to a corresponding increase in
the amount of Registrable Securities to be included in such Demand Registration.
(d) Underwriting; Selection of Underwriters. If the Initiating
Holders holding a majority of the Registrable Securities for which registration
was requested in the Request so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
Underwritten Offering in customary form; and such Initiating Holders may require
that all Persons (including other Holders) participating in such registration
sell their Registrable Securities to the Underwriters at the same price and on
the same terms of underwriting applicable to the Initiating Holders. If any
Demand Registration involves an Underwritten Offering, the sole or managing
Underwriters and any additional investment bankers and managers to be used in
connection with such registration shall be selected by the IPO Entity, subject
to the approval of the Holders of a majority of the Registrable Securities for
which registration was requested in the Request (such approval not to be
unreasonably withheld). If any Demand Registration is being requested
concurrently with the IPO or other offering by the Company and such registration
is for an Underwritten Offering, the sole or managing Underwriters for such
registration shall be the same as selected by the Company for the registration
of the IPO or such offering.
(e) Registration of Other Securities. Whenever an IPO Entity shall
effect a Demand Registration, no securities other than the Registrable
Securities shall be covered by such registration unless the Majority Holders of
the Registration shall have consented in writing to the inclusion of such other
securities.
(f) Effective Registration Statement; Suspension. A Demand
Registration Statement shall not be deemed to have become effective (and the
related registration will not be deemed to have been effected) (i) unless it has
been declared effective by the SEC and remains effective in compliance with the
provisions of the
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Securities Act with respect to the disposition of all Registrable Securities
covered by such Demand Registration Statement for the time period specified in
Section 3.1(b), (ii) if the offering of any Registrable Securities pursuant to
such Demand Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, or (iii) if, in the case of an Underwritten Offering, the
conditions to closing specified in an underwriting agreement to which an IPO
Entity is a party are not satisfied other than by the sole reason of any breach
or failure by the Holders of Registrable Securities or are not otherwise waived.
(g) Other Registrations. During the period (i) beginning on the date
of a Request for an Underwriting Offering and (ii) ending on the date that is 90
days after the date that a Demand Registration Statement filed pursuant to such
Request has been declared effective by the SEC (or ending on such earlier date
as the Holders shall have withdrawn such Request or such Demand Registration
Statement), the relevant IPO Entity shall not, without the consent of the
Majority Holders of the Registration, file a registration statement pertaining
to any other securities of such IPO Entity.
(h) Registration Statement Form. Registrations under this Section
2.1 shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Request, and (ii) which
shall be available for the sale of Registrable Securities in accordance with the
intended method or methods of disposition specified in the requests for
registration. Each IPO Entity shall include in any such Registration Statement,
in addition to such information as the IPO Entity may desire, all additional
information which any selling Holder, upon advice of counsel, shall reasonably
request.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If any IPO Entity at
any time, or from time to time, proposes to engage in an Initial Public Offering
or any subsequent public offering of its securities (other than on Form S-8 or
S-4) while this Agreement is in effect, such IPO Entity shall deliver prompt
written notice (which notice shall be given at least 45 days prior to such
proposed registration) to all Holders of Registrable Securities of such IPO
Entity's intention to undertake such Offering, describing in reasonable detail
the proposed registration and distribution (including in the case of an Initial
Public Offering the anticipated range of the proposed offering price, the
breadth of which shall not exceed 10% of the lowest price of the estimated
range, and the case of all registrations, the class and number of securities
proposed to be registered and the distribution arrangements) and of such
Holders' right to participate in such registration under this Section 2.2 as
hereinafter provided. Subject to the other provisions of this paragraph (a) and
Section 2.2(b), upon the written request of any Holder made within 20 days after
the receipt of such written notice (which request shall specify the amount of
Registrable Securities to be registered (based on the estimated range) and the
intended method of disposition thereof), the Company shall effect the
registration under the Securities Act of all Registrable Securities requested by
Holders to be so registered
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(an "Incidental Registration"), to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the Registration Statement which covers the securities which the
relevant IPO Entity proposes to register and shall cause such Registration
Statement to become and remain effective with respect to such Registrable
Securities in accordance with the registration procedures set forth in Section
3. Immediately upon notification to the relevant IPO Entity from the Underwriter
of the price at which such securities are to be sold, such IPO Entity shall so
advise each participating Holder. If in the case of an Initial Public Offering
such price differs from the high or low end of the estimated price range by more
than 10%, the Holders requesting inclusion in an Incidental Registration may, at
any time prior to the effective date of the Incidental Registration Statement,
revoke or change such request by delivering written notice to such IPO Entity
revoking or changing (specifying such change in reasonable detail) such
requested inclusion within such reasonable time period as may be required by the
Underwriter.
(b) Priority in Incidental Registration. If the sole or the lead
managing Underwriter, as the case may be, shall advise the relevant IPO Entity
in writing (with a copy to each Holder requesting registration) on or before the
date five days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in such
offering without materially interfering with the successful marketing of the
securities being offered (such writing to state the basis of such opinion and
the approximate number of such securities which may be included in such offering
without such effect), such IPO Entity shall include in such registration, to the
extent of the number which it is so advised may be included in such offering
without such effect, (i) in the case of a registration initiated by such Entity,
(A) first, the securities that such IPO Entity proposes to register for its own
account, (B) second, the Registrable Securities requested to be included in such
registration by the Holders, allocated pro rata in proportion to the number of
Registrable Securities requested to be included in such registration by each of
them, and (C) third, other securities of such IPO Entity to be registered on
behalf of any other Person, and (ii) in the case of a registration initiated by
a Person other than such IPO Entity, (A) first, the Registrable Securities
requested to be included in such registration by the Holders, allocated pro rata
in proportion to the number of securities requested to be included in such
registration by each of them, (B) second, the Registrable Securities requested
to be included in such registration by any Persons initiating such registration,
allocated pro rata in proportion to the number of securities requested to be
included in such registration by each of them, (C) third, the securities that
such IPO Entity proposes to register for its own account, and (D) fourth, other
securities of such IPO Entity to be registered on behalf of any other Person;
provided, however, that in the event such IPO Entity will not, by virtue of this
Section 2.2(b), include in any such registration all of the Registrable
Securities of any Holder requested to be included in such registration, such
Holder may, upon written notice to such IPO Entity given within three days of
the time such Holder first is notified of such matter, reduce the amount of
Registrable Securities it desires to have included in such
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registration, whereupon only the Registrable Securities, if any, it desires to
have included will be so included and the Holders not so reducing shall be
entitled to a corresponding increase in the amount of Registrable Securities to
be included in such registration. In addition, to the extent that an Initial
Holder is not permitted to register all of its Registrable Securities in such
registration, the relevant IPO Entity shall register the balance of such
Registrable Securities pursuant to the terms of this Agreement, which
registration shall be filed as soon as practicable thereafter and which the
relevant IPO Entity shall cause to become effective no later than the six month
anniversary of the Applicable Effective Date.
(c) Selection of Underwriters. The sole or managing Underwriter(s)
and any additional investment bankers and managers to be used in connection with
an IPO shall be selected by the IPO Entity, subject to the approval of the
Majority Holders of the Registration (such approval not to be unreasonably
withheld).
2.3 S-3 Registration; Shelf Registration
(a) S-3 Registration. If, at any time, an IPO Entity's Initial
Public Offering with respect to which the Holders have not been permitted to
register all of their Registrable Securities pursuant to Section 2.1(a), (i) one
or more Holders of Registrable Securities representing 25% or more of the
Registrable Securities then outstanding request that an IPO Entity file a
registration statement on Form S-3 or any successor form thereto for a public
offering of all or any portion of the shares of Registrable Securities held by
such Holder or Holders, the reasonably anticipated aggregate price to the public
of which would exceed $10 million, and (ii) such IPO Entity is a registrant
entitled to use Form S-3 or any successor form thereto to register such
securities, then such IPO Entity shall, as expeditiously as possible following
such Request, use its best efforts to register under the Securities Act on Form
S-3 or any successor form thereto, for public sale in accordance with the
intended methods of disposition specified in such Request or any subsequent
requests (including, without limitation, by means of a Shelf Registration) the
Registrable Securities specified in such Request and any subsequent requests;
provided, that if such registration is for an Underwritten Offering, the terms
of Sections 2.1(b) and 2.1(d) shall apply (and any reference to "Demand
Registration" therein shall, for purposes of this Section 2.3, instead be deemed
a reference to "S-3 Registration"). If the sole or lead managing Underwriter (if
any) or the Majority Holders of the Registration shall advise the relevant IPO
Entity in writing that in its opinion additional disclosure not required by Form
S-3 is of material importance to the success of the offering, then such
Registration Statement shall include such additional disclosure. Whenever an IPO
Entity is required by this Section 2.3 to use its best efforts to effect the
registration of Registrable Securities, each of the procedures and requirements
of Sections 2.1(a) and 2.1(e) (including but not limited to the requirements
that such IPO Entity (A) notify all Holders of Registrable Securities from whom
such Request for registration has not been received and provide them with the
opportunity to participate in the offering and (B) use its best efforts to have
such S-3 Registration Statement declared and remain effective for the time
period specified herein) shall apply to such registration (and any reference in
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such Sections 2.1(a) and 2.1(e) to "Demand Registration" shall, for purposes of
this Section 2.3, instead be deemed a reference to "S-3 Registration"). There is
no limitation on the number of S-3 Registrations that an IPO Entity is obligated
to effect; provided that no such registration shall be required in respect of
Registrable Securities that are freely tradable under the Securities Act.
The registration rights granted pursuant to the provisions of this
Section 2.3(a) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(b) Shelf Registration. If a request made pursuant to Section 2.1 or
2.3(a) is for a Shelf Registration, the relevant IPO Entity shall use its best
efforts to keep the Shelf Registration continuously effective through the date
on which all of the Registrable Securities covered by such Shelf Registration
may be sold pursuant to Rule 144(k) under the Securities Act (or any successor
provision having similar effect); provided, however, that prior to the
termination of such Shelf Registration, such IPO Entity shall first furnish to
each Holder of Registrable Securities participating in such Shelf Registration
(i) an opinion, in form and substance reasonably satisfactory to the Majority
Holders of the Registration, of counsel for such IPO Entity reasonably
satisfactory to the Majority Holders of the Registration stating that such
Registrable Securities are freely salable pursuant to Rule 144(k) under the
Securities Act (or any successor provision having similar effect) or (ii) a
"No-Action Letter" from the staff of the SEC stating that the SEC would not
recommend enforcement action if the Registrable Securities included in such
Shelf Registration were sold in a public sale other than pursuant to an
effective registration statement.
2.4 Expenses. Each IPO Entity shall pay all of its Registration Expenses
and all discounts and commissions payable to underwriters, selling brokers,
managers or other similar Persons engaged in the distribution of such Holder's
Registrable Securities pursuant to any registration pursuant to this Section 2
in connection with any Demand Registration, Incidental Registration, S-3
Registration or Shelf Registration, whether or not such registration shall
become effective and whether or not all Registrable Securities originally
requested to be included in such registration are withdrawn or otherwise
ultimately not included in such registration, except as otherwise provided with
respect to a Withdrawn Request and a Withdrawn Demand Registration in Section
2.1(b).
2.5 Underwritten Offerings.
(a) Demand Underwritten Offerings. If requested by the sole or lead
managing Underwriter for any Underwritten Offering effected pursuant to a Demand
Registration or an S-3 Registration, the relevant IPO Entity shall enter into a
customary underwriting agreement with the Underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to each Holder of
Registrable Securities participating in such offering and to contain such
representations and warranties by such IPO Entity and such other terms as are
generally prevailing in agreements of that type,
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including, without limitation, indemnification and contribution to the effect
and to the extent provided in Section 5.
(b) Holders of Registrable Securities to be Parties to Underwriting
Agreement. The Holders of Registrable Securities to be distributed by
Underwriters in an Underwritten Offering contemplated by Section 2 shall be
parties to the underwriting agreement among the relevant IPO Entity and such
Underwriters and may, at such Holders' option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
relevant IPO Entity to and for the benefit of such Underwriters shall also be
made to and for the benefit of such Holders of Registrable Securities and that
any or all of the conditions precedent to the obligations of such Underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holders of Registrable Securities; provided, however, that such IPO Entity
shall not be required to make any representations or warranties with respect to
written information specifically provided by a selling Holder for inclusion in
the Registration Statement. No Holder shall be required to make any
representations or warranties to, or agreements with, such IPO Entity or the
Underwriters other than representations, warranties or agreements regarding such
Holder, such Holder's Registrable Securities and such Holder's intended method
of disposition.
(c) Participation in Underwritten Registration. Notwithstanding
anything herein to the contrary, no Person may participate in any underwritten
registration hereunder unless such Person (i) agrees to sell its securities on
the same terms and conditions provided in any underwritten arrangements approved
by the Persons entitled hereunder to approve such arrangements and (ii)
accurately completes and executes in a timely manner all questionnaires, powers
of attorney, indemnities, custody agreements, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements.
2.6 Conversions; Exercises. Notwithstanding anything to the contrary
herein, in order for any Registrable Securities that are issuable only upon the
exercise of conversion rights, to be included in any registration pursuant to
Section 2 hereof, the exercise of such conversion rights must be effected no
later than immediately prior to the closing of any sales under the Registration
Statement pursuant to which such Registrable Securities are to be sold.
3. REGISTRATION PROCEDURES.
3.1 Obligations of the IPO Entities. Whenever an IPO Entity is required to
effect the registration of Registrable Securities under the Securities Act
pursuant to Section 2 of this Agreement, such IPO Entity shall, as expeditiously
as possible:
(a) prepare and file with the SEC (promptly, and in any event within
60 days after receipt of a request to register Registrable Securities) the
requisite Registration Statement to effect such registration, which Registration
Statement shall comply as to form in all material respects with the requirements
of the applicable form
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and include all financial statements required by the SEC to be filed therewith,
and such IPO Entity shall use its best efforts to cause such Registration
Statement to become effective (provided, that such IPO Entity may discontinue
any registration of its securities that are not Registrable Securities, and,
under the circumstances specified in Section 2.2, its securities that are
Registrable Securities); provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, or comparable
statements under securities or blue sky laws of any jurisdiction, such IPO
Entity shall (i) provide Holders' Counsel and any other Inspector with an
adequate and appropriate opportunity to participate in the preparation of such
Registration Statement and each Prospectus included therein (and each amendment
or supplement thereto or comparable statement) to be filed with the SEC, which
documents shall be subject to the review and reasonable comment of Holders'
Counsel, and (ii) not file any such Registration Statement or Prospectus (or
amendment or supplement thereto or comparable statement) with the SEC to which
Holder's Counsel, any selling Holder or any other Inspector shall have
reasonably objected on the grounds that such filing does not comply in all
material respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary (i) to keep such Registration Statement effective, and (ii) to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such Registration Statement, in each
case until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller(s) thereof
set forth in such Registration Statement; provided, that except with respect to
any Shelf Registration, such period need not extend beyond nine months after the
effective date of the Registration Statement; and provided further, that with
respect to any Shelf Registration, such period need not extend beyond the time
period provided in Section 2.3, and which periods, in any event, shall terminate
when all Registrable Securities covered by such Registration Statement have been
sold (but not before the expiration of the 90 day period referred to in Section
4(3) of the Securities Act and Rule 174 thereunder, if applicable);
(c) furnish, without charge, to each selling Holder of such
Registrable Securities and each Underwriter, if any, of the securities covered
by such Registration Statement, such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits), and the Prospectus included in such Registration Statement (including
each preliminary Prospectus) in conformity with the requirements of the
Securities Act, and other documents, as such selling Holder and Underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such selling Holder (each IPO Entity
hereby consenting to the use in accordance with applicable law of each such
Registration Statement (or amendment or post-effective amendment thereto) and
each such Prospectus (or preliminary prospectus or supplement thereto) by each
such selling Holder of
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Registrable Securities and the Underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Registration
Statement or Prospectus);
(d) prior to any public offering of Registrable Securities, use its
best efforts to register or qualify all Registrable Securities and other
securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions as any selling Holder of Registrable
Securities covered by such Registration Statement or the sole or lead managing
Underwriter, if any, may reasonably request to enable such selling Holder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such selling Holder and to continue such registration or qualification
in effect in each such jurisdiction for as long as such Registration Statement
remains in effect (including through new filings or amendments or renewals), and
do any and all other acts and things which may be necessary or advisable to
enable any such selling Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such selling Holder;
provided, however, that an IPO Entity shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3.1(d), (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
(e) use its best efforts to obtain all other approvals, consents,
exemptions or authorizations from such governmental agencies or authorities as
may be necessary to enable the selling Holders of such Registrable Securities to
consummate the disposition of such Registrable Securities;
(f) promptly notify Holders' Counsel, each Holder of Registrable
Securities covered by such Registration Statement and the sole or lead managing
Underwriter, if any: (i) when the Registration Statement, any pre-effective
amendment, the Prospectus or any prospectus supplement related thereto or
post-effective amendment to the Registration Statement has been filed and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any state
securities or blue sky authority for amendments or supplements to the
Registration Statement or the Prospectus related thereto or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threat of any
proceedings for that purpose, (iv) of the receipt by the relevant IPO Entity of
any notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
existence of any fact of which the relevant IPO Entity becomes aware or the
happening of any event which results in (A) the Registration Statement
containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make any statements
therein not misleading, or (B) the Prospectus included in such Registration
Statement containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make any
statements therein, in the light of the circumstances
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under which they were made, not misleading, (vi) if at any time the
representations and warranties contemplated by Section 2.5(b) cease to be true
and correct in all material respects, and (vii) of the relevant IPO Entity's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate or that there exists circumstances not yet
disclosed to the public which make further sales under such Registration
Statement inadvisable pending such disclosure and post-effective amendment; and,
if the notification relates to an event described in any of the clauses (ii)
through (vii) of this Section 3.1(f), such IPO Entity shall promptly prepare a
supplement or post-effective amendment to such Registration Statement or related
Prospectus or any document incorporated therein by reference or file any other
required document so that (1) such Registration Statement shall 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 not misleading,
and (2) as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading (and shall furnish to each such Holder
and each Underwriter, if any, a reasonable number of copies of such Prospectus
so supplemented or amended); and if the notification relates to an event
described in clause (iii) of this Section 3.1(f), the relevant IPO Entity shall
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(g) make available for inspection by any selling Holder of
Registrable Securities, any sole or lead managing Underwriter participating in
any disposition pursuant to such Registration Statement, Holders' Counsel and
any attorney, accountant or other agent retained by any such seller or any
Underwriter (each, an "Inspector" and, collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
relevant IPO Entity and any subsidiaries thereof as may be in existence at such
time (collectively, the "Records") as shall be necessary, in the opinion of such
Holders' and such Underwriters' respective counsel, to enable them to exercise
their due diligence responsibility and to conduct a reasonable investigation
within the meaning of the Securities Act, and cause such IPO Entity's and any of
its subsidiaries' officers, directors and employees, and the independent public
accountants of such IPO Entity, to supply all information reasonably requested
by any such Inspectors in connection with such Registration Statement;
(h) obtain an opinion from the relevant IPO Entity's counsel and a
"cold comfort" letter from such IPO Entity's independent public accountants who
have certified such IPO Entity's financial statements included or incorporated
by reference in such Registration Statement, in each case dated the effective
date of such Registration Statement (and if such registration involves an
Underwritten Offering, dated the date of the closing under the underwriting
agreement), in customary form and covering such matters as are customarily
covered by such opinions and "cold comfort" letters delivered to underwriters in
underwritten public offerings, which opinion and letter shall be reasonably
satisfactory to the sole or lead managing Underwriter, if any, and to the
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Majority Holders of the Registration, and furnish to each Holder participating
in the offering and to each Underwriter, if any, a copy of such opinion and
letter addressed to such Holder (in the case of the opinion) and Underwriter (in
the case of the opinion and the "cold comfort" letter);
(i) provide a CUSIP number for all Registrable Securities and
provide and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than the
effectiveness of such Registration Statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and any other governmental agency or authority
having jurisdiction over the offering, and make available to its security
holders, as soon as reasonably practicable but no later than 90 days after the
end of any 12-month period, an earnings statement (i) commencing at the end of
any month in which Registrable Securities are sold to Underwriters in an
Underwritten Offering and (ii) commencing with the first day of the relevant IPO
Entity's calendar month next succeeding each sale of Registrable Securities
after the effective date of a Registration Statement, which statement shall
cover such 12-month periods, in a manner which satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) if so requested by the Majority Holders of the Registration, use
its best efforts to cause all such Registrable Securities to be listed (i) on
each national securities exchange on which the relevant IPO Entity's securities
are then listed or (ii) if securities of such IPO Entity are not at the time
listed on any national securities exchange (or if the listing of Registrable
Securities is not permitted under the rules of each national securities exchange
on which such IPO Entity's securities are then listed), on a national securities
exchange reasonably acceptable to the Majority Holders of the Registration;
(l) keep each selling Holder of Registrable Securities advised as to
the initiation and progress of any registration under Section 2 hereunder;
(m) enter into and perform customary agreements (including, if
applicable, an underwriting agreement in customary form) and provide officers'
certificates and other customary closing documents;
(n) cooperate with each selling Holder of Registrable Securities and
each Underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the NASD and make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the Underwriters (taking into account
the needs of the relevant IPO Entity's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
Underwritten Offering;
(o) furnish to each Holder participating in the offering and the
sole or lead managing Underwriter, if any, without charge, at least one
manually-signed copy of
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the Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those deemed to be incorporated by
reference);
(p) cooperate with the selling Holders of Registrable Securities and
the sole or lead managing Underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the Underwriters or, if not an Underwritten Offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities;
(q) if requested by the sole or lead managing Underwriter or any
selling Holder of Registrable Securities, immediately incorporate in a
prospectus supplement or post-effective amendment such information concerning
such Holder of Registrable Securities, the Underwriters or the intended method
of distribution as the sole or lead managing Underwriter or the selling Holder
of Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the relevant IPO Entity, including,
without limitation, information with respect to the number of shares of the
Registrable Securities being sold to the Underwriters, the purchase price being
paid therefor by such Underwriters and with respect to any other terms of the
Underwritten Offering of the Registrable Securities to be sold in such offering;
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by the sole or lead
managing Underwriter of such Registrable Securities; and
(r) use its best efforts to take all other steps necessary to
expedite or facilitate the registration and disposition of the Registrable
Securities contemplated hereby.
3.2 Seller Information. An IPO Entity may require each selling Holder of
Registrable Securities as to which any registration is being effected to furnish
to it such information regarding such Holder, such Holder's Registrable
Securities and such Holder's intended method of disposition as such IPO Entity
may from time to time reasonably request in writing; provided that such
information shall be used only in connection with such registration.
If any Registration Statement or comparable statement under "blue
sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the relevant IPO Entity, then such Holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and such IPO Entity, to the effect that the holding
by such Holder of such securities is not to be
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construed as a recommendation by such Holder of the investment quality of such
IPO Entity's securities covered thereby and that such holding does not imply
that such Holder will assist in meeting any future financial requirements of
such IPO Entity, and (ii) in the event that such reference to such Holder by
name or otherwise is not in the judgment of such IPO Entity, as advised by
counsel, required by the Securities Act or any similar federal statute or any
state "blue sky" or securities law then in force, the deletion of the reference
to such Holder.
3.3 Notice to Discontinue. Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
an IPO Entity of the happening of any event of the kind described in Section
3.1(f)(ii) through (vii), such Holder shall forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3.1(f) and, if so
directed by such IPO Entity, such Holder shall deliver to such IPO Entity (at
such IPO Entity's expense) all copies, other than permanent file copies, then in
such Holder's possession of the Prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If such IPO Entity shall
give any such notice, such IPO Entity shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 3.1(b)) by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 3.1(f) to and including the date when the Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by and meeting the requirements of Section 3.1(f).
4. INDEMNIFICATION; CONTRIBUTION.
4.1 Indemnification by the IPO Entities. Each IPO Entity agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each Holder
of Registrable Securities, its officers, directors, partners, members,
shareholders, employees, Affiliates and agents (collectively, "Agents") and each
Person who controls such Holder (within the meaning of the Securities Act) and
its Agents with respect to each registration which has been effected pursuant to
this Agreement, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof, and expenses (as incurred or suffered and including, but not
limited to, any and all expenses incurred in investigating, preparing or
defending any litigation or proceeding, whether commenced or threatened, and the
reasonable fees, disbursements and other charges of legal counsel) in respect
thereof (collectively, "Claims"), insofar as such Claims arise out of or are
based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus (including any preliminary, final or
summary prospectus and any amendment or supplement thereto) related to any such
registration or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by an IPO Entity of the Securities Act or any rule
or
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regulation thereunder applicable to an IPO Entity and relating to action or
inaction required of an IPO Entity in connection with any such registration, or
any qualification or compliance incident thereto; provided, however, that an IPO
Entity will not be liable in any such case to the extent that any such Claims
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact so made in
reliance upon and in conformity with written information furnished to an IPO
Entity in an instrument duly executed by such Holder specifically stating that
it was expressly for use therein. Each IPO Entity shall also indemnify any
Underwriters of the Registrable Securities, their Agents and each Person who
controls any such Underwriter (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the Holders
of Registrable Securities. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Person who may be
entitled to indemnification pursuant to this Section 5 and shall survive the
transfer of securities by such Holder or Underwriter.
4.2 Indemnification by Holders. Each Holder, if Registrable Securities
held by it are included in the securities as to which a registration is being
effected, agrees to, severally and not jointly, indemnify and hold harmless, to
the fullest extent permitted by law, the relevant IPO Entity, its directors and
officers, each other Person who participates as an Underwriter in the offering
or sale of such securities of the relevant IPO Entity and its Agents and each
Person who controls such IPO Entity or any such Underwriter (within the meaning
of the Securities Act) and its Agents against any and all Claims, insofar as
such Claims arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (including any preliminary, final or summary prospectus and any
amendment or supplement thereto) related to such registration, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to such IPO Entity in an
instrument duly executed by such Holder specifically stating that it was
expressly for use therein; provided, however, that the aggregate amount which
any such Holder shall be required to pay pursuant to this Section 4.2 shall in
no event be greater than the amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities pursuant to the Registration
Statement giving rise to such Claims less all amounts previously paid by such
Holder with respect to any such Claims. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
Holder or Underwriter.
4.3 Conduct of Indemnification Proceedings. Promptly after receipt by an
indemnified party of notice of any Claim or the commencement of any action or
proceeding involving a Claim under this Section 4, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party
pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim
or the commencement
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of such action or proceeding; provided, that the failure of any indemnified
party to provide such notice shall not relieve the indemnifying party of its
obligations under this Section 4, except to the extent the indemnifying party is
materially and actually prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section 4, and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided, however, that any indemnified party shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the indemnifying party has agreed in writing to pay
such fees and expenses, (B) the indemnifying party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory to such
indemnified party within 10 days after receiving notice from such indemnified
party that the indemnified party believes it has failed to do so, (C) in the
reasonable judgment of any such indemnified party, based upon advice of counsel,
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such indemnified party) or (D) such indemnified party is a
defendant in an action or proceeding which is also brought against the
indemnifying party and reasonably shall have concluded that there may be one or
more legal defenses available to such indemnified party which are not available
to the indemnifying party. No indemnifying party shall be liable for any
settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. In addition, without the
consent of the indemnified party (which consent shall not be unreasonably
withheld), no indemnifying party shall be permitted to consent to entry of any
judgment with respect to, or to effect the settlement or compromise of any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim), unless such settlement,
compromise or judgment (1) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim, (2) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party, and (3) does not provide for any
action on the part of any party other than the payment of money damages which is
to be paid in full by the indemnifying party.
4.4 Contribution. If the indemnification provided for in Section 4.1 or
4.2 from the indemnifying party for any reason is unavailable to (other than by
reason of exceptions provided therein), or is insufficient to hold harmless, an
indemnified party hereunder in respect of any Claim, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, in connection with the actions which resulted in such Claim, as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party
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and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. If, however, the
foregoing allocation is not permitted by applicable law, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative faults
but also the relative benefits of the indemnifying party and the indemnified
party as well as any other relevant equitable considerations.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by a party as a result of any Claim referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in Section 4.3, any legal or other fees, costs or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. Notwithstanding anything in this Section 4.4 to the contrary, no
indemnifying party (other than the relevant IPO Entity) shall be required
pursuant to this Section 4.4 to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of the Registrable
Securities pursuant to the Registration Statement giving rise to such Claims,
less all amounts previously paid by such indemnifying party with respect to such
Claims. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
4.5 Other Indemnification. Indemnification similar to that specified in
the preceding Sections 4.1 and 4.2 (with appropriate modifications) shall be
given by each IPO Entity and each selling Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act. The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract.
4.6 Indemnification Payments. The indemnification and contribution
required by this Section 4 shall be made by periodic payments of the amount
thereof during the course of any investigation or defense, as and when bills are
received or any expense, loss, damage or liability is incurred.
5. GENERAL
5.1 Adjustments Affecting Registrable Securities. The IPO Entity agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which
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would adversely affect in any material respects the ability of the Holder of any
Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration.
5.2 Registration Rights to Others. Other than as listed on Schedule 4.14
of the Purchase Agreement, the IPO Entity is not a party to any agreement (other
than this Agreement) with respect to its securities granting any registration
rights to any Person. If any IPO Entity shall at any time hereafter provide to
any holder of any securities of an IPO Entity rights with respect to the
registration of such securities under the Securities Act, such rights shall not
be in conflict with or adversely affect any of the rights provided in this
Agreement to the Holders.
5.3 [Intentionally Omitted].
5.4 Amendments and Waivers. The provisions of this Agreement may not be
amended, modified, supplemented or terminated in any material respect, and
waivers or consents to departures from the provisions hereof may not be given,
without the written consent of the Company and the Holders of not less than 50%
of the Registrable Securities then outstanding; provided, however, that no such
amendment, modification, supplement, waiver or consent to departure shall reduce
the aforesaid percentage of Registrable Securities without the written consent
of all of the Holders of Registrable Securities; and provided further, that
nothing herein shall prohibit any amendment, modification, supplement,
termination, waiver or consent to departure the effect of which is limited only
to those Holders who have agreed to such amendment, modification, supplement,
termination, waiver or consent to departure.
5.6 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, telecopier, any
courier guaranteeing overnight delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to the applicable
party at the address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties in accordance with the
provisions of this Section:
(i) If to the IPO Entities, to:
ASC Holdings, Inc.
Sunday River Access Road
P.O. Box 450
Bethel, Maine 04217
Attn.: Mr. Chris Howard
Telecopy: 207-824-5158
Telephone: 207-824-8100
(ii) If to the Initial Holders, to:
Madeleine, LLC
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450 Park Avenue
28th Floor
New York, New York 10022
Attn: Mr. Robert Davenport
Telecopy: 212-758-5305
Telephone: 212-891-2118
With a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Mark A. Neporent, Esq.
Telecopy: (212) 593-5955
Telephone: (212) 756-2000
(iii) If to any subsequent Holder, to the address of such Person set
forth in the records of the Company.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; when receipt
is acknowledged, if telecopied; on the next business day, if timely delivered to
a courier guaranteeing overnight delivery; and five days after being deposited
in the mail, if sent first class or certified mail, return receipt requested,
postage prepaid.
5.7 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors
and permitted assigns (including any permitted transferee of Registrable
Securities). Any Holder may assign to any permitted (as determined under the
Purchase Agreement transferee of its Registrable Securities (other than a
transferee that acquires such Registrable Securities in a registered public
offering or pursuant to a sale under Rule 144 of the Securities Act (or any
successor rule)), its rights and obligations under this Agreement; provided,
however, if any permitted transferee shall take and hold Registrable Securities,
such transferee shall promptly notify the Company and, by taking and holding
such Registrable Securities, such permitted transferee shall automatically be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement as
if it were a party hereto (and shall, for all purposes, be deemed a Holder under
this Agreement). If the Company shall so request, any heir, successor or
permitted assign (including any permitted transferee) shall agree in writing to
acquire and hold the Registrable Securities subject to all of the terms hereof.
For purposes of this Agreement, "successor" for any entity other than a natural
person shall mean a successor to such entity as a result of such entity's
merger, consolidation, liquidation, dissolution, sale of substantially all of
its assets, or similar transaction. Except as provided above or otherwise
permitted by this Agreement, neither this
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Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by any party hereto without the consent of the
other parties.
5.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
5.9 Descriptive Headings, Etc. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and paragraph references are to the Sections and
paragraphs of this Agreement unless otherwise specified; (4) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless otherwise specified; (5) "or" is not
exclusive; and (6) provisions apply to successive events and transactions.
5.10 Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
5.11 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (without giving effect to the
conflict of laws principles thereof).
5.12 Remedies; Specific Performance. The parties hereto acknowledge that
money damages would not be an adequate remedy at law if any party fails to
perform in any material respect any of its obligations hereunder, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to seek to compel
specific performance of the obligations of any other party under this Agreement,
without the posting of any bond, in accordance with the terms and conditions of
this Agreement in any court of the United States or any State thereof having
jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law. Except as otherwise provided by
law, a delay or omission by a party hereto in exercising any right or remedy
accruing upon any such breach shall not
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impair the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative. The failure to file a Demand Registration Statement within
__ days of a Request under Section 2.1 or 2.3 shall constitute, in the absence
of an injunction having been imposed or a Withdrawn Request, a breach thereof
entitling the Holders to remedies hereunder.
5.13 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises or
undertakings, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings among the Company and the
other parties to this Agreement with respect to such subject matter.
5.14 Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company (on behalf of the IPO Entities), be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
5.16 Consent to Jurisdiction. Each party to this Agreement hereby
irrevocably and unconditionally agrees that any legal action, suit or proceeding
arising out of or relating to this Agreement or any agreements or transactions
contemplated hereby may be brought in any federal court of the Southern District
of New York or any state court located in New York County, State of New York,
and hereby irrevocably and unconditionally expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and hereby
irrevocably and unconditionally waives any claim (by way of motion, as a defense
or otherwise) of improper venue, that it is not subject personally to the
jurisdiction of such court, that such courts are an inconvenient forum or that
this Agreement or the subject matter may not be enforced in or by such court.
Each party hereby irrevocably and unconditionally consents to the service of
process of any of the aforementioned courts in any such action, suit or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth or provided for in Section 5.5 of this
Agreement, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section.
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<PAGE>
5.15 Further Assurances. Each party hereto shall do and perform or cause
to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.17 No Inconsistent Agreements. Each IPO Entity will not hereafter enter
into any agreement which is inconsistent with the rights granted to the Holders
in this Agreement.
5.18 Construction. Each of the parties hereto acknowledges that it has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement with its legal counsel and that this
Agreement shall be construed as if jointly drafted by the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
ASC HOLDINGS, INC. MADELEINE L.L.C.:
By: /s/ Christopher E. Howard By: /s/ Bob Davenport
------------------------- -----------------
Its Senior Vice President
and Chief Administrative
Officer
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<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS....................................................... 1
2. REGISTRATION UNDER THE SECURITIES ACT............................. 6
2.1 DEMAND REGISTRATION......................................... 6
2.2 INCIDENTAL REGISTRATION..................................... 9
2.3 S-3 REGISTRATION; SHELF REGISTRATION........................ 11
2.4 EXPENSES.................................................... 12
2.5 UNDERWRITTEN OFFERINGS...................................... 12
2.6 CONVERSIONS; EXERCISES...................................... 13
3. REGISTRATION PROCEDURES........................................... 13
3.1 OBLIGATIONS OF THE IPO ENTITIES............................. 13
3.2 SELLER INFORMATION.......................................... 18
3.3 NOTICE TO DISCONTINUE....................................... 19
4. INDEMNIFICATION; CONTRIBUTION..................................... 19
4.1 INDEMNIFICATION BY THE IPO ENTITIES......................... 19
4.2 INDEMNIFICATION BY HOLDERS.................................. 20
4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS...................... 20
4.4 CONTRIBUTION................................................ 21
4.5 OTHER INDEMNIFICATION....................................... 22
4.6 INDEMNIFICATION PAYMENTS.................................... 22
5. GENERAL........................................................... 22
5.1 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES................ 22
5.2 REGISTRATION RIGHTS TO OTHERS............................... 23
5.3 [INTENTIONALLY OMITTED]..................................... 23
5.4 AMENDMENTS AND WAIVERS...................................... 23
5.6 NOTICES..................................................... 23
5.7 SUCCESSORS AND ASSIGNS...................................... 24
5.8 COUNTERPARTS................................................ 25
5.9 DESCRIPTIVE HEADINGS, ETC................................... 25
5.10 SEVERABILITY................................................ 25
5.11 GOVERNING LAW............................................... 25
5.12 REMEDIES; SPECIFIC PERFORMANCE.............................. 25
5.13 ENTIRE AGREEMENT............................................ 26
5.14 NOMINEES FOR BENEFICIAL OWNERS.............................. 26
5.15 CONSENT TO JURISDICTION..................................... 26
5.15 FURTHER ASSURANCES.......................................... 27
5.17 NO INCONSISTENT AGREEMENTS.................................. 27
5.18 CONSTRUCTION................................................ 27
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EXHIBIT 10.70
INDENTURE dated as of ______________* between ___________________,**
a ________ corporation (the "Company"), and ______________***, a banking
corporation duly organized and existing under the laws of the state of New York,
as Trustee (the "Trustee").
Both parties agree as follows for the benefit of the other and for
the equal and ratable benefit of the registered holders of the Company's 6%
Convertible Subordinated Debentures due ______**** .
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Affiliate" of any specified person means any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or Conversion Agent.
"Adjusted IPO Price" means the IPO Price as adjusted for the events
specified in Section 4.6(a).
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles;
the amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Cash" or "cash" means such coin or currency of the United States as
at any time of payment is legal tender for the payment of public and private
debts.
- ----------
* Date of Issuance.
** Acquiring Person/IPO Entity.
*** Insert name of trustee.
**** Five years from date of Issuance.
<PAGE>
"Certificated Securities" means Securities that are in the form of
the Securities attached hereto as Exhibit A-1.
"Common Stock" means the class of common stock of the Company to be
issued to the public, as such Common Stock as it exists on the date of this
Indenture or as it may be constituted from time to time.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture, and thereafter means the
successor.
"Conversion Price" has the meaning ascribed to such term in Section
4.1.
"Corporate Trust Office" means the principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered which office at the date of the execution of this Indenture is
located at ____________________________________________,
____________________________________________ or at any other time at such other
address as the Trustee may designate from time to time by notice to the Company.
"Default" or "default" means any event which is, or after notice or
passage of time, or both, would be an Event of Default.
"Holder" or "Securityholder" means the person in whose name a
Security is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from
time to time pursuant to the terms of this Indenture.
"Officer" means the Chairman or any Co-Chairman of the Board, any
Vice Chairman of the Board, the President, any Vice President, the Chief
Financial Officer, the Secretary or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers;
provided, however, that for purposes of Section 6.4, "Officers' Certificate"
means a certificate signed by the principal executive officer, principal
financial officer or principal accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of or counsel to the Company or the Trustee.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, or any other entity or organization, including a government or political
subdivision or instrumentality thereof.
"Principal" or "principal" of a debt security, including the
Securities, means the principal of the security plus, when appropriate, the
premium, if any, on the security.
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<PAGE>
"Redemption Date" or "redemption date," when used with respect to
any Security to be redeemed, means the date fixed for such redemption pursuant
to this Indenture.
"Redemption Price" or "redemption price," when used with respect to
any Security to be redeemed, means the price fixed for such redemption pursuant
to this Indenture, as set forth in the form of Security annexed as Exhibit A-1
hereto.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means the 6% Convertible Subordinated Debentures due
_______* or any of them (each, a "Security"), as amended or supplemented from
time to time, that are issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the following: (a) the principal of and
premium, if any, and interest (including, without limitation, any interest
accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceedings, whether or not constituting an allowed
claim in any such proceedings) on, and fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations in respect of, the following,
whether presently outstanding or hereafter incurred or created: all indebtedness
or obligations of the Company to any person, including, but not limited to,
banks and other lending institutions, for money borrowed (other than that
evidenced by the Securities) or in respect of credit or other banking facilities
and which is evidenced by a note, bond, debenture, loan agreement, a lease
intended as security or similar instrument or agreement (including purchase
money obligations with an original maturity in excess of one year and
noncontingent obligations to reimburse any bank or other person in respect of
amounts paid under letters of credit); (b) commitment or standby fees due and
payable to lending institutions with respect to credit facilities available to
the Company; (c) all noncontingent obligations of the Company (i) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (ii) under interest rate swaps, caps, collars,
options and similar arrangements, and (iii) under any foreign exchange contract,
currency swap agreement, futures contract, currency option contract, or other
foreign currency hedge; (d) all obligations of the Company for the payment of
money relating to a Capitalized Lease Obligation; (e) any liabilities of others
described in the preceding clauses (a), (b), (c) and (d) which the Company has
guaranteed or which are otherwise its legal liability; and (f) renewals,
extensions, refundings, restructurings, amendments and modifications of any such
indebtedness or guarantee. Notwithstanding anything to the contrary in this
Indenture or the Securities, "Senior Indebtedness" shall not include (x) any
particular indebtedness, lease, fee, obligation, renewal, extension, refunding,
restructuring, amendment or modification if, under the express provisions of the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, such indebtedness, lease, fee, obligation, renewal, extension,
refunding, restructuring, amendment or modification thereof is stated to be not
superior in right of payment
- ----------
* Insert date five years from date of Issuance.
3
<PAGE>
to the Securities, (y) indebtedness of the Company (i) owing, directly or
indirectly, to any person under or in respect of any employee benefit plan of
the Company, or (ii) owing, directly or indirectly, to any employee of the
Company or any Affiliate of the Company, and (z) the Securities.
"Subsidiary" means any corporation of which at least a majority of
the outstanding capital stock having voting power under ordinary circumstances
to elect directors of such corporation shall at the time be held, directly or
indirectly, by the Company, by the Company and one or more Subsidiaries, or by
one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 and as in effect on the date of this Indenture,
except as provided in Section 11.3, and except to the extent any amendment to
the Trust Indenture Act expressly provides for application of the Trust
Indenture Act as in effect on another date.
"Trading Day" means, with respect to any security, each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on which securities
are not generally traded on the exchange or market in which such security is
traded.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means the successor.
"Trust Officer" means, with respect to the Trustee, any officer
assigned to the Corporate Trust office, including any managing director, vice
president, assistant vice president, assistant treasurer, assistant secretary or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above-designated officers and having direct
responsibility for the administration of this Indenture, and also, with respect
to a particular matter, any other officer, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Section 1.2 Other Definitions.
Term Defined in Section
---- ------------------
"Agent Members" 2.1
"Bankruptcy Law" 8.1
"Company Order" 2.2
"Conversion Agent" 2.3
"Conversion Date" 4.2
"Conversion Price" 4.6
"Conversion Shares" 4.6
"Custodian" 8.1
"DTC" 2.1
"Default Notice" 5.5
"Depositary" 2.1
4
<PAGE>
"Determination Date" 4.6
"Distribution Date" 4.6
"Event of Default" 8.1
"Exchange Act" 3.8
"Legal Holiday" 12.7
"Paying Agent" 2.3
"Registrar" 2.3
"Rights" 4.6
"Transfer Restricted Security" 2.12
"Triggering Distribution" 4.6
"Unissued Shares" 3.8
"U.S. Government Obligations" 10.1
Section 1.3 Trust Indenture Act Provisions.
Whenever this Indenture refers to a provision of the TIA, that
provision is incorporated by reference in and made a part of this Indenture. The
Indenture shall also include those provisions of the TIA required to be included
herein by the provisions of the Trust Indenture Reform Act of 1990. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles in effect on the date hereof, and
any other reference in this Indenture
5
<PAGE>
to "generally accepted accounting principles" refers to
generally accepted accounting principles in effect on
the date hereof;
(3) words in the singular include the plural, and words in
the plural include the singular;
(4) provisions apply to successive events and transactions;
and
(5) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE II
THE SECURITIES
Section 2.1 Form and Dating.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A-1, which is incorporated in and made
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve, with the consent of the Trustee, the form of the Securities and any
notation, legend or endorsement thereon. Each Security shall be dated the date
of its authentication.
Section 2.2 Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
Typographic and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security which has been authenticated and delivered by the Trustee.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities for original issue in the aggregate principal amount of up to
$____________ upon a written order or orders of the Company signed by two
officers of the Company (a "Company Order"). The Company Order shall specify the
amount of Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $___________, except as
provided above and in Section 2.7.
6
<PAGE>
The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 2.3 Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Securities may be presented for payment (the "Paying
Agent"), an office or agency where Securities may be presented for conversion
(the "Conversion Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register of the Securities and of their transfer and
exchange.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or
agent for service of notices and demands, or fails to give the foregoing notice,
the Trustee shall act as such. The Company or any Affiliate of the Company may
act as Paying Agent (except for the purposes of Section 6.1 and Article 10),
Registrar or Conversion Agent.
The Company initially appoints the Trustee as Registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands in
connection with the Securities.
Section 2.4 Paying Agent to Hold Money In Trust.
On or prior to each due date of the principal of or interest on any
Securities, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal or interest so becoming due. Subject to Section 5.7, the
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Securities, and shall notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment. If
the Company or an Affiliate of the Company acts as Paying Agent, it shall, on or
before each due date of the principal of or interest on any Securities,
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
the Trustee may at any time during the continuance of any default, upon written
request to a Paying Agent, require such Paying Agent to forthwith pay to the
Trustee all sums so held in trust
7
<PAGE>
by such Paying Agent. Upon doing so, the Paying Agent (other than the Company)
shall have no further liability for the money.
Section 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each semiannual interest payment date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Securityholders.
Section 2.6 Transfer and Exchange.
(a) When a Security is presented to the Registrar with a request to
register a transfer thereof or to exchange such Security for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested; provided, however, that
every Security presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Registrar duly executed by the Holder thereof or his or
her attorney duly authorized in writing. To permit registration of transfers and
exchanges, upon surrender of any Security for registration of transfer or
exchange at the office or agency maintained pursuant to Section 2.3, the Company
shall execute and the Trustee shall authenticate Securities of a like aggregate
principal amount at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Company or the Registrar may require payment of
a sum sufficient to cover any tax, assessment or other governmental charge that
may be imposed in relation thereto, and provided further that this sentence
shall not apply to any exchange pursuant to Section 2.10, 3.6, 3.11, 4.2 (last
paragraph) or 11.5.
Neither the Company, the Registrar nor the Trustee shall be required
to exchange or register a transfer of (a) any Securities for a period of 15 days
next preceding any selection of Securities to be redeemed, or (b) any Securities
or portions thereof selected or called for redemption (except, in the case of
redemption of a Security in part, the portion not to be redeemed).
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt and entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
(b) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register for the Securities.
(c) Any Registrar appointed pursuant to Section 2.3 hereof shall
provide to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon transfer or
exchange of Securities.
8
<PAGE>
(d) No Registrar shall be required to make registrations of transfer
or exchange of Securities during any periods designated in the text of the
Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.
Section 2.7 Replacement Securities.
If any mutilated Security is surrendered to the Company, the
Registrar or the Trustee, or the Company, the Registrar and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company, the Registrar and the Trustee
such Security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company, the Registrar or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in lieu
of any such destroyed, lost or stolen Security, a new Security of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be redeemed or
purchased by the Company pursuant to Article 3, the Company in its discretion
may, instead of issuing a new Security, pay, redeem or purchase such Security,
as the case may be.
Upon the issuance of any new Securities under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax, assessment
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee or the Registrar)
in connection therewith.
Every new Security issued pursuant to this Section 2.7 in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.8 Outstanding Securities.
Securities outstanding at any time are all Securities authenticated
by the Trustee, except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.8 as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
9
<PAGE>
If the Paying Agent (other than the Company) holds on a redemption
date or maturity date money sufficient to pay the principal of, and premium, if
any, and accrued interest on, Securities payable on that date, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
Subject to the restrictions contained in Section 2.9, a Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security.
Section 2.9 Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any notice, direction, waiver or consent,
Securities owned by the Company or any other obligor on the Securities or by any
Affiliate of the Company or of such other obligor shall be disregarded, except
that, for purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only Securities which
the Trustee knows are so owned shall be so disregarded. Securities so owned
which have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to the Securities and that the pledgee is not the Company or any
other obligor on the Securities or any Affiliate of the Company or of such other
obligor.
Section 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and execute, and, upon the order of the Company, the Trustee shall
authenticate and deliver, temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company with the consent of the Trustee considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate and deliver definitive Securities in exchange for
temporary Securities.
Section 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Securities surrendered to them for
transfer, exchange, payment or conversion. The Trustee and no one else shall
cancel, in accordance with its standard procedures, all Securities surrendered
for transfer, exchange, redemption, payment, conversion or cancellation and
shall deliver the canceled Securities to the Company. The Company may not issue
new Securities to replace Securities it has paid or delivered to the Trustee for
cancellation or that any Holder has converted pursuant to Article 4.
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<PAGE>
ARTICLE III
REDEMPTION AND PURCHASES
Section 3.1 Right to Redeem; Notice to Trustee.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at the redemption prices specified in
paragraph 5 of the form of Security attached hereto as Exhibit A-1, together
with accrued interest up to but not including the Redemption Date; provided that
the Securities may not be so redeemed prior to the fifth anniversary of their
issuance unless the closing price per share of the Common Stock for any 45
consecutive trading days ending no more than 30 calendar days prior to the date
notice of redemption is first mailed is at least 140% of the Adjusted IPO Price
then in effect.
If the Company elects to redeem Securities pursuant to this Section
3.1 and paragraph 5 of the Securities, it shall notify the Trustee at least 100
days prior to the redemption date as fixed by the Company of the redemption date
and the principal amount of Securities to be redeemed. If fewer than all of the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall not
be less than five days after the date of notice to the Trustee.
Section 3.2 Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall, not more than 100 days prior to the redemption date, select the
Securities to be redeemed by lot. The Trustee shall make the selection from the
Securities outstanding and not previously called for redemption. Securities in
denominations of $1,000 may only be redeemed in whole. The Trustee may select
for redemption portions (equal to $1,000 or any multiple thereof) of the
principal of Securities that have denominations larger than $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
Section 3.3 Notice of Redemption.
At least 90 days but not more than 120 days before a redemption
date, the Company shall mail or cause to be mailed a notice of redemption by
first-class mail to each Holder of Securities to be redeemed at such Holder's
address as it appears on the Registrar's books.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the then current Conversion Price;
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(4) the name and address of the Paying Agent and the
Conversion Agent;
(5) that Securities called for redemption must be presented
and surrendered to the Paying Agent to collect the
redemption price;
(6) that the Securities called for redemption may be
converted at any time before the close of business on
the redemption date;
(7) that Holders who wish to convert Securities must satisfy
the requirements in paragraph 8 of the Securities;
(8) that, unless the Company defaults in making the
redemption payment, interest on Securities called for
redemption shall cease accruing on and after the
redemption date and the only remaining right of the
Holder shall be to receive payment of the redemption
price upon presentation and surrender to the Paying
Agent of the Securities; and
(9) if any Security is being redeemed in part, the portion
of the principal amount of such Security to be redeemed
and that, after the redemption date, upon presentation
and surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
Section 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price stated in the notice, except for Securities that are converted in
accordance with the provisions of Section 4.1. Upon presentation and surrender
to the Paying Agent, Securities called for redemption shall be paid at the
redemption price, plus accrued interest up to but not including the redemption
date.
Section 3.5 Deposit of Redemption Price.
On or prior to 12:00 noon New York time on the redemption date, the
Company shall deposit with the Paying Agent (or, if the Company acts as Paying
Agent, shall segregate and hold in trust) money sufficient to pay the redemption
price of and accrued interest on all Securities to be redeemed on that date,
other than Securities or portions thereof called for redemption on that date
which have been delivered by the Company to the Trustee for cancellation or have
been converted. The Paying Agent shall return to the Company any money not
required for that purpose because of the conversion of securities pursuant to
Article 4 or
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otherwise. If such money is then held by the Company in trust and is not
required for such purpose, it shall be discharged from the trust.
Section 3.6 Securities Redeemed in Part.
Upon presentation and surrender of a Security that is redeemed in
part, the Company shall execute and the Trustee shall authenticate for and
deliver to the Holder a new Security equal in principal amount to the unredeemed
portion of the Security surrendered.
Section 3.7 Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities, the Company may
arrange for the purchase and conversion of any Securities called for redemption
by an agreement with one or more investment bankers or other purchasers to
purchase such Securities by paying to the Paying Agent in trust for the
Securityholders, on or before the close of business on the Redemption Date, an
amount that, together with any amounts deposited with the Paying Agent by the
Company for the redemption of such Securities, is not less than the Redemption
Price, together with interest, if any, accrued to, but not including, the
Redemption Date, of such Securities. Notwithstanding anything to the contrary
contained in this Article 3, the obligation of the Company to pay the Redemption
Price of such Securities, including all accrued interest, if any, shall be
deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, any Securities not duly
surrendered for conversion by the Holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article 4) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the Redemption Date, subject to
payment of the above amount as aforesaid. The Paying Agent shall hold and pay to
the Holders whose Securities are selected for redemption any such amount paid to
it for purchase and conversion in the same manner as it would moneys deposited
with it by the Company for the redemption of Securities. Without the Paying
Agent's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Securities shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Paying Agent as set forth in this Indenture, and the Company agrees to
indemnify the Paying Agent from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Securities between the Company and such
purchasers, including the costs and expenses incurred by the Paying Agent in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
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ARTICLE IV
CONVERSION
Section 4.1 Conversion Privilege.
Subject to the further provisions of this Section 4.1, a Holder of a
Security may convert such Security into Common Stock at any time prior to
maturity, at the Conversion Price then in effect; provided, however, that, if
such Security is called for redemption pursuant to Article 3, such conversion
right shall terminate at the close of business on the redemption date for such
Security (unless the Company shall default in making the redemption payment when
due, in which case the conversion right shall terminate at the close of business
on the date such default is cured and such Security is redeemed). The number of
shares of Common Stock issuable upon conversion of a Security shall be
determined by dividing the principal amount of the Security or portion thereof
surrendered for conversion by the Conversion Price in effect on the Conversion
Date. The initial Conversion Price is set forth in paragraph 7 of the Securities
and is subject to adjustment as provided in this Article 4.
A Holder may convert a portion of a Security equal to $1,000 or any
integral multiple thereof. Provisions of this Indenture that apply to conversion
of all of a Security also apply to conversion of a portion of a Security.
A Holder of Securities is not entitled to any rights of a holder of
Common Stock until such Holder has converted his or her Securities to Common
Stock, and only to the extent such Securities are deemed to have been converted
into Common Stock pursuant to this Article 4.
Section 4.2 Conversion Procedure.
To convert a Security, a Holder must (a) complete and manually sign
the conversion notice on the back of the Security and deliver such notice to the
Conversion Agent, (b) surrender the Security to the Conversion Agent, (c)
furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, and (d) pay any transfer or similar tax, if
required. The date on which the Holder satisfies all of those requirements is
the "Conversion Date." As soon as practicable after the Conversion Date, the
Company shall deliver to the Holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional shares pursuant to Section 4.3.
The person in whose name the certificate is registered shall be
deemed to be a shareholder of record on the Conversion Date; provided, however,
that no surrender of a Security on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the person or persons
entitled to receive the shares of Common Stock upon such conversion as the
record holder or holders of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the person or persons entitled to
receive such shares of Common Stock as the record holder or holders for all
purposes at the close of business
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on the next succeeding day on which such stock transfer books are open;
provided, further, that such conversion shall be at the Conversion Price in
effect on the Conversion Date as if the stock transfer books of the Company had
not been closed. Upon conversion of a Security, such person shall no longer be a
Holder of such Security. No payment or adjustment will be made for dividends or
distributions on shares of Common Stock issued upon conversion of a Security.
Upon conversion of a Security, the Holder shall be paid, in cash, an
amount equal to accrued interest on the converted Security.
If a Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the aggregate principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security equal in principal amount to the unconverted portion of the
Security surrendered.
Section 4.3 Fractional Shares.
The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash based upon the closing sale price of the Common Stock on the Trading Day
immediately prior to the date of conversion.
Section 4.4 Taxes on Conversion.
If a Holder converts a Security, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon such conversion. However, the Holder shall pay any such tax
which is due because the Holder requests the shares to be issued in a name other
than the Holder's name. The Conversion Agent may refuse to deliver the
certificate representing the Common Stock being issued in a name other than the
Holder's name until the Conversion Agent receives a sum sufficient to pay any
tax which will be due because the shares are to be issued in a name other than
the Holder's name. Nothing herein shall preclude any tax withholding required by
law or regulation.
Section 4.5 Company to Provide Stock.
The Company shall, prior to issuance of any Securities hereunder,
and from time to time as it may be necessary, reserve, out of its authorized but
unissued Common Stock, a sufficient number of shares of Common Stock to permit
the conversion of all outstanding Securities into shares of Common Stock.
All shares of Common Stock delivered upon conversion of the
Securities shall be newly issued shares or treasury shares, shall be duly
authorized, validly issued, fully paid and nonassessable and shall be free from
preemptive rights and free of any lien or adverse claim.
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The Company will endeavor promptly to comply with all federal and
state securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Securities, if any, and will list or cause to have
quoted such shares of Common Stock on each national securities exchange or in
the over-the-counter market or such other market on which the Common Stock is
then listed or quoted.
Section 4.6 Adjustment of Conversion Price.
The conversion price as stated in paragraph 8 of the Securities (the
"Conversion Price") shall be adjusted from time to time by the Company as
follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock to all holders of Common Stock, (ii) make a distribution in shares of
Common Stock to all holders of Common Stock, (iii) subdivide its outstanding
Common Stock into a greater number of shares, or (iv) combine its outstanding
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Holder of any Security
thereafter surrendered for conversion shall be entitled to receive that number
of shares of Common Stock which he or she would have owned had such Security
been converted immediately prior to the happening of such event. An adjustment
made pursuant to this subsection (a) shall become effective immediately after
the record date in the case of a dividend in shares or distribution and shall
become effective immediately after the effective date in the case of subdivision
or combination.
(b) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not more
than 60 days after such record date) to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the current market price per share of Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) at the record date for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Price in effect immediately prior thereto shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on such
record date, plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate Conversion
Price of the convertible securities so offered) would purchase at such current
market price, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively whenever
any such rights or warrants are issued, and shall become effective immediately
after such record date. If at the end of the period during which such rights or
warrants are exercisable not all rights or warrants shall have been exercised,
the adjusted Conversion Price shall be immediately readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
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(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), evidences of indebtedness or other non-cash assets
(including securities of any company other than the Company), or shall
distribute to all or substantially all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (excluding those
referred to in subsection (b) of this Section 4.6), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
current market price per share (as defined in subsection (e) of this Section
4.6) of the Common Stock on the record date mentioned below less the fair market
value on such record date (as determined by the Board of Directors, whose
determination shall be conclusive evidence of such fair market value) of the
portion of the capital stock or assets or evidences of indebtedness so
distributed or of such rights or warrants applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date), and of which the denominator shall be the
current market price per share (as defined in subsection (e) of this Section
4.6) of the Common Stock on such record date. Such adjustment shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Company shall distribute rights or warrants
(other than those referred to in subsection (b) of this Section 4.6) ("Rights")
pro rata to holders of Common Stock, the Company may, in lieu of making any
adjustment pursuant to this Section 4.6, make proper provision so that each
holder of a Security who converts such Security (or any portion thereof) after
the record date for such distribution and prior to the expiration or redemption
of the Rights shall be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable upon such conversion (the "Conversion
Shares"), a number of Rights to be determined as follows: (i) if such conversion
occurs on or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of Common Stock equal
to the number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the Security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute (a "Triggering Distribution") to all or substantially all holders of
its Common Stock cash in an aggregate amount that, together with the aggregate
amount of any other cash distributions to all or substantially all holders of
its Common Stock made within the 12 months preceding the date of payment of the
Triggering Distribution and in respect of which no Conversion Price adjustment
pursuant to this Section 4.6 has been made, exceeds 15% of the product of the
current market price per share of Common Stock (as determined in accordance with
subsection (e) of this Section 4.6) on the Business Day (the "Determination
Date") immediately preceding the day on which such Triggering Distribution is
declared by the Company multiplied by the number of shares of Common Stock
outstanding on such date (excluding shares held in the Treasury of the
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Company), the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying such Conversion Price in effect immediately
prior to the Determination Date by a fraction of which the numerator shall be
the current market price per share of the Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) on the Determination Date
less the amount of cash so distributed within such 12 months (including, without
limitation, the Triggering Distribution) applicable to one share of Common Stock
(determined on the basis of the number of shares of Common Stock outstanding on
the Determination Date) and the denominator shall be such current market price
per share of the Common Stock (as determined in accordance with subsection (e)
of this Section 4.6) on the Determination Date, such reduction to become
effective immediately prior to the opening of business on the day following the
date on which the Triggering Distribution is paid.
(e) For the purpose of any computation under subsections (b), (c)
and (d) of this Section 4.6, the current market price per share of Common Stock
on any date shall be deemed to be the average of the daily closing prices for
the 30 consecutive Trading Days commencing 45 Trading Days before (i) the
Determination Date with respect to distributions under subsection (d) of this
Section 4.6 or (ii) the record date with respect to distributions, issuances or
other events requiring such computation under subsection (b) or (c) of this
Section 4.6. The closing price for each day shall be the last reported sales
price or, in case no such reported sale takes place on such date, the average of
the reported closing bid and asked prices in either case on the NASDAQ National
Market System or, if the Common Stock is not listed or admitted to trading on
the NASDAQ National Market System, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the closing sales price
of the Common Stock as quoted by NASDAQ or, in case no reported sales takes
place, the average of the closing bid and asked prices as quoted by NASDAQ or
any comparable system or, if the Common Stock is not quoted on NASDAQ or any
comparable system, the closing sales price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as furnished by any two
members of the National Association of Securities Dealers, Inc. selected from
time to time by the Company for that purpose. If no such prices are available,
the current market price per share shall be the fair value of a share of Common
Stock as determined by the Board of Directors of the Company.
(f) In any case in which this Section 4.6 shall require that an
adjustment be made following a record date or a Determination Date, as the case
may be, established for purposes of this Section 4.6, the Company may elect to
defer (but only until five Business Days following the filing by the Company
with the Trustee of the certificate described in Section 4.9) issuing to the
holder of any Security converted after such record date or Determination Date
the shares of Common Stock and other capital stock of the Company issuable upon
such conversion over and above the shares of Common Stock and other capital
stock of the Company issuable upon such conversion only on the basis of the
Conversion Price prior to adjustment; and, in lieu of the shares the issuance of
which is so deferred, the Company shall issue or cause its transfer agents to
issue due bills or other appropriate evidence prepared by the Company of the
right to receive such shares. If any distribution in respect of which an
adjustment to the Conversion Price is required to be made as of the record date,
effective date or Determination Date therefor is
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not thereafter made or paid by the Company for any reason, the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect if
such record date had not been fixed or such effective date or Determination Date
had not occurred.
Section 4.7 No Adjustment.
No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this Section 4.7 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article 4 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in Section
4.6 if all Securityholders are entitled to participate in the transaction on a
basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction. The Company shall give 30 days prior notice to
the Trustee and to the Holders of the Securities of any such determination.
No adjustment need be made for rights to purchase Common Stock or
issuances of Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or a change
to no par value of the Common Stock.
To the extent that the Securities become convertible into the right
to receive cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
Section 4.8 Adjustment for Tax Purposes.
The Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required by Section 4.6, as it in its
discretion shall determine to be advisable in order that any stock dividends,
subdivisions of shares, distributions of rights to purchase stock or securities
or distributions of securities convertible into or exchangeable for stock
hereafter made by the Company to its shareholders shall not be taxable; provided
that no such reduction shall give rise to a right of the Company to optionally
redeem the securities pursuant to Section 3.1.
Section 4.9 Notice of Adjustment.
Whenever the Conversion Price is adjusted, the Company shall
promptly mail to Securityholders a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence of the correctness of such adjustment.
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Section 4.10 Notice of Certain Transactions.
In the event that:
(1) the Company takes any action which would require an
adjustment in the Conversion Price;
(2) the Company consolidates or merges with, or transfers
all or substantially all of its assets to, another
corporation and shareholders of the Company must approve
the transaction; or
(3) there is a dissolution or liquidation of the Company,
the Company shall mail to Securityholders and file with the Trustee a notice
stating the proposed record or effective date, as the case may be. The Company
shall mail the notice at least ten days before such date. Failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section 4.10.
Section 4.11 Effect of Reclassification, Consolidation, Merger or
Sale on Conversion Privilege.
If any of the following shall occur, namely: (a) any
reclassification or change of shares of Common Stock issuable upon conversion of
the Securities (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination, or any other change for which an adjustment is provided in Section
4.6); (b) any consolidation or merger to which the Company is a party other than
a merger in which the Company is the continuing corporation and which does not
result in any reclassification of, or change (other than a change in name, or in
par value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination) in, outstanding shares of Common
Stock; or (c) any sale or conveyance of all or substantially all of the assets
of the Company as an entirety, then the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Security then outstanding shall have the right to convert such Security
into the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reclassification, change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
deliverable upon conversion of such Security immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
supplemental indenture shall provide for adjustments of the Conversion Price
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Price provided for in this Article 4. If, in the case of any such
consolidation, merger, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
include shares of stock or other securities and property of a corporation other
than the successor or purchasing corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then such supplemental indenture
shall also be executed by such other corporation and shall contain such
additional provisions to protect the
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interests of the Holders of the Securities as the Board of Directors shall
reasonably consider necessary by reason of the foregoing. The provisions of this
Section 4.11 shall similarly apply to successive consolidations, mergers, sales
or conveyances.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 4.11, the Company shall promptly file with the Trustee
(x) an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders of the Securities upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance, any
adjustment to be made with respect thereto and that all conditions precedent
have been complied with and (y) an Opinion of Counsel that all conditions
precedent have been complied with.
Section 4.12 Trustee's Disclaimer.
The Trustee has no duty to determine if the conditions precedent to
the Company's redemption rights under Section 3 have been satisfied and to
determine when an adjustment under this Article 4 should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of that fact or the correctness of any such adjustment, and shall be protected
in relying upon, an Officers' Certificate including the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 4.9. The Trustee makes no representation as to the validity
or value of any securities or assets issued upon conversion of Securities, and
the Trustee shall not be responsible for the Company's failure to comply with
any provisions of this Article 4.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.11, but may accept as conclusive evidence of the
correctness thereof, and shall be fully protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 4.11.
ARTICLE V
SUBORDINATION
Section 5.1 Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each holder of Securities
issued hereunder by his or her acceptance thereof likewise covenants and agrees,
that all Securities shall be issued subject to the provisions of this Article 5;
and each person holding any Security, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of and interest on all Securities
issued hereunder (including, without limitation, in connection with any
redemption of Securities) shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to
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the prior payment in full of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter created, assumed or guaranteed.
Section 5.2 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation, Reorganization, Etc., of the Company.
Upon the payment or distribution of the assets of the Company of any
kind or character, whether in cash, property or securities (including any
collateral at any time securing the Securities), to creditors upon any
dissolution, winding-up, total or partial liquidation or reorganization of the
Company (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation, receivership proceedings, or upon an assignment for
the benefit of creditors, or any other marshalling of the assets and liabilities
of the Company, or otherwise), then in such event:
(a) all Senior Indebtedness (including principal thereof, interest
thereon and fees and expenses relating thereto) and the reasonable fees and
expenses of the Trustee shall first be paid in full, in cash, or have provision
made for such payment, before any payment is made on account of the principal of
or interest on the indebtedness evidenced by the Securities or any deposit is
made pursuant to Section 6.3;
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than securities of
the Company as reorganized or readjusted, or securities of the Company or any
other company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided in this Article 5, with respect to the Securities, to the
payment of all Senior Indebtedness at that time outstanding and to the payment
of all securities issued in exchange therefor to the holders of the Senior
Indebtedness at the time outstanding), to which the Holders or the Trustee on
behalf of the Holders would be entitled except for the provisions of this
Article 5, including any such payment or distribution which may be payable or
deliverable by reason of the payment of another debt of the Company being
subordinated to the payment of the Securities, shall be paid or delivered by any
debtor, Custodian or other person making such payment or distribution, directly
to the holders of the Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness have been
issued, ratably according to the aggregate amounts remaining unpaid on account
of the principal of, interest on and fees and expenses relating to the Senior
Indebtedness held or represented by each, for application to payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior Indebtedness;
and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 5.2, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities other than securities
of the Company as reorganized or readjusted, or securities of the Company or any
other Company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
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Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon the happening of an Event of Default under this Indenture,
subject to the provisions of Article 8, and the rights, if any, under this
Article 5 of the holders of Senior Indebtedness in respect of assets, whether in
cash, property or securities of the Company received upon the exercise of any
such remedy.
Section 5.5 Company Not to Make Payment With Respect to Securities
in Certain Circumstances.
(a) Upon the happening of a default in payment (whether at maturity
or at a date fixed for prepayment or by acceleration or otherwise) of the
principal of or interest on any Senior Indebtedness, as such default is defined
under or in respect of such Senior Indebtedness or in any agreement pursuant to
which such Senior Indebtedness has been incurred, then, unless and until the
amount of such Senior Indebtedness then due shall have been paid in full or
provision made therefor in a manner satisfactory to the holders of such Senior
Indebtedness, or such default shall have been cured or waived or shall have
ceased to exist, the Company shall not pay principal of or interest on the
Securities or make any deposit pursuant to Section 6.3 or 10.1 and shall not
repurchase, redeem or otherwise retire any Securities (collectively, "pay the
Securities").
(b) Upon the happening of an event of default with respect to any
Senior Indebtedness (other than under circumstances when the terms of subsection
(a) of this Section 5.5 are applicable), as such event of default is defined
under or in respect of such Senior Indebtedness or in any agreement pursuant to
which such Senior Indebtedness has been incurred, permitting the holders thereof
to accelerate the maturity thereof, and upon written notice thereof given to the
Company and the Trustee by any holders of such Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have been issued (a "Default Notice"), then, unless and until such
event of default shall have been cured or waived in writing by the holders of
such Senior Indebtedness or shall have ceased to exist, no direct or indirect
payment shall be made with respect to the principal of or interest on the
Securities or to acquire any of the Securities or on account of the redemption
or mandatory repurchase provisions of the Securities; provided, however, that
this subsection (b) shall not prevent the making of any such payment (which is
not otherwise prohibited by subsection (a) of this Section 5.5) for more than
120 days after the Default Notice shall have been given unless the Senior
Indebtedness in respect of which such event of default exists has been declared
due and payable in its entirety, in which case no such payment may be made until
such acceleration has been waived, rescinded or
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annulled, or such Senior Indebtedness shall have been paid in full, or payment
thereof shall be duly provided for in cash or in any other manner satisfactory
to the holders of such Senior Indebtedness. Notwithstanding the foregoing, not
more than one Default Notice shall be given with respect to the same issue of
Senior Indebtedness within a period of 360 consecutive days, and no event of
default which existed or was continuing on the date of any Default Notice and
was known to the holders of such issue of Senior Indebtedness shall be made the
basis for the giving of a subsequent Default Notice by the holders of such issue
of Senior Indebtedness.
(c) In the event that, notwithstanding the foregoing provisions of
this Section 5.5, any payment on account of the principal of or interest on the
Securities shall be made by or on behalf of the Company and received by the
Trustee, any Holder or any Paying Agent (or, if the Company is acting as its own
Paying Agent, money for any such payment shall be segregated and held in trust),
after the happening of a default under any Senior Indebtedness of the type
specified in subsections (a) and (b) of this Section 5.5, then, unless and until
the amount of such Senior Indebtedness then due shall have been paid in full, or
provision made therefor or such default shall have been cured or waived, such
payment (subject, in each case, to the provisions of Sections 5.6 and 5.7 and
the proviso contained in subsection (b) of this Section 5.5) shall be held in
trust for the benefit of, and shall be immediately paid over to, the holders of
Senior Indebtedness or their representative or representatives or the trustee or
trustees under any indenture under which any instruments evidencing any of the
Senior Indebtedness may have been issued ratably according to the aggregate
amounts remaining unpaid on account of the principal of and interest on, and
fees and other charges in respect of, the Senior Indebtedness held or
represented by each, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of Senior Indebtedness.
Section 5.6 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article 5 or any other provision of this Indenture, the Trustee shall not
at any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, unless and until the
Trustee shall have received written notice thereof from the Company or from the
holder or holders of Senior Indebtedness or from their representative or
representatives or from the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness have been
issued; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Sections 9.1 and 9.2, shall be entitled to assume
conclusively that such facts do not exist.
The Trustee shall be entitled to rely conclusively on the delivery
to it of a written notice by a person representing himself or herself to be a
holder of Senior Indebtedness (or a representative of such holder or the trustee
under any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness have been issued) to establish that such notice has been
given by a holder of Senior Indebtedness or a representative of any such holder.
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In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article 5, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
each person under this Article 5, and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 5.7 Application by Trustee of Monies Deposited With It.
Money or U.S. Government Obligations deposited in trust with the
Trustee pursuant to Sections 6.3 and 10.1 and not in violation of this Article 5
shall be for the sole benefit of Securityholders and shall thereafter not be
subject to the subordination provisions of this Article 5. Otherwise, any
deposit of monies by the Company with the Trustee or any Paying Agent (whether
or not in trust) for the payment of the principal of or interest on any
Securities shall be subject to the provisions of Sections 5.1, 5.2, 5.3 and 5.5;
except that, if two Business Days prior to the date on which by the terms of
this Indenture any such monies may become payable for any purpose (including,
without limitation, the payment of either the principal of or interest on any
Security) the Trustee shall not have received with respect to such monies the
notice provided for in Section 5.6, then the Trustee or any Paying Agent shall
have full power and authority to receive such monies and to apply such monies to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date. This
Section 5.7 shall be construed solely for the benefit of the Trustee and the
Paying Agent and shall not otherwise affect the rights that holders of Senior
Indebtedness may have to recover any such payments from the Holders in
accordance with the provisions of this Article 5.
Section 5.8 Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. The holders of any Senior Indebtedness may extend,
renew, modify or amend the terms of such Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company, all without affecting the liabilities and obligations of the
parties to this Indenture or the Holders. No provision in any supplemental
indenture which affects the superior position of the holders of the Senior
Indebtedness shall be effective against the holders of the Senior Indebtedness
unless the holders of such Senior Indebtedness (required pursuant to the terms
of such Senior Indebtedness to give such consent) have consented thereto.
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Section 5.9 Trustee to Effectuate Subordination.
Each holder of a Security by his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided in this
Article 5 and appoints the Trustee his or her attorney-in-fact for any and all
such purposes.
Section 5.10 Right of Trustee to Hold Senior Indebtedness.
The Trustee, in its individual capacity, shall be entitled to all of
the rights set forth in this Article 5 in respect of any Senior Indebtedness at
any time held by it to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 9.7.
Section 5.11 Article 5 Not to Prevent Events of Default.
The failure to make a payment on account of the principal of or
interest on the Securities by reason of any provision in this Article 5 shall
not be construed as preventing the occurrence of an Event of Default under
Section 8.1.
Section 5.12 No Fiduciary Duty Created to Holders of Senior
Indebtedness.
Notwithstanding any other provision in this Article 5, the Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness by virtue of the provisions of this Article 5.
Section 5.13 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 5 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 5 in addition to or in place of the Trustee;
provided, however, that Sections 5.6, 5.10 and 5.12 shall not apply to the
Company if it acts as Paying Agent.
ARTICLE VI
COVENANTS
Section 6.1 Payment of Securities.
The Company shall promptly make all payments in respect of the
Securities on the dates and in the manner provided in the Securities and this
Indenture. An installment of
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principal or interest shall be considered paid on the date it is due if the
Paying Agent (other than the Company or any Affiliate thereof) holds on that
date money, deposited by the Company or an Affiliate thereof, sufficient to pay
the installment. The Company shall pay interest on overdue principal at the rate
borne by the Securities per annum; it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
Section 6.2 SEC Reports.
The Company shall file all reports and other information and
documents which it is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act, and within 15 days after it files them with the SEC,
the Company shall file copies of all such reports, information and other
documents with the Trustee. The Company will cause any quarterly and annual
reports which it mails to its shareholders to be mailed to the Holders of the
Securities.
In the event the Company is at any time not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
prepare, for the first three quarters of each fiscal year, quarterly financial
statements substantially equivalent to the financial statements required to be
included in a report on Form 10-Q under the Exchange Act. The Company will also
prepare, on an annual basis, complete audited consolidated financial statements,
including, but not limited to, a balance sheet, a statement of operations, a
statement of cash flows and all appropriate notes. All such financial statements
will be prepared in accordance with generally accepted accounting principles.
The Company will cause a copy of such financial statements to be filed with the
Trustee and mailed to the Holders of the Securities within 50 days after the end
of each of the first three quarters of each fiscal year and within 95 days after
the close of each fiscal year. The Company will also comply with the other
provisions of TIA Section 314(a).
Section 6.3 Liquidation.
Subject to the provisions of Article 5, so far as they may be
applicable hereto, the Board of Directors or the shareholders of the Company may
not adopt a plan of liquidation, which plan provides for, contemplates or the
effectuation of which is preceded by (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company otherwise
than substantially as an entirety (any such sale, lease, conveyance or other
disposition substantially as an entirety being governed by Article 7) and (b)
the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and of the remaining assets of the
Company to the holders of the capital stock of the Company, unless the Company
shall in connection with the adoption of such plan make provision for, or agree
that prior to making any liquidating distributions it will make provision for,
the satisfaction of the Company's obligations hereunder and under the Securities
as to the payment of the principal and interest thereof. The Company shall be
deemed to make provision for such payments only if (1) the Company irrevocably
deposits in trust with the Trustee money or U.S. Government Obligations maturing
as to principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such interest, to pay
the principal of and interest on the Securities then outstanding to maturity and
to pay all other sums payable by it
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hereunder or (2) there is an express assumption of the due and punctual payment
of the Company's obligations hereunder and under the Securities and the
performance and observance of all covenants and conditions to be performed by
the Company hereunder, by the execution and delivery of a supplemental indenture
in form satisfactory to the Trustee by a person who acquires, or will acquire
(otherwise than pursuant to a lease), a portion of the assets of the Company,
and which person will have assets (immediately after the acquisition) and
aggregate earnings (for such person's four full fiscal quarters immediately
preceding the acquisition) equal to not less than the assets of the Company
(immediately preceding such acquisition) and the aggregate earnings of the
Company (for its four full fiscal quarters immediately preceding the
acquisition), respectively, and which is a corporation organized under the laws
of the United States, any State thereof or the District of Columbia; provided,
however, that the Company shall not make any liquidating distribution until
after the Company (x) has certified to the Trustee with an Officers' Certificate
at least five days prior to the making of any liquidating distribution that it
has complied with the provisions of this Section 6.3 and (y) delivered to the
Trustee an Opinion of Counsel that all conditions precedent to such liquidation
have been complied with.
Section 6.4 Compliance Certificates.
The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate as to the
signer's knowledge of the Company's compliance with all conditions and covenants
on its part contained in this Indenture and stating whether or not the signer
knows of any default or Event of Default. If such signer knows of such a default
or Event of Default, the Officers' Certificate shall describe the default or
Event of Default and the efforts to remedy the same. For the purposes of this
Section 6.4, compliance shall be determined without regard to any grace period
or requirement of notice provided pursuant to the terms of this Indenture. The
Officers' Certificate need not comply with Section 12.4 hereof.
Section 6.5 Notice of Defaults.
In the event (a) that indebtedness of the Company in an aggregate
amount in excess of $5,000,000 is declared due and payable before its maturity
because of the occurrence of any default under such indebtedness, or (b) of the
occurrence of any event which entitles the holder or holders of such
indebtedness to declare such indebtedness due and payable before its maturity
and with respect to which any applicable grace period has lapsed or expired, the
Company will promptly give written notice to the Trustee of such declaration or
event.
Section 6.6 Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purposes of this Indenture.
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ARTICLE VII
SUCCESSOR CORPORATION
Section 7.1 When Company May Merge, Etc.
The Company shall not consolidate with or merge with or into, or
transfer all or substantially all of its assets to, any person unless:
(a) either the Company shall be the resulting or surviving entity or
such person is a corporation organized and existing under the laws of the United
States, a State thereof or the District of Columbia, and such person expressly
assumes by supplemental indenture executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Securities and this Indenture (in which case all such obligations of the Company
shall terminate); and
(b) immediately before and immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company as a result of such transaction as having been incurred by the Company
at the time of such transaction, no default or Event of Default shall have
occurred and be continuing.
The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each of which
shall comply with Section 12.4 and shall state that such consolidation, merger
or transfer and such supplemental indenture comply with this Article 7 and that
all conditions precedent herein provided for relating to such transaction have
been complied with; provided, however, that such Opinion of Counsel shall not
address Events of Default, except where such counsel has actual knowledge of any
such Event of Default.
Section 7.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 7.1,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor corporation had been named as the
Company herein.
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ARTICLE VIII
DEFAULT AND REMEDIES
Section 8.1 Events of Default.
An "Event of Default" shall occur if:
(1) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and the
default continues for a period of 10 business days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at
maturity, upon redemption or otherwise;
(3) the Company fails to comply with any of its other
agreements contained in the Securities or this Indenture
and the default continues for the period and after the
notice specified below;
(4) a default shall occur under any bond, debenture, note or
other evidence of Indebtedness for money borrowed by the
Company or any Restricted Subsidiary, which default
shall have resulted in such Indebtedness becoming or
being declared payable prior to the date on which it
would otherwise have been due and payable (provided that
the aggregate amount of such Indebtedness subject to
acceleration exceeds $5 million), without such
Indebtedness having been discharged, such acceleration
having been rescinded or annulled or there having been
deposited in trust a sum of money sufficient to
discharge in full such Indebtedness;
(5) the Company or any of its Subsidiaries fails to pay any
principal or interest when due under any bond,
debenture, note or other evidence of Indebtedness for
money (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument
evidencing or governing such Indebtedness, has expired
(provided that the amount of such Indebtedness, and any
interest or premium thereon, exceeds $5 million);
(6) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding;
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(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property;
or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case or proceeding;
(B) appoints a Custodian of the Company or for all or
substantially all of its property; or
(C) orders the liquidation of the Company;
and in each case the order or decree remains unstayed and in
effect for 60 days.
The term "Bankruptcy Law" means Title 11 of the United States Code
or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
A default under clause (3) above is not an Event of Default until
the Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the Securities then outstanding notify the Company and the Trustee, of
the default, and the Company does not cure the default within 30 days after
receipt of such notice. The notice given pursuant to this Section 8.1 must
specify the default, demand that it be remedied and state that the notice is a
"Notice of Default." When a default is cured, it ceases.
Subject to the provisions of Sections 9.1 and 9.2, the Trustee shall
not be charged with knowledge of any Event of Default unless written notice
thereof shall have been given to a Trust Officer at the Corporate Trust Office
of the Trustee by the Company, the Paying Agent, any Holder or any agent of any
Holder.
Section 8.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (5) or (6) of Section 8.1) occurs and is continuing, the Trustee may, by
notice to the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by notice to the Company and the Trustee, and
the Trustee shall, upon the request of such Holders, declare all unpaid
principal of and accrued interest to the date of acceleration on the Securities
then outstanding (if not then due and payable) to be due and payable upon any
such declaration, and
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the same shall become and be immediately due and payable. If an Event of Default
specified in clause (5) or (6) of Section 8.1 occurs, all unpaid principal of
and accrued interest on the Securities then outstanding shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Securityholder. The Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
rescind an acceleration and its consequences if (a) all existing Events of
Default, other than the nonpayment of the principal of and accrued interest on
the Securities which has become due solely by such declaration of acceleration,
have been cured or waived; (b) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid; (c) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction; and (d) all payments due to the Trustee and
any predecessor Trustee under Section 9.7 have been made. Anything herein
contained to the contrary notwithstanding, in the event of any acceleration
pursuant to this Section 8.2, the Company shall not be obligated to pay any
premium which it would have had to pay if it had then elected to redeem the
Securities pursuant to paragraph 5 of the Securities, except in the case of any
Event of Default occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium which it would have had to pay if it had then elected to
redeem the Securities pursuant to paragraph 5 of the Securities, in which case
an equivalent premium shall also become and be immediately due and payable to
the extent permitted by law.
Section 8.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 8.4 Waiver of Defaults and Events of Default.
Subject to Sections 8.7 and 11.2, the Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
waive an existing default or Event of Default and its consequence, except a
default in the payment of the principal of or interest on any Security as
specified in clauses (1) and (2) of Section 8.1. When a default or Event of
Default is waived, it is cured and ceases.
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Section 8.5 Control by Majority.
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder or the Trustee, or that may
involve the Trustee in personal liability; provided, however, that the Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
Section 8.6 Limitations on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities (except actions for payment of overdue principal or
interest or for the conversion of the Securities pursuant to Article 4) unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
then outstanding Securities make a written request to
the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of
indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by
the Holders of a majority in principal amount of the
Securities then outstanding.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
Section 8.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of the principal of and interest on
the Security, on or after the respective due dates expressed in the Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not be impaired or
affected without the consent of the Holder.
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Section 8.8 Collection Suit by Trustee.
If an Event of Default in the payment of principal or interest
specified in clause (1) or (2) of Section 8.1 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or another obligor on the Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
borne by the Securities and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 8.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor on the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceeding is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 9.7, and to the
extent that such payment of the reasonable compensation, expenses, disbursements
and advances in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
Securityholders may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to, or, on behalf of any Securityholder, to authorize, accept or
adopt any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
Section 8.10 Priorities.
If the Trustee collects any money pursuant to this Article 8, it
shall pay out the money in the following order:
First, to the Trustee for amounts due under Section 9.7;
Second, to the holders of Senior Indebtedness to the extent required
by Article 5;
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Third, to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Fourth, to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section 8.10.
Section 8.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 8.11 does not apply to a suit made by the Trustee, a suit by a
Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in
principal amount of the Securities then outstanding.
Section 8.12 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE IX
TRUSTEE
Section 9.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no others;
and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. The
Trustee, however, shall examine any certificates and
opinions which by any provision hereof are specifically
required to be delivered to the Trustee to determine
whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of subsection
(b) of this Section 9.1;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless
it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 8.5.
(d) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability, expense or fee.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 9.2 Rights of Trustee.
Subject to Section 9.1:
(a) The Trustee may rely conclusively on any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 12.4(b). The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Certificate or Opinion.
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(c) The Trustee may act through its agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the advice or opinion
of such counsel as to matters of law shall be full and complete authorization
and protection in respect of any such action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
Section 9.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 9.10 and 9.11.
Section 9.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities other than its certificate of
authentication.
Section 9.5 Notice of Default or Events of Default.
If a default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder notice
of the default or Event of Default within 90 days after it occurs. Except in the
case of a default or an Event of Default in payment of the principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of Securityholders.
Section 9.6 Reports by Trustee to Holders.
If such report is required by TIA Section 313, within 60 days after
each April 15, beginning with the April 15 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report dated as of such
April 15 that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Section 313(b)(2) and (c).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed. The Company shall notify the Trustee
whenever the Securities become listed on any stock exchange and any changes in
the stock exchanges on which the Securities are listed.
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Section 9.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust). The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses may
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability or expense (including reasonable legal fees and
expenses) incurred by it in connection with its duties under this Indenture or
any action or failure to act as authorized or within the discretion or rights or
powers conferred upon the Trustee hereunder. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Trustee shall have the option of undertaking the defense of such
claims; provided, however, that if the Trustee opts not to defend itself, the
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement
without its written consent, which shall not be unreasonably withheld.
The Company need not reimburse the Trustee for any expense or
indemnify it against any loss or liability incurred by it resulting from its
negligence or bad faith.
To secure the Company's payment obligations in this Section 9.7, the
Trustee shall have a senior claim to which the Securities are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the principal of and interest on
particular Securities. The obligations of the Company under this Section 9.7 to
compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the Holders of particular
Securities. The obligations of the Company under this Section 9.7 shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in clause (5) or (6) of Section 8.1 occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 9.8 Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then outstanding may remove the
Trustee by so notifying the Trustee and may, with the Company's written consent,
appoint a successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
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(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of 10% in principal amount of the Securities then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee and be released from its obligations (exclusive of any
liabilities that the retiring Trustee may have incurred while acting as Trustee)
hereunder, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Securityholder.
A retiring Trustee shall not be liable for the acts or omissions of
any successor Trustee after its succession.
Notwithstanding replacement of the Trustee pursuant to this Section
9.8, the Company's obligations under Section 9.7 shall continue for the benefit
of the retiring Trustee.
Section 9.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, the resulting, surviving or transferee corporation, without any
further act, shall be the successor Trustee, provided such transferee
corporation shall qualify and be eligible under Section 9.10.
Section 9.10 Eligibility; Disqualification.
The Trustee shall always satisfy the requirements of paragraphs (1),
(2) and (5) of TIA Section 310(a). If at any time the Trustee shall cease to
satisfy any such requirements, it shall resign immediately in the manner and
with the effect specified in this Article 9. The Trustee shall be subject to the
provisions of TIA Section 310(b). Nothing herein shall prevent
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the Trustee from filing with the SEC the application referred to in the
penultimate paragraph of TIA Section 310(b).
Section 9.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE X
SATISFACTION AND DISCHARGE OF INDENTURE
Section 10.1 Termination of Company's Obligations.
Subject to applicable rules of any stock exchange or system on which
the Securities are listed or quoted, the Company may terminate all of its
obligations under the Securities and this Indenture (excepting those obligations
referred to in the immediately succeeding paragraph) if all Securities
previously authenticated and delivered (other than destroyed, lost or stolen
Securities which have been replaced or paid or Securities for whose payment
money has theretofore been held in trust and thereafter repaid to the Company,
as provided in Section 10.3) have been delivered to the Trustee or the Paying
Agent for cancellation and the Company has paid all sums payable by it
hereunder, or if the Company irrevocably deposits in trust with the Trustee or
the Paying Agent, pursuant to a written trust agreement satisfactory to the
Trustee, money or U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of any reinvestment of such interest, to pay the principal of and
interest on the Securities then outstanding to maturity or to the date fixed for
redemption and to pay all other sums payable by it hereunder. The Company may
make an irrevocable deposit pursuant to this Section 10.1 only if at such time
it is not prohibited from doing so under the provisions of Article 5 and the
Company shall have delivered to the Trustee and any such Paying Agent an
Officers' Certificate and an Opinion of Counsel to that effect and that all
other conditions to such deposit have been complied with.
The Company's obligations in paragraph 13 of the Securities and in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 2.12, 6.1, 9.7, 9.8, 10.4 and Article 4
shall survive until the Securities are no longer outstanding. Thereafter, the
Company's obligations in such paragraph 13 and in Section 9.7 shall survive.
After such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture, except for those surviving obligations specified
above.
"U.S. Government Obligations" means direct non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States is pledged.
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Section 10.2 Application of Trust Money.
The Trustee or the Paying Agent shall hold in trust, for the benefit
of the Holders, money or U.S. Government Obligations deposited with it pursuant
to Section 10.1, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of the
principal of and interest on the Securities. Money and U.S. Government
Obligations so held in trust shall not be subject to the subordination
provisions of Article 5.
Section 10.3 Repayment to Company.
Subject to Section 10.1, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess money or U.S. Government
Obligations held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after a right to such money has matured;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such payment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in The City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to money must look to the Company for payment
as general creditors unless otherwise prohibited by law.
Section 10.4 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 10.1 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 10.1 until such time as the Trustee or the Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
10.1; provided, however, that if the Company has made any payment of the
principal of or interest on any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive any such payment from the money or U.S. Government
Obligations held by the Trustee or the Paying Agent.
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ARTICLE XI
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 11.1 Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture
or the Securities without notice to or consent of any Securityholder:
(a) to comply with Sections 4.11, 6.3 and 7.1;
(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(c) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any Securityholder;
(d) to comply with the provisions of the TIA; or
(e) to appoint a successor Trustee.
Section 11.2 With Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture
or the Securities without notice to any Securityholder with the written consent
of the Holders of a majority in principal amount of the Securities then
outstanding. The Holders of a majority in principal amount of the Securities
then outstanding may waive compliance in a particular instance by the Company
with any provision of this Indenture or the Securities without notice to any
Securityholder. Subject to Section 11.4, without the written consent of each
Securityholder affected, however, an amendment, supplement or waiver, including
a waiver pursuant to Section 8.4, may not:
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest on any Security;
(3) reduce the principal of or premium on or change the
fixed maturity of any Security or alter the redemption
provisions with respect thereto in a manner adverse to
the Holder thereof;
(4) alter the conversion provisions with respect to any
Security in a manner adverse to the Holder thereof;
(5) waive a default in the payment of the principal of or
premium or interest on any Security;
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(6) make any changes in Section 8.4 or 8.7 or in this
sentence;
(7) modify the provisions of Article 5 in a manner adverse
to the Holders; or
(8) make any Security payable in money other than that
stated in the Security.
It shall not be necessary for the consent of the Holders under this
Section 11.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 11.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
An amendment under this Section 11.2 may not make any change that
adversely affects the rights under Article 5 of any holder of an issue of Senior
Indebtedness unless the holders of that issue, pursuant to its terms, consent to
the change.
Section 11.3 Compliance With Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as in effect at the date of such amendment or
supplement.
Section 11.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his or her Security or portion of a Security if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 11.2. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
Section 11.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may
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place an appropriate notation on the Security about the changed terms and return
it to the Holder. Alternatively, if the Company or the Trustee so determines,
the Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms.
Section 11.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplement authorized
pursuant to this Article 11 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, in its sole discretion, but need not sign it. In signing or
refusing to sign such amendment or supplement, the Trustee shall be entitled to
receive and, subject to Section 9.1, shall be fully protected in relying upon,
an opinion of Counsel stating that such amendment or supplement is authorized or
permitted by this Indenture. The Company may not sign an amendment or supplement
until the Board of Directors approves it.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA
through operation of Section 318(c) thereof, such imposed duties shall control.
Section 12.2 Notices.
Any notice, request or communication shall be given in writing and
delivered in person or mailed by first-class mail, postage prepaid, addressed as
follows:
If to the Company:
If to the Trustee:
Such notices or communications shall be effective when received.
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed by first-class mail to him or her at his or her address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or
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communication to a Securityholder is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
Section 12.3 Communications by Holders With Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
Section 12.4 Certificate and Opinion as to Conditions Precedent.
(a) Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
at the request of the Trustee:
(1) an Officer's Certificate stating that, in the opinion of
the signers, all conditions precedent (including any
covenants, compliance with which constitutes a condition
precedent), if any, provided for in this Indenture
relating to the proposed action have been complied with;
and
(2) an opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent (including
any covenants, compliance with which constitutes a
condition precedent) have been complied with.
(b) Each Officers' Certificate and opinion of Counsel with respect
to compliance with a condition or covenant provided for in this Indenture (other
than annual certificates provided pursuant to Section 6.4) shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person, he or
she has made such examination or investigation as is
necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied
with; provided, however, that with respect to matters of
fact an Opinion of Counsel
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may rely on an Officers' Certificate or certificates of
public officials.
Section 12.5 Record Date for Vote or Consent of Securityholders.
The Company (or, in the event deposits have been made pursuant to
Section 6.3 or 10.1, the Trustee) may set a record date for purposes of
determining the identity of Securityholders entitled to vote or consent to any
action by vote or consent authorized or permitted under this Indenture, which
record date shall be the later of ten days prior to the first solicitation of
such vote or consent or the date of the most recent list of Securityholders
furnished to the Trustee pursuant to Section 2.5 prior to such solicitation.
Notwithstanding the provisions of Section 11.4, if a record date is fixed, those
persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to take such
action by vote or consent or to revoke any vote or consent previously given,
whether or not such persons continue to be Holders after such record date.
Section 12.6 Rules by Trustee, Paying Agent, Registrar, Conversion
Agent.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable
rules for its functions.
Section 12.7 Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday or a day on which state or
federally chartered banking institutions in New York, New York (or such other
city and state where the Trustee's corporate trust operations are then located)
are not required to be open. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
Section 12.8 Governing Law.
Except as specifically provided in Section 3.8(a), the laws of the
State of New York shall govern this Indenture and the Securities without regard
to principles of conflicts of law.
Section 12.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.10 No Recourse Against Others.
All liability described in paragraph 18 of the Securities of any
director, officer, employee or shareholder, as such, of the Company is waived
and released.
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Section 12.11 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 12.12 Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
Section 12.13 Separability.
In case any provisions in this Indenture or in the Securities 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.
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Section 12.14 Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this 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.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of ________________________.
[ISSUER]
By:
------------------------------------
Name:
Title:
{SEAL}
Attest:
By:
------------------------------------
Name:
Title:
[TRUSTEE]
By:
------------------------------------
Name:
Title:
{SEAL}
By:
------------------------------------
Name:
Title:
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EXHIBIT A-1
[FORM OF FACE OF SECURITY]
6% Convertible Subordinated Debentures due _______(1)
[NAME OF ISSUER]
INCORPORATED UNDER THE
LAWS OF THE STATE OF MAINE
CUSIP: __________ R-__________
6% Repriced Convertible Subordinated Debentures due _______(2)
[Name of Issuer] promises to pay to _______________, or registered
assigns, the principal sum of __________________ Dollars on _______(2).
Interest Payment Dates: January 15, April 15, July 15 and October 15
Record Dates: December 30, March 30, June 30, and September 30
This Debenture is convertible as specified on the other side of this
Debenture. Additional provisions of this Debenture are set forth on the other
side of this Debenture.
- ----------
(1) Insert five years from date of issuance.
(2) Insert fifth anniversary of date of issuance.
<PAGE>
IN WITNESS WHEREOF, [Name of Issuer] has caused this instrument to
be duly executed in its corporate name and the facsimile of its corporate seal
to be affixed hereunto or imprinted hereon.
[NAME OF ISSUER]
By:
-------------------------------------
President and Chief Executive Officer
[SEAL]
Attest:
Dated:
Trustee's Certificate of Authentication:
This is one of the Securities referred to
in the within-mentioned Indenture.
[NAME OF TRUSTEE],
as Trustee
By:
--------------------------------------
Authorized Signatory
1
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
[NAME OF ISSUER]
6% Repriced Convertible Subordinated Debentures due _______(1)
1. Interest.
[Name Of Issuer], a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Debenture at the rate per annum
shown above. The Company shall pay interest quarterly on January 15, April 15,
July 15 and October 15 of each year, commencing _____________.(2) Interest on
the Debentures shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of first issuance of the
Debentures under the Indenture (as defined below); provided, however, that if
there is not an existing default in the payment of interest, and if this
Debenture is authenticated between a record date referred to on the face hereof
and the next succeeding interest payment date, interest shall accrue from such
interest payment date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment.
The Company shall pay interest on this Debenture (except defaulted
interest) to the person who is the Holder of this Debenture at the close of
business on the December 30, March 30, June 30 or September 30 next preceding
the related interest payment date. The Holder must surrender this Debenture to
the Paying Agent to collect payment of principal. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company may, however, pay
principal and interest by its check or wire payable in such money. It may mail
an interest check to the Holder's registered address.
3. Paying Agent, Registrar and Conversion Agent.
Initially, [Insert Name of Trustee] (the "Trustee") will act as
Paying Agent, Registrar and Conversion Agent. The Company may change any Paying
Agent, Registrar or Conversion Agent without notice to the Holder. The Company
or any of its Subsidiaries may act as Paying Agent, Registrar or Conversion
Agent.
- ----------
(1) Insert five years from date of issuance.
(2) Insert first quarterly payment date after issuance.
2
<PAGE>
4. Indenture, Limitations
This Debenture is one of a duly authorized issue of Debentures of
the Company designated as its 6% Convertible Subordinated Debentures due
_______(1) (the "Debentures"), issued under an Indenture dated as of [insert
date of issuance] (the "Indenture"), between the Company and the Trustee. The
terms of this Debenture include those stated in the Indenture and those required
by or made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended, and as in effect on the date of the Indenture. This Debenture
is subject to all such terms and the Holder of this Debenture is referred to the
Indenture and said Act for a statement of them.
The Debentures are subordinated unsecured obligations of the Company
limited to up to $____________ aggregate principal amount, subject to Section
2.2 of the Indenture. The Indenture does not limit other debt of the Company,
secured or unsecured, including Senior Indebtedness.
5. Optional Redemption.
The Debentures are subject to redemption, at any time as a whole or
in part, at the election of the Company; provided that the Debentures may not be
so redeemed prior to [insert the fifth anniversary of date of issuance] unless
the closing price per share of the Common Stock for 45 consecutive trading days
ending no more than 30 calendar days prior to the date notice of redemption is
first mailed is at least 140% of the Adjusted IPO Price then in effect. The
Redemption Price shall equal 100% of the principal amount thereof, in each case
together with accrued interest through the Redemption Date.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 90
days before the Redemption Date to each Holder of Debentures to be redeemed at
his or her registered address. Debentures in denominations larger than $1,000
may be redeemed in part, but only in whole multiples of $1,000. On and after the
Redemption Date, subject to the deposit with the Paying Agent of funds
sufficient to pay the Redemption Price interest ceases to accrue on Debentures
or portions of them called for redemption.
7. Conversion.
A Holder of a Debenture may convert such Debenture into shares of
Common Stock of the Company at any time prior to maturity; provided, however,
that if the Debenture is called for redemption, the conversion right will
terminate at the close of business on the redemption date for such Debenture
(unless the Company shall default in making the redemption
- ----------
(1) Insert five years from date of issuance.
3
<PAGE>
payment when due, in which case the conversion right shall terminate at the
close of business on the date such default is cured and such Debenture is
redeemed); provided, further, that if the Holder of a Debenture presents such
Debenture for redemption prior to the close of business on the redemption date
for such Debenture, the right of conversion shall terminate upon presentation of
the Debenture to the Trustee (unless the Company shall default in making the
redemption payment when due, in which case the conversion right shall terminate
on the close of business on the date such default is cured and such Debenture is
redeemed). The initial conversion price is ___* per share, subject to adjustment
under certain circumstances. The number of shares issuable upon conversion of a
Debenture is determined by dividing the principal amount converted by the
conversion price in effect on the Conversion Date. No payment or adjustment will
be made for accrued interest on a converted Debenture or for dividends or
distributions on shares of Common Stock issued upon conversion of a Debenture.
No fractional shares will be issued upon conversion; in lieu thereof, an amount
will be paid in cash based upon the closing sale price of the Common Stock on
the last Trading Day prior to the Conversion Date.
To convert a Debenture, a Holder must (a) complete and manually sign
the conversion notice set forth below and deliver such notice to the Conversion
Agent, (b) surrender the Debenture to the Conversion Agent, (c) furnish
appropriate endorsements or transfer documents if required by the Registrar or
the Conversion Agent, and (d) pay any transfer or similar tax, if required. If a
Holder surrenders a Debenture for conversion after the close of business on the
record date for the payment of an installment of interest and before the close
of business on the related interest payment date then, notwithstanding such
conversion, the interest payable on such interest payment date shall be paid to
the Holder of such Debenture on such record date. In such event, the Debenture
must be accompanied by payment of an amount equal to the interest payable on
such interest payment date on the principal amount of the Debenture or portion
thereof then converted. A Holder may convert a portion of a Debenture equal to
$1,000 or any integral multiple thereof.
A Debenture in respect of which a Holder had delivered a Change in
Control Purchase Notice exercising the option of such Holder to require the
Company to purchase such Debenture may be converted only if the Change in
Control Purchase Notice is withdrawn as provided above and in accordance with
the terms of the Indenture.
8. Conversion Arrangement on Call for Redemption.
Any Securities called for redemption, unless surrendered for
conversion before the close of business on the Redemption Date, may be deemed to
be purchased from the Holders of such Securities at an amount not less than the
Redemption Price, together with accrued interest, if any, to, but not including,
the Redemption Date, by one or more investment bankers or other purchasers who
may agree with the Company to purchase such Securities from the Holders, to
- ----------
* Insert the initial conversion price determined pursuant to Section 6.15(c)
or Section 8.1(b), as applicable, of the Securities Purchase Agreement, dated
July 2, 1997, between ASC Holdings, Inc., and Madeleine LLC.
4
<PAGE>
convert them into Common Stock of the Company and to make payment for such
Securities to the Paying Agent in Trust for such Holders.
9. Subordination.
The indebtedness evidenced by the Debentures is, to the extent and
in the manner provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full of all Senior Indebtedness of the Company.
Any Holder by accepting this Debenture agrees to and shall be bound by such
subordination provisions and authorizes the Trustee to give them effect. Such
subordination provisions include certain rights of the holders of Senior
Indebtedness to block the payment of principal and interest on the Debentures
during the pendency of certain defaults in respect of such Senior Indebtedness.
In addition to all other rights of Senior Indebtedness described in
the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any terms of any instrument relating to the
Senior Indebtedness or any extension or renewal of the Senior Indebtedness.
10. Denominations, Transfer, Exchange.
The Debentures are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of or exchange Debentures in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes or other governmental
charges that may be imposed by law or permitted by the Indenture.
11. Persons Deemed Owners.
The Holder of a Debenture may be treated as the owner of it for all
purposes.
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its written request. After that, Holders entitled to money must look
to the Company or payment.
13. Amendment, Supplement and Waiver.
Subject to certain exceptions, the Indenture or the Debentures may
be amended or supplemented with the consent of the Holders of a majority in
principal amount of the Debentures then outstanding and any past default or
compliance with any provision may be
5
<PAGE>
waived in a particular instance with the consent of the Holders of a majority in
principal amount of the Debentures then outstanding. Without the consent of or
notice to any Holder, the Company and the Trustee may amend or supplement the
Indenture or the Debentures to, among other things, provide for uncertificated
Debentures in addition to or in place of certificated Debentures, or to cure any
ambiguity, defect or inconsistency or make any other change that does not
adversely affect the rights of any Holder.
14. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Debentures and the Indenture in accordance with the terms
and conditions of the Indenture, the predecessor corporation will be released
from those obligations.
15. Defaults and Remedies.
An Event of Default is: default for 10 business days in payment of
interest on the Debentures; default in payment of principal on the Debentures
when due; failure by the Company for 30 days after notice to it to comply with
any of its other agreements contained in the Indenture or the Debentures;
certain events of bankruptcy, insolvency or reorganization of the Company; and
defaults in respect of certain other indebtedness. If an Event of Default (other
than as a result of certain events of bankruptcy, insolvency or reorganization)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Debentures then outstanding may declare all unpaid
principal of and accrued interest to the date of acceleration on the Debentures
then outstanding to be due and payable immediately, all as and to the extent
provided in the Indenture. If an Event of Default occurs as a result of certain
events of insolvency or reorganization, unpaid principal of and accrued interest
on the Debentures then outstanding shall become due and payable without any
declaration or other act on the part of the Trustee, or all as and to the extent
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Debentures. Subject to certain
limitations, Holders of a majority in principal amount of the Debentures then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to file periodic reports
with the Trustee as to the absence of default.
16. Trustee Dealings With the Company.
[Insert name of Trustee], the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from and
perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.
6
<PAGE>
17. No Recourse Against Others.
A director, officer, employee or shareholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Debentures or the Indenture nor for any claim based on, in respect of or by
reason of such obligations or their creation. The Holder of this Debenture by
accepting this Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Debenture.
18. Discharge Prior to Maturity.
If the Company deposits with the Trustee or the Paying Agent money
or U.S. Government Obligations sufficient to pay the principal of and interest
on the Debentures to maturity, the Company will be discharged from the Indenture
except for certain sections thereof.
19. Authentication.
This Debenture shall not be valid until the Trustee or an
authenticating agent signs the certificate of authentication on the other side
of this Debenture.
20. Abbreviations and Definitions.
Customary abbreviations may be used in the name of the Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
All capitalized terms used in this Debenture and not specifically
defined herein are defined in the Indenture and are used herein as so defined.
21. Indenture to Control.
In the case of any conflict between the provisions of this Debenture
and the Indenture, the provisions of the Indenture shall control.
The Company will furnish to any Holder, upon written request and
without charge, a copy of the Indenture. Requests may be made to: [Insert name
and address].
7
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
I or we assign and transfer this Debenture to
-----------------------------------------------------
-----------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-----------------------------------------------------
agent to transfer this Debenture on the books of the
Company. The Agent may substitute another to act for
him or her.
Date:________________________________________________
Your signature:
--------------------------------------
(Sign exactly as your name
appears on the other side of
this Debenture)
-----------------------------------------------------
(Sign exactly as your name appears on the other
side of this Debenture)
**/Signature guaranteed by:
----------------------------
By:
-----------------------------------------
- ----------
** The signature must be guaranteed by a bank, a trust company or a member
firm of the New York Stock Exchange.
8
<PAGE>
CONVERSION NOTICE
To convert this Debenture into Common Stock of the Company, check the box:
|_|
To convert only part of this Debenture, state the amount to be converted:
$_____________
If you want the stock certificate made out in another person's name, fill in the
form below:
- -----------------------------------------------------
- -----------------------------------------------------
(Insert other person's soc. sec. or tax I.D. no.)
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
(Print or type assignee's name, address and zip code)
Date:________________________________________________
Your signature: _____________________________________
(Sign exactly as your name appears on the
other side of this Debenture)
- -----------------------------------------------------
(Sign exactly as your name appears on the
other side of this Debenture)
*/Signature guaranteed by:
---------------------------
By:
--------------------------------------------------
- ----------
* The signature must be guaranteed by a bank, a trust company or a member
firm of the New York Stock Exchange.
9
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...........................1
Section 1.1 Definitions................................................1
Section 1.2 Other Definitions..........................................4
Section 1.3 Trust Indenture Act Provisions.............................5
Section 1.4 Rules of Construction......................................5
ARTICLE II THE SECURITIES......................................................6
Section 2.1 Form and Dating............................................6
Section 2.2 Execution and Authentication...............................6
Section 2.3 Registrar, Paying Agent and Conversion Agent...............7
Section 2.4 Paying Agent to Hold Money In Trust........................7
Section 2.5 Securityholder Lists.......................................8
Section 2.6 Transfer and Exchange......................................8
Section 2.7 Replacement Securities.....................................9
Section 2.8 Outstanding Securities.....................................9
Section 2.9 Treasury Securities.......................................10
Section 2.10 Temporary Securities.....................................10
Section 2.11 Cancellation.............................................10
ARTICLE III REDEMPTION AND PURCHASES..........................................11
Section 3.1 Right to Redeem; Notice to Trustee........................11
Section 3.2 Selection of Securities to Be Redeemed....................11
Section 3.3 Notice of Redemption......................................11
Section 3.4 Effect of Notice of Redemption............................12
Section 3.5 Deposit of Redemption Price...............................12
Section 3.6 Securities Redeemed in Part...............................13
Section 3.7 Conversion Arrangement on Call for Redemption.............13
ARTICLE IV CONVERSION.........................................................14
Section 4.1 Conversion Privilege......................................14
Section 4.2 Conversion Procedure......................................14
Section 4.3 Fractional Shares.........................................15
Section 4.4 Taxes on Conversion.......................................15
Section 4.5 Company to Provide Stock..................................15
Section 4.6 Adjustment of Conversion Price............................16
Section 4.7 No Adjustment.............................................19
Section 4.8 Adjustment for Tax Purposes...............................19
Section 4.9 Notice of Adjustment......................................19
Section 4.10 Notice of Certain Transactions............................20
i
<PAGE>
Section 4.11 Effect of Reclassification, Consolidation, Merger
or Sale on Conversion Privilege......................20
Section 4.12 Trustee's Disclaimer.....................................21
ARTICLE V SUBORDINATION.......................................................21
Section 5.1 Securities Subordinated to Senior Indebtedness............21
Section 5.2 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation,
Reorganization, Etc., of the Company.................22
Section 5.3 Securityholders to Be Subrogated to Right of Holders
of Senior Indebtedness...............................32
Section 5.4 Obligations of the Company Unconditional..................36
Section 5.5 Company Not to Make Payment With Respect to Securities
in Certain Circumstances.............................36
Section 5.6 Notice to Trustee.........................................37
Section 5.7 Application by Trustee of Monies Deposited With It........38
Section 5.8 Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness.........38
Section 5.9 Trustee to Effectuate Subordination.......................39
Section 5.10 Right of Trustee to Hold Senior Indebtedness.............39
Section 5.11 Article 5 Not to Prevent Events of Default...............39
Section 5.12 No Fiduciary Duty Created to Holders of Senior
Indebtedness.........................................39
Section 5.13 Article Applicable to Paying Agents......................39
ARTICLE VI COVENANTS..........................................................39
Section 6.1 Payment of Securities.....................................39
Section 6.2 SEC Reports...............................................40
Section 6.3 Liquidation...............................................40
Section 6.4 Compliance Certificates...................................41
Section 6.5 Notice of Defaults........................................41
Section 6.6 Further Instruments and Acts..............................41
ARTICLE VII SUCCESSOR CORPORATION.............................................42
Section 7.1 When Company May Merge, Etc...............................42
Section 7.2 Successor Corporation Substituted.........................42
ARTICLE VIII DEFAULT AND REMEDIES.............................................43
Section 8.1 Events of Default.........................................43
Section 8.2 Acceleration..............................................44
Section 8.3 Other Remedies............................................45
Section 8.4 Waiver of Defaults and Events of Default..................45
Section 8.5 Control by Majority.......................................46
Section 8.6 Limitations on Suits......................................46
Section 8.7 Rights of Holders to Receive Payment......................46
ii
<PAGE>
Section 8.8 Collection Suit by Trustee................................47
Section 8.9 Trustee May File Proofs of Claim..........................47
Section 8.10 Priorities...............................................47
Section 8.11 Undertaking for Costs....................................48
Section 8.12 Waiver of Usury, Stay or Extension Laws..................48
ARTICLE IX TRUSTEE............................................................48
Section 9.1 Duties of Trustee.........................................48
Section 9.2 Rights of Trustee.........................................49
Section 9.3 Individual Rights of Trustee..............................50
Section 9.4 Trustee's Disclaimer......................................50
Section 9.5 Notice of Default or Events of Default....................50
Section 9.6 Reports by Trustee to Holders.............................50
Section 9.7 Compensation and Indemnity................................51
Section 9.8 Replacement of Trustee....................................51
Section 9.9 Successor Trustee by Merger, Etc..........................52
Section 9.10 Eligibility; Disqualification............................52
Section 9.11 Preferential Collection of Claims Against Company........53
ARTICLE 10. SATISFACTION AND DISCHARGE OF INDENTURE...........................53
Section 10.1 Termination of Company's Obligations.....................53
Section 10.2 Application of Trust Money...............................54
Section 10.3 Repayment to Company.....................................54
Section 10.4 Reinstatement............................................54
ARTICLE XI AMENDMENTS, SUPPLEMENTS AND WAIVERS................................55
Section 11.1 Without Consent of Holders...............................55
Section 11.2 With Consent of Holders..................................55
Section 11.3 Compliance With Trust Indenture Act......................56
Section 11.4 Revocation and Effect of Consents........................56
Section 11.5 Notation on or Exchange of Securities....................56
Section 11.6 Trustee to Sign Amendments, etc..........................57
ARTICLE XII MISCELLANEOUS.....................................................57
Section 12.1 Trust Indenture Act Controls.............................57
Section 12.2 Notices..................................................57
Section 12.3 Communications by Holders With Other Holders.............58
Section 12.4 Certificate and opinion as to Conditions Precedent.......58
Section 12.5 Record Date for Vote or Consent of Securityholders.......59
Section 12.6 Rules by Trustee, Paying Agent, Registrar, Conversion
Agent................................................59
Section 12.7 Legal Holidays...........................................59
Section 12.8 Governing Law............................................59
Section 12.9 No Adverse Interpretation of Other Agreements............59
Section 12.10 No Recourse Against Others..............................59
iii
<PAGE>
Section 12.11 Successors..............................................60
Section 12.12 Multiple Counterparts...................................60
Section 12.13 Separability............................................60
Section 12.14 Table of Contents, Headings, etc........................61
Exhibit A-1 Form of Face of Security
Exhibit A-2 Form of Face of Regulation S Temporary Global Security
Exhibit B-1 Form of Certificate for Exchange or Registration of Transfer from
Restricted Global Security to Regulation S Global Security
Exhibit B-2 Form of Certificate for Exchange or Registration of Transfer from
Regulation S Global Security to Restricted Global Security
Exhibit B-3 Form of Certificate for Exchange or Registration of Transfer of
Certificated Securities
Exhibit B-4 Form of Certificate for Exchange or Registration of Transfer from
Restricted Global Security or Regulation S Permanent Global
Security to Certificated Security
Exhibit B-5 Form of Certificate for Exchange or Registration of Transfer from
Certificated Security to Restricted Global Security or Regulation
S Permanent Global Security
iv
<PAGE>
CROSS-REFERENCE TABLE*
Indenture
TIA Section Section
- ----------
* This Cross-Reference Table shall not, for any purpose, be deemed a part of
this Indenture.
v
<PAGE>
EXHIBIT D
6% Repriced Convertible Subordinated Debentures
due *
-------------------------------------------
INDENTURE
Dated as of [date of issuance]
-------------------------------------------
---------------
Trustee
-------------------------------------------
- ----------
* 5 years after date of issuance
<PAGE>
EXHIBIT 10.71
================================================================================
LOAN AND SECURITY AGREEMENT
among
GRAND SUMMIT RESORT PROPERTIES, INC., as Borrower
and
TEXTRON FINANCIAL CORPORATION, as Administrative Agent
and
THE LENDERS LISTED HEREIN, as Lenders
Dated as of August 1, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. INTERPRETATION OF THIS AGREEMENT............................... 1
1.1 Terms Defined............................................ 1
1.2 Directly or Indirectly................................... 31
1.3 Headings................................................. 31
1.4 Accounting Principles.................................... 31
2. ADVANCES AND NOTE.............................................. 32
2.1 Pre-Sale Advance......................................... 32
2.2 Subsequent Advances...................................... 33
2.3 Borrowing Mechanics; Advances Generally.................. 36
2.4 Issuance of Note; Interest Payments...................... 38
2.5 Collections; Sales Proceeds; Required Payments;
Voluntary Prepayments of Loan............................ 42
2.6 Participating Lender..................................... 50
2.7 Commitment Fee........................................... 52
2.8 Right of First Refusal................................... 52
3. COLLATERAL..................................................... 53
3.1 Security................................................. 53
3.2 Undertakings Regarding Collateral........................ 56
3.3 Financing Statements..................................... 57
3.4 Location of Collateral; Books and Records................ 58
3.5 Insurance of Collateral.................................. 58
3.6 Condemnation............................................. 62
3.7 Taxes Affecting Collateral............................... 65
3.8 Discharge of Liens Affecting Collateral.................. 66
3.9 Use of the Projects; Voting Rights of Borrower........... 67
3.10 Other Quartershare Covenants............................. 70
3.11 Protection of Collateral; Assessments; Reimbursement..... 73
3.12 Interest on Lender Paid Expenses......................... 73
3.13 Lender Responsibility.................................... 73
3.14 Verification of Contracts................................ 73
3.15 Release of Lien on Quartershare Interests, Residential
Units and Commercial Units............................... 74
3.16 Nondisturbance Agreements................................ 75
3.17 Filing of Declarations; Incorporation of Associations.... 77
3.18 Take-Out Facility........................................ 77
4. REPRESENTATIONS AND WARRANTIES AND COVENANTS................... 77
4.1 Subsidiaries and Capital Structure....................... 77
4.2 Corporate Matters........................................ 78
4.3 Business and Property.................................... 78
4.4 Financial Statements..................................... 78
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TABLE OF CONTENTS
Page
----
4.5 Full Disclosure.......................................... 78
4.6 Pending Litigation....................................... 79
4.7 Title to Properties; Environmental Status................ 79
4.8 Trademarks; Licenses and Permits......................... 79
4.9 Transaction Is Legal and Authorized...................... 79
4.10 No Defaults.............................................. 80
4.11 Governmental Consent..................................... 80
4.12 Taxes.................................................... 80
4.13 Use of Proceeds.......................................... 80
4.14 Compliance with Law...................................... 81
4.15 Restrictions of Borrower................................. 81
4.16 Brokers' Fees............................................ 82
4.17 Deferred Compensation Plans.............................. 82
4.18 Labor Relations.......................................... 82
4.19 Validity of Contracts.................................... 82
4.20 Validity of Liens Granted to Lender...................... 82
4.21 Quartershare Regimen Reports............................. 82
4.22 Sale of Quartershare Interests........................... 82
4.23 Solvency................................................. 83
4.24 Attitash Project Quartershare Interests.................. 83
5. CONDITIONS PRECEDENT TO PRE-SALE ADVANCE....................... 84
5.1 Opinions of Counsel...................................... 84
5.2 Warranties and Representations True as of Closing Date... 85
5.3 Compliance with this Agreement........................... 85
5.4 Officer's Certificates; Secretary's Certificates;
Good-Standing Certificates .............................. 85
5.5 Uniform Commercial Code Financing Statements............. 86
5.6 Assignment of Property-Related Contracts................. 86
5.7 Assignment of Declarant's Rights......................... 86
5.8 Subordination of Indebtedness............................ 86
5.9 Expenses................................................. 87
5.10 Note; Blanket Mortgages; Assignment of Rents............. 87
5.11 Title Insurance; Casualty Insurance...................... 87
5.12 Environmental Site Assessment Report..................... 88
5.13 Taxes.................................................... 89
5.14 Inspection............................................... 89
5.15 Survey................................................... 89
5.16 Delivery of Contracts.................................... 89
5.17 Budgets; Plans; Architect; Cost and Architect
Certificates; Miscellaneous ............................. 89
5.18 Pre-Construction Cost Certificate........................ 90
5.19 Payoff of Existing Attitash Loan......................... 90
5.20 Proceedings Satisfactory................................. 91
6. SUBSEQUENT PROJECT ADVANCES CLOSING CONDITIONS................. 91
6.1 First Project Advance.................................... 91
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TABLE OF CONTENTS
Page
----
6.2 Special Submissions...................................... 96
6.3 Requests for Subsequent Project Advance.................. 97
6.4 Final Construction Advance Conditions.................... 99
6.5 Defaults; Expenses; Miscellaneous........................ 99
6.6 Disbursements; Disbursement Agent Reports................100
6.7 Proceedings Satisfactory.................................101
6.8 Subcontracts.............................................101
6.9 Costs and Expenses.......................................101
7. COVENANTS......................................................101
7.1 Payment of Taxes and Claims..............................101
7.2 Maintenance of Properties; Company Existence;
Indebtedness; Liens; Business............................101
7.3 Payment of Notes and Maintenance of Office...............103
7.4 Sale of Properties.......................................104
7.5 Consolidation and Merger.................................104
7.6 Guaranties...............................................104
7.7 Distributions............................................105
7.8 Compliance with Environmental Laws.......................105
7.9 Transactions with Affiliates; Principal Properties.......106
7.10 Use of the Lender Name...................................107
7.11 Subordinated Obligations.................................107
7.12 Notice of Legal Proceedings..............................107
7.13 Further Assurances.......................................107
7.14 Financial Statements.....................................108
7.15 Officers' Certificate....................................110
7.16 Inspection...............................................111
8. EVENTS OF DEFAULT..............................................111
8.1 Default..................................................111
8.2 Default Remedies.........................................113
9. REVIVAL OF OBLIGATIONS AND LIENS...............................117
10. ADMINISTRATIVE AGENT...........................................117
10.1 Appointment..............................................117
10.2 Powers; General Immunity.................................118
10.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness............................120
10.4 Right to Indemnity.......................................120
10.5 Successor Administrative Agent...........................120
10.6 Collateral Documents.....................................121
10.7 Designation of Additional Administrative Agents..........121
10.8 Payments.................................................121
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TABLE OF CONTENTS
Page
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11. MISCELLANEOUS..................................................122
11.1 Governing Law............................................122
11.2 Expenses and Closing Fees................................122
11.3 Parties, Successors and Assigns..........................124
11.4 Notices..................................................124
11.5 Total Agreement..........................................124
11.6 Survival.................................................125
11.7 Set-Off..................................................125
11.8 Ratable Sharing..........................................126
11.9 Litigation...............................................126
11.10 Power of Attorney........................................127
11.11 Survival of Indemnities..................................128
11.12 Conflicting Obligations; Rights and Remedies.............128
11.13 Independent Nature of Lenders' Rights....................128
11.14 Severability.............................................128
11.15 Duplicate Originals, Execution in Counterpart..t.........128
Schedule 1 - Description of Attitash Project
Schedule 2 - Description of Jordan Bowl
Schedule 3 - Description of Killington
Schedule 4 - Schedule of Minimum Release Prices
Schedule 5 - Description of Mt. Snow
Schedule 6 - Schedule of Pay-Out Release Prices
Schedule 7 - Permitted Exceptions
Schedule 8 - Pricing Matrix
Schedule 9 - Textron Financial Corporation Purchase Facility
Schedule 10 - Payment Instructions for Proceeds
Schedule 11 - Property-Related Contracts
Schedule 12 - Names of Affiliates and Nature of Affiliation
Schedule 13 - General Business Description
Schedule 14 - Financial Statements of Borrower and Host Companies
Schedule 15 - Litigation
Schedule 16 - Permitted Leases
Schedule 17 - Hazardous Substances
Schedule 18 - Use of Proceeds
Schedule 19 - Licenses, Permits etc not obtained
Schedule 20 - Broker's Fees
Schedule 21 - Deferred Compensation Plans
Schedule 22 - List of certain Costs and Expenses for Approval of Lenders
Schedule 23 - Addresses for Notices and Demands
Schedule 24 - List of Fees
Exhibit A - Escrow Account Acknowledgement
Exhibit B - Form of Blanket Mortgage (New Hampshire, Maine and Vermont)
Exhibit C - Form of Loan Disbursement Agreement
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TABLE OF CONTENTS
Page
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Exhibit D - Intentionally Omitted
Exhibit E - Intentionally Omitted
Exhibit F - Form of Validation Certificate
Exhibit G - Form of Note
Exhibit H - Form of Proxy
Exhibit I - Form of Request of Release
Exhibit J - Form of Partial Release of Mortgage
Exhibit K - Form of Partial Release of Security Interest
Exhibit L - Form of Instrument of Subordination
Exhibit M - Form of Assignment of Declarant's Rights
Exhibit N-1 - Form of Opinion of Borrower's Counsel
Exhibit N-2 - Form of Opinion of Borrower's New Hampshire Counsel
Exhibit N-3 - Form of Opinion of Borrower's Counsel
Exhibit N-4 - Form of Opinion of Borrower's Maine Counsel
Exhibit N-5 - Form of Opinion of Borrower's Vermont Counsel
Exhibit O - Form of Officer's Certificate
Exhibit P - Form of Secretary's Certificate of Borrower
Exhibit Q - Form of Secretary's Certificate of Parent/Host Company
Exhibit R - Form of Assignment of Property-Related Contracts
Exhibit S - Form of Subordination Agreement
Exhibit T - Form of Assignment of Rents (New Hampshire, Maine and Vermont)
Exhibit U - Form of Assignment of Contracts
Exhibit V - Form of Assignment of Architect's Contract
Exhibit W - Form of Assignment of Construction Contract
Exhibit X - Form of Request for Subsequent Project Advance
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended from time to time, this
"Agreement"), made and executed as of the 1st day of August, 1997, by and among
GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, as debtor (herein
referred to as the "Borrower"), the lenders listed on the signature pages hereof
(each individually referred to herein as a "Lender" and, collectively, the
"Lenders") and TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as agent
for the Lenders (in such capacity herein referred to as the "Administrative
Agent").
RECITALS
A. The Borrower desires that the Lenders extend certain credit facilities
to the Borrower for the purposes hereinafter stated;
B. The Lenders are agreeable, on the terms and conditions hereinafter
stated, to extend such facilities;
C. The Borrower is agreeable to
(i) granting a lien and security interest to the
Administrative Agent on behalf of the Lenders in, or
(ii) otherwise conveying, encumbering and/or mortgaging to the
Administrative Agent on behalf of the Lenders all of,
the Collateral (as such term is hereinafter defined) in order to secure
its obligations hereunder and under the other Security Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, the Lenders and the
Administrative Agent agree as follows:
1. INTERPRETATION OF THIS AGREEMENT
1.1 Terms Defined.
As used in this Agreement, the following terms shall have the following
respective meanings set forth below or set forth in the Section referred to
following such term:
Administrative Agent -- has the meaning set forth in the first
paragraph of this Agreement.
Advance -- means any one or more of the Interest Advances, Pre-Sale
Advance or Project Advances, as the case may be.
Advance Date -- means, with respect to the Pre-Sale Advance, the
date on which the Pre-Sale Advance is made and, with respect to any
Project Advance, the Subsequent Project Advance Date thereof.
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Affiliate -- means any Person
(a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Borrower;
(b) which beneficially owns or holds 5% or more of any class
of the Voting Equity of the Borrower; or
(c) 5% or more of the Voting Equity of which is beneficially
owned or held by the Borrower.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Equity, other voting
Securities, by contract or otherwise.
Aggregate Amounts Due -- as defined in Section 11.8 of this
Agreement.
Aggregate Project Borrowing Base -- means, on any date and with
respect to all of the Projects, the lesser of
(a) $55,000,000 minus the sum of (i) the outstanding principal
balance of the Pre-Sale Advance as of such date plus (ii) the aggregate
outstanding principal balance of the Interest Advances as of such date, or
(b) the aggregate of the Project Borrowing Bases for each of the
Projects as of such date.
Agreement or this Agreement -- as defined in the preamble hereto.
Applicable States -- means (i) New Hampshire, Maine and Vermont, and
(ii) any other state in which the Borrower is or becomes qualified to sell
Quartershare Interests, Residential Units and/or Commercial Units,
provided that acceptable proof of such qualification has been delivered to
the Administrative Agent.
Approved Escrow Account -- means,
(a) in the case of the Attitash Project and any Contract
related thereto, account numbers 126674-3 and 523549 at the Berlin
City Bank of Berlin, New Hampshire,
(b) in the case of the Jordan Bowl Project and any Contract
related thereto, account number 191824001090 at Key Bank of Maine,
(c) in the case of the Killington Project and any Contract
related thereto, account number 454645000323 at Key Bank in Rutland,
Vermont, and
(d) in the case of the Mt. Snow Project and any Contract
related thereto, account 454645000281 at Key Bank in Rutland,
Vermont,
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provided that, in each case, the Borrower and the Title Company shall have
acknowledged and agreed in writing (which writing shall be substantially
in the form of Exhibit A hereto) that, upon the consummation of the sale
of any Quartershare Interest subject to any such Contract (in accordance
with the terms of such Contract), all cash on deposit in such escrow
account will be paid directly to the Administrative Agent (less any
customary and normal costs of closing of such Contract not previously
deducted from other cash proceeds in respect of such sale).
Architect -- means, individually or collectively (as the context may
require), the Jordan Bowl Architect, the Killington Architect and the Mt.
Snow Architect.
Architect's Construction Cost Certificate -- means, with respect to
the construction at any Under-Construction Project and any Construction
Cost Certificate issued hereunder, a certificate, addressed to the
Administrative Agent and in form and substance satisfactory to the
Administrative Agent, from the Architect for such Under-Construction
Project and the TFC Architect which
(a) confirms that such Architect and such TFC Architect have
inspected the construction at such Under-Construction Project and
reviewed such Construction Cost Certificate and the attachments
thereto,
(b) confirms that such Construction Cost Certificate and the
attachments thereto are satisfactory to them,
(c) certifies that the construction of the building and the
other improvements at such Under-Construction Project have been made
in accordance with the Plans for such Under-Construction Project and
in compliance with all applicable laws,
(d) confirms that the unexpended construction portion of the
Budget for such Under-Construction Project is adequate to complete
the construction at such Under-Construction Project,
(e) confirms that the aggregate principal amount of the
Project Advances then outstanding used to finance Construction Costs
for such Under-Construction Project is not more than 80% of
aggregate cost of the construction work then in place for such
Under-Construction Project plus the pre-development expenses and
land values (net of mortgage debt) of such Under-Construction
Project set forth on Schedule 22 hereto,
(f) confirms that the completion of the construction of the
building and the other improvements at such Under-Construction
Project in connection therewith can reasonably be expected to occur
on or before the Completion Date for such Under-Construction
Project, and
(g) states in detail any modifications or changes to the
Budget for such Under-Construction Project or such Project Plans not
previously disclosed in a prior Architect's Construction Cost
Certificate for such Under-Construction Project.
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Architect's Final Construction Cost Certificate -- means, with
respect to the completion of the construction at any Under-Construction
Project and the Final Construction Cost Certificate issued hereunder in
respect thereof, a certificate, addressed to the Administrative Agent and
in form and substance satisfactory to the Administrative Agent, from the
Architect for such Under-Construction Project and the TFC Architect which
(a) confirms that such Architect and such TFC Architect have
inspected the construction at such Under-Construction Project and
reviewed such Final Construction Cost Certificate and the
attachments thereto,
(b) confirms that such Final Construction Cost Certificate and
the attachments thereto are satisfactory to them,
(c) certifies that the construction of the building and the
other improvements at such Under-Construction Project in connection
therewith has been in accordance with Plans for such
Under-Construction Project, is in compliance with all applicable
laws and is complete as provided for in the Plans for such
Under-Construction Project, and
(d) has as an attachment a Certificate of Substantial
Completion (AIA Document G704) executed by such Architect and the
General Contractor with respect to such Under-Construction Project;
the Final Architect's Construction Cost Certificate shall certify
that the list of items to be completed set forth on such Certificate
of Substantial Completion by such General Contractor shall have been
completed in accordance with the Plans for such Under-Construction
Project.
Assignment of Rents -- as defined in Section 5.10(c) of this
Agreement.
Association(s) -- means individually or collectively (as the context
may require), the Attitash Association, the Jordan Bowl Association, the
Killington Association, and the Mt. Snow Association.
Attitash Association -- means the Grand Summit Hotel Condominium
Unit Owners' Association, Inc., a voluntary corporation established under
the laws of New Hampshire, or any successor association thereto as
provided in the Attitash Declaration.
Attitash By-Laws -- means those certain By-Laws of Grand Summit
Hotel and Crown Club at Attitash Bear Peak, a Condominium, which is
recorded in Book 1692 at Page 1008 of the Register of Carroll County, New
Hampshire, as amended from time to time in accordance with the provisions
hereof.
Attitash Common Areas -- means those areas at the Attitash Project
that have been designated in accordance with the Attitash Declaration, on
the Attitash Resort Map or by the Attitash Association as "Common Areas,"
as used and defined in the Attitash Declaration, for the primary or
exclusive use of the owners of Attitash Residential Units, Attitash
Quartershare Interests and Attitash Commercial Units.
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Attitash Commercial Unit -- means a commercial condominium unit at
the Attitash Project.
Attitash Declaration -- means that certain Grand Summit Hotel and
Crown Club at Attitash Declaration of Condominium and Interval Ownership
Interests by the Borrower, as declarant, which is recorded in Book 1692 at
Page 989 of the Register of Carroll County, New Hampshire, as amended from
time to time in accordance with the provisions hereof.
Attitash Easements -- means that certain Amended and Restated
Declaration of Easements by and between L.B.O. Holding, Inc., a Maine
corporation, and the Borrower, which is recorded in Book 1674 at Page 471
of the Register of Carroll County, New Hampshire, as amended from time to
time in accordance with the provisions hereof.
Attitash Escrow Agent -- means Berlin City Bank of Berlin, New
Hampshire, or such escrowee duly authorized to act as such under
applicable New Hampshire law.
Attitash Limited Common Areas -- means those areas at the Attitash
Project that have been designated in accordance with the Attitash
Declaration, on the Attitash Resort Map or by the Attitash Association as
"Limited Common Areas," as used and defined in the Attitash Declaration,
for the primary or exclusive use of certain of the owners of Attitash
Residential Units, Attitash Quartershare Interests and Attitash Commercial
Units, as the case may be.
Attitash Project -- means that certain resort property commonly
known as The Grand Summit Hotel and Crown Club at Attitash, situated on
certain land located in Bartlett, New Hampshire, and particularly
described on Schedule 1 attached hereto and made a part hereof, and
including all improvements now or hereafter located on said land, and all
facilities, roadways, common furnishings, club furnishings, equipment and
all other appurtenances thereunto belonging. Attitash Project shall
include the Attitash Residential Units, the Attitash Quartershare
Interests, the Attitash Common Area and the Attitash Limited Common Areas
in respect of said land.
Attitash Project Documents -- means the Attitash Declaration, the
Articles of Incorporation and the By-Laws of the Attitash Association, and
the rules and regulations of the Attitash Association.
Attitash Quartershare Interest -- means the "Quarter-Interest," as
described and defined in the Attitash Declaration and the Attitash
By-Laws, with the owner of such interest being entitled to the exclusive
right to the possession, use and occupancy of an Attitash Residential Unit
during thirteen (13) calendar weeks of each calendar year, as more
particularly provided in the Attitash Declaration.
Attitash Residential Unit -- means a residential condominium unit at
the Attitash Project.
Attitash Resort Map -- means that (a) certain Condominium Plan Grand
Summit Hotel at Attitash prepared by Thaddeus-Thorne Surveys, Inc., dated
September 18, 1996,
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parts I and II recorded in the Carroll County Registry of Deeds at Plan
Book 157, Pages 56 and 57, as revised by revisions dated January 21, 1997
and March 25, 1997 and recorded on April 10, 1997 at Plan Book 159 Pages
77 and 78 and (b) that certain As Built Site Plan prepared by
Thaddeus-Thorne Surveys, Inc. and As Built Floor Plans prepared by JSA,
Inc., all dated March 27, 1997, recorded March 28, 1997 at Plan Book 159,
Pages 53 through 65.
Blanket Mortgage(s) -- means individually or collectively (as the
context may require), each Combination Mortgage, Security Agreement and
Fixture Financing Statement encumbering a Project substantially in the
form of Exhibit B to this Agreement, as each may be amended from time to
time.
Books and Records -- means all books, records, computer tapes,
disks, software and micro-fiche records of the Borrower.
Borrower -- as defined in the preamble to this Agreement.
Budget -- means, with respect to any Under-Construction Project, the
budget submitted to the Administrative Agent by the Borrower for the
acquisition costs or value, development, construction and furnishing of
such Under-Construction Project in accordance with the Plans for such
Under-Construction Project and the marketing and selling of the
Quartershare Interests for such Under-Construction Project, which budget
shall have been accepted by the Administrative Agent, as amended from time
to time (each such amendment to have been accepted by the Administrative
Agent in writing). Such budget shall include, among other things, all
costs of materials, fixtures, furnishings, personal Property and labor to
be incurred in the construction and furnishing of the Residential Units,
the Common Elements and the Limited Common Elements, in each case for such
Under-Construction Project, and the provision of all utilities to such
Under-Construction Project. The Budget for such Under-Construction Project
(and any amendment thereto) shall, among other things, consist of
(a) a description of work, such work being classified and
shown on a line item basis reasonably satisfactory to the
Administrative Agent for the building and other improvements to be
built at such Under-Construction Project, such classification to
include: "construction line items" for sitework, concrete work,
masonry work, rough carpentry work, finish carpentry and cabinet
work, architectural carpentry work, waterproofing, insulation,
fireproofing, drywall, ceiling work, flooring and base work,
painting and finishing work, wall covering work, windows, ceramic
tile work, bathroom fixtures and hardware, kitchen fixtures and
hardware, HVAC, plumbing work, sprinkler work and electrical work;
"furniture, fixtures and equipment line items"; "marketing costs
line items;" "sale cost line items;" "commissions payable line
items"; and "professional fee line items" (including architectural,
engineering, accounting and legal services),
(b) an allocation to each construction line item of a
scheduled portion of the fixed construction price in the
Construction Contract for such Under-Construction Project, and
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<PAGE>
(c) a completion timeline for each construction line item
indicating when such item is anticipated to be 25%, 50%, 75% and
100% completed.
Business Day -- means a day other than a Saturday or Sunday or a day
on which banks in the State of Maine, the State of Rhode Island or the
State of Connecticut are required or authorized by law to be closed (other
than for a general banking moratorium or holiday for a period exceeding 4
consecutive days).
By-Laws -- means individually or collectively (as the context may
require), the by-laws of the Associations, as amended from time to time.
CCR's --means individually or collectively (as the context may
require), the Attitash Easements, the Jordan Bowl Easements, the
Killington CCR's, and the Mt. Snow CCR's.
Change in Management -- means the Parent shall cease to own,
directly or indirectly, 100% of the voting power of all classes of Voting
Stock or other equity interests of the Borrower, any Host Company or any
Person which shall have managerial and/or supervisory operational
responsibilities in respect of the Projects except as may be consented to
in writing by the Required Lenders. For the avoidance of doubt, a public
offering of common stock of the Parent shall not be deemed a Change in
Management.
Closing Date -- means August __, 1997.
Closing Date Equity Contribution -- as such term is defined in
Section 5.17(c) hereof.
Collateral -- as defined Section 3.1 of this Agreement.
Commercial Unit -- means a commercial condominium unit at any
Project, the use of which is for commercial or other nonresidential uses
to the extent permitted under the Declaration for such Project, the Plans
for such Project, the CCR's for such Project, and under the zoning laws,
land use laws, rules and regulations that are applicable for such Project.
Commitment-- means, with respect to each Lender that is a party
hereto, the amount set forth underneath its signature hereto, provided
that the amount of such Commitment shall be adjusted to give effect to any
assumptions of Commitments permitted under Section 2.3(a)(i) hereof and
any assignments of Commitments permitted under Section 2.6(b) hereof.
Commitment Letter -- means that certain letter dated July 14, 1997
from the Lenders to the Borrower, which letter was accepted by the
Borrower on July 30, 1997.
Commitment Period -- means the period commencing on the Closing Date
and ending on the Termination Date.
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Common Elements -- means individually or collectively (as the
context may require), the Attitash Common Areas, the Jordan Bowl Common
Elements, the Killington Common Elements, and the Mt. Snow Common
Elements.
Compensation -- as defined in Section 3.1(g) of this Agreement.
Completion Date -- means individually or collectively (as the
context may require),
(a) June 1, 1998 for Jordan Bowl,
(b) June 1, 1998 for Killington, and
(c) June 1, 1998 for Mt. Snow.
Condemnation Compensation -- as defined in Section 3.6(a)(i) of this
Agreement.
Consummation Date -- means the date on which the purchase and sale
of a Quartershare Interest, Residential Unit or Commercial Unit for any
Project is consummated.
Construction Contract -- means individually or collectively (as the
context may require), the Jordan Bowl Construction Contract, the
Killington Construction Contract, and the Mt. Snow Construction Contract.
Construction Cost Certificate -- means, as of any date and with
respect to any Under-Construction Project, a certificate which is signed
by the Borrower, is addressed, and is in form and substance satisfactory,
to the Administrative Agent, and
(a) includes as an attachment thereto an Application and
Certificate for Payment from the General Contractor for such
Under-Construction Project (AIA Document G702) (and a fully
completed Continuation Sheet thereto (AIA Document G703)) executed
by such General Contractor and duly notarized and certified and
executed by the Architect for such Under-Construction Project; the
Continuation Sheet shall show under the "Description of Work" each
construction line item classification of the Budget for such
Under-Construction Project and with respect thereto the scheduled
value thereof (as listed in such Budget),
(b) includes as an attachment thereto the Architect's
Construction Cost Certificate for such Under-Construction Project,
(c) includes as an attachment thereto a certificate from such
General Contractor to the Borrower and the Administrative Agent that
(i) certifies that the construction of the building and
the other improvements at such Under-Construction Project in
connection therewith has been in accordance with the
Construction Documents (as such term is defined in the
Construction Contract for such Under-Construction Project),
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(ii) certifies that such General Contractor has fully
paid for (except in respect of contractually permitted
retainages) all progress payments or other costs in respect of
the work, labor, fuel, materials and/or equipment incurred by
it or by its subcontractors, materialmen and/or suppliers in
respect of the construction at such Under-Construction Project
through the date or dates of all prior applications and
certificates in respect of which such General Contractor has
been paid hereunder and/or has been paid by the Borrower (with
Equity Moneys or otherwise),
(iii) includes as an attachment copies of cancelled
checks, paid-in-full invoices or other proof of payment
(acceptable to the Lender) in respect of the payment of the
aforesaid subcontractors, materialmen and/or suppliers
together with unconditional lien waivers in respect thereof,
(iv) includes as an attachment copies of (1) all
invoices and bills of its costs or progress payments then due
and (2) all invoices and bills of the costs of its
subcontractors, materialmen and/or suppliers and/or
applications for payment submitted to it by its subcontractors
for progress payments to be satisfied (less any retained
amount thereof), in whole or part, with any Project Advance to
be made hereunder in connection with such Cost Construction
Certificate, and
(v) includes as an attachment appropriate mechanic's,
materialman's and laborer's progress payment lien waivers or
releases in respect of such aforesaid progress payments or
costs to the extent that the same are so paid (and such
condition of payment shall be the only condition to which such
waivers or releases shall be subject);
(d) certifies the accuracy and correctness of the application
and certificates referred to in clauses (a), (b) and (c) above,
(e) certifies (i) the aggregate costs incurred by the Borrower
in respect of Construction Costs, FF&E Costs and Sales, Marketing &
Other Costs in each case for such Under-Construction Project up to
and including such date, (ii) the aggregate amount of Equity Moneys
and Project Advances in each case for such Project utilized prior to
such date to satisfy, in whole or part, such Costs and (iii) that
the unutilized principal amount of this Agreement available for such
Under-Construction Project, the Project Advances likely to be repaid
and to be reborrowable in respect of such Under-Construction Project
and the remaining Equity Moneys, if any, are sufficient to satisfy
the remaining Construction Costs, FF&E Costs and Sales, Marketing &
Other Costs for such Under-Construction Project,
(f) certifies with respect to each construction line item in
the Budget for such Under-Construction Project the total amount of
the scheduled value thereof completed as of such date and the
portion of such completed scheduled value
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(i) paid for by Equity Moneys,
(ii) paid for by prior Project Advances hereunder,
(iii) deferred as retainage, and
(iv) to be paid for by a currently requested Project
Advance hereunder,
(g) includes as an attachment evidence of the application of
the proceeds of any prior Project Advances and Equity Moneys in each
case for such Project not previously accounted for in a prior
Construction Cost Certificate, Nonconstruction Cost Certificate or
under subclause (c) above, in each case for such Under-Construction
Project,
(h) compares the actual costs incurred in respect of each line
item in the Budget for such Under-Construction Project with the
projected amount thereof as of such date and explains any material
variance in respect thereof, and
(i) includes as an attachment a current title report in
respect of such Under-Construction Project issued by the title
insurance company that shall have issued the Title Insurance Policy
{Blanket} (or a current update of a title report in respect of such
Under-Construction Project previously delivered to the
Administrative Agent by such title insurance company) showing no
Lien or exception to title other than the Permitted Exceptions and
showing, in particular, no mechanic's, materialmen's, labor's or
other similar Lien of record.
Construction Costs -- means, with respect to any Under-Construction
Project, any costs and expenses required to be paid by the Borrower under
the Construction Contract for such Under-Construction Project to the
General Contractor for such Under-Construction Project or otherwise
identified as construction costs in the Budget for such Under-Construction
Project and approved by the Administrative Agent (including, without
limitation, site work and landscaping), provided that "Construction Costs"
shall not include overhead costs of the Borrower or the General Contractor
for such Under-Construction Project, FF&E Costs (other than costs of
equipment that is to be incorporated into, and made a part of, the
building to be built at such Under-Construction Project), insurance and
bonding costs (except to the extent incorporated into the Construction
Contract), Sales, Marketing & Other Costs or Pre-Construction Costs.
Contract -- means any purchase contract between one or more Persons,
as purchaser (the "Purchaser"), and the Borrower, as seller, which
agreement provides for the sale by the Borrower to such Purchaser of one
or more Quartershare Interests in any Project.
Declaration(s) -- means individually or collectively (as the context
may require), the Attitash Declaration, the Jordan Bowl Declaration, the
Killington Declaration, and the Mt. Snow Declaration.
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Declarant(s) -- means individually or collectively (as the context
may require), the status of the Borrower as the declarant under applicable
law and under the Declarations and the Articles of Incorporation and
By-Laws of the Associations, as amended.
Default -- means an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an
Event of Default.
Default Rate -- means, at any time, the per annum rate of interest
equal to the Interest Rate, then in effect, plus 2% per annum; provided,
however, that the Default Rate shall in no event exceed the Maximum Rate.
Disbursement Agent -- means Funds Administration Services, L.L.C. or
such other Person as shall have been designated by the Administrative
Agent. The "Disbursement Agent" shall be the exclusive agent of the
Administrative Agent and the Lenders.
Eligible Assignee -- means
(a) any Lender that is a signatory hereto or any parent,
affiliate or subsidiary of any such Lender,
(b) any commercial bank organized under the laws of the United
States of America or any state thereof that has combined capital and
surplus of at least $100,000,000,
(c) any savings and loan association or savings bank organized
under the laws of the United States of America or any state thereof
that has combined capital and surplus of at least $100,000,000, and
(d) any other trust or entity organized under the laws of the
United States of America or any state thereof that (i) is an
"accredited investor" (as defined in Regulation D under the
Securities Act of 1933, as amended), (ii) is a commercial finance
company, insurance company or other financial institution that
regularly makes commercial loans in the ordinary course of its
business or (iii) has combined capital and equity of at least
$100,000,000.
Environmental Protection Law -- means each federal, state, county,
regional or local law, statute, or regulation enacted in connection with
or relating to the protection or regulation of the environment, including,
without limitation, those laws, statutes, and regulations regulating the
disposal, removal, production, storing, refining, handling, transferring,
processing, or transporting of Hazardous Substances, and any regulations
issued or promulgated in connection with such statutes by any governmental
authority and any orders, decrees or judgments issued by any court of
competent jurisdiction in connection with any of the foregoing.
Equity Moneys -- means, at any time, cash equity contributions made
to the Borrower by its Parent.
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Escrow Agent -- means individually or collectively (as the context
may require), the Attitash Escrow Agent, the Jordan Bowl Escrow Agent, the
Killington Escrow Agent, and the Mt. Snow Escrow Agent.
Event of Default -- as defined in Section 8.1 of this Agreement.
Existing Attitash Loan -- means that certain Loan from Key Bank of
Maine to L.B.O. Hotel Co. in the current outstanding principal amount of
$4,063,646 and secured by that certain Mortgage dated October 3, 1996 and
recorded in the Carroll County Registry of Deeds at Book 1674, Page 483,
by that certain Collateral Assignment of Income, Revenues and Rentals
dated March 26, 1997 and recorded in the Carroll County Registry of Deeds
at Book 1694, Page 630 and that certain Conditional Assignment of
Declarant's rights dated March 26, 1997 and recorded in the Carroll County
Registry of Deeds at Book 1694, Page 624.
FF&E Costs -- means, with respect to any Under-Construction Project,
the costs of acquisition and delivery of furniture, fixtures and equipment
to be installed and/or used in the building and the other improvements
being constructed at such Under-Construction Project. "FF&E Costs" shall
not include any Construction Costs or Pre-Construction Costs.
Fair Market Value -- at any time with respect to any Property means
the sale value of such Property that would be realized in an arm's-length
sale at such time between an informed and willing buyer, and an informed
and willing seller, under no compulsion to buy or sell, respectively.
Final Construction Cost Advance -- means, with respect to any
Under-Construction Project, the last Project Advance in respect of
Construction Costs for such Under-Construction Project, which shall have
as its sole purpose the financing of the payment of any unutilized
Retainages under the Construction Contract for such Under-Construction
Project.
Final Construction Cost Certificate -- means, with respect to any
Under-Construction Project, a certificate, addressed to the Administrative
Agent and in form and substance satisfactory to the Administrative Agent,
signed by the Borrower, which
(a) includes as an attachment thereto a Certificate of
Substantial Completion (AIA Document G704) executed by the Architect
for such Under-Construction Project, the General Contractor for such
Under-Construction Project and the Borrower; the list of items to be
completed set forth on such Certificate shall have been completed to
the satisfaction of the Architect for such Under-Construction
Project and the TFC Architect and both of such Persons shall have so
certified in the Architect's Final Construction Cost Certificate for
such Under-Construction Project (which shall also be an attachment
to such Final Construction Cost Certificate)
(b) includes as an attachment thereto a certificate from such
General Contractor to the Borrower and the Administrative Agent that
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(i) the construction of the building and the other
improvements at such Under-Construction Project in connection
therewith has been completed in accordance with the Plans for
such Under-Construction Project and in compliance with the
Construction Documents (as such term is defined in the
Construction Agreement of such General Contractor),
(ii) such General Contractor has fully paid for all of
the work, labor, fuel, materials and/or equipment furnished by
it or by its subcontractors, materialmen and/or suppliers in
respect of the construction at such Under-Construction
Project, and
(iii) attached thereto are mechanic's, materialman's and
laborer's final lien waivers or releases in respect of such
General Contractor and all subcontractors, materialmen and/or
suppliers;
(c) certifies the accuracy and correctness of the application
and certificates referred to in clauses (a) and (b) above;
(d) includes as an attachment appropriate insurance
certificates evidencing the necessary insurance required by Section
3.5 and any necessary consents of any surety that shall have issued
any performance or payment bond provided by the General Contractor
for such Under-Construction Project, and
(e) includes as an attachment a current title report in
respect of such Under-Construction Project issued by the title
insurance company that shall have issued the Title Insurance Policy
{Blanket} (or a current update of a title report in respect of such
Under-Construction Project previously delivered to the
Administrative Agent by such title insurance company) showing no
Lien or exception to title other than the Permitted Exceptions and
showing, in particular, no mechanic's, materialmen's, labor's or
other similar Lien of record.
General Contractor(s) -- means individually or collectively (as the
context may require), the Jordan Bowl General Contractor, the Killington
General Contractor, and the Mt. Snow General Contractor.
Hazardous Substances -- means any and all pollutants, contaminants,
toxic or hazardous wastes or any other substances that might pose a hazard
to health or safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment,
storage, handling, transportation, transfer, use, disposal, release,
discharge, spillage, seepage or filtration of which is or shall be
restricted, prohibited or penalized by any Environmental Protection Law
(including, without limitation, asbestos, urea formaldehyde foam
insulation and polychlorinated biphenyls); provided, however, that
"Hazardous Substances" shall not include any substance used by the
Borrower or its agents in the ordinary course of business and in
compliance with applicable Environmental Protection Laws.
Host Company -- means, with respect to each of the
Under-Construction Projects, the following companies:
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(a) Jordan Bowl Project - Sunday River Skiway Corporation, a
Maine corporation;
(b) Killington Project - Killington, Ltd., a Vermont
corporation;
(c) Mt. Snow Project - Mount Snow, Ltd., a Vermont
corporation; and
(d) Attitash Project - L.B.O. Holding, Inc., a Maine
corporation.
Host Company Lease Agreement -- means each of the following:
(a) with respect to the Jordan Bowl Project, that certain
lease agreement to be entered into between the Borrower and Sunday
River Skiway Corporation, a Maine corporation, with respect to
certain infrastructure items located at the Jordan Bowl Project;
(b) with respect to the Killington Project, that certain lease
agreement to be entered into between the Borrower and Killington,
Ltd., a Vermont corporation, with respect to certain infrastructure
items located at the Killington Project; and
(c) with respect to the Mt. Snow Project, that certain lease
agreement to be entered into between the Borrower and Mount Snow,
Ltd., a Vermont corporation, with respect to certain infrastructure
items located at the Mt. Snow Project.
For the avoidance of doubt, the Borrower represents and warrants that
there is no, and will not be, a "Host Company Lease Agreement" in respect
of the Attitash Project.
Impositions -- as defined in Section 3.7 of this Agreement.
Insurance Premiums -- as defined in Section 3.5(a)(iv) of this
Agreement.
Interest Advance -- as defined in Section 2.4(c)(iii) of this
Agreement.
Interest Rate -- means, with respect to any calendar month, a per
annum rate of interest equal to the greater of:
(a) 9.25%, or
(b) the sum of
(i) 1.5%, plus
(ii) the Prime Rate then in effect for such month.
The interest rate for each calendar month shall be based upon the Prime
Rate in effect at 9:00 a.m. (Eastern time) on the 1st day of such month.
The term "Prime Rate" shall
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mean the "prime rate" as announced from time to time by Chase Manhattan
Bank, New York, New York or any successor thereto. In the event Chase
Manhattan Bank, New York, New York or any successor thereto, shall
discontinue announcement of said Prime Rate, a comparable index designated
by the Lender shall be used in calculating the Interest Rate. It is
expressly agreed that the use of the term "prime rate" or any other
similar designation is not intended to, nor does it, imply that said rate
of interest is a preferred rate of interest or one which is offered by
Chase Manhattan Bank, New York, New York or any successor thereto to its
most creditworthy customers.
Jordan Bowl Architect -- means a duly licensed architect under Maine
law approved by the Administrative Agent.
Jordan Bowl Association -- means The Jordan Grand Condominium Owners
Association, a Maine non-profit corporation, or any successor association
thereto as provided in the Jordan Bowl Declaration.
Jordan Bowl Easements -- means that certain Declaration of Easements
by and between the Borrower and Sunday River Skiway Corporation, a Maine
corporation, which is to be recorded in the applicable land records of
Oxford County, Maine, and which shall be satisfactory in form and
substance to the Administrative Agent in its discretion, as amended from
time to time in accordance with the provisions hereof.
Jordan Bowl Common Elements -- means those areas at the Jordan Bowl
Project that have been designated in accordance with the Jordan Bowl
Declaration, on the Jordan Bowl Resort Map or by the Jordan Bowl
Association as "Common Elements," as used and described in the Jordan Bowl
Declaration, for the primary benefit of the owners of Jordan Bowl
Residential Units and Jordan Bowl Commercial Units.
Jordan Bowl Commercial Unit -- means any condominium unit at the
Jordan Bowl Project that has been designated for commercial use.
Jordan Bowl Construction Contract -- means that certain Standard
Form of Agreement between the Borrower and the Jordan Bowl General
Contractor, as amended from time to time, as approved by the
Administrative Agent.
Jordan Bowl Declaration -- means that certain Declaration of
Condominium, The Jordan Grand at Sunday River, A Condominium by the
Borrower, as declarant, which is to be recorded in the land records of
Oxford County, Maine, and which shall be satisfactory to the
Administrative Agent in form and substance in its discretion, as amended
from time to time in accordance with the provisions hereof.
Jordan Bowl Escrow Agent -- means Key Bank of Maine, or such
escrowee duly authorized to act as such under applicable Maine law.
Jordan Bowl General Contractor -- means such general contractor as
shall be acceptable to the Administrative Agent.
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Jordan Bowl Limited Common Elements -- means those areas at the
Jordan Bowl Project that have been designated in accordance with the
Jordan Bowl Declaration, on the Jordan Bowl Resort Map or by the Jordan
Bowl Association as "Limited Common Elements," as defined in the Jordan
Bowl Declaration, for the primary or exclusive use of only certain owners
of Jordan Bowl Residential Units, the Jordan Bowl Quartershare Interests
and the Jordan Bowl Commercial Units.
Jordan Bowl Project -- means that certain resort property commonly
known as The Jordan Grand at Sunday River, A Condominium, situated on
certain land located in Oxford County, Maine, and particularly described
on Schedule 2 attached hereto and made a part hereof, and including all
improvements now or hereafter located on said land, and all facilities,
roadways, common furnishings, club furnishings, equipment and all other
appurtenances thereunto belonging. The Jordan Bowl Project shall include,
when the Jordan Bowl Declaration is recorded, the Jordan Bowl Residential
Units, the Jordan Bowl Quartershare Interests, the Jordan Bowl Commercial
Units, the Jordan Bowl Common Elements and the Jordan Bowl Limited Common
Elements.
Jordan Bowl Project Advances -- as defined in Section 2.3(b)(iii)
hereof.
Jordan Bowl Project Documents -- means the Jordan Bowl Declaration,
the Articles of Incorporation and the By-Laws of the Jordan Bowl
Association, and the rules and regulations of the Jordan Bowl Association.
Jordan Bowl Quartershare Interest -- means the "Quarter Share
Estates" as defined and described in the Jordan Bowl Declaration, with
such interest being entitled to the exclusive right to the possession, use
and occupancy of a Jordan Bowl Residential Unit during thirteen (13)
calendar weeks of each calendar year, as more particularly provided in the
Jordan Bowl Declaration.
Jordan Bowl Residential Unit -- means any condominium unit at the
Jordan Bowl Project other than those units that have been designated for
commercial use.
Jordan Bowl Resort Map -- means the plats and plans in respect of
the Jordan Bowl Project to be recorded in the real property records of
Oxford County, Maine Registry of Deeds and which shall be satisfactory to
the Administrative Agent.
Killington Architect -- means a duly licensed architect under
Vermont law approved by the Administrative Agent.
Killington Association -- means Killington Grand Hotel and Crown
Club Owners Association, Inc., a Vermont non-profit corporation, or any
successor association thereto as provided in the Killington Declaration.
Killington CCR's -- means (a) that certain Killington Grand Hotel
and Crown Club at Killington Declaration of Protective Covenants by the
Borrower, as declarant, which is to be recorded in the land records of the
Town of Rutland, Vermont, and which shall be satisfactory to the
Administrative Agent in its discretion, as amended from time to time in
accordance with the provisions hereof and (b) that certain Declaration of
Easements by
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and between the Borrower and Killington, Ltd., a Vermont corporation,
which is to be recorded in the applicable land records of Town of Rutland,
Vermont, and which shall be satisfactory in form and substance to the
Administrative Agent in its discretion, as amended from time to time in
accordance with the provisions hereof.
Killington Commercial Common Areas and Facilities -- means those
areas at the Killington Project that have been designated in accordance
with the Killington Declaration, on the Killington Resort Map or by the
Killington Association as "Commercial Common Areas and Facilities," as
defined in the Killington Declaration, for the primary or exclusive use of
the owners of Killington Commercial Units.
Killington Commercial Unit -- means a commercial condominium unit at
the Killington Project.
Killington Common Elements -- means the real estate and improvements
located at the Killington Project other than those areas designated as
Killington Residential Units or Killington Commercial Units and, with
respect to the Killington Residential Units and Killington Quartershare
Interests, shall mean the Killington Residential Common Areas and
Facilities and the Killington Common Furnishings and the Killington
General Common Areas and Facilities applicable thereto, and with respect
to the Killington Commercial Units, means the Killington Commercial Common
Areas and Facilities and the Killington Common Furnishings and the
Killington General Common Areas and Facilities applicable thereto, in each
case as more particularly provided for in the Killington Declaration.
Killington Common Furnishings -- means all furniture, furnishings,
appliances, fixtures and equipment, and all other personal property from
time to time owned or leased by the Killington Association at the
Killington Project for the use by the owners of Killington Residential
Units, the Killington Quartershare Interests or the Killington Commercial
Units.
Killington Construction Contract -- means that certain Standard Form
of Agreement between the Borrower and the Killington General Contractor,
as amended from time to time, which shall be acceptable to the
Administrative Agent.
Killington Declaration -- means that certain Declaration of
Condominium and Interval Ownership, Killington Grand Hotel and Crown Club
at Killington, by the Borrower, as declarant, which is to be recorded in
the applicable land records, and which shall be satisfactory to the
Administrative Agent in its discretion, as amended from time to time in
accordance with the provisions hereof.
Killington Escrow Agent -- means Key Bank in Rutland, Vermont, or
such escrowee duly authorized to act as such under applicable Vermont law.
Killington General Common Areas and Facilities -- means all Common
Areas and Facilities (as defined in the Killington Declaration) other than
the Killington Residential Common Areas and Facilities and the Killington
Commercial Common Areas and Facilities.
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Killington General Contractor -- means such general contractor as
shall be acceptable to the Administrative Agent.
Killington Project -- means that certain resort property commonly
known as the Killington Grand Hotel and Crown Club at Killington, situated
on certain land located in Killington, Vermont, and particularly described
on Schedule 3 attached hereto and made a part hereof, and including all
improvements now or hereafter located on said land, and all facilities,
roadways, common furnishings, club furnishings, equipment and all other
appurtenances thereunto belonging. The Killington Project shall include,
when the Killington Declaration is recorded, the Killington Residential
Units, the Killington Quartershare Interests, the Killington Commercial
Units and the Killington Common Elements.
Killington Project Advances -- as defined in Section 2.3(b)(iii)
hereof.
Killington Project Documents -- means the Killington Declaration,
the Articles of Incorporation and the By-Laws of the Killington
Association, and the rules and regulations of the Killington Association.
Killington Quartershare Interest -- means the "Interval Ownership
Interests" as defined and described in the Killington Declaration, with
the owner of such interest being entitled to the exclusive right to the
possession, use and occupancy of a Killington Residential Unit during
thirteen (13) calendar weeks of each calendar year, as more particularly
provided in the Killington Declaration.
Killington Residential Common Areas and Facilities -- means those
areas at the Killington Project that have been designated in accordance
with the Killington Declaration, on the Killington Resort Map or by the
Killington Association as "Residential Common Areas and Facilities," as
defined in the Killington Declaration, for the primary or exclusive use of
the owners of Killington Residential Units or Killington Quartershare
Interests.
Killington Residential Unit -- means a residential condominium unit
at the Killington Project.
Killington Resort Map -- means the plat and floor plans for the
Killington Project to be recorded in the real property records of the Town
of Rutland, Vermont and which shall be satisfactory to the Administrative
Agent.
Land Costs -- the out-of-pocket costs of the Borrower in acquiring
the "Land," as such term is defined in the Blanket Mortgages, for all of
the Projects.
Lenders -- as defined in the preamble to this Agreement, together
with their successors and permitted assigns pursuant to Section 2.6(b) of
this Agreement.
Lien -- any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including,
but not limited to, attachments, judgments or tax liens and the security
interest or lien arising from a mortgage, deed of
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trust, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes.
Loan -- means, at any time, the aggregate principal balance of all
Advances outstanding at such time.
Loan Costs -- as defined in Section 11.2 of this Agreement.
Loan Disbursement Agreement -- means that certain loan disbursement
agreement of even date herewith among the Disbursement Agent, the Borrower
and the Lenders, substantially in the form of Exhibit C hereto, as amended
from time to time.
Loan Exposure -- means, with respect to any Lender as of any date of
determination, (a) prior to the termination of the Commitment Period, the
Commitment of such Lender and (b) after the termination of the Commitment
Period, the aggregate principal amount of the Loan made by, or assigned
to, such Lender and outstanding on such date.
Maturity Date -- means the first Business Day of the 40th month
following the Closing Date (not counting the month in which the Closing
Date falls).
Maximum Rate -- as defined in Section 2.4(c)(iv) of this Agreement.
Minimum Quartershare Interest Release Price -- means
(a) in the case of the Attitash Project, means the dollar
amounts or amounts set forth on Schedule 4 hereto,
(b) in the case of the Jordan Bowl Project, means the dollar
amounts or amounts set forth on Schedule 4 hereto,
(c) in the case of the Killington Project, means the dollar
amounts or amounts set forth on Schedule 4 hereto, and
(d) in the case of the Mt. Snow Project, means the dollar
amounts or amounts set forth on Schedule 4 hereto.
Monthly Average Weighted Loan Balance -- means, for any calendar
month, the quotient of
(a) the aggregate of the Daily Loan Balances for each of the
days of such month in respect of the Loan, divided by
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(b) the number of days in such month.
For purposes of this definition, "Daily Loan Balance" shall mean, for any
day, the principal balance of the Loan outstanding as of the close of
business of the Administrative Agent for such day after giving effect to
all payments received and Advances made during such day.
Monthly Rental Amount -- means, with respect to each
Under-Construction Project and the Host Company Lease Agreement in respect
thereof, the following:
(a) Jordan Bowl Project - $71,400 per month, which shall
commence to be payable upon the completion of the construction of
the facilities being leased at the Jordan Bowl Project pursuant to
the Host Company Lease Agreement in respect thereof;
(b) Killington Project - $92,600 per month, which shall
commence to be payable upon the completion of the construction of
the facilities being leased at the Killington Project pursuant to
the Host Company Lease Agreement in respect thereof; and
(c) Mt. Snow Project - $29,000 per month, which shall commence
to be payable upon the completion of the construction of the
facilities being leased at the Mt. Snow Project pursuant to the Host
Company Lease Agreement in respect thereof.
Mt. Snow Architect -- means a duly licensed architect under Vermont
law approved by the Administrative Agent.
Mt. Snow Association -- means the Mount Snow Grand Summit Hotel and
Crown Club Owners Association, a Vermont non-profit corporation, or any
successor association thereto as provided in the Mt. Snow Declaration.
Mt. Snow CCR's -- means (a) that certain Grand Summit Hotel and
Crown Club at Mount Snow Declaration of Protective Covenants by the
Borrower, as declarant, which is to be recorded in the land records of the
Town of West Dover, Vermont, and which shall be satisfactory to the
Administrative Agent in its discretion, as amended from time to time in
accordance with the provisions hereof and (b) that certain Declaration of
Easements by and between the Borrower and Mount Snow, Ltd., a Vermont
corporation, which is to be recorded in the applicable land records of the
Town of West Dover, Vermont, and which shall be satisfactory in form and
substance to the Administrative Agent in its discretion, as amended from
time to time in accordance with the provisions hereof.
Mt. Snow Commercial Common Areas and Facilities -- means those areas
at the Mt. Snow Project that have been designated in accordance with the
Mt. Snow Declaration, on the Mt. Snow Resort Map or by the Mt. Snow
Association as "Commercial Common Areas and Facilities," as defined in the
Mt. Snow Declaration, for the primary or exclusive use of the owners of
Mt. Snow Commercial Units.
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Mt. Snow Commercial Unit -- means a commercial condominium unit at
the Mt. Snow Project.
Mt. Snow Common Elements -- means the real estate and improvements
located at the Mt. Snow Project other than those areas designated as Mt.
Snow Residential Units or Mt. Snow Commercial Units and, with respect to
the Mt. Snow Residential Units and Mt. Snow Quartershare Interests, shall
mean the Mt. Snow Residential Common Areas and Facilities and the Mt. Snow
Common Furnishings and the Mt. Snow General Common Areas and Facilities
applicable thereto, and with respect to the Mt. Snow Commercial Units,
means the Mt. Snow Commercial Common Areas and Facilities and the Mt. Snow
Common Furnishings and the Mt. Snow General Common Areas and Facilities
applicable thereto, in each case as more particularly provided for in the
Mt. Snow Declaration.
Mt. Snow Common Furnishings -- means all furniture, furnishings,
appliances, fixtures and equipment, and all other personal property from
time to time owned or leased by the Mt. Snow Association at the Mt. Snow
Project for the use by the owners of Mt. Snow Residential Units, the Mt.
Snow Quartershare Interests or the Mt. Snow Commercial Units.
Mt. Snow Construction Contract -- means that certain Standard Form
of Agreement between the Borrower and the Mt. Snow General Contractor, as
amended from time to time, and satisfactory to the Administrative Agent.
Mt. Snow Declaration -- means that certain Declaration of
Condominium and Interval Ownership, Grand Summit Hotel and Crown Club at
Mount Snow, by the Borrower, as declarant, which is to be recorded in the
land records of the Town of West Dover, Vermont, and which shall be
satisfactory to the Administrative Agent in its discretion, as amended
from time to time in accordance with the provisions hereof.
Mt. Snow Escrow Agent -- means Key Bank in Rutland, Vermont, or such
escrowee duly authorized to act as such under applicable Vermont law.
Mt. Snow General Common Areas and Facilities -- means all "Common
Areas and Facilities" (as defined in the Mt. Snow Declaration) other than
the Mt. Snow Residential Common Areas and Facilities and the Mt. Snow
Commercial Common Areas and Facilities.
Mt. Snow General Contractor -- means such general contractor as
shall be acceptable to the Administrative Agent.
Mt. Snow Project -- means that certain resort property commonly
known as the Grand Summit Hotel and Crown Club at Mount Snow, situated on
certain land located at Mount Snow, West Dover, Vermont, and particularly
described on Schedule 5 attached hereto and made a part hereof, and
including all improvements now or hereafter located on said land, and all
facilities, roadways, common furnishings, club furnishings, equipment and
all other appurtenances thereunto belonging. The Mt. Snow Project shall
include, when the Mt. Snow Declaration is recorded, the Mt. Snow
Residential Units, the Mt. Snow
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Quartershare Interests, the Mt. Snow Commercial Units and the Mt.
Snow Common Elements.
Mt. Snow Project Advances -- as defined in Section 2.3(b)(iii)
hereof.
Mt. Snow Project Documents -- means the Mt. Snow Declaration, the
Articles of Incorporation and the By-Laws of the Mt. Snow Association, and
the rules and regulations of the Mt. Snow Association.
Mt. Snow Quartershare Interest -- means the "Interval Ownership
Interests" as defined and described in the Mt. Snow Declaration, with the
owner of such interest being entitled to the exclusive right to the
possession, use and occupancy of a Mt. Snow Residential Unit during
thirteen (13) calendar weeks of each calendar year, as more particularly
provided in the Mt. Snow Declaration.
Mt. Snow Residential Unit -- means a residential condominium unit at
the Mt. Snow Project.
Mt. Snow Residential Common Areas and Facilities -- means those
areas at the Mt. Snow Project that have been designated in accordance with
the Mt. Snow Declaration, on the Mt. Snow Resort Map or by the Mt. Snow
Association as "Residential Common Areas and Facilities," as defined in
the Mt. Snow Declaration, for the primary or exclusive use of the owners
of Mt. Snow Residential Units or Mt. Snow Quartershare Interests.
Mt. Snow Resort Map -- means the plat and floor plans for the Mt.
Snow Project to be recorded in the real property records of the Town of
West Dover, Vermont and which shall be satisfactory to the Administrative
Agent.
Net Sales Proceeds -- means, with respect to any Contract for the
sale of any Quartershare Interval in any Project or any other contract for
the purchase and sale of any Residential Unit or Commercial Unit in any
Project, the sum of the cash downpayments, other cash payments, cash loan
proceeds and cash purchase proceeds in respect of such Contract or other
contract delivered to the Administrative Agent on the Consummation Date in
respect thereof pursuant to Section 3.15 hereof (less any customary and
normal costs of closing of such Contract or other contract not previously
deducted from other cash proceeds in respect of such sale), provided that
(i) for the avoidance of doubt, "cash purchase proceeds" delivered to the
Administrative Agent pursuant to Section 3.15 shall not be deemed to
include any amounts that are withheld from the full cash purchase price to
be paid to the Borrower under the Take-Out Facility in respect of any
Quartershare Note arising from the sale of any such Quartershare Interest,
and (ii) such amount in cash shall not be less than the full purchase
price to be paid by the Purchaser thereof (less any customary and normal
costs of closing of such Contract or other contract not previously
deducted from other cash proceeds in respect of such sale).
Nonconstruction Cost Certificate -- means, as of any date and with
respect to any Under-Construction Project, a certificate, addressed to the
Administrative Agent and
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in form and substance satisfactory to the Administrative Agent, signed by
the Borrower, which
(a) includes as an attachment thereto the TFC Architect's
Nonconstruction Cost Certificate for such Under-Construction Project
in the case of any Project Advance being made in respect of FF&E
Costs,
(b) includes as an attachment thereto copies of all invoices
and bills in respect of FF&E Costs and/or Sales, Marketing & Other
Costs for which the Borrower is to be reimbursed, in whole or part,
by a Project Advance to be made hereunder in respect of such
Under-Construction Project and certifies the accuracy and
correctness of such invoices and bills,
(c) certifies (i) the aggregate costs incurred by the Borrower
in respect of Construction Costs, FF&E Costs and Sales, Marketing &
Other Costs in each case for such Under-Construction Project up to
and including such date, (ii) the aggregate amount of Equity Moneys
and Project Advances in each case for such Under-Construction
Project utilized prior to such date to satisfy, in whole or part,
such Costs and (iii) that the unutilized principal amount of this
Agreement for such Under-Construction Project, the Project Advances
likely to be repaid and to be reborrowable in respect of such
Under-Construction Project and the remaining Equity Moneys, if any,
are sufficient to satisfy the remaining Construction Costs, FF&E
Costs and Sales, Marketing & Other Costs for such Under-Construction
Project, and
(d) compares the actual costs incurred in respect of each line
item in the Budget for such Under-Construction Project with respect
to such FF&E and Sales, Marketing & Other Costs with the projected
amount thereof as of such date and explains any material variance in
respect thereof.
Note -- as defined in Section 2.4(a) of this Agreement.
Obligations -- means all sums now or hereafter loaned, advanced or
incurred by any one or more of the Lenders or the Administrative Agent to
or on behalf of the Borrower under this Agreement, the Notes and any other
Security Document (including, without limitation, accrued and unpaid
interest and Loan Costs), and the full, prompt and complete performance of
all obligations owed by, or undertakings or indemnities of, Borrower
arising hereunder or thereunder. "Obligations" shall also include the
Borrower's obligations and undertaking to or in favor of Textron Financial
Corporation under the Take-Out Facility and any "Note Purchase Agreement"
or other documentation executed in connection therewith.
Parent -- means American Skiing Company, a Maine corporation.
Parent Indenture -- means each of the following: (a) that certain
Indenture, dated as of June 28, 1996, with the Parent, as issuer, and
United States Trust Company of New York, as trustee, in respect of the
Series A and Series B 12% Senior Subordinated Notes due 2006 and (b) that
certain Indenture, dated as of June 28, 1996, with the Parent, as
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issuer, and United States Trust Company of New York, as trustee, in
respect of the 13.75% Subordinated Discount Notes due 2007.
Participating Lender -- means any Person which (a) shall have been
granted the right by a Lender to participate in the Note of such Lender
and (b) shall have entered into a participation agreement with such Lender
which shall provide, inter alia, that such Participating Lender shall
communicate and deal only with such Lender with respect to such
Participating Lender's interest in such Note.
Pay-Out Release Price -- means the dollar amount or amounts set
forth on Schedule 6 hereto.
Permitted Exceptions -- means the title exceptions set forth in
Schedule 7 of this Agreement.
Person -- means an individual, partnership, corporation, trust,
unincorporated organization, limited liability company or a government or
agency or political subdivision thereof.
Plans -- means, with respect to any Under-Construction Project,
those certain plans, specifications and designs prepared by the Architect
for such Under-Construction Project in connection with the construction
and development of such Under-Construction Project.
Pre-Construction Costs -- means, with respect to the Projects, all
out-of-pocket costs up to a maximum of $6,100,000 for the Projects
incurred by the Borrower in connection with (a) the preliminary design and
engineering work required in connection with the construction of the
Projects, (b) obtaining necessary permits, consents, licenses and
approvals under applicable zoning, design and land use ordinances,
building codes, health and environmental laws and regulations and all
other applicable laws, rules and regulations, (c) marketing the Projects
and the Quartershare Interests relating thereto.
Pre-Construction Cost Certificate -- means a certificate, addressed
to the Administrative Agent and in form and substance satisfactory to the
Administrative Agent, signed by the Borrower, which
(a) includes as an attachment thereto the TFC Architect's
PreConstruction Cost Certificate covering the portion of the
Pre-Sale Advance being made in respect of Pre-Construction Costs,
(b) includes as an attachment thereto copies of all invoices
and bills in respect of Pre-Construction Costs for which the
Borrower is to be reimbursed, in whole or part, by the Pre-Sale
Advance and certifies the accuracy and correctness of such invoices
and bills,
(c) certifies (i) that the aggregate Pre-Construction Costs
are less than $6,100,000, and (ii) that the aggregate amount of the
Pre-Sale Advance is less than $10,000,000, and
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(d) certifies that (i) the aggregate amount of the purchase
prices payable under Validated Contracts for all of the Projects is
not less than 45% of the aggregate amount of the Construction Costs
for the Under-Construction Projects as set forth in the Budgets for
the Under-Construction Projects (inclusive of the construction costs
of all capital improvements at the Under-Construction Projects to be
leased to a Host Company by the Borrower pursuant to a Host Company
Lease Agreement), (ii) the aggregate amount of the purchase prices
payable under Validated Contracts for all of the Projects is not
less than 50% of the aggregate amount of the Construction Costs for
the Under-Construction Projects as set forth in the Budgets for the
Under-Construction Projects (exclusive of the construction costs of
all capital improvements at the Under-Construction Projects to be
leased to a Host Company by the Borrower pursuant to a Host Company
Lease Agreement), (iii) for each of the Killington Project and the
Jordan Bowl Project, the amount of the purchase prices payable under
Validated Contracts for each such Project is not less than 35% of
the aggregate amount of the Construction Costs for each such Project
as set forth in the Budget for each such Project (exclusive of the
construction costs of all capital improvements at each such Project
to be leased to the relevant Host Company by the Borrower pursuant
to the relevant Host Company Lease Agreement for each such Project),
(iv) for the Mt. Snow Project, the amount of the purchase prices
payable under Validated Contracts for such Project is not less than
30% of the aggregate amount of the Construction Costs for such
Project as set forth in the Budget for such Project (exclusive of
the construction costs of all capital improvements at such Project
to be leased to the Host Company for such Project by the Borrower
pursuant to the Host Company Lease Agreement for such Project) and
(v) each of the conditions set forth in clauses (a) through (l),
inclusive, of the definition of "Validated Contracts" are satisfied
in all respects.
Pre-Sale Advance -- as defined in Section 2.1 of this Agreement.
Pricing Matrix -- means that certain schedule relating to sales of
Quartershare Interests, Residential Units, and/or Commercial Units
attached hereto as Schedule 8.
Prime Rate -- as defined in the definition of "Interest Rate" in
this Section 1.1.
Project(s) -- means, individually or collectively (as the context
may require), the Attitash Project, the Jordan Bowl Project, the
Killington Project and the Mt. Snow Project.
Project Advance -- as defined in Section 2.2 of this Agreement.
Project Advance Request -- as defined in Section 6.3 of this
Agreement.
Project Borrowing Base -- means, on any date and with respect to any
Under-Construction Project, 80% of the aggregate amount of
(a) Construction Costs for such Under-Construction Project,
FF&E Costs for such Under-Construction Project and Sales, Marketing
& Other Costs for such Under-Construction Project incurred and paid
for by the Borrower on or
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prior to such date in respect of such Under-Construction Project
under and in accordance with the Budget for such Under-Construction
Project plus
(b) pre-development expenses and land values (net of mortgage
debt) for such Under-Construction Project set forth on Schedule 22
hereto,
provided that the "Project Borrowing Base" in respect of each of the
Under-Construction Projects shall, in no case, exceed the following
maximum amounts:
(i) Jordan Bowl Project: $21,270,000;
(ii) Killington Project: $23,270,000; and
(iii) Mt. Snow Project: $22,460,000.
Project Documents -- means, individually or collectively (as the
context may require), the Attitash Project Documents, the Jordan Bowl
Project Documents, the Killington Project Documents, and the Mt. Snow
Project Documents.
Projected Inventory Loan Amount -- means, as of any Quarterly
Testing Date, the principal amount of the Loan that would be outstanding
on such Quarterly Testing Date assuming that each Release Price paid after
the Closing Date and on or prior to such Quarterly Testing Date in respect
of a Quartershare Interest was equal to the higher of the Pay-Out Release
Price or the actual Release Price paid to the Administrative Agent.
Property -- means any interest in any kind of property or asset of
Borrower, whether real, personal or mixed, or tangible or intangible.
Property-Related Contract -- as defined in Section 3.1(b) of this
Agreement.
Purchaser -- as defined in the definition of "Contract" in this
Section 1.1.
Quarterly Testing Date -- as defined in Section 2.5(c)(iii) of this
Agreement.
Quartershare Interest(s) -- means individually or collectively (as
the context may require), an Attitash Quartershare Interest, a Jordan Bowl
Quartershare Interest, a Killington Quartershare Interest, and/or a Mt.
Snow Quartershare Interest.
Quartershare Mortgage -- means, with respect to any Quartershare
Note, a mortgage in and to the Quartershare Interest whose purchase is
being financed, in whole or part, by such Quartershare Note.
Quartershare Note -- means any promissory note made payable to the
order of the Borrower which provides for payment of the deferred purchase
price of one or more Quartershare Interests purchased by the Purchaser
thereof.
Release Percentage -- means
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(a) 85%, in the case of the Attitash Project,
(b) 80%, in the case of the Jordan Bowl Project,
(c) 80%, in the case of the Killington Project, and
(d) 80%, in the case of the Mt. Snow Project.
Release Price -- means,
(a) with respect to any Quartershare Interest in any Project
to be sold pursuant to a Contract, an amount in cash equal to the
result of the Release Percentage for such Project times the Net
Sales Proceeds payable in connection with such sale, provided that
in no event shall the Release Price for any Quartershare Interest be
less than the Minimum Quartershare Interest Release Price for such
Project, and
(b) with respect to any Residential Unit to be sold as a
condominium unit in its entirety at any Project or any Commercial
Unit to be sold in its entirety at any Project, an amount in cash
equal to the Net Sales Proceeds payable by the purchaser thereof in
connection with such sale, provided that in no event shall the
Release Price for any Residential Unit or Commercial Unit in any
Project be less than the purchase price for such Residential Unit or
Commercial Unit in such Project as set forth in the Pricing Matrix.
If at any time during the Commitment Period, there are no Obligations
outstanding, the release price in respect of the sale of any Quartershare
Interest, Residential Unit or Commercial Unit shall be $0.
Release Price Catch-Up Payment -- as defined in Section 2.5(c)(iii)
of this Agreement.
Required Lenders -- means any one or more Lenders having or holding
51% or more of the aggregate Loan Exposure of all Lenders.
Residential Unit(s) -- means individually or collectively (as the
context may require), an Attitash Residential Unit, a Jordan Bowl
Residential Unit, a Killington Residential Unit, and/or a Mt. Snow
Residential Unit.
Resort Map(s) -- means individually or collectively (as the context
may require), the Attitash Resort Map, the Jordan Bowl Resort Map, the
Killington Resort Map, and the Mt. Snow Resort Map.
Retainage Amount -- as defined in Section 2.2(d) of this Agreement.
Sales, Marketing & Other Costs -- means, with respect to any
Under-Construction Project, all out-of-pocket costs for such
Under-Construction Project incurred by the Borrower in connection with
selling and marketing of the Quartershare Interests, all
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general and administrative out-of-pocket costs of the Borrower, all
interest costs and loan fees of the Borrower relating to such
Under-Construction Project, all professional fees of the Borrower relating
to such Under-Construction Project (including architectural, accounting,
engineering and legal fees) and all other out-of-pocket costs incurred by
the Borrower in connection with the development (for purposes of the
avoidance of doubt, "development" shall exclude construction), sale and
operation of such Under-Construction Project and the maintenance of the
Collateral relating to such Under-Construction Project, provided that
"Sales, Marketing & Other Costs" shall not include Pre-Construction Costs.
Security -- shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents -- means this Agreement, the Notes, all
assignments of Contracts, all assignments of Property-Related Contracts,
the Blanket Mortgages, the Subordination Agreements, the collateral
assignment of declarant's rights provided for in Section 5.7 hereof, the
proxy referred to in Section 3.9(c) hereof, the Loan Disbursement
Agreement, and all assignments, instruments, certificates, notices and
other documents now or hereafter executed and delivered in connection with
the transactions contemplated herein.
Senior Credit Facility -- means that certain Credit Agreement, dated
as of June 28, 1996, among the Parent, Fleet National Bank, as Agent, and
certain other persons and lenders party thereto, as amended from time to
time.
Subordination Agreement -- as defined in Section 5.8 of this
Agreement.
Subsequent Project Advance -- as defined in Section 6 of this
Agreement.
Subsequent Project Advance Date -- as defined in Section 6 of this
Agreement.
Subsequent Phase -- means
(a) the expansion of any or all of the Projects and the
Property and improvements located thereon (i) to include additional
Property, (ii) to accommodate the construction of additional
buildings constituting the Projects, and/or (iii) to accommodate the
expansion of any buildings existing at the Projects at the time of
such expansion or
(b) the construction or development of any other hotel
projects by the Borrower similar to any one or more of the Projects.
Take-Out Facility -- means the Textron Financial Corporation
purchase facility described on Schedule 9 hereto.
Termination Date -- means the earliest of
(a) the date on which the Lenders' obligations hereunder to
make Advances are terminated pursuant to Section 8.2(a) of this
Agreement,
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(b) the date on which the Obligations are accelerated pursuant
to Section 8.2(a) of this Agreement,
(c) the date on which any of the Events of Default set forth
in Section 8.1(e) shall have occurred, and
(d) the first Business Day of the 24th month following the
Closing Date (not counting the month in which the Closing Date
falls).
TFC Acceptance -- as defined in Section 2.8 of this Agreement.
TFC Architect -- means such person or firm as the Administrative
Agent shall select.
TFC Architect's Nonconstruction Cost Certificate -- means, with
respect to any Under-Construction Project and any Project Advance in
respect of FF&E Costs and the Nonconstruction Cost Certificate in respect
thereof, a certificate, addressed to the Administrative Agent and in form
and substance satisfactory to the Administrative Agent, from the TFC
Architect in respect of such Under-Construction Project which
(a) confirms that such TFC Architect has inspected such
Under-Construction Project and reviewed such Nonconstruction Cost
Certificate and the attachments thereto, and
(b) confirms that such Nonconstruction Cost Certificate and
the attachments thereto are satisfactory to it.
TFC Architect's Pre-Construction Cost Certificate -- means, with
respect to the Pre-Sale Advance in respect of Pre-Construction Costs and
the Pre-Construction Cost Certificate in respect thereof, a certificate,
addressed to the Administrative Agent and in form and substance
satisfactory to the Administrative Agent, from the TFC Architect in
respect of the Attitash Project which
(a) confirms that the TFC Architect has reviewed such
Pre-Construction Cost Certificate and the attachments thereto, and
(b) confirms that such Pre-Construction Cost Certificate and
the attachments thereto are satisfactory to it.
TFC First Refusal Offer -- as defined in Section 2.8 of this
Agreement.
Third-Party Offer -- as defined in Section 2.8 of this Agreement.
Title Company -- means Lawyers Title Insurance Company, or any
successor or other title company approved by the Administrative Agent from
time to time.
Title Insurance Policy {Blanket} -- as defined in Section 5.11
hereof.
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Under-Construction Project(s) -- means, individually or collectively
(as the context may require), the Jordan Bowl Project, the Killington
Project and the Mt. Snow Project. For the avoidance of doubt, the Attitash
Project shall not be an "Under-Construction Project" and no Project
Advances shall be made in respect thereof.
Uniform Commercial Code -- means the Uniform Commercial Code as
adopted and in force in the State of Maine from time to time in effect.
Validated Contract -- means each Contract in respect of a
Quartershare Interest and any Project and in respect of which all of the
following requirements shall have been satisfied:
(a) such Contract shall arise from the agreement of any
third-party Purchaser that is not an Affiliate of the Borrower to
purchase, and the Borrower to sell, one or more Quartershare
Interests in a Project;
(b) the Purchaser shall be a legal resident of the United
States of America or Canada and the payments under such Contract
shall be payable in legal tender of the United States of America;
(c) the executed original of such Contract, which shall be
satisfactory to the Administrative Agent in form and substance,
shall have been assigned by the Borrower to the Administrative Agent
on behalf of the Lenders and a copy thereof shall have been
delivered to the Administrative Agent;
(d) the Administrative Agent shall have, at its option (if so
directed by the Required Lenders), received the original of such
Contract and shall, in any case, have a valid and perfected,
first-priority Lien in and to such Contract and all proceeds arising
therefrom;
(e) (i) the Purchaser shall have paid to the Borrower, in
connection with the execution and delivery of such Contract, a down
payment (after giving effect to any discounts offered to such
Purchaser) of not less than 5% of the purchase price (as set forth
in such Contract) of the Quartershare Interest being so purchased by
such Purchaser, (ii) such downpayment shall have been deposited by
the Borrower in an Approved Escrow Account in respect of such
Project and (iii) the Borrower shall have delivered to the
Administrative Agent evidence reasonably satisfactory to the
Administrative Agent of the depositing of such downpayment in such
Approved Escrow Account and the clearing of such downpayment;
(f) such Contract (and the execution and delivery thereof)
shall comply with all requirements of United States and applicable
state law, including, without limitation, any consumer credit code,
as adopted and in effect from time to time in the State in which the
Project is situated, any condominium ownership act as adopted and in
effect from time to time in the State in which the Project is
situated, any subdivision laws of the State in which the Project is
situated, as amended, and the rules and regulations as adopted from
time to time thereunder;
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(g) all rights of rescission of the Purchaser in respect of
such Contract under federal law, the law of the State in which the
Project is located, the law of the state of the residence of the
Purchaser and as expressly provided in such Contract shall have
expired and such Purchaser shall have not at any time requested
rescission in respect of such Contract or otherwise stated in
writing that it does not intend to consummate such Contract;
(h) such Contract is, subject to the terms and conditions
thereof and applicable laws of rescission, a valid and binding
obligation of the Purchaser;
(i) the Purchaser under such Contract shall not be subject to
any bankruptcy or insolvency proceeding; and
(j) the Borrower shall have confirmed the existence and bona
fide nature of such Contract and the satisfaction of such Contract
of each of the foregoing criteria by delivering to the
Administrative Agent a validation certificate in respect of such
Contract, which shall be substantially in the form of Exhibit F
hereto.
Voting Equity -- means Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions) of such corporation or, in the case
of a Person which is not a corporation, Securities or similar equity or
partnership interests which entitle the holder thereof to elect, select or
control the management or policies of such Person.
1.2 Directly or Indirectly.
Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provisions shall be
applicable whether such action is taken directly or indirectly by such Person.
1.3 Headings.
Section headings have been inserted in this Agreement as a matter of
convenience of reference only; such section headings are not a part of this
Agreement and shall not be used in the interpretation of this Agreement.
1.4 Accounting Principles.
Where the character or amount of any asset or liability or item of income
or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be determined or made in accordance with generally accepted accounting
principles, procedures and practices consistently applied at the time in effect,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
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2. ADVANCES AND NOTE
2.1 Pre-Sale Advance.
Each of the Lenders agrees, pursuant to the terms of this Agreement and
subject to the satisfaction of the conditions precedent in Section 5 of this
Agreement, to make its Pro Rata Share of a one-time advance (such one-time
advance is referred to herein as the "Pre-Sale Advance"") to the Borrower from
time to time during the Commitment Period, provided that
(a) the Pre-Sale Advance shall not be made
(i) unless the proceeds thereof are to be used (A) first to
pay off the Existing Attitash Loan and (b) then to satisfy the
Pre-Construction Costs or to reimburse the Borrower for having paid
in full such Pre-Construction Costs; or
(ii) if a Default or Event of Default shall then exist;
(iii) if the aggregate amount of the purchase prices payable
under Validated Contracts for all Projects is less than 45% of the
aggregate amount of the Construction Costs for the
Under-Construction Projects, as more particularly set forth in the
Budgets for the Under-Construction Projects (inclusive of the
construction costs of all capital improvements at the
Under-Construction Projects to be leased to a Host Company by the
Borrower pursuant to a Host Company Lease Agreement), as determined
on the date of the making of the Pre-Sale Advance; or
(iv) if the aggregate amount of the purchase prices payable
under Validated Contracts for all Projects is less than 50% of the
aggregate amount of the Construction Costs for the
Under-Construction Projects, as more particularly set forth in the
Budgets for the Under-Construction Projects (exclusive of the
construction costs of all capital improvements at the
Under-Construction Projects to be leased to a Host Company by the
Borrower pursuant to a Host Company Lease Agreement), as determined
on the date of the making of the Pre-Sale Advance; or
(v) if the amount of the purchase prices payable under
Validated Contracts for the Killington Project is less than 35% of
the aggregate amount of the Construction Costs for the Killington
Project, as set forth in the Budget for the Killington Project, as
determined on the date of the making of the Pre-Sale Advance
(exclusive of the construction costs of all capital improvements at
the Killington Project to be leased to the Host Company for the
Killington Project by the Borrower pursuant to the Host Company
Lease Agreement for the Killington Project); or
(vi) if the amount of the purchase prices payable under
Validated Contracts for the Jordan Bowl Project is less than 35% of
the aggregate amount of the Construction Costs for the Jordan Bowl
Project, as set forth in the Budget for the Jordan Bowl Project, as
determined on the date of the making of the Pre-
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Sale Advance (exclusive of the construction costs of all capital
improvements at the Jordan Bowl Project to be leased to the Host
Company for the Jordan Bowl Project by the Borrower pursuant to the
Host Company Lease Agreement for the Jordan Bowl Project); or
(vii) if the amount of the purchase prices payable under
Validated Contracts for the Mt. Snow Project is less than 30% of the
aggregate amount of the Construction Costs for the Mt. Snow Project,
as set forth in the Budget for the Mt. Snow Project, as determined
on the date of the making of the Pre-Sale Advance (exclusive of the
construction costs of all capital improvements at the Mt. Snow
Project to be leased to the Host Company for the Mt. Snow Project by
the Borrower pursuant to the Host Company Lease Agreement for the
Mt. Snow Project);
(b) the principal amount of the Pre-Sale Advance shall not exceed
$10,000,000; and
(c) the Pre-Sale Advance shall be the first Advance under this
Agreement.
2.2 Subsequent Advances.
Each of the Lenders agrees, pursuant to the terms of this Agreement and
subject to the satisfaction of the conditions precedent in Section 6 of this
Agreement, to make its Pro Rata Share of one or more advances in respect of any
of the Under-Construction Projects (such advances, with respect to any Project,
are individually referred to herein as, a "Project Advance" and, with respect to
any single Project or all of the Projects (as the context may require), are
collectively referred to as the "Project Advances") to the Borrower from time to
time during the Commitment Period, provided that
(a) no Project Advance in respect of an Under-Construction Project
shall be made
(i) unless the proceeds thereof are to be used to satisfy
Construction Costs in respect of such Under-Construction Project,
FF&E Costs in respect of such Under-Construction Project and/or
Sales, Marketing & Other Costs in respect of such Under-Construction
Project and all Equity Moneys then on hand shall have first been
utilized to satisfy such Costs;
(ii) if the proceeds thereof are to be used to reimburse the
Borrower for any Equity Moneys previously used to satisfy
Construction Costs in respect of such Under-Construction Project,
FF&E Costs in respect of such Under-Construction Project and/or
Sales, Marketing & Other Costs in respect of such Under-Construction
Project;
(iii) if a Default or Event of Default shall then exist;
(iv) if such Project Advance is the first Project Advance in
respect of such Under-Construction Project, the Project Advance
Request therefor shall not
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have been delivered to the Administrative Agent on or prior to
September 30, 1997;
(v) if the aggregate amount of the purchase prices payable
under Validated Contracts for all Projects is less than 45% of the
aggregate amount of the Construction Costs for the
Under-Construction Projects, as more particularly set forth in the
Budgets for the Under-Construction Projects, as determined on the
date of the making of such Project Advance (inclusive of the
construction costs of all capital improvements at the
Under-Construction Projects to be leased to a Host Company by the
Borrower pursuant to a Host Company Lease Agreement);
(vi) if the aggregate amount of the purchase prices payable
under Validated Contracts for all Projects is less than 50% of the
aggregate amount of the Construction Costs for the
Under-Construction Projects, as more particularly set forth in the
Budgets for the Under-Construction Projects, as determined on the
date of the making of such Project Advance (exclusive of the
construction costs of all capital improvements at the
Under-Construction Projects to be leased to a Host Company by the
Borrower pursuant to a Host Company Lease Agreement);
(vii) if the amount of the purchase prices payable under
Validated Contracts for the Killington Project is less than 35% of
the aggregate amount of the Construction Costs for the Killington
Project, as set forth in the Budget for the Killington Project, as
determined on the date of the making of such Project Advance
(exclusive of the construction costs of all capital improvements at
the Killington Project to be leased to the Host Company for the
Killington Project by the Borrower pursuant to the Host Company
Lease Agreement for the Killington Project);
(viii) if the amount of the purchase prices payable under
Validated Contracts for the Jordan Bowl Project is less than 35% of
the aggregate amount of the Construction Costs for the Jordan Bowl
Project, as set forth in the Budget for the Jordan Bowl Project, as
determined on the date of the making of such Project Advance
(exclusive of the construction costs of all capital improvements at
the Jordan Bowl Project to be leased to the Host Company for the
Jordan Bowl Project by the Borrower pursuant to the Host Company
Lease Agreement for the Jordan Bowl Project); or
(ix) if the amount of the purchase prices payable under
Validated Contracts for the Mt. Snow Project is less than 30% of the
aggregate amount of the Construction Costs for the Mt. Snow Project,
as set forth in the Budget for the Mt. Snow Project, as determined
on the date of the making of such Project Advance (exclusive of the
construction costs of all capital improvements at the Mt. Snow
Project to be leased to the Host Company for the Mt. Snow Project by
the Borrower pursuant to the Host Company Lease Agreement for the
Mt. Snow Project);
(b) (i) on the date of the making of any Project Advance in respect
of an Under-Construction Project (and after giving effect thereto) the
aggregate outstanding
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principal amount of all Project Advances made hereunder with respect to
all of the Under-Construction Projects shall not exceed the Aggregate
Project Borrowing Base, determined as of such date, (ii) on the date of
the making of any Project Advance hereunder in respect of such
Under-Construction Project (and after giving effect thereto) the aggregate
original principal amount of all Project Advances (with respect to all
Under-Construction Projects), the aggregate original principal amount of
all of the Interest Advances and the original principal amount of the
Pre-Sale Advance shall not exceed $77,000,000 and (iii) on the date of the
making of any Project Advance hereunder in respect of such
Under-Construction Project (and after giving effect thereto), the
outstanding principal amount of the Pre-Sale Advance, the aggregate
outstanding principal amount of all Interest Advances and the aggregate
outstanding principal amount of all Project Advances with respect to all
Under-Construction Projects shall not exceed $55,000,000;
(c) on the date of the making of any Project Advance in respect of
an Under-Construction Project (and after giving effect thereto) the
aggregate original principal amount of all Project Advances made hereunder
with respect to such Under-Construction Project shall not exceed the
Project Borrowing Base for such Under-Construction Project, determined as
of such date;
(d) the original principal amount of each Project Advance to be made
in respect of Construction Costs of an Under-Construction Project, at the
time of the making thereof, shall have been determined by excluding from
such Construction Costs a contractor's retainage of not less than 10% of
at least one-half of the applicable Construction Costs (such 10% so
reserved from any such Construction Costs is referred to herein as the
"Retainage Amount;" for purposes of the avoidance of doubt, the Retainage
Amount shall be based upon the full amount of certified Construction Costs
and shall remain as a retainage until the final payment thereof), provided
that, in connection with the Final Construction Cost Advance for such
Under-Construction Project and subject to the requirements of Section 6
hereof, this clause (d) shall not operate and the aggregate unutilized
Retainage Amounts for such Under-Construction Project may then be borrowed
in their entirety and provided further that the Administrative Agent, as
directed by the Required Lenders and upon the Borrower's submission of a
written request therefor (which request shall be based upon the completion
of construction work at such Under-Construction Project by a subcontractor
or by the General Contractor for such Under-Construction Project and the
desire of the Borrower to pay such subcontractor or the General Contractor
for such work), may agree to advance any or all of such unutilized
Retainage Amounts prior to the making of the Final Construction Cost
Advance for such Under-Construction Project upon such terms and conditions
as it may require; and
(e) the original principal amount of any Final Construction Cost
Advance with respect to any Under-Construction Project, assuming
compliance with clauses (b) and (c) above, shall not exceed 100% of the
aggregate amount of the Retainage Amounts then owing to the General
Contractor for such Under-Construction Project under the Construction
Contract for such Under-Construction Project, as of the date of the making
of such Final Construction Cost Advance;
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(f) no more than one Project Advance in respect of any
Under-Construction Project shall be made during any weekly period;
(g) no Project Advance shall relate to or be attributable to more
than one Under-Construction Project; and
(h) no Project Advance shall be in an amount of less than $50,000.
2.3 Borrowing Mechanics; Advances Generally.
(a) Borrowing Mechanics.
(i) All requested advances under this Agreement shall be made
by the Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall
be responsible for any default by any other Lender in that other
Lender's obligation to make its share of a requested advance
hereunder nor shall the Commitment of any Lender be increased or
decreased as a result of a default by any other Lender in that other
Lender's obligation to make its share of a requested advance
hereunder, provided that any one or more of the nondefaulting
Lenders may, in their sole discretion and by a written notice to the
Borrower, the Administrative Agent and the defaulting Lender, elect
to assume that portion of the Commitment of a defaulting Lender not
then being honored by such defaulting Lender and, in any such case,
the Commitment of such nondefaulting Lenders and the Commitment of
such defaulting Lender shall be appropriately adjusted to reflect
such assumption (if more than one nondefaulting Lender shall desire
to effect the assumption referred to in this clause (a), such
assumption shall be shared ratably among such nondefaulting Lenders
in accordance with their Commitments, as determined immediately
prior to such assumption) and new Notes shall be issued in exchange
for the then outstanding Notes to reflect such assumption.
(ii) Each Lender shall either (A) deliver the amount of each
of its Pre-Sale Advances or Project Advances directly to the
Administrative Agent on the applicable Advance Date in respect
thereof as provided for herein or (B) deliver the amount of each of
its Pre-Sales Advances or Project Advances as provided in Section
10.7(b) hereof. Each Lender shall inform the Administrative Agent in
writing of its preferred way of making its Pro Rata Share of the
Pre-Sale Advance and Project Advances hereunder.
(iii) This clause (iii) shall apply with the respect to any
Lender that shall have elected option (A) under Section 2.3(a)(ii)
hereof; otherwise Section 10.7(b) hereof shall apply. Subject to the
satisfaction of the conditions precedent set forth in Section 6
hereof, the Administrative Agent shall deliver the proceeds of the
Pro Rata Share of each Pre-Sale Advance or Project Advance from each
Lender delivered to it in immediately available funds to the
Borrower on the applicable Advance Date in immediately available
funds as provided for in Schedule 10 hereto. Unless the
Administrative Agent shall have been notified by a Lender prior to
any applicable Advance Date that such Lender does not intend to make
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available to the Administrative Agent its Pro Rata Share of a
Pre-Sale Advance or Project Advance in respect of such Advance Date,
the Administrative Agent may assume, for purposes of this clause
(iii), that such Lender will make such Pro Rata Share of such
Pre-Sale Advance or Project Advance then requested available to the
Administrative Agent on the applicable Advance Date, and the
Administrative Agent may, in its sole discretion, but shall not be
obligated to, deliver to the Borrower, as provided in clause (ii)
above, the amount of such Pro Rata Share of such Advance. If such
Lender does not in fact make such Pro Rata Share of such Pre-Sale
Advance or Project Advance available to the Administrative Agent on
the applicable Advance Date, the Administrative Agent shall be
entitled to recover such amount from such Lender together with
interest accrued thereon at the Interest Rate. If such Lender shall
not pay to the Administrative Agent such amount (together with
interest) forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent may promptly inform, in writing, the
Borrower of such circumstances and the Borrower shall promptly repay
such Pro Rata Share of such Pre-Sale Advance or Project Advance
together with interest accrued thereon at the Interest Rate for the
period of time such Pre-Sale Advance or Interest Advance shall have
been outstanding. Nothing in this clause (iii) shall be deemed to
relieve any Lender from its obligations to fulfill its Commitment
hereunder and nothing in this clause (iii) shall be deemed to
relieve any nondefaulting Lender from its rights under clause (i)
above.
(b) Advances Generally.
(i) Other than as provided in Sections 2.5, 3.5 and 3.6
hereof, the Borrower may not prepay the Loan. It is the intention of
Borrower and Lender that the Loan be available to the Borrower in a
series of advances (including the Pre-Sale Advance, the Interest
Advances and the Project Advances) to be made during the Commitment
Period. The Borrower may not re-borrow any amount of the Pre-Sale
Advance Loan that has been paid. The Borrower may not re-borrow any
amount of any Interest Advance that has been paid. The Borrower may
re-borrow, in accordance with the terms and conditions hereof, any
Project Advance that has been paid except a Project Advance which is
a Final Construction Cost Advance.
(ii) The Loan shall be payable in the manner set forth in
Sections 2.4 and 2.5 of this Agreement. The Loan shall be due and
payable on the Maturity Date together with any accrued interest
thereon then remaining unpaid and any other unpaid amounts
outstanding under the Note or under any of the other Security
Documents, provided that, if earlier than the Maturity Date, each
Project Advance shall mature and be due and payable on the first day
of the 37th month following the date on which the first Project
Advance Request in respect of the Under-Construction Project related
to such Project Advance shall have been submitted to the
Administrative Agent. The Pre-Sale Advance shall be disbursed on
terms and conditions set forth in Section 5 of this Agreement and
otherwise satisfactory to the Lenders and the Administrative Agent,
each Interest Advance shall be disbursed on terms set forth in
Section 2.4(c) hereof and each Project
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Advance hereunder shall be disbursed by the Administrative Agent in
the manner set forth in Section 6 of this Agreement.
(iii) Each Project Advance shall be attributable to a
particular Under-Construction Project. Accordingly, each Project
Advance will be characterized as follows: a Project Advance in
respect of the Jordan Bowl Project (a "Jordan Bowl Project Advance"
and, collectively, the "Jordan Bowl Project Advances"), a Project
Advance in respect of the Killington Project (a "Killington Project
Advance" and, collectively, the "Killington Project Advances") or a
Project Advance in respect of the Mt. Snow Project (a "Mt. Snow
Project Advance" and, collectively, the "Mt. Snow Project
Advances"). For the avoidance of doubt, the Final Construction Cost
Advance in respect of each Under-Construction Project shall be
deemed to be and is a Project Advance and shall further be deemed to
be and is a Jordan Bowl Project Advance, Killington Project Advance
or Mt. Snow Project Advance, as the case may be.
2.4 Issuance of Note; Interest Payments.
(a) Note. The Borrower shall authorize, issue and deliver to each
Lender a promissory note (as amended from time to time, a "Note," and,
collectively, the "Notes"), substantially in the form attached to this
Agreement as Exhibit G, to evidence such Lender's Pro Rata Share of the
Loan and in the original stated principal amount of such Lender's
Commitment. Each of the Lenders is hereby authorized by the Borrower to
record (in good faith) in the manual or data processing records of such
Lender, or on the grid schedule annexed to the Note of such Lender, the
date and amount of its Pro Rata Share of the Pre-Sale Advance and each
Project Advance extended to the Borrower hereunder, the Under-Construction
Project related to such Project Advance (i.e., whether such Project
Advance is a Jordan Bowl Project Advance, a Killington Project Advance or
a Mt. Snow Project Advance), whether the Advance is a Pre-Sale Advance or
an Interest Advance, the date and amount of its Pro Rata Share of each
repayment of principal of each such Advance and its Pro Rata Share of each
payment of interest on account of each such Advance. In the absence of
manifest error, such records and schedule shall be conclusive as to such
Lender's Pro Rata Share of the outstanding principal amount of each
Advance (and, in the case of a Project Advance, the Under-Construction
Project related thereto) and of the Loan and such Lender's Pro Rata Share
of the payment of interest accrued thereunder and hereunder; provided,
that the failure to make any such record entry with respect to any such
Advance, any such Under-Construction Project or any such payment shall not
limit or otherwise affect the obligations of the Borrower to such Lender
under this Agreement, the Note of such Lender or any other Security
Document.
(b) Assumptions as to Holders. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof
unless and until an assignment agreement effecting the assignment or
transfer thereof shall have been accepted by Administrative Agent as
provided in Section 2.6(b) hereof. Any request, authority or consent of
any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and
binding on
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any subsequent holder, assignee or transferee of that Note or of any Note
or Notes issued in exchange therefor.
(c) Interest Payments.
(i) Interest shall accrue on the Loan, as more particularly
provided for in this clause (c), and shall be due and payable
monthly in arrears on the 15th day of the month following the month
in respect of which such interest accrued, provided that all accrued
and unpaid interest on the Maturity Date shall be due on the
Maturity Date. Subject to the accrual of interest on the Loan after
the occurrence of a Default or Event of Default, as more
particularly provided in this clause (c), the Monthly Average
Weighted Loan Balance in respect of the Loan for each calendar month
shall bear interest at a rate per annum equal to the Interest Rate.
Interest shall be calculated on the basis of actual days elapsed
over a period of a 360 day year.
(ii) Each Lender's Pro Rata Share of an Advance shall bear
interest as of the date of such Lender's wiring of funds thereof (or
as otherwise provided with respect to an Interest Advance under
Section 2.4(c) hereof) through the date of the receipt by such
Lender of the repayment thereof (if the repayment of all or any
portion of such Lender's Pro Rata Share of the principal amount
thereof is received by such Lender later than 12:00 pm, Eastern
time, then interest accrual thereon shall be through the next
Business Day following such receipt). After the occurrence of an
Event of Default or after the Maturity Date (if the aggregate
outstanding principal balance of the Loan and any other sums due
under any Security Document is not paid in full on the Maturity
Date) or the maturity date of any Project Advances (if the aggregate
outstanding principal balance of such Project Advances is not paid
in full on such maturity date), each Lender's Pro Rata Share of such
aggregate outstanding principal balance of the Loan will bear
interest at the Default Rate.
(iii) The Borrower hereby requests the Lenders (such request
to be deemed a standing request unless rescinded in writing by the
Borrower), and hereby authorizes the Lenders, to make an advance
(each such advance is referred to herein as an "Interest Advance")
to it on the 15th day of each calendar month in an amount equal to
the lesser of
(A) the amount of accrued interest due and payable on
such day to the Lenders and
(B) an amount, which when added to the aggregate
outstanding principal amounts of all prior Advances made by
the Lenders would not exceed $55,000,000,
and the Lenders agree, subject only to the lack of existence of a
Default or Event of Default, to extend their respective Pro Rata
Shares of each such Interest Advance to the Borrower, provided that
all of the proceeds of each such Pro Rata Share shall be used by the
Lender related to such Pro Rata Share for the sole
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purpose of satisfying (in whole or part, as the case may be) the
accrued interest due and payable on such 15th day of such month and
the Borrower hereby irrevocably authorizes and instructs such use.
To the extent that the amount of any such Advance is insufficient to
pay in full the amount of such interest due and payable on such 15th
day of such month or no such Interest Advance is made, the Borrower
shall pay, on such 15th day, the balance of interest due and payable
on such 15th day. In connection with any such Interest Advance, the
Borrower shall deliver to the Administrative Agent title insurance
endorsements to the Title Insurance Policy {Blanket} in respect of
all Projects in form and substance reasonably satisfactory to the
Administrative Agent whereby the effective date of such Title
Insurance Policy {Blanket} shall be made the date of such Interest
Advance, all exclusions and/or exceptions not satisfactory to the
Administrative Agent shall have been removed or appropriate
endorsements in respect thereof shall have been obtained; such Title
Insurance Policy {Blanket} shall be in an amount not less than the
sum of the principal amount of the Loan outstanding after giving
effect to such Interest Advance. All premiums in respect of such
endorsement to such Title Insurance Policy {Blanket} shall have been
paid in full and evidence thereof shall have been delivered to the
Administrative Agent.
(iv) The Borrower and each Lender intend to comply at all
times with applicable usury laws. All agreements between the
Borrower and such Lender, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the
maturity of any Note or otherwise, shall the interest contracted
for, charged, received, paid or agreed to be paid to such Lender
exceed the maximum amount permissible under applicable law (the
"Maximum Rate"). Each Lender may, in determining the Maximum Rate in
effect from time to time, take advantage of any law, rule or
regulation in effect from time to time available to such Lender
which exempts such Lender from any limit upon the rate of interest
it may charge or grants to such Lender the right to charge a higher
rate of interest than that otherwise permitted by applicable law.
If, from any circumstance whatsoever, interest would otherwise be
payable to a Lender in excess of the Maximum Rate, the interest
payable to such Lender shall be reduced to the Maximum Rate; and if
from any circumstance such Lender shall ever receive anything of
value deemed interest by applicable law in excess of the Maximum
Rate, an amount equal to any excessive interest shall be applied to
the reduction of the principal of the Pro Rata Share of the Loan
allocable to such Lender hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance
of principal of such Pro Rata Share of the Loan, such excess shall
be refunded to the Borrower by such Lender. All interest paid or
agreed to be paid to a Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full period until payment in full of the principal so
that the interest on the portion of the Loan allocable to such
Lender for such full period shall not exceed the Maximum Rate for
such Lender. The Borrower agrees that in determining whether or not
any interest payment under the Security Documents exceeds the
Maximum Rate for a Lender, any non-principal payment (except
payments specifically described in the Security Documents as
"interest") including without limitation, fees and late charges,
shall to the maximum extent not
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prohibited by law, be an expense, fee or premium rather than
interest in respect of such Lender. Each Lender hereby expressly
disclaims any intent to contract for, charge or receive interest in
an amount which exceeds the Maximum Rate for such Lender. The
provisions of this Agreement, the Notes, and all other Security
Documents are hereby modified to the extent necessary to conform
with the limitations and provisions of this paragraph, and this
paragraph shall govern over all other provisions in any document or
agreement now or hereafter existing. This paragraph shall never be
superseded or waived unless there is a written document executed by
each Lender and the Borrower, expressly declaring the usury
limitation set forth in this paragraph to be null and void, and no
other method or language shall be effective to supersede or waive
this paragraph.
(d) Interest and Other Payments Due on Holidays. If any payment due
on, or with respect to, this Agreement, the Notes or any other Security
Document shall fall due on a day other than a Business Day, then such
payment shall be made on the 1st Business Day following the day on which
such payment shall have so fallen due; provided that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, and such interest
shall accrue and be payable to (but not including, subject to clause (e)
below) the actual date of payment.
(e) Application of Payments Received after 12:00 pm.
(i) Any payment to be made to the Administrative Agent and
actually received by the Administrative Agent at or before 12:00
p.m. Eastern time, by federal funds wire transfer on any Business
Day, shall be deemed to have been received by the Administrative
Agent on such day. Any payment actually received by the
Administrative Agent after 12:00 p.m. Eastern time, by federal funds
wire transfer on any Business Day, shall be deemed to have been
received on the next following Business Day. All payments received
by the Administrative Agent on a day other than a Business Day, or
in a manner other than by federal funds wire transfer, shall be
deemed to have been received by such Person on the Business Day such
amounts actually become available to such Person prior to 12:00 p.m.
Eastern time in immediately available funds.
(ii) All payments from the Borrower to the Administrative
Agent or any Lender shall be by means of federal funds wire transfer
as set forth in Schedule 10 hereto (or as otherwise instructed in a
writing from the Administrative Agent or such Lender to the Borrower
and delivered to the Borrower not less than 2 Business Days prior to
any date of any payment that is to be subject to such new
instructions).
(iii) All payments from the Administrative Agent to the
Borrower or any Lender shall be by means of federal funds wire
transfer as set forth in Schedule 10 hereto (or as otherwise
instructed in a writing from the Borrower or such Lender and
delivered to the Administrative Agent not less than 2 Business Days
prior to any date of any payment that is to be subject to such new
instructions).
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(f) No Defenses. All payments by the Borrower of principal,
interest, fees and other Obligations hereunder and under the other
Security Documents shall be made without defense, setoff or counterclaim
and free of any restriction or condition.
(g) Payments Pro Rata. For the avoidance of doubt, aggregate
principal and interest payments hereunder and under the Notes shall be
apportioned such that each Lender receives its Pro Rata Share thereof.
2.5 Collections; Sales Proceeds; Required Payments; Voluntary Prepayments
of Loan.
(a) Host Company Lease Agreements Payments. The Borrower shall
direct or otherwise cause each Host Company to make all payments under its
respective Host Company Lease Agreement (including, without limitation,
all Monthly Rental Amounts in respect thereof) to the Administrative
Agent. For the avoidance of doubt, the Borrower shall, on or before the
fifteenth (15th) day of each month, cause each such Host Company to make
each payment in respect of the Monthly Rental Amount that accrued in
respect of the immediately preceding month to the Administrative Agent.
All such payments in respect of Monthly Rental Amounts delivered to the
Administrative Agent shall be in good, collected funds in legal tender of
the United States of America and shall be applied as set forth in Section
2.5(d) hereof, provided that, if a Default or an Event of Default shall
then exist, the entire amount of such payments shall be applied pursuant
to Section 2.5(d) or Section 8.2(c) of this Agreement, whichever shall be
applicable. If any payment under a Host Company Lease Agreement (other
than a Monthly Rental Amount) is delivered to the Administrative Agent,
then Section 2.5(e) hereof shall be applicable thereto.
(b) Receipts from Sale Proceeds of Quartershare Interests,
Commercial Units and Residential Units.
(i) The Borrower shall promptly consummate the purchase and
sale of
(1) each Quartershare Interest under each Contract,
(2) each Residential Unit, and
(3) each Commercial Unit
as soon as possible after the Project applicable thereto shall have
received a permanent certificate of occupancy from the town or other
municipality that covers such Project, and the Declaration and
Resort Map for such Project shall have been recorded in the
applicable office(s) or amendments thereto shall have been so
recorded (as the case may be). The Borrower shall use its best
efforts, as soon as practicable after the completion of the
construction and furnishing of such Project to obtain a permanent
certificate of occupancy in respect thereof and in respect of the
Residential Units and Commercial Units (including, if permitted by
the town or other municipality that covers such Project, obtaining
certificates of
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occupancy on a floor by floor basis) and to record the aforesaid
Declarations, Resort Maps and amendments in the applicable offices.
(ii) With respect to each sale of a Quartershare Interest in
any Project, the Borrower shall deliver, or cause to be delivered,
to the Administrative Agent all cash downpayments and all other cash
payments received by the Borrower and paid by the Purchaser under
each Contract on the Consummation Date of such sale. The Borrower
agrees to instruct, and hereby so instructs, the Escrow Agent for
such Project to deliver directly to the Administrative Agent all
escrowed amounts in respect of each Contract that are held by such
Escrow Agent and all additional payments received by such Escrow
Agent on the Consummation Date in respect of such Contract upon
receipt by such Escrow Agent of a written confirmation from either
the Borrower or the Administrative Agent that such sale has been
consummated. The Borrower agrees that all payments delivered by any
Purchaser to the Borrower on the Consummation Date of its Contract
shall be delivered by the Borrower to the applicable Escrow Agent
and shall be subject to the terms and requirements of this clause
(ii). The Borrower shall not permit any payments from the Purchaser
under any Contract to be escrowed or retained after the Consummation
Date in respect thereof. If the Borrower shall have provided
financing to the Purchaser under any Contract in order to consummate
such a sale and such Purchaser shall have executed and delivered to
the Borrower a Quartershare Note and Quartershare Mortgage in
respect thereof, the Borrower shall promptly sell such Quartershare
Note and Quartershare Mortgage to Textron Financial Corporation
under the Take-Out Facility. The Borrower shall irrevocably instruct
Textron Financial Corporation under the Take-Out Facility to deliver
all proceeds to the Administrative Agent which arise out of any
purchases of the Quartershare Notes (including, without limitation,
any payment to the Borrower by Textron Financial Corporation of cash
reserves originally withheld from any purchase by Textron Financial
Corporation of Quartershare Notes under and pursuant to the Take-Out
Facility and subsequently paid back to the Borrower). To the extent
that any of the cash downpayments, cash payments, loan proceeds
and/or sale proceeds in respect of any Contract shall be paid to the
Borrower, the Borrower shall hold the same in trust for the
Administrative Agent and promptly deliver the same to the
Administrative Agent. The escrow procedures and the escrow account
being used by each Escrow Agent shall be satisfactory to the
Administrative Agent. The Borrower shall cause such changes in such
escrow procedures (in accordance with applicable law and the terms
of any Contract and the escrow agreement in respect thereof and
subject to the approval of any applicable governmental agency or
agencies) as the Administrative Agent may reasonably request from
time to time. Upon not less than 30 days' prior written notice from
the Administrative Agent and subject to the receipt of all
applicable governmental agency approvals, the Borrower shall
establish a different escrowee for all Contracts to be entered into
thereafter, which escrowee shall be subject to the terms and
requirements set forth in this clause (ii) and shall be satisfactory
in all respects to the Administrative Agent, provided that the
Administrative Agent agrees not to request such a change of escrowee
unless a sufficient cause, in the reasonable judgment of the
Administrative Agent, shall have arisen to justify such change. All
payments made hereunder to the Administrative Agent in respect of
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proceeds from the sale of any Quartershare Interest under a Contract
shall be net of all customary and normal costs of closing not
previously deducted from other proceeds in respect of such Contract.
On the Consummation Date of the sale of any Quartershare
Interest in any of the Projects made in the normal and ordinary
course of Borrower's business on an arm's-length basis to Persons
that are not Affiliates (or, with the prior consent of the
Administrative Agent, to an Affiliate), the cash downpayments, cash
payments, loan proceeds and/or sale proceeds paid to Administrative
Agent pursuant to this clause (ii) in respect thereof shall be
applied to the Loan and the other amounts owing hereunder and under
the Security Documents as provided in Section 2.5(d) hereof in an
amount equal to the Release Price applicable to such sale and the
remainder thereof shall be paid by the Administrative Agent to the
Borrower, provided that (1) if a Default or an Event of Default
shall then exist, the entire amount of such cash downpayments, cash
payments, loan proceeds and/or sale proceeds shall be applied
pursuant to Section 2.5(d) or Section 8.2(c) of this Agreement,
whichever shall be applicable, or (2) the Borrower may apply the
entire amount of such cash downpayments, cash payments, loan
proceeds and/or sale proceeds to the payment or prepayment of any or
all of the Obligations. Anything contained in this clause (ii)
notwithstanding, if any Quartershare Interest in any of the Projects
is sold in other than in the normal and ordinary course of
Borrower's business, or on other than an arm's-length basis, or to
Persons that are Affiliates (unless the Administrative Agent shall
have consented thereto), then Section 2.5(e) hereof shall be
applicable thereto. All payments to be applied to the Loan under
this clause (ii) shall be in good, collected funds in legal tender
of the United States of America.
(iii) With respect to the each sale of a Residential Unit, as
a condominium unit, the Borrower shall deliver, or cause to be
delivered, to the Administrative Agent all cash downpayments and all
other cash payments received by the Borrower and paid by the
purchaser of such Residential Unit under the contract of purchase in
respect thereof on the Consummation Date of such sale. The Borrower
agrees to instruct, and hereby so instructs, any escrowee involved
in connection with such sale to deliver directly to the
Administrative Agent all escrowed amounts in respect of such
contract of purchase held by it and any additional payments received
by it on the Consummation Date of such sale upon receipt by such
escrowee of a written confirmation from either the Borrower or the
Administrative Agent that such sale shall have been consummated. The
Borrower agrees that all payments delivered by any purchaser of a
Condominium Unit to the Borrower on the Consummation Date shall be
delivered by the Borrower to the Administrative Agent and shall be
subject to the terms and requirements of this clause (c). The
Borrower shall not permit any payments from any purchaser of a
Condominium Unit to be escrowed or retained after Consummation Date.
If the Borrower shall have provided financing to any purchaser of
any Residential Unit in order to consummate the sale of such
Residential Unit and such purchaser shall have executed and
delivered to the Borrower a note and mortgage in respect thereof,
the Borrower shall promptly sell or pledge, as the case may be, such
note and mortgage to a
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lender or purchaser under, and pursuant to the terms of, an
appropriate take-out facility approved by the Administrative Agent.
The Borrower shall irrevocably instruct the lender or purchaser
under such take-out facility to deliver all proceeds to the
Administrative Agent which arise out of any purchases of such notes.
To the extent that any of the cash downpayments, cash payments, loan
proceeds and/or sale proceeds in respect of any sale of a
Condominium Unit shall be paid to the Borrower, the Borrower shall
hold the same in trust for the Administrative Agent and promptly
deliver the same to the Administrative Agent. The escrow procedures
and the escrow account being used by the Borrower in connection with
such sales shall be satisfactory to the Administrative Agent and
subject to the approval of any applicable governmental agency or
agencies. The Borrower shall cause such changes in such escrow
procedures (in accordance with applicable law and the terms of any
contract of purchase and the escrow agreement in respect thereof) as
the Administrative Agent may reasonably request from time to time.
Upon not less than 30 days' prior written notice from the
Administrative Agent, the Borrower shall establish a different
escrowee for all such contracts of purchase to be entered into
thereafter, which escrowee shall be subject to the terms and
requirements set forth in this clause (c) and shall be satisfactory
in all respects to the Administrative Agent. All payments made
hereunder to the Administrative Agent in respect of proceeds from
the sale of any Residential Unit shall be net of all customary and
normal costs of closing not previously deducted from other proceeds
in respect of such sale.
On the Consummation Date of the sale of any Residential Unit
in any of the Projects made in the normal and ordinary course of
Borrower's business on an arm's-length basis to Persons that are not
Affiliates (or, with the prior consent of the Administrative Agent,
to an Affiliate), the cash downpayments, cash payments, loan
proceeds and/or sale proceeds paid to Administrative Agent pursuant
to this clause (iii) in respect thereof shall be applied to the Loan
and the other amounts owing hereunder and under the Security
Documents as provided in Section 2.5(d) hereof in an amount equal to
the Release Price applicable to such sale and the remainder thereof
shall be paid by the Administrative Agent to the Borrower, provided
that (y) if a Default or an Event of Default shall then exist, the
entire amount of such cash downpayments, cash payments, loan
proceeds and/or sale proceeds shall be applied pursuant to Section
2.5(d) or Section 8.2(c) of this Agreement, whichever shall be
applicable and (z) the Borrower may apply the entire amount of such
cash downpayments, cash payments, loan proceeds and/or sale proceeds
to the payment or prepayment of any or all of the Obligations.
Anything contained in this clause (iii) notwithstanding, if any
Residential Unit in any of the Projects is sold in other than in the
normal and ordinary course of Borrower's business, or on other than
an arm's-length basis, or to Persons that are Affiliates (unless the
Administrative Agent shall have consented thereto), then Section
2.5(e) hereof shall be applicable thereto. All payments to be
applied to the Loan under this clause (iii) shall be in good,
collected funds in legal tender of the United States of America.
(iv) With respect to the each sale of a Commercial Unit, as a
condominium unit, the Borrower shall deliver, or cause to be
delivered, to the
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Administrative Agent all cash downpayments and all other cash
payments received by the Borrower and paid by purchaser of such
Commercial Unit under the contract of purchase in respect thereof on
the Consummation Date of such sale. The Borrower agrees to instruct,
and hereby so instructs, any escrowee involved in connection with
such sale to deliver directly to the Administrative Agent all
escrowed amounts in respect of such contract of purchase held by it
and any additional payments received by it on the Consummation Date
of such sale upon receipt by such escrowee of a written confirmation
from either the Borrower or the Administrative Agent that such sale
shall have been consummated. The Borrower agrees that all payments
delivered by any purchaser of such Commercial Unit to the Borrower
on the Consummation Date shall be delivered by the Borrower to the
Administrative Agent and shall be subject to the terms and
requirements of this clause (iv). The Borrower shall not permit any
payments from any purchaser of a Commercial Unit to be escrowed or
retained after the Consummation Date of such sale. The Borrower
shall require that the sale of any Commercial Unit be for an all
cash consideration. To the extent that any of the cash downpayments
and cash payments in respect of a sale of a Commercial Unit shall be
paid to the Borrower, the Borrower shall hold the same in trust for
the Administrative Agent and promptly deliver the same to the
Administrative Agent. The escrow procedures and the escrow account
being used by the Borrower in connection with such sales shall be
satisfactory to the Administrative Agent. The Borrower shall cause
such changes in such escrow procedures (in accordance with
applicable law and the terms of any contract of purchase and the
escrow agreement in respect thereof) as the Administrative Agent may
reasonably request from time to time. Upon not less than 30 days'
prior written notice from the Administrative Agent, the Borrower
shall establish a different escrowee for all such contracts of
purchase to be entered into thereafter, which escrowee shall be
subject to the terms and requirements set forth in this clause (iv)
and shall be satisfactory in all respects to the Administrative
Agent. All payments made hereunder to the Administrative Agent in
respect of proceeds from the sale of any Commercial Unit shall be
net of all customary and normal costs of closing not previously
deducted from other proceeds in respect of such sale.
On the Consummation Date of the sale of any Commercial Unit in
any of the Projects made in the normal and ordinary course of
Borrower's business on an arm's-length basis to Persons that are not
Affiliates (or, with the prior consent of the Administrative Agent,
to an Affiliate), the cash downpayments, cash payments, loan
proceeds and/or sale proceeds paid to Administrative Agent pursuant
to this clause (iv) in respect thereof shall be applied to the Loan
and the other amounts owing hereunder and under the Security
Documents as provided in Section 2.5(d) hereof in an amount equal to
the Release Price applicable to such sale and the remainder thereof
shall be paid by the Administrative Agent to the Borrower, provided
that (y) if a Default or an Event of Default shall then exist, the
entire amount of such cash downpayments, cash payments, loan
proceeds and/or sale proceeds shall be applied pursuant to Section
2.5(d) or Section 8.2(c) of this Agreement, whichever shall be
applicable, or (z) the Borrower may apply the entire amount of such
cash downpayments, cash payments, loan proceeds and/or sale proceeds
to the payment or prepayment of any or all of the
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Obligations. Anything contained in this clause (iv) notwithstanding,
if any Commercial Unit in any of the Projects is sold in other than
in the normal and ordinary course of Borrower's business, or on
other than an arm's-length basis, or to Persons that are Affiliates
(unless the Administrative Agent shall have consented thereto), then
Section 2.5(e) hereof shall be applicable thereto. All payments to
be applied to the Loan under this clause (iv) shall be in good,
collected funds in legal tender of the United States of America.
(c) Borrowing Base Prepayments; Release Price Catch-up Payment.
(i) If on any date the aggregate original principal amount of
all Project Advances made hereunder with respect to all of the
Under-Construction Projects shall exceed the Aggregate Project
Borrowing Base, determined as of such date, the Borrower shall
immediately pay the amount of such excess to the Administrative
Agent together with interest accrued thereon to (but not including)
the date of such payment and such amounts shall be applied by the
Administrative Agent when received in good, collected funds as set
forth in Section 2.5(d) hereof.
(ii) If on any date the aggregate original principal amount of
all Project Advances made hereunder with respect to any
Under-Construction Project shall exceed the Project Borrowing Base
for such Under-Construction Project, determined as of such date, the
Borrower shall immediately pay the amount of such excess to the
Administrative Agent together with interest accrued thereon to (but
not including) the date of such payment and such amounts shall be
applied by the Administrative Agent when received in good, collected
funds as set forth in Section 2.5(d) hereof.
(iii) If, as of each March 31st, June 30th, September 30th and
December 31st on and after the Closing Date (each such date is
referred to as a "Quarterly Testing Date"), the outstanding
principal balance of the Loan on such Quarterly Testing Date exceeds
the Projected Inventory Loan Amount, determined for such Quarterly
Testing Date, then the Borrower shall, promptly upon the receipt of
a written notice from the Administrative Agent (as instructed by the
Required Lenders), and in any case within 10 days after the receipt
of such written notice, pay to the Administrative Agent the
remainder of
(A) the aforesaid principal balance of the Loan on such
Quarterly Testing Date minus
(B) such Projected Inventory Loan Amount,
and such payment shall be applied to the then outstanding principal
balance of the Loan as provided in Section 2.5(d) hereof. With
respect to any Quarterly Testing Date, the aforesaid remainder is
referred to herein as the "Release Price Catch-Up Payment."
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(d) Application of Lease Payments, Sales Proceeds and Other
Payments. Subject to the appropriate application of Section 8.2(c) hereof,
the payments delivered to the Administrative Agent and/or Lenders under
this Section 2.5 or under Sections 3.5 and 3.6 hereof in good, collected
funds in legal tender of the United States of America shall be applied as
follows to the Obligations:
first, in the case of each payment under any Host Company
Lease Agreement delivered to the Administrative Agent pursuant to
Section 2.5(a) above, each payment in respect of a sale of any
Quartershare Interest, Residential Unit or Commercial Unit delivered
to the Administrative Agent pursuant to Section 2.5(b) above, each
Borrowing Base prepayment delivered to the Administrative Agent
pursuant to Section 2.5(c)(i) or (ii) above and each Release Price
Catch-Up Payment, towards the fees, costs and expenses required to
be paid under this Agreement, including, without limitation, the
Loan Costs and all other fees, costs and expenses set forth in
Section 11.2 of this Agreement, in each case, as the same may have
arisen in respect of the Loan;
second, in the case of each payment under any Host Company
Lease Agreement delivered to the Administrative Agent pursuant to
Section 2.5(a) above remaining after clause first above, each
payment in respect of a sale of any Quartershare Interest,
Residential Unit or Commercial Unit delivered to the Administrative
Agent pursuant to Section 2.5(b) above remaining after clause first
above, each Borrowing Base prepayment delivered to the
Administrative Agent pursuant to Section 2.5(c)(i) or (ii) above
remaining after clause first above and each Release Price Catch-Up
Payment remaining after clause first above, towards the accrued and
unpaid interest on the Loan at the Interest Rate or Default Rate for
and in respect of each complete calendar month immediately preceding
such payment (to the extent not paid by the making of an Interest
Advance hereunder), and in the event that any such payment shall be
insufficient to pay all of such accrued and unpaid interest, such
payment shall be allocated ratably based on the accrued and unpaid
interest outstanding in respect of each of the Advances and shall be
applied towards the payment of such accrued and unpaid interest;
third, in the case of each payment under any Host Company
Lease Agreement delivered to the Administrative Agent pursuant to
Section 2.5(a) above remaining after clauses first and second above,
each payment in respect of a sale of any Quartershare Interest,
Residential Unit or Commercial Unit delivered to the Administrative
Agent pursuant to Section 2.5(b) above remaining after clauses first
and second above, each Borrowing Base prepayment delivered to the
Administrative Agent pursuant to Section 2.5(c)(i) or (ii) above
remaining after clauses first and second above and each Release
Price Catch-Up Payment remaining after clauses first and second
above, towards the payment of the principal amount of any Interest
Advances then outstanding, and in the event that any such payment
shall be insufficient to pay-off all of such Interest Advances, such
payment shall be allocated ratably based on the then outstanding
principal amounts of each of the Interest Advances;
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fourth, in the case of each payment under any Host Company
Lease Agreement delivered to the Administrative Agent pursuant to
Section 2.5(a) above remaining after clauses first, second and third
above, each payment in respect of a sale of any Quartershare
Interest, Residential Unit or Commercial Unit delivered to the
Administrative Agent pursuant to Section 2.5(b) above remaining
after clauses first, second and third above and each Borrowing Base
prepayment delivered to the Administrative Agent pursuant to Section
2.5(c)(i) above remaining after clauses first, second and third
above, towards the then remaining outstanding principal amount of
the Pre-Sale Advance;
fifth, (i) in the case of each payment under any Host Company
Lease Agreement delivered to the Administrative Agent pursuant to
Section 2.5(a) above and remaining unapplied after clauses first,
second, third and fourth above, each payment in respect of a sale of
any Quartershare Interest, Residential Unit or Commercial Unit
delivered to the Administrative Agent pursuant to Section 2.5(b)
above and remaining unapplied after clauses first, second, third and
fourth above, each Borrowing Base prepayment delivered to the
Administrative Agent pursuant to Section 2.5(c)(i) above and
remaining unapplied after clauses first, second, third and fourth
above, each Borrowing Base prepayment delivered to the
Administrative Agent pursuant to Section 2.5(c)(ii) above and
remaining unapplied after clauses first, second and third above and
each payment delivered to the Administrative Agent pursuant to
Section 3.5 and/or Section 3.6 hereof, towards the then-outstanding
principal amount of the Project Advance for the Under-Construction
Project in respect of which
(w) the aforesaid Host Company Lease Agreement relates,
(x) the aforesaid Quartershare Interest, Residential
Unit or Commercial Unit is located, provided that any payments
hereunder in respect of sales of Quartershare Interests,
Residential Units or Commercial Units at the Attitash Project
shall be allocated ratably among the Project Advances in
accordance with the remaining outstanding principal amounts
thereof and applied towards the payment of such remaining
outstanding principal amounts,
(y) the aforesaid Borrowing Base relates (except that,
with respect to any payment made pursuant to Section
2.5(c)(i), such payment shall be allocated ratably across all
Project Advances based on the then remaining outstanding
principal thereof) and
(z) the insurance or condemnation event that resulted in
the payment under Section 3.5 or Section 3.6 hereof relates,
provided that any payments hereunder in respect of insurance
or condemnation proceeds of the Attitash Project shall be
allocated ratably among the Project Advances in accordance
with the remaining outstanding principal amounts thereof and
applied towards the payment of such remaining outstanding
principal amounts,
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and the excess, if any, of any such payments shall be applied
towards the remaining principal amounts of each of the other
Advances having principal amounts then outstanding, and in the event
that any such excess payment shall be insufficient to pay-off all of
such remaining principal amounts of such Advances, such payment
shall be allocated ratably among such Advances in accordance with
the remaining outstanding principal amounts thereof to be applied
towards the payment of such remaining outstanding principal amounts,
sixth, in the case of each payment delivered to the
Administrative Agent in connection with any Release Price Catch-Up
Payment remaining after clauses first, second and third above,
towards the then remaining outstanding principal amount of the
Project Advances and in the event that any such payment shall be
insufficient to pay-off all of such Project Advances, such payment
shall be allocated ratably based on the then outstanding principal
amounts of each of the Project Advances, and
seventh, towards the payment of all other Obligations.
At any time when the Obligations hereunder shall be equal to $0 during the
Commitment Period, all cash payments, cash downpayments and other proceeds
in respect of the sale of Quartershare Interests, Residential Units and/or
Commercial Units and all other payments delivered to the Administrative
Agent pursuant to this Section 2.5 or Sections 3.5 or 3.6 hereof may be
retained by the Borrower or, if delivered to the Administrative Agent,
shall be delivered to the Borrower by the Administrative Agent in the form
so received.
(e) No Voluntary Prepayments. Borrower shall not have the right to
voluntarily prepay the Loan except in connection with the sales of
Quartershare Interests, Residential Units and/or Commercial Units in any
of the Projects made in the normal and ordinary course of Borrower's
business on an arm's-length basis to Persons that are not Affiliates or,
with the prior consent of the Administrative Agent, to an Affiliate, and
except as otherwise set forth in this Section 2.5 or in Sections 3.5 or
3.6 hereof. The Borrower acknowledges and agrees that if any of the
Quartershare Interests, Residential Units and/or Commercial Units in any
of the Projects are sold in other than in the normal and ordinary course
of Borrower's business, or on other than an arm's-length basis, or to
Persons that are Affiliates (unless the Administrative Agent shall have
consented thereto), then the Borrower shall not have the right to prepay
the Loan. In such event, the Borrower's obligation to make the payments
set forth in Section 2.5 hereof shall be mandatory but the Administrative
Agent shall have the right to retain such payments as additional
Collateral hereunder on behalf of the Lenders and not apply it as set
forth in Section 2.5(d) hereof.
2.6 Participating Lender.
(a) Participations. Each of the Lenders shall have the right,
without prior notice to the Borrower or the approval of the Borrower, to
designate one or more Participating Lenders and to grant to such
Participating Lenders participations in such Lender's Pro Rata Share of
the Loan on terms and conditions satisfactory to such Lender.
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In the event that such Lender so designates such a Participating Lender
and grants such Participating Lender a participation in its Pro Rata Share
of the Loan, such Participating Lender shall communicate and deal only
with such Lender in respect to such Participating Lender's interest in
such Loan and neither the Borrower nor the Administrative Agent shall be
obligated to communicate or deal with such Participating Lender. Anything
contained in this Section 2.6(a) notwithstanding, the Borrower and each
Lender hereby acknowledge and agree that, solely for purposes of Section
11.7 and Section 11.8 hereof, (i) any participation held by a
Participating Lender will give rise to a direct obligation of Borrower to
such Participating Lender and (ii) such Participating Lender shall be
considered to be a "Lender" hereunder.
(b) Assignments. Each Lender shall have the right, at any time, to
sell, assign or transfer to any Eligible Assignee all or any part of its
Commitment or its Pro Rata Share of the Loan, provided that
(i) no such sale, assignment or transfer shall, without the
prior written consent of the Borrower, require the Borrower to file
a registration statement with the Securities and Exchange Commission
or apply to qualify such sale, assignment or transfer under the
securities laws of any state, and
(ii) no such sale, assignment or transfer shall be effective
unless and until an assignment agreement effecting such sale,
assignment or transfer, in form and substance reasonably
satisfactory to the Administrative Agent, shall have been accepted
by the Administrative Agent, and
(iii) no such sale, assignment or transfer shall be effected
in an amount of less than $1,000,000.
To the extent of any such assignment in accordance with the requirements
of this Section 2.6(b), the assigning Lender shall be relieved of its
obligations with respect to its Commitment and its Pro Rata Share of the
Loans or the portion thereof so assigned. Upon such execution, deliver and
acceptance from and after the effective date specified in the aforesaid
assignment agreement, (A) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment agreement, shall have the
rights and obligations of a Lender hereunder and (B) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such assignment agreement, relinquish its
rights and be released from its obligations under this Agreement. The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its Note to the Borrower for
cancellation, and thereupon new Notes shall be issued by the Borrower to
the assignee and to the assigning Lender, substantially in the form of
Exhibit G attached hereto with appropriate insertions, to reflect the new
Commitments of the assignee and the assigning Lender. Except as otherwise
provided in this Section 2.6(b) and in Section 2.3(a)(i) hereof, no Lender
shall, as between the Borrower and such
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Lender, be relieved of any of its obligations hereunder as a result of any
sale, assignment or transfer of all or any part of its Commitment or its
Pro Rata Share of the Loans.
(c) Information. Each Lender and the Administrative Agent may
furnish any information concerning the Borrower, any of the Projects, the
Collateral and the Security Documents in the possession of such Person
from time to time to assignees and Participating Lenders (including,
without limitation, prospective assignees and participants), subject to
the prior execution of a confidentiality agreement by any such assignee or
Participating Lender or any such prospective assignee or prospective
Participating Lender in form and substance substantially similar to the
form of confidentiality agreement executed by such Lender or the
Administrative Agent, provided that no such confidentiality agreement
shall be required to be executed in connection with any such assignee or
Participating Lender that is an affiliate of such Lender and would,
pursuant to the terms of the confidentiality agreement executed by such
Lender, be covered by such confidentiality agreement.
2.7 Commitment Fee.
The Borrower agrees to pay to each of the Lenders its Pro Rata Share of a
total commitment fee of $550,000 in connection with the Loan. Borrower and
Lenders acknowledge the payment to the Lenders by Borrower of an aggregate
amount of $75,000 in respect of the foregoing fee. An additional $475,000 of the
foregoing fee shall be due and payable to the Lenders (to be shared in
accordance with their Pro Rata Shares) on the date of the making of the Pre-Sale
Advance. To the extent that the Borrower shall have paid the remaining $475,000
owing hereunder to the Administrative Agent, as required by Section 5.9 hereof,
and any Lender fails to extend on or after the Closing Date its Pro Rata Share
of the Pre-Sale Advance with respect to which all conditions precedent have been
satisfied and for which the Borrower shall have not failed to perform any
undertaking or Obligation required of it hereunder, such Lender shall, upon
receipt of a written demand from the Borrower, pay to the Borrower its Pro Rata
Share (based upon its Commitment) of such $550,000 less any Loan Costs incurred
by such Lender. The full commitment fee of $550,000 shall be deemed to have been
irrevocably earned upon the Lenders' willingness to advance the Pre-Sale Advance
on or prior to August 31, 1997 and the Borrower being either unwilling to accept
such Advance during such time period or having failed to satisfy the requisite
conditions precedent set forth in Section 5 hereof with respect to such Advance
during such time period.
2.8 Right of First Refusal.
If, at any time during the Commitment Period or at any time thereafter
when any Obligation shall be outstanding hereunder or the Take-Out Facility
shall still be in effect, the Borrower or any Affiliate shall have obtained a
bona fide third-party offer (the "Third-Party Offer") for the financing of any
Subsequent Phase, the Borrower shall, in writing, promptly inform the
Administrative Agent (such writing to the Administrative Agent is referred to
herein as the "TFC First Refusal Offer") of such Third-Party Offer and the terms
and conditions of such Third-Party Offer (and shall attach a copy of such
Third-Party Offer to such TFC First Refusal Offer) and, in such TFC First
Refusal Offer, shall offer, or shall cause its Affiliate to offer, to the
Lenders a right of first refusal (based on their respective Pro Rata Shares) in
respect of such financing. Such right of first refusal shall grant the Lenders
the right to, within 20 Business Days after the receipt
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of such TFC First Refusal Offer, deliver a writing to the Borrower or such
Affiliate (the "TFC Acceptance") stating that Lenders agree to extend such
financing on terms which shall be the same or better than both (a) the terms of
financing under such Third-Party Offer (as such terms were communicated to the
Administrative Agent by the Borrower) and (b) the terms of financing that would
have applied hereunder if such financing were had hereunder. Upon receipt of the
TFC Acceptance by the Borrower, the Lenders and the Borrower (or such Affiliate)
shall be deemed to have reached an agreement for such financing on the terms set
forth in such TFC Acceptance (subject to the satisfaction of appropriate
conditions in respect of due diligence, documentation and other customary and
commercial conditions precedent, including, without limitation, appropriate
modifications and amendments to this Agreement, the Blanket Mortgages and the
other Security Documents). If any Lender shall have declined to exercise its
right under such TFC First Refusal Offer, or shall have failed to timely respond
to such TFC First Refusal Offer or shall have offered a counterproposal to the
Borrower (or such Affiliate) in respect of such TFC First Refusal Offer, the
Borrower (or such Affiliate) shall be free to close such Third-Party Offer
within 180 days of the date of such TFC First Refusal Offer on terms
substantially similar to the terms thereof set forth in such Third-Party Offer
(as communicated to the Administrative Agent), provided that if one Lender shall
have declined to exercise its right under such TFC First Refusal Offer or shall
have failed to timely respond, the other Lender may elect within the aforesaid
20 day period, to assume such declining or failing Lender's Pro Rata Share of
the TFC First Refusal Offer. If the Borrower (or such Affiliate) shall have
failed to so close such financing within said 180 days, then a new right of
first refusal for the benefit of the Lenders with respect to such financing
shall immediately arise. The Borrower agrees to inform any Person making a
Third-Party Offer of the Lenders' rights under this Section 2.8 in respect
thereof. This Section 2.8 shall survive the final payment of all of the
Obligations and the resulting termination of this Agreement.
With respect to any Third-Party Offer that is paired with a take-out
facility with respect to the quartershare notes expected to be generated from
the sale of quartershare interests in such Subsequent Phase, the Lenders shall
only have a right to issue a TFC Acceptance if the Lenders pair such TFC
Acceptance with an offer of a take-out facility with respect to the quartershare
notes expected to be generated from the sale of quartershare interests in such
Subsequent Phase that is on terms that are the same or better than both (i) the
terms of the take-out facility associated with such Third-Party Offer and (ii)
the terms under the Take-Out Facility if then maintained by Textron Financial
Corporation.
3. COLLATERAL
3.1 Security.
For the purpose of securing the prompt and complete payment and
performance by the Borrower of all of the Obligations, the Borrower does
unconditionally and irrevocably hereby grant to the Administrative Agent on
behalf of the Lenders a security interest in, and a Lien upon, the following
Property of the Borrower, whether now owned or hereafter acquired (such Property
being herein referred to as the "Collateral"):
(a) (i) all of the Borrower's right, title and interest in, to and
under all Contracts (now or hereafter existing) together with all
downpayments, deposits, accounts, accounts receivable, contract rights,
general intangibles, chattel paper and other
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receivables arising under or in connection with such Contracts or
otherwise securing the obligations thereunder of the Purchasers in respect
thereof, together with all payments and other proceeds thereunder
(including, without limitation, all Quartershare Notes and all
Quartershare Mortgages) and (ii) all of the Borrower's right, title and
interest in, to and under any purchase contract for the acquisition of any
Residential Unit or Commercial Unit, as a condominium unit, (now or
hereafter existing) together with all downpayments, deposits, accounts,
accounts receivable, contract rights, general intangibles, chattel paper
and other receivables arising under or in connection with such purchase
contracts or otherwise securing the obligations thereunder of the
purchasers in respect thereof, together with all payments and other
proceeds thereunder (including, without limitation, all notes and
mortgages arising from the financing of the sales of such Residential
Units and/or Commercial Units);
(b) all of the Borrower's right, title and interest in, to and under
(including, without limitation, all revenues, proceeds, rents and other
benefits derived from) any franchises, permits, trade names, trademarks
(and goodwill associated therewith), approvals, leasehold interests
(whether as lessor or lessee or sublessor or sublessee), management
contracts, marketing contracts, maintenance contracts, utility contracts,
security contracts, other servicing contracts, licensing contracts,
Project Documents or other similar contracts and all guaranties of any of
the foregoing, including, without limitation, the contracts set forth on
Schedule 11 to this Agreement (individually, a "Property-Related Contract"
and, collectively, the "Property-Related Contracts"), relating, in each
case, to any of the Projects, the Quartershare Interests, the Residential
Units, the Commercial Units and/or the Common Elements;
(c) all other accounts, contract rights, general intangibles,
documents, instruments, chattel paper and proceeds of the Borrower related
to the Property described in clause (a) or clause (b) above, or otherwise
connected with, or related to, the operation and/or construction,
management and use of any of the Projects, including, without limitation,
any of the Borrower's right, title and interest in and to the Approved
Escrow Accounts or any other trust account maintained by any Escrow Agent
(or any successor escrow agent) for or on behalf of the Borrower;
(d) all Books and Records;
(e) all fixtures, inventory, fittings, machinery, appliances,
equipment, apparatus, furnishings, and personal Property of every nature
found on or used in connection with any of the Projects and any of the
Common Elements;
(f) all of the Borrower's right, title and interest of whatever
character (whether as owner, vendor, mortgagee, chattel lessee, Declarant,
Quartershare Interest owner, Residential Unit owner, Commercial Unit owner
or otherwise, whether vested or contingent and whether now owned or
hereafter acquired) in and to (i) any and all of the Projects, including,
without limitation, all Quartershare Interests (now existing or hereafter
created) relating thereto (whether sold or unsold), (ii) the Declarations
(including, without limitation, its development rights under applicable
law), (iii) all building materials, supplies and other Property now or
hereafter stored at or delivered to any of the Projects or any other
location for installation in or on any of the Projects, (iv) any and all
plans,
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specifications, drawings, books, records, marketing materials and similar
items now or hereafter relating to any of the Projects the operation and
use thereof, any rights of the Borrower thereto or any interest therein
(including, without limitation, the Plans for each of the Projects), (v)
the Construction Contract for each of the Under-Construction Projects and
the architect and engineering contracts entered into or to be entered into
by the Borrower in connection with the construction and development of
each of the Under-Construction Projects and (vi) any payment, performance
or other surety bonds obtained by any contractor or subcontractor in
connection with the development and construction of each of the
Under-Construction Projects;
(g) all of the Borrower's right, title and interest of whatever
character (whether as owner, chattel lessee, Declarant, Quartershare
Interest owner, Residential Unit owner, Commercial Unit owner or
otherwise, whether vested or contingent and whether now owned or hereafter
acquired) in and to any and all judgments, settlements, claims, awards,
insurance proceeds and other proceeds and compensation, and any interest
thereon (collectively, "Compensation"), now or hereafter made or payable
in connection with (i) any casualty or other damage to all or any part of
any of the Projects, (ii) any condemnation proceedings affecting all or
any part of any of the Projects or any rights thereto or any interest
therein, (iii) any damage to or taking of all or any part of any of the
Projects, or any rights thereto or any interest therein arising from or
otherwise relating to any exercise of the power of eminent domain
(including, without limitation, any and all Compensation for change of
grade of streets or any other injury to or decrease in the value of any of
the Projects), or any conveyance in lieu of or under threat of any such
taking, (iv) any and all proceeds of any sale, assignment or other
disposition of all or any part of any of the Projects or any rights
thereto or any interest therein, (v) any and all proceeds of any other
conversion (whether voluntary or involuntary) of all or any part of any of
the Projects or any rights thereto or any interest therein or to cash or
any liquidated claim, and (vi) any and all refunds and rebates of or with
respect to any Insurance Premium, any Imposition or any other charge for
utilities relating to all or any part of any of the Projects (including,
without limitation, any and all refunds and rebates of or with respect to
any deposit or prepayment relating to any such Insurance Premium,
Imposition or charge), and any and all interest thereon, whether now or
hereafter payable or accruing; and
(h) all other "Mortgaged Property," under and as defined in any of
the Blanket Mortgages,
whether such Collateral shall be presently in existence or whether it shall be
acquired or created by the Borrower at any time hereafter, wherever located,
together with the products and proceeds thereof, and any replacements, additions
and/or accessions thereto and substitutions thereof and after-acquired Property.
The Borrower shall use its best efforts to the extent legally available to
cause each Association for each Project to grant to the Administrative Agent a
Lien and security interest in any all of its respective right, title and
interest in, to and under (including, without limitation, all revenues,
proceeds, rents and other benefits derived from) any management contracts,
marketing contracts, maintenance contracts, utility contracts, security
contracts, other servicing contracts,
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licensing contracts, Project Documents or other similar contracts and all
guaranties of any of the foregoing that may affect such Project.
3.2 Undertakings Regarding Collateral.
(a) Maintenance of Perfection. Neither the Administrative Agent nor
the Lenders shall be required to take any steps to perfect or maintain the
perfection of its security interest in the Collateral and no loss of, or
damage to, the Collateral shall release the Borrower from any of the
Obligations.
(b) Collections on all Contracts. The Administrative Agent shall
have a security interest in, and may collect payments under, all of the
Contracts of the Borrower and all of the contracts of purchase in respect
of the Residential Units and/or Commercial Units.
(c) No Assumption of Obligations. The execution and delivery of this
Agreement, and the granting of the Liens in and to the Collateral, shall
not subject the Administrative Agent or the Lenders to, or transfer or
pass to the Administrative Agent or any Lender or in any way affect or
modify, the liability of the Borrower under any or all of the Contracts,
any of the contracts of purchase in respect of the Residential Units
and/or Commercial Units, the Property-Related Contracts or in connection
with any of the Projects, the Declarations, the Articles of Incorporation
or By-Laws for the Associations or the other Project Documents, it being
understood and agreed that notwithstanding this Agreement, and the
granting of the Liens in and to the Collateral, all of the obligations of
the Borrower (whether as owner, chattel lessee, vendor, mortgagee,
Declarant, Residential Unit owner, Quartershare Interest owner, Commercial
Unit owner or otherwise) to each and every other party under each and
every one of the Contracts, the contracts of purchase in respect of the
Residential Units and/or Commercial Units and the Property-Related
Contracts and/or in connection with any of the Projects, the Declarations,
the Articles of Incorporation or By-Laws for the Associations and the
other Project Documents shall be and remain enforceable by such other
party, its successors and assigns, only against the Borrower or Persons
other than the Administrative Agent or the Lenders, and the neither the
Administrative Agent nor the Lenders have assumed any of the obligations
or duties of the Borrower under or with respect to any of the Contracts,
such contracts of purchase or the Property-Related Contracts or otherwise
in connection with any of the Projects, the Declarations, the Articles of
Incorporation or By-Laws for the Associations or the other Project
Documents.
(d) No Obligation to Take Action. The Borrower hereby agrees and
acknowledges that neither the acceptance of this Agreement or any other
Security Document by the Administrative Agent or the Lenders nor the
exercise of, or failure to exercise, any right, power or remedy in this
Agreement or in any other Security Document conferred upon the any none or
more of the Administrative Agent or the Lenders shall be deemed or
construed to obligate the Administrative Agent or any of the Lenders to
pay any sum of money, take any other action or incur any liability in
connection with, or collect or realize upon, any of the Contracts or any
other Collateral. It is further agreed and understood by the Borrower that
the neither the Administrative Agent nor the Lenders shall be liable in
any way for any cost, expense or liability connected with, or any charge
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or liability arising from, any of the Contracts, any of the contracts of
purchase in respect of the Residential Units and/or Commercial Units, any
of the Property-Related Contracts or any other Collateral.
(e) Indemnification. The Borrower hereby agrees to indemnify each of
the Administrative Agent and the Lenders, and hold each of such Persons
harmless, from any and all liability, loss or damage which such Person may
or might incur by reason of any and all claims and demands whatsoever
which may be asserted against such Person arising out of, as a result of,
or otherwise connected with, the Liens hereby granted to the
Administrative Agent for their benefit of the Lenders by the Borrower
under or in respect of any of the Contracts or any other Collateral by
reason of (i) the failure by the Borrower to perform any obligations or
undertakings required to be performed by the Borrower under or in
connection with any of such Contracts, the Property-Related Contracts or
any other Collateral, (ii) any failure by the Borrower, in connection with
any of such Contracts, the Property-Related Contracts or any other
Collateral, to comply with any applicable federal, state or local consumer
credit, sale rescission, blue-sky, securities or usury statute, including,
without limitation, any such statute of any state in which a Purchaser may
reside, the Consumer Credit Protection Act, as amended, the Federal Trade
Commission Act, as amended, the Interstate Land Sales Full Disclosure Act,
and all rules and regulations promulgated under the foregoing statutes,
acts and codes, and (iii) failure by the Borrower to comply with any
applicable federal, state or local statutes, ordinances or declarations
and the restrictions, rules and regulations promulgated thereunder or
contained therein pertaining to the construction, use or operation of any
of the Projects (including, without limitation, the statutes, ordinances,
declarations, restrictions, rules and regulations of the towns or other
municipalities covering the areas in which the Project are situated, and
the declarations, restrictions and requirements of the CCR's and
Declarations affecting the Projects) or to otherwise discharge its duties
and obligations under applicable law, under the Declarations or the
Articles of Incorporation or By-Laws of the Associations, unless such
claims or demands were directly a result of such Person's intentional
misconduct or gross negligence.
3.3 Financing Statements.
The Borrower agrees, at its own expense, to execute the financing
statements required by the Administrative Agent together with any and all other
instruments or documents and take such other action, including delivery of such
instruments and documents, as may be necessary to perfect, and to continue the
perfection of, the Administrative Agent's security interest and Liens in the
Collateral and, unless prohibited by law, the Borrower hereby authorizes the
Administrative Agent to execute and file any such financing statement on the
Borrower's behalf. The parties agree that a legible carbon, photographic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement.
The Borrower agrees, at its own expense, to use its best efforts to cause
each Association to execute the financing statements required by the
Administrative Agent together with any and all other instruments or documents
and take such other action, including delivery of such instruments and
documents, as may be necessary to perfect, and to continue the perfection of,
the Lender's security interest and Liens in the collateral granted hereunder by
such Association.
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3.4 Location of Collateral; Books and Records.
All tangible Collateral (other than Collateral delivered to the
Administrative Agent or located in any Approved Escrow Account) which is
personal Property is to remain, at all times, on the premises of the Borrower at
Sunday River Road, in Bethel, Maine, or at the Projects and the Borrower
represents and warrants to the Administrative Agent and the Lenders that all of
the currently existing tangible Collateral is now located there, and the
Borrower will not transfer the Collateral from such premises to other locations
without the prior written approval of the Administrative Agent. The Borrower
shall, upon receipt of a written request therefor from the Administrative Agent
after the occurrence of an Event of Default, deliver to the Administrative Agent
then current copies of all computer tapes, disks, software and micro-fiche
records constituting, in whole or in part, the Books and Records.
3.5 Insurance of Collateral.
(a) Maintenance of Insurance.
(i) The Borrower agrees to maintain or cause to be maintained
(including, without limitation, causing each General Contractor to
maintain), or, as provided under the Declarations, cause each of the
Associations to maintain (as to their respective Projects and the
personal Property located thereon), insurance (with financially
sound and reputable insurers) with respect to
(1) each Project,
(2) the personal Property located at the Projects
(including, without limitation, the furniture, fixtures and
furnishings thereof),
(3) all other equipment and other personal Property of
every nature whatsoever now or hereafter located in or on, or
attached to, and used or intended to be used in connection
with any of the Projects, and
(4) the Books and Records and the other valuable papers
of the Borrower,
against casualties, contingencies, hazards and such other risks
(including, without limitation, (A) fire, hurricane, tornado, wind
damage, and such other risks insured against by a standard all-risk
property and fire insurance policy and endorsement for extended
coverage, (B) flood insurance, if applicable, and (C) builder's risk
insurance in completed value form) and in such amounts as shall be
reasonably satisfactory to the Administrative Agent (such insurance
to be maintained during the construction and development of each
Under-Construction Project and to cover materials in as well as
adjacent to the structures so insured; such insurance (other than
such builder's risk insurance) shall also be maintained after such
development and construction as well); provided, however, that such
casualty insurance shall (aa) in no case be in an amount less than
an amount sufficient to rebuild each Project or the portions thereof
which shall have suffered the loss and replace any of the personal
Property located therein, (bb) be sufficient to avoid
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any co-insurance requirements in respect of the Borrower and/or the
Associations, and (cc) be sufficient to provide funds to fully
compensate owners of Quartershare Interests, Residential Units and
Commercial Units for any inability to utilize any such condominium
units or the Common Elements during any period following a loss
thereto. With respect to such insurance, the Borrower shall deliver
or cause to be delivered, or cause the Associations to deliver (to
the extent permitted by applicable law and the Declarations),
certificates of insurance to the Administrative Agent, with
satisfactory lender's loss payable endorsements naming the
Administrative Agent on behalf of the Lenders as loss payee to the
extent of its interest and as such interest may appear on the
Closing Date. Each policy of such insurance or endorsement with
respect thereto shall contain a clause requiring the insurer to give
not less than 30 days' prior written notice to the Administrative
Agent in the event of cancellation of the policy for any reason
whatsoever and a clause that the interest of the Administrative
Agent shall not be impaired or invalidated by any act or neglect of
the Borrower or owner of the Property nor by the occupation of the
premises for purposes more hazardous than are permitted by said
policy. If the Borrower shall fail to provide for such insurance, or
have the same provided for, the Administrative Agent may, at the
Borrower's expense, procure the same, but shall not be required to
do so.
(ii) The Borrower shall maintain or cause to be maintained
insurance with financially sound and reputable insurers with respect
to its Property and business (including, without limitation, the
Collateral) covering any public liability of the Borrower, its
officers, agents or employees (including, without limitation, damage
by Borrower or its officers, agents or employees to the Property of
other Persons, any bodily injury caused by Borrower or its officers,
agents or employees to any other Person, or any negligent act or
other similar liability of Borrower or its officers, agents or
employees) and in such amounts as are satisfactory to the
Administrative Agent; the Administrative Agent and the Lenders shall
be named as an additional insureds thereon. The Borrower shall, as
provided in the Declarations, cause the Associations to maintain
insurance with financially sound and reputable insurers with respect
to the Projects covering any public liability of the Associations or
their officers, agents or employees to the Property of other
Persons, any bodily injury caused by the Associations or their
officers, agents or employees to any other Person, or any negligent
act or other similar liability of the Association or its officers,
agents or employees) and in such amounts as are provided for in the
Declarations.
(iii) The Borrower shall, prior to renewal, submit, or cause
the Associations to submit, to the Administrative Agent insurance
certificates showing the type and amounts of insurance coverage
maintained in respect of the Projects. The Borrower shall, to the
extent permitted by applicable law and the Declarations, cause all
casualty policies of insurance provided under the Declarations to
have mortgagee endorsements in respect of the Administrative Agent's
interests in and to the Quartershare Interests, Residential Units,
and/or Commercial Units that are the subject of the Blanket
Mortgages or any Quartershare Mortgage in which the Lender may have
a security interest and Lien hereunder.
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(iv) The Borrower shall pay, or cause the Associations to pay,
all premiums on the aforesaid insurance policies and all other fees
and charges payable in connection with such insurance policies (such
premiums, fees and charges being collectively referred to herein as
"Insurance Premiums") not later than the due date thereof. If the
Borrower shall fail to pay, or cause the Associations to pay, any
such Insurance Premiums, the Administrative Agent may (but shall not
be obligated to), at Borrower's expense and upon the written
instructions of the Required Lenders, pay the same. Any such payment
shall be subject to Section 3.11 and Section 3.12 hereof.
(v) If the Mortgaged Property (under and as defined in any of
the Blanket Mortgages) or any portion is sold at a foreclosure sale
or if any Lender shall acquire title to said Mortgaged Property or
any such portion, such Lender shall have all of the right, title and
interest of the Borrower in and to all insurance policies required
under this Section 3.5(a) and the unearned premiums thereon, related
to such Mortgaged Property or such portion, and in and to the
proceeds resulting from any damage to said Mortgaged Property or
such portion prior to such sale or acquisition.
(vi) Borrower agrees to cause any contractor hired by it to
effect any of the construction and development of any
Under-Construction Project to carry adequate insurance in respect of
bodily injury or other personal liability or property damage in
respect of its employees or other third persons in connection with
such construction and development. Borrower shall use its best
efforts to cause certificates of such insurance to be filed with the
Administrative Agent.
(vii) Anything contained in this Section 3.5(a) to the
contrary notwithstanding, any of the undertakings of the Borrower in
this Section 3.5(a) in respect of insuring the Projects or in
respect of causing the Associations to perform any undertaking under
this Section 3.5(a) shall be subject to the requirements of the
condominium acts or other common interest ownership acts as adopted
and in effect from time to time in the States in which the Project
are situated, and the rules and regulations as adopted from time to
time thereunder and the Declarations.
(b) Condominium Insurance Proceeds.
(i) Any proceeds of insurance in respect of the Projects
received by the Associations or any manager retained by it and then
further paid by the Associations or such manager to the Borrower
(whether as Declarant or otherwise), as provided for in the
Declarations, shall be promptly paid and/or turned over by the
Borrower to the Administrative Agent as proceeds of the Collateral
and applied to the prepayment of the Loan as provided in Section
2.5(d) hereof.
(ii) Without limiting the immediately preceding paragraph, any
proceeds of insurance in respect of the Projects received by the
Borrower at a time during which the insurance provisions of the
relevant Declaration shall not be in effect as
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to the affected Project shall be treated as provided in Section
3.5(c) of this Agreement.
(c) Miscellaneous Application of Insurance Proceeds. In connection
with, and pursuant to, Section 3.5(b)(ii) hereof, the Lenders and the
Borrower agree to the following:
(i) Following the occurrence of any Default or Event of
Default (provided that if such Default or Event of Default is cured
by the Borrower, then clause (ii) below and not this clause (i)
shall thereafter apply), the Administrative Agent at the instruction
of the Required Lenders is hereby authorized and empowered to adjust
or compromise any loss under any insurance policies maintained
pursuant to this Section 3.5, and to collect and receive the
proceeds from any such policies. In such event, each insurance
company is hereby authorized and directed to make payment for all
such losses directly to the Administrative Agent, instead of to the
Borrower (and/or the applicable Association) and the Administrative
Agent jointly. In the event any insurance company fails to disburse
directly and solely to the Administrative Agent but disburses
instead either solely to the Borrower or to the Borrower (and/or any
Association) and the Administrative Agent jointly, the Borrower
agrees immediately to endorse and transfer, or cause to be endorsed
and transferred, such proceeds to the Administrative Agent. Upon the
failure of the Borrower to endorse and transfer such proceeds as
aforesaid (or cause the same to be done), the Administrative Agent
at the instruction of the Required Lenders may execute such
endorsements or transfers for and in the name of the Borrower
(whether as Declarant or otherwise) and the Borrower hereby
unconditionally and irrevocably appoints the Administrative Agent as
the Borrower's agent and attorney-in-fact, coupled with an interest,
to endorse and transfer such proceeds to the Administrative Agent on
behalf of the Lenders. After deducting from said insurance proceeds
all of its expenses incurred in the collection and administration of
such sums, including attorneys' fees, the Administrative Agent may
apply the net proceeds or any part thereof, as instructed by the
Required Lenders, (i) to payment of the Obligations, whether or not
due, as provided in Section 2.5(d) hereof, (ii) to the repair and/or
restoration of the applicable Project or (iii) for any other
purposes or objects for which the Administrative Agent or the
Lenders are entitled to advance funds under this Agreement or any of
the other Security Documents; all without affecting the Liens and
security interests of this Agreement and the other Security
Documents. Neither the Administrative Agent nor the Lenders shall be
held responsible for any failure to collect any insurance proceeds
due under the terms of any policy regardless of the cause of such
failure.
(ii) Prior to the occurrence of any Default or Event of
Default and if the Borrower gives the Administrative Agent notice of
any casualty as provided in clause (d) below, the Borrower shall
have the right to adjust and compromise losses under insurance
policies and to collect and receive insurance proceeds and shall
apply such insurance proceeds with respect to such losses solely and
exclusively to the repair and restoration of the affected Project
or, if consented to
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by the Administrative Agent at the instruction of the Required
Lenders, to the payment of the Obligations as the Borrower deems
appropriate in its reasonable discretion. With respect to any such
casualty loss, the Borrower shall have the right to use any
insurance proceeds received on account of such loss to the repair
and restoration of the affected Project, provided that prior written
notice is given with respect thereto to the Administrative Agent and
the scope and plans for the repair or restoration have been approved
by the Administrative Agent, which approval shall not be
unreasonably withheld or delayed if the repair or restoration will
result in a new "resort" which is substantially comparable to the
pre-existing "resort" at such Project in terms of overall usable
square footage and types of functions served by such pre-existing
"resort", the new "resort" is constructed with the same or better
quality of materials and workmanship as such pre-existing "resort,"
and is constructed in accordance with the applicable requirements of
then existing zoning, design and building codes and other applicable
laws, the applicable CCR's and market considerations. All such
repair and restoration shall be diligently prosecuted to completion
by the Borrower and shall be completed on or prior to the Maturity
Date or, if earlier, the maturity date of the Project Advances
related to such Project if such Project is an Under-Construction
Project.
(d) Borrower Undertakings. In the event of any material casualty or
loss in respect of any of the Projects (including, without limitation, any
of the Collateral), (i) the Borrower shall immediately notify the
Administrative Agent of the same and (ii) the Administrative Agent may, in
addition to its rights as mortgagee under the Blanket Mortgages, elect (at
the instruction of the Required Lenders) to exercise the voting rights of
the Borrower as a mortgagee or a holder of a security interest in respect
of any Quartershare Mortgage pledged to the Administrative Agent hereunder
or as the owner of any Quartershare Interest, Residential Unit or
Commercial Unit, as such voting rights are provided for under the
applicable Declaration, regarding all matters of repair and restoration.
In the event of any casualty or loss in respect of any Project (including,
without limitation, any of the Collateral), the Borrower shall pay all
assessments as required by the applicable Declaration and/or the
applicable Articles of Incorporation or By-Laws for repair and restoration
due to inadequacy of insurance.
3.6 Condemnation.
(a) Condominium/Timeshare Condemnation Compensation.
(i) Any compensation, awards, damages, claims, rights of
action, proceeds, payment and other relief (collectively,
"Condemnation Compensation") of, or on account of, any damage or
taking of all or any part of the Projects in connection with any
condemnation proceedings or any exercise of the power of eminent
domain (or any conveyance in lieu of or under threat of any such
taking), including, without limitation, any such Condemnation
Compensation for change of grade of streets or any other injury to
or decrease in the value of all or any part of the Projects, payable
to any Association or any manager retained by it and paid further by
such Association or such manager to the Borrower (whether as
Declarant or otherwise), as provided for in the applicable
Declaration, shall be
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promptly paid and/or turned over to the Administrative Agent as
proceeds of the Collateral or otherwise and, subject to clause (ii)
below if such clause shall then be applicable, applied to the
prepayment of the Loan, as provided in Section 2.5(d) hereof.
(ii) Any Condemnation Compensation in respect of any of the
Projects received by the Borrower at a time during which the
condemnation provisions of the relevant Declaration shall not be in
effect with respect to the affected Project shall be treated as
provided in Section 3.6(b) below.
(b) Miscellaneous Application of Condemnation Compensation. In
connection with, and pursuant to, Section 3.6(a)(ii) hereof, the Lenders
and the Borrower agree to the following:
(i) if all or any portion of any Project shall be damaged or
taken through condemnation (which term when used in this Agreement
shall include any damage or taking by any governmental authority and
any transfer by private sale in lieu thereof), so as to, either
(A) temporarily or permanently, materially adversely
affect the type or scope of resort operations existing prior
to the condemnation or taking of, or the net operating income
of, such Project (both being determined by Administrative
Agent in its sole and absolute discretion), or
(B) result in Condemnation Compensation in excess of
$500,000,
then the all of the Project Advances (together with accrued and
unpaid interest thereon and such Project advances' ratable share of
all Interest Advances then outstanding and the Pre-Sale Advance then
outstanding) relating to such Project shall, at the option of the
Required Lenders, become immediately due and payable.
(ii) The Administrative Agent shall be entitled to receive all
Condemnation Compensation payable with respect to any condemnation
or taking. The application of such Condemnation Compensation shall
be as set forth below in clause (iii) below. The Administrative
Agent is hereby authorized, at the instruction of the Required
Lenders, to commence, appear in and prosecute, in its own or in
Borrower's name, any action or proceeding relating to any
condemnation or taking, and to settle or compromise any claim in
connection therewith. All Condemnation Compensation and the rights
thereto are hereby assigned by Borrower to Administrative Agent on
behalf of the Lenders.
(iii) After deducting from any Condemnation Compensation all
of its expenses incurred in the collection and administration
thereof, including attorney's fees, the Administrative Agent shall,
if no Default or Event of Default shall then exist, or may, at the
instruction of the Required Lenders, if a Default or Event of
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Default shall then exist, make the net Condemnation Compensation
available to Borrower to repair and/or restore the affected Project,
provided that
(1) Borrower requests that such proceeds be made
available for repairing or restoring such Project in a written
notice delivered to Administrative Agent within 30 days after
the occurrence of the condemnation or taking,
(2) Administrative Agent and the Lenders approve
Borrower's plans for repair and/or replacement of such
Project, which approval shall not be unreasonably withheld or
delayed,
(3) any such repairs must restore such Project to at
least as good condition as prior to the condemnation or
taking,
(4) any replacement shall be of the same or equal value
to the Property replaced, and
(5) Administrative Agent must determine that the repairs
or replacement can be substantially completed prior to the
Maturity Date or, if earlier, the maturity date of the Project
Advances related to such Project.
If Borrower fails to comply with any of the requirements set forth
in the immediately preceding sentence or if a Default or Event of
Default exists and the Administrative Agent shall have decided not
to make such net Condemnation Compensation available to Borrower,
the Administrative Agent may, at the instruction of the Required
Lenders, apply such net Condemnation Compensation or any part
thereof, (A) to the payment of the aforesaid Obligations, whether or
not due, as provided in Section 2.5(d) hereof, or (B) for any other
purposes or objects for which the Administrative Agent is entitled
to advance funds under this Agreement, all without affecting the
security interests or Liens of this Agreement or any of the other
Security Documents. All net Condemnation Compensation to be
disbursed by the Administrative Agent pursuant to this clause (iii)
shall be disbursed in a manner acceptable to the Administrative
Agent as the repair and/or replacement work proceeds. Neither the
Administrative Agent nor the Lenders shall be held responsible for
any failure to collect any condemnation regardless of the reason for
such failure. Borrower agrees to execute such further assignment of
any compensation, awards, damages, claims, rights of action and
proceeds as the Administrative Agent may require. All repair and/or
replacement work shall be diligently prosecuted to completion by the
Borrower and shall be completed prior to the Maturity Date or, if
earlier, the maturity date of the Project Advances related to such
Project.
(c) Borrower Undertakings. In the event of any condemnation or
taking in respect of any Project (including, without limitation, any of
the Collateral), (i) the Borrower shall immediately notify the
Administrative Agent of the same, (ii) the Administrative Agent may, in
addition to its rights under the Blanket Mortgages, elect to exercise the
voting
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rights of the Borrower as mortgagee or the holder of a security interest
in respect of any Quartershare Mortgage pledged to it hereunder relating
to such Project or as the owner of any Quartershare Interest, Residential
Unit and/or Commercial Unit relating to such Project, as such voting
rights are provided for under the applicable Declaration, regarding all
matters of repair and restoration, and (iii) the Borrower shall pay all
assessments as required by the applicable Declaration and/or Articles of
Incorporation or By-Laws for repair and restoration due to inadequacy of
the Condemnation Compensation.
3.7 Taxes Affecting Collateral.
The Borrower shall pay or, as provided in the Declarations, cause the
Associations to pay, on or before the last day when they may be paid without
interest or penalty, all taxes, assessments, rates, dues, charges, fees, levies,
excises, duties, fines, impositions, liabilities, obligations and encumbrances
(including, without limitation, water and sewer rents and charges, charges for
setting or repairing meters and charges for other utilities or services),
general or special, ordinary or extraordinary, foreseen or unforeseen, of every
kind whatsoever, now or hereafter imposed, levied or assessed by any public or
quasi-public authority or instrumentality upon or against any of the Collateral
or the use, occupancy or possession of any Project, or upon or against this
Agreement, the Notes or the other Security Documents, the Obligations or the
interest of the Administrative Agent or the Lenders in the Contracts, any of the
contracts of purchase in respect of the Residential Units and/or Commercial
Units or the Blanket Mortgages or any other item of Collateral (provided that
this Section 3.7 shall not be construed to require the Borrower to pay any
income tax imposed upon the general income of the Administrative Agent or the
Lenders), as well as all assessments and other governmental or
quasi-governmental charges imposed, levied or assessed in respect of any
Collateral, and any and all interest, costs and penalties on or with respect to
any of the foregoing (collectively, the "Impositions"). Upon request by the
Administrative Agent, the Borrower shall deliver, or cause the Associations to
deliver, to the Administrative Agent receipts or other satisfactory proof of
payment of any Impositions.
The Borrower shall not claim, demand or be entitled to receive any
reduction of, or credit toward, any Imposition on account of the Obligations. No
deduction shall be claimed from the taxable value of any Collateral or any
Project by reason of the Obligations, any of the Security Documents or the
interest of the Lender in the Collateral.
If existing laws or procedures governing the taxation of mortgages,
security documents or debts secured by deeds of trusts, mortgages or other
security documents shall be changed in any manner after the date hereof so as to
materially adversely impair the security of the Blanket Mortgages or the
security interest herein granted or granted in any of the other Security
Documents or to reduce the net income to any of the Lenders in respect of its
Pro Rata Share of the Obligations (excluding from any such determination of net
income any reduction in such net income attributable to a change in taxes
imposed on, or measured by, the net income of such Lender), then, upon request
by such Lender, the Borrower shall pay to such Lender or to the taxing authority
(if so directed by such Lender), all taxes, charges and related costs for which
the Lender may be liable as a result thereof.
The Borrower shall pay, or cause to be paid, when due, any and all
recording (deed of trust, mortgage or personal property), intangible property
and documentary stamp taxes, all
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similar taxes, and all filing, registration and recording fees, which are now or
hereafter may become payable in connection with the Obligations, the Blanket
Mortgages, this Agreement, any of the other Security Documents, the Quartershare
Mortgages or any of the other Collateral. The Borrower shall pay when due any
and all excise, transfer and conveyance taxes which are now or hereafter may
become payable in connection with the Obligations, the Blanket Mortgages, any
Quartershare Mortgage, this Agreement or any of the other Security Documents, or
in connection with any foreclosure of the Blanket Mortgages, any Quartershare
Mortgage or any other foreclosure of any Collateral under this Agreement or
under any of the other Security Documents, or any other transfer of any item of
Collateral in extinguishment of all or any part of the Obligations or any other
enforcement of the rights of the Lender with respect thereto.
3.8 Discharge of Liens Affecting Collateral.
If any mechanic's, laborer's, materialman's, statutory or other Lien shall
be filed or otherwise imposed upon or against any item of the Collateral or any
of the Projects, then the Borrower shall, within 30 days after being given
notice of the filing of such Lien or otherwise becoming aware of the imposition
of such Lien, cause such Lien to be vacated or discharged of record by payment,
deposit, bond, final order of a court of competent jurisdiction or otherwise.
The Borrower shall have the right, at its sole expense, to contest the
validity of any such Lien or of the claim evidenced or secured thereby, by
appropriate proceedings commenced prior to the expiration of the aforesaid
30-day period and thereafter diligently and continuously conducted in good faith
to final determination, in which event the Borrower shall not be required to
cause any such Lien to be vacated or discharged of record in accordance with the
immediately preceding paragraph if, and only so long as:
(a) no final judicial determination in respect of any foreclosure or
other enforcement proceeding in respect of such Lien or the claim
evidenced or secured thereby shall have been rendered and no nonjudicial
foreclosure proceeding or sale in respect of such Lien or such claim shall
have been commenced;
(b) no claim for liability of any kind shall have been asserted
against the Administrative Agent or any Lender in connection with such
Lien or the claim evidenced or secured thereby; and
(c) if such Lien shall secure a claim of more than $50,000, the
Borrower shall have established an escrow with the Administrative Agent,
or shall have delivered to the Administrative Agent a satisfactory bond
issued by a surety acceptable to the Administrative Agent or a
satisfactory letter of credit for the benefit of the Administrative Agent
issued by a bank acceptable to the Administrative Agent, in each case in
an amount estimated by the Administrative Agent to be adequate to cover
(i) the unpaid amount of such claim, (ii) all interest, penalties and
similar charges which reasonably can be expected to accrue by reason of
such contest or by reason of such nonpayment, and (iii) all costs, fees
and expenses (including, without limitation, attorneys' fees and
disbursements) which reasonably can be expected to be incurred in
connection therewith by the Administrative Agent, which escrow, bond or
letter of credit shall be maintained in effect throughout such contest and
the amount of which shall be increased from time to
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time if reasonably required by the Lender to cover the foregoing amounts
in subclause (i), subclause (ii) and subclause (iii).
The Borrower shall inform the Administrative Agent, in advance and in
writing, of its intention to contest any Lien securing a claim, or such claim
itself, under this Section 3.8 if such claim shall exceed $50,000.
Upon termination of any such contest (whether by final determination or
otherwise), or at any time during the course of any such contest that the
conditions relieving the Borrower of its obligation to cause such Lien to be
vacated or discharged shall no longer be satisfied or shall be discovered not to
have been satisfied, the Borrower shall cause such Lien to be vacated or
discharged of record. At the Administrative Agent's option (at the instruction
of the Required Lenders), the escrow established or bond or letter of credit, as
the case may be, delivered pursuant to this Section 3.8 may be, in the case of
the escrow, liquidated, or, in the case of the bond or the letter of credit,
drawn upon, at such time and the proceeds thereof may be applied to payment of
all or any part of the claim evidenced or secured by such Lien and the interest,
penalties, charges, costs, fees and expenses (including, without limitation,
attorneys' fees and disbursements) referred to in subclause (ii) and subclause
(iii) of the immediately preceding paragraph. Promptly after such Lien has been
vacated or discharged of record, the Borrower shall deliver to the
Administrative Agent evidence reasonably satisfactory to the Administrative
Agent that such Lien has been vacated or discharged of record. Thereafter, the
amount then remaining in the escrow established pursuant to this Section 3.8 or
such bond or letter of credit, as the case may be, shall be returned to the
Borrower free and clear of the Lien of this Agreement or any other Security
Document so long as no Event of Default shall have occurred and be continuing
or, if an Event of Default shall have occurred and be continuing, shall be
retained by the Administrative Agent as part of the Collateral.
If any Lien shall not be vacated or discharged as required by this
Section, then, in addition to any other right or remedy of the Lender, the
Administrative Agent may, but shall not be obligated to, discharge such Lien in
such manner as the Administrative Agent may select, and the Administrative Agent
shall be entitled, if instructed by the Required Lenders, to compel the
prosecution of an action for the foreclosure of such Lien by the lienor and to
pay the amount of any judgment in favor of such lienor with interest, costs and
allowances. Upon request by the Administrative Agent, the Borrower shall pay to
the Administrative Agent, or to any other Person designated by the
Administrative Agent, the amount of all payments made by the Administrative
Agent as provided above and all costs, expenses and liabilities (including,
without limitation, attorneys' fees and disbursements) incurred by the
Administrative Agent in connection therewith, together with interest thereon at
the Default Rate from the date paid or incurred by the Administrative Agent
until the date so paid to, or as directed by, the Administrative Agent. To the
extent permitted by law, the Administrative Agent shall thereupon be subrogated
to the rights of such lienor and any such payments made by the Administrative
Agent pursuant to this Section 3.8 shall be secured by the Collateral.
3.9 Use of the Projects; Voting Rights of Borrower.
(a) Use of the Projects Generally. The Borrower shall not, as
Declarant, Quartershare Interest owner, Residential Unit owner or
Commercial Unit owner, without the prior written consent of the
Administrative Agent,
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(i) request or otherwise initiate or consent to any zoning
classification or reclassification of any of the Projects or the
adoption, issuance, imposition or amendment of any other law,
ordinance, rule, regulation, order, judgment, injunction or decree
relating to the use, occupancy, operation, development, disposition
or design of any of the Projects which would limit the use of the
Quartershare Interests, Residential Units or Commercial Units in a
manner that materially reduces their Fair Market Value,
(ii) request or otherwise initiate or consent to the
annexation of any part of any of the Projects by or into any
municipality or other governmental or quasi-governmental unit,
(iii) execute, file or record any subdivision plat affecting
any of the Projects (other than as contemplated in the Plans or
other than pursuant to a request of a purchaser of a Commercial Unit
to subdivide the Commercial Unit being so purchased or other than in
respect of an amendment to a Declaration for the purpose of
submitting any Project to such Declaration) or request or otherwise
initiate, consent to or acquiesce in any subdivision of any Project
(other than as contemplated and provided for in the Declarations or
the Plans),
(iv) enter into, consent to or otherwise cause, permit or
suffer any Project to become subject to any covenant, agreement or
other arrangement restricting or limiting the use, occupancy,
operation, development or disposition thereof (other than any
covenant of this Agreement or the other Security Documents, the
Declarations, and the CCR's),
(v) materially and substantially modify, alter, remove or
improve any of the Common Elements without the prior written consent
of the Administrative Agent (except for the creation of additional
common elements and limited common elements resulting from the
construction and development of the Residential Units, Commercial
Units and the Projects in accordance with the Plans),
(vi) maintain the Quartershare Interests, Residential Units or
Commercial Units owned by it for lease or as a rental project
(except as expressly permitted in the Declarations),
(vii) add or withdraw real Property from any of the Projects
or create additional club interests, club units or commercial units
beyond those existing or planned for in accordance with, and
pursuant to, the Declarations and the Plans, or
(viii) permit the Quartershare Interests or Residential Units
to be used for other than for nonpermanent residential purposes.
(b) Use by Public. The Borrower shall not cause, permit or suffer
any Project to be used by the public without restriction (except as
required by applicable law or as otherwise provided with respect to the
Commercial Units, the Declarations and the CCR's)
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or in any manner that might tend to impair the Borrower's right, title and
interest in and to the Projects or in any manner that might make possible
any claim of adverse usage or adverse possession by the public or any
claim of implied dedication of all or any part of the Projects.
(c) Voting Rights. The Borrower hereby appoints and constitutes the
Administrative Agent as its attorney-in-fact (with full power of
substitution) to exercise all of its voting rights pertaining to any
Quartershare Interest, Residential Unit and/or Commercial Unit owned by
the Borrower or in which the Borrower has an interest giving rise to the
right to vote (whether as Declarant, as a holder of any Quartershare
Mortgage or otherwise). This power of attorney is coupled with an interest
and shall be irrevocable for so long as any Obligations are owing by the
Borrower to the any Lender. This power of attorney may be used from time
to time in the sole discretion of the Administrative Agent if there shall
exist an Event of Default, or a material casualty or a material
condemnation or taking (as contemplated in Section 3.6(b)(i) hereof) shall
have occurred with respect to the Projects or any part thereof. The
Borrower agrees to execute, from time to time, such other documents as the
Administrative Agent may request (including, without limitation, the form
of proxy substantially in the form of Exhibit H to this Agreement; which
proxy shall, at the request of the Administrative Agent, be periodically
renewed) and file the same with the Secretary of the applicable
Association in accordance with such Association's By-Laws.
If any voting rights pertaining to any Quartershare Interest,
Residential Unit and/or Commercial Unit owned by the Borrower or in which
the Borrower has an interest giving rise to the right to vote (whether as
Declarant, as a holder of a Quartershare Mortgage or otherwise) shall be
exercisable pursuant to a written ballot distributed by the applicable
Association in accordance with the terms of the By-Laws of said
Association, the Borrower agrees to exercise its right to vote in respect
of such written ballot in accordance with the rights of the Administrative
Agent under the first paragraph of this Section 3.9(c) as if the proxy
referred to therein were directly applicable to such written ballot (any
provision in said By-Laws to the contrary notwithstanding) and to promptly
give the Administrative Agent written notice of any such written ballot if
the Administrative Agent shall then be entitled to exercise the voting
rights in respect thereof.
If any voting rights pertaining to any Quartershare Interest,
Residential Unit and/or Commercial Unit owned by the Borrower or in which
the Borrower has an interest giving rise to the right to vote (whether as
Declarant, as a holder of a Quartershare Mortgage or otherwise) shall be
exercisable pursuant to the attendance by the Borrower at a meeting of the
members of the applicable Association in accordance with the terms of the
By-Laws of such Association, the Borrower agrees to exercise its right to
vote in respect of such attendance in accordance with the rights of the
Administrative Agent under the first paragraph of this Section 3.9(c) as
if the proxy referred to therein were directly applicable to such meeting
(any provision in said By-Laws to the contrary notwithstanding) and to
promptly give the Administrative Agent written notice of its intention to
attend any such meeting if the Administrative Agent shall then be entitled
to exercise the voting rights in respect thereof.
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Except with the prior written consent of the Administrative Agent,
the Borrower shall not propose or vote for or consent to any modification
of, or amendment to, any Declaration or any Association's Articles of
Incorporation or By-Laws which could have (in the reasonable sole opinion
of the Administrative Agent or the Required Lenders) a material adverse
effect on the Collateral or the operation or prospects of any Project. In
each case under any Declaration and/or any Association's Articles of
Incorporation or ByLaws in which the consent or the vote of a holder of a
mortgage in respect of the Quartershare Interests, Residential Units
and/or Commercial Units (including any such case in which the Borrower
would be considered to be a holder of a mortgage by virtue of any
Quartershare Mortgage) is provided for or is required, or in which the
Borrower's consent is required (as Declarant or as an owner of a
Quartershare Interest, Residential Unit or Commercial Unit or as a vendor
or mortgagee) for any proposed action, the Borrower shall not vote or give
such consent without obtaining the prior written consent of the
Administrative Agent if such action (in the reasonable sole opinion of the
Administrative Agent) could have an material adverse effect on the
Collateral or the operation or prospects of any Project.
3.10 Other Quartershare Covenants.
(a) Access. With respect to the consummation of each sale of a
Quartershare Interest in respect of any Project to a Purchaser under a
Contract, the Borrower shall cause the owner of such Quartershare Interest
to have access to a publicly dedicated road within such Project and shall
cause all private roadways and parking lots or areas in each Project to be
Common Elements in respect of such Quartershare Interest, as the case may
be, under the applicable Declaration.
(b) Utilities. With respect to the consummation of each sale of a
Quartershare Interest in respect of any Project to a Purchaser under a
Contract, the Borrower shall cause electric, sewer, and water service and
other necessary utilities to be available to such Project and the
Residential Units for such Project in sufficient capacity to service the
same and shall pay, or cause to be paid, all tap fees or other connection
charges in respect thereof).
(c) Use of Amenities. With respect to the consummation of each sale
of a Quartershare Interest in respect of any Project to a Purchaser under
a Contract, the Borrower shall cause the owner of such Quartershare
Interest to have access to, and the use of, all of the amenities and
public utilities relating to such Project and such Quartershare Interest
(consistent with the contractual provisions and rules and regulations
existing with respect to such amenities and public utilities).
(d) Timeshare Regimen. With respect to the consummation of each sale
of a Quartershare Interest in respect of any Project to a Purchaser under
a Contract, the Borrower shall do all things necessary in order to
preserve the condominium and quartershare regimens in respect of such
Quartershare Interest.
(e) Local Legal Compliance. The Borrower shall comply, and shall
cause each Project and the Quartershare Interests and the Residential
Units and Commercial Units relating to such Project to comply, with all
applicable restrictive covenants, zoning,
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design and land use ordinances and building codes, all applicable health
and environmental laws and regulations and all other applicable laws,
rules and regulations and all approvals, consents and licenses (including,
without limitation, the CCR's); and the Borrower shall use its best
efforts to obtain all certificates of occupancy in respect of the use and
operation of each Project and the Residential Units and the Commercial
Units relating thereto as promptly as possible after the completion of the
construction of such Project, and the Borrower shall keep such
certificates in full force and effect.
(f) Registration Compliance. The Borrower shall maintain, or cause
to be maintained, all necessary consents, franchises, approvals, and
exemption certificates in connection with, and the Borrower will make, or
cause to be made, all registrations or declarations with any government or
any agency or department thereof required in connection with, the
occupancy, use and operation of each Project and the marketing and sale of
the Quartershare Interests, the Residential Units and/or the Commercial
Units relating thereto.
(g) Records. The Borrower shall maintain accurate and complete files
relating to the Contracts, the Quartershare Notes and the other Collateral
to the reasonable satisfaction of the Administrative Agent, and such files
will contain copies of each Contract, Quartershare Note, Quartershare
Mortgage, all relevant credit memoranda, and all collection information
and correspondence in respect thereof.
(h) Forms of Project Documents. Instruments in substantially the
form of the Contract, the form of statement of rescission rights required
by the law of the State in which the Project is located or the law of any
of the Applicable States, and the form of other instruments and documents
related thereto, in each case in form and substance acceptable to the
Administrative Agent, shall be used by the Borrower for all purchase and
sale transactions of Quartershare Interests consummated during the
Commitment Period. The Borrower shall not materially modify, amend or
otherwise alter any of the terms of such forms without the Administrative
Agent's prior written consent, except as may be required by any regulatory
agency or applicable law. Notwithstanding the Administrative Agent and/or
Lenders' review and determination of acceptability, if any, of such forms,
the Borrower shall remain solely liable for all aspects of such forms and
their use; any determination of acceptability, if any, by the
Administrative Agent or any Lender relating to such forms shall only be
for the Administrative Agent's and each Lender's benefit and no other
Person shall be entitled to rely thereon in any manner.
Instruments in substantially the form of the Quartershare Note, the
form of the Quartershare Mortgage, the form of the special warranty deed,
the form of the Truth-in-Lending Statement and the form of the other
instruments and documents related thereto, that, in each case, are in form
and substance reasonably acceptable to the Administrative Agent and the
Lenders, shall be used by the Borrower for all sales of Quartershare
Interests which may be closed after the Closing Date and for so long as
any Obligation remains outstanding. The Borrower shall not materially
modify, amend or otherwise alter such forms or any of the terms of such
forms without the Administrative Agent's prior written consent, except as
may be required by any regulatory agency or applicable law.
Notwithstanding the Administrative Agent's or any Lender's review and
determination of acceptability, if any, of such forms, the Borrower shall
remain solely liable for all aspects
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of such forms and their use; any determination of acceptability, if any,
by the Administrative Agent or any Lender relating to such forms shall
only be for the Administrative Agent's and the Lenders' benefit and no
other Person shall be entitled to rely thereon in any manner.
(i) Payments on Validated Contracts and Other Purchase Agreements.
The Borrower, except as specifically consented to in writing by the
Administrative Agent, shall not grant any extensions of time for the
payment of, compromise for less than the full face value of, release in
whole or in any part any Person liable for the payment of, allow any
credit whatsoever except for the amount of cash to be paid upon, or
otherwise modify or amend, any Validated Contract or any purchase contract
in respect of any Residential Unit or Commercial Unit.
(j) Property-Related Contracts. Except as required by applicable
law, the Borrower shall not materially modify or amend, or (subject to the
rights and obligations of the Associations under the Declarations or the
Articles of Incorporation or By-Laws of the Associations) permit to be
materially modified or amended, any material Property-Related Contract
without the prior written consent of the Administrative Agent, which
consent shall not be unreasonably withheld, or enter into, or (subject to
the rights and obligations of the Associations under the Declaration or
Articles of Incorporation or By-Laws of the Associations) permit to be
entered into, any new material Property-Related Contract without the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld. The Borrower shall perform all of its obligations
in a timely fashion under each Property-Related Contract.
(k) Undertaking. The Borrower shall perform each and every covenant,
agreement, and undertaking applicable to the Borrower (whether as
Declarant, owner of a Quartershare Interest, Residential Unit or
Commercial Unit or otherwise) under the Declarations and the Articles of
Incorporation and By-Laws of the Associations.
(l) Notices. The Borrower shall promptly deliver to the
Administrative Agent copies of each written notice or request, financial
statement, budget or other information received by the Borrower under or
with respect to the Declarations and/or the Articles of Incorporation or
By-Laws of the Associations, whether in its capacity as Declarant, owner
of a Quartershare Interest, Residential Unit or Commercial Unit, holder of
a mortgage, deed of trust or other security interest or otherwise.
(m) Quartershare Interests. Except as the Lender may have otherwise
agreed to in writing, the Borrower shall subject each of the Residential
Units to the "quartershare interest" regime contemplated under each of the
Declarations. It is the intention of the Borrower to hold for sale not
less than 2,048 Quartershare Interests in respect of 512 Residential Units
in the Projects. Each Residential Unit shall have a full kitchen or
kitchenettes, a dining area and a video cassette player. Each Project
shall have a grand ballroom (other than the Jordan Bowl Project), a
conference room, a restaurant, a three-level atrium lobby, retail space, a
health club with an outdoor pool and other recreational amenities. The
Borrower shall use its best efforts to cause each of the following
Projects to be accepted by Resorts Condominium International, Inc. into
its timeshare exchange program and to maintain itself and such projects in
good standing as participants in such
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timeshare exchange program: Attitash Project, Jordan Bowl Project,
Killington Project and Mt. Snow Project.
3.11 Protection of Collateral; Assessments; Reimbursement.
All Insurance Premiums and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all Impositions on any of the Collateral or in respect of the sale or other
disposal thereof shall be borne and paid by the Borrower or the Borrower shall
cause the Associations or any manager retained by it to pay the same, as
provided for in the Declarations and/or the Articles of Incorporation or By-Laws
of the Associations. The Borrower shall promptly pay, as the same become due and
payable, its share of all Insurance Premiums, expenses, Impositions and/or
assessments as required by the Declarations and/or the Articles of Incorporation
or By-Laws of the Associations. If the Borrower shall fail to pay, or cause to
be paid, any such Insurance Premiums, expenses, Impositions and/or assessments,
the Administrative Agent may, at the Borrower's expense, pay the same.
If, by reason of any suit or proceeding of any kind, nature or description
against the Borrower, or by the Borrower or any other party against any other
Person, or by reason of any other facts or circumstances, which in the
Administrative Agent's or any Lender's sole discretion makes it advisable for
such Person to seek counsel for the protection and preservation of the
Collateral, or to defend its own interest, such expenses and counsel fees shall
be allowed to such Person and borne and paid by the Borrower.
3.12 Interest on Lender Paid Expenses.
All sums paid or incurred by the Administrative Agent or any Lender under
this Section 3, and any and all other sums for which the Borrower may become
liable hereunder, and all costs and expenses (including payments to other Lien
holders and attorneys' fees, legal expenses and court costs) which the
Administrative Agent or any Lender may incur in enforcing or protecting its
Liens on, or rights and interest in, the Collateral or any of its rights or
remedies under this Agreement or any other Security Document or in respect of
any of the transactions contemplated herein or therein shall (a) be considered
as additional indebtedness owing by the Borrower to the Administrative Agent or
such Lender hereunder and, as such, shall be secured by all of the Collateral
and (b) accrue interest at the Default Rate from the date paid or incurred until
paid in full by the Borrower.
3.13 Lender Responsibility. Neither the Administrative Agent nor any
Lender shall be (a) obligated or responsible for, the payment of any of the
amounts or sums referred to in this Section 3, or (b) liable or responsible in
any way for the safekeeping of any of the Collateral or for any loss or damage
thereto.
3.14 Verification of Contracts. Upon prior notification to the Borrower,
the Administrative Agent may contact any Purchaser in order to verify the
Contract to which such Purchaser is a party and the Borrower shall render such
assistance to the Administrative Agent in connection therewith as the
Administrative Agent may reasonably request.
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3.15 Release of Lien on Quartershare Interests, Residential Units and
Commercial Units.
(a) Release for Quartershare Interests, Residential Units and
Commercial Units. The Administrative Agent agrees to execute and deliver
to the Borrower or its escrowee the documents referred to below pursuant
to which the security interest and Lien in and to any Quartershare
Interest, Residential Unit or Commercial Unit in any Project created by
this Agreement, the Blanket Mortgages or any other Security Document will
be released if, but only if, all of the following conditions shall have
been fully satisfied:
(i) such Quartershare Interest, Residential Unit or Commercial
Unit in such Project is being sold in the ordinary course of
Borrower's business,
(ii) the full Release Price in respect of such Quartershare
Interest, Residential Unit or Commercial Unit in such Project shall
have been paid to the Administrative Agent or its agent in good,
collected funds;
(iii) a request, substantially in the form of Exhibit I
attached hereto, shall have been completed and executed by the
Borrower and submitted to the Administrative Agent not less than 2
Business Days in advance of the date on which the Borrower desires
to obtain such release; and
(iv) a partial release of mortgage substantially in the form
of Exhibit J attached hereto, and a partial release of security
interest, substantially in the form of Exhibit K attached hereto, in
each case, in respect of such Project, shall have been completed by
the Borrower and submitted to the Administrative Agent with the
aforesaid request.
The Borrower shall bear the responsibility of recording any and all
documents executed by the Administrative Agent under this Section. The
Borrower shall pay all escrow costs and recording and transfer costs in
respect of such documents. The Borrower shall establish an escrow in
respect of any release under this Section. The Administrative Agent shall
deposit the documents to be executed by it pursuant to clause (iv) above
in such escrow if, but only if,
(1) the documentation establishing such escrow is in form and
substance satisfactory to the Administrative Agent and such
documentation shall have been submitted to the Administrative Agent
together with the written request referred to in clause (ii) above,
(2) the escrowee under such escrow documentation is
satisfactory to the Administrative Agent,
(3) such escrow documentation provides that simultaneously
with the release from such escrow of the documents referred to in
clause (iv) above, the Release Price in respect of such Quartershare
Interest, Residential Unit or Commercial Unit for such Project to be
so released shall have been wired via
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Federal Reserve Bank wire (in immediately available funds) to the
Administrative Agent and a confirmation of such wire shall have been
obtained,
(4) such escrow documentation provides that such escrow will
be consummated within 5 Business Days of the Administrative Agent's
depositing of such release documents therein or such release
documents shall be returned to the Administrative Agent by the
escrowee of such escrow, and
(5) at the time of the depositing of such documentation into
such escrow, all of the conditions in clauses (ii) through (iv)
above shall have been fully satisfied.
(b) Full Release of Collateral and Blanket Mortgages. Upon the full,
final and indefeasible payment of all Obligations and the termination of
the Commitment Period, the Administrative Agent shall release its security
interests and Liens in and to the Collateral, shall execute in favor of
the Borrower any UCC release or termination statement in respect thereof,
shall release the Blanket Mortgages, Assignment of Rents and any other
recorded Security Document and shall reassign and deliver to the Borrower
all Contracts and the other Collateral then in the physical possession of
the Administrative Agent or its agent (without recourse and without
representations or warranties of any kind). The Borrower shall bear all
out-of-pocket expenses (including, without limitation, legal fees and
disbursements of the Administrative Agent) in connection with such
release, reassignment and delivery. All such release and/or termination
documentation shall be reasonably satisfactory to the Administrative
Agent, the Lenders and their counsel.
3.16 Nondisturbance Agreements.
Anything contained herein to the contrary notwithstanding, the
Administrative Agent and the Lenders hereby agree to do, or cause to be done,
each of the following:
(a) the Administrative Agent shall subordinate its Liens and
security interests in and to each Under-Construction Project to the Lien
and terms of the Declaration, the Resort Map, and the Common Elements for
such Under-Construction Project and to the rights of any owner of a
Quartershare Interest, Residential Unit or Commercial Unit in such
Under-Construction Project and the Association under such Declaration if
(i) such Declaration and Resort Map are in form and substance
satisfactory to the Administrative Agent and the Required Lenders;
(ii) no Default or Event of Default shall then exist;
(iii) such Declaration and Resort Map shall have been recorded
in the applicable recording offices;
(iv) the instrument of subordination shall be substantially in
the form thereof set forth in Exhibit L hereto;
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(v) a title insurance endorsement to the Title Insurance
Policy {Blanket} in form and substance satisfactory to the
Administrative Agent and the Required Lenders shall have been
delivered to the Administrative Agent whereby the effective date of
the Title Insurance Policy {Blanket} for such Under-Construction
Project shall be extended through the date of such instrument of
subordination, which contains no exclusions and/or exceptions
unsatisfactory to the Administrative Agent or the Required Lenders
(including the removal of any exceptions or exclusions in respect of
mechanic's, materialmen's or laborer's liens or any exceptions in
respect of the failure to deliver a current survey, provided that
any exclusions or exceptions previously approved by the Lenders
shall be deemed satisfactory to the Administrative Agent and the
Required Lenders and any Lien which (in the sole opinion of Required
Lenders) shall not have a material adverse effect upon the Borrower,
any of the Projects or the Collateral shall be deemed to be
satisfactory) and in respect of which all premiums shall have been
paid;
(vi) the Blanket Mortgage in respect of such
Under-Construction Project constitutes a first priority Lien in and
to all unsold Quartershare Interests, Residential Units and
Commercial Units in such Under-Construction Project and all payments
under the Host Company Lease Agreement in respect of such
Under-Construction Project shall continue to be assigned to the
Administrative Agent under such Blanket Mortgage and under the
Assignment of Rents in respect of such Under-Construction Project
and all payments in respect thereof shall continue to be made
directly to the Administrative Agent;
(vii) the Administrative Agent shall have received a
satisfactory legal opinion from counsel to the Borrower as to the
effectiveness of such Declaration to establish the "quartershare
interest" regime in respect of such Under-Construction Project, the
continued validity and enforceability of this Agreement, such
Blanket Mortgage and the other Security Documents and such other
matters as the Administrative Agent or the Required Lenders may
reasonably request; and
(viii) the Borrower shall have paid for all of the costs and
expenses incurred by the Administrative Agent and the Lenders in
connection with the preparation and recordation of such instrument
of subordination (including, without limitation, attorney's fees and
expenses); and
(b) if the Administrative Agent or any Lender shall acquire all or
any Common Elements in any Project or any of the rights of any Association
in any Project in respect of any management contract, marketing contract,
maintenance contract, utility contract, security contract, other servicing
contract, licensing contract, Project Document or other similar contract
pursuant to the rights and remedies provided for herein, in the Blanket
Mortgages or in any other Security Document, the Administrative Agent or
such Lender shall take such Common Elements or such rights subject to the
rights of owners of the Quartershare Interests, the owners of the
Residential Units and the owners of the Commercial Units in and to such
Project and subject to the rights of the Association for such Project and
shall not interfere with the rights of such owners or such Association, as
provided for in the Declaration and the other Project Documents.
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3.17 Filing of Declarations; Incorporation of Associations.
Notwithstanding anything to the contrary contained herein, the Borrower
shall cause the Declaration and the Resort Map of each Under-Construction
Project to be recorded in the applicable recording offices with respect thereto
not later than October 31, 1998. Upon the recording of each such Declaration,
(a) the Borrower shall undertake to assist the Administrative Agent
in (i) recording an assignment of the Borrower's rights (but not
obligations) as developer and declarant under each such Declaration, which
assignment shall be substantially in the form of Exhibit M hereof, and
(ii) filing the proxy referenced in Section 3.9(c) above with the
Secretary of the applicable Association, and
(b) the Borrower shall deliver to the Administrative Agent duly
recorded copies of each such Declaration.
Notwithstanding anything to the contrary contained herein, the Borrower
shall cause each Association to be duly incorporated under the laws of the State
in which the applicable Under-Construction Project is located not later than
October 31, 1998. Upon the effecting of each such incorporation, the Borrower
shall have delivered to the Administrative Agent, in form satisfactory to the
Administrative Agent, (1) a certificate of the Secretary of such State
certifying the due corporate existence of each such Association, (2) copies of
recorded Articles of Incorporation and all amendments thereto of each such
Association certified to be true and correct by the Secretary of such State, and
(3) copies of the By-Laws of each such Association certified to be true and
correct by a senior officer of the Borrower. Said Articles of Incorporation and
By-Laws shall be reasonably satisfactory to the Required Lenders in both form
and substance.
3.18 Take-Out Facility.
The Borrower shall irrevocably direct Textron Financial Corporation under
the Take-Out Facility to pay all amounts owing to the Borrower directly to the
Administrative Agent on behalf of the Lenders in respect of any moneys to be
paid to the Borrower by Textron Financial Corporation, including, without
limitation, any moneys that are a return of a reserve in respect of, or that are
a payment of the deferred purchase price of, a Quartershare Note purchased under
such Take-Out Facility.
4. REPRESENTATIONS AND WARRANTIES AND COVENANTS
As an inducement to the Lenders to make the Loan, the Borrower warrants
and represents, as of the date hereof, and covenants to the Lenders as follows:
4.1 Subsidiaries and Capital Structure.
The Borrower owns no Voting Equities in any Person. The Parent owns 100%
of the Voting Equity of Borrower and of each Host Company. Schedule 12 to this
Agreement states the name of each Affiliate of the Borrower and the nature of
the affiliation.
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4.2 Corporate Matters.
The Borrower
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maine;
(b) has all requisite company power and authority and necessary
licenses and permits to own, construct and operate each Project and to
carry on its business as now conducted and contemplated to be conducted in
the future; and
(c) has duly qualified and is authorized to do business as a foreign
corporation in each jurisdiction where the character of its Properties or
the nature of its activities makes such qualification necessary or
desirable.
4.3 Business and Property.
Schedule 13 to this Agreement correctly describes the general nature of
the businesses and Properties (including all owned real Property, leases and
leasehold interests) of the Borrower. The Borrower has not changed its name or
acquired all or substantially all of the assets of any Person. The Projects are
the Borrower's sole operating assets. The construction and development of each
Project and the proposed operation of each Project has not caused, and there
have not been, any public demonstrations in respect of, injunctions obtained
against, legislation or ordinances passed or introduced to regulate or restrict,
or any governmental administrative action directed at preserving any species or
any natural resources that may be adversely affected by, such construction,
development or proposed operation.
4.4 Financial Statements.
The financial statements of the Borrower set forth on Schedule 14 hereto
have been delivered to each Lender and, except as set forth on said Schedule 14,
present fairly the financial position of the Borrower as at the date set forth
on said Schedule and the results of its operations for the period set forth on
said Schedule. The Borrower intends to engage in no other business other than
the ownership and operation of each Project and the sale of Quartershare
Interests, Residential Units and Commercial Units in respect thereof.
The financial statements of each of the Host Companies set forth on
Schedule 14 hereto have been delivered to each Lender and, except as set forth
on said Schedule 14, present fairly the financial position of such Host Company
as at the date set forth on said Schedule and the results of its operations for
the period set forth on said Schedule.
4.5 Full Disclosure.
Neither this Agreement nor any written statement made by the Borrower or
any Affiliate in connection with this transaction contains any untrue statement
of a material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact which the Borrower
or any Affiliate has not disclosed to the Lenders in writing which materially
affects adversely or, so far as the Borrower can now foresee, will materially
affect
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adversely the Property, business, prospects, profits or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform its
Obligations under this Agreement, the Notes or the other Security Documents.
4.6 Pending Litigation.
Except as set forth in Schedule 15 to this Agreement, there are no
proceedings pending, or to the knowledge of the Borrower threatened, against or
affecting the Borrower, any Affiliate or any Project in any court or before any
governmental authority or arbitration board or tribunal (a) which either involve
the possibility of materially and adversely affecting the Property, business,
prospects, profits or condition (financial or otherwise) of the Borrower or the
ability of the Borrower to perform its obligations under this Agreement, the
Notes or the other Security Documents or (b) in respect of which more than
$50,000 is sought in damages. Neither the Borrower nor any Affiliate nor any
Project is in default with respect to any order of any court, governmental
authority, quasi-governmental authority or arbitration board or tribunal.
4.7 Title to Properties; Environmental Status.
The Borrower has good and marketable title in fee simple (or its
equivalent under applicable law) to all the real Property which it purports to
own free from Liens except as set forth on Schedule 7 to this Agreement, and has
good title to, and is the sole owner of, all personal Property which it purports
to own (including, without limitation, the personal Property constituting the
Collateral), which personal Property is free from all Liens except as set forth
on Schedule 7 to this Agreement. Except as set forth on Schedule 16 hereto and
except for the Host Company Lease Agreements, the Projects are not subject to
any leases.
The Projects are not under investigation with respect to, and are not in
violation of, any Environmental Protection Law. No proceedings have been
commenced against, nor notice received by, the Borrower or any Affiliate
concerning any alleged violation of any Environmental Protection Law. The
Projects are not, and have not been, the subject of any threatened, proposed or
actual cleanup or other protective or remedial action relating to any Hazardous
Substances, whether pursuant to any Environmental Protection Law or otherwise.
There are no Hazardous Substances in, on, or under any of the Projects, except
as set forth on Schedule 17 to this Agreement.
4.8 Trademarks; Licenses and Permits.
The Borrower owns or possesses all of the trademarks, service marks, trade
names, copyrights, franchises and licenses, and rights with respect thereto
necessary for the conduct of its business as now conducted and as proposed to be
conducted, without any known conflict with the rights of others.
4.9 Transaction Is Legal and Authorized.
The execution and delivery of this Agreement, the Notes and the other
Security Documents by the Borrower and the grant of the Liens to the Lender with
respect to the Collateral by the Borrower and compliance by the Borrower with
all of the provisions of this Agreement, the Notes and the other Security
Documents are:
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(a) within the corporate powers of the Borrower; and
(b) valid and legal acts and will not conflict with, or result in
any breach in any of the provisions of, or constitute a default under, or
result in the creation of any Lien (except Liens contemplated under this
Agreement or any other Security Document) upon any Property of the
Borrower under the provisions of, any agreement, articles or organization,
or other instrument to which the Borrower is a party or by which its
Property may be bound.
4.10 No Defaults.
No Default or Event of Default exists, and there is no violation in any
material respect of any term of any agreement, charter instrument, bylaw or
other instrument to which the Borrower is a party or by which it may be bound.
4.11 Governmental Consent.
Neither the nature of the Borrower nor its business or Properties, nor any
relationship between the Borrower and any other Person, or any circumstance in
connection with the execution or delivery of this Agreement, the Notes or the
other Security Documents, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Borrower, as a condition of the
execution, delivery or performance of this Agreement, the Notes or any other
Security Document.
4.12 Taxes.
The Borrower is not in default with respect to the payment of any taxes
levied or assessed against it or any of its assets and has not failed to file
any tax return required to be filed by it.
4.13 Use of Proceeds.
The proceeds from the Pre-Sale Advance will be used
(a) first, to pay the Loan Costs incurred in connection with the
closing of this Agreement,
(b) second, to pay for the Pre-Construction Costs and to pay off the
Existing Attitash Loan, all as more particularly set forth on Schedule 18
hereto.
The proceeds of Project Advances will be used
(i) first, to pay any Loan Costs then due at the time of the making
of such Subsequent Project Advances and
(ii) second, to pay for or otherwise provide for the payment of
Construction Costs, FF&E Costs and Sales, Marketing & Other Costs.
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The proceeds of the Interest Advances will be used to pay interest accrued on
the Loan and due and payable upon the date of the making of such Interest
Advances; cash will not be disbursed by the Lenders in connection with any
Interest Advance.
None of the transactions contemplated in this Agreement will violate or result
in the violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including, without
limitation, Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. The Borrower does not intend to carry or
purchase any "margin security" within the meaning of said Regulation G. None of
the proceeds will be used to purchase or carry (or refinance any borrowing, the
proceeds of which were used to purchase or carry) any "margin security" within
the meaning of said Regulation.
4.14 Compliance with Law.
The Borrower
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject; and
(b) except as set forth in Schedule 19 hereto, has not failed to
obtain any licenses, permits, franchises or other governmental
authorizations, or make or cause to be made any registrations or
declarations with any government or agency or department thereof or
quasi-governmental entity or under the CCR's, necessary to the ownership
of its Property or to the conduct of its business (including, without
limitation, a small loan license under New Hampshire Revised Statutes
Annotated Chapter 399-A, as amended);
which violation or failure to obtain or register would materially adversely
affect the business, prospects, profits, Property or condition (financial or
otherwise) of the Borrower.
4.15 Restrictions of Borrower.
The Borrower is not a party to any contract or agreement which restricts
its right or ability to incur indebtedness, or prohibits the execution of, or
compliance with, this Agreement or any of the other Security Documents by the
Borrower. The Borrower has not agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its Property
constituting the Collateral, whether now owned or hereafter acquired, to be
subject to a Lien other than the Liens provided for herein, in the other
Security Documents and in the Declaration.
Without limiting the scope of the immediately preceding paragraph, the
Borrower qualifies as a "Real Estate Subsidiary" under, and as defined in, the
Parent Indenture. The Board of Directors of the Parent has designated the
Borrower as such "Real Estate Subsidiary." The Loan constitutes "Non-Recourse
Real Estate Debt" under, and as defined in, the Parent Indenture.
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4.16 Brokers' Fees.
Except as set forth on Schedule 20 hereto, there are no brokers or finders
which are entitled to receive compensation for their services rendered to the
Borrower with respect to the transactions described in this Agreement and with
which the Borrower has had dealings.
4.17 Deferred Compensation Plans.
Except as set forth on Schedule 21 hereto, the Borrower does not have a
pension, profit sharing or other compensatory or similar plan providing for a
program of deferred compensation for any employee or officer which is subject to
any requirement of the Employee Retirement Income Security Act of 1974, as
amended.
4.18 Labor Relations.
Borrower is not a party to any collective bargaining agreement, there are
no material grievances, disputes or controversies with any union or any other
organization of Borrower's employees, or threats of strikes, work stoppages or
any asserted pending demands for collective bargaining by any union or
organization.
4.19 Validity of Contracts.
Each of the Contracts is a bona fide, genuine and true contract for the
purchase of a Quartershare Interest from the Borrower by the Purchaser in
respect thereof and is valid and binding against such Purchaser (subject to the
terms and conditions thereof and any right of rescission granted under
applicable law or referred to in that certain letter from the Borrower to the
Administrative Agent dated the Closing Date).
4.20 Validity of Liens Granted to Lender.
Except with respect to the Permitted Exceptions and as provided for in
Section 3.16 and Section 3.17 hereof, all Liens granted to the Lender in respect
of the Collateral are, and shall continue to be, prior in right and superior to
all other Liens granted to, or held by, any other Person.
4.21 Quartershare Regimen Reports.
Subject to Section 3.17 hereof, the Borrower has furnished to the
Administrative Agent true and correct copies of all Project Documents and all
filings and/or recordations in order to establish the condominium and the
quartershare ownership regimens in respect of each Project have been done and
all applicable laws and statutes in connection therewith have been complied
with.
4.22 Sale of Quartershare Interests.
The sale and offering of sale of Quartershare Interests and Residential
Units (i) do not and will not constitute the sale, or the offering of sale, of
Securities subject to the registration requirements of the Securities Act of
1933, as amended, or the blue-sky securities laws of any
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of the Applicable States, (ii) are done and will only be done in the State in
which the Project is situated (and no solicitation and no advertising in respect
of the sale of Quartershare Interests or Residential Units that would, in either
case, be in violation of applicable law is done or will be done in any States
other than the Applicable States), (iii) except as set forth in that certain
letter from the Borrower to the Administrative Agent dated the Closing Date, do
not violate and will not violate any applicable federal, state or local consumer
credit or sale rescission statute, including, without limitation, any such
statute of any State in which a Purchaser may reside, and (iv) do not violate
and will not violate any other applicable federal, state or local law, statute
or regulation (including, without limitation, any timeshare or subdivision law
applicable to the Projects or to the sale of Quartershare Interests and in
effect in any Applicable State or in any other State in which a Purchaser may
reside or in which the sale of any such Quartershare Interest to such Purchaser
was closed).
Without limiting the generality of the immediately preceding paragraph,
the Borrower has, to the extent required by its activities and businesses, fully
complied with and will continue to fully comply with (1) (A) the Federal Trade
Commission Act, as amended, (B) except as set forth in that certain letter from
the Borrower to the Administrative Agent dated the Closing Date, the Interstate
Land Sales Full Disclosure Act, as amended, (C) all other applicable federal
statutes and laws pertaining to the Projects and (D) the rules and regulations
promulgated under such Acts, statutes and laws and (2) all of the applicable
provisions of any law of any State (and the rules and regulations promulgated
thereunder) or municipality or other governmental or quasi-governmental
authority relating to the operation of the Projects. The sale and offering of
sale of Quartershare Interests is not affected and will not be affected by any
home solicitations.
4.23 Solvency.
The Borrower is not entering into this Agreement and the transactions
contemplated hereby, and does not intend to incur any obligations hereunder or
otherwise make any transfers in connection herewith, with the actual intent to
hinder, delay or defraud either present or future creditors. After giving effect
to the consummation of the transactions contemplated by this Agreement and the
making of the Advances hereunder, (a) the assets of the Borrower at a fair
valuation thereof on a going concern basis will not be less than its debts, (b)
the Borrower is not currently engaged in or about to engage in a business or
transaction for which its remaining assets are unreasonably small in relation to
such business or transaction, and (c) the Borrower will be able to pay its
respective debts as they become due. "Debt" for purposes of this Section 4.23
means any liability on a claim, and "claim" means (i) any right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (ii) any right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured.
4.24 Attitash Project Quartershare Interests.
(a) Access. The owners of Attitash Quartershare Interests in the
Attitash Project have direct access from the Attitash Project to a
publicly dedicated road, and all roadways inside the Attitash Project are
Common Elements under the Attitash Declaration.
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(b) Utilities. On and after the Closing Date, electric, sewer, water
facilities and other necessary utilities will be available in sufficient
capacity to service each of the Attitash Residential Units and Attitash
Commercial Units at the Attitash Project.
(c) Amenities. On and after the Closing Date, each purchaser of a
Attitash Quartershare Interest at the Attitash Project will have access
to, and the use of, all of the amenities and public utilities relating to
the Attitash Project and the Attitash Common Elements (subject to only the
requirements of the Attitash Project Documents).
(d) Laws. The Attitash Residential Units and the Attitash
Quartershare Interests in respect thereof in the Attitash Project comply
with all applicable restrictive covenants, zoning and land use ordinances
and regulations and building codes, all applicable health and
environmental laws and regulations and all other applicable laws, rules
and regulations and all approvals, consents, licenses and certificates of
occupancy in respect of the use and operation of such Attitash Residential
Units and Attitash Quartershare Interests have been obtained and are in
full force and effect.
(e) Sale of Quartershare Interests. The sale, offering of sale, and
financing of Attitash Quartershare Interests in the Attitash Project (i)
do not constitute the sale, or the offering of sale, of Securities subject
to the registration requirements of the Securities Act of 1933, as
amended, or the blue-sky securities laws of the State of New Hampshire,
(ii) are only done in the State of New Hampshire (and no solicitation and
no advertising in respect of the sale of Attitash Quartershare Interests
in the Attitash Project that would, in either case, be in violation of
applicable law is done in any other state or province other than the
Applicable States), (iii) except as set forth in that certain letter from
the Borrower to the Administrative Agent dated the Closing Date, do not
violate any applicable federal, state or local consumer credit, sale
rescission or usury statute, including, without limitation, any such
statute of any state in which an obligor of a Quartershare Note in respect
of an Attitash Quartershare Interest may reside, and (iv) do not violate
in any material respect any other applicable federal, state or local law,
statute or regulation.
(f) Exchange Program. The Attitash Project has been accepted by
Resorts Condominium International, Inc. into its timeshare exchange
program and the Borrower and the Attitash Project are in good standing as
participants in such timeshare exchange program and have satisfied all
eligibility requirements in respect thereof.
5. CONDITIONS PRECEDENT TO PRE-SALE ADVANCE
The obligation of the Lenders to make the Pre-Sale Advance shall be
subject to the following conditions precedent (all deliveries required in this
Section 5 shall be made to the Administrative Agent and the Disbursement Agent
not less than 15 Business Days prior to the date of the making of the Pre-Sale
Advance):
5.1 Opinions of Counsel.
The Administrative Agent shall have received from Christopher Howard,
general counsel for the Borrower and L.B.O. Holding, Inc., a closing opinion
substantially in the form of Exhibit N-1 attached to this Agreement dated the
Closing Date and from Wadleigh, Starr, Peters, Dunn
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& Chiesa, local counsel for the Borrower and L.B.O. Holding, Inc. for the State
of New Hampshire, closing opinions substantially in the forms thereof set forth
in Exhibit N-2 attached to this Agreement and dated the Closing Date.
5.2 Warranties and Representations True as of Closing Date.
(a) The warranties and representations contained in this Agreement
shall be true in all material respects on the Closing Date.
(b) The Borrower shall not have taken any action, or permitted any
condition to exist which would have been prohibited by any provision of
this Agreement if such provision had been binding and effective at all
times during the period from July 2, 1997 to and including the Closing
Date.
5.3 Compliance with this Agreement.
The Borrower shall have performed and complied with all covenants,
agreements and conditions contained herein (including all of the conditions set
forth in this Section 5) which are required to be performed or complied with by
it before or on the Closing Date.
5.4 Officer's Certificates; Secretary's Certificates; Good-Standing
Certificates.
(a) The Administrative Agent shall have received a certificate,
substantially in the form of Exhibit O to this Agreement, dated as of the
Closing Date and signed by the chief financial officer or other senior
officer of the Borrower, certifying that the conditions specified in
Sections 5.2 and 5.3 of this Agreement have been fulfilled.
(b) The Administrative Agent shall have received a certificate of
the secretary or assistant secretary of the Borrower, substantially in the
form of Exhibit P to this Agreement, dated as of the Closing Date,
certifying (i) the adoption by the board of directors of the Borrower of a
resolution authorizing the Borrower to enter into this Agreement and the
transactions and instruments contemplated hereby (including, without
limitation, the execution and delivery of the Security Documents to which
the Borrower is a party and the granting of the Liens in and to the
Collateral), and (ii) as to the incumbency of, and verifying the specimen
signatures of, the signatories of the Borrower.
(c) The Borrower shall have delivered to the Administrative Agent,
in form satisfactory to the Administrative Agent, a recent good standing
certificate from the Secretary of State of Maine certifying the Borrower's
good standing together with a certified copy of its articles of
organization duly recorded with the Secretary of State of Maine (and all
amendments thereto) and a copy of its By-Laws, certified by a senior
officer of the Borrower to be true and correct.
(d) The Administrative Agent shall have received a certificate of
the Secretary or any Assistant Secretary of each of the Parent and L.B.O.
Holding, Inc. substantially in the form of Exhibit Q to this Agreement,
dated as of the Closing Date, certifying (i) the adoption by the Board of
Directors of Parent and L.B.O. Holding, Inc., as the case may be, of a
resolution authorizing the Parent and L.B.O. Holding, Inc. to enter into
the
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subordination agreement contemplated hereby and (ii) the incumbency and
authority of, and verifying the specimen signatures of, the officers of
the Parent and L.B.O. Holding, Inc., as the case may be, authorized to
execute and deliver such subordination agreement.
(e) Each of the Parent and L.B.O. Holding, Inc. shall have delivered
to the Administrative Agent, in form satisfactory to the Administrative
Agent, a recent good standing certificate from the Secretary of State of
Maine certifying the Parent's and L.B.O. Holding, Inc.'s due corporate
existence and including a certified copy of its articles of organization
duly recorded with the Secretary of State of Maine (and all amendments
thereto) and a copy of its By-Laws, certified by a senior officer of the
Parent and L.B.O. Holding, Inc., as the case may be, to be true and
correct. Each of the Parent and L.B.O. Holding, Inc. shall have delivered
to the Administrative Agent, in form satisfactory to the Administrative
Agent, a recent certificate from the Secretary of State of New Hampshire
certifying the Parent's and L.B.O. Holding's status as a foreign
corporation duly qualified to transact business in the State of New
Hampshire.
5.5 Uniform Commercial Code Financing Statements.
All filings of Uniform Commercial Code financing statements and all other
filings and actions necessary to perfect the Administrative Agent's security
interests in and to the Collateral shall have been filed and confirmation
thereof received.
5.6 Assignment of Property-Related Contracts.
The Borrower shall have delivered to the Administrative Agent certified
copies of all material Property-Related Contracts in respect of the Attitash
Project and executed and delivered in favor of the Administrative Agent an
assignment or assignments thereof, in substantially the form of Exhibit R
attached to this Agreement. All such Property-Related Contracts shall be
satisfactory to the Administrative Agent in form and substance. Each Person
(other than the Borrower) which is a party to any such Property-Related Contract
set forth on Schedule 11 hereto shall have been notified of the assignment
thereof.
5.7 Assignment of Declarant's Rights.
The rights (but not the obligations) of the Borrower as declarant under
the Attitash Declaration shall have been assigned to the Administrative Agent
pursuant to an assignment substantially in the form of Exhibit M hereof, and the
Attitash Association shall have consented to the same.
5.8 Subordination of Indebtedness.
The Borrower, the Parent and L.B.O. Holding, Inc., a Maine company, shall
have entered into one or more Subordination Agreements, substantially in the
form of Exhibit S attached to this Agreement (as amended, individually, a
"Subordination Agreement" and, collectively, the "Subordination Agreements").
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5.9 Expenses.
The Borrower shall have paid all fees and expenses required to be paid
under this Agreement, including, without limitation, the fees and expenses set
forth in Section 11.2 of this Agreement and the commitment fee referred to in
Section 2.7 hereof.
5.10 Note; Blanket Mortgages; Assignment of Rents.
(a) Notes. The Borrower shall have executed and delivered the Notes
to the Lenders.
(b) Blanket Mortgages. The Borrower shall have executed and
delivered to the Administrative Agent the Blanket Mortgage encumbering all
of the unsold Attitash Quartershare Interests, Residential Units and
Commercial Units as of the Closing date as well as the Declarant's rights
in respect of the convertible lands under, and as defined in, the Attitash
Declaration. Such Blanket Mortgage shall have been recorded, as of the
Closing Date, in the applicable recording office in Carroll County, New
Hampshire and all taxes, recording fees and other fees and charges
required by applicable law to be paid in connection therewith shall have
been duly paid in full. Such Blanket Mortgage shall have created a valid
Lien in and to the unsold Attitash Quartershare Interests, Residential
Units and Commercial Units as of the Closing date and in and to said
convertible lands in respect of the Obligations, subject to no other Liens
except for the Permitted Exceptions.
(c) Assignment of Rents. The Borrower shall have executed and
delivered to the Administrative Agent assignments of leases and rents for
the Attitash Project (such assignment of leases and rents and the other
assignments of leases and rents to be obtained in the other Projects are
referred to herein, individually, as an "Assignment of Rents," and,
collectively (as the context may require), the "Assignments of Rents";
each reference to an Assignment of Rents shall mean such Assignment of
Rents as amended from time to time), substantially in the form of Exhibit
T to this Agreement (with such changes to such form as may be required by
Administrative Agent for the use of such form in the State of New
Hampshire). Such Assignment of Rents shall have been recorded in the
applicable recording office of Carroll County, New Hampshire and all
taxes, recording fees and other fees and charges required by applicable
law to be paid in connection therewith shall have been duly paid in full.
Such Assignment of Rents shall have created a valid Lien in and to the
Property referred to therein in respect of the Obligations subject to no
other Liens except for the Permitted Exceptions.
(d) TFC Architect. The TFC Architect shall have accepted its
appointment.
5.11 Title Insurance; Casualty Insurance.
(a) Title Insurance Policy {Blanket} The Borrower shall have
delivered to the Administrative Agent a mortgagee's title insurance policy
(issued to the Administrative Agent and in full force and effect) in
respect of the Blanket Mortgage encumbering the Attitash Project (said
mortgagee's title insurance policy together with the other mortgagee's
title insurance policies in respect of the other Blanket Mortgages, the
"Title
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Insurance Policy {Blanket}") together with such endorsements thereto as
the Administrative Agent may require, dated the Closing Date. The Title
Insurance Policy {Blanket} in respect of the Blanket Mortgage encumbering
the Attitash Project (a) shall have been issued by a title insurance
company which is satisfactory to the Administrative Agent, (b) shall be in
form and substance satisfactory to the Administrative Agent and its
special counsel, (c) shall be in amount not less than the principal amount
of the Pre-Sale Advance, (d) shall insure that such Blanket Mortgage
creates a valid first Lien in and to the Attitash Project free and clear
of all defects, encumbrances and other Liens unacceptable to the
Administrative Agent and (e) shall contain such further endorsements and
affirmative coverage as the Administrative Agent may request, including,
without limitation, automatic increases in the amount of the insurance
upon the making of future Project Advances and/or Interest Advances by the
Lenders so that, at all times, the amount of the insurance provided by the
Title Insurance Policy {Blanket} shall equal or exceed the aggregate
outstanding amount of all Advances, provided that the maximum value of
such insurance in respect of the Attitash Project shall be limited to
$10,000,000 and provided further that no mechanic's, materialmen's or
laborer's liens endorsement or current survey or easement endorsement
shall be required in respect of the so-called mechanic's lien, easement
and survey exceptions in such Title Insurance Policy {Blanket}. All
premiums in respect of such Title Insurance Policy {Blanket} shall have
been paid in full and evidence thereof shall have been delivered to the
Administrative Agent.
(b) Insurance. The Borrower shall have delivered to the
Administrative Agent certificates of insurance evidencing the insurance
policies and endorsements relating to the Attitash Project that are
required to be delivered pursuant to Section 3.5 hereof, together with
copies of such insurance policies certified by the Borrower to be true and
correct. All premiums in respect of such insurance policies shall have
been paid in full and evidence thereof shall have been delivered to the
Administrative Agent.
5.12 Environmental Site Assessment Report.
The Borrower (at its own expense) shall have delivered to the
Administrative Agent not less than 15 Business Days prior to the Closing Date a
"Phase I" environmental survey of the Attitash Project, provided that if such
"Phase I" environmental survey is not available or is unsatisfactory to the
Administrative Agent (in its sole determination), the Borrower (at its own cost)
shall have delivered to the Administrative Agent an engineering report or
reports which shall be in form and substance satisfactory to the Administrative
Agent and shall confirm the following items:
(a) the absence of Hazardous Substances on or under the Attitash
Project and any portion thereof; and
(b) that the engineering firm has obtained, reviewed and included
within its report a printout from the Comprehensive Environmental Response
Compensation and Liability Information System of the Environmental
Protection Agency and all other applicable state and local authorities and
such other information as the Administrative Agent may reasonably require,
all of which information shall confirm that there is no reason to believe
that any Hazardous Substances exist on or under the Attitash Project
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and that there is no known or suspected Hazardous Substance waste site
located at the Attitash Project or in such proximity thereto as to create
a material risk of contamination of the Attitash Project.
Each environmental survey and engineering report delivered pursuant to
this Section shall provide that the Lenders may rely thereon in connection with
its making Advances hereunder.
5.13 Taxes.
The Borrower shall have delivered to the Administrative Agent copies of
the most recent tax receipts for the Attitash Project (or certificates in
respect thereof) evidencing no delinquency in the payment thereof.
5.14 Inspection.
The Borrower shall have permitted the Administrative Agent, the Lenders,
the TFC Architect, and/or any of their representatives to make an
inspection/audit of its books, accounts and records and such other papers as
they may desire and of its premises and of the Attitash Project, as the Lenders
may in its sole discretion determine. Such inspection/audit shall have been
satisfactory to the Lenders (in its sole determination).
5.15 Survey.
The Borrower shall have delivered to the Administrative Agent a survey of
the Attitash Project, prepared by a licensed surveyor acceptable to the
Administrative Agent and shall contain a certification noted thereon in form and
substance satisfactory to the Administrative Agent; such survey shall show no
easements, rights-of-way, encroachments, streets or alleys which interfere with
the use, enjoyment or market value of the Attitash Project.
5.16 Delivery of Contracts; Assignments of Certain Other Contracts.
(a) Assignment of Contracts. The Borrower shall have delivered to
the Administrative Agent copies of all of its Contracts relating to the
Attitash Project or any other Project and an instrument (substantially in
the form of Exhibit U attached to this Agreement) confirming the
collateral assignment to the Administrative Agent hereunder of all of the
Borrower's right, title and interest in and to each of such Contracts.
(b) Loan Disbursement Agreement. The Borrower and the Disbursement
Agreement shall have executed the Loan Disbursement Agreement and
delivered an executed copy thereof to the Administrative Agent. All costs
and expenses of the Disbursement Agent shall have been paid in full. All
Disbursement Agent reports required to be delivered to the Administrative
Agent under the Loan Disbursement Agreement in respect of the Pre-Sale
Advance shall have been delivered to the Administrative Agent and shall be
reasonably satisfactory to it.
5.17 Budgets; Plans; Architect; Cost and Architect Certificates;
Miscellaneous.
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(a) Escrow Letter. The Attitash Escrow Agent shall have executed and
delivered to the Administrative Agent the escrow account acknowledgement
letter set forth in Exhibit A attached to this Agreement.
(b) Take-Out Facility. Borrower shall have received a Take-Out
Facility commitment or letter of intent and shall have executed the same
and returned the same to Textron Financial Corporation.
(c) Equity Moneys. The Borrower shall have delivered to the
Administrative Agent a certificate executed by the chief financial officer
or other senior officer of the Borrower showing that the Borrower has
received Equity Moneys and other contributions to its equity in an
aggregate amount of not less than the greater of $14,400,000 or 20% of the
fair market value of the land of the Projects and the other costs and
expenses set forth on Schedule 22 hereto (such Equity Moneys and other
contributions are referred to herein as "Closing Date Equity
Contributions").
5.18 Pre-Construction Cost Certificate.
With respect to the portion of the Pre-Sale Advance being used to
reimburse the Borrower for the Pre-Construction Costs,
(a) the Borrower shall have certified the same, in writing, to the
Administrative Agent and submitted to the Lender a fully executed and
completed Pre-Construction Cost Certificate (with all attachments thereto,
including, without limitation, the TFC Architect's Pre-Construction Cost
Certificate), and
(b) the Borrower shall have delivered a writing to the
Administrative Agent (i) requesting the making of the Pre-Sale Advance,
(ii) certifying that the conditions to borrowing set forth in this Section
5 and in Section 2.1 hereof are satisfied in respect of such Pre-Sale
Advance, and (iii) certifying that no Default or Event of Default exists.
The foregoing shall be forwarded to the Administrative Agent not less than 5
Business Days prior to the date on which the Pre-Sale Advance shall have been
requested to be made, and shall be satisfactory to both the Administrative Agent
and the TFC Architect. The Borrower acknowledges that the Lenders shall not make
Advances in respect of costs which have not been approved by the Administrative
Agent.
5.19 Payoff of Existing Attitash Loan.
With respect to the portion of the Pre-Sale Advance being used to pay-off
the Existing Attitash Loan,
(a) the Borrower shall have delivered to the Administrative Agent a
copy of a payoff letter in respect of the Existing Attitash Loan showing
the amount required to payoff such Loan in full, and
(b) the Existing Attitash Loan lender shall have executed and
delivered a release or releases of the mortgage, assignment of rents and
collateral assignment of
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declarant's rights encumbering the Attitash Project that shall be recorded
upon funding of the Pre-Sale Advance or are otherwise subject to escrow
arrangements that are satisfactory to the Administrative Agent.
Such portion of the Pre-Sale Advance shall be funded directly to the Existing
Attitash Loan lender or to the Title Company or in such other manner as the
Administrative Agent may require in order to assure Lenders that such portion is
received by the Existing Attitash Loan lender.
5.20 Proceedings Satisfactory.
All actions taken in connection with the execution of this Agreement, the
Notes, any other Security Document and all documents and papers relating thereto
shall be satisfactory to the Lenders and their counsel. The Lenders shall be
satisfied with its physical inspection of the Attitash Project. The Lenders and
their counsel shall have received copies of such documents and papers as the
Lenders or such counsel may reasonably request in connection therewith, all in
form and substance satisfactory to the Lenders and their counsel.
6. SUBSEQUENT PROJECT ADVANCES CLOSING CONDITIONS
After the making of the Pre-Sale Advance, the obligation of the Lenders to
make Project Advances in respect of any Under-Construction Project (individually
a "Subsequent Project Advance") on a Business Day of any month (herein referred
to as a "Subsequent Project Advance Date") shall be subject to the satisfaction
of all of the following conditions precedent as applicable to such
Under-Construction Project:
6.1 First Project Advance.
The following conditions shall be satisfied if the Subsequent Project
Advance is the first Project Advance:
(a) Opinions of Counsel. The Administrative Agent shall have
received from Christopher Howard, general counsel for the Borrower, Sunday
River Skiway Corporation, Killington, Ltd. and Mount Snow, Ltd.
substantially in the form of Exhibit N-3 attached to this Agreement dated
the Closing Date, a closing opinion substantially in the form of Exhibit
N-4 attached to this Agreement dated the Closing Date, from Pierce Atwood,
local counsel for the Borrower and Sunday River Skiway Corporation for the
State of Maine and a closing opinion substantially in the form of Exhibit
N-5 attached to this Agreement dated the Closing Date and from Reiber,
Kenlan, Schweibert & Facey, local counsel for the Borrower, Killington,
Ltd. and Mount Snow, Ltd. for the State of Vermont.
(b) Assignment of Property-Related Contracts. The Borrower shall
have delivered to the Administrative Agent certified copies of all
material Property-Related Contracts in respect of the Jordan Bowl,
Killington and Mt. Snow Projects and executed and delivered in favor of
the Administrative Agent an assignment or assignments thereof, in
substantially the form of Exhibit R attached to this Agreement. All such
Property-Related Contracts shall be satisfactory to the Administrative
Agent in form and substance. Each Person (other than the Borrower) which
is a party to any such Property-Related
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Contract set forth on Schedule 11 hereto shall have been notified of the
assignment thereof.
(c) Assignment of Declarant's Rights. The rights (but not the
obligations) of the Borrower as declarant under the Jordan Bowl,
Killington and Mt. Snow Declarations shall have been assigned to the
Administrative Agent pursuant to an assignment substantially in the form
of Exhibit M hereof, and the Jordan Bowl, Killington and Mt. Snow
Associations, respectively, shall have consented to the same.
(b) Blanket Mortgages. The Borrower shall have executed and
delivered Blanket Mortgages encumbering the Jordan Bowl Project, the
Killington Project and the Mt. Snow Project, respectively, to the
Administrative Agent. Such Blanket Mortgages shall have been recorded, as
of the Closing Date, in the applicable recording office in Maine and
Vermont and all taxes, recording fees and other fees and charges required
by applicable law to be paid in connection therewith shall have been duly
paid in full. Such Blanket Mortgages shall have created a valid Lien in
and to the Jordan Bowl Project, the Killington Project and the Mt. Snow
Project, respectively, in respect of the Obligations, subject to no other
Liens except for the Permitted Exceptions.
(c) Assignment of Rents. The Borrower shall have executed and
delivered to the Administrative Agent Assignments of Rents, and which
shall assign to Administrative Agent, among other things, all of the
Borrower's right, title and interest in and to the Host Company Lease
Agreement relating to the Jordan Bowl Project, the Killington Project and
the Mt. Snow Project, respectively. Such Assignments of Rents shall have
been recorded in the applicable recording office of Maine and Vermont and
all taxes, recording fees and other fees and charges required by
applicable law to be paid in connection therewith shall have been duly
paid in full. Such Assignments of Rents shall have created a valid Lien in
and to the Property referred to therein in respect of the Obligations
subject to no other Liens except for the Permitted Exceptions. The
appropriate Host Company shall have acknowledged in writing its obligation
to make all payments under such Host Company Lease Agreements directly to
the Administrative Agent.
(d) Title Insurance Policy {Blanket}. The Borrower shall have
delivered to the Administrative Agent Title Insurance Policies {Blanket}
(issued to the Administrative Agent and in full force and effect) in
respect of the Blanket Mortgages encumbering the Jordan Bowl Project, the
Killington Project and the Mt. Snow Project together with such
endorsements thereto as the Administrative Agent may require, dated the
Closing Date. Such Title Insurance Policies {Blanket} (a) shall have been
issued by a title insurance company which is satisfactory to the
Administrative Agent, (b) shall be in form and substance satisfactory to
the Administrative Agent and its special counsel, (c) shall be in a
maximum amount not less than $55,000,000 subject to such tie-in or
coordination endorsements as shall be acceptable to the Administrative
Agent and shall be reflective of the values set forth in the first proviso
set forth below, (d) shall insure that such Blanket Mortgages create a
valid first Lien in and to the Jordan Bowl Project, the Killington Project
and the Mt. Snow Project, respectively, free and clear of all defects,
encumbrances and other Liens unacceptable to the Administrative Agent and
(e) shall contain such further endorsements and affirmative coverage as
the Administrative Agent may request,
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including, without limitation, automatic increases in the amount of the
insurance upon the making of future Project Advances and/or Interest
Advances by the Lenders so that, at all times, the amount of the insurance
provided by the Title Insurance Policy {Blanket} shall equal or exceed the
aggregate outstanding amount of all Advances, provided that the maximum
value of such insurance in respect of the Jordan Bowl Project shall be
limited to $21,270,000, the maximum value of such insurance in respect of
the Killington Project shall be limited to $23,270,000 and the maximum
value of such insurance in respect of the Mt. Snow Project shall be
limited to $22,460,000, and provided further that no mechanic's,
materialmen's or laborer's liens endorsement or current survey or easement
endorsement shall be required in respect of the so-called mechanic's lien,
easement and survey exceptions in such Title Insurance Policies {Blanket}.
All premiums in respect of such Title Insurance Policies {Blanket} shall
have been paid in full and evidence thereof shall have been delivered to
the Administrative Agent.
The Borrower shall have delivered to the Administrative Agent a
title insurance endorsement to the Title Insurance Policy {Blanket} in
respect of the Blanket Mortgage for the Attitash Project in form and
substance reasonably satisfactory to it whereby the effective date of such
Title Insurance Policy {Blanket} shall be made such Subsequent Project
Advance Date, all exclusions and/or exceptions not satisfactory to the
Administrative Agent shall have been removed or appropriate endorsements
in respect thereof shall have been obtained. Such Title Insurance Policy
{Blanket} shall be in a maximum amount of not less than $55,000,000
subject to such tie-in or coordination endorsements as shall be acceptable
to the Administrative Agent and shall be reflective of the values set
forth above and a value of $10,000,000 for the Attitash Project. All
premiums in respect of such endorsement to such Title Insurance Policy
{Blanket} shall have been paid in full and evidence thereof shall have
been delivered to the Administrative Agent.
(e) Insurance. The Borrower shall have delivered to the
Administrative Agent certificates of insurance evidencing the insurance
policies and endorsements relating to the Jordan Bowl, Killington and Mt.
Snow Projects that are required to be delivered pursuant to Section 3.5
hereof, together with copies of such insurance policies certified by the
Borrower to be true and correct. All premiums in respect of such insurance
policies shall have been paid in full and evidence thereof shall have been
delivered to the Administrative Agent.
(f) Environmental Site Assessment Report. The Borrower (at its own
expense) shall have delivered to the Administrative Agent not less than 15
Business Days prior to the Subsequent Project Advance Date a "Phase I"
environmental survey of the Jordan Bowl Project, the Killington Project
and the Mt. Snow Project, provided that if such "Phase I" environmental
survey is not available or is unsatisfactory to the Administrative Agent
(in its sole determination), the Borrower (at its own cost) shall have
delivered to the Administrative Agent an engineering report or reports
which shall be in form and substance satisfactory to the Administrative
Agent and shall confirm the following items:
(i) the absence of Hazardous Substances on or under the Jordan
Bowl Project, the Killington Project and the Mt. Snow Project and
any portion thereof, respectively; and
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(ii) that the engineering firm has obtained, reviewed and
included within its report a printout from the Comprehensive
Environmental Response Compensation and Liability Information System
of the Environmental Protection Agency and all other applicable
state and local authorities and such other information as the
Administrative Agent may reasonably require, all of which
information shall confirm that there is no reason to believe that
any Hazardous Substances exist on or under the Jordan Bowl Project,
the Killington Project and the Mt. Snow Project and that there is no
known or suspected Hazardous Substance waste site located at the
Jordan Bowl Project, the Killington Project and the Mt. Snow Project
or in such proximity thereto as to create a material risk of
contamination of the Jordan Bowl Project, the Killington Project and
the Mt. Snow Project.
The Borrower (at its own expense) shall have also delivered to
the Administrative Agent an engineering report in respect of the
soil conditions at the Jordan Bowl Project, the Killington Project
and the Mt. Snow Project and the ability of such soil to support the
improvements contemplated in the Plans for the Jordan Bowl Project,
the Killington Project and the Mt. Snow Project. Each such
engineering report shall be accompanied by a satisfactory opinion to
the Lenders from the TFC Architect regarding such engineering report
and the ability of the soil at the Jordan Bowl Project, the
Killington Project and the Mt. Snow Project to support the
improvements contemplated in the Plans for the Jordan Bowl Project,
the Killington Project and the Mt. Snow Project.
Each environmental survey and engineering report delivered
pursuant to this clause (f) shall provide that the Lenders may rely
thereon in connection with its making Advances hereunder.
(g) Taxes. The Borrower shall have delivered to the Administrative
Agent copies of the most recent tax receipts for the Jordan Bowl Project,
the Killington Project and the Mt. Snow Project (or certificates in
respect thereof) evidencing no delinquency in the payment thereof.
(h) Inspection. The Borrower shall have permitted the Administrative
Agent, the Lenders, the TFC Architect, and/or any of their representatives
to make an inspection/audit of the Jordan Bowl Project, the Killington
Project and the Mt. Snow Project as the Lenders may in its sole discretion
determine. Such inspection/audit shall have been satisfactory to the
Lenders (in its sole determination).
(i) Survey. The Borrower shall have delivered to the Administrative
Agent a survey of each of the Jordan Bowl Project, the Killington Project
and the Mt. Snow Project showing its perimeter; such survey shall be
prepared in accordance with ALTA/ACSM 1992 Minimum Survey Requirements by
a licensed surveyor acceptable to the Administrative Agent and shall be
dated (or re-certified) as of a recent date and shall contain a
certification noted thereon in form and substance satisfactory to the
Administrative Agent; such survey shall show no easements, rights-of-way,
encroachments, streets or alleys which interfere with the use, enjoyment
or market value of the Jordan Bowl Project, the Killington Project and the
Mt. Snow Project, respectively.
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(j) Permits. The Borrower shall have delivered to the Administrative
Agent a copy of all of the permits allowing the construction and
development of the Jordan Bowl Project, the Killington Project and the Mt.
Snow Project, respectively.
(k) Architect's Contract. The Borrower shall have delivered to the
Administrative Agent and the TFC Architect a copy of the architectural
contract with the Architect for each of Jordan Bowl Project, the
Killington Project and the Mt. Snow Project. The Borrower shall have
delivered to the Administrative Agent an assignment of its rights under
each such contract (duly consented to by each such Architect)
substantially in the form of Exhibit V hereto. Each Such Architect and
each such architectural contract shall be satisfactory to the
Administrative Agent.
(l) Construction Contract. The Borrower shall have delivered to the
Administrative Agent and the TFC Architect a copy of the Construction
Contract with the General Contractor for each of the Jordan Bowl Project,
the Killington Project and the Mt. Snow Project. The Borrower shall have
delivered to the Administrative Agent an assignment of its rights under
each such Construction Contract (duly consented to by each such General
Contractor), which assignment shall be substantially in the form of
Exhibit W hereto, and an assignment of each payment and performance bond
covering each such General Contractor, which bonds and the surety(s)
issuing the same shall be satisfactory to the Administrative Agent and
shall name Administrative Agent on behalf of the Lenders as dual obligee.
Each such General Contractor and each such Construction Contract shall be
satisfactory to the Administrative Agent.
The Borrower shall have delivered to the Administrative Agent and
the TFC Architect a copy of each subcontract in respect of the Jordan Bowl
Project, the Killington Project and the Mt. Snow Project in excess of
$50,000.
(m) Budgets. The Borrower shall have submitted to the Administrative
Agent the Budget for each of Jordan Bowl Project, the Killington Project
and the Mt. Snow Project and such Budget shall be reasonably satisfactory
to the Administrative Agent and the TFC Architect, and shall have been
certified as being true and correct by the chief financial officer of
Borrower. No such Budget shall have been modified or supplemented without
the prior written consent of the Administrative Agent.
(n) Plans. The Borrower shall have delivered to the Administrative
Agent and the TFC Architect a copy of the Plans for each of Jordan Bowl
Project, the Killington Project and the Mt. Snow Project and each such
Plan shall be reasonably satisfactory to the Administrative Agent and to
the TFC Architect. No such Plan shall have been modified or supplemented
without the prior written consent of the Administrative Agent.
(o) Architect's Certificate. The Architect shall have delivered a
certificate to the Administrative Agent to the effect that (i) the Plans
for each of Jordan Bowl Project, the Killington Project and the Mt. Snow
Project are complete, (ii) the construction and furnishing of the Jordan
Bowl Project, the Killington Project and the Mt. Snow Project pursuant to
the Plans for each of such Projects and the intended use of each of such
Projects complies with all zoning and other ordinances, rules, regulations
and building and use restrictions applicable thereto, (iii) all necessary
architectural, design and
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landscaping approvals have been obtained under applicable law and (iv) the
construction and furnishing of Jordan Bowl Project, the Killington Project
and the Mt. Snow Project in accordance with the Plans therefor can be
completed within the construction budget criteria therefor as set forth in
the respective Budgets for such Projects. Such certificate shall be
reasonably satisfactory to the Administrative Agent and to the TFC
Architect and shall address such other issues or matters as the
Administrative Agent may reasonably request.
(p) Escrow Letter. Each of the Jordan Bowl Escrow Agent, the
Killington Escrow Agent and the Mt. Snow Escrow Agent shall have executed
and delivered to the Administrative Agent the escrow account
acknowledgement letter set forth in Exhibit A attached to this Agreement.
(q) Secretary's Certificate. The Administrative Agent shall have
received a certificate of the Secretary or any Assistant Secretary of each
of Host Companies of the Under-Construction Projects substantially in the
form of Exhibit Q to this Agreement, dated as of the Closing Date,
certifying (i) the adoption by the Board of Directors of such Host Company
of a resolution authorizing the such Host Company to enter into the
subordination agreement contemplated hereby and its Host Company Lease
Agreement and (ii) the incumbency and authority of, and verifying the
specimen signatures of, the officers of such Host Company authorized to
execute and deliver such subordination agreement and such Host Company
Lease Agreement.
(r) Good Standing Certificates. Each Host Company of an
Under-Construction Project shall have delivered to the Administrative
Agent, in form satisfactory to the Administrative Agent, a recent good
standing certificate from the Secretary of State of Maine or Vermont, as
the case may be, certifying such Host Company's due corporate existence
and including a certified copy of its articles of organization duly
recorded with the Secretary of State of Maine or Vermont, as the case may
be, (and all amendments thereto) and a copy of its By-Laws, certified by a
senior officer of such Host Company
(s) Host Company Lease Agreements; Subordination Agreements. The
Borrower shall have delivered to the Administrative Agent fully executed
and valid Host Company Lease Agreement for each of the Under-Construction
Projects. Each of the Host Companies in respect of the Under-Construction
Projects and the Borrower shall have executed and delivered to the
Administrative Agent a Subordination Agreement.
6.2 Special Submissions.
(a) Amendments to Plans and Budgets. The Borrower shall have
submitted to the Administrative Agent any amendments and/or modifications
to the Plans for such Under-Construction Project and any of the other
Under-Construction Projects, which amendments and modifications shall be
acceptable to the Administrative Agent in its reasonable discretion. The
Borrower shall have submitted to the Administrative Agent any amendments
and/or modifications to the Budget for such Under-Construction Project and
any of the other Under-Construction Projects, which amendments and/or
modifications shall be acceptable to the Administrative Agent in its
reasonable discretion.
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(b) Declaration Requirements. The Borrower shall have complied with
the requirements of Section 3.17 hereof.
(c) Take-Out Facility. The Take-Out Facility letter of intent shall
be in full force and effect or, if the Take-Out Facility shall have been
documented, the undertakings of the Textron Financial Corporation
thereunder shall be in full force and effect.
(d) Change Orders. No change orders in respect of the Construction
Contract for such Under-Construction Project or for any of the other
Under-Construction Projects shall have been effected without the prior
written consent of the Administrative Agent if any such change order for
such Under-Construction Project has a cost of in excess of $50,000 or if
such change order and all other such change orders for such
Under-Construction Project have an aggregate cost in excess of $200,000.
(e) Material Change Orders. No change orders in respect of the
Construction Contract for such Under-Construction Project or any of the
other Under-Construction Projects shall have been effected without the
prior written consent of the Administrative Agent if any such change order
involved (i) a material modification in the architectural, mechanical or
structural design of the building to be constructed in respect of such
Under-Construction Project or such other Under-Construction Projects or
(ii) a material change in the quality of workmanship or materials to be
used in any such building or (iii) a delay in the final completion date
for the construction of such building beyond October 31, 1998.
(f) Modifications to Other Contracts. No modifications to the
architectural contract with the Architect for such Under-Construction
Project or any other Under-Construction Project shall have been effected
without the prior written consent of the Administrative Agent.
(g) Construction Contract Default. No material default shall exist
in respect of the Construction Contract for such Under-Construction
Project or any other Under-Construction Project.
(i) Delivery of Contracts. The Borrower shall have delivered to the
Administrative Agent all of its Contracts for such Under-Construction
Project and any other Under-Construction Project to the extent not
previously delivered.
(j) Section 2.2 Conditions. All of the conditions to lending set
forth in Section 2.2 shall have been satisfied.
6.3 Requests for Subsequent Project Advance.
A request for such Subsequent Project Advance in respect of any
Under-Construction Project (a "Project Advance Request")
(a) shall be in writing,
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(b) shall state the name of the Under-Construction Project to which
such Subsequent Project Advance relates,
(b) if all or portion of such Subsequent Project Advance is to be
used to satisfy Construction Costs for such Under-Construction Project,
the Borrower shall have certified the same in such request to the
Administrative Agent and shall attach to such request a fully executed and
completed Construction Cost Certificate for such Under-Construction
Project (with all attachments thereto, including, without limitation, an
Architect's Construction Cost Certificate for such Under-Construction
Project),
(c) if all or portion of such Subsequent Project Advance is to be
used to satisfy FF&E Costs for such Under-Construction Project and/or
Sales, Marketing & Other Costs for such Under-Construction Project, the
Borrower shall have certified the same to the Administrative Agent in such
request and shall attach to such request a fully executed and completed
Nonconstruction Cost Certificate for such Under-Construction Project (with
all attachments thereto, including, without limitation in the case of a
Subsequent Project Advance financing FF&E Costs for such
Under-Construction Project, a TFC Architect's Nonconstruction Cost
Certificate for such Under-Construction Project),
(d) shall state what portion of such Subsequent Project Advance is
to defray Construction Costs, FF&E Costs and/or Sales, Marketing & Other
Costs, in each case, in respect of such Under-Construction Project, shall
show the calculation of any Retainage Amounts in respect thereof of the
portion of such Subsequent Project Advance in respect of Construction
Costs for such Under-Construction Project, shall certify that the
conditions to borrowing set forth in Section 2.2 hereof are satisfied in
respect of such Subsequent Project Advance and shall certify that no
Default or Event of Default exists,
(e) if such Subsequent Project Advance is to also constitute a Final
Construction Cost Advance for such Under-Construction Project, shall so
identify such Subsequent Project Advance as the "Final Construction Cost
Advance", shall show and certify all calculations in respect of the
aggregate amount of all contractually required Retainage Amounts to be
financed thereby, and shall have attached thereto the Final Construction
Cost Certificate for such Under-Construction Project (including all
attachments thereto, which shall include the Architect's Final
Construction Cost Certificate for such Under-Construction Project),
(f) shall have been delivered to the office of the Administrative
Agent and the TFC Architect at least 10 Business Days in advance of the
Subsequent Project Advance Date, and
(g) shall otherwise be substantially in the form of Exhibit X
attached to this Agreement.
The requirements in clause (a) through clause (g) above shall be satisfied in
the sole opinion of the Administrative Agent and the TFC Architect. The Borrower
acknowledges that the Lenders shall not make Project Advances in respect of
costs which have not been approved by it. The Lenders agree with the Borrower
that the costs set forth in the Budget for each Under-Construction Project are
acceptable to them and that neither they nor the Administrative Agent
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shall unreasonably withhold its approval in respect of costs corresponding to
those in any such Budget subject to (i) such costs conforming to the amounts,
conditions, assumptions and requirements of such Budget, (ii) the proper
incurrence and documentation of such costs, and (iii) the submission of proper
written certification in respect of such costs from the Borrower, the General
Contractor for such Under-Construction Project, the Architect for such
Under-Construction Project and the TFC Architect, as provided for above. The
Borrower agrees to submit one Project Request Advance for each
Under-Construction Project for which a Project Advance is needed; the Borrower
agrees not to use one Project Request Advance to request Project Advances for
more than one Under-Construction Project.
6.4 Final Construction Advance Conditions.
If such Subsequent Project Advance for any such Under-Construction Project
shall constitute, in whole or part, a Final Construction Cost Advance, then the
following additional conditions shall apply to the making thereof:
(a) As-Built Survey. The Borrower shall have delivered to the
Administrative Agent an as-built survey showing the location of the
building as well as the remainder of such Under-Construction Project and
the other improvements thereon; such survey shall be prepared in
accordance with ALTA/ACSM 1992 Minimum Survey Requirements and in
accordance with the applicable rules and regulations of the appropriate
state licensing board by a licensed surveyor acceptable to the Lender and
shall be dated a date not more than 15 days prior to such Subsequent
Project Advance Date and shall contain a certification noted thereon in
form and substance satisfactory to the Administrative Agent and the Title
Company issuing the Title Insurance Policy {Blanket} in respect of such
Under-Construction Project; such survey shall show no easement,
rights-of-way, party walls, encroachments, streets or alleys which
interfere with the use, enjoyment or market value of the building
constructed at such Under-Construction Project, the Residential Units or
Commercial Units therein and the Common Elements relating thereto. All
easements in respect of egress and ingress, all amenity easements, all
utility easements, parking easements and all other easements shall be
drawn on, and/or otherwise shown or referred to in, such survey and/or
certificate; and
(b) Certificate of Occupancy. The Borrower shall have delivered to
the Administrative Agent a copy (certified to be true and correct) of a
permanent and unconditional certificate of occupancy in respect of the
building to be built at such Under-Construction Project and each of the
Residential Units and Commercial Units therein. The Borrower shall have
delivered to the Administrative Agent a copy (certified to be true and
correct) of any other governmental certificates or licenses necessary for
the occupancy of such building and the Residential Units and Commercial
Units therein.
6.5 Defaults; Expenses; Miscellaneous.
(a) No Default or Event of Default. No Default or Event of Default
shall exist immediately prior to the making of such Subsequent Project
Advance or, after giving effect thereto, immediately after the making of
such Subsequent Project Advance.
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(b) Insufficient Availability. No such Subsequent Project Advance
shall be made if the Administrative Agent shall have determined that the
remaining availability under this Agreement (including any Project
Advances then outstanding and anticipated to be repaid and then
reborrowed) and any additional Equity Moneys contributed to the Borrower
(in addition to the Closing Date Equity Contributions) are insufficient to
cover the remaining costs to complete the construction, furnishing and
marketing of either (i) such Under-Construction Project, as contemplated
in the Plans for such Under-Construction Project and the Budget for such
Under-Construction Project, or (ii) all of the other Under-Construction
Projects, as contemplated in the Plans for all such other
Under-Construction Projects and the Budgets for all such other
Under-Construction Projects.
(c) Fees and Expenses. The Borrower shall have paid all fees and
expenses required to be paid under this Agreement (including, without
limitation, the fees and expenses set forth in Section 11.2 of this
Agreement) in connection with such requested Subsequent Project Advance.
(d) Title Insurance Endorsement. The Borrower shall have delivered
to the Administrative Agent title insurance endorsements to the Title
Insurance Policy {Blanket} in respect of all Projects in form and
substance reasonably satisfactory to the Administrative Agent whereby the
effective date of such Title Insurance Policy {Blanket} shall be made such
Subsequent Project Advance Date, all exclusions and/or exceptions not
satisfactory to the Administrative Agent shall have been removed or
appropriate endorsements in respect thereof shall have been obtained. Such
Title Insurance Policy {Blanket} shall be in an amount not less than the
sum of the principal amount of the Loan outstanding on such Subsequent
Project Advance Date, after giving effect to the making of such Subsequent
Project Advance. All premiums in respect of such endorsement to such Title
Insurance Policy {Blanket} shall have been paid in full and evidence
thereof shall have been delivered to the Administrative Agent.
(e) Warranties and Representations True. The warranties and
representations contained in this Agreement shall be true in all material
respects as of Subsequent Project Advance Date.
(f) Legal Opinion Updates. If reasonably requested by the
Administrative Agent, the Borrower shall have delivered to the
Administrative Agent updates and confirmations of the legal opinions
delivered to the Administrative Agent pursuant to Section 5.1 and/or
Section 6.1(a) hereof, which updates and confirmations shall be
satisfactory to the Administrative Agent in form and substance.
6.6 Disbursements; Disbursement Agent Reports.
The proceeds of such Subsequent Project Advance that are to defray
Construction Costs or are in respect of the Final Construction Cost Advance
shall be disbursed by the Disbursement Agent directly to the General Contractor
or as the General Contractor may direct in writing. The proceeds of such
Subsequent Project Advance that are to defray FF&E Costs and/or Sales, Marketing
& Other Costs shall be disbursed by the Disbursement Agent to the Borrower or as
the Borrower may direct in writing. All Disbursement Agent reports required to
be delivered to the Administrative Agent under the Loan Disbursement Agreement
in respect of such Subsequent
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Project Advance shall have been delivered to the Administrative Agent and shall
be reasonably satisfactory to it.
6.7 Proceedings Satisfactory.
All actions taken in connection with the Subsequent Project Advance shall
be reasonably satisfactory to the Administrative Agent and its counsel. The
Administrative Agent and its counsel shall receive copies of such documents and
papers as the Administrative Agent or such counsel may reasonably request in
connection with any such Subsequent Project Advance, all in form and substance
satisfactory to the Administrative Agent and its counsel.
6.8 Subcontracts.
The Borrower shall have delivered to the Administrative Agent and the TFC
Architect a copy of each subcontract in respect of any Under-Construction
Project in excess of $50,000 that have not been previously so delivered.
6.9 Costs and Expenses.
All costs and expenses of the Disbursement Agent and all other Loan Costs
shall have been paid in full.
7. COVENANTS
The Borrower covenants that on and after the date hereof and so long as
any Obligation of the Borrower to the Lenders exists as follows:
7.1 Payment of Taxes and Claims.
Except as otherwise provided for in Section 3.7 and Section 3.8 hereof,
the Borrower shall pay, or cause to be paid, before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, including, without limitation, the
Collateral; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might
result in the creation of a Lien upon its Property, including, without
limitation, the Collateral.
7.2 Maintenance of Properties; Company Existence; Indebtedness; Liens;
Business.
The Borrower shall:
(a) Property -- maintain its Property in good repair, working order
and condition and make all necessary renewals, repairs, replacements,
additions, betterments and improvements thereto and, without limiting the
generality of the foregoing, promptly complete the construction and
development of each Under-Construction Project in
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accordance with the Plans for such Under-Construction Project on or prior
to October 31, 1998 and thereafter maintain, or cause to be maintained,
each Project in good repair, working order and condition and make, or
cause to be made, all necessary repairs, replacements, additions,
betterments and improvements to each Project;
(b) Insurance -- maintain, or cause to be maintained, insurance as
required by Section 3.5 of this Agreement;
(c) Financial Records -- (i) keep true books of records and accounts
(including, without limitation, the Books and Records) in which full and
correct entries will be made of all its business transactions and (ii)
reflect in its financial statements adequate accruals and appropriations
to reserves, all in accordance with generally accepted accounting
principles, practices and procedures at the time in effect and
consistently applied or on a cash basis consistently applied;
(d) Company Existence and Rights -- do or cause to be done all
things necessary or required to preserve and keep in full force and effect
its corporate existence, rights, powers and franchises, including, without
limitation, its authorization to do business in the state in which the
Projects are located;
(e) Compliance with Law -- except as set forth in that certain
letter from the Borrower to the Administrative Agent dated the Closing
Date, not be in violation of (i) any laws, ordinances, governmental rules
and regulations to which it is subject, and to that end, the Borrower
shall not fail to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Properties
or to the conduct of its business, which violation or failure to obtain
might materially and adversely affect the business, prospects, profits,
Property or condition (financial or otherwise) of the Borrower, including,
without limitation, any zoning laws, land use, design controls,
subdivision controls or Environmental Protection Laws applicable to its
real Property (including, without limitation, the Projects), (ii) any
statutes, rules and regulations, whether now or hereafter in force, in any
jurisdiction in which the Borrower may make sales of Quartershare
Interests relating to the right to do business in such jurisdiction and
(iii) any applicable federal, state or municipal statutes, rules and
regulations relating to sales of Quartershare Interests and the manner of
evidencing and financing the same to the end that all of the Contracts
shall be valid, binding and legally enforceable in accordance with their
respective terms subsequent to the assignment thereof to the
Administrative Agent;
(f) Deferred Compensation Plans -- to the extent that it has one or
more pension, profit sharing or other compensatory or similar plans
providing for a program of deferred compensation for any employee or
officer, be in compliance with all requirements of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated in connection therewith;
(g) Development and Construction of the Projects -- retain only duly
licensed and qualified architects, engineers, contractors and
subcontractors to complete the development and construction of the
Under-Construction Projects;
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(h) Indebtedness -- not incur any liability for any indebtedness for
borrowed money (other than the Loan and other than as permitted in Section
7.6 hereof), whether such indebtedness is secured or unsecured, and
whether such liability is direct or indirect or contingent or
noncontingent, and not, as Declarant, permit any Association to incur any
liability for any indebtedness for borrowed money, whether secured or
unsecured, other than in the ordinary course of the operation and
maintenance of the Projects, provided that the Borrower may incur borrowed
money indebtedness owing to the Parent or any other Affiliate of the
Borrower if (i) such indebtedness is incurred in the ordinary course of
business of the Borrower, (ii) at the time of the incurrence of such
indebtedness (and after giving effect thereto), no Default or Event of
Default shall exist, (iii) such indebtedness is unsecured and (iv) such
indebtedness is subordinated to the Loan as provided for in Section 7.11
hereof;
(i) Liens -- (i) not allow any Liens or encumbrances whatsoever to
attach to the Collateral other than the Liens and security interests of
the Administrative Agent created by the Security Documents, any Liens in
favor of the Associations under the Declarations and the other Liens set
forth on Schedule 7 hereto and (ii) cause the Liens and security interests
of the Administrative Agent created by the Security Documents in and to
the Collateral to continue to be valid, enforceable, perfected Liens and
security interests subject to no other Liens except as set forth in this
Agreement or in any other Security Document and in Schedule 7 hereto;
(j) Business -- have as its sole business activity the ownership of
the Projects and the sale of Quartershare Interests, Residential Units and
Commercial Units in respect thereof and not pursue any other business
activities or own any other Property, provided that the Borrower may own,
construct, develop, operate and/or manage, and sell quartershare interests
or condominium units in, other hotel projects if such other hotel projects
are part of the "Projects" hereunder, become additional "Projects"
hereunder or are otherwise financed by the Lenders;
(k) Material Adverse Effect -- not undertake any action that would
have a material adverse effect on the operation of the Projects or the
Collateral; and
(l) Notification of Claims -- promptly notify the Administrative
Agent of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or any of the security interests granted
hereunder, and, at the request of the Administrative Agent, appear in and
defend, at the Borrower's expense, any such claim, action or proceeding.
7.3 Payment of Notes and Maintenance of Office.
The Borrower shall punctually pay or cause to be paid the principal and
interest to become due in respect of each of the Notes according to the terms
thereof (all of which are incorporated herein by reference) and shall make all
other payments required hereunder and under any other Security Documents. All
payments hereunder or under the Notes to the Administrative Agent or the Lenders
shall be made in accordance with the payment instructions for such Persons set
forth in Schedule 10 to this Agreement or such other payment instructions that
the Administrative Agent or any Lender shall deliver, in writing, to the
Borrower and the
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Administrative Agent not less than 2 Business Days prior to any date on which a
payment is to be made hereunder or under the Notes.
The Borrower shall maintain an office at Sunday River Road, P.O. Box 450,
Bethel, Maine, where notices, presentations and demands in respect of this
Agreement, the Notes or any other Security Document may be made upon the
Borrower. Such offices shall be maintained at said address of the Borrower until
such time as the Borrower shall so notify the Administrative Agent, in writing,
of any change of location of such offices. The Books and Records of the Borrower
shall be maintained at said address. The Borrower shall not change its name
without 30-day prior written notice to the Administrative Agent.
7.4 Sale of Properties.
Without the prior written consent of the Administrative Agent, the
Borrower shall not sell, lease, transfer or otherwise dispose of any of the
Collateral, provided that the Borrower
(a) may sell the unsold Quartershare Interests, the Residential
Units and the Commercial Units in the ordinary course of its business to
unaffiliated consumers or, if consented to by Lender, to Affiliates or
affiliated consumers,
(b) may sell and dispose of (and receive the proceeds thereof) in
the ordinary course of its business, free from any Lien created or
contemplated by this Agreement, items of Collateral consisting of
inventory, and
(c) may remove and dispose of (and receive the proceeds thereof) in
the ordinary course of its business, free from any Liens created or
contemplated by this Agreement, items of Collateral consisting of
fixtures, fittings, machinery, appliances, equipment, apparatus,
furnishings and other personal Property which shall have become worn out
or obsolete
and provided further that the Borrower may sell Quartershare Notes pursuant to
the Take-Out Facility on the condition that all cash proceeds thereof not
withheld or reserved under such Take-Out Facility be delivered to the
Administrative Agent and applied to the payment of the Loan to the extent
required in this Agreement.
7.5 Consolidation and Merger.
The Borrower shall not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into it. The Borrower shall
not permit a Change in Management to occur.
7.6 Guaranties.
The Borrower shall not become or be liable in respect of any guaranty
except (a) the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection, (b) the guarantees provided for under the
Parent Indenture, provided that such guarantees are unsecured and junior and
subordinate in payment to the Obligations as provided for in the Parent
Indenture as of the Closing Date and (c) the guarantee provided for in the
Senior Credit Facility issued, provided that such guarantee is unsecured and
junior and
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subordinate in payment to the Obligations, as provided in that certain
subordination agreement of even date herewith. The Borrower shall not consent to
or permit any modification or change in any of the terms and provisions of any
of the subordination provisions referred to in clauses (b) and (c) above.
7.7 Distributions.
The Borrower shall not after the Closing Date declare, make or pay any
dividend or other distribution or redeem any of its capital stock (in cash or
Property) if (a) after giving effect thereto a Default or Event of Default would
exist, (b) if after giving effect thereto, it would be rendered insolvent, made
unable to pay its debts as they come due or be left without adequate capital to
pursue its business or (c) if after giving effect thereto, the Borrower would
not have on hand free, unencumbered and unrestricted cash (except for the Liens
and restrictions of the Security Documents) in an amount of not less than
$2,000,000.
7.8 Compliance with Environmental Laws.
The Borrower shall comply, and shall cause each Project to be in
compliance, with
(a) all Environmental Protection Laws (including, without
limitation, all federal, state and local environmental or
pollution-control laws, regulations, orders and decrees governing the
emission of waste water effluent, the treatment, transportation, disposal,
generation and storage of solid and hazardous waste, hazardous and toxic
substances and air pollution, and/or setting forth general environmental
conditions),
(b) any other applicable requirements for conducting, on a timely
basis, periodic tests and monitoring for contamination of ground water,
surface water, air and/or land, and for biological toxicity of the
aforesaid, and
(c) the regulations of each relevant federal, state or local
authority administering environmental laws, ordinances or regulations,
to the extent that the failure to so comply could have a material and adverse
effect on the business, prospects, profits, Property or condition (financial or
otherwise) of the Borrower or any one or more of the Projects.
Without limiting the generality of the foregoing, the Borrower shall not
release or otherwise dispose of any Hazardous Substance or any other substance
regulated, controlled or described as hazardous under any Environmental
Protection Law on or beneath any real Property owned, leased or otherwise used
by the Borrower or allow the same to occur with any of the Projects in violation
of any Environmental Protection Law; and no asbestos, urea formaldehyde foam,
polychlorinated biphenyls, aluminum wire or lead-containing paint shall be
installed or used on any such Property or any Project. The Borrower shall not
take or suffer to be taken any act or omission that would subject it or any
Project to liability under any Environmental Protection Law which liability
could have a material and adverse effect on the business, prospects, profits,
Property or condition (financial or otherwise) of the Borrower or any one or
more of the Projects.
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The Administrative Agent shall have the right, but shall not be obligated,
to notify any state, federal or local governmental authority of information
which may come to its attention with respect to Hazardous Substances on or
emanating from any Project and the Borrower irrevocably releases the
Administrative Agent and the Lenders from any claims of loss, damage, liability,
expense or injury relating to or arising from, directly or indirectly, any such
disclosure. The Administrative Agent will notify the Borrower prior to or
contemporaneously with any action taken by the Administrative Agent pursuant to
this paragraph, provided that the failure by the Administrative Agent to provide
such notification shall not affect any action so taken.
Without limiting the scope and the effectiveness of the foregoing
undertakings in this Section 7.8, the Borrower agrees to indemnify and hold the
Administrative Agent and the Lenders harmless from and against any losses,
liabilities, damages, claims, causes of action, costs or expenses (including,
without limitation, attorneys' fees and disbursements), arising from, incurred
by, or asserted against, any one or more of the Administrative Agent or the
Lenders in connection with any cleanup, removal or similar protective or
remedial action that may be required or undertaken by any governmental authority
as a result of the presence of any Hazardous Substances at any Project, the
release of any other Hazardous Substance on or from any Project or the
generation, treatment, storage, handling or disposal of any Hazardous Substances
on or from any Project (unless such presence, release, generation, treatment,
storage, handling or disposal is directly caused by the Administrative Agent
and/or the Lenders or by any agent of the Administrative Agent or the Lenders
acting under the Administrative Agent's or the Lenders' direct orders). The
liability of the Borrower to Administrative Agent or any Lender under this
paragraph shall survive any assignment, transfer, discharge or foreclosure of
the Blanket Mortgages or any transfer of any Project (or any portion thereof) by
deed in lieu of foreclosure or otherwise, and any one or more transfers of any
Project (or any portion thereof) by deed or otherwise, by whosoever made.
If the Borrower fails to diligently take any action required under this
Section 7.8 or by any governmental entity with respect to the cleanup, control
or reporting of any Hazardous Substances, materials or wastes in, on, from or
under any Project, the Administrative Agent, at the instruction of the Required
Lenders, may enter upon such Project, retain such experts and consultants at the
expense of the Borrower and take such action as the Administrative Agent deems
advisable, and the Administrative Agent may, in its sole discretion, advance
such sums of money as it deems necessary, with respect to the cleanup, control
or reporting of any such substances, materials or wastes in, on or under such
Project. The Borrower shall pay to the Administrative Agent immediately and upon
demand, all sums of money so advanced or expended by the Administrative Agent
pursuant to this paragraph, together with interest on each such advance at the
Default Rate, and all such sums, and the interest thereon, shall be secured by
the Collateral. The Administrative Agent will notify the Borrower prior to or
contemporaneously with any action taken by the Administrative Agent pursuant to
this paragraph, provided that the failure by the Administrative Agent to provide
such notification shall not affect any action so taken.
7.9 Transactions with Affiliates; Principal Properties.
The Borrower shall not enter into any transaction including, without
limitation, the purchase, sale or exchange of Property or the rendering of any
service with any Affiliate except in the ordinary course of, and pursuant to the
reasonable requirements of, the Borrower's
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business and upon fair and reasonable terms no less favorable to the Borrower
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate. The Borrower shall have no investments in any Voting Equities.
Anything contained in this Section 7.9 shall not prohibit or affect any of the
Host Company Lease Agreements.
7.10 Use of the Lender Name.
The Borrower shall not, nor shall it permit any Affiliate to, without the
prior written consent of the Administrative Agent, use the name of the
Administrative Agent or any Lender or the name of any affiliate of any Lender in
connection with any of its respective businesses or activities, except in
connection with internal business matters and as required in dealings with
governmental agencies or as may be required by law.
7.11 Subordinated Obligations.
The Borrower shall not, directly or indirectly, (a) permit any payment to
be made in respect of any indebtedness, liabilities or obligations, direct or
contingent, which are subordinated by the terms thereof or by separate
instrument to the payment of principal of, and interest and premium on, the
Notes except in accordance with the terms of such subordination, (b) permit the
amendment, rescission or other modification of any such subordination provisions
of any of the Borrower's subordinated obligations in such a manner as to affect
adversely the Administrative Agent's Lien or the prior position of the Notes, or
(c) permit the unscheduled prepayment or redemption of all or any part of any
subordinated obligations of the Borrower except in accordance with the terms of
such subordination. The Borrower shall cause each of the Parent and the Host
Companies to subordinate all of its indebtedness, liabilities or obligations,
direct or contingent, owing to it from the Borrower to the payment of the
Obligations. The Borrower shall cause each of its other Affiliates to
subordinate all indebtedness, liabilities or obligations, direct or contingent,
owing to it from the Borrower to the payment of the Obligations. The terms of
such subordination shall be satisfactory to the Administrative Agent. Such
subordination may permit payments by the Borrower in respect of such
subordinated indebtedness, liabilities or obligations if (i) no Default or Event
of Default then exists or, after giving effect to such payment, would exist and
(ii) the Borrower would not be rendered insolvent, made unable to pay its debts
as they come due or be left without adequate capital to pursue its business
after giving effect to such payment.
7.12 Notice of Legal Proceedings.
Promptly upon becoming aware of the existence thereof, the Borrower shall
deliver to the Administrative Agent written notification of the institution of
any litigation, legal proceeding or dispute with any Person, entity or
governmental authority in any way involving the Borrower, any Project, the
Collateral or any of the Borrower's other assets as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, would materially adversely affect the Borrower, any Project, the
Collateral or any of the Borrower's other assets.
7.13 Further Assurances.
The Borrower shall from time to time execute and deliver to the
Administrative Agent such other instruments, certificates and documents and
shall take such other action and do all other
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things as may from time to time be reasonably requested by the Administrative
Agent or the Required Lenders in order to implement or effectuate the provisions
of, or more fully perfect the rights granted or intended to be granted by the
Borrower to the Administrative Agent or the Lenders pursuant to the terms of,
this Agreement, the Notes or any other Security Document. The Borrower agrees,
in its capacity as Declarant (to the extent permitted by applicable law), to
cause each Association to take such action and to do all other things as may
from time to time be reasonably requested by the Administrative Agent or the
Required Lenders in order to implement or effectuate the provisions of this
Agreement and the other Security Documents.
7.14 Financial Statements.
The Borrower shall submit to the Lender the following:
(a) Annual Statements -- As soon as practicable after the end of
each fiscal year of the Borrower, and in any event no later than 90 days
thereafter, duplicate copies of:
(i) a balance sheet of the Borrower as at the end of such
fiscal year, and
(ii) a statement of income of the Borrower for such fiscal
year, and
(iii) a statement of changes in cash flows of the Borrower
during such fiscal year,
(iv) a statement of material changes of accounting policies,
presentations or principles during such fiscal year, and
(v) notes to such financial statements.
Each of the above shall have been prepared (as an unaudited
compilation) by an independent certified public accounting firm, selected
by the Borrower and acceptable to the Administrative Agent, in reasonable
detail and shall set forth, in each case, in comparative form the figures
for the previous fiscal year, and shall be certified as complete and
correct by the chief financial officer of the Borrower. The Borrower shall
also deliver to the Administrative Agent with the above financial
statements a report, certified as complete and correct by the chief
financial officer of the Borrower, showing all sales and cancellations
made in respect of Quartershare Interests, Residential Units and
Commercial Units at each of the Projects for the fiscal year of the
Borrower then most recently ended and in respect of which said financial
statements shall have been prepared. The above financial statements shall
be accompanied by a certificate of the chief financial officer of the
Borrower, which certificate shall be acceptable to the Administrative
Agent and shall, without qualification, state that such financial
statements fairly present the financial condition of the Borrower and have
been prepared consistently with past practices.
In the event that the aforesaid annual financial statements are not
in form and content satisfactory to the Required Lenders, in their sole
determination, the Borrower
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shall, within 90 days of the receipt of the Administrative Agent's written
request therefor, deliver to the Administrative Agent duplicate copies of
the aforesaid financial statements together with an unqualified opinion
thereon of an independent certified public accounting firm, selected by
the Borrower and satisfactory to the Administrative Agent, which opinion
shall state that such financial statements present fairly the financial
condition of the Borrower, have been prepared in accordance with generally
accepted accounting principles, procedures and practices consistently
applied (except for changes in application in which such accountants
concur) and that the examination of such financial statements by such
accountants has been made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances. The aforesaid audited financial statements shall be in form
and content satisfactory to the Administrative Agent.
If the amount shown on Borrower's aforesaid unaudited statement of
income for "total operating income," as such term is defined in accordance
with generally accepted accounting principles, does not vary by more than
5% from the amount shown on Borrower's aforesaid unqualified audited
statement of income for "total operating income" and if the amount shown
on Borrower's aforesaid unaudited statement of income for "net operating
income," as such term is defined in accordance with generally accepted
accounting principles, does not vary by more than 5% from the amount shown
on Borrower's aforesaid unqualified audited statement of income for "net
operating income," the Lenders shall bear, in accordance with their Pro
Rata Shares, the cost and expense of the certified public accounting firm
utilized to deliver the aforesaid audited financial statements and
accountancy opinion; otherwise, the Borrower shall bear all such costs and
expenses.
(b) Quarterly Statements -- As soon as practicable after the end of
each fiscal quarter of the Borrower, and in any event no later than 60
days thereafter, duplicate copies of:
(i) a balance sheet of the Borrower as at the end of such
fiscal quarter,
(ii) a statement of income of the Borrower for such quarter
and (in the case of the second and third quarters) for the portion
of the fiscal year ending with such quarter,
(iii) a statement of changes in cash flows of the Borrower
during such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such
quarter, and
(iv) a statement of material changes of accounting policies,
presentations or principles during such quarter.
Each of the above shall have been prepared in reasonable detail and
in accordance with generally accepted accounting principles, procedures
and practices consistently applied (other than the preparation of notes to
such financial statements),
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subject to changes resulting from year-end adjustments, and shall set
forth in each case in comparative form the figures for the corresponding
periods in the immediately preceding fiscal year, and shall be certified
as complete and correct by the chief financial officer of the Borrower.
(c) Notice of Default or Event of Default -- Promptly upon becoming
aware of the existence of any condition or event which constitutes a
Default or an Event of Default, a written notice specifying the nature and
period of existence thereof and what action the Borrower is taking or
proposes to take with respect thereto.
(d) Notice of Claimed Default -- Immediately upon becoming aware
that the holder of any obligation or of any evidence of indebtedness or
other Security of the Borrower has given notice or taken any other action
with respect to a claimed default or event of default thereunder, a
written notice specifying the notice given or action taken by such holder
and the nature of the claimed default or event of default and what action
the Borrower is taking or proposes to take with respect thereto.
(e) Material Adverse Developments -- Immediately upon becoming aware
of any development or other information which may materially and adversely
affect the Property, business, prospects, profits or condition (financial
or otherwise) of the Borrower or the ability of the Borrower to perform
its obligations under this Agreement, the Notes or the other Security
Documents, telephonic, telefax or telegraphic notice specifying the nature
of such development or information and the anticipated effect.
(f) Financial Information -- As promptly as possible after the
receipt thereof, all financial statements, budgets and other information
distributed by the Associations. The Borrower, as Declarant or otherwise,
shall cause each Association to prepare annual financial statements and an
annual budget, and shall deliver each to the Administrative Agent within
90 days of the end of each of each Association's fiscal years.
(g) Sales Information -- On or before the 15th day of each month, a
report showing (by Purchaser and in the aggregate) the previous month's
sales of, and cancellations of sales of, Quartershare Interests,
Residential Units and Commercial units with respect to each of the
Projects.
(h) Requested Information -- With reasonable promptness, such other
data and information as from time to time may be reasonably requested by
the Administrative Agent or the Required Lenders.
7.15 Officers' Certificate.
The financial statements delivered to the Administrative Agent pursuant to
Section 7.14(a) and Section 7.14(b) of this Agreement shall be accompanied by a
certificate of the chief financial officer of the Borrower setting forth:
(a) Covenant Compliance -- the information required in order to
establish whether the Borrower was in compliance with all financial
covenants contained in
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Section 7 of this Agreement during the period covered by the financial
statements or reports then being furnished; and
(b) Event of Default -- a statement that the signers have reviewed
the relevant terms of this Agreement (and all other agreements and
exhibits between the parties) and have made, or caused to be made, under
their supervision, a review of the transactions and conditions of the
Borrower from the beginning of the period covered by the financial
statements or reports being delivered therewith to the date of the
certificate and that such review has not disclosed the existence during
such period of any condition or event which constitutes a Default or Event
of Default or, if any such condition or event existed or exists or will
exist, specifying the nature and period of existence thereof and what
action the Borrower has taken or proposes to take with respect thereto.
7.16 Inspection.
The Borrower shall permit the Administrative Agent or its representatives
to make such inspections/audits of its books, accounts, records, orders,
original correspondence and such other papers as it may desire and of its
premises, the Projects and the other Collateral, from time to time, as the
Administrative Agent may in its sole discretion determine. The Borrower shall
supply copies of such records and papers as the Administrative Agent may
reasonably request, and shall permit the Administrative Agent to discuss the
Borrower's affairs, finances and accounts with the Borrower's managers,
officers, employees and independent public accountants (and by this provision
the Borrower hereby authorizes said accountants to discuss with the
Administrative Agent the finances and affairs of the Borrower), all at
reasonable times and as often as may be desired by the Administrative Agent. The
Borrower further agrees to supply the Administrative Agent with such other
reasonable information relating to the Borrower and the Collateral as the
Administrative Agent may request. With respect to any inspections and/or audits
referred to in this Section 7.16, the Borrower shall pay for all out-of-pocket
costs and expenses incurred by the Administrative Agent (including, without
limitation, travel expenses, but excluding salaries of employees of the
Administrative Agent) and shall promptly reimburse the Administrative Agent
therefor upon receipt by the Borrower of a written demand therefor from the
Administrative Agent, provided that, for so long as no Default or Event of
Default shall exist, the Borrower shall not be obligated to reimburse the
Administrative Agent for such costs and expenses in excess of $10,000 during any
calendar year.
8. EVENTS OF DEFAULT
8.1 Default.
The Borrower hereby covenants, agrees and acknowledges that an Event of
Default shall exist under this Agreement if any of the following events or
conditions (each, an "Event of Default") shall occur and be continuing:
(a) Payments -- (i) failure to make any payment of interest on any
Note on or before 5 days after the due date thereof; (ii) failure to make
any payment of principal of any Note on or before the due date thereof; or
(iii) failure to make any other payment required pursuant to the terms of
this Agreement, the Notes or any other Security Document on or before 10
days after the due date thereof; or
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(b) Warranties or Representations -- any warranty, representation or
other statement made or furnished to the Administrative Agent or the
Lenders by or on behalf of the Borrower, the Parent or any Host Company in
this Agreement or any other Security Document proves to have been false or
misleading in any material respect when made or furnished; or
(c) Other Covenants -- the failure by the Borrower, the Parent or
any Host Company to comply with any covenant relating to such Person
contained in any Security Document to which such Person is a party, and
the continuance of such failure for more than 30 days after such failure
shall have first become known to any manager, officer or director of the
Borrower, the Parent or such Host Company; or
(d) Material Adverse Change -- any material adverse change in or in
respect of the Collateral or any one or more of the Projects (including,
without limitation, the termination of any applicable quartershare
interest or condominium regimen {whether by consent of the condominium
owners or quartershare interest owners or otherwise} with respect to any
Project, any modification or amendment to the Declarations of any of the
Projects which is reasonably likely to adversely affect the Collateral or
the operations or prospects of any of the Projects, or the substantial
destruction of any Project, if not fully insured) or in the financial
condition of the Borrower; or
(e) Insolvency -- (i) a receiver, liquidator, custodian or trustee
of the Borrower, the Parent or any Host Company of all or any of the
Property of any of them shall be appointed by court order and such order
remains in effect for more than 60 days; or an order for relief shall be
entered with respect to the Borrower, the Parent or any Host Company, or
the Borrower, the Parent or any Host Company shall be adjudicated a
bankrupt or insolvent; or any of the Property of any of them shall be
sequestered by court order and such order remains in effect for more than
60 days; or a petition shall be filed against the Borrower, the Parent or
any Host Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and shall not be
dismissed within 60 days after such filing; or (ii) the Borrower, the
Parent or any Host Company shall file a petition in voluntary bankruptcy
or seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction, whether now or hereafter in effect, or shall
consent to the filing of any petition against it under any such law; or
(iii) the Borrower, the Parent or any Host Company shall make an
assignment for the benefit of its creditors, or shall admit in writing its
inability, or shall fail, to pay its debts generally as they become due,
or shall consent to the appointment of a receiver, liquidator or trustee
of the Borrower, the Parent or any Host Company, or of all or any part of
the Property of any of them; or
(f) Judgment -- final judgment or judgments for the payment of
money, the aggregate of which exceeds $500,000, shall be outstanding
against the Borrower, the Parent or any Host Company and any of such
judgments shall have been outstanding for more than 30 days from the date
of its entry and shall not have been discharged in full or stayed; or
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(g) Default in Lender Agreements -- any default (after giving effect
to the expiration of any applicable grace periods) under, and as defined
in, any other agreement, now existing or hereafter entered into, between
the Borrower and any one or more of the Lenders or any affiliate of any
Lender, including, without limitation, any default under the Take-Out
Facility or any "Note Purchase Agreement" executed in connection therewith
or in that certain letter from the Borrower to the Administrative Agent
dated the Closing Date; or
(h) Default by Borrower in Other Agreements -- any default by the
Borrower in the payment of material indebtedness for borrowed money or any
guarantee issued by the Borrower in respect of borrowed money (including,
without limitation, any guarantee issued by the Borrower under the Parent
Indenture or any under the Senior Credit Facility); any other default
under such indebtedness which accelerates or permits the acceleration
(after the giving of notice or passage of time, or both) of the maturity
of such indebtedness, whether or not such default has been waived by the
holder of such indebtedness; or
(i) Suspension of Sales -- the issuance of any stay order, cease and
desist order or similar judicial or nonjudicial sanction limiting or
otherwise affecting the sale of Quartershare Interests, Residential Units
or Commercial Units and any such order or sanction shall have been
outstanding for more than 30 days from the date of its entry and shall not
have been discharged in full or stayed by appeal, bond or otherwise; or
(j) Host Companies -- any Host Company shall cease to be in business
or to operate the ski facilities adjacent to its respective Project; any
Host Company shall be in default (after the elapse of all applicable grace
or cure periods) under its Host Company Lease Agreement; or any Host
Company shall not allow Quartershare Interest owners at its respective
Project to have access and use of its ski facilities (except if such
owners do not comply with the rules or regulations of such facilities or
fail to comply with the payment terms or other conditions of use of such
facilities that are generally applicable to users of such facilities); or
(k) Parent Indenture; Senior Credit Facility -- if the Borrower is
not, or no longer qualifies as, a "Real Estate Subsidiary" under, and as
defined in, the Parent Indenture; or if the Loan is not, or no longer
qualifies as, "Non-Recourse Real Estate Debt" under, and as defined in,
the Parent Indenture; if the Borrower is not, or no longer qualifies as,
an "Unrestricted Subsidiary" under the Senior Credit Facility; if the
guarantees issued by the Borrower under the Parent Indenture or in respect
of the Senior Credit Facility are not junior and subordinate to the Loan
to the same extent as provided for in the respective controlling documents
on the Closing Date.
8.2 Default Remedies.
(a) Acceleration of Obligations; Right To Dispose of Collateral.
(i) If an Event of Default under Section 8.1(e) of this
Agreement shall occur, then the Obligations shall, automatically and
without notice or demand by the Administrative Agent or the Lenders,
become at once due and payable and
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all Commitments shall at once terminate, and the Borrower will
forthwith pay to the Lenders, in addition to any and all sums and
charges otherwise due in respect of the Obligations, the entire
principal of and interest accrued on the Notes. If any other Event
of Default shall occur, all of the Obligations shall, at the option
of the Required Lenders, and without notice or demand by the
Administrative Agent or the Lenders, become at once due and payable
and all Commitments shall at once terminate, and the Borrower will
forthwith pay to the Lenders, in addition to any and all sums and
charges otherwise due in respect of the Obligations, the entire
principal of and interest accrued on the Notes. The Administrative
Agent on behalf of the Lenders shall have all the rights and
remedies of a secured party under the Uniform Commercial Code, all
the rights and remedies under the Blanket Mortgages and the
Assignment of Rents and all other legal and equitable rights to
which it may be entitled, including, without limitation and without
further notice to Borrower, the right to collect and/or continue to
collect all payments being made or to be made on the Contracts and
to apply such payments to the Obligations and to sue in its own name
(or the name of the Borrower) the Purchaser under any Contract. The
Administrative Agent shall also have the right to require the
Borrower to assemble the Collateral or any portion thereof, at the
Borrower's expense, and make it available to the Administrative
Agent at a place to be designated by the Administrative Agent, which
is reasonably convenient to both parties, and the Administrative
Agent shall have the right to take immediate possession of the
Collateral or such portion and may enter any of the premises of the
Borrower or wherever the Collateral or such portion shall be
located, in accordance with applicable law, and to keep and store
the same on said premises until sold (and if said premises be the
Property of the Borrower, the Borrower agrees not to charge the
Administrative Agent or the Lenders for storage thereof for a period
of at least 90 days after sale or disposition of such Collateral).
The Administrative Agent shall have the right to sell the Collateral
or any part thereof in one or more parcels at public or private sale
for cash, on credit or for future delivery, at such time or times
and at such price or prices and upon such other terms as the
Required Lenders may deem commercially reasonable. The Borrower, the
Administrative Agent and the Lenders agree that 10 days' notice to
the Borrower of any public or private sale or other disposition of
Collateral or any portion shall be reasonable notice thereof and
such sale shall be at such location(s) as the Administrative Agent
shall designate in said notice. The Administrative Agent shall have
the right to bid at any such sale on behalf of the Lenders and each
Lender shall have the right to bid at any such sale on its own
behalf and, in connection with any such bid, such Person shall be
entitled, for the purpose of making settlement or payment in respect
of any such accepted bid, to use and apply any amounts to be paid to
it under Section 8.2(c) hereof as a credit against the purchase
price payable by it in respect of such accepted bid. Each purchaser
at any such sale shall hold the Property so sold absolutely free
from any claim or right on the part of the Borrower, and the
Borrower hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay and appraisal which it now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of
sale having been given. The Administrative Agent may adjourn any
public or private
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sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(ii) In view of the fact that federal and state securities
laws may impose certain restrictions on the methods by which a sale
of Collateral, if comprised of Securities, may be effected after an
Event of Default, the Borrower agrees that, upon the occurrence and
continuance or existence of an Event of Default, the Administrative
Agent may, from time to time, attempt to sell all or any part of
such Collateral by means of a private placement restricting the
bidding and prospective purchasers to those who will represent and
agree that they are purchasing for investment only and not for, or
with a view to, distribution. In so doing, and without limiting any
other means of private placement, the Administrative Agent may
solicit offers to buy such Collateral, or any part of it for cash,
from a limited number of investors deemed by the Administrative
Agent, in its reasonable judgment, to be responsible parties who
might be interested in purchasing the Collateral, and if the
Administrative Agent solicits such offers from not less than 4 such
investors (and otherwise acts in good faith), then the acceptance by
the Administrative Agent of the highest offer obtained therefrom
shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
(iii) At any time after the Obligations have become
accelerated and due and payable at the option of the Required
Lenders pursuant to clause (i) above, the Required Lenders, by
written notice to the Borrower, may rescind and annul such
acceleration and its consequences if (1) the Borrower has paid all
overdue interest on the Notes, all principal due and payable on any
Notes other than by reason of such declaration, and all interest on
such overdue principal, if any, and all other costs and expenses
then due and payable hereunder or under any of the other Security
Documents, (2) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section
11.5, and (3) no judgment or decree has been entered against the
Borrower for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this clause (iii) will
extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
(b) Application of Collateral; Termination of Agreements. Upon the
occurrence of any Event of Default, the Required Lenders may, with or
without the Administrative Agent's proceeding with any aforesaid sale or
foreclosure or the Required Lenders' demanding acceleration of the payment
of the Obligations, without notice, terminate each Lender's Commitment,
without further liability or obligation by such Lender. Upon the
occurrence of any Event of Default, but otherwise subject to Section 11.8
hereof, each Lender may, at any time, appropriate and apply (as provided
below) to any Obligations owing to such Lender any and all Collateral in
its possession and any and all balances, credits, deposits, accounts,
reserves, indebtedness or other monies due or owing to the Borrower held
by such Lender hereunder or under any other financing agreement or
otherwise, whether accrued or not. Neither the termination of Commitments,
nor the termination of this Agreement by lapse of time, the giving of
notice
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or otherwise, shall absolve, release or otherwise affect the liability of
the Borrower in respect of transactions prior to such termination, or
affect any of the Liens, security interests, rights, powers and remedies
of the Administrative Agent or the Lenders hereunder or under any other
Security Document, but they shall, in all events, continue until all of
the Obligations are satisfied.
(c) Application of Proceeds. The proceeds of any exercise of rights
with respect to Collateral or any part thereof shall be paid to and
applied as follows:
First, to the payment of
(i) all costs and charges in connection therewith, including,
without limitation, (1) attorneys' fees for advice, counsel or other
legal services, (2) costs and expenses incurred as a result of
pursuing, reclaiming, seeking to reclaim, taking, keeping, removing,
storing, advertising for sale, selling and foreclosing on the
Collateral and any and all other charges and expenses in connection
therewith, and (3) any costs and expenses (including, without
limitation, costs and expenses in the management and operation of
the Projects) provided for in the Assignment of Rents, the Blanket
Mortgages or any other Security Document,
(ii) all taxes, assessments or Liens superior to the Lien of
this Agreement or the other Security Documents, except any taxes,
assessments or other superior Liens subject to which any sale of
Collateral may have been made, and
(iii) all Loan Costs;
Second, towards the payment of all accrued and unpaid interest then
due and payable in respect of the Loan (all amounts under this clause to
be paid to each of the Lenders ratably in accordance with the amount of
interest owing to each such Lender),
Third, to the payment of the principal amount of the Loan (all
amounts under this clause to be paid to each of the Lenders ratably in
accordance with the amount of principal owing to each such Lender under
its Note),
Fourth, to the payment of any other Obligations remaining
outstanding (all amounts under this clause to be paid to each of the
Lenders ratably in accordance with the amount of such Obligations owing to
each such Lender), and
Fifth, to the payment of the surplus, if any, to the Borrower, its
successors and assigns, or to whomsoever may be lawfully entitled to
receive the same, provided that if any Obligations shall not have been
paid in full, any such surplus shall continue to be held as Collateral
hereunder and shall continue to be subject to the terms and conditions
hereof until such Obligations shall have been paid in full.
The Borrower shall remain liable hereunder for payment of any
deficiency owing on the Obligations after application of such proceeds.
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(d) Remedies Cumulative; No Waivers. All covenants, conditions,
provisions, warranties, guaranties, indemnities and other undertakings of
the Borrower, the Parent and/or any Host Company contained in this
Agreement, or in any document referred to herein or contained in any
agreement supplementary hereto or in any schedule given to any one or more
of the Administrative Agent and/or the Lenders or contained in any other
agreement among any one or more of the Lenders, the Borrower, the Parent,
the Host Companies and/or the Administrative Agent, heretofore,
concurrently or hereafter entered into, including, without limitation, the
Blanket Mortgages or any other Security Document, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions or agreements of the Borrower herein contained. The
failure or delay of the Administrative Agent or any Lender to exercise or
enforce any rights, Liens, powers or remedies hereunder or under any of
the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such Liens, rights, powers and remedies,
but all such Liens, rights, powers and remedies shall continue in full
force and effect until the Loan and all other Obligations shall have been
fully satisfied. All Liens, rights, powers and remedies herein provided
for are cumulative and none are exclusive.
The acceptance by the Administrative Agent or any Lender at any time
and from time to time of partial payments of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by
the Administrative Agent or any Lender of any Event of Default shall be
deemed to be a waiver of any other or subsequent Event of Default. No
delay or omission by the Administrative Agent or any Lender in exercising
any right or remedy under the Security Documents shall impair such right
or remedy or be construed as a waiver thereof or an acquiescence therein,
nor shall any single or partial exercise of any such right or remedy
preclude other or further exercise thereof, or the exercise of any other
right or remedy under the Security Documents or otherwise.
9. REVIVAL OF OBLIGATIONS AND LIENS
Neither the Administrative Agent nor any Lender shall be under any
obligation to marshall any assets in favor of the Borrower, the Parent, any Host
Company or any other party hereto or to any other Security Document or against
or in payment of any or all of the Obligations. The Borrower expressly agrees
that if the Borrower makes a payment to the Administrative Agent or any Lender,
which payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, or otherwise required to be repaid to a trustee,
receiver or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such repayment, the
Obligations or any part thereof intended to be satisfied and the Liens provided
for hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.
10. ADMINISTRATIVE AGENT
10.1 Appointment.
Textron Financial Corporation is hereby appointed Administrative Agent
hereunder and under the other Security Documents and each Lender hereby
authorizes the Administrative Agent to act as its agent in accordance with the
terms of this Agreement and the other Security
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Documents. The Administrative Agent agrees to act upon the express conditions
contained in this Agreement and the other Security Documents, as applicable. The
provisions of this Section 10 are solely for the benefit of the Administrative
Agent and the Lenders, and the Borrower agrees it shall have no rights as a
third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as an agent of the Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for the Borrower, the Parent, any Host Company or any Affiliate.
10.2 Powers; General Immunity.
(a) Duties Specified. Each Lender irrevocably authorizes the
Administrative Agent to take such action on such Lender's behalf and to
exercise such powers hereunder and under the other Security Documents as
are specifically delegated to the Administrative Agent by the terms hereof
and thereof, together with such powers as are reasonably incidental
thereto. The Administrative Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the
other Security Documents and it may perform such duties by or through its
agents or employees. The Administrative Agent shall not have, by reason of
this Agreement or any of the other Security Documents, a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or
any of the other Security Documents, expressed or implied, is intended to
or shall be so construed as to impose upon the Administrative Agent any
obligations in respect of this Agreement or any of the other Security
Documents except as expressly set forth herein or therein. It is expressly
understood that the Administrative Agent's role hereunder will be
primarily administrative in nature. To the extent that any provision
hereof or any other Security Document requires the Administrative Agent to
make disbursements or payments to any Lender of amounts received by the
Administrative Agent, such disbursements or payments shall be subject to
the Administrative Agent's having received good, collected, immediately
available funds prior to 12:00 p.m. on the Business Day prior to the date
on which such disbursement or payment is to be made.
(b) No Responsibility for Certain Matters. The Administrative Agent
shall not be responsible to any Lender for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of
this Agreement or any other Security Document or for any representations,
warranties, recitals or statements made herein or therein or made in any
written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or
made by the Administrative Agent to any one or more of the Lenders or by
or on behalf of Borrower, the Parent or any Host Company to the
Administrative Agent or any Lender in connection with the Security
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of the Borrower, the Parent, any Host
Company or any other Person liable for the payment of any Obligations, nor
shall the Administrative Agent be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Security Documents or as
to the use of the proceeds of the Loan or as to the existence or possible
existence of any Default or Event of Default.
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(c) Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees or agents shall be liable to any one
or more of the Lenders for any action taken or omitted by the
Administrative Agent under or in connection with this Agreement or any of
the other Security Documents except to the extent caused by the
Administrative Agent's gross negligence or willful misconduct. If the
Administrative Agent shall request instructions from the Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Security Documents, the
Administrative Agent shall be entitled to refrain from such act or taking
such action unless and until the Administrative Agent shall have received
instructions from the Required Lenders or the Lenders, as may be required
hereunder. Without prejudice to the generality of the foregoing, (i) the
Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent
by the proper Person or Persons, and shall be entitled to rely and shall
be protected in relying on opinions and judgments of attorneys (who may be
attorneys for the Borrower, the Parent, any Host Company or any
Affiliate), accountants, experts and other professional advisors selected
by it; and (ii) no Lender shall have any right of action whatsoever
against the Administrative Agent as a result of Administrative Agent's
acting or refraining from acting under this Agreement or any of the other
Security Documents in accordance with the instructions of the Required
Lenders or the Lender, as may be required hereunder. The Administrative
Agent shall be entitled to refrain from exercising any power, discretion
or authority vested in it under this Agreement or any of the other
Security Documents unless and until it has obtained the instructions of
the Lenders or the Required Lenders, as the case may be, and such
indemnification as it may reasonably request. The Administrative Agent
shall not be liable to any Lender with respect to its failure to take any
action under any Security Document directed by the Lenders or Required
Lenders, as may be required hereunder, if such action would, in the good
faith opinion of the Administrative Agent, be unlawful or contrary to the
terms and provisions of this Agreement or any other Security Document, or
would subject the Administrative Agent to liability under any
Environmental Protection Law. For the avoidance of doubt, unless otherwise
expressly provided for herein or in any Security Document, the
Administrative Agent may rely upon instructions given to it by the
Required Lenders.
(d) Administrative Agent Entitled to Act as Lender. The agency
hereby created shall in no way impair or affect any of the rights and
powers of, or impose any duties or obligations upon, the Administrative
Agent in its individual capacity as a Lender hereunder. With respect to
its participating in the Loan, the Administrative Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the
same as though it were not performing the duties and functions delegated
to it hereunder, and the term "Lender" or "Lenders" or any similar term
shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent
and its affiliates may lend money to and generally engage in any kind of
financial or other business with the Borrower, the Parent, any Host
Company or any of the Affiliates as if it were not performing the duties
specified herein, and may accept fees and other consideration from the
Borrower, the Parent, any Host Company and the Affiliates for services in
connection with this Agreement and otherwise without having to account for
the same to the Lenders.
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(e) Advancing of Own Funds. The Administrative Agent shall not be
required to advance, expend or risk its own funds or otherwise incur
personal liability in the performance of its duties or in the exercise of
any rights or remedies hereunder or under the other Security Documents.
10.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of the Borrower, the
Parent, each Host Company and the Projects in connection with entering into this
Agreement and the making of the Advances hereunder and that it has made and
shall continue to make its own appraisal of the creditworthiness of the
Borrower, the Parent, each Host Company and the Projects. The Administrative
Agent shall not have any duty or responsibility, either initially or on a
continuing basis, to make any such investigation or any such appraisal on behalf
of the Lenders or to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the making of
the Advances or at any time or times thereafter, and the Administrative Agent
shall not have any responsibility with respect to the accuracy of or the
completeness of any information provided, directly or indirectly, to the Lenders
by the Borrower, the Parent, any Host Company, any Affiliate or any employee,
officer, director or agent thereof.
10.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify the Administrative Agent, to the extent that the Administrative Agent
shall not have been reimbursed by the Borrower, for and against any and all
liabilities, obligations, losses, claims, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against the Administrative Agent in
performing its duties hereunder or under the other Security Documents or
otherwise in its capacity as the Administrative Agent in any way relating to or
arising out of this Agreement or the other Security Documents, provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
claims, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct. If any indemnity furnished to the Administrative Agent for
any purpose in connection with its performance of its duties hereunder or under
any other Security Document shall, in the opinion of the Administrative Agent,
be insufficient or become impaired, the Administrative Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
10.5 Successor Administrative Agent.
The Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to the Lenders and the Borrower, and the Administrative
Agent may be removed at any time with or without cause by an instrument or
concurrent instruments in writing delivered to the Borrower and the
Administrative Agent and signed by the Required Lenders. Upon any such notice of
resignation or any such removal, the Required Lenders shall have the right, upon
5 Business Days' notice to the Borrower, to appoint a successor Administrative
Agent. Upon the
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acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent and the retiring or removed
Administrative Agent shall be discharged from its duties and obligations under
this agreement. After any retiring or removed Administrative Agent's resignation
or removal hereunder as Administrative Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and the other Security
Documents.
10.6 Collateral Documents.
Each Lender hereby approves the forms of the Security Documents attached
as Exhibits to this Agreement and further authorizes the Administrative Agent to
accept from the Borrower, the Parent and each Host Company and to execute and
deliver as Administrative Agent the Security Documents, as secured party on
behalf of and for the benefit of the Lenders, and agrees to be bound by the
terms of the Security Documents, in each case substantially in the form of such
Exhibits with such changes, additions or deletions as the Administrative Agent,
in its sole discretion, may approve as necessary or appropriate to accomplish
the purposes of such Security Documents. Anything contained in any of the
Security Documents to the contrary notwithstanding, each Lender agrees that no
Lender shall have any right individually to realize upon any of the Collateral
under the Security Documents, it being understood and agreed that all rights and
remedies under the Security Documents may be exercised solely by the
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof.
10.7 Designation of Additional Administrative Agents.
Whenever the Administrative Agent shall deem it necessary or prudent in
order either to conform to any law of any jurisdiction in which all or any part
of the Collateral shall be situated or to make any claim or bring any suit with
respect to the Collateral or the Security Documents, or in the event that the
Administrative Agent shall have been requested to do so by the Required Lenders,
the Administrative Agent and, to the extent necessary, the Borrower, the Parent
and the Host Companies shall execute and deliver a supplemental agreement and
all other instruments and agreements necessary or proper to constitute a bank or
trust company or one or more other Persons approved by the Administrative Agent,
either to act as Administrative Agent or agents with respect to all or any part
of the Collateral, in any such case with such powers of the Administrative Agent
as may be provided in such supplemental agreement, and to vest in such bank,
trust company or other Person as such Administrative Agent or separate trustee,
as the case may be, any property, title, right, or power of the Administrative
Agent deemed necessary or advisable by the Administrative Agent.
10.8 Payments.
(a) Notification of Advance Request. When the Borrower gives the
Administrative Agent notice that it desires an Advance hereunder, the
Administrative Agent shall promptly notify each of the Lenders of the
notice for an Advance from such Lender, which notice shall specify the
amount of the Advance desired from such Lender and the amount of such
Lender's Pro Rata Share of the requested advance.
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(b) Direct Funding Alternative. If the aforesaid notice is received
by a Lender on or before 12:00 p.m. (Lender's time), such Lender shall
wire, transfer or deliver good funds by 11:00 a.m. the next Business Day
or such other later Business Day as may have been indicated in such notice
of its Pro Rata Share of the requested advance to the Borrower. If such
notice is received after 12:00 p.m. (Lender's time), then such Lender
shall wire, transfer or deliver good funds by 11:00 a.m. the second
Business Day or such other later Business Day as may have been indicated
in such notice of its Pro Rata Share of the requested advance to the
Borrower. If a Lender desires this clause (b) to be the effective means by
which it funds advances hereunder (rather than Section 2.3(a)(ii)(A)
hereof), it shall notify the Administrative Agent, in writing, of such
election.
(c) Distributions to Lenders. The Administrative Agent shall
distribute to each Lender, such Lender's Pro Rata Share of all amounts
representing collections in reference to the Loan by 11:00 a.m. on the
next Business Day after good, collected funds in respect thereof shall
have been received or collected if such funds are received or collected
prior to 12:00 p.m. (Administrative Agent's time). If such funds shall be
received or collected after 12:00 p.m. (Administrative Agent's time),
Administrative Agent shall promptly distribute such funds to Lender by
11:00 a.m. on the second Business Day after such funds shall have been
received or collected.
(d) Delay in Disbursing. If funds required for an Advance from a
Lender or for payment by the Administrative Agent are not distributed to
the Borrower or the applicable Lender, as the case may be, within the time
set forth herein for such distribution for any reason other than an "Act
of God" or the nonoperation of the Federal Reserve Bank wire transfer
system, the party entitled to such funds shall be entitled to interest on
such funds from the Person obligated to disburse the same at the rate of
the prevailing Federal Funds rate from and including the date such funds
were received or to be disbursed, but excluding the date such funds are
received by the recipient thereof.
11. MISCELLANEOUS
11.1 Governing Law.
This Agreement and all transactions, assignments and transfers hereunder,
and all the rights of the parties hereto shall be governed as to the validity,
construction, enforcement and in all other respects by the internal laws of the
State of Maine. To the extent any provision of this Agreement is not enforceable
under applicable law, such provision shall be deemed null and void and shall
have no effect on the remaining portions of this Agreement.
11.2 Expenses and Closing Fees.
Whether or not the transactions contemplated hereunder are completed, the
Borrower shall pay all expenses of any one or more of the Lenders and/or the
Administrative Agent relating to negotiating, preparing, documenting, closing
and enforcing this Agreement, relating to the making by any one or more of the
Lenders of any Advances hereunder to the Borrower and/or relating to the
performance of the duties of the Administrative Agent hereunder and under the
other Security Documents, including, but not limited to:
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(a) the cost of reproducing this Agreement, the Notes and the other
Security Documents;
(b) the fees and disbursements of each of the Lender's counsel and
the Administrative Agent's counsel;
(c) each of the Lender's and the Administrative Agent's
out-of-pocket expenses in connection with any audits in respect of the
Borrower and/or the Collateral conducted by such Lender or the
Administrative Agent prior to the date hereof per Schedule 24 hereto;
(d) all fees and expenses (including fees and expenses of counsel to
each of the Lenders and counsel to the Administrative Agent) relating to
any amendments, waivers, consents or review of documents in connection
with this Agreement or relating to the funding of any Advance hereunder;
(e) all costs, outlays, attorneys' fees and expenses of every kind
and character had or incurred in (i) the enforcement of any of the
provisions of, or rights and remedies under, this Agreement, any
assignment agreement, or any other Security Document and (ii) the
preparation for, negotiations regarding, consultations concerning, or the
defense of legal proceedings involving, any claim or claims made or
threatened against any one or more of the Lenders and/or the
Administrative Agent arising out of this transaction or the protection of
the Collateral securing the Obligations, expressly including, without
limitation, the defense by any Lender or the Administrative Agent of any
legal proceedings instituted or threatened by any Person to seek to
recover or set aside any payment or setoff theretofore received or applied
by such Lender or the Administrative Agent with respect to the
Obligations;
(f) all expenses relating to the Approved Escrow Accounts;
(g) all expenses relating to the safekeeping of the Contracts by the
Administrative Agent (including, without limitation, the retention by the
Administrative Agent of any custodian or trust department to safekeep such
Contracts);
(h) all filing and recording fees, costs and expenses which may be
incurred by any one or more of the Lenders and/or the Administrative Agent
with respect to the filing or recording of any document or instrument
relating to the transactions described in this Agreement or the other
Security Documents;
(i) the Administrative Agent's advances (together with interest
thereon as provided for herein) in respect of any of the Borrower's
expenses or undertakings to make payments set forth herein or in any other
Security Document for which the Administrative Agent shall have paid such
expenses or made such payments in accordance with the terms and conditions
hereof or such other Security Documents, and
(j) all costs and expenses owing to the Disbursement Agent under the
Loan Disbursement Agreement,
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(all of the foregoing in this Section 11.2 being referred to herein as, the
"Loan Costs").
11.3 Parties, Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (except that the
Borrower may not assign any of its rights hereunder), and all representations,
covenants, provisions and agreements by or on behalf of the Borrower which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of the Lenders and the Administrative Agent. Except as provided in this
Section 11.3, this Agreement shall not create and shall not be construed as
creating any rights enforceable by, or benefits in favor of, any Person not a
party hereto.
11.4 Notices.
All notices or demands by any Person hereunder to any other Person
hereunder relating to this Agreement or any other Security Document shall,
except as otherwise provided herein, be in writing and sent by certified or
registered United States mail, first class postage prepaid and return receipt
requested, or by a nationally recognized overnight courier service with all
delivery fees prepaid. Notices shall be deemed received
(a) on the 3rd succeeding Business Day following deposit in the
United States mail, certified or registered and first class postage
prepaid and return receipt requested, provided that notices to the
Administrative Agent shall not be effective until received or
(b) upon delivery if sent by nationally recognized overnight courier
with all delivery fees prepaid.
Notices and demands shall be addressed, if to the Borrower, at the mailing
address set forth on Schedule 23 to this Agreement or to such other address as
the Borrower may from time to time specify in writing or, if to a Lender, at the
mailing address of such Lender set forth on Schedule 23 hereto or to such other
address as such Lender may from time to time specify in writing to the Borrower
or, if to the Administrative Agent, at the mailing address of the Administrative
Agent set forth on Schedule 23 hereto or to such other address as the
Administrative Agent may from time to time specify in writing to the Borrower
and the Lenders.
11.5 Total Agreement.
This Agreement, including the Exhibits, the Schedules and the other
agreements referred to herein, is the entire agreement between the parties
hereto relating to the subject matter hereof, incorporates or rescinds all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof, and may not be changed or terminated orally or by course of
conduct. Any provision of this Agreement may be modified, changed or waived only
in a writing executed by the Required Lenders and the Borrower, provided that
(a) any such modification, change or waiver which (i) increases the
amount of any of the Commitments or reduces the principal amount of the
Loan, (ii) changes any Lender's Pro Rata Share or Loan Exposure, (iii)
changes the defined term "Required Lenders" or "Maturity Date," (iv)
decreases the Interest Rate or the Default Rate, (v)
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postpones the date on which any interest or any fees are payable or how
proceeds from the sale of Quartershare Interests, Residential Units or
Condominium Units are collected and distributed to the Lenders, (vi)
releases all, substantially all, or any material portion of the Collateral
(other than as expressly contemplated herein and in the other Security
Documents) or (vii) changes any provision of this Section 11.5, shall
become effective only after having been consented to in writing by all of
the Lenders,
(b) any such modification, change or waiver in respect of any
provision of any Note (other than a provision incorporated by reference
therein to which another clause of this Section 11.5 is applicable) shall
become effective only after having been consented to in writing by the
Lender holding such Note and
(c) any such modification, change or waiver which affects any of the
rights, duties or obligations of the Administrative Agent hereunder or
under any other Security Document (including, without limitation, any
modification or change in Section 10 hereof) shall become effective only
after being consented to, in writing, by the Administrative Agent.
The failure or delay of any Lender or the Administrative Agent to exercise or
enforce any rights, Liens, powers, remedies, conditions or other terms hereunder
or under any other agreement or instrument executed in connection herewith shall
not operate as a waiver of any such rights, Liens, powers, remedies, conditions
or other terms.
11.6 Survival.
All warranties, representations and covenants made by the Borrower herein
or in any certificate or other instrument delivered by it or on its behalf under
this Agreement shall be considered to have been relied upon by the Lenders and
shall survive the delivery to the Lenders of the Notes regardless of any
investigation made by the Lenders or on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Borrower hereunder.
11.7 Set-Off.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by the Borrower at any time or
from time to time, without notice to the Borrower or any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other indebtedness at any time held or
owing by such Lender to or for the creditor or the account of the Borrower
against and on account of the obligations and liabilities of the Borrower to
such Lender under this Agreement and participations therein and the other
Security Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement or any other
Security Document, irrespective of whether or not (a) such Lender shall have
made any demand hereunder or (b) the principal of or the interest on the Loan or
any other amounts due hereunder shall have become due and
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payable pursuant to Section 8 hereof and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
11.8 Ratable Sharing.
The Lenders hereby agree among themselves that if any of them shall
(whether by voluntary payment, by realization upon security, through the
exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Security Documents or
otherwise) receive payment or reduction of a proportion of the aggregate amount
of principal, interest, amounts payable in respect of the Loan and other amounts
then due and owing to such Lender hereunder or under the other Security
Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is
greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then such Lender receiving such
proportionately greater payment shall (a) notify the Administrative Agent and
each other Lender of the receipt of such payment and (b) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries in respect of all Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
each of them; provided that if all or part of such proportionately greater
payment received by such purchasing Lender is thereafter recovered from such
Lender upon the bankruptcy or reorganization of the Borrower or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. The Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by the Borrower to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
11.9 Litigation.
THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF
ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT
OF THIS AGREEMENT, THE NOTES, ANY OTHER SECURITY DOCUMENT, THE COLLATERAL OR ANY
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER AMONG
THE BORROWER, THE LENDERS AND/OR THE ADMINISTRATIVE AGENT OF ANY KIND OR NATURE.
THE BORROWER, EACH OF THE LENDERS AND THE ADMINISTRATIVE AGENT
HEREBY AGREE THAT THE FOLLOWING COURTS:
STATE COURT: (1) SUPERIOR COURT OF THE STATE OF MAINE FOR OXFORD COUNTY
SITTING AT SOUTH PARIS or (2) THE SUPERIOR COURT OF THE STATE OF RHODE ISLAND
SITTING AT PROVIDENCE;
FEDERAL COURT: (1) UNITED STATES DISTRICT COURT FOR MAINE SITTING AT
PORTLAND, or (2) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND
SITTING AT PROVIDENCE,
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SHALL HAVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG THE BORROWER, THE LENDERS AND/OR
THE ADMINISTRATIVE AGENT PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OTHER SECURITY DOCUMENT OR ANY MATTER ARISING HEREFROM OR THEREFROM. THE
BORROWER, EACH OF THE LENDERS AND THE ADMINISTRATIVE AGENT EXPRESSLY SUBMIT AND
CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN
ANY SUCH COURT.
THE STIPULATIONS OF THE BORROWER IN THIS SECTION 11.9 SHALL SURVIVE THE
FINAL PAYMENT OF ALL OF THE OBLIGATIONS OF THE BORROWER AND THE RESULTING
TERMINATION OF THIS AGREEMENT.
NEITHER THE LENDERS NOR THE ADMINISTRATIVE AGENT SHALL BE RESPONSIBLE FOR
ANY LOST PROFITS OF THE BORROWER ARISING FROM ANY BREACH OF CONTRACT, TORT
(EXCLUDING ANY LENDER'S OR THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT) FOR ANY OTHER WRONG ARISING FROM THE ESTABLISHMENT,
ADMINISTRATION, FAILURE TO FUND OR COLLECTION OF THE CREDIT EXTENDED UNDER THIS
AGREEMENT.
11.10 Power of Attorney.
The Borrower hereby makes, constitutes and appoints the Administrative
Agent the true and lawful agent and attorney-in-fact of the Borrower, with full
power of substitution, (a) during the existence of any Event of Default, to
receive, open and dispose of all mail addressed to the Borrower relating to the
Contracts; (b) during the existence of any Event of Default, to open all such
mail and remove therefrom any notes, checks, acceptances, drafts, money orders
or other instruments constituting Collateral, with full power to endorse the
name of the Borrower upon any such notes, checks, acceptances, drafts, money
orders, instruments or other documents, and to effect the deposit and collection
thereof, and the Administrative Agent shall have the further right and power to
endorse the name of the Borrower on any documents relating to the Collateral;
(c) to execute on behalf of the Borrower assignments, notices of assignment,
financing statements and other public records and notices in respect of the
Contracts; (d) during the existence of any Event of Default, to notify
Purchasers of the Contracts to make all payments thereunder directly to the
Administrative Agent at an address to be designated by the Administrative Agent
and to execute and send other notices to such Purchasers and obligors as the
Administrative Agent may deem necessary in order to protect and/or collect the
same; and (e) to do any and all things necessary or take action in the name and
on behalf of the Borrower to carry out the intent of this Agreement, including,
without limitation, the grant of the security interest provided herein and to
perfect and protect the security interest granted to the Administrative Agent
with respect to the Collateral and the Administrative Agent's rights created
under this Agreement, to act on behalf of the Borrower in connection with
obtaining funds from any Approved Escrow Account and to endorse any checks or
other instruments of payment in respect of any payment, performance or other
surety bond made payable to Borrower or to Borrower and the Administrative Agent
jointly. The Borrower agrees that neither the Administrative Agent nor any of
its agents, designees or attorneys-in-fact will be liable for any acts of
commission or omission, or for any error of judgment or mistake of fact or law
with respect to the exercise of the power of attorney granted under this Section
11.10 except for its
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own gross negligence or willful misconduct. The power of attorney granted under
this Section 11.10 is coupled with an interest and shall be irrevocable during
the term of this Agreement.
11.11 Survival of Indemnities.
All indemnities set forth in this Agreement shall survive the execution
and delivery of this Agreement and the execution and delivery of the Notes as
well as the payment in full of the Notes and the otherwise full performance of
this Agreement.
11.12 Conflicting Obligations; Rights and Remedies.
To the extent that the terms of any of the Security Documents contain
conflicting obligations, the terms set forth in this Agreement shall be deemed
to be the controlling terms, provided that all rights and remedies of the
Administrative Agent under the Security Documents are cumulative and in addition
to every other right or remedy, and no right or remedy is intended to be
exclusive of any other right or remedy.
11.13 Independent Nature of Lenders' Rights.
Nothing contained herein or in any other Security Document, and no action
taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute
the Lenders as a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement, and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
11.14 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
11.15 Duplicate Originals, Execution in Counterpart.
Two or more duplicate originals of this Agreement may be signed by the
parties hereto, each of which shall be an original but all of which together
shall constitute one and the same instrument. This Agreement may be executed in
one or more counterparts and shall be effective when at least one counterpart
shall have been executed by each party hereto, and each set of counterparts
which, collectively, show execution by each party hereto shall constitute one
duplicate original.
[Remainder of page intentionally left blank. Next page is signature page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Borrower: Lender:
GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION
PROPERTIES, INC.
By /s/ Mark P. Girard By /s/ Nicholas L. Mecca
------------------------------ ---------------------------------
Name: Mark P. Girard Name: Nicholas L. Mecca
Title: Vice President Title: Vice President
Commitment: $30,000,000
Lender:
GREEN TREE FINANCIAL SERVICING
CORPORATION
By
-----------------------------------
Name:
Title:
Commitment: $25,000,000
Administrative Agent:
TEXTRON FINANCIAL CORPORATION
By /s/ Nicholas L. Mecca
-----------------------------------
Name: Nicholas L. Mecca
Title: Vice President
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Borrower: Lender:
GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION
PROPERTIES, INC.
By By /s/ Nicholas L. Mecca
------------------------------ ---------------------------------
Name: Name: Nicholas L. Mecca
Title: Title: V.P.
Commitment: $30,000,000
Lender:
GREEN TREE FINANCIAL SERVICING
CORPORATION
By
-----------------------------------
Name:
Title:
Commitment: $25,000,000
Administrative Agent:
TEXTRON FINANCIAL CORPORATION
By /s/ Nicholas L. Mecca
---------------------------------
Name: Nicholas L. Mecca
Title: V.P.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Borrower: Lender:
GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION
PROPERTIES, INC.
By By
------------------------------ ---------------------------------
Name: Name:
Title: Title:
Commitment: $30,000,000
Lender:
GREEN TREE FINANCIAL SERVICING
CORPORATION
By /s/ Christopher A. Goibros
-----------------------------------
Name: Christopher A. Goibros
Title: V.P., GENERAL MANAGER
Commitment: $25,000,000
Administrative Agent:
TEXTRON FINANCIAL CORPORATION
By
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.72
SUBORDINATED PROMISSORY NOTE
$2,750,000 Portland, Maine
November 27, 1996
FOR VALUE RECEIVED, the undersigned Booth Creek Ski Acquisition Corp.,
Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc.
(collectively referred to as "maker") jointly and severally promise to pay to
the order of American Skiing Company (together with any subsequent holder of
this Note herein referred to as "holder"), a corporation organized and existing
under the laws of the State of Maine, with a principal place of business in the
Town of Newry, Maine, the principal sum of Two Million Seven Hundred Fifty
Thousand and 00/100 Dollars ($2,750,000) together with interest upon the
principal sum hereof from time to time outstanding, computed from the date
hereof at the rate of twelve percent (12%) per annum.
Subject to the terms and provisions hereinafter contained, interest shall
be payable semi-annually on December 31 and June 30 of each year beginning June
30, 1997 and continuing until maturity.
Subject to the terms and provisions hereinafter contained, principal shall
be payable in installments as follows:
Date Principal Amount Due
---- --------------------
1/10/97 $250,000
1/31/98 $100,000
1/31/99 $150,000
1/31/00 $200,000
1/31/01 $250,000
1/31/02 $300,000
1/31/03 $350,000
6/30/04 Remaining Principal
Payments under this Subordinated Promissory Note (this "Note") shall be
applied as follows: (1) first to the interest on the unpaid balance of the debt
evidenced hereby and (2) then the remainder to the unpaid principal balance of
the debt until the same is paid in full.
Payments of principal and interest under this Note not made within fifteen
(15) days following the date due shall bear interest at a rate per annum equal
to 15% until so paid.
<PAGE>
This Note is subject to the condition that at no time shall the maker be
obligated or required to pay interest at a rate which could subject the holder
hereof to either civil or criminal liability, forfeiture or loss of principal,
interest or other sums as a result of being in excess of the maximum interest
rate which maker is permitted by law to pay. If by the terms of this Note maker
would at any time be required or obligated to pay interest at a rate in excess
of such maximum rate, then the rate of interest under this Note shall be deemed
to be immediately reduced to such maximum rate for so long as such maximum rate
shall be in effect and shall thereafter be payable at the rate herein provided.
In case of failure to make payment within fifteen (15) days following the
due date of any installments of, principal of, or interest on, this Note or in
case of default (not cured within any applicable grace period) in the terms or
conditions of (i) the Second Mortgage Deed, Security Agreement and Financing
Statement dated as of the date hereof and executed by Waterville Valley Ski
Resort, Inc. in favor of holder (as amended or otherwise modified from time to
time, the "Waterville Mortgage") and (ii) the Second Mortgage Deed, Security
Agreement and Financing Statement dated as of the date hereof and executed by
Mount Cranmore Ski Resort, Inc. in favor of holder (as amended or otherwise
modified from time to time, the "Cranmore Mortgage" and, together with the
Waterville Mortgage, the "Mortgages"), subject to the terms and provisions
hereinafter contained the holder of this Note shall have the option, upon
delivery of written notice to the maker, to declare due and payable at once the
entire principal balance hereof together with accrued interest at the rates
hereinabove provided.
All payments due hereunder and any notice given by the maker to the holder
hereof shall be addressed to American Skiing Company, P.O. Box 450, Sunday River
Access Road, Bethel, Maine 04217, Attn: Chief Administrative Officer unless
written notice of another holder or address be given to the maker. Any notice
given by the holder to the maker shall be addressed to Booth Creek Ski
Acquisition Corp., 1000 South Frontage Road, Vail, Colorado 81657, Attn:
Chairman unless written notice of another address be given to the holder.
This Note evidences a loan for business and commercial purposes.
Each maker is jointly and severally liable for all obligations hereunder.
The maker and all other parties that may be or become liable herefor, whether
principal, guarantor, endorser or otherwise, hereby severally waive demand,
notice and protest, and waive all recourse to suretyship and guarantorship
defenses generally, including but not limited to, any extensions of time for
payment or performance which may be granted to the maker or to any other party,
any modification or amendments to this Note or any document securing payment and
performance hereof, any release of security, any release of a liable party or
parties, and all other indulgences of any type which may be granted by the
holder hereof to any or all of maker or any other party that may be or become
liable herefor, and do also agree to pay all reasonable costs and expenses of
any nature, whether incurred in or out of court, and whether incurred before or
after this Note shall become due at its maturity date or otherwise, including
but not limited to reasonable attorney's fees and costs, which the holder hereof
may deem necessary or proper in connection with the collection or satisfaction
of the indebtedness evidenced hereby or in the administration, supervision,
preservation or protection (including but not limited to the maintenance of
adequate insurance) of or realization upon any collateral security herefor.
2
<PAGE>
Maker and all parties that may be or become liable herefor shall have the
right to prepay the principal hereof in full or in part together with accrued
interest to the date of payment on the principal amount being prepaid, at any
time and from time to time without premium or penalty.
The obligations of the maker hereunder are hereby made subordinate and
junior in right of payment, to the extent and in the manner provided herein, to
the prior payment in full in cash of all Senior Debt (as hereinafter defined) of
the maker (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed).
The following terms shall have the meanings hereinafter set forth:
"Insolvency or Liquidation Proceeding" means any insolvency or bankruptcy
or similar case or proceeding, or any reorganization, receivership, liquidation,
dissolution or winding up of maker, whether voluntary or involuntary, or any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of the maker.
"Post-Petition Interest" means all interest accrued or accruing on such
indebtedness after the commencement of any Insolvency or Liquidation Proceeding
against the obligor on such indebtedness in accordance with and at the contract
rate (including, without limitation, any rate applicable upon default) specified
in the agreement or instrument creating, evidencing or governing such
indebtedness, whether or not, pursuant to applicable law or otherwise, the claim
for such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding.
"Representative" means, with respect to any Senior Debt, the agent or
other representative(s), if any, of holders of such Senior Debt.
"Senior Debt" means and includes all principal of, premium and interest
on, and any other penalties, premiums, fees, charges, obligations, expense
reimbursement or other liabilities (including, but not limited to, Post-Petition
Interest) existing from time to time under (i) any indebtedness of maker (other
than the Subordinated Obligation) incurred or established to finance the
purchase price payable under that certain Purchase and Sale Agreement among
Waterville Valley Ski Area, Ltd., Cranmore, Inc., American Skiing Company and
Booth Creek Ski Acquisition Corp. dated as of August 30, 1996, and including any
amendments, restatements, supplements, modifications, renewals and extensions
thereof and any complete or partial refinancing and replacements thereof, (ii)
any indebtedness of maker incurred or established with one or more financial
institutions unrelated to maker to fund working capital requirements for the
Waterville Valley Ski Resort in Waterville Valley, New Hampshire and/or the Mt.
Cranmore ski resort in North Conway, New Hampshire (the "Resorts") and including
any amendments, restatements, supplements, modifications, renewals and
extensions thereof and any complete or partial refinancing and replacements
thereof, (iii) indebtedness of maker incurred or established to finance the
purchase or improvement, or any capitalized leases, of property or assets to be
used in the operation of the Resorts and including any amendments, restatements,
supplements, modifications, renewals and extensions thereof and any complete or
partial refinancings and replacements thereof, and (iv) any other indebtedness
of maker owing to the financial institutions that provided the financing
described in clauses (i), (ii) and (iii) above, including their successors and
assigns.
3
<PAGE>
"Subordinated Obligation" means this Note and all obligations of payment
hereunder and under the Mortgages including principal, interest, premium and
costs, expenses and other charges.
Upon any distribution of cash, securities or other property to creditors
of the maker in a liquidation or dissolution of the maker or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
maker or its property, in an assignment for the benefit of creditors or any
marshaling of the maker's assets and liabilities;
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash of all Senior Debt before the holder of this Note shall be
entitled to receive any payment with respect to this Note; and
(2) until all Senior Debt (as provided in subsection (1) above) is
paid in full in cash, any distribution to which holders of this Note would
be entitled but for the subordination provisions of this paragraph shall
be made to holders of such Senior Debt, as their interests may appear.
The maker may not make any payment or distribution to any holder of this
Note until all Senior Debt has been paid in full in cash; provided, however,
that the maker may make payments of principal and interest on this Note unless:
(1) a default in the payment of the principal of or premium or
interest on Senior Debt (a "Payment Default") occurs and is continuing;
or
(2) a default, other than a Payment Default (a "Non-Payment
Default"), under any agreement, indenture, or other document governing
Senior Debt occurs and is continuing that permits holders of Senior Debt
as to which such default relates to accelerate its maturity and the holder
of this Note receives a notice of such default (a "Payment Blockage
Notice") from any holder of Senior Debt. If the holder of this Note
receives any such Payment Blockage Notice, no subsequent Payment Blockage
Notice shall be effective for purposes of this subsection (2) unless and
until at least 179 days shall have elapsed since the delivery of the
immediately prior Payment Blockage Notice. No Non-Payment Default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice shall be, or made, the basis for a subsequent Payment Blockage
Notice.
The maker may and shall resume all payments on this Note upon:
(1) in the case of a default referred to in subsection (1) above,
the date upon which such default is cured or waived; or
(2) in the case of a default referred to in subsection (2) above,
the earlier of the date upon which the default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of such Senior Debt has been accelerated.
4
<PAGE>
If payment of this Note is accelerated because of any default hereunder or
under the Mortgages, the maker shall promptly notify holders of Senior Debt of
the acceleration.
In the event that any holder of this Note receives any payment with
respect to this Note at a time when such payment is prohibited hereby, such
payment shall be held by such holder, in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, to the holders of
Senior Debt as their interests may appear under the indenture or other agreement
(if any) pursuant to which such Senior Debt may have been issued, as their
respective interests may appear or as directed by final, non-appealable action
of a court of competent jurisdiction for application to the payment of all
Senior Debt remaining unpaid to the extent necessary to pay all Senior Debt in
full in accordance with its terms, after giving affect to any concurrent payment
or distribution to or for the holders of such Senior Debt.
With respect to the holders of Senior Debt, the holder hereof undertakes
to perform only such obligations as are specifically set forth herein, and no
implied covenants or obligations with respect to the holders of such Senior Debt
shall be read into this Note against the holder hereof. The holder hereof shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall
not be liable to any such holders if the holder hereof shall accept or retain
money or assets to which any holders of such Senior Debt shall be entitled by
virtue of this Note, except if such payment is made at a time when the terms of
this Note prohibit such payment.
The maker shall promptly notify the holder hereof in writing of any facts
known to the maker that would cause a payment under this Note to violate this
Note, but failure to give such notice shall not affect the subordination of this
Note to the Senior Debt of the maker as provided herein.
After all Senior Debt is paid in full in cash and until this Note is paid
in full the holder of this Note shall be subrogated to the rights of holders of
such Senior Debt to receive distributions applicable to such Senior Debt to the
extent that distributions otherwise payable to the holder hereof have been
applied to the payment of such Senior Debt. A distribution made hereunder to
holders of Senior Debt that otherwise would have been made to the holder hereof
is not, as between the maker and holder hereof a payment by the maker.
The holder may not unilaterally commence proceedings to enforce any rights
or remedies that it may have against the maker of any of its assets under this
Note or the Mortgages or accelerate this Note until the passage of 360 days
after the receipt by maker and the holders of the Senior Debt of notice from
the holder hereof that a default has occurred under this Note or the Mortgages.
5
<PAGE>
The foregoing provisions defines the relative rights of the holder of this
Note and holders of Senior Debt of the maker. Nothing in this Note shall:
(1) impair, as between the maker, and the holder of this Note, the
obligation of the maker, which is absolute and unconditional, to pay
principal of and premium, interest and other fees, charges and expenses,
if any, on this Note in accordance with its terms; or
(2) affect the relative rights of the holder of this Note and
creditors of the maker other than the rights of the holder of this Note in
relation to holders of the Senior Debt; or
(3) except as expressly limited hereunder, prevent the holder of
this Note from exercising its available remedies upon a default hereunder
or under the Mortgages, subject to the rights of holders of such Senior
Debt to receive distributions and payments otherwise payable to the holder
of this Note.
If the maker fails because of the foregoing provisions to pay principal of
or premium, interest or other fees, charges and expenses, if any, on this Note
on the due date, the failure shall none-the-less constitute a default hereunder.
No right of any holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by this Note shall be impaired by any act or failure to
act by the maker or any holder of Senior Debt or the failure of the maker or any
holder to comply with this Note.
The holders of any Senior Debt of the maker may, at any time and from time
to time, without the consent of or notice to the holder hereof, without
incurring any liabilities to the holder hereof and without impairing or
releasing the subordination and other benefits provided herein or the
obligations of the holder of this Note to the holders of such Senior Debt, even
if any holder's right of reimbursement or subrogation or other right or remedy
is affected, impaired or extinguished thereby, do any one or more of the
following: (i) amend, renew, exchange, extend, modify, increase or supplement in
any manner such Senior Debt or any instrument evidencing or guaranteeing or
securing such Senior Debt or any agreement under which such Senior Debt is
outstanding (including, but not limited to, changing the manner, place or terms
of payment or changing or extending the time of payment of, or renewing,
exchanging, amending, increasing, releasing, terminating or altering any such
instrument or agreement), (ii) sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and in any order any property
pledged, mortgaged or otherwise securing such Senior Debt or any liability of
any obligor thereon, to such holder, or any liability incurred in respect
thereof; (iii) settle or compromise any such Senior Debt or any other liability
of any obligor of such Senior Debt to such holder or any security therefor or
any liability incurred in respect thereof and apply any sums by whomsoever paid
and however realized to any liability (including, without limitation, payment of
any Senior Debt) in any manner or order; and (iv) release, terminate or
otherwise cancel, or fail to take or to record or otherwise perfect, for any
reason or for no reason, any lien or security interest securing such Senior Debt
by whomsoever granted, exercise or delay in or refrain from exercising any right
or remedy against any obligor or any guarantor or any other person, elect any
remedy and otherwise deal freely with any obligor and any security for such
Senior Debt or any liability of any obligor to the holders of such Senior Debt
or any liability incurred in respect to such Senior Debt.
6
<PAGE>
Upon any payment or distribution of assets of the maker referred to
herein, the holder of this Note shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction or upon any certificate of an
authorized representative of the holders of Senior Debt or the maker or of the
liquidating trustee or agent or other person making any distribution to the
holder of this Note for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Debt and other
indebtedness of the maker, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto.
For all purposes of this Note, a "payment or distribution on account of
Subordinated Obligations" shall include, without limitation, any direct or
indirect payment or distribution on account of the purchase, prepayment,
redemption, retirement, defeasance or acquisition of this Note, any recovery by
the exercise of any right of set-off, any direct or indirect payment of
principal, premium or interest with respect to or in connection with any
mandatory or optional redemption or purchase provisions, any direct or indirect
payment or distribution payable or distributable by reason of any Subordinated
Obligations, and any direct or indirect payment or recovery on any claim
relating to or arising under this Note.
If any obligation or portion of this promissory note is determined to be
invalid or unenforceable under law, it shall not affect the validity or
enforceability of the remaining obligations or portions hereof. If there is more
than one party signatory hereto, the liability of all such parties whether
principal, guarantor, endorser or otherwise hereunder shall be joint and
several. This Note shall be governed by and construed in accordance with the
laws of the State of Maine without regard to the conflicts of laws and
provisions thereof.
Maker hereby consents to and acknowledges the pledge and assignment of
this Note to Fleet National Bank, as agent, pursuant to that certain Security
Agreement among American Skiing Company certain subsidiaries thereof and Fleet
National Bank, as agent, dated June 28, 1996.
7
<PAGE>
The provisions of this Note regarding subordination and other matters
relating to the holders of Senior Debt are for the benefit of the holders of
Senior Debt and may be enforced directly by them against the holder of this
Note. The holder of this Note acknowledges and agrees, by acceptance hereof,
that the holders of the Senior Debt have relied upon and will continue to rely
upon the subordination provided for herein in entering into the transaction to
which they are a party and making the extensions of credit comprising the Senior
Debt. The holder of this Note hereby waives notice of or proof of reliance
hereon.
BOOTH CREEK SKI
ACQUISITION CORP.
By: /s/ [Illegible]
----------------------------
Name:
--------------------------
Title:
-------------------------
WATERVILLE VALLEY SKI
RESORT, INC.
By: /s/ [Illegible]
----------------------------
Name:
--------------------------
Title:
-------------------------
MOUNT CRANMORE SKI RESORT, INC.
By: /s/ [Illegible]
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE>
EXHIBIT 10.74
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
by and between
WOLF MOUNTAIN RESORTS, L.C.
("Seller")
and
ASC UTAH, INC.
("Buyer")
dated as of
July 3, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT......................................................................1
ARTICLE I PURCHASE AND SALE....................................................1
1.01 Subsidiaries......................................................1
1.02 Ski Areas Improvements............................................2
1.03 Personal Property.................................................2
1.04 Licenses and Permits..............................................2
1.05 Books and Records.................................................2
1.06 Intellectual Property.............................................2
1.07 Contract Rights...................................................2
1.08 Water Rights......................................................3
1.09 Claims, Suits, etc................................................3
1.10 Accounts Receivable; Deposits.....................................3
ARTICLE II EXCLUDED ASSETS.....................................................3
2.01 Cash..............................................................3
2.02 Accounts Receivable...............................................4
2.03 Other Assets......................................................4
2.04 Ground Lease Assets...............................................4
2.05 Legal Restrictions................................................4
2.06 Concert Contract..................................................4
ARTICLE III NO ASSUMPTION OF LIABILITIES.......................................4
3.01 No Assumption by Buyer............................................4
ARTICLE IV PURCHASE AND SALE...................................................4
4.01 Purchase Price....................................................4
4.02 Purchase Price Adjustment.........................................5
4.03 Consulting Agreement..............................................6
4.04 Adjustment for Taxes, Prepayments and Deposits....................7
4.05 Adjustment for Utilities..........................................7
4.06 Transfer Taxes....................................................7
4.07 Adjustment Payment................................................8
ARTICLE V CLOSING..............................................................8
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER............................8
6.01 Corporate Organization............................................8
6.02 Authorization of Agreement........................................8
6.03 Compliance with Laws..............................................9
6.04 Licenses and Permits..............................................9
6.05 Environmental Matters; Health and Safety..........................9
6.06 Title............................................................10
6.07 Applicable Zoning and Use........................................10
6.08 Litigation.......................................................10
6.09 Warranty of Purchased Assets.....................................10
<PAGE>
TABLE OF CONTENTS
(continued)
Page
6.10 Seller Not "Foreign Persons\.....................................11
6.11 Taxes............................................................11
6.12 Contracts and Commitments........................................11
6.13 Intellectual Property............................................11
6.14 Employee Benefit Plans...........................................12
6.15 Labor and Employee Relations.....................................12
6.16 General Provisions Regarding Article VI..........................12
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER...........................12
7.01 Corporate Organization...........................................13
7.02 Authorization of Agreement.......................................13
7.03 Financial Status.................................................13
7.04 Litigation.......................................................13
ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING BY BUYER ON THE CLOSING DATE.....14
8.01 Compliance.......................................................14
8.02 No Material Adverse Change.......................................14
8.03 Closing Documents................................................14
8.04 Permits and Licenses.............................................15
8.05 Failure to Deliver the Purchased Assets by the Closing Date......16
8.06 Litigation and Regulatory Action.................................16
ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY SELLER ON THE CLOSING DATE......16
9.01 Compliance.......................................................16
9.02 Closing Documents................................................16
9.03 Payment of Money.................................................17
ARTICLE X COVENANTS OF SELLER AS TO INTERIM OPERATION.........................17
10.01 Conduct of Business.............................................17
10.02 Risk of Loss....................................................18
10.03 Access..........................................................18
10.04 Insurance Coverage..............................................19
10.05 Maintenance of Purchased Assets.................................19
10.06 Competing Offers................................................19
10.07 Further Assurances..............................................20
10.08 Specific Arrangements...........................................20
ARTICLE XI INDEMNITY..........................................................20
11.01 Seller's Indemnity..............................................20
11.02 Buyer's Indemnity...............................................20
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE XII MISCELLANEOUS.....................................................21
12.01 Consents to Assignment by Third Parties.........................21
12.02 Confidentiality.................................................21
12.03 Brokers.........................................................21
12.04 Representations and Warranties..................................21
12.05 Further Assurances..............................................21
12.06 Tax Matters.....................................................22
12.07 Amendment.......................................................22
12.08 Governing Law; Severability.....................................22
12.09 Retention of Books and Records..................................22
12.10 Waiver..........................................................23
12.11 Headings........................................................23
12.12 Counterparts....................................................23
12.13 Notices.........................................................23
12.14 Assignment......................................................24
12.15 Expenses........................................................24
12.16 Third Party Beneficiaries.......................................24
12.17 Entire Agreement................................................24
12.18 Reconveyance....................................................24
iii
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into as of this 3rd day of July, 1997,
between Wolf Mountain Resorts, L.C., a Utah limited liability company with a
place of business in Summit County, Utah ("Seller") and ASC Utah, a Maine
corporation with a principal place of business at Newry, Maine ("Buyer").
RECITALS
1. Seller owns, leases or has a real property interest in the land used in
the operation of the Wolf Mountain Ski Resort and intends to lease or sublease
such land to Buyer pursuant to a Ground Lease Agreement more particularly
described herein.
2. Seller owns or leases buildings, improvements and personal property
constituting a portion of, or used in connection with, the Wolf Mountain Ski
Resort, as more specifically identified in this Agreement.
3. Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller all of Seller's buildings, improvement and personal property owned or
leased by Seller constituting a portion of, or used in connection with, the Wolf
Mountain Ski Resort.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Subject to the terms and conditions of this Agreement, Seller agrees to
sell, convey, transfer, set over, assign and deliver to Buyer, and Buyer agrees
to purchase and accept from Seller, all of Seller's right, title and interest in
and to the following assets (the "Purchased Assets"):
1.01 Subsidiaries.
(a) All right, title and interest of the Seller in and to all issued
and outstanding capital stock in Community Water Co., a Utah corporation
("Subsidiaries").
(b) Seller shall cause to be conveyed to Buyer all real, personal
and mixed property of any nature whatsoever owned by OGM, L.C., under the same
terms and conditions as specified herein for the same categories of Purchased
Assets of Seller.
<PAGE>
1.02 Ski Areas Improvements.
All buildings (including, without limitation, lift buildings, base lodges,
restaurants sports facilities, condominium units, service buildings and
pumphouse buildings), structures, lifts, towers, snowmaking equipment, fixtures
and other improvements owned by Seller which are utilized in any way in the
operation of the Wolf Mountain Ski Resort including without limitation the items
listed in Schedule 1.02 (the "Ski Area Improvements").
1.03 Personal Property.
All inventory, rental inventory, supplies, materials, computers, phone
equipment, vehicles, groomers, machinery and equipment, furniture and other
personal property of any nature whatsoever (including any leasehold interests in
the same) owned by Seller which constitute a portion of or are utilized in any
way in the operation of the Wolf Mountain Ski Resort, including without
limitation the personal property described in Schedule 1.03 (the "Personal
Property").
1.04 Licenses and Permits.
All right, title and interest in, and all rights and benefits under, any
and all governmental licenses, permits and approvals relating to the Purchased
Assets or any businesses, activities or enterprises operated or engaged in by
Seller and involving the Purchased Assets ("Ski Area Business"), including but
not limited to the licenses and permits listed on Schedule 1.04 ("Assumed
Permits").
1.05 Books and Records.
Copies of all books, records, reports, studies, data and other information
owned by or under control of Seller and that relate in any way to the Purchased
Assets or the Ski Area Business ("Records").
1.06 Intellectual Property.
All rights to any trademarks, tradenames, servicemarks (whether or not
registered), registrations thereof, applications for registration, copyrights
(whether or not registered) and any applications for registration, relating to
or associated with the Purchased Assets or the Ski Area Business, including
without limitation as listed on Schedule 1.06 ("Intellectual Property Rights").
1.07 Contract Rights.
All right, title and interest of Seller in, to or under any and all
contracts, agreements, leases and commitments, and all amendments, extensions,
renewals, substitutions and replacements thereof, necessary for or relating to
the operation of the Purchased Assets or the Ski Area Business, except Seller's
interests in leases being subleased to Buyer pursuant to the Resort Ground
Lease, including those interests listed in Schedule 1.07.
2
<PAGE>
1.08 Water Rights.
All right, title and interest of Seller in and to any and all water rights
or entitlements of any nature whatsoever, including without limitation decree
rights, appropriated rights, paper water rights, wet water rights, actual
diversion rights or water storage rights and/or capacity, to the extent such
rights do not pass to Buyer under the Resort Ground Lease for the term thereof
("Water Rights"). Water Rights include without limitation the rights listed in
Schedule 1.08, but excluding the Water Rights described on Schedule 2.03.
1.09 Claims, Suits, etc.
All claims, suits, and causes of action that Seller has against third
parties with respect to the Purchased Assets or the Ski Area Business,
including, without limitation, any rights or claims arising from manufacturer
warranties with respect to machinery and equipment included in the Purchased
Assets.
1.10 Accounts Receivable; Deposits.
All of Seller's accounts receivable (or pro rata portion thereof) for
services to be performed or use of any of the Purchased Assets on or after the
Closing, and all deposits, prepaid expenses and refunds (or pro rata portion
thereof) relating thereto.
It is the intention of Seller and Buyer that the foregoing description of
the Purchased Assets be construed broadly so as to identify any and all tangible
or intangible real, personal or mixed property and property interests, of any
nature whatsoever, owned by Seller that constitutes a portion of, relates to or
is in any way associated with the Ski Area Business, excepting the Excluded
Assets. Seller hereby acknowledges and agrees that Buyer will undertake a
comprehensive asset search prior to Closing and that Seller and Buyer may refine
the descriptions of the Purchased Assets set forth above and attached hereto in
the Schedules identified above prior to Closing with the consent of both
parties, in which event the more comprehensive asset descriptions shall be used
in transferring and conveying Seller's right, title and interest in and to
Purchased Assets at the Closing.
ARTICLE II
EXCLUDED ASSETS
Notwithstanding the foregoing, the assets listed below shall be excluded
from the Purchased Assets and retained by Seller (the "Excluded Assets"):
2.01 Cash.
All of the Seller's cash on hand and any cash equivalents in the form of
bank accounts, investment securities, notes and other deposits, prepaid expenses
and refunds, excepting those identified in Section 1.10.
3
<PAGE>
2.02 Accounts Receivable.
All of Seller's accounts receivable (or pro rata portion thereof) for
services performed or use of any of the Purchased Assets on or prior to the
Closing.
2.03 Other Assets.
Assets listed on Schedule 2.03, if any.
2.04 Ground Lease Assets.
Assets leased under the Resort Ground Lease including without limitation,
all of the land covered thereby (the "Resort Land").
2.05 Legal Restrictions.
Those assets identified in Schedule 2.05, with respect to which Seller is
prohibited by law from transferring assets to Buyer.
2.06 Concert Contract.
The United Concerts contract for the summer concert series.
ARTICLE III
NO ASSUMPTION OF LIABILITIES
3.01 No Assumption by Buyer.
Except for the liabilities of Seller hereby assumed by Buyer as described
in Schedule 3.01 hereof or as otherwise expressly provided for in this Agreement
("Assumed Liabilities"), Buyer does not, and shall not be obligated to assume or
become liable for any of Seller liabilities, obligations, debts, contracts or
other commitments whatsoever, whether known or unknown, fixed or contingent, now
existing or hereafter arising.
ARTICLE IV
PURCHASE AND SALE
4.01 Purchase Price.
In consideration of Seller's sale, assignment and transfer of the
Purchased Assets to Buyer and Seller's agreement to perform the terms, covenants
and provisions of this Agreement on its part to be performed, at Closing, (as
hereinafter defined), Buyer will assume the Assumed Liabilities, and will pay to
Seller the amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000)
in the manner and upon the conditions specified below (the "Purchase Price"):
(a) Deposit. Upon the execution of this Agreement Two Hundred
Thousand Dollars ($200,000.00) (the "Deposit") shall be deposited with Seller as
an earnest money deposit.
4
<PAGE>
(i) If the Closing shall occur, the Deposit together with any
earnings thereon to the Closing Date (as defined in Article V) shall be paid to
Seller at Closing.
(ii) If the Closing shall not occur by reason of a material
breach of this Agreement by Buyer, including by failing to close the transaction
contemplated hereby upon satisfaction by Seller of the conditions set forth in
Article VIII hereof, and the Seller is not in breach of this Agreement in any
material respect, then upon termination of this Agreement Seller shall be
entitled to retain the Deposit, together with any earnings thereon, for their
own account in addition to any and all other claims, actions or remedies which
Seller may have against Buyer arising out of such breach.
(iii) If the Closing shall not occur for any reason other than
as set forth in clause (ii) of this Section 4.01(a), then upon termination of
this Agreement the Deposit, together with any earnings thereon, shall be
returned to Buyer.
(b) Cash at Closing. At Closing Buyer shall pay to Seller the amount
of One Million Two Hundred Thousand Dollars ($1,200,000.00), less the amount of
the Deposit, together with any earnings thereon, in cash by wire transfer or
other acceptable means of delivering same day good funds.
(c) Promissory Note. At Closing Buyer shall deliver to Seller a
Promissory Note in the principal amount of Six Million Five Hundred thousand
Dollars ($6,500,000), bearing interest at a rate of twelve percent (12%) per
annum, payable as of the 1st day of each month and with principal payable in two
installments as follows:
Date Principal Payment
---- -----------------
January 31, 1998 $2,300,000
Earlier of (1) any public offering by Tenant,
Buyer or Holdings (defined below), or (2)
April 15, 2005
$4,200,000
The Promissory Note shall be guaranteed by ASC Holdings, Inc. ("Holdings")
4.02 Purchase Price Adjustment.
(a) The portion of the Purchase Price payable to Seller at Closing
shall be used and applied at Closing on a dollar-for-dollar basis by the amount
necessary to the amounts set forth in this Schedule 4.02 to deliver title to all
Purchased Assets, in accordance with the terms hereof.
(b) All Purchase Price payable to Seller on a post-Closing basis
shall be subject to reduction on a dollar-for-dollar basis by the amount
required to be paid by Buyer to satisfy any further or additional liens or
encumbrances upon, or claims to or against the
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Purchased Assets, or claims against Buyer as the owner of the Purchased Assets,
or any liabilities or obligations imposed upon Buyer as the purchaser of the
Purchased Assets, but only to the extent such liens, encumbrances, claims,
liabilities or obligations (i) do not represent Assumed Liabilities, (ii) result
from the breach or violation of the representation, warranties or covenants of
Seller under this Agreement (as limited by Section 6.16 below), or (iii)
constitute an Indemnified Expense as defined below. Any reduction in Purchase
Price shall be effected in accordance with the following procedure. Prior to
effecting any reduction in Purchase Price, Buyer shall provide Seller with
written notice of any such claim, liability or encumbrance resulting in the
reduction, which shall (I) describe the claimant or creditor; (II) provide a
brief description of the nature of the claim, and (III) state the amount of the
claim. Seller shall have a period of ten (10) days following receipt of such
notice to advise Buyer in writing whether Seller disputes the amount, validity
or any other matter with respect to the claim. Notwithstanding anything to the
contrary in the foregoing, Buyer may not compromise or pay any claim or
liability, effect any such reduction or agree with any claimant to do the same
unless each of the following conditions exist: (A) such claim, liability or
encumbrance is reduced to a judgment, lien, claim, encumbrance, other interest
or right ("Creditor Interest") that is or becomes, or with the passage of time
or giving of notice, or both, would be or become, within thirty days,
immediately enforceable against the Purchased Assets, or any portion thereof, in
such a fashion as would materially interfere with Buyer's possession or use of
such assets or the Buyer, (B) Seller fails to contest the amount or validity
thereof in good faith by appropriate proceedings within the period provided by
applicable law, rule, regulation or ordinance to commence proceedings to appeal
or contest and the enforcement of such Creditor Interest is not stayed or
suspended pending the completion of the proceedings to appeal or contest, and
(C) the full amount thereof is neither bonded by the Seller nor secured by other
collateral posted by the Seller with the Buyer in an amount and of a character
such as to provide reasonably adequate security for all claims and liabilities.
Buyer agrees to use reasonable efforts to cooperate and assist in the defense or
contest of such claims by the Seller, at the Seller's expense, including in
proceedings where the Buyer or the Purchased Assets, or any portion thereof in
rem, are parties to the proceedings; provided, that nothing herein shall be
construed to authorize Seller to act on Buyer's behalf in respect of such
claims. Seller may not act for or on behalf of Buyer in attempting to resolve
such disputes or claims, but rather shall contest, dispute or resolve such
claims at Seller's sole cost and expense, and in Seller's name. Nothing set
forth herein shall in any way prevent, prohibit or restrict Buyer from taking
any action, or refraining from any action, Buyer deems necessary or appropriate
to defend, protect or advance its interests with respect to such claims, whether
or not consistent with Seller's position as to such matters, at Buyers sole cost
and expense.
(c) Nothing set forth in this Agreement shall in any way limit or
restrict any rights or entitlements Buyer may have at low or in equity.
4.03 Consulting Agreement.
Separate and apart from the Purchase Price, as a condition of Closing,
Buyer shall enter into a consulting agreement with Mr. Kenneth Griswold pursuant
to which Griswold shall agree
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to provide consulting services to Buyer on a basis acceptable to both Buyer and
Griswold for a period of two years following the Closing.
4.04 Adjustment for Taxes, Prepayments and Deposits.
Real property taxes, personal property taxes, other ad valorem taxes, any
governmental levies, charges or assessments, utilities, water, sewer and any
other charges attributable to the Purchased Assets for the fiscal year during
which the Closing Date occurs as well as any other prepayments and deposits with
respect to the Purchased Assets shall be prorated and adjusted as of the Closing
Date as mutually agreed by Buyer and Seller prior to Closing. If the real
property taxes or personal property taxes for the fiscal year during which the
Closing Date occurs are not finally determined, then such taxes for the
immediately prior fiscal year shall be used for the purposes of prorating taxes
on the Closing Date, with a further adjustment to be made after the Closing Date
as soon as such taxes are finalized. Installments of special taxes or
assessments with respect to the Purchased Assets which are payable for the
fiscal period in which the Closing Date occurs shall be prorated as of the
Closing Date as mutually agreed by Buyer and Seller prior to Closing. Seller's
and Buyer's obligation to make post-Closing Date adjustments for taxes,
prepayments and deposits shall survive the Closing. Seller's obligations
hereunder not funded separately by Seller at Closing shall be deducted from cash
payable to Seller at Closing and paid by Buyer.
4.05 Adjustment for Utilities.
Seller shall cause all meters for electricity, gas, water, sewer and other
utility usage related to the Purchased Assets to be read on the Closing Date,
and Seller shall pay all charges for such utilities which have accrued on or
prior to the Closing Date. If the utility companies are unable or refuse to read
the meters on the Closing Date, all charges for such utilities to the extent
unpaid shall be prorated and adjusted as of the Closing Date as mutually agreed
by Buyer and Seller prior to Closing based on the most recent bills therefor.
The Seller shall provide notice to Buyer within three (3) days before the
Closing Date setting forth (i) whether utility meters will be read as of the
Closing Date and (ii) a copy of the most recent bill for any utility charges
which are to be prorated and adjusted as of the Closing Date. If the meters
cannot be read as of the Closing Date and, therefore, the most recent bill is
used to prorate and adjust as of the Closing Date, then to the extent that the
amount of such prior bill proves to be more or less than the actual charges for
the period in question, a further adjustment shall be made after the Closing
Date as soon as the actual charges for such utilities are available, which Buyer
shall have read as soon as possible after the Closing Date. Seller's and Buyer's
obligation to make such post-Closing Date adjustments for utilities shall
survive the Closing. Seller's obligations hereunder not funded separately by
Seller at Closing shall be deducted from cash payable to Seller at Closing.
4.06 Transfer Taxes.
Buyer shall pay all state or local transfer tax, deed excise tax (or any
other tax based upon the transfer of the Purchased Assets) and the recording fee
for all deeds imposed in connection with the purchase and sale. Seller shall pay
any land gain tax or similar tax due upon sale of the
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Purchased Assets. Seller's obligations hereunder not funded separately by Seller
at Closing shall be deducted from cash payable to Seller at Closing and paid by
Buyer.
4.07 Adjustment Payment.
Within five (5) days after the date upon which the amount of each
adjustment which is permitted to be made after the Closing is finally determined
pursuant to this Article IV, payments required thereby will be made by check or
wire transfer payable to the appropriate party.
ARTICLE V
CLOSING
The closing (the "Closing") of the transaction contemplated by this
Agreement will take place at the offices of Parsons, Behle and Latimer in Salt
Lake City or such other location in the Salt Lake City, Utah area as Buyer and
Seller may designate at 10:00 a.m. local time on the fifth business day
following the date upon which all of the conditions precedent set forth in
Articles VIII and IX of this Agreement are satisfied or waived by the
appropriate party hereto, or at such other time and place as the parties may
agree in writing. Notwithstanding the foregoing if the Closing does not occur on
or before July 31, 1997, this Agreement may be terminated by either party. The
date of Closing is sometimes referred to herein as the "Closing Date".
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
6.01 Corporate Organization.
Seller is a limited liability company duly organized and legally and
validly existing under the laws of the State of Utah, and has full power and
authority to own or lease its properties and to carry on its businesses as now
conducted and to execute and deliver this Agreement and to carry out the terms
hereof.
OGM, L.C. is a limited liability company duly organized and legally and
validly existing under the laws of the State of Utah, and has full power and
authority to own or lease its properties and to carry on its businesses as now
conducted.
Community Water Co. is a corporation duly organized and legally and
validly existing under the laws of the State of Utah, and has full power and
authority to own or lease its properties and to carry on its businesses as now
conducted .
6.02 Authorization of Agreement.
The execution and delivery of this Agreement and the agreements
contemplated hereby (the "Related Agreements") by Seller and the performance by
Seller of the obligations to be performed hereunder and thereunder have been
duly authorized by all necessary and appropriate action by Seller under its
Operating Agreement. Except as listed in Schedule 6.02 the execution
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and delivery of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereby and thereby do not and will not (i)
conflict with, or result in a breach of, or default under, or permit
acceleration of any obligation under, any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license, material agreement
or other material instrument or obligation to which Seller is a party, or by
which it or the Purchased Assets may be bound or affected or (ii) violate any
order, writ, injunction, decree or statute, or any rule, regulation, permit,
license or conditions thereto, or (iii) result in the creation or imposition of
any lien, charge or encumbrance of any nature upon any of the Purchased Assets.
This Agreement and the Related Agreements are valid and binding obligations of
Seller enforceable in accordance with their terms, subject to equitable
principles and applicable bankruptcy and other creditors' rights laws,
regulations and rulings.
6.03 Compliance with Laws.
Except as set forth in Schedule 6.03, Seller (a) does not have any
Seller's Knowledge (as defined herein) of any violation of any applicable
federal, state and local laws, rules, regulations, ordinances, codes or orders
("Laws") governing the Purchased Assets and the operation of the Ski Area
Business, including without limitation, environmental and health and safety laws
rules and regulations, and (b) has not received written notification of any
asserted uncured material past or present failure by any of them to operate the
Purchased Assets and the Ski Area Business in accordance with any such law,
ordinance or regulation, or of any event that has occurred which with notice or
the passage of time would constitute any such failure.
6.04 Licenses and Permits.
(a) No permits, licenses, approvals, clearances or other
governmental consents are required for the transfer of the Purchased Assets to
Buyer pursuant to the terms of this Agreement, except for the transfer or
reissuance of the governmental licenses, permits, authorizations, approvals and
certificates identified in Section 1.04.
(b) The Seller has not disposed of or permitted to lapse any
license, permit or other authorization from any federal, state or local
authorities related to the Purchased Assets that is currently required for the
operation of the Ski Area Business.
(c) Except as reported in Schedule 1.04, the Licenses and Permits
listed on Schedule 1.04 are all of the governmental licenses, permits,
authorizations, approvals and certificates which are, to Seller's Knowledge,
required for the current use of the Purchased Assets for the Ski Area Business.
6.05 Environmental Matters; Health and Safety.
(a) Except as disclosed in Schedule 6.05, to Seller's Knowledge,
there are no outstanding or, threatened actions, claims, proceedings,
determinations or judgments by any party, including, but not limited to, any
governmental authority or agency, against or involving the Seller, arising under
the Clear Air Act, the Federal Water Pollution Control Act of 1972, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Solid
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Waste Disposal Act, the Resource Conservation and Recovery Act and the Toxic
Substances Control Act, and any amendments or extensions of the foregoing
statutes, and all other applicable environmental requirements or any other
federal, state, local or other environmental, health or safety law, regulation,
order or requirement, requiring the remediation or removal of an existing
environmentally contaminated condition or substance. Except as listed in
Schedule 6.05, there are, to the Seller's Knowledge, no outstanding or
threatened orders, determinations or notices of violation issued by any federal,
state, local or other governmental authority administering environmental or
health and safety laws in connection with operation of the Purchased Assets or
the Ski Area Business, which have not been complied with or resolved to the
satisfaction of such governmental authority.
6.06 Title.
Except as set forth in Schedules 6.06, Seller holds and shall convey to
Buyer at Closing good and marketable title to all Purchased Assets free of all
liens, restrictions and encumbrances, except such encumbrances as will be
discharged at Closing in accordance with Section 4.02, applicable zoning and
land use laws, regulations, rules and ordinances and such restrictions as do not
materially interfere with the current use of the Purchased Assets for Ski Area
Business, and the sale of the Purchased Assets does not require the consent of
any person or entity. Except for those listed on Schedule 6.12, Seller have no
outstanding leases, licenses, occupancy agreements or any contracts or
agreements with respect to the Purchased Assets.
6.07 Applicable Zoning and Use.
The existing uses of the Purchased Assets are permitted uses within the
zoning districts in which they are located and otherwise permitted under
applicable federal, state and local laws, rules and regulations and under the
Assumed Permits held by Seller.
6.08 Litigation.
Except as provided in Schedule 6.08, there is, to Seller's Knowledge, no
action, suit, proceeding at law or in equity by any person or entity, or any
arbitration or any administrative or other proceeding by or before any
governmental or other instrumentality or agency, pending or threatened, against
Seller with respect to the Ski Area Business or any of the Purchased Assets.
6.09 Warranty of Purchased Assets.
All of the Purchased Assets consisting of buildings, machinery and
equipment and other tangible personal property or improvements to real estate
are being purchased "As-Is, Where-Is", and Seller specifically disclaims any
representations or warranties with respect thereto, including without
limitation, any warranty of merchantability, condition or fitness for a
particular purpose.
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6.10 Seller Not "Foreign Persons".
Seller is not a "foreign person" as defined in Internal Revenue Code (the
"Code") Section 1445, and Seller will execute and deliver to Buyer at Closing an
affidavit in compliance with Code Section 1445(b)(2).
6.11 Taxes.
Except as described in Schedule 6.11, Seller has timely filed all tax
returns, tax information returns and other tax reports required to be filed with
any applicable governmental authorities through the Closing Date which relate to
the Purchased Assets or the Ski Area Business, and have paid all taxes and other
charges which have become due pursuant to such returns and reports, or pursuant
to any assessment received by it, except for any taxes the validity of which
Seller may be contesting in good faith in appropriate proceedings. Seller is not
delinquent in the payment of any tax assessment or governmental charge which
relates to any of the Purchased Assets, no written notices asserting
deficiencies for any taxes which relate to any of the Purchased Assets have been
received, and no requests for waivers of the time to assess or pay any such tax
are pending, except such as are listed in Schedule 6.11 or that will be paid and
discharged at Closing. There are no tax liens upon any of the Purchased Assets
and no such liens will arise as a result of the transaction contemplated hereby
except as listed in Schedule 6.11 or that will be paid and discharged at
Closing. For the purposes of this Agreement, the term "tax" shall include all
federal, state, local and foreign income, property, sales, excise and other
taxes of any nature whatsoever.
6.12 Contracts and Commitments.
Schedule 6.12 sets forth a description of all material contracts,
agreements and commitments of Seller, constituting the Purchased Assets. Each
executed contract or commitment set forth in Schedule 6.12 hereto is in full
force and effect and, except as set forth in Schedule 6.12, the Seller is not in
default under any such contract or commitment and such contracts and commitments
may be freely assigned to Buyer without the consent or approval of any third
parties.
6.13 Intellectual Property.
Attached as Schedule 1.06 is a list of Seller's trademarks (whether or not
registered), tradenames, servicemarks (whether or not registered), copyrights
(whether or not registered), trademark and service mark registrations (and
pending applications therefor). Seller have not granted any outstanding licenses
or other rights to use any Intellectual Property Rights, and Seller is not
liable, nor Seller made any contract or arrangement whereby it may become
liable, to any person for any royalty or other compensation for the use of any
Intellectual Property Rights. None of the rights of Seller in, to or under any
Intellectual Property Rights will be adversely affected by the consummation of
the transactions contemplated hereby. To Seller's Knowledge, the use of the
Intellectual Property Rights in the manner conducted by Seller during the
1996-1997 ski season will not infringe any patent or copyright of any third
party, nor constitute a misappropriation of the trade secrets or other
proprietary rights of any third party.
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6.14 Employee Benefit Plans.
All of the pension, retirement, profit sharing, savings, stock options,
severance bonus, fringe benefit, insurance or other employee benefit plan or
arrangement of Seller or applicable to its employees is listed in Schedule 6.15.
Each of the above plans has been, to Seller's Knowledge, operated and
administered in accordance with applicable laws, including ERISA and the Code.
Buyer assumes no responsibility, liability or obligation with respect to such
plans and such plans shall be administered by Seller following the Closing.
6.15 Labor and Employee Relations.
Except as listed in Schedule 6.15, Seller has no ongoing employment
relationships other than employment of its employees at will. No persons have
employment obligations to Seller that will restrict their freedom to become the
employees of Buyer if Buyer so desires. Buyer is under no obligation to employ
any of Seller's employees.
6.16 General Provisions Regarding Article VI.
(a) The representations and warranties contained in this Article VI
shall survive the Closing and continue in force for the periods set forth below:
(i) Section 6.11 - no time limit;
(ii) Sections 6.05 and 6.06 - Seven years following Closing;
and
(iii) Sections 6.01 - 6.04, 6.07 - 6.10 and 6.12 - 6.16 -
three years following Closing.
(b) Sellers disclaim any express or implied warranties not set forth
in this Agreement, the Resort Ground Lease or any agreements, documents,
instruments, deeds or other written material executed by Seller and delivered at
Closing.
(c) "Seller's Knowledge" - Seller will be deemed to have "knowledge"
of a particular fact or other matter by any one or more of Michael Baker,
Kenneth Griswold or Paul Peters, Beth Moon, Steve Bench, Steve Huntzberger and
Dick Reynolds:
(i) Is actually aware of such fact or other matter; or
(ii) Any one or more of such persons could reasonably be
expected to become aware of such fact or other matter in
the ordinary course of business.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
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7.01 Corporate Organization.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of Maine with full power and authority to own or lease
its property and to carry on its businesses as now conducted and to execute,
deliver and perform its obligations hereunder and under the Related Agreements.
Buyer is qualified as a foreign corporation under the laws of the State of Utah.
Buyer is a Maine corporation, qualified to do business in the State of
Utah, all of the issued and outstanding common stock of which is owned
beneficially and of record by Holdings. Holdings is a Maine corporation, all of
the outstanding voting stock of which is owned beneficially and of record by
Leslie B. Otten. American Skiing Company, a Maine corporation ("ASC"), is a
subsidiary of ASC Holdings, Inc. 96% of the issued and outstanding stock of ASC
is owned by Holdings.
7.02 Authorization of Agreement.
The execution and delivery of this Agreement and the Related Agreements by
Buyer and the performance by Buyer of the obligations to be performed hereunder
and thereunder have been duly authorized by all necessary and appropriate action
by the directors of Buyer and no shareholder approval is required in connection
therewith. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby do not and will not conflict with or result in a breach of, or
constitute a default under, the terms and conditions of Buyer's Articles of
Incorporation, By-Laws, any court or administrative order or process by which
Buyer is bound, or any agreement or instrument to which Buyer is a party or is
bound. This Agreement and the Related Agreements are the valid and binding
obligations of Buyer, enforceable in accordance with their terms, subject to
equitable principles and applicable bankruptcy and other creditors' rights,
laws, regulations and rulings.
7.03 Financial Status.
(a) There has been no material change in the financial condition of
American Skiing Company since the date of filing of American Skiing Company's
most recent Form 10Q with the Securities and Exchange Commission.
(b) American Skiing Company is not in default under its $120,000,000
12% Senior Subordinated Notes due 2006 or its $39,132,000 13 3/4% Subordinated
Discount Notes due 2007, nor has any event or conditioned occurred which, with
the passage of time or the giving of notice or both would constitute a default
thereunder.
7.04 Litigation.
There is no action, suit or proceeding at law or in equity by any person
or entity, or any arbitration or any administrative or other proceeding by or
before any governmental or other instrumentality or agency, pending or to
Buyer's knowledge, threatened against Buyer, ASC or
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Holdings, that if adversely determined would have a material adverse impact upon
any such entity's financial condition.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
BY BUYER ON THE CLOSING DATE
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of each of the following
conditions precedent being satisfied on or before the Closing Date, subject to
the right of Buyer to waive any one or more of such conditions:
8.01 Compliance.
The representations and warranties of Seller contained in this Agreement
or in any of the Schedules attached hereto or any agreement or document
delivered in connection herewith shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date.
The Seller shall have performed and complied with all of its obligations and
covenants required to be performed or complied with on or before the Closing
Date.
8.02 No Material Adverse Change.
There shall have been no material adverse change in the condition of the
Purchased Assets from the date of this Agreement.
8.03 Closing Documents.
Seller shall have delivered or caused to be delivered to Buyer, or Buyer
shall have otherwise received, on or before the Closing Date, in a form
reasonably satisfactory to Buyer:
(a) The Resort Ground Lease in the form attached hereto as Schedule
8.03(b), but with such additional provisions or grants of other interests,
mortgages, commitments or agreements added thereto prior to the execution and
delivery thereof by Buyer and Seller as may be necessary, in Buyer's reasonable
judgment, to protect Buyer's leasehold estate established under the Resort
Ground Lease from being adversely affected by Sellers bankruptcy, insolvency,
receivership or other financial distress.
(b) An owner's title insurance policy or commitments, as applicable,
dated the Closing Date on such ALTA Forms as are reasonably acceptable to Buyer
and its counsel with extended coverage guaranteeing over the standard exceptions
to title customarily contained in such policies and the Endorsements, insuring
(i) Buyer's leasehold interest under the Resort Ground Lease and (ii) all real
estate that is the subject of any contracts, agreements or options to acquire
real estate included in the Purchased Assets or the Resort Ground Lease, and
(iii) any and all real estate owned by the Subsidiaries, issued by a title
insurance company acceptable to Buyer, at Buyer's expense, insuring such
interests and/or such real property in the amount of at least $36 million
containing only such Schedule B exceptions as are acceptable to Buyer; and
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Seller shall have provided to the extent reasonably possible all statements,
affidavits, and certificates which are customarily required of Seller by title
insurance companies in order for the title insurance company to provide Buyer
with the title insurance policies (and related endorsements) described in this
Agreement, which Buyer shall exercise reasonable efforts to obtain.
(c) Bills of sale, stock powers, assignments or other appropriate
conveyance documents conveying all Purchased Assets to Buyer duly executed by
Seller (Seller and Buyer hereby agreeing that neither the representations and
warranties nor the rights and remedies of any party hereunder shall be deemed to
be enlarged, modified or altered in any way by such Bills of Sale) together with
all consents, waivers and authorizations of any person required in order to
validly convey such Purchased Assets;
(d) Assignments of all Assigned Contracts identified in Schedule
1.07, together with all consents, waivers and authorizations of any person
required for the valid assumption of the Assigned Contracts.
(e) Certified copies of the authorization by Seller of the sale of
the Purchased Assets to Buyer in accordance with this Agreement and Seller's
execution and delivery of this Agreement;
(f) An affidavit, under penalty of perjury, indicating Seller's
United States taxpayer identification number and stating that Seller are not a
foreign person, in a form sufficient to exempt Buyer from the withholding
provisions of Section 1445 of the Code;
(g) A certificate of legal existence from the State of Utah for each
of Seller and the Subsidiaries and incumbency certificates of Seller and the
Subsidiaries, together with a certified copy of each of Seller's and the
Subsidiaries' Operating Agreement and other organizational documents;
(h) To the extent provided by Utah taxing authorities, a written
statement from Utah taxing authorities certifying that the Seller and the
Subsidiaries have no past-due state income or employment tax liability, except
such as will be satisfied at Closing with the proceeds of the sale; and
(i) Such other documents and certificates as are contemplated hereby
or as Buyer or its counsel may reasonably request.
8.04 Permits and Licenses.
Seller shall have delivered or caused to be delivered to Buyer, or Buyer
shall have otherwise received, on or before the Closing Date, in a form
reasonably satisfactory to Buyer, all necessary agreements, waivers,
authorizations and consents to the transfer, assignment or reissuance of all
Assumed Permits, to the extent available from applicable governmental
authorities, required for the ownership and operation of the Purchased Assets
and the Resort Land consistent with its historical operations.
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8.05 Failure to Deliver the Purchased Assets by the Closing Date.
If Seller is unable to deliver any material portion of the Purchased
Assets in accordance with terms and conditions of this Agreement and in a
condition substantially similar to their condition as of the date hereof on the
Closing Date because of damage by fire or casualty, then Buyer shall not have
the right to terminate this Agreement, but Seller shall pay over to Buyer all
proceeds of insurance, or claims therefor, relating to any such casualty loss.
8.06 Litigation and Regulatory Action.
No litigation or regulatory action shall have been filed, brought or
otherwise commenced against any of Seller or the Subsidiaries, Buyer or the
Purchased Assets which forbids, prohibits or in any way restricts the
transactions contemplated hereby, including without limitation the inclusion,
incorporation or joinder of Buyer, any of the Seller or the Subsidiaries, or the
Purchased Assets, in any pending proceedings.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING BY
SELLER ON THE CLOSING DATE
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of each of the following
conditions precedent being satisfied on or before the Closing Date, subject to
the right of Seller to waive any one or more of such conditions:
9.01 Compliance.
The representations and warranties of Buyer contained in this Agreement or
in any of the Schedules attached hereto or in any agreement or document
delivered in connection herewith shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date.
The Buyer shall have performed and complied with all of its obligations and
covenants required to be performed or complied with on or before the Closing
Date. Seller and Buyer shall have received any and all approvals required under
the Hart, Scott, Rodino Act, any applicable bulk sales laws or other
governmental approvals.
9.02 Closing Documents.
Buyer shall have delivered to Seller, in a form reasonably satisfactory to
counsel for Seller:
(a) certified copies of the resolutions adopted by Buyer's Board of
Directors (and stockholders where required) authorizing the purchase of the
Purchased Assets from Seller in accordance with this Agreement and Buyer's
execution and delivery of this Agreement; certified copies of the resolutions
adopted by American Skiing Company's Board of Directors authorizing such
company's execution and deliver of this Agreement and the guaranty attached to
this Agreement;
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(b) an assumption agreement or agreements in form acceptable to
Seller with respect to the Assumed Liabilities;
(c) a guaranty of Buyer's obligations under subsection 4.01(c)
hereof and of the Resort Ground Lease by Holdings. in form attached hereto;
(d) such other documents and certificates as are contemplated hereby
or as Seller or their counsel may reasonably request including without
limitation, the Resort Ground Lease and the Consulting Agreement referred to in
Section 4.03 above;
(e) Agreement of Buyer and ASC in recordable form to honor six (6)
lifetime pass commitment of Mike Baker to Annette R. Baker as well as agreement
to provide Mike Baker and Kenneth Griswold with the same skiing privileges and
merchandise and food and beverage discounts as made available to American Skiing
Company senior vice presidents; and
(f) a sublease to Kenneth Griswold for facilities necessary for
15-22 dates to continue the United Concert summer concert series, with the
general terms therefor summarized in Schedule 9.02(g).
9.03 Payment of Money.
Buyer shall have paid the Deposit as provided in Section 4.01(a), the cash
portion of the Purchase Price to the Seller as provided in Section 4.01(b), and
delivered the note described in Section 4.01(c).
ARTICLE X
COVENANTS OF SELLER AS TO INTERIM OPERATION
Seller hereby covenant and agree with Buyer as follows:
10.01 Conduct of Business.
From the date hereof to the Closing Date, Seller will carry on its
activities in substantially the same manner as they have previously been carried
out, in the ordinary course of business, and will not employ methods of
manufacture, purchase, sale, lease, management, accounting, or operation that
vary from those methods used by Seller outside of the ordinary course of
business consistent with past practices. Without limiting the foregoing, except
as specifically contemplated in this Agreement, from the date of this Agreement
to the Closing, Seller will:
(a) not engage in any transaction which would cause a breach of any
such representation, warranty or covenant;
(b) except as provided on Schedule 10.01(b) and in the ordinary
course of business, not sell, transfer, convey, assign, lease, license or
otherwise dispose of any of the Purchased Assets;
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(c) not mortgage, pledge, subject to a lien, or grant a security
interest in, or otherwise encumber, any of the Purchased Assets;
(d) use reasonable efforts (without making any commitments on behalf
of Buyer) to keep its business organizations intact, keep available its present
employees and to preserve its present relationship with customers, suppliers,
employees and other having business relationships with Seller;
(e) not cause a breach of any material contract or commitment,
collective bargaining agreement, employee benefit plan, or any other material
agreement to which Seller is a party, or by which it or any of its assets or
properties are bound;
(f) not violate or fail to comply with laws applicable to it or its
properties or business if such violation will have or is reasonably likely to
have a material adverse affect upon the ability to continue the Ski Area
Business or develop any of the Resort Land for resort purposes;
(g) not amend, change, terminate or otherwise modify any lease,
contract, agreement or commitment other than in the ordinary course of business;
and
(h) not enter into, or become obliged under, any contract,
agreement, lease or other commitment relating to the Purchased Assets or the Ski
Area Business, other than any contract, agreement, lease or other commitment
entered into in the ordinary course of business consistent with past practice.
10.02 Risk of Loss.
Seller shall bear the risk of loss, damage or destruction with respect to
the Purchased Assets from any casualty until the successful consummation of the
sale and purchase of the Purchased Assets on the Closing Date. In the event of
any such loss, damage or destruction, the proceeds of any claim for any loss
payable under any insurance policy covering such loss shall be payable to
Seller. In the event of any such material loss or damage, Seller shall specify
in writing to Buyer with particularity the loss or damage incurred, the cause
thereof, if known or reasonably ascertainable, and the extent to which
restoration, replacement and repair of the Purchased Assets lost or destroyed
will be reimbursed under any insurance policy with respect thereto. Buyer's
right to terminate this Agreement in such circumstances shall be governed by
Section 8.05 of this Agreement.
10.03 Access.
(a) From the date hereof to the Closing Date, Seller will afford to
the representatives of Buyer, including its counsel and auditors, during normal
business hours and upon reasonable advance written or oral notice, access to any
and all of the Purchased Assets to the end that Buyer may have a reasonable
opportunity to make such a full investigation of the Purchased Assets and of
Seller's Ski Area Business in advance of the Closing Date as it shall reasonably
desire, and the officers of Seller will confer with representatives of Buyer and
will
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furnish to Buyer, either orally or by means of such records, documents, and
memoranda as are available such information as Buyer may reasonably request, and
Seller will furnish to Buyer's auditors all consents and authority that they may
reasonably request in connection with any examination by Buyer.
(b) From the date hereof to the Closing Date, Buyer shall have the
right, at its expense, to enter upon the Resort Land and undertake all such
actions as may be necessary to prepare the Purchased Assets to open for the 1997
- - 1998 ski season, including all maintenance, making improvements, acquiring or
updating permits and approvals and any such other actions as may be required,
and to operate the Purchased Assets for Buyer's own account and at Buyer's sole
expense (although no obligation to undertake any such action is hereby implied).
Buyer shall indemnify and hold Seller harmless from and against any claims,
liability, loss, cost or expense resulting from any bodily injury, death or
property damage occurring as a proximate result of Buyer's access to and
activities involving the Purchased Assets or action, or failure to act, at the
Resort Land, including without limitation, any such claims, liability, damages,
loss costs or expense resulting from the negligence of Seller (but not gross
negligence) or relating to premises or other strict liability of Seller as the
owner/lessee of the Resort Land. Buyer shall extend the same liability insurance
as is currently in place at ASC's existing Ski Resorts to the Resort Land during
the period of Buyer's use or occupancy of the same under this Section 10.03(b),
and shall have the Seller named as an additional insured on such policy(s) of
insurance. In the event the transaction contemplated hereby does not close for
any reason, Buyer shall have, for a reasonable period, the right to remove any
and all improvements made by Buyer to the Purchased Assets; provided however,
that Buyer shall have no claim against Seller for the value of any improvements
made to the Purchased Assets.
10.04 Insurance Coverage.
Existing insurance coverages for the Purchased Assets shall be maintained
in effect by Seller between the date hereof and the Closing Date.
10.05 Maintenance of Purchased Assets.
At all times from the execution of this Agreement to the Closing Date,
Seller agrees to maintain the Purchased Assets in substantially the same
condition as of the date of this Agreement. Seller shall (i) not alter,
disassemble or remove any Purchased Assets from the Resort Land or take any
other action in connection with the Purchased Assets which has or is likely to
have a material adverse affect upon the value of, or beneficial use of, the
Purchased Assets or the ability to continue to engage in the Ski Area Business,
and (ii) maintain in full force and effect any and all contracts, permits and
licenses which are Purchased Assets or Assumed Liabilities. Seller shall notify
Buyer promptly of any material change in the condition of the Purchased Assets.
10.06 Competing Offers.
Seller shall not entertain, discuss, invite, encourage, solicit, accept or
facilitate any competing offers for the Purchased Assets during the term of this
Agreement. The foregoing
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covenants and agreements are of the essence of this Agreement. Violation of the
foregoing will give rise to Buyer's right to terminate this Agreement.
10.07 Further Assurances.
From and after the Closing Date, Seller and Buyer shall execute and
deliver to each other all such further assignments, assumptions, endorsements
and other documents as the other may reasonably request for the purpose of
effecting transfer and assumption of Seller's title to and operation of the
Purchased Assets and/or carrying out the provisions of this Agreement.
10.08 Specific Arrangements.
Buyer and Seller have made arrangements to deal with certain transactions
scheduled to occur between the date hereof and Closing. Those arrangements are
described in detail in Schedule 10.09. Has to be agreed to by both parties (see
12.17 below).
ARTICLE XI
INDEMNITY
11.01 Seller's Indemnity.
Seller shall indemnify and hold harmless Buyer and its directors, officers
and employees from and against all expenses, claims, costs, damages or
liabilities, including reasonable attorneys' fees (each an "Indemnified
Expense"), arising out of or relating to (i) the material breach of any
representation or warranty made by Seller in this Agreement, (ii) any material
breach of Seller's covenants contained herein, (iii) claims by third parties,
including applicable governmental authorities, relating to Seller's operations,
activities or use of the Purchased Assets prior to the Closing Date, and (iv)
any and all actions, suits, proceedings, demands, assessments, penalties,
judgments, costs and legal fees and other expenses incurred by Buyer associated
with any of the foregoing. Seller shall have no obligation to indemnify Buyer
with respect to an Indemnified Expense unless notice of the Indemnified Expense
is provided to Seller on or before the seventh anniversary of the Closing Date;
provided, however, that the foregoing limitation shall not apply to Indemnified
Expenses resulting from federal, state or local tax liability of Seller or the
Subsidiaries relating to any period ended on or before Closing and in addition,
shall not extend the liability of Seller on any of the representations or
warranties of Seller set forth in this Agreement beyond the limitation periods
set forth in Section 6.17(a). Buyer hereby acknowledges and agrees that nothing
set forth in this Section 11.01 shall in any way limit or restrict its
obligations under Section 11.02.
11.02 Buyer's Indemnity.
Buyer shall indemnify and hold harmless Seller and the Subsidiaries, their
directors, officers and employees from and against all expenses, claims, costs,
damages or liabilities, including reasonable attorneys' fees (each an
"Indemnified Expense"), arising out of or relating to any material breach of any
of Buyer's representations, warranties or covenant contained herein or to the
operation of the Purchased Assets by Buyer following the Closing and any and all
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actions, suits, proceedings, demands, assessments, penalties, judgments, costs
and legal fees and other expenses incurred by Buyer associated with any of the
foregoing. Seller hereby acknowledges and agrees that nothing set forth in this
Section 11.02 shall in any way limit or restrict its obligations under Section
11.01 and 4.02 hereof .
ARTICLE XII
MISCELLANEOUS
12.01 Consents to Assignment by Third Parties.
This Agreement shall not constitute an agreement to assign any asset,
claim, contract, permit, franchise, license or similar agreement or right if any
attempted assignment of the same without the consent of the other party thereto
would constitute a breach thereof or in any way affect the rights of Seller or
Buyer thereunder.
12.02 Confidentiality.
Buyer acknowledges that in the course of preparing this Agreement, Buyer
has obtained information concerning the business of Seller which is of a
confidential and/or proprietary nature (the "Confidential Information"). Buyer
(including the directors, officers, employees and agents thereof) agrees to
retain in confidence and not to disclose any of the Confidential Information of
Seller to any third party and if this Agreement is terminated and the
transactions contemplated hereby are not concluded, to promptly return all such
Confidential Information to Seller and not retain or use any Confidential
Information or copies thereof for any purpose, except as disclosure may be
required by law or government regulation or order or unless the information
sought to be disclosed or used (i) is publicly known as of the date hereof or
becomes publicly known though no fault of Buyer, or (ii) is lawfully received by
Buyer from a third party not bound in a confidential relationship to any party
whose confidential information is to be protected hereunder.
12.03 Brokers.
Each of Buyer and Seller represents and warrants to the other that they
have not engaged any brokers and there are no brokerage or finders' fees payable
in connection with the transactions contemplated hereby resulting from any
actions taken by them.
12.04 Representations and Warranties.
Seller and Buyer hereby agree that statements made in the Schedules
attached hereto and the certificates delivered in connection herewith shall be
representations and warranties for purposes of this Agreement.
12.05 Further Assurances.
From and after the Closing Date, upon the reasonable request of Buyer from
time to time, and at Buyer's expense, Seller shall execute and deliver all
documents, make all rightful oaths,
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testify in any proceedings and do all other acts which may be reasonably
necessary or desirable in the opinion of Buyer to protect or defend the right,
title or interest of Buyer in and to the Purchased Assets.
12.06 Tax Matters.
The aggregate purchase price for the Purchased Assets paid by Buyer in
accordance with this Agreement will be allocated among the Purchased Assets by
Buyer and Seller in accordance with Section 1060 of the Code and the regulations
thereunder, as set forth in Schedule 12.06 attached hereto, as revised by mutual
agreement of Buyer and Seller at Closing. Buyer and Seller covenant and agree
that the Buyer and Seller shall each timely file (with the appropriate Internal
Revenue Service) Form 8594 in substantially the form attached to Schedule 12.06.
The covenants and agreements of the Buyer and Seller set forth in this Section
shall survive the Closing and shall continue so long as the Buyer or Seller (as
the case may be) is obligated under the Internal Revenue Code of 1986, as
amended or the regulations or rulings promulgated thereunder, to file Form 8594,
including any Supplemental Statement under Part IV of Form 8594. Buyer and
Seller will furnish each other with a copy of the purchase price allocation
information they submit to the Internal Revenue Service, in connection with the
filing of their fiscal 1996 federal income tax returns.
12.07 Amendment.
This Agreement may not be amended except by written agreement signed by
duly authorized representatives of Seller and Buyer.
12.08 Governing Law; Severability.
This Agreement shall be construed in all respects in accordance with, and
governed by, the internal laws (as opposed to conflicts of laws provisions) of
Utah. The parties agree that the state and federal courts located in Utah shall
have jurisdiction with respect to all matters arising under this Agreement and
hereby submit to such jurisdiction. If any provision, clause or part of this
Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the applications of each provision,
clause or part under other circumstances, shall not be affected thereby.
12.09 Retention of Books and Records.
Buyer and Seller shall retain for a period of three (3) years from the
Closing all of their books and records (including such records as may be stored
in computer databases) relating to the Purchased Assets. During such three-year
period, each party will make such books and records available to the other for
purposes of inspection and copying, upon a proper purpose being stated. If any
party requires the original of any document in possession of the other, such
party shall provide the same, if available, subject to the providing party's
right to inspect and copy it. Each party will have the right to destroy such
books and records at any time after the end of such three-year period; provided,
however, that it shall give written notice to the other party prior to the time
it intends to destroy such books and records so that if the other party
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wishes to take possession of all or some part of such books and records it may
do so, at its expense.
12.10 Waiver.
The failure of Seller or Buyer to insist, in any one or more instances,
upon performance of any of the terms or conditions of this Agreement, shall not
be construed as a waiver or relinquishment of any rights granted hereunder or
the future performance of any such term, covenant or condition.
12.11 Headings.
The descriptive headings in this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
12.12 Counterparts.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
12.13 Notices.
Any notice to be given hereunder shall be given in writing and delivered
or mailed by registered or certified mail, return receipt requested, in the case
of Seller, to:
Prior to Closing:
Michael Baker
Kenneth Griswold
4000 Parkwest Drive
Park City, Utah 84060
After Closing:
c/o Clark Thompson
Bracewell & Patterson, L.L.P.
South Tower Penzoil Place
711 Louisiana Street, Suite 2800
Houston, TX 770002-2781
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and, in the case of Buyer, to
Christopher E. Howard
Chief Administrative Officer and General Counsel
American Skiing Company
P.O. Box 450
Bethel, ME 04217
or to such other address as Seller or Buyer may designate by at least ten (10)
days prior notice in writing to the other, provided that no party may designate
that notices be sent to more than two locations at any particular time.
12.14 Assignment.
This Agreement may not be transferred, assigned, pledged or hypothecated
by any party hereto without the prior written consent of the other parties
hereto, except that subsequent to the Closing, Seller shall be permitted to
transfer all of its rights hereunder to any party, provided that Seller shall
remain obligated to perform all its obligations hereunder and shall continue to
be subject to al liabilities imposed hereunder notwithstanding such assignment.
Upon prior written consent being obtained, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
12.15 Expenses.
All expenses incurred by, on behalf of, or for the benefit of Seller or
Buyer in connection with the closing of transactions contemplated hereby,
including without limitation, engineering, legal, advisory, investment banking
and accounting fees, shall be, except as otherwise provided herein, the
responsibility of and for the account of the party or parties who ordered the
particular service or particular expense.
12.16 Third Party Beneficiaries.
Each party hereto intends that this Agreement shall not benefit or create
any right or cause of action in or on behalf of any person other than the
parties hereto or their permitted assigns.
12.17 Entire Agreement.
This Agreement and the related closing documents executed and delivered in
connection herewith constitute the entire agreement between Seller and Buyer
with respect to the transactions contemplated hereby, superseding all prior
understandings and agreements among Seller and Buyer with respect to the subject
matter hereof.
12.18 Reconveyance.
In the event the Resort Ground Lease is lawfully terminated or expires in
accordance with its terms, the Buyer shall reconvey or convey to the Seller the
following assets:
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(a) Rights to establish and maintain ski terrain on the so-called
Condas property, lands owned by the Osguthorpe Family or individuals under any
then-existing agreement with such parties, or their successors, assigns or
transferees;
(b) All water rights transferred and conveyed hereunder;
(c) All Assumed Permits; and
(d) All Intellectual Property Rights.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed under seal as of the day and year first above written.
WOLF MOUNTAIN RESORTS, LC.
By: /s/ Kenneth Griswold
----------------------
Kenneth Griswold
Member
ASC UTAH, INC.
By: /s/ Jullianne Cloutier
----------------------
Its Vice President
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GUARANTY COMMITMENT
ASC Holdings, Inc., a Maine corporation with a principal place of business
at Newry, Maine ("ASC"), does hereby agree to guaranty the obligations of Buyer
set forth in this Agreement. In connection therewith, ASC covenants and agrees
as follows:
ASC is a corporation duly organized, validly existing and in good standing
under the laws of Maine with full power and authority to own or lease its
property and to carry on its businesses as now conducted.
The execution and delivery of this Agreement and the Related Agreements by
ASC and the performance by ASC of the obligations to be performed hereunder and
thereunder have been duly authorized by all necessary and appropriate action by
the directors of ASC and no shareholder approval is required in connection
therewith. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby do not and will not conflict with or result in a breach of, or
constitute a default under, the terms and conditions of ASC's Certificate of
Incorporation, By-Laws, any court or administrative order or process by which
ASC is bound, or any agreement or instrument to which ASC is a party or is
bound. This Agreement and the Related Agreements are the valid and binding
obligations of ASC, enforceable in accordance with their terms, subject to
equitable principles and applicable bankruptcy and other creditors' rights,
laws, regulations and rulings.
ASC UTAH, INC.
By: /s/ Jullianne Cloutier
----------------------
Its Vice President
<PAGE>
EXHIBIT 10.75
SECOND MORTGAGE DEED, SECURITY AGREEMENT
AND FINANCING STATEMENT
KNOW ALL BY THESE PRESENTS, that WATERVILLE VALLEY SKI RESORT, INC., a
Delaware corporation, having a mailing address of One Ski Area Road, Waterville
Valley, New Hampshire 03215, (hereinafter called "Grantor"), does hereby GIVE,
GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto American Skiing Company, a Maine
corporation (hereinafter called "Grantee"), its successors and assigns forever,
WITH MORTGAGE COVENANTS to secure payment of that certain Subordinated
Promissory Note dated as of the date hereof from Booth Creek Ski Acquisition
Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc.,
as co-makers, in the principal amount of Two Million Seven Hundred Fifty
Thousands Dollars ($2,750,000) with interest and other charges, as applicable,
in accordance with the terms and conditions of the said Subordinated Promissory
Note, which note, together with any extensions, amendments, modifications,
replacements or substitutions thereof or thereto, is referred to herein as the
"Note", all as hereafter set forth, a certain lot or parcel of land situated in
Grafton County, New Hampshire, and all improvements thereon and all easements,
rights and appurtenances thereto, which lot or parcel is bounded and described
on Exhibit A attached hereto and by this reference incorporated herein;
provided, however, that all grants contained herein and all rights of Grantee
hereunder are subordinated to the prior and superior rights of the holders of
Senior Debt (as such term is defined in the Note) pursuant to the terms and
conditions set forth in the Note.
Also hereby conveying all of the Grantor's right, title and interest in
and to the fee underlying all public or private rights-of-way, easements,
streets and alleys over, contiguous, benefiting or appurtenant to the premises
conveyed hereby.
(All of the above are collectively referred to herein as the "Premises".)
As additional security for payment and performance of the Note and the
covenants and agreements described herein, Grantor hereby transfers, assigns and
grants a second mortgage and security interest to Grantee in the following
property and in all additions, accessions, substitutions and replacements
thereto and therefor (which personal property, together with all additions,
accessions, substitutions and replacements thereto and therefor are collectively
referred to herein as the "Personal Property Collateral"), such second mortgage
and security interest to be subject to and subordinate to the prior and superior
rights of the holders of Senior Debt pursuant to the terms and conditions set
forth in the Note:
(a) All rents, profits, revenues, royalties, rights and benefits
under any and all leases or tenancies now existing or hereafter created of the
Premises or any part thereof and all deposits granted to secure the tenants'
performance thereunder, and all other income, receivables, general intangibles,
products and proceeds derived from the ownership, management and operation of
the Premises, with the right to receive and apply the same to the obligations
secured hereby, and Grantee may demand, sue for and recover such payments, but
shall not be required to do so; provided, however, that so long as Grantor is
not in default hereunder, as hereinafter defined, the right to receive and
retain such rents, issues, profits and income is reserved to Grantor. Nothing
herein shall obligate Grantee to perform the duties of Grantor as landlord or
lessor under any such leases or tenancies, which duties Grantor hereby covenants
and agrees to well and punctually perform;
<PAGE>
(b) All judgments, awards of damages and settlements hereafter made
as a result or in lieu of any taking of the Premises or any interest therein or
part thereof under the power of eminent domain, or for any damage (whether
caused by such taking or otherwise) to the Premises, or the improvements thereon
or any part thereof, including any award for change of grade of streets, now
existing or hereafter arising. Grantee may apply all such sums or any part
thereof so received to the obligations secured hereby in such manner as it
elects or, at its option, the entire amount, or any part thereof so received,
may be released. Grantor hereby irrevocably authorizes and appoints Grantee as
Grantor's attorney-in-fact to collect and receive any such judgments, awards and
settlements from the authorities or entities making the same, to appear in any
proceeding therefor, to give receipts and acquaintances therefor, and to apply
the same to payment on account of the obligations secured hereby, whether then
matured or not; and Grantor will execute and deliver to Grantee on demand such
assignments and other instruments as Grantee may require for said purposes and
will reimburse Grantee for its costs (including counsel fees) in the collection
of such judgments and settlements; and
(c) All machinery, equipment, construction materials and supplies,
furniture, fixtures and other personal property, including inventory, of
Grantor, now owned or hereafter acquired by Grantor, located at or on the
Premises, including without limitation all ski lifts, snowmaking equipment, snow
grooming equipment, compressors, pumps and pumphouse structures, plumbing,
electrical, heating, ventilating, lighting and air conditioning equipment or
apparatus, water tanks, mantels, screens, storm doors and windows, screen doors,
window shades, awnings, garbage incinerators and receptacles, elevators and
elevator machinery, boilers, tanks, motors, sprinkler and fire extinguishing
systems, doorbell and alarm systems, and all other personal property of whatever
kind or nature now or hereafter affixed to the Premises together with all
accessions and additions thereto, substitutions and replacements thereof,
electronic programs and software used with, and parts and accessories therefor,
all cash or non-cash proceeds thereof (although no disposition thereof by
Grantor is thereby authorized) including, without limitation, insurance
proceeds.
(d) All permits, licenses, authorizations and approvals relating to
the operation of the Premises as a ski resort (other than any permits, licenses,
authorization or approvals for which an assignment or grant of a security
interest is prohibited by the contractual terms thereof or under applicable
law);
(e) All contracts, agreements, leases and commitments necessary for,
or used or useful in the operation of the Premises as a ski resort (other than
any contracts, agreements, leases or commitments for which an assignment or
grant of a security interest is prohibited by the contractual terms thereof or
under applicable law).
<PAGE>
Receipt of rents, awards and any other monies or evidences thereof,
pursuant to the provisions of the foregoing paragraphs (a) through (e) and any
disposition of the same by Grantee shall not constitute a waiver of the right of
foreclosure by Grantee in the event of default or failure of performance by
Grantor of any covenant or agreement contained herein or in the note secured
hereby which right of foreclosure is limited pursuant to paragraph 7 hereof.
TO HAVE AND TO HOLD, subject to the prior and superior rights of the
holders of Senior Debt pursuant to the Note, the aforegranted and bargained
Premises and Personal Property Collateral, with all the privileges and
appurtenances thereof (all of which are collectively referred to hereinafter as
the "Mortgaged Property"), to Grantee, its successors and assigns, to their use
forever; PROVIDED, NEVERTHELESS, that if Grantor pays to Grantee the sum of TWO
MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00) together with
interest thereon and such other amounts as may become due and payable under the
terms of the Note, and performs all of Grantor's obligations, covenants and
agreements contained herein, then this Second Mortgage Deed, Security Agreement
and Financing Statement shall be void, otherwise it shall remain in full force.
Grantor, for itself, its successors and assigns, covenants and agrees with
Grantee, its successors and assigns, as follows:
1. Grantor is lawfully seized of an indefeasible estate in fee simple,
free from encumbrances other than Permitted Liens (as defined below), and has
good right and power to convey the Mortgaged Property to Grantee to hold as
aforesaid and that Grantor shall and will Warrant and Defend the same to Grantee
forever against the claims and demands of all persons other than holders of
Senior Debt. For purposes herein, "Permitted Liens" shall mean (a) liens and
encumbrances in favor of the United States of America or any political
subdivision thereof to secure partial payments under contracts, (b) all liens
and encumbrances incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security
benefits, or to secure the performance of statutory obligations, surety and
appeal bonds, bids, leases, performance and return-of-money bonds and other
similar obligations, (c) liens and encumbrances for taxes, assessments or
governmental charges not then due, (d) liens and encumbrances arising in
connection with court proceedings, (e) liens and encumbrances in the nature of
zoning restrictions, easements, rights and restrictions of record on the use of
real property, and all exceptions to title as are set forth in the title
insurance policy or title commitment delivered to Grantor, (f) liens and
encumbrances incidental to the conduct of business or the ownership of
properties and assets (including warehousemen's and attorney's liens, mechanics;
liens, materialmen's liens, carriers' liens and statutory landlords' liens) and
liens to secure the performance of bids, tenders or trade contracts, or to
secure statutory obligations, surety or appeal bonds or other liens of a like
general nature, and (g) liens and encumbrances securing Senior Debt.
<PAGE>
2. Grantor shall pay all sums secured hereby pursuant to the terms of the
Note.
3. Grantor shall pay, when due, all taxes and assessments of every type or
nature levied or assessed against the Mortgaged Property and any claim, lien or
encumbrance against the Premises, the buildings, improvements, fixtures and
personal property thereon.
4. Grantor shall have and maintain on the Premises and the buildings,
improvements, fixtures and personal property thereon, insurance against fire and
other casualty and general liability insurance in amounts and with coverages
consistent with customary industry practices, which insurance shall contain the
Standard Maine Mortgagee Clause with loss payable to the holders of Senior Debt
and the Grantee as their interests may appear. Receipt of any insurance proceeds
and any disposition of the same by Grantee shall not constitute a waiver of any
rights of Grantee, statutory or otherwise, and specifically shall not constitute
a waiver of the right of foreclosure by Grantee in the event of default or
failure of performance by Grantor of any covenant or agreement contained herein
or any note secured hereby.
5. Grantor shall maintain the Mortgaged Property in good condition and
repair, ordinary wear and tear excepted, shall not commit or suffer any material
waste thereof and shall comply in all material respects with all laws,
ordinances, regulations, covenants, conditions and restrictions affecting the
Mortgaged Property except where the failure to so comply could not reasonably be
expected to have a material adverse effect on the business of Grantor.
6. If Grantor fails to pay any claim, lien or encumbrance or any tax,
assessment or insurance premium when due, unless being contested in good faith,
or to keep the Mortgaged Property in good condition and repair, ordinary wear
and tear excepted, or shall commit or permit any material waste, or if there be
commenced any action or proceeding affecting this Mortgage or the indebtedness
secured hereby, the lien established hereunder upon the Mortgaged Property, then
Grantee, at its option, may pay said claim, lien, encumbrance, tax, assessment
or premium, with right of subrogation thereunder, may procure such abstracts or
other evidence of title as it deems reasonably necessary, may make such repairs
and take such steps as it deems reasonably necessary to prevent or cure such
waste, and may appear in any such action or proceeding and retain counsel
therein, and take such action therein as Grantee deems reasonably necessary, and
for any of said purposes Grantee may advance such sums of money as it deems
reasonably necessary.
7. The Grantee may not unilaterally commence proceedings to enforce any
rights or remedies that it may have against the Grantor or any of the Mortgaged
Property under this Mortgage until the later to occur of the passage of 179 days
after the receipt by Grantor and the holders of Senior Debt of notice from
Grantee that a default has occurred under this Mortgage.
<PAGE>
8. This Mortgage shall constitute a security agreement with respect to the
Personal Property Collateral whether now owned or hereafter acquired. Grantor
hereby grants and conveys to Grantee, its successors and assigns, a security
interest in the Personal Property Collateral. The security interest and other
rights established hereunder are subject to and subordinate to the prior and
superior security interest of the holders of Senior Debt. Grantee shall give
Grantor notice, by registered mail, postage prepaid, of the time and place of
any public sale of any of the Personal Property Collateral or of the time any
private sale or other intended disposition thereof is to be made by sending
notice to Grantor at least ten (10) days before the time of the sale or other
disposition, which provisions for notice Grantor and Grantee hereby agree are
reasonable; provided, however, that nothing herein shall preclude Grantee from
proceeding as to both real and personal property in accordance with Grantee's
rights and remedies in respect of the real property covered hereby. Grantee
shall have all of the remedies of a secured party under the Uniform Commercial
Code as now in effect in the State of New Hampshire and such further remedies as
may from time to time hereafter be provided in New Hampshire for a secured party
subject to the prior and superior right of the holders of Senior Debt. Grantor
agrees that all rights of Grantee as to said Personal Property Collateral and as
to said real estate, and rights and interests appurtenant thereto, may be
exercised together or separately and further agrees that in exercising its power
of sale as to said Personal Property Collateral and as to said real estate, and
rights and interests appurtenant thereto, Grantee may sell the Personal Property
Collateral or any part thereof, either separately from or together with the said
real estate, rights and interests appurtenant thereto, or any part thereof, all
as Grantee in its discretion elects subject to the prior and superior right of
the holders of Senior Debt.
9. This instrument is intended to serve as a FINANCING STATEMENT under the
New Hampshire Uniform Commercial Code with respect to the Personal Property
Collateral. The address of Grantor (Debtor) is One Ski Area Road, Waterville
Valley, New Hampshire 03215. The address of Grantee (Secured Party) is P.O. Box
450, Bethel, Maine 04217.
10. Subject to the prior and superior right of the holders of Senior Debt,
it is an additional condition of Grantor herein for breach of which foreclosure
may be claimed and for breach of which all indebtedness secured hereby may be
declared due and payable at once, that legal or beneficial title to the within
described Mortgaged Property shall not pass from Grantor by deed, mortgage,
pledge, encumbrance, lien, lease of the Mortgaged Property in its entirety or
substantially in its entirety to one person or entity for a term in excess of
one year, conditional sale, title retention agreement or operation of law, or
from any subsequent title holder, either voluntarily or involuntarily. Any
change in the legal or equitable title or ownership of the Premises or the
Personal Property Collateral or in the beneficial ownership of the Premises or
Personal Property Collateral, whether or not of record and whether or not for
consideration, or any sale, transfer or other disposition or new issuance of any
or all of the stock of Grantor if Grantor is a corporation, or of any or all of
the partnership interest of Grantor or admission of new partners, if Grantor is
a limited or general partnership, shall be deemed to be a sale of the Premises
and the Personal Property Collateral and shall, unless done with the prior
written consent of Grantee, constitute a breach of this covenant and shall be a
default hereunder.
<PAGE>
This condition shall continue until all indebtedness and obligations secured
hereby are satisfied, and permission given or election not to foreclose or
accelerate said indebtedness by Grantee, its successors or assigns, as to any
one such transfer, shall not constitute a waiver of any rights of Grantee, its
successors or assigns, as to any subsequent such transfer of title as to which
this condition shall remain in full force and effect. The term title as used
herein shall mean the estate of Grantor subject to the lien of this Mortgage.
11. The covenants and agreements herein contained shall bind, and the
benefits and advantages thereof shall inure to, the respective heirs, executors,
administrators, successors and assigns of Grantor, Grantee and the holders of
Senior Debt. Wherever used, the singular number shall include the plural, the
plural shall include the singular and the use of any gender shall be applicable
to all genders.
12. This Mortgage is given upon the STATUTORY CONDITION, a breach of which
shall be an event of default hereunder. The covenants and agreements set forth
herein are in addition to the covenants and agreements set forth in the
Statutory Condition.
13. The Grantee, its heirs, personal representatives, successors and
assigns, for breach of any term, condition, covenant or agreement contained or
referred to herein or upon breach of the Statutory Condition, shall have the
right of foreclosure and any and all other rights and remedies given to a
Mortgagee and Secured Party under the law of New Hampshire as of the date hereof
or at the time of such breach, including without limitation the STATUTORY POWER
OF SALE, which is expressly incorporated herein by reference, to the extent
authorized by any present or future law of the State of New Hampshire subject to
the limitations set forth in Paragraph 7. This Mortgage is given primarily for a
business, commercial or agricultural purpose. Grantor warrants that the loan
proceeds secured by this Mortgage will be used for, and this Mortgage is given
primarily for, business, commercial or agricultural purposes.
14. If any obligation or portion of this Mortgage is determined to be
invalid or unenforceable under law, it shall not affect the validity or
enforcement of the remaining obligations or portions hereof.
The provisions of this Mortgage regarding subordination and other matters
relating to the holders of Senior Debt are for the benefit of the holders of
Senior Debt and may be enforced directly by them against the Grantee. The
Grantee acknowledges and agrees, by acceptance hereof, that the holders of the
Senior Debt have relied upon and will continue to rely upon the subordination
provided for herein in entering into the transaction to which they are a party
and making the extensions of credit comprising the Senior Debt. The Grantee
hereby waives notice of or proof of reliance hereon.
<PAGE>
IN WITNESS WHEREOF, the undersigned party hereto has caused its duly
authorized officer to execute and deliver this Second Mortgage Deed, Security
Agreement and Financing Statement as of this 27th day of November, 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF: WATERVILLE VALLEY SKI RESORT, INC.
/s/ [Illegible] By: /s/ Jeffrey J. Joyce
- ---------------------------- ------------------------------
Print Name: Jeffrey J. Joyce
----------------------
Its: Vice President
-----------------------------
STATE OF MASSACHUSETTS
COUNTY OF SUFFOLK , ss
On November 27, 1996, personally appeared the above-named Jeffrey J.
Joyce, as Vice President of said Waterville Valley Ski Resort, Inc., and
acknowledged the foregoing instrument to be his free act and deed in his said
capacity, and the free act and deed of said corporation.
Before me,
[NOTARY STAMP]
/s/ Saundra L. O'Malley
---------------------------------------------
Notary Public/Maine Attorney
Typed or Printed Name: Saundra L. O'Malley
<PAGE>
Exhibit 10.76
PROMISSORY NOTE
$30,000,000 August 15, 1997
Hartford, Connecticut
FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note (this
"Note"), the undersigned, GRAND SUMMIT RESORT PROPERTIES, INC., a Maine
corporation (the "Borrower"), promises to pay to the order of TEXTRON FINANCIAL
CORPORATION (the "Lender") (the Lender and all subsequent holders of this Note
being hereinafter referred to as the "Holder"), at 333 East River Drive, East
Hartford, Connecticut or at such other place as the Holder hereof may designate
in writing, the principal sum of up to THIRTY MILLION DOLLARS ($30,000,000), or
so much thereof as shall be outstanding hereunder from time to time as a result
of advances of principal by the Lender to the Borrower pursuant to that certain
Loan and Security Agreement dated as of August 1, 1997 among the Borrower, the
Lender, Green Tree Financial Servicing Corporation and Textron Financial
Corporation, as Administrative Agent (as amended from time to time, the "LSA"),
together with interest on the unpaid principal amount from time to time
outstanding under this Note at the rate or rates of interest provided therefor
in the LSA.
The aforesaid principal amount and interest thereon shall be due and
payable on the dates and in the manner as provided in the LSA. All principal,
interest and any other amounts due under this Note shall be payable in lawful
money of the United States of America at the place or places above stated.
Unless and until an assignment agreement effecting the assignment or
transfer of this Note shall have been accepted by the Administrative Agent, as
provided for in Section 2.6(b) of the LSA, the Borrower and the Administrative
Agent shall be entitled to deem and treat the Lender as the owner and holder of
this Note.
The Borrower may only prepay the principal sum outstanding from time to
time hereunder as provided in the LSA.
This Note is secured by a security interest in the Collateral (as such
term is defined in the LSA).
This Note is one of the Borrower's "Notes" in the aggregate principal
amount of $55,000,000 and has been issued pursuant to the LSA, and all of the
terms, covenants and conditions of the LSA (including all Exhibits and Schedules
thereto) and all other instruments evidencing or securing the indebtedness
hereunder are hereby made a part of this Note and are deemed incorporated herein
in full.
In the event of an Event of Default (as such term is defined in the LSA),
the unpaid balance of the principal amount of this Note, together with all
accrued and unpaid interest thereon, may become, or may be declared to be, due
and payable in the manner, upon the conditions and with the effect provided in
the LSA.
The Borrower and the Holder intend to comply at all times with applicable
usury laws. All agreements between the Borrower and the Holder, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of demand or acceleration of the
maturity of this Note or otherwise, shall the interest
<PAGE>
contracted for, charged, received, paid or agreed to be paid to the Holder
exceed the maximum amount permissible under applicable law (the "Maximum Rate").
The Holder may, in determining the Maximum Rate in effect from time to time,
take advantage of any law, rule or regulation in effect from time to time
available to the Holder which exempts the Holder from any limit upon the rate of
interest it may charge or grants to the Holder the right to charge a higher rate
of interest than that otherwise permitted by applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to a Holder in
excess of the Maximum Rate, the interest payable to the Holder shall be reduced
to the Maximum Rate; and if from any circumstance the Holder shall ever receive
anything of value deemed interest by applicable law in excess of the Maximum
Rate, an amount equal to any excessive interest shall be applied to the
reduction of the outstanding principal hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to the Borrower by the Holder. All
interest paid or agreed to be paid to the Holder shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period hereof until payment in full of the principal so that the interest
hereon for such full period shall not exceed the Maximum Rate for the Holder.
The Borrower agrees that in determining whether or not any interest payment
hereunder exceeds the Maximum Rate for the Holder, any non-principal payment
(except payments specifically described in the Security Documents (as defined in
the LSA) as "interest") including without limitation, fees and late charges,
shall to the maximum extent not prohibited by law, be an expense, fee or premium
rather than interest in respect of the Holder. The Holder hereby expressly
disclaims any intent to contract for, charge or receive interest in an amount
which exceeds the Maximum Rate for the Holder.
Time is of the essence for the performance and observance of each
agreement and obligation of the Borrower under this Note, the LSA and under the
Security Documents.
This Note also evidences Borrower's obligation to repay with interest all
additional moneys advanced or expended from time to time by the Holder to or for
the account of the Borrower or otherwise to be added to the principal balance
hereof as provided in any of the Security Documents, whether or not the
principal amount hereof shall thereby exceed the principal amount above stated.
The Borrower and all sureties, endorsers, guarantors and all other parties
now or hereafter liable for the payment of this Note, in whole or in part,
hereby severally waive presentment for payment, demand and protest and notice of
protest, acceleration, or dishonor and non-payment of this Note, and expressly
consent to any extension of time of payment hereof or of any installment hereof,
to the release of any party liable for this obligation, to the release, change
or modification of any of the Collateral, and any such extension, modification
or release may be made without notice to any of said parties and without in any
way affecting or discharging this liability.
No single or partial exercise of any power hereunder, under the LSA or
under any other Security Document shall preclude other or further exercise
thereof or the exercise of any other power. No delay or omission on the part of
the Holder in exercising any right or remedy hereunder or the acceptance of one
or more installments from any person after a default hereunder, under the LSA or
under any other Security Document shall operate as a
2
<PAGE>
waiver of such right or remedy or of any other right or remedy under this Note
nor as a waiver of such right or remedy in connection with any future default.
In the event any one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
The Holder is hereby authorized by the Borrower to record in the manual or
data processing records of the Holder, or on the grid schedule annexed to this
Note, the date, type and amount of each Advance extended to the Borrower by the
Holder hereunder and the date, type and amount of each repayment of principal
and each payment of interest on account thereof. In the absence of manifest
error, such records and schedule shall be conclusive as to the outstanding
principal amount of all Advances and the payment of interest accrued hereunder;
provided, however, that the failure of the Holder to make any such record entry
with respect to any Advance or any payment in respect thereof shall not limit or
otherwise affect the obligations of the Borrower under this Note or the other
Security Documents.
The Borrower promises to pay all costs and expenses as provided in Section
11.2 of the LSA.
[Remainder of page intentionally left blank. Next page is signature page.]
3
<PAGE>
THIS NOTE AND ALL TRANSACTIONS HEREUNDER OR EVIDENCED HEREIN SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF MAINE.
The Borrower has caused this Note to be signed by a duly authorized
officer on the date first above written.
BORROWER:
GRAND SUMMIT RESORT PROPERTIES, INC.
By: /s/ Mark P. Girard
----------------------------
Name: Mark P. Girard
Title: Vice President
4
<PAGE>
SCHEDULE TO PROMISSORY NOTE
================================================================================
Date Principal Amount Amount of Amount of Unpaid
of Advance Principal Repaid/ Interest Principal
Made/Type of Type of Advance: Paid Balance of:
Advance: Pre-Sale Pre-Sale Advance, Pre-Sale
Advance, Interest Interest Advance, Advances,
Advance, Jordan Jordan Bowl aggregate
Bowl Project Project Advance, amount of
Advance, Killington Killing-ton Project Interest
Project Advance or Advance or Mt. Advances and
Mt. Snow Project Snow Project Jordan Bowl
Advance Advance Project
Advance,
Killington
Project
Advance or Mt.
Snow Project
Advance
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5
<PAGE>
================================================================================
Date Principal Amount Amount of Amount of Unpaid
of Advance Principal Repaid/ Interest Principal
Made/Type of Type of Advance: Paid Balance of:
Advance: Pre-Sale Pre-Sale Advance, Pre-Sale
Advance, Interest Interest Advance, Advances,
Advance, Jordan Jordan Bowl aggregate
Bowl Project Project Advance, amount of
Advance, Killington Killing-ton Project Interest
Project Advance or Advance or Mt. Advances and
Mt. Snow Project Snow Project Jordan Bowl
Advance Advance Project
Advance,
Killington
Project
Advance or Mt.
Snow Project
Advance
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================================================================================
6
<PAGE>
EXHIBIT 10.78
SECOND MORTGAGE DEED, SECURITY AGREEMENT
AND FINANCING STATEMENT
KNOW ALL BY THESE PRESENTS, that MOUNT CRANMORE SKI RESORT, INC., a
Delaware corporation, having a mailing address of Skimobile Road, North Conway,
New Hampshire, (hereinafter called "Grantor"), does hereby GIVE, GRANT, BARGAIN,
SELL, ASSIGN and CONVEY unto American Skiing Company, a Maine corporation
(hereinafter called "Grantee"), its successors and assigns forever, WITH
MORTGAGE COVENANTS to secure payment of that certain Subordinated Promissory
Note dated as of the date hereof from Booth Creek Ski Acquisition Corp.,
Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc., as
co-makers, in the principal amount of Two Million Seven Hundred Fifty Thousands
Dollars ($2,750,000) with interest and other charges, as applicable, in
accordance with the terms and conditions of the said Subordinated Promissory
Note, which note, together with any extensions, amendments, modifications,
replacements or substitutions thereof or thereto, is referred to herein as the
"Note", all as hereafter set forth, a certain lot or parcel of land situated in
Carroll County, New Hampshire, and all improvements thereon and all easements,
rights and appurtenances thereto, which lot or parcel is bounded and described
on Exhibit A attached hereto and by this reference incorporated herein;
provided, however, that all grants contained herein and all rights of Grantee
hereunder are subordinated to the prior and superior rights of the holders of
Senior Debt (as such term is defined in the Note) pursuant to the terms and
conditions set forth in the Note.
Also hereby conveying all of the Grantor's right, title and interest in
and to the fee underlying all public or private rights-of-way, easements,
streets and alleys over, contiguous, benefiting or appurtenant to the premises
conveyed hereby.
(All of the above are collectively referred to herein as the "Premises".)
As additional security for payment and performance of the Note and the
covenants and agreements described herein, Grantor hereby transfers, assigns and
grants a second mortgage and security interest to Grantee in the following
property and in all additions, accessions, substitutions and replacements
thereto and therefor (which personal property, together with all additions,
accessions, substitutions and replacements thereto and therefor are collectively
referred to herein as the "Personal Property Collateral"), such second mortgage
and security interest to be subject to and subordinate to the prior and superior
rights of the holders of Senior Debt pursuant to the terms and conditions set
forth in the Note:
(a) All rents, profits, revenues, royalties, rights and benefits
under any and all leases or tenancies now existing or hereafter created of the
Premises or any part thereof and all deposits granted to secure the tenants'
performance thereunder, and all other income, receivables, general intangibles,
products and proceeds derived from the ownership, management and operation of
the Premises, with the right to receive and apply the same to the obligations
secured hereby, and Grantee may demand, sue for and recover such payments, but
shall not be required to do so; provided, however, that so long as Grantor is
not in default hereunder, as hereinafter defined, the right to receive and
retain such rents, issues, profits and income is reserved to Grantor. Nothing
herein shall obligate Grantee to perform the duties of Grantor as landlord or
lessor under any such leases or tenancies, which duties Grantor hereby covenants
and agrees to well and punctually perform;
<PAGE>
(b) All judgments, awards of damages and settlements hereafter made
as a result or in lieu of any taking of the Premises or any interest therein or
part thereof under the power of eminent domain, or for any damage (whether
caused by such taking or otherwise) to the Premises, or the improvements thereon
or any part thereof, including any award for change of grade of streets, now
existing or hereafter arising. Grantee may apply all such sums or any part
thereof so received to the obligations secured hereby in such manner as it
elects or, at its option, the entire amount, or any part thereof so received,
may be released. Grantor hereby irrevocably authorizes and appoints Grantee as
Grantor's attorney-in-fact to collect and receive any such judgments, awards and
settlements from the authorities or entities making the same, to appear in any
proceeding therefor, to give receipts and acquaintances therefor, and to apply
the same to payment on account of the obligations secured hereby, whether then
matured or not; and Grantor will execute and deliver to Grantee on demand such
assignments and other instruments as Grantee may require for said purposes and
will reimburse Grantee for its costs (including counsel fees) in the collection
of such judgments and settlements; and
(c) All machinery, equipment, construction materials and supplies,
furniture, fixtures and other personal property, including inventory, of
Grantor, now owned or hereafter acquired by Grantor, located at or on the
Premises, including without limitation all ski lifts, snowmaking equipment, snow
grooming equipment, compressors, pumps and pumphouse structures, plumbing,
electrical, heating, ventilating, lighting and air conditioning equipment or
apparatus, water tanks, mantels, screens, storm doors and windows, screen doors,
window shades, awnings, garbage incinerators and receptacles, elevators and
elevator machinery, boilers, tanks, motors, sprinkler and fire extinguishing
systems, doorbell and alarm systems, and all other personal property of whatever
kind or nature now or hereafter affixed to the Premises together with all
accessions and additions thereto, substitutions and replacements thereof,
electronic programs and software used with, and parts and accessories therefor,
all cash or non-cash proceeds thereof (although no disposition thereof by
Grantor is thereby authorized) including, without limitation, insurance
proceeds.
(d) All permits, licenses, authorizations and approvals relating to
the operation of the Premises as a ski resort (other than any permits, licenses,
authorization or approvals for which an assignment or grant of a security
interest is prohibited by the contractual terms thereof or under applicable
law);
(e) All contracts, agreements, leases and commitments necessary for,
or used or useful in the operation of the Premises as a ski resort (other than
any contracts, agreements, leases or commitments for which an assignment or
grant of a security interest is prohibited by the contractual terms thereof or
under applicable law).
2
<PAGE>
Receipt of rents, awards and any other monies or evidences thereof,
pursuant to the provisions of the foregoing paragraphs (a) through (e) and any
disposition of the same by Grantee shall not constitute a waiver of the right of
foreclosure by Grantee in the event of default or failure of performance by
Grantor of any covenant or agreement contained herein or in the note secured
hereby which right of foreclosure is limited pursuant to paragraph 7 hereof.
TO HAVE AND TO HOLD, subject to the prior and superior rights of the
holders of Senior Debt pursuant to the Note, the aforegranted and bargained
Premises and Personal Property Collateral, with all the privileges and
appurtenances thereof (all of which are collectively referred to hereinafter as
the "Mortgaged Property"), to Grantee, its successors and assigns, to their use
forever; PROVIDED, NEVERTHELESS, that if Grantor pays to Grantee the sum of TWO
MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00) together with
interest thereon and such other amounts as may become due and payable under the
terms of the Note, and performs all of Grantor's obligations, covenants and
agreements contained herein, then this Second Mortgage Deed, Security Agreement
and Financing Statement shall be void, otherwise it shall remain in full force.
Grantor, for itself, its successors and assigns, covenants and agrees with
Grantee, its successors and assigns, as follows:
1. Grantor is lawfully seized of an indefeasible estate in fee simple,
free from encumbrances other than Permitted Liens (as defined below), and has
good right and power to convey the Mortgaged Property to Grantee to hold as
aforesaid and that Grantor shall and will Warrant and Defend the same to Grantee
forever against the claims and demands of all persons other than holders of
Senior Debt. For purposes herein, "Permitted Liens" shall mean (a) liens and
encumbrances in favor of the United States of America or any political
subdivision thereof to secure partial payments under contracts, (b) all liens
and encumbrances incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security
benefits, or to secure the performance of statutory obligations, surety and
appeal bonds, bids, leases, performance and return-of-money bonds and other
similar obligations, (c) liens and encumbrances for taxes, assessments or
governmental charges not then due, (d) liens and encumbrances arising in
connection with court proceedings, (e) liens and encumbrances in the nature of
zoning restrictions, easements, rights and restrictions of record on the use of
real property, and all exceptions to title as are set forth in the title
insurance policy or title commitment delivered to Grantor, (f) liens and
encumbrances incidental to the conduct of business or the ownership of
properties and assets (including warehousemen's and attorney's liens, mechanics;
liens, materialmen's liens, carriers' liens and statutory landlords' liens) and
liens to secure the performance of bids, tenders or trade contracts, or to
secure statutory obligations, surety or appeal bonds or other liens of a like
general nature, and (g) liens and encumbrances securing Senior Debt.
3
<PAGE>
2. Grantor shall pay all sums secured hereby pursuant to the terms of the
Note.
3. Grantor shall pay, when due, all taxes and assessments of every type or
nature levied or assessed against the Mortgaged Property and any claim, lien or
encumbrance against the Premises, the buildings, improvements, fixtures and
personal property thereon.
4. Grantor shall have and maintain on the Premises and the buildings,
improvements, fixtures and personal property thereon, insurance against fire and
other casualty and general liability insurance in amounts and with coverages
consistent with customary industry practices, which insurance shall contain the
Standard Maine Mortgagee Clause with loss payable to the holders of Senior Debt
and the Grantee as their interests may appear. Receipt of any insurance proceeds
and any disposition of the same by Grantee shall not constitute a waiver of any
rights of Grantee, statutory or otherwise, and specifically shall not constitute
a waiver of the right of foreclosure by Grantee in the event of default or
failure of performance by Grantor of any covenant or agreement contained herein
or any note secured hereby.
5. Grantor shall maintain the Mortgaged Property in good condition and
repair, ordinary wear and tear excepted, shall not commit or suffer any material
waste thereof and shall comply in all material respects with all laws,
ordinances, regulations, covenants, conditions and restrictions affecting the
Mortgaged Property except where the failure to so comply could not reasonably be
expected to have a material adverse effect on the business of Grantor.
6. If Grantor fails to pay any claim, lien or encumbrance or any tax,
assessment or insurance premium when due, unless being contested in good faith,
or to keep the Mortgaged Property in good condition and repair, ordinary wear
and tear excepted, or shall commit or permit any material waste, or if there be
commenced any action or proceeding affecting this Mortgage or the indebtedness
secured hereby, the lien established hereunder upon the Mortgaged Property, then
Grantee, at its option, may pay said claim, lien, encumbrance, tax, assessment
or premium, with right of subrogation thereunder, may procure such abstracts or
other evidence of title as it deems reasonably necessary, may make such repairs
and take such steps as it deems reasonably necessary to prevent or cure such
waste, and may appear in any such action or proceeding and retain counsel
therein, and take such action therein as Grantee deems reasonably necessary, and
for any of said purposes Grantee may advance such sums of money as it deems
reasonably necessary.
7. The Grantee may not unilaterally commence proceedings to enforce any
rights or remedies that it may have against the Grantor or any of the Mortgaged
Property under this Mortgage until the later to occur of the passage of 360 days
after the receipt by Grantor and the holders of Senior Debt of notice from
Grantee that a default has occurred under this Mortgage.
4
<PAGE>
8. This Mortgage shall constitute a security agreement with respect to the
Personal Property Collateral whether now owned or hereafter acquired. Grantor
hereby grants and conveys to Grantee, its successors and assigns, a security
interest in the Personal Property Collateral. The security interest and other
rights established hereunder are subject to and subordinate to the prior and
superior security interest of the holders of Senior Debt. Grantee shall give
Grantor notice, by registered mail, postage prepaid, of the time and place of
any public sale of any of the Personal Property Collateral or of the time any
private sale or other intended disposition thereof is to be made by sending
notice to Grantor at least ten (10) days before the time of the sale or other
disposition, which provisions for notice Grantor and Grantee hereby agree are
reasonable; provided, however, that nothing herein shall preclude Grantee from
proceeding as to both real and personal property in accordance with Grantee's
rights and remedies in respect of the real property covered hereby. Grantee
shall have all of the remedies of a secured party under the Uniform Commercial
Code as now in effect in the State of New Hampshire and such further remedies as
may from time to time hereafter be provided in New Hampshire for a secured party
subject to the prior and superior right of the holders of Senior Debt. Grantor
agrees that all rights of Grantee as to said Personal Property Collateral and as
to said real estate, and rights and interests appurtenant thereto, may be
exercised together or separately and further agrees that in exercising its power
of sale as to said Personal Property Collateral and as to said real estate, and
rights and interests appurtenant thereto, Grantee may sell the Personal Property
Collateral or any part thereof, either separately from or together with the said
real estate, rights and interests appurtenant thereto, or any part thereof, all
as Grantee in its discretion elects subject to the prior and superior right of
the holders of Senior Debt.
9. This instrument is intended to serve as a FINANCING STATEMENT under the
New Hampshire Uniform Commercial Code with respect to the Personal Property
Collateral. The address of Grantor (Debtor) is Skimobile Road, North Conway, New
Hampshire. The address of Grantee (Secured Party) is P.O. Box 450, Bethel, Maine
04217.
10. Subject to the prior and superior right of the holders of Senior Debt,
it is an additional condition of Grantor herein for breach of which foreclosure
may be claimed and for breach of which all indebtedness secured hereby may be
declared due and payable at once, that legal or beneficial title to the within
described Mortgaged Property shall not pass from Grantor by deed, mortgage,
pledge, encumbrance, lien, lease of the Mortgaged Property in its entirety or
substantially in its entirety to one person or entity for a term in excess of
one year, conditional sale, title retention agreement or operation of law, or
from any subsequent title holder, either voluntarily or involuntarily. Any
change in the legal or equitable title or ownership of the Premises or the
Personal Property Collateral or in the beneficial ownership of the Premises or
Personal Property Collateral, whether or not of record and whether or not for
consideration, or any sale, transfer or other disposition or new issuance of any
or all of the stock of Grantor if Grantor is a corporation, or of any or all of
the partnership interest of Grantor or admission of new partners, if Grantor is
a limited or general partnership, shall be deemed to be a sale of the Premises
and the Personal Property Collateral and shall, unless done with the prior
written consent of Grantee, constitute a breach of this covenant and shall be a
default hereunder.
5
<PAGE>
This condition shall continue until all indebtedness and obligations secured
hereby are satisfied, and permission given or election not to foreclose or
accelerate said indebtedness by Grantee, its successors or assigns, as to any
one such transfer, shall not constitute a waiver of any rights of Grantee, its
successors or assigns, as to any subsequent such transfer of title as to which
this condition shall remain in full force and effect. The term title as used
herein shall mean the estate of Grantor subject to the lien of this Mortgage.
11. The covenants and agreements herein contained shall bind, and the
benefits and advantages thereof shall inure to, the respective heirs, executors,
administrators, successors and assigns of Grantor, Grantee and the holders of
Senior Debt. Wherever used, the singular number shall include the plural, the
plural shall include the singular and the use of any gender shall be applicable
to all genders.
12. This Mortgage is given upon the STATUTORY CONDITION, a breach of which
shall be an event of default hereunder. The covenants and agreements set forth
herein are in addition to the covenants and agreements set forth in the
Statutory Condition.
13. The Grantee, its heirs, personal representatives, successors and
assigns, for breach of any term, condition, covenant or agreement contained or
referred to herein or upon breach of the Statutory Condition, shall have the
right of foreclosure and any and all other rights and remedies given to a
Mortgagee and Secured Party under the law of New Hampshire as of the date hereof
or at the time of such breach, including without limitation the STATUTORY POWER
OF SALE, which is expressly incorporated herein by reference, to the extent
authorized by any present or future law of the State of New Hampshire subject to
the limitations set forth in Paragraph 7. This Mortgage is given primarily for a
business, commercial or agricultural purpose. Grantor warrants that the loan
proceeds secured by this Mortgage will be used for, and this Mortgage is given
primarily for, business, commercial or agricultural purposes.
14. If any obligation or portion of this Mortgage is determined to be
invalid or unenforceable under law, it shall not affect the validity or
enforcement of the remaining obligations or portions hereof.
The provisions of this Mortgage regarding subordination and other matters
relating to the holders of Senior Debt are for the benefit of the holders of
Senior Debt and may be enforced directly by them against the Grantee. The
Grantee acknowledges and agrees, by acceptance hereof, that the holders of the
Senior Debt have relied upon and will continue to rely upon the subordination
provided for herein in entering into the transaction to which they are a party
and making the extensions of credit comprising the Senior Debt. The Grantee
hereby waives notice of or proof of reliance hereon.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned party hereto has caused its duly
authorized officer to execute and deliver this Second Mortgage Deed, Security
Agreement and Financing Statement as of this 27th day of November, 1996.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF: MOUNT CRANMORE SKI RESORT, INC.
/s/ [Illegible] By: /s/ Jeffrey J. Joyce
- ---------------------------- ------------------------------
Print Name: Jeffrey J. Joyce
----------------------
Its: Vice President
-----------------------------
STATE OF MASSACHUSETTS
COUNTY OF SUFFOLK , ss
On November 27th, 1996, personally appeared the above-named Jeffrey J.
Joyce, as Vice President of said Mount Cranmore Ski Resort, Inc., and
acknowledged the foregoing instrument to be his free act and deed in his said
capacity, and the free act and deed of said corporation.
Before me,
[NOTARY STAMP] [SEAL]
/s/ Saundra L. O'Malley
---------------------------------------------
Notary Public/Maine Attorney
Typed or Printed Name: _____________________
7
<PAGE>
Exhibit 10.79
PROMISSORY NOTE
$25,000,000 August 15, 1997
Hartford, Connecticut
FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note (this
"Note"), the undersigned, GRAND SUMMIT RESORT PROPERTIES, INC., a Maine
corporation (the "Borrower"), promises to pay to the order of GREEN TREE
FINANCIAL SERVICING CORPORATION (the "Lender") (the Lender and all subsequent
holders of this Note being hereinafter referred to as the "Holder"), at 100
North Point Center, East, Suite 200, Alpharette, Georgia or at such other place
as the Holder hereof may designate in writing, the principal sum of up to
TWENTY-FIVE MILLION DOLLARS ($25,000,000), or so much thereof as shall be
outstanding hereunder from time to time as a result of advances of principal by
the Lender to the Borrower pursuant to that certain Loan and Security Agreement
dated as of August 1, 1997 among the Borrower, the Lender, Textron Financial
Corporation and Textron Financial Corporation, as Administrative Agent (as
amended from time to time, the "LSA"), together with interest on the unpaid
principal amount from time to time outstanding under this Note at the rate or
rates of interest provided therefor in the LSA.
The aforesaid principal amount and interest thereon shall be due and
payable on the dates and in the manner as provided in the LSA. All principal,
interest and any other amounts due under this Note shall be payable in lawful
money of the United States of America at the place or places above stated.
Unless and until an assignment agreement effecting the assignment or
transfer of this Note shall have been accepted by the Administrative Agent, as
provided for in Section 2.6(b) of the LSA, the Borrower and the Administrative
Agent shall be entitled to deem and treat the Lender as the owner and holder of
this Note.
The Borrower may only prepay the principal sum outstanding from time to
time hereunder as provided in the LSA.
This Note is secured by a security interest in the Collateral (as such
term is defined in the LSA).
This Note is one of the Borrower's "Notes" in the aggregate principal
amount of $55,000,000 and has been issued pursuant to the LSA, and all of the
terms, covenants and conditions of the LSA (including all Exhibits and Schedules
thereto) and all other instruments evidencing or securing the indebtedness
hereunder are hereby made a part of this Note and are deemed incorporated herein
in full.
In the event of an Event of Default (as such term is defined in the LSA),
the unpaid balance of the principal amount of this Note, together with all
accrued and unpaid interest thereon, may become, or may be declared to be, due
and payable in the manner, upon the conditions and with the effect provided in
the LSA.
The Borrower and the Holder intend to comply at all times with applicable
usury laws. All agreements between the Borrower and the Holder, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by
<PAGE>
reason of demand or acceleration of the maturity of this Note or otherwise,
shall the interest contracted for, charged, received, paid or agreed to be paid
to the Holder exceed the maximum amount permissible under applicable law (the
"Maximum Rate"). The Holder may, in determining the Maximum Rate in effect from
time to time, take advantage of any law, rule or regulation in effect from time
to time available to the Holder which exempts the Holder from any limit upon the
rate of interest it may charge or grants to the Holder the right to charge a
higher rate of interest than that otherwise permitted by applicable law. If,
from any circumstance whatsoever, interest would otherwise be payable to a
Holder in excess of the Maximum Rate, the interest payable to the Holder shall
be reduced to the Maximum Rate; and if from any circumstance the Holder shall
ever receive anything of value deemed interest by applicable law in excess of
the Maximum Rate, an amount equal to any excessive interest shall be applied to
the reduction of the outstanding principal hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to the Borrower by the Holder. All
interest paid or agreed to be paid to the Holder shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period hereof until payment in full of the principal so that the interest
hereon for such full period shall not exceed the Maximum Rate for the Holder.
The Borrower agrees that in determining whether or not any interest payment
hereunder exceeds the Maximum Rate for the Holder, any non-principal payment
(except payments specifically described in the Security Documents (as defined in
the LSA) as "interest") including without limitation, fees and late charges,
shall to the maximum extent not prohibited by law, be an expense, fee or premium
rather than interest in respect of the Holder. The Holder hereby expressly
disclaims any intent to contract for, charge or receive interest in an amount
which exceeds the Maximum Rate for the Holder.
Time is of the essence for the performance and observance of each
agreement and obligation of the Borrower under this Note, the LSA and under the
Security Documents.
This Note also evidences Borrower's obligation to repay with interest all
additional moneys advanced or expended from time to time by the Holder to or for
the account of the Borrower or otherwise to be added to the principal balance
hereof as provided in any of the Security Documents, whether or not the
principal amount hereof shall thereby exceed the principal amount above stated.
The Borrower and all sureties, endorsers, guarantors and all other parties
now or hereafter liable for the payment of this Note, in whole or in part,
hereby severally waive presentment for payment, demand and protest and notice of
protest, acceleration, or dishonor and non-payment of this Note, and expressly
consent to any extension of time of payment hereof or of any installment hereof,
to the release of any party liable for this obligation, to the release, change
or modification of any of the Collateral, and any such extension, modification
or release may be made without notice to any of said parties and without in any
way affecting or discharging this liability.
No single or partial exercise of any power hereunder, under the LSA or
under any other Security Document shall preclude other or further exercise
thereof or the exercise of any other power. No delay or omission on the part of
the Holder in exercising any right or remedy hereunder or the acceptance of one
or more installments from any person after a default hereunder, under the LSA or
under any other Security Document shall operate as a
2
<PAGE>
waiver of such right or remedy or of any other right or remedy under this Note
nor as a waiver of such right or remedy in connection with any future default.
In the event any one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
The Holder is hereby authorized by the Borrower to record in the manual or
data processing records of the Holder, or on the grid schedule annexed to this
Note, the date, type and amount of each Advance extended to the Borrower by the
Holder hereunder and the date, type and amount of each repayment of principal
and each payment of interest on account thereof. In the absence of manifest
error, such records and schedule shall be conclusive as to the outstanding
principal amount of all Advances and the payment of interest accrued hereunder;
provided, however, that the failure of the Holder to make any such record entry
with respect to any Advance or any payment in respect thereof shall not limit or
otherwise affect the obligations of the Borrower under this Note or the other
Security Documents.
The Borrower promises to pay all costs and expenses as provided in Section
11.2 of the LSA.
[Remainder of page intentionally left blank. Next page is signature page.]
3
<PAGE>
THIS NOTE AND ALL TRANSACTIONS HEREUNDER OR EVIDENCED HEREIN SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF MAINE.
The Borrower has caused this Note to be signed by a duly authorized
officer on the date first above written.
BORROWER:
GRAND SUMMIT RESORT PROPERTIES, INC.
By: /s/ Mark P. Girard
----------------------------
Name: Mark P. Girard
Title: Vice President
4
<PAGE>
SCHEDULE TO PROMISSORY NOTE
================================================================================
Date Principal Amount Amount of Amount of Unpaid
of Advance Principal Repaid/ Interest Principal
Made/Type of Type of Advance: Paid Balance of:
Advance: Pre-Sale Pre-Sale Advance, Pre-Sale
Advance, Interest Interest Advance, Advances,
Advance, Jordan Jordan Bowl aggregate
Bowl Project Project Advance, amount of
Advance, Killington Killing-ton Project Interest
Project Advance or Advance or Mt. Advances and
Mt. Snow Project Snow Project Jordan Bowl
Advance Advance Project
Advance,
Killington
Project
Advance or Mt.
Snow Project
Advance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
5
<PAGE>
================================================================================
Date Principal Amount Amount of Amount of Unpaid
of Advance Principal Repaid/ Interest Principal
Made/Type of Type of Advance: Paid Balance of:
Advance: Pre-Sale Pre-Sale Advance, Pre-Sale
Advance, Interest Interest Advance, Advances,
Advance, Jordan Jordan Bowl aggregate
Bowl Project Project Advance, amount of
Advance, Killington Killing-ton Project Interest
Project Advance or Advance or Mt. Advances and
Mt. Snow Project Snow Project Jordan Bowl
Advance Advance Project
Advance,
Killington
Project
Advance or Mt.
Snow Project
Advance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
6
<PAGE>
Exhibit 10.80
SUBSCRIPTION AGREEMENT
RECITALS
A. Leslie B. Otten, an individual with a mailing address of P.O. Box 450,
Bethel, Maine, 04217, is the sole shareholder of the following five Maine
corporations: Sunday River Skiway Corporation, Sunday River, Ltd., Perfect Turn,
Inc., L.B.O. Holding, Inc., Sunday River Transportation, Inc. and the following
three Vermont corporations: Sugarbush Resort Holdings, Inc., Sugarbush Leasing
Company, Sugarbush Restaurants, Inc. (collectively, the "Corporations").
B. Leslie B. Otten now wishes to convey all his shares in the Corporations
to the American Skiing Company, a Maine Corporation (the "Company") in exchange
for shares of the Company.
NOW THEREFORE, Leslie B. Otten hereby agrees to transfer to the Company
all shares now owned by him in the Corporations.
In consideration thereof, the Company agrees to issue to Leslie B. Otten,
and Leslie B. Otten hereby subscribes for, 938,168 shares of common stock of the
Company.
To ensure the transfer of stock from Leslie B. Otten to the Company is not
treated as a taxable event, as such is allowed under Section 351 of the Internal
Revenue Code, Leslie B. Otten hereby makes the representations set forth on
Exhibit A attached hereto.
The closing date for the transfer and exchange of stock contemplated
herein shall be on or before June 28, 1996.
This agreement shall be governed and interpreted in accordance with the
laws of the State of Maine.
IN WITNESS WHEREOF, this Subscription Agreement was duly executed on this
27 day of June, 1996.
/s/ Christopher E. Howard /s/ Leslie B. Otten
- ----------------------------- -----------------------------------
Witness Leslie B. Otten
/s/ Christopher E. Howard THE AMERICAN SKIING COMPANY
- ----------------------------- -----------------------------------
Witness
By: /s/ Leslie B. Otten
-------------------------------
Leslie B. Otten
President
<PAGE>
EXHIBIT 10.81
SUGARLOAF JOINDER
JOINDER
OF
SUGARLOAF MOUNTAIN CORPORATION
SUGARTECH
and
MOUNTAINSIDE
August 30, 1996
Fleet National Bank, as Agent
One Federal Street
Boston, MA 02211
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of June 28,
1996, as from time to time in effect (the "Credit Agreement"), by and among
American Skiing Company, a Maine corporation ("American Ski"), certain of its
subsidiaries (together with American Ski, the "Borrowers"), Fleet National Bank,
as agent (the "Agent") and the lenders party thereto. All capitalized terms
defined in the Credit Agreement and not otherwise defined herein are used herein
with the meanings so defined.
Immediately following the execution and delivery hereof, the undersigned,
Sugarloaf Mountain Corporation, a Maine corporation ("Sugarloaf"), Sugartech, a
Maine corporation ("Sugartech"), and Mountainside, a Maine corporation
("Mountainside"), will be wholly-owned Subsidiaries of American Ski.
To induce the Lenders to make Revolving Credit Advances and Swing Line
Loans from time to time to the Borrowers and in accordance with Section 2.15 of
the Credit Agreement, Sugarloaf, Sugartech and Mountainside hereby (a) become
Borrowers under the Credit Agreement, jointly and severally, and (b) consent and
agree (i) to be jointly and severally liable for all Lender Obligations
currently outstanding or hereafter created, and (ii) to be bound by all
representations, warranties, covenants and agreements of the Borrowers under the
Credit Agreement, the Notes and all Lender Agreements in each case, with the
same force and effect as if Sugarloaf, Sugartech and Mountainside were
signatories to such documents and were expressly named therein. Without limiting
the generality of the foregoing, from and after the date hereof, S-K-I Limited
will maintain legal and beneficial ownership of 100% of the equity interests of
Sugarloaf and its Subsidiaries in accordance with Section 10.1(l) of the Credit
Agreement.
Sugarloaf, Mountainside and Sugartech hereby represent and warrant that
all conditions precedent to the Sugarloaf Joinder set forth in Section 2.15 of
the Credit Agreement have been satisfied in full.
<PAGE>
Upon execution of this Joinder and satisfaction of all conditions set
forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as
of June 28, 1996 executed by Sugarloaf in favor of the Agent shall terminate.
Upon execution of this Joinder and satisfaction of all conditions set
forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as
of June 28, 1996 executed by Sugartech in favor of the Agent shall terminate.
Upon execution of this Joinder and satisfaction of all conditions set
forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as
of June 28, 1996 executed by Mountainside in favor of the Agent shall terminate.
EXECUTED as an instrument under seal as of the date first written above.
WITNESS: SUGARLOAF MOUNTAIN CORPORATION
/s/ [Illegible By: /s/ Thomas M. Richardson
- ------------------------ ---------------------------------
Name: Name: Thomas M. Richardson
Title: Treasurer
WITNESS: SUGARTECH
/s/ [Illegible By: /s/ Thomas M. Richardson
- ------------------------ ---------------------------------
Name: Name: Thomas M. Richardson
Title: Treasurer
WITNESS: MOUNTAINSIDE
/s/ [Illegible By: /s/ Thomas M. Richardson
- ------------------------ ---------------------------------
Name: Name: Thomas M. Richardson
Title: Treasurer
2
<PAGE>
Acknowledged and Agreed:
FLEET NATIONAL BANK,
AS AGENT ON BEHALF
OF EACH OF THE LENDERS
By: /s/ David B. Henderson
- ----------------------------
Name: David B. Henderson
Title: Vice President
The undersigned Borrowers hereby (a)
acknowledge the foregoing Joinder, (b) agree
to be jointly and severally liable for all
obligations of Sugarloaf Mountain
Corporation, Sugartech and Mountainside
under the Credit Agreement, the Notes and
the other Lender Agreements, (c) confirm and
restate as of the date hereof, after giving
effect to the foregoing Joinder, the
representations and warranties of the
Borrowers contained in Article 5 of the
Credit Agreement, and (d) certify that no
Default has occurred under the Credit
Agreement.
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORT SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS
RESORTS TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
3
<PAGE>
DEERFIELD OPERATING COMPANY
MOUNTAIN WASTEWATER TREATMENT, INC.
By: /s/ Thomas M. Richardson
-------------------------------------
Name: Thomas M. Richardson
Title: Treasurer
4
<PAGE>
JOINDER TO
REVOLVING CREDIT NOTES AND SWING
LINE NOTE DATED JUNE 28, 1996
The undersigned, Sugarloaf Mountain Corporation, a Maine corporation,
Sugartech, a Maine corporation and Mountainside, a Maine corporation, hereby
consent and agree to be jointly and severally bound as a "Borrower" under the
terms of those certain Revolving Credit Notes and Swing Line Note, each dated
June 28, 1996 in favor of the holders of such notes, with the same force and
effect as if the undersigned was a signatory thereto and expressly named
therein. The holders of such Notes may attach this Joinder to such notes.
EXECUTED as an instrument under seal as of August 29, 1996.
WITNESS: SUGARLOAF MOUNTAIN CORPORATION
/s/ [Illegible] By: /s/ Thomas M. Richardson
- ----------------------------- -------------------------------------
Name: [Illegible] Name: Thomas M. Richardson
Title: Treasurer
WITNESS: SUGARTECH
/s/ [Illegible] By: /s/ Thomas M. Richardson
- ----------------------------- -------------------------------------
Name: [Illegible] Name: Thomas M. Richardson
Title: Treasurer
WITNESS: MOUNTAINSIDE
/s/ [Illegible] By: /s/ Thomas M. Richardson
- ----------------------------- -------------------------------------
Name: [Illegible] Name: Thomas M. Richardson
Title: Treasurer
5
<PAGE>
Exhibit 10.82
RECEIVED
CARROLL COUNTY REGISTRY
009968 1997 AUG 21 PM 3:47
/s/ Lillian O. Brookes
REGISTER OF DEEDS
MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(Attitash)
THIS MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this "mortgage"
or "Mortgage") made as of August 1, 1997, by GRAND SUMMIT RESORT PROPERTIES,
INC., a Maine corporation ("Mortgagor"), having a mailing address of P.O. Box
450, Sunday River Road, Bethel, ME 04217 in favor of TEXTRON FINANCIAL
CORPORATION, a Delaware corporation, as administrative agent for Textron
Financial Corporation, as lender, and Green Tree Financial Servicing
Corporation, as lender (collectively, the "Lenders") (in such capacity herein
referred to as the "Mortgagee"), having a mailing address of 40 Westminster
Street, Providence, Rhode Island 02903.
W I T N E S S E T H:
THAT Mortgagor has entered into a certain Loan and Security Agreement (as
amended from time to time, the "LSA"), dated as of August 1, 1997, with
Mortgagee and the Lenders, pursuant to which, among other things, the Lenders
have agreed, subject to the terms and conditions therein stated, to make one or
more loan advances to the Mortgagor in the aggregate maximum principal amount of
FIFTY-FIVE MILLION DOLLARS ($55,000,000), as evidenced by Mortgagor's promissory
notes, dated August 15, 1997, in said aggregate principal amount (as amended,
restated, extended, renewed or otherwise modified from time to time,
collectively, the "Note"), in which Note Mortgagor promises to pay said
principal amount (or so much thereof as may be outstanding from time to time),
together with interest thereon at a variable per annum rate of interest equal to
the greater of (a) 9.25%, or (b) the sum of (i) 1.5%, plus (ii) the Prime Rate
(as defined in the LSA) then in effect for such month, as more particularly set
forth in the LSA, and other amounts at the rates, at the times, and in amounts
as in the Note or LSA provided, until the entire principal and accrued interest
have been paid, but in any event, the unpaid balance (if any) remaining due on
the Note shall be due and payable not later than December 1, 2000 ("Maturity
Date");
THAT all capitalized terms that are not otherwise defined herein shall
have the meanings ascribed to such terms in the LSA; and
THAT in order to secure the indebtedness evidenced by the Note, Mortgagor
has entered into certain Security Documents (including the LSA).
NOW, THEREFORE, to secure the payment of the aforesaid indebtedness and
all future advances made in accordance with the terms and conditions hereof, of
the Note, and of the LSA, and all extensions, renewals, refinancings,
replacements and substitutions thereof,
After recording please return to:
Jeffery S. Kuperstock, Esq.
Hebb & Gitlin
A Professional Corporation
One State Street
Hartford, Connecticut 06103
<PAGE>
and the performance of the covenants and agreements contained herein and therein
and in the Security Documents, and also to secure the payment of any and all
other indebtedness, direct or contingent, that may now or hereafter become owing
from Mortgagor to Mortgagee or the Lenders whether under the Note, under this
Mortgage, or under any other Security Document or otherwise, Mortgagor does by
these presents hereby grant, mortgage, assign and transfer unto Mortgagee, as
administrative agent for the Lenders, its successors and assigns forever, with
MORTGAGE COVENANTS, all of the following (all of the following, together with
any additional property from time to time added to the following, is hereinafter
collectively referred to as the "Mortgaged Property"):
(a) all of Mortgagor's right, title and interest in and to the
"Quarter Interests" set forth on Exhibit A hereto, consisting of undivided
one-quarter fee interests in the Units of the Condominium set forth on
said Exhibit A, as provided for in, and as such terms are defined in, that
certain Declaration of Condominium Grand Summit Hotel and Crown Club at
Attitash Bear Peak, A Condominium, dated March 26, 1997, recorded on March
28, 1997, in Book 1692, at Page 989, of the Office of the Registry of
Deeds of Carroll County, New Hampshire, as amended from time to time (as
amended from time to time, the "Declaration"), and according to that
certain map entitled "Condominium Plan Grand Summit Hotel and Crown Club
at Attitash Bear Peak, A Condominium", dated March 27, 1997, and recorded
as Plan Number 159 / 53-65 in the Office of the Registry of Deeds of
Carroll County, New Hampshire;
(b) all of Mortgagor's right, title and interest in respect of the
Units or the "Quarter Interests", including, without limitation, (i)
Mortgagor's membership interest in and to the Grand Summit Hotel
Condominium Unit Owner's Association, Inc. and Mortgagor's voting rights
relating thereto, (ii) Mortgagor's interest in and to all furniture,
furnishings, fixtures and personal property of every nature relating
thereto, (iii) Mortgagor's interest in and to any Common Areas and Limited
Common Areas (as such terms are defined in the Declaration), and (iv)
Mortgagor's rights to insurance or condemnation proceeds payable in
respect thereof and to the proceeds of any sales, assignments or other
dispositions thereof;
(c) all of Mortgagor's rights, benefits and privileges from time to
time existing under or in respect of the Declaration and any and all other
documents or instruments now or hereafter relating to the Declaration, the
Condominium, any Unit and/or any of the "Quarter Interests", and
Mortgagor's rights relating to the management, government and
administration of the affairs of the Condominium, any Unit and/or any of
the "Quarter Interests";
(d) all of Mortgagor's right, title and interest in, to and under
any and all other leases, subleases, use or occupancy agreements, purchase
agreements, concession agreements or other agreements of any kind now or
hereafter relating to the Condominium, any Unit and/or any of the "Quarter
Interests", and all rents, issues, proceeds and profits accruing and to
accrue therefrom; and
(e) all of Mortgagor's right, title and interest in and to the
Convertible Land (which Convertible Land is more particularly described
and defined in the Declaration), whether such right, title or interest
arises under or pursuant to the Declaration,
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applicable law or otherwise, including, without limitation, Mortgagor's
development rights, declarant rights and rights to construct improvements
thereon, together with (i) all fixtures of any kind or nature owned by Mortgagor
located on or in, or used or intended to be used in connection with the
Convertible Land, the buildings, structures, improvements thereon, the Units
and/or the common elements and limited common elements in respect thereof, (ii)
all tenements, hereditaments, easements, appurtenances, riparian rights, water
rights, mineral rights, rents, issues, profits, condemnation awards, judgments,
settlements, claims, insurance proceeds and other proceeds and compensation,
option payments and any and all proceeds of any sales, assignments or other
dispositions, accounts, accounts receivable, option rights, contract rights,
general intangibles, permits, licenses, approvals, bonuses, actions and rights
in action, rights in trade names and other rights now or hereafter belonging or
in any way pertaining to the Convertible Land or the buildings, structures,
improvements thereon or the Units, (iii) all building materials, furniture,
furnishings, equipment and all other personal property owned by Mortgagor and
now or hereafter located in or on, or used or intended to be used in connection
with, the Convertible Land, the buildings, structures, improvements thereon, the
Units and/or the common elements and limited common elements in respect thereof,
and all renewals or replacements thereof or articles in substitution therefor,
whether or not the same are or shall be attached to said buildings, structures
or improvements in any manner, (iv) all of Mortgagor's right, title and
interest, whether now owned or hereafter acquired, in and to any construction
contract, architect's contract or engineering contract in connection with the
construction and development of the Convertible Lands, (v) all of Mortgagor's
right, title and interest, whether now owned or hereafter acquired, in and to
any payment, performance or other surety bonds obtained by any contractor or
subcontractor in connection with the development and construction of the
Convertible Lands and (vi) all of Mortgagor's right, title and interest, whether
now owned or hereafter acquired, in and to all rents, issues, proceeds and
profits accruing and to accrue from the Convertible Land;
(f) all proceeds and after-acquired title of any of the above.
TO HAVE AND TO HOLD the same unto the Mortgagee, as administrative agent
for the Lenders, its successors and assigns forever, for the purposes and uses
herein set forth.
THIS MORTGAGE SECURES, AMONG OTHER THINGS, FUTURE ADVANCES AND FUTURE
EXTENSIONS OF CREDIT. Each and every loan, future advance and other extension of
credit made under the Note, the LSA or any of the other Security Documents shall
be secured by this Mortgage equally with, and with the same priority as, the
proceeds initially advanced in respect of the Indebtedness (as hereinafter
defined). The maximum amount secured by this Mortgage is $75,000,000, which
includes an aggregate maximum principal amount of $55,000,000 of debt under the
Note (whether currently outstanding or by future advances), together with,
interest, fees and charges under the Note or the LSA, advances by Mortgagee of
taxes or assessments and/or insurance and/or other monies to protect the
collateral, plus costs of collection, including attorneys' fees and all other
indebtedness referred to above or otherwise herein (collectively, referred to
herein as the "Indebtedness").
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This mortgage is upon the STATUTORY CONDITIONS and upon the other terms
and conditions of the Note and the Security Documents, and upon the further
condition that in the event of any breach thereof or upon the occurrence of any
Event of Default (as hereinafter defined), Mortgagee shall have the STATUTORY
POWER OF SALE.
To the extent permitted by law, the lien of this Mortgage shall attach
automatically, without the necessity of any action by Mortgagor or any other
person, to all right, title and interest of Mortgagor in and to any and all
after-acquired property similar in character or type to any property
constituting the Mortgaged Property. Mortgagor shall promptly execute and
deliver to Mortgagee such documents and instruments as may be requested by
Mortgagee to confirm such lien. Mortgagor hereby irrevocably authorizes and
appoints Mortgagee the agent and attorney-in-fact of Mortgagor to execute all
such documents and instruments on behalf of Mortgagor, which appointment shall
be deemed to be coupled with an interest.
Mortgagor represents that it is the absolute owner in fee simple of the
Quarter- Interests described in Exhibit A, free and clear of any liens or
encumbrances except as set out in Exhibit B attached hereto, and except for
taxes which are not yet due or delinquent.
Mortgagor shall forever warrant and defend the title to the Mortgaged
Property against all claims and demands of all persons whomsoever and will on
demand execute any additional instrument which may be required to give Mortgagee
a valid first lien on all of the Mortgaged Property, except as stated in Exhibit
B.
MORTGAGOR COVENANTS AND AGREES AS FOLLOWS:
1. Mortgagor will duly and punctually pay any and all amounts evidenced by
the Note in accordance with the terms thereof and all other Indebtedness, when
and as due and payable. The provisions of the Note and the LSA are hereby
incorporated by reference into this Mortgage as fully as if set forth at length
herein. All payments received by Mortgagee or the Lenders from Mortgagor under
the Note or this Mortgage shall be applied as set forth in the LSA.
2. Mortgagor shall not create, incur or suffer to exist any lien, security
interest, encumbrance or charge on the Mortgaged Property or any part thereof,
other than as permitted pursuant to the terms of the LSA. Mortgagor shall pay
when due and as required by the LSA all assessments and dues and other amounts
required under any declaration or other instrument affecting the Mortgaged
Property.
3. Mortgagor shall comply with all present and future statutes, laws,
rules, orders, regulations and ordinances, and any easements, protective
covenants or other restrictions affecting the Mortgaged Property, any part
thereof or the use thereof.
4. Mortgagor (a) shall keep or cause to be kept the Mortgaged Property in
safe and good repair and condition; (b) shall not commit waste of the Mortgaged
Property, and (c) shall not remove any of the fixtures or personal property
included in the Mortgaged Property unless the same is promptly replaced with
property of at least equal value and utility and this Mortgage becomes a valid
first lien on such property or unless such removal is otherwise permitted under
the LSA.
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5. Mortgagor shall pay, or cause to be paid, all charges made by utility
companies, whether public or private, for electricity, gas, heat, water, or
sewer, furnished or used in connection with the Mortgaged Property or any part
thereof, and will, upon written request of Mortgagee, furnish proper receipts
evidencing such payment.
6. Mortgagor shall permit the Mortgagee, the Lenders or their respective
agents to enter upon the Mortgaged Property at all reasonable times for the
purposes of inspecting the Mortgaged Property or any part thereof, as more
particularly provided for in the LSA. Notwithstanding the foregoing, neither the
Mortgagee nor any of the Lenders shall have any duty to make any such
inspections.
7. If Mortgagor fails to perform or comply with any of the covenants and
agreements contained in this Mortgage or in any of the other Security Documents
or if any action or proceeding is commenced which affects the Mortgaged Property
or the interest of the Mortgagee therein, or the title thereto, then the
Mortgagee, acting pursuant to the direction of the Required Lenders or otherwise
in accordance with the LSA, may perform such covenants and agreements, defend
against and/or investigate such action or proceeding, and/or pay any money which
Mortgagor is required to pay hereunder or with respect to the permitted
encumbrances described in Exhibit B hereto, and/or take such other action as
Mortgagee or the Required Lenders deem necessary to protect their interests in
the exercise of their judgment. Mortgagee shall be entitled to rely on an
opinion of counsel as to the legality, validity and priority of any claim, lien,
encumbrance, tax, assessment, charge and premium paid by it and shall be the
sole judge of the amount necessary to be paid in satisfaction thereof. Mortgagee
is hereby given the irrevocable power of attorney (which power is coupled with
an interest) to enter upon the Mortgaged Property as Mortgagor's agent in
Mortgagor's name to perform any and all covenants and agreements to be performed
by Mortgagor as herein provided. Mortgagee will notify Mortgagor prior to or
contemporaneously with any action taken by Mortgagee pursuant to this paragraph
7, provided that the failure by Mortgagee to provide such notification shall not
affect any action so taken. Any amounts or expenses disbursed or incurred by
Mortgagee or the Lenders pursuant to this paragraph 7, or to otherwise enforce
any provisions of this Mortgage or to preserve any of the rights, powers or
privileges of Mortgagee or the Lenders granted or created hereby, including,
without limitation, attorneys' fees, including fees and costs incurred in any
appeal, with interest thereon as hereinafter stated, shall become additional
Indebtedness of Mortgagor secured by this Mortgage. Unless Mortgagor and
Mortgagee agree in writing to other terms of repayment, such amounts shall be
immediately due and payable, and, subject to paragraph 24 hereof, shall bear
interest from the date of disbursement at the Default Rate. Mortgagee shall, at
its option, be subrogated to the lien of any mortgage, deed of trust, or other
lien discharged in whole or in part by the Indebtedness or by Mortgagee under
the provisions hereof, and any such subrogation rights shall be additional and
cumulative security for this Mortgage. Nothing contained in this paragraph 7
shall require Mortgagee or the Lenders to incur any expense or do any act
hereunder, and neither Mortgagee nor the Lenders shall be liable to Mortgagor
for any damages or claims arising out of action taken by Mortgagee or the
Lenders pursuant to this paragraph 7 or out of any failure to so act.
8. Mortgagor hereby irrevocably assigns to Mortgagee, as administrative
agent for the Lenders, any award or payment which pursuant to the Declaration
becomes payable to
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Mortgagor by reason of any taking of the Mortgaged Property, or any part
thereof, whether directly or indirectly, temporarily or permanently, in or by
condemnation or other eminent domain proceedings or the settlement thereof
(hereinafter called "Taking"). Forthwith upon receipt by Mortgagor of notice of
the institution of any proceedings or negotiations for a Taking, Mortgagor shall
give notice thereof to Mortgagee. Mortgagor, notwithstanding that Mortgagee may
not be a party to any such proceeding, will promptly give to Mortgagee copies of
all notices, pleadings, judgments, determinations and other papers received by
Mortgagor therein. Mortgagor will not consent to, or enter into, any agreement
permitting or consenting to the Taking of the Mortgaged Property, or any part
thereof, or providing for the conveyance thereof in lieu of condemnation, with
anyone authorized to acquire the same in condemnation or by eminent domain
unless Mortgagee, acting pursuant to the direction of the Required Lenders or
otherwise in accordance with the LSA, shall first have consented thereto in
writing. All awards or payments payable as a result of a Taking shall be paid to
Mortgagee, and said awards or payments shall be applied (after first deducting
expenses, including, but not limited to attorney's fees, incurred by Mortgagee
or the Lenders in the collection thereof) to the reduction of Indebtedness
(whether or not then due) pursuant to the LSA.
9. (a) Mortgagor shall not create or permit to be created any
subordinate lien on the Mortgaged Property or any part thereof for borrowed
money or otherwise.
(b) Mortgagor shall pay, or cause to be paid, all taxes, assessments
and related charges pursuant to, and in accordance with the terms of the LSA.
(c) Mortgagor shall maintain, or cause to be maintained, policies of
insurance and shall pay the premiums associated therewith pursuant to, and in
accordance with the terms of the LSA.
(d) Mortgagor shall not sell, convey or transfer the Mortgaged
Property other than as permitted in the LSA.
(e) Mortgagor shall perform each of its obligations, and shall
enforce each obligation of third-parties, under every lease or other agreement
that is assigned to Mortgagee pursuant to this Mortgage. Mortgagor shall perform
each of its obligations as declarant under the Declaration.
10. Mortgagor hereby assigns to Mortgagee, as administrative agent for the
Lenders, directly and absolutely, and not merely collaterally, the rents,
issues, profits, proceeds, security deposits, royalties, and other payments
payable under or in respect of all leases, subleases, use or occupancy
agreements, purchase agreements, concession agreements or other agreements now
or hereafter burdening or affecting the Mortgaged Property or any part thereof,
and all of Mortgagor's right, title, interest and income accruing to Mortgagor
under any contracts for the sale, transfer and other conveyance of the Mortgaged
Property or any part thereof, with the right to receive the same and apply them
to the Indebtedness as provided in the LSA, provided that prior to the existence
of an Event of Default and subject to the Mortgagor's undertakings and the
rights and remedies of the Mortgagee hereunder and in the LSA, Mortgagor is
authorized to collect such rents, issues, profits, proceeds, security deposits,
royalties, and other payments. During the occurrence of
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an Event of Default, all such rents, issues, profits, proceeds, security
deposits, royalties, and other payments shall be accepted and held for Mortgagee
in trust and shall not be commingled with the funds and property of Mortgagor,
but shall be promptly paid over to Mortgagee.
11. It is the intention of Mortgagor and Mortgagee that the assignment
effectuated by this Mortgage with respect to the aforesaid rents, issues,
profits, proceeds, security deposits, royalties, and other payments payable
under the leases, subleases, use or occupancy agreements or other agreements now
or hereafter burdening or affecting the Mortgaged Property or any part thereof
(collectively, the "Leases"), and other amounts payable under such Leases shall
be a direct and currently effective assignment and shall not constitute merely
the granting of a lien, security interest or pledge for the purpose of securing
the Indebtedness secured hereby. In the event that a court of competent
jurisdiction determines that, notwithstanding such expressed intent of the
parties, Mortgagee's interest in such rents, issues, profits, proceeds, security
deposits, royalties, and other payments and amounts payable under the Leases
constitutes a lien on or security interest in or pledge thereof, it is agreed
and understood that the forwarding of a notice to Mortgagor after the occurrence
of a default, advising Mortgagor of the revocation of any authorization then in
favor of Mortgagor to collect such rents or other amounts payable under the
Leases, or of the existence of a default, shall be sufficient action by
Mortgagee to (a) perfect and/or enforce such lien on or security interest in or
pledge of such rents, issues, profits, proceeds, security deposits, royalties,
and other payments and other amounts payable under the Leases (to the extent
such lien, security interest or pledge shall not have theretofore been perfected
or enforced under applicable law) and (b) entitle Mortgagee to immediate and
direct payment of such rents, issues, profits, proceeds, security deposits,
royalties, and other payments payable and other amounts payable under the Leases
(to the extent Mortgagee shall not have theretofore had the right to immediately
and directly receive such rents, issues, profits, proceeds, security deposits,
royalties, and other payments), for application as provided in this paragraph
11, all without the necessity of any further action by Mortgagee, including,
without limitation, any action to obtain possession of the Mortgaged Property.
Mortgagee may apply any such rents, issues, profits, proceeds, security
deposits, royalties and other payments so received or collected, less costs and
expenses of operation and collection, including attorneys' fees and costs and
attorneys' fees and costs on appeal, upon any Indebtedness secured hereby, at
Mortgagee's option and in such order as Mortgagee may determine, all pursuant to
the direction of the Required Lenders or otherwise in accordance with the LSA,
and, if such costs and expenses and attorneys' fees and costs shall exceed the
amount received or collected, the excess shall be immediately due and payable.
Notwithstanding the direct and absolute assignment of the rents and other
amounts payable under the Leases as herein described, there shall be no pro
tanto reduction in any portion of the Indebtedness secured by this Mortgage
except with respect to rents and other amounts payable under the Leases actually
received by Mortgagee and applied by Mortgagee toward payment of the
Indebtedness, as provided for in the LSA. The receipt collection of any rents,
issues, profits, proceeds, security deposits, royalties and other payments and
the application thereof as aforesaid shall not (i) be deemed to constitute
mortgagee-in-possession, or (ii) cure or waive any Event of Default or notice of
default hereunder or under any other Security Document or invalidate any act
done pursuant to such notice. Failure or discontinuance of Mortgagee at any
time, or from time to time, to receive or collect any such moneys shall not
impair in any manner the subsequent enforcement by Mortgagee of the right, power
and authority herein
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conferred on Mortgagee. Nothing contained herein, including the exercise of any
right, power or authority herein granted to Mortgagee, shall be, or be construed
to be, an affirmation by Mortgagee or any of the Lenders of any tenancy, lease
or option, or an assumption of liability under, or the subordination of the lien
or charge of this Mortgage to any such tenancy, lease or option. Mortgagor
hereby agrees that, in the event Mortgagee exercises its rights as in this
paragraph provided, Mortgagor waives any right to compensation for the use of
Mortgagor's furniture, furnishings or equipment located in or at the Mortgaged
Property for the period such assignment of rents or receivership is in effect,
it being understood that the rents, issues, profits, proceeds, security
deposits, royalties, other payments and installments of money derived from the
use of any such items shall be applied to Mortgagor's obligations hereunder as
above provided.
12. The occurrence of an "Event of Default" under, and as defined in, the
LSA shall constitute an event of default (an "Event of Default") under this
Mortgage.
13. Upon the occurrence of any Event of Default, in addition to any other
rights or remedies provided in this Mortgage, the Security Documents, at law, in
equity or otherwise, Mortgagee shall have the STATUTORY POWER OF SALE and shall
have the right to foreclose the lien hereof. In any suit to foreclose the lien
hereof and in any sale of the Mortgaged Property (whether pursuant to the
statutory power of sale or otherwise and whether as an entirety or in separate
portions), there shall be allowed and included as additional Indebtedness
payable by Mortgagor to Mortgagee and secured hereby, all expenditures and
expenses which may be paid or incurred by or on behalf of Mortgagee for
attorneys' fees and costs, including attorneys' fees and costs on appeal,
appraisers' fees, auctioneer's and/or broker's commissions and fees,
expenditures for documentary and expert evidence, stenographer's charges,
publication and advertising costs, survey costs, environmental audits and costs
(which may be estimated as to items to be expended after the entry of any
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates and similar data
and assurances with respect to title as Mortgagee deems reasonably necessary
either to prosecute such suit or to consummate such sale or to evidence to
bidders at any sale the true condition of the title to or the value of the
Mortgaged Property.
14. This Mortgage is subject to the STATUTORY CONDITIONS and upon the
further condition that all covenants and agreements of Mortgagor herein and in
the Security Documents shall be fully or timely performed, time being of the
essence under this Mortgage. No breach of the STATUTORY CONDITIONS or any such
other covenant or agreement shall be permitted, and in the event of any such
breach or upon the occurrence of any Event of Default, Mortgagee shall have the
STATUTORY POWER OF SALE, and this mortgage shall be subject to foreclosure as
provided by NHRSA 479:25 et seq., as amended, or as otherwise provided by law,
and Mortgagee may also (i) take any one or more of the actions and exercise and
enforce any one or more of the rights, powers and remedies provided in this
Mortgage or in any of the other Security Documents, or (ii) exercise and enforce
any other right, power or remedy available to Mortgagee, at law or in equity.
Mortgagee may take such actions and exercise and enforce such rights, powers and
remedies, at Mortgagee's option, separately or concurrently and in such order as
Mortgagee may desire, either with or without entry in or on or taking possession
of all or any part of the Mortgaged Property and whether
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or not all or any part of the Indebtedness shall have been declared to be
immediately due and payable or shall otherwise be due and payable.
15. The proceeds of any foreclosure sale, sale pursuant to the statutory
power of sale or other sale of the Mortgaged Property in accordance with the
terms hereof or as permitted by law, shall be distributed and applied as
provided for in the LSA.
16. During the continuance of any Event of Default, Mortgagor shall
forthwith upon demand of Mortgagee surrender to Mortgagee possession of the
Mortgaged Property, and Mortgagee shall be entitled to take actual possession of
the Mortgaged Property or any part thereof personally or by its agents or
attorneys, and Mortgagee acting pursuant to the direction of the Required
Lenders or otherwise in accordance with the LSA, may, with or without force and
with or without process of law, enter upon and take and maintain possession of
all or any part of the Mortgaged Property together with all documents, books,
records, papers and accounts of the Mortgagor or the then owner of the Mortgaged
Property relating thereto, and may exclude Mortgagor, its agents or assigns
wholly therefrom, and may as attorney-in-fact or agent of the Mortgagor, or in
its own name as Mortgagee and under the powers herein granted:
(a) hold, operate, manage or control the Mortgaged Property and
conduct the business, if any, thereof, either personally or by its agents, and
with full power to use such measures, legal or equitable, as in its discretion
it deems proper or necessary to enforce the payment or security of the income,
rents, issues and profits of the Mortgaged Property, including actions for the
recovery of rent, actions in forcible detainer and actions in distress for
rents, hereby granting full power and authority to exercise each and every of
the rights, privileges and powers herein granted at any and all times hereafter,
without notice to Mortgagor;
(b) cancel or terminate any Lease for any cause or on any ground
which would entitle Mortgagor to cancel the same;
(c) elect to cancel any Lease made subsequent to this Mortgage or
subordinated to the lien hereof unless this Mortgage has specifically been made
subordinate to such Lease;
(d) extend or modify any then existing Lease and make new Leases,
which extensions, modifications or new Leases may provide for terms to expire,
or for options to lessees to extend or renew terms to expire, beyond the
Maturity Date of the Note and the issuance of a deed or deeds to a purchaser or
purchasers at a foreclosure sale or other sale of the Mortgaged Property
pursuant to the statutory power of sale or otherwise, it being understood and
agreed that all such Leases, and the options or other such provisions to be
contained therein, shall be binding upon Mortgagor and all persons whose
interests in the Mortgaged Property are subject to the lien hereof and shall be
binding also upon the purchaser or purchasers at any foreclosure or other sale,
notwithstanding any redemption from sale, discharge of the Indebtedness secured
hereby, satisfaction of any foreclosure decree, or issuance of any certificate
of sale or deed to any purchaser; and
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(e) make all necessary or proper repairs, decorating, renewals,
replacements, alterations, additions, betterments and improvements to the
Mortgaged Property as it may deem judicious, insure and reinsure the same and
all risks incidental to Mortgagee's possession, operation and management
thereof, and receive all income, rents, issues and profits.
Neither Mortgagee nor any Lender shall be obligated to perform or
discharge, nor does any such Person hereby undertake to perform or discharge,
any obligation, duty or liability under any Lease, and the Mortgagor shall and
does hereby agree to indemnify and to hold Mortgagee and each Lender harmless of
and from all liability, loss or damage which it might incur under said Leases or
under or by reason of the assignment thereof, and of and from any and all claims
or demands whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in said Leases. Should Mortgagee or any
Lender incur any such liability, loss or damage under any of said Leases, or
under or by reason of the assignment thereof, or in the defense of any claims or
demands, the amount thereof, including costs, expenses and attorneys' fees and
costs, including attorneys' fees and costs on appeal, shall be secured hereby
and Mortgagor shall reimburse Mortgagee therefor immediately upon demand,
together with interest at the Default Rate from the date of payment by Mortgagee
to the date of reimbursement.
Mortgagee in the exercise of the rights and powers hereinabove conferred
upon it shall have the full power to use and apply the avails, rents, issues and
profits of the Mortgaged Property to the payment of or on account of the
following, at the election of Mortgagee and in such order as Mortgagee may
determine, in each case acting pursuant to the direction of the Required Lenders
or otherwise in accordance with the LSA:
(i) to the payment of the expenses of operating the Mortgaged
Property, including cost of management and leasing thereof (which shall include
reasonable compensation to Mortgagee and its agent or agents if management is
delegated to an agent or agents, and shall also include lease commissions and
other compensation and expenses of seeking and procuring tenants and entering
into Leases), established claims for damages, if any, and premiums on insurance
as hereinabove authorized;
(ii) to the payment of taxes and special assessments now due or
which may hereafter become due on the Mortgaged Property;
(iii) to the payment of all repairs, decorating, renewals,
replacements, alterations, additions, betterments and improvements of the
Mortgaged Property and of placing the Mortgaged Property in such condition as
will in the judgment of Mortgagee make it readily rentable; and/or
(iv) to the payment of any Indebtedness secured hereby or any
deficiency which may result from any foreclosure sale or other sale of the
Mortgaged Property pursuant to the statutory power of sale or otherwise.
17. During the continuance of any Event of Default under this Mortgage,
Mortgagee, acting pursuant to the direction of the Required Lenders or otherwise
in
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accordance with the LSA, may apply to any court having jurisdiction for the
appointment of a receiver of the Mortgaged Property. Such appointment may be
made either before or after sale, without notice, without regard to the solvency
or insolvency of Mortgagor at the time of application for such receiver and
without regard to the then value of the Mortgaged Property or the adequacy of
Mortgagee's security. The receiver shall have power to collect the rents, issues
and profits of the Mortgaged Property during the pendency of any foreclosure
proceedings and, in case of a sale, during the full redemption period, if any,
as well as during any further times when Mortgagor, except for the intervention
of such receiver, would be entitled to collect such rents, issues and profits.
In addition, the receiver shall have all other powers which shall be necessary
or are usual in such cases for the protection, possession, control, management
and operation of the Mortgaged Property during the whole of said period. The
court from time to time may authorize the receiver to apply the net income in
his hands at Mortgagee's election and in such order as Mortgagee may determine
(in accordance with the LSA) in payment in full or in part of:
(i) the Indebtedness secured hereby or provided by any decree
foreclosing this mortgage, or any tax, special assessment or other lien which
may be or become superior to the lien hereof or of such decree, provided such
application is made prior to foreclosure sale; and
(ii) the deficiency in case of a sale and deficiency.
18. (a) Mortgagor agrees that all costs, charges and expenses, including
attorneys' fees, incurred or expended by Mortgagee or any of the Lenders arising
out of or in connection with any action, proceeding or hearing, legal, equitable
or quasi-legal, including the preparation therefor and any appeal therefrom, in
any way affecting or pertaining to this Mortgage, the Note, the LSA, the other
Security Documents or the Mortgaged Property, shall be promptly paid by
Mortgagor. All such sums not promptly paid by Mortgagor shall be added to the
Indebtedness secured hereby and shall bear interest at the Default Rate from the
date of such advance and shall be due and payable on demand.
(b) Mortgagor hereby agrees that upon the occurrence of an Event of
Default and the acceleration of the principal sum secured hereby pursuant to the
LSA, to the full extent that such rights can be lawfully waived, Mortgagor
hereby waives and agrees not to insist upon, plead, or in any manner take
advantage of, any notice of acceleration, any stay, extension, exemption,
homestead, marshaling or moratorium law or any law providing for the valuation
or appraisement of all or any part of the Mortgaged Property prior to any sale
or sales thereof under any provision of this Mortgage or before or after any
decree, judgment or order of any court or confirmation thereof, or claim or
exercise any right to redeem all or any part of the Mortgaged Property so sold
and hereby expressly waives to the full extent permitted by applicable law on
behalf of itself and each and every person or entity acquiring any right, title
or interest in or to the all or any part of the Mortgaged Property, all benefit
and advantage of any such laws which would otherwise be available to Mortgagor
or any such person or entity, and agrees that neither Mortgagor nor any such
person or entity will invoke or utilize any such law to otherwise hinder, delay
or impede the exercise of any remedy granted or delegated to Mortgagee herein
but will permit the exercise of such remedy as though any such laws had not been
enacted. Mortgagor hereby further expressly waives to the full extent permitted
by applicable law on behalf of itself and each and every person or
11
<PAGE>
entity acquiring any right, title or interest in or to all or any part of the
Mortgaged Property any and all rights of redemption from any sale (whether
pursuant to the statutory power of sale or otherwise) or any order or decree of
foreclosure obtained pursuant to provisions of this mortgage.
19. (a) Mortgagor has executed and delivered that certain Assignment of
Leases and Rents assigning to Mortgagee, as administrative agent, directly and
absolutely, and not merely collaterally, the interest of Mortgagor as lessor
under the existing leases of the Mortgaged Property, as well as all other leases
which may hereafter be made in respect of the Mortgaged Property, and the rents
and other income arising thereunder and from the use and/or sale of the
Mortgaged Property. Said Assignment of Leases and Rents grants to Mortgagee, as
said administrative agent, specific rights and remedies, and such rights and
remedies so granted shall be cumulative of those granted herein.
(b) Upon any foreclosure sale, Mortgagee on behalf of all of the
Lenders or any Lender on its own behalf (in either case in accordance with the
LSA) may bid for and purchase all or any part of the Mortgaged Property and,
upon compliance with the terms of sale, may hold, retain, possess and dispose of
such property in its own absolute right without further accountability. Upon any
foreclosure sale, Mortgagee or such Lender may, if permitted by law, and after
allowing for costs and expenses of the sale, compensation and other charges, in
paying the purchase price, apply all or any part of the Indebtedness in lieu of
cash to the extent of the net proceeds of such sale distributable to the Lenders
or such Lender in respect of such Indebtedness.
20. All rights and remedies granted to Mortgagee or any of the Lenders in
the Security Documents shall be in addition to and not in limitation of any
rights and remedies to which they are entitled in equity, at law or by statute,
and the invalidity of any right or remedy herein provided by reason of its
conflict with applicable law or statute shall not affect any other valid right
or remedy afforded to Mortgagee or any Lender. No waiver of any Event of Default
or of any default in the performance of any covenant contained in the Note or
the LSA or any other instrument securing the Note or the LSA shall at any time
thereafter be held to be a waiver of any rights of the Mortgagee or the Lenders
hereunder, nor shall any waiver of a prior Event of Default or default operate
to waive any subsequent Event of Default or default. All remedies provided for
herein, in the Note, in the LSA and in any other instrument securing or
guarantying all or any portion of the Note or the Indebtedness evidenced thereby
are cumulative and may, at the election of Mortgagee in accordance with the LSA,
be exercised alternatively, successively, or concurrently. No act of Mortgagee
or any Lender shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision or to proceed against
one portion of the Mortgaged Property to the exclusion of any other portion.
21. Mortgagee and the Lenders may enforce their rights, powers and
remedies with respect to, and realize upon any guaranty of all or any part of
the Indebtedness secured hereby or any additional security now or hereafter held
by Mortgagee or the Lenders in connection with all or any part of the
Indebtedness secured hereby, either before or concurrently with or after a
foreclosure or other enforcement of this Mortgage (including, without
limitation, any sale of the Mortgaged Property pursuant to the Statutory Power
of Sale) or of any of the other Security Documents, without being deemed to have
waived any
12
<PAGE>
rights, benefits, liens or security interests evidenced by or arising under or
in connection with this Mortgage or any of the other Security Documents and
without being deemed to have made an election thereby or to have accepted the
benefits of any of such guaranties or such additional security (or the proceeds
thereof) in full settlement of such Indebtedness secured hereby and of their
rights with respect thereto. No judgment, order or decree with respect to the
Note or with respect to any such guaranty or such additional security whether
rendered in the State of New Hampshire or elsewhere, shall in any manner affect
the security of this Mortgage, and any deficiency or other debt represented by
any such judgment, order or decree shall, to the extent permitted by law, be
secured by this Mortgage to the same extent that the Indebtedness shall have
been secured by this Mortgage prior to the rendering of such judgment, order or
decree. Mortgagor, for itself and for any and all persons who may at any time
claim through or under Mortgagor, hereby irrevocably waives and releases, to the
extent permitted by law, all benefit of any and all laws that would limit or
prohibit the effectiveness of anything set forth in this paragraph 21.
22. Notwithstanding anything contained herein to the contrary, neither
Mortgagee nor any of the Lenders shall be under any duty to Mortgagor, any of
its affiliates or any other person or entity to exercise, exhaust or first
resort to all or any of the rights, powers and remedies available to Mortgagee
or the Lenders, whether under the Note, this Mortgage or the other Security
Documents prior to the sale of the Mortgaged Property or any other enforcement
of this Mortgage. Furthermore, Mortgagor and such other persons and entities
waive all rights relating to marshaling and agree that neither Mortgagee nor the
Lenders shall be compelled to release any part of the security of this Mortgage
or the other Security Documents or be prevented from foreclosing or enforcing
this Mortgage or the other Security Documents upon all or any part of such
security unless the Note and all other amounts due under the Security Documents
shall have been fully and finally paid and that neither Mortgagee nor the
Lenders shall be compelled to accept or allow any apportionment of the Note or
said amounts to or among any of the property encumbered by this Mortgage or the
other Security Documents.
23. By accepting payment of any sum secured hereby after its due date,
Mortgagee and the Lenders do not waive their right either to require prompt
payment when due of all other sums or installments so secured or to declare a
default for failure to pay such other sums or installments.
24. Notwithstanding anything herein, in the Note, or in any other Security
Document to the contrary, any provision contained herein which purports to
obligate Mortgagor to pay any amount of interest or any fees, costs or expenses
which are in excess of the Maximum Rate, as defined in and provided for in
Section 2.4(c) of the Loan and Security Document, shall be subject to such
Maximum Rate and said Section 2.4(c).
25. In the event one or more provisions of the Security Documents shall be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof, and
this Mortgage shall be construed as if any such provision had never been
contained herein.
26. If the payment of the Indebtedness secured hereby or of any part
thereof shall be extended or varied, or if any part of the security be released,
all persons now or at any
13
<PAGE>
time hereafter liable therefor, or interested in the Mortgaged Property, shall
be held to assent to such extension, variation or release, and their liability
and the lien and all provisions hereof shall continue in full force, the right
of recourse against all such persons being expressly reserved by Mortgagee
notwithstanding such variation or release.
27. Upon payment in full of the Indebtedness secured hereby and the
performance by Mortgagor of all of the obligations imposed on Mortgagor in the
Security Documents, then, these presents shall be null and void, and Mortgagee
shall release this Mortgage and the lien hereof in full by proper instrument
executed in recordable form. Mortgagee shall grant partial releases under this
Mortgage in respect of sales of Units or the Quarter-Interests in respect of the
Mortgaged Property as provided for in Section 3.15 of the LSA.
28. Any notice which any party hereto may desire or be required to give to
the other shall be deemed to be an adequate and sufficient notice if given in
conformity with the requirements of Section 11.4 of the LSA.
29. This Mortgage and all the provisions hereof shall extend to and be
binding upon Mortgagor and all persons claiming by, under or through Mortgagor,
and the word "Mortgagor" when used herein shall include all such persons and all
persons liable for the payment of the Indebtedness secured hereby or any part
thereof, whether or not such persons have executed the Note, this Mortgage or
any other Security Document. The word "Mortgagee" as used herein shall include
the successors and assigns of the Mortgagee named herein. Each and every
decision, determination, estimate, request, consent or similar matter to be made
or given by Mortgagee from time to time pursuant to or in connection with this
Mortgage or any of the other Security Documents shall be within Mortgagee's
sole, absolute and unlimited discretion (subject to the rights of the Lenders
set forth in the LSA). All rights, powers and remedies of Mortgagee under this
Mortgage or any of the other Security Documents may be exercised by Mortgagee
itself or by its officers, employees, agents, contractors, attorneys or other
representatives.
30. Mortgagor has had the opportunity to fully negotiate and modify the
terms of this Mortgage. Therefore, the terms of this Mortgage shall be construed
and interpreted without any presumption, inference, or rule requiring
construction or interpretation of any provision of this Mortgage against the
interest of the party causing this Mortgage or any portion of it to be drafted.
Mortgagor is entering into this Mortgage freely and voluntarily without any
duress, economic or otherwise. Mortgagor acknowledges that it has received an
accurate and complete copy of this instrument.
31. The substantive laws of the State of New Hampshire shall govern the
validity, construction, enforcement and interpretation of this Mortgage, to the
extent required by principles of conflicts of laws recognized in such State;
otherwise, the laws of the State of Maine shall govern.
32. MORTGAGOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF
ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT
OF THIS MORTGAGE, THE NOTE, THE LSA, ANY OTHER SECURITY DOCUMENT, THE COLLATERAL
OR ANY ASSIGNMENT THEREOF OR
14
<PAGE>
BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER AMONG MORTGAGOR, THE LENDERS
AND/OR THE MORTGAGEE OF ANY KIND OR NATURE.
33. The Mortgagor represents and warrants that this Mortgage and the
Indebtedness secured hereby is for the sole purpose of conducting or acquiring a
lawful business, professional or commercial activity or for the acquisition or
management of real or personal property as a commercial investment, and all
proceeds of such Indebtedness shall be used for said business or commercial
investment purpose and that the Mortgaged Property secured hereby is not a
residence or homestead or used for mining, grazing, agriculture, timber or
farming purposes.
34. Unless Mortgagee shall otherwise direct in writing, Mortgagor shall
appear in and defend all actions or proceedings purporting to affect the
security hereunder, or any right or power of the Mortgagee. The Mortgagee (on
behalf of the Lenders) shall have the right to appear in such actions or
proceedings. Mortgagor shall save Mortgagee and each Lender harmless from all
costs and expenses, including attorneys' fees and costs of a title search,
continuation of abstract and preparation of survey, incurred by reason of any
action, suit, proceeding, hearing, motion or application before any court or
administrative body in and to which Mortgagee or any Lender may be or become a
party by reason hereof. Such proceedings shall include but not be limited to
condemnation, bankruptcy, probate and administration proceedings, as well as any
other action, suit, proceeding, right, motion or application wherein proof of
claim is by law required to be filed or in which it becomes necessary to defend
or uphold the terms of this Mortgage or otherwise purporting to affect the
security hereof or the rights or powers of Mortgagee or any Lender. All money
paid or expended by Mortgagee or any Lender in that regard, together with
interest thereon from date of such payment at the Default Rate shall be
additional Indebtedness secured hereby and shall be immediately due and payable
by Mortgagor without notice.
15
<PAGE>
35. The Mortgaged Property is not homestead property; and Mortgagor
releases all rights of homestead and other interests therein.
36. This Mortgage is a fixture filing pursuant to the Uniform Commercial
Code of the State of New Hampshire.
[Remainder of page intentionally blank; next page is signature page]
16
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this mortgage to be duly executed
and delivered as a sealed instrument as of the date first above written.
Signed and Acknowledged GRAND SUMMIT RESORT PROPERTIES, INC.
in the Presence of:
/s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard
- ---------------------------- ----------------------------
Name: Deirdre M. O'Callaghan Name: Mark P. Girard
Its: Vice President
[Sign in black ink]
STATE OF CONNECTICUT )
) ss.
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 14th day of
August, 1997, by Mark P. Girard, the Vice President of GRAND SUMMIT RESORT
PROPERTIES, INC., a Maine corporation, on behalf of said corporation.
/s/ Lori L. Bridwell
---------------------------------------
Notary Public
My Commission Expires:
LORI L BRIDWELL
NOTARY PUBLIC
MY COMMISSION EXPIRES NOV. 30, 2000
Grantee's Mailing Address:
Textron Financial Corporation, as administrative agent
40 Westminster Street
Providence, Rhode Island 02903
17
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Certain condominium quarter-share units in Grand Summit Hotel and Crown Club at
Attitash/Bear Peak, A Condominium, Bartlett, Carroll County, New Hampshire, as
established by a Declaration of Condominium, Grand Summit Hotel and Crown Club
at Attitash/Bear Peak, A Condominium, dated March 26, 1997, recorded at Book
1692, Page 989, being more particularly described in said Declaration, and as
more particularly shown on As-Built Site Plans prepared by Thaddeus
Thorne-Surveys, Inc., and As Built Floor Plans, prepared by JSA, Inc., all dated
March 27, 1997, recorded March 28, 1997, at Plan Book 159, Pages 53 through 65,
as Units:
Unit 1 (Commercial Unit)
Unit Number Quarter-share Intervals
102 1, 2 & 3
103/105 2, 3 & 4
104 1, 2, 3 & 4
107 1, 2, 3 & 4
109/111 1, 2, 3 & 4
110 1, 2, 3 & 4
114/116 1, 2, 3 & 4
118 1, 2, 3 & 4
120 1, 2, 3 & 4
122/124 1, 2, 3 & 4
125/127 1, 3 & 4
126 1, 2, 3 & 4
128 1, 2, 3 & 4
129 1, 2, 3 & 4
130 1 & 2
131 1, 2, 3 & 4
132 3
134/136 1 & 3
137 1, 2, 3 & 4
138 3
139 1, 2, 3 & 4
140/142 1, 2, 3 & 4
EXHIBIT A-1
<PAGE>
Unit Number Quarter-share Intervals
141/143 1, 2, 3 & 4
144 1, 2, 3 & 4
145/147 1, 2, 3 & 4
149 1, 2, 3 & 4
150 2
152 1, 2, 3 & 4
201/203 2
202 1, 2, 3 & 4
204 1, 2, 3 & 4
205 3 & 4
206/208 1, 2, 3 & 4
207 1, 2, 3 & 4
209/211 1, 3 & 4
210/212 1 & 4
213 1, 2, 3 & 4
214 1, 2, & 3
216 1, 2, 3 & 4
219 1, 2, 3 & 4
220 3 & 4
221 1, 2, 3 & 4
222 1, 2, 3 & 4
223/225 1 & 2
224/226 1, 2, & 3
228/230 1, 2, 3 & 4
232/234 1, 2, 3 & 4
235/237 1, 2, 3 & 4
236 1, 3 & 4
238 1, 2, 3 & 4
239 1
240 1, 2, 3 & 4
241 1, 2, 3 & 4
243 1 & 2
244 1, 2, 3 & 4
245 1, 2, 3 & 4
246/248 1, 2, 3 & 4
247/249 1, 2, 3 & 4
EXHIBIT A-2
Unit Number Quarter-share Intervals
<PAGE>
250 1, 2, 3 & 4
251 1, 2, 3 & 4
252/254 4
253/255 1, 2, 3 & 4
256/258 1, 2 & 4
260 3 & 4
301 1, 2 & 3
302 2, 3 & 4
304/306 1, 2, 3 & 4
305/307 1, 2, 3 & 4
308 1, 2, 3 & 4
309 1, 2, 3 & 4
310/312 3 & 4
311 1, 2, 3 & 4
314/316 1, 2, 3 & 4
315 1, 2, 3 & 4
317 1
318/320 1, 2, 3 & 4
322/324 1, 2, & 3
326 1 & 2
328 1 & 3
330/332 2
331 2 & 4
333 1, 2, 3 & 4
335 1, 2 & 4
337 1, 2, 3 & 4
333/340 1, 2, 3 & 4
339 1, 3 & 4
341 1, 2, 3 & 4
342/344 1, 2, 3 & 4
343 1, 2 & 3
345 1 & 3
346 1, 2, 3 & 4
348 1, 2, 3 & 4
350/352 1
354 1, 2, 3 & 4
EXHIBIT A-3
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Any taxes which are not yet due and payable.
2. Rights of parties in possession of Unit 1 (the Commercial Unit) under
unrecorded leases.
3. Declaration of Easements and Restrictive Covenants by Mount Attitash
Lift Corp. recorded December 1, 1993 at Book 1555, Page 97.
4. Amended and Re-Stated Declaration of Easements by and between L.B.O.
Holding, Inc. and LBO Hotel Co., recorded at Books 1674, Page 471.
5. Those matter shown on the following Plans of Land as pertaining to
Parcel 2 as shown on said Plans:
a. "Condominium Plan Grand Summit Hotel at Attitash", prepared by Thaddeus
- -Thorne Surveys, Inc., dated September 18, 1996, parts I and II recorded in the
Carroll County Registry of Deeds at Plan Book 157, Pages 56 and 57, as revised
by revisions dated January 21, 1997, and March 25, 1997, recorded April 10,
1997, at Plan Book 159 Pages 77 and 78.
b. Plan of Land entitled "Subdivision Plat, Grand Summit Hotel at
Attitash" prepared by Thaddeus-Thorne Surveys, Inc., dated March 7, 1996,
revised to May 20, 1996, recorded at Plan Book 156, Pages 40 and 41, as revised
by revision dated July 11, 1996, recorded at Plan Book 157, Pages 1 and 2.
c. As Built Site prepared by Thaddeus Thorne-Surveys, Inc., and As Built
Floor Plans, prepared by JSA, Inc., all dated March 27, 1997, recorded March
28, 1997, at Plan Book 159, Pages 53 through 65.
6. Provisions of Certificate of Registration for Grand Summit Hotel and
Crown Club at Attitash Bear Peak, Bartlett, New Hampshire, dated March 27, 1997,
recorded at Book 1692, Page 988,
7. Declaration of Condominium, Grand Summit Hotel and Crown Club at
Attitash Bear Peak, a Condominium, dated March 26, 1997, recorded at Book 1692,
Page 989.
8. Articles of Agreement of Grand Summit Hotel Condominium Unit Owners
Association, Inc., recorded at Book 1693, Page 3.
EXHIBIT B-1
<PAGE>
9. Notice of Lease between L.B.O. Holding Company, d/b/a Grand Summit
Hotel, and MAC-GRAY Co., Inc., dated April 27, 1997, recorded at Book 1701, Page
492, referencing the laundry rooms at the Grand Summit Hotel.
10. The provisions of NH RSA 356-B, the Condominium Act. NOTE: the rights
of the Declarant to convert convertible land is subject to limitations, as set
forth in the Declaration of Condominium and the Condominium Act.
EXHIBIT B-2
<PAGE>
EXHIBIT 10.83
FLEET NATIONAL BANK
One Federal Street
Boston, MA 02211
THE FIRST NATIONAL BANK OF BOSTON
100 Federal Street
Boston, MA 02110
KEY BANK OF MAINE
286 Water Street
Augusta, ME 04332
August 30, 1996
American Skiing Company
Sunday River Skiway Corporation
Sunday River Ltd.
Perfect Turn, Inc.
Sunday River Transportation Inc.
LBO Holding, Inc.
Cranmore, Inc.
Sugarbush Resort Holdings Inc.
Sugarbush Leasing Company
Sugarbush Restaurants, Inc.
S-K-I Ltd.
Killington, Ltd.
Mount Snow Ltd.
Waterville Valley Ski Area Ltd.
Pico Ski Area Management Company
Resort Software Services, Inc.
Killington Restaurants
Resorts Technologies, Inc.
Dover Restaurants, Inc.
Deerfield Operating Company
Mountain Wastewater Treatment, Inc.
c/o American Skiing Company
P.O. Box 450
Bethel, ME 04217
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of June 28,
1996, as from time to time in effect (the "Credit Agreement"), by and among
American Skiing Company, a Maine corporation ("American Ski"), certain of its
subsidiaries (together with American Ski, the "Borrowers"), Fleet National Bank,
as agent (the "Agent") and the lenders party thereto
<PAGE>
(the "Lenders"). All capitalized terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so defined.
You have informed us that S-K-I, a Borrower under the Credit Agreement and
a wholly-owned subsidiary of American Ski, is exercising its right to purchase
the Sugarloaf Minority Interests (the "Acquisition"). You have also informed us
that in connection with the Acquisition, S-K-I is entering into a letter
agreement (the "Sugarloaf Letter Agreement") whereby S-K-I has agreed to pay, in
addition to the purchase price, an additional performance-based purchase price
for the shares (the "Additional Purchase Price"). The Acquisition and the
Sugarloaf Letter Agreement require certain consents under and modifications of
the Credit Agreement.
The Agent, the Lenders and the Borrowers hereby agree as follows:
1. The incurrence of Indebtedness by S-K-I under the Sugarloaf Letter
Agreement will be deemed permitted Indebtedness pursuant to Section 9.1 of the
Credit Agreement.
2. The purchase of the Sugarloaf Minority Interests and the payment, if
any, of the Additional Purchase Price in accordance with the terms of the
Sugarloaf Letter Agreement, will be deemed a permitted Distribution pursuant to
Section 9.8 of the Credit Agreement. Not less than five (5) Business Days prior
to making any payments of the Additional Purchase Price under the Sugarloaf
Letter Agreement, S-K-I shall provide the Agent with written notice of the
amount of such payment and the calculation thereof.
3. The purchase of the Sugarloaf Minority Interests and the payment, if
any, of the Additional Purchase Price in accordance with the terms of the
Sugarloaf Letter Agreement, will be deemed a permitted transaction with
Affiliates pursuant to Section 9.10 of the Credit Agreement.
4. Schedules 5.2, 5.4, 5.13, 5.16 and 5.25 to the Credit Agreement shall
be deleted in their entirety and the new Schedules 5.2, 5.4, 5.13, 5.16 and
5.25, attached hereto, shall be substituted thereof.
EXECUTED as an instrument under seal as of the date first written above.
AGENT:
FLEET NATIONAL BANK, as Agent
By: /s/ David B. Henderson
----------------------------
Name: David B. Henderson
Title: Vice President
2
<PAGE>
LENDERS:
FLEET NATIONAL BANK
By: /s/ David B. Henderson
---------------------------
Name: David B. Henderson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Andrew T. Fay
---------------------
Name: Andrew T. Fay
Title: Vice President
KEY BANK OF MAINE
By: /s/ Richard E. Rummler
-----------------------
Name: Richard E. Rummler
Title: Senior Vice President
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORT SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS
RESORTS TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
MOUNTAIN WASTEWATER TREATMENT, INC.
By: /s/ Thomas M. Richardson
------------------------
Name: Thomas M. Richardson
Title: Treasurer
3
<PAGE>
EXHIBIT 10.84
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of August 30, 1996 between SUGARLOAF MOUNTAIN
CORPORATION, a Maine corporation, MOUNTAINSIDE, a Maine corporation, and
SUGARTECH, a Maine corporation, (each a "Debtor" and collectively, the
"Debtors") and FLEET NATIONAL BANK, as agent (the "Agent") for itself and the
other lenders which are, or may in the future become, parties to that certain
Credit Agreement (as hereinafter defined).
Recitals
Pursuant to a joinder of even date herewith, the Debtors are parties to
that certain Credit Agreement dated as of June 28, 1996 (as amended and in
effect from time to time, the "Credit Agreement"), among the Debtors, the banks
and other financial institutions from time to time parties thereto (together
with their successors and assigns, the "Lenders"), and the Agent. Capitalized
terms used and not defined herein shall have the same definition as in the
Credit Agreement. Pursuant to the Credit Agreement, the Lenders have, upon the
terms and subject to the conditions contained therein, agreed to make loans and
otherwise extend credit to the Debtors. It is a condition precedent to the
Lenders making any loans or otherwise extending credit to the Debtors under the
Credit Agreement that the Debtors execute and deliver to the Agent, for the
benefit of the Lenders and the Agent, this Security Agreement, as security for
the payment and performance of all obligations of each of the Debtors to the
Agent and the Lenders.
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. GRANT OF SECURITY
Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a
continuing security interest ("Security Interest") in and to all personal
property and fixtures of the Debtor, whether now or hereafter existing or now or
hereafter acquired and wherever located, including all equipment, accounts,
inventory and general intangibles, all as more fully described as follows (the
"Collateral"):
(a) All money, cash, bank accounts, deposit accounts, goods,
inventory, equipment, computer hardware and software, instruments,
securities, documents, documents of title, chattel paper, accounts,
accounts receivable, lease receivables and leases including but not
limited to, rights to rentals thereunder and the Debtor's reversionary
interest in property leased thereunder and any equity rights in leases
sold to third parties, contract rights, licenses, general intangibles,
copyrights, patents and patents pending, trademarks and goodwill, trade
secrets, credits, claims, demands and all other property of the Debtor
(including but not limited to leasehold improvements); but excluding the
capital stock and other equity interests held by the Debtors in their
Subsidiaries and any assets held by U.S. Trust Company of New York (or its
<PAGE>
successor), as Collateral Agent under the Pledge and Disbursement
Agreement of even date herewith, by and between American Skiing Company
and U.S. Trust Company of New York;
(b) All equipment, including without limitation all fixtures,
machinery, equipment, molds, dies, motor vehicles, and other goods whether
now owned or hereafter acquired by the Debtor, wherever located, all
replacements, substitutions and all parts thereof and all accessions
thereto, as well as all of the Debtor's right, title and interest in and
to any such goods now or hereafter held or used by the Debtor under any
lease, lease-purchase, conditional sales, use or other agreements under
which the Debtor is entitled to the use and possession thereof, with any
other rights and benefits flowing from such agreements, all as may be used
or useful in connection with the Debtor's business as now or hereafter
carried on, any operations incidental to or associated with the same, or
for any other purpose (any and all such equipment, machinery and fixtures,
parts and accessions being the "Equipment");
(c) All inventory in all of its forms, wherever located, now or
hereafter existing including, but not limited to (i) raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, and (ii) goods which
are returned to or repossessed by the Debtor and all accessions thereto
and products thereof (any and all such inventory, accessions and products
being the "Inventory");
(d) All accounts receivable, including without limitation accounts,
contracts, contract rights, chattel paper, instruments, licenses and other
obligations of any kind whether now existing or hereafter arising,
including without limitation any arising out of or in connection with the
operation, management or rental by Debtor of skiing, recreational,
commercial, hotel, retail, conference facility, food service, condominium,
residential, and any other type of real estate, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, general intangibles or obligations
(any and all such accounts, contract rights, chattel paper, instruments,
general intangibles and obligations being the "Receivables," and any and
all such leases, security agreements and other contracts being the
"Contracts");
(e) All general intangibles including without limitation,
tradenames, trademarks, servicemarks, tax refunds, the corporate name and
all product names; and
(f) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
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Section 1.2 Security for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the Obligations.
ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Debtor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
Section 2.1 Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve and perfect the security interest
granted by such Debtor to the Agent hereby in respect of the Collateral have
been accomplished and the security interest granted to the Agent pursuant to
this Agreement in and to the Collateral constitutes, upon satisfaction of such
filings, registrations and recordings, a perfected security interest therein (to
the extent that the same can be perfected by filing, registration or recording
and excepting therefore railroad cars, locomotives and other rolling stock,
titled vehicles and aircraft) prior to the rights of all other Persons therein
(other than any such rights pursuant to Permitted Liens) and subject to no other
Liens (other than Permitted Liens) and is entitled to all the rights, priorities
and benefits afforded by the Uniform Commercial Code to perfected security
interests.
Section 2.2 No Liens. Such Debtor is, and as to Collateral acquired by it
from time to time after the date hereof such Debtor will be, the owner of all
Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and such Debtor shall defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest therein
(other than in connection with Permitted Liens) adverse to the Agent.
Section 2.3 Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as any Lender Obligations or commitments with
respect thereto are outstanding, such Debtor will not execute or authorize to be
filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except financing statements filed or to be filed in
respect of and covering the security interests granted hereby by such Debtor or
in connection with Permitted Liens.
Section 2.4 Chief Executive Office; Records. As of the date hereof, the
chief executive office of such Debtor is located at the address indicated on
Exhibit A hereto for such Debtor. Such Debtor will not move its chief executive
office except to such new location as such Debtor may establish in accordance
with the last sentence of this Section 2.4. A complete set of books of account
and records of such Debtor relating to the Receivables and the
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Contract Rights are, and will continue to be, kept at such chief executive
office, at one or more of the other record locations set forth on Exhibit A
hereto for such Debtor or at such new locations as such Debtor may establish in
accordance with the last sentence of this Section 2.4. All Receivables and
Contract Rights of such Debtor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, the office locations described above or such new location
established in accordance with the last sentence of this Section 2.4. No Debtor
shall establish new locations for such offices until (a) it shall have given to
the Agent not less than 30 days' prior written notice of its intention to do so,
clearly describing such new location and providing such other information in
connection therewith as the Agent may reasonably request and (b) with respect to
such new location, it shall have taken all action reasonably satisfactory to the
Agent, to maintain the security interest of the Agent in the Collateral intended
to be granted hereby at all times fully perfected and in full force and effect.
Section 2.5 Location of Inventory and Equipment. As of the date hereof,
all Inventory and Equipment held by each Debtor is located at one of the
locations shown on Exhibit B hereto for such Debtor. Each Debtor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Exhibit B
hereto, or such new location as such Debtor may establish in accordance with the
last sentence of this Section 2.5. Any Debtor may establish a new location for
Inventory and Equipment only if (a) it shall have given to the Agent not less
than 30 days' prior written notice of its intention so to do, clearly describing
such new location and providing such other information in connection therewith
as the Agent may reasonably request and (b) with respect to such new location,
it shall have taken all action reasonably satisfactory to the Agent to maintain
the security interest of the Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
Section 2.6 Recourse. This Agreement is made with full recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Debtor contained herein, in the other Lender
Agreements and otherwise in writing in connection herewith or therewith.
Section 2.7 Trade Names; Change of Name. As of the date hereof, no Debtor
has or operates in any jurisdiction under, or in the preceding 12 months has had
or has operated in any jurisdiction under, any trade names, fictitious names or
other names except its legal name. No Debtor shall change its legal name or
assume or operate in any jurisdiction under any trade, fictitious or other name
and new names established in accordance with the last sentence of this Section
2.7. No Debtor shall assume or operate in any jurisdiction under any new trade,
fictitious or other name until (a) it shall have given to the Agent not less
than 30 days' prior written notice of its intention so to do, clearly describing
such new name and the jurisdictions in which such new name shall be used and
providing such other information in connection therewith as the Agent may
reasonably request and (b) with respect to such new name, it shall have taken
all action reasonably requested by the Agent, to maintain the security
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interest of the Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
Section 3.1 Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Debtor shall be deemed to have represented
and warranted that such Receivable, and all records, papers and documents
relating thereto are what they purport to be in all material respects, and that
such Receivable will, to the best knowledge of such Debtor, evidence true and
valid obligations of the account debtor named therein.
Section 3.2 Maintenance of Records. Each Debtor will keep and maintain at
its own cost and expense, records of its Receivables and Contracts and such
Debtor will make the same available on an Debtor's premises to the Agent for
inspection, at such Debtor's own cost and expense, at any and all reasonable
times upon reasonable prior notice to such Debtor. Upon the occurrence and
during the continuance of an Event of Default and at the reasonable request of
the Agent, such Debtor shall, at its own cost and expense, deliver all tangible
evidence of its Receivables and Contract Rights (including, without limitation,
all documents evidencing the Receivables and all Contracts) and such books and
records to the Agent or to its representatives (copies of which evidence and
books and records may be retained by such Debtor). If the Agent so directs, upon
the occurrence and during the continuance of an Event of Default such Debtor
shall legend, in form and manner satisfactory to the Agent, the Receivables and
the Contracts, as well as books, records and documents of such Debtor evidencing
or pertaining to such Receivables and Contracts with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the Agent and
that the Agent has a security interest therein.
Section 3.3 Direction to Account Debtors; Contracting Parties; etc. Upon
the occurrence and during the continuance of an Event of Default, and if the
Agent so directs any Debtor, such Debtor agrees (a) to cause all payments on
account of the Receivables and Contracts to be made directly to the Cash
Collateral Account, (b) that the Agent may, at its option, directly notify the
obligors with respect to any Receivables and/or under any Contracts to make
payments with respect thereto as provided in preceding clause (a) and (c) that
the Agent may enforce collection of any such Receivables and Contracts and may
adjust, settle or compromise the amount of payment thereof, in the same manner
and to the same extent as such Debtor. Without notice to or assent by any
Debtor, the Agent may apply any or all amounts then in, or thereafter deposited
in, the Cash Collateral Account which application shall be effected in the
manner provided in Section 7.4 of this Agreement. The reasonable costs and
expenses (including reasonable attorneys' fees) of collection, whether incurred
by the relevant Debtor or the Agent, shall be borne by the relevant Debtor. The
Agent shall deliver a
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copy of each notice referred to in the preceding clause (b) to the relevant
Debtor; provided, that the failure by the Agent to so notify such Debtor shall
not affect the effectiveness of such notice or the other rights of the Agent
created by this Section 3.3.
Section 3.4 Modification of Terms; etc. No Debtor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Agent, except in accordance
with such Debtor's reasonable business practices.
Section 3.5 Collection. Each Debtor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract. The
reasonable costs and expenses (including, without limitation, attorneys' fees)
of collection, if incurred by an Debtor or the Agent, shall be borne by the
relevant Debtor.
Section 3.6 Instruments. If any Debtor owns or acquires any Instrument
constituting Collateral, such Debtor will within 10 Business Days notify the
Agent thereof, and upon request by the Agent will promptly deliver such
Instrument to the Agent appropriately endorsed to the order of the Agent as
further security hereunder.
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Section 4.1 Additional Representations and Warranties. Each Debtor
represents and warrants that, as of the date hereof, it is the true and lawful
owner of all right, title and interest to or otherwise has the right to use the
registered Marks listed in Exhibit C hereto for such Debtor and that, as of the
date hereof said listed Marks constitute all the marks and applications for
marks registered in the United States Patent and Trademark Office that such
Debtor presently owns or uses in connection with its business. Each Debtor
represents and warrants that it owns, is licensed to use or otherwise has the
right to use all material Marks that it uses. Each Debtor further warrants that
it has no knowledge of any third party claim that any aspect of such Debtor's
present or contemplated business operations infringes or will infringe any
trademark, service mark or trade name in any respect which could reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities or condition (financial or otherwise) of the
Borrowers and their Restricted Subsidiaries taken as a whole. Each Debtor
represents and warrants that except as listed on
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Exhibit C, as of the date hereof it is the beneficial and record owner of all
trademark registrations and applications listed in Exhibit C hereto for such
Debtor and that said registrations are valid and subsisting, and that such
Debtor is not aware of any third-party claim that any of said registrations in
respect of any material Mark is invalid or unenforceable. Each Debtor hereby
grants to the Agent an absolute power of attorney to sign, upon the occurrence
and during the continuance of an Event of Default, any document which may be
required by the United States Patent and Trademark Office in order to effect an
absolute assignment of all right, title and interest in each Mark, and record
the same.
Section 4.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to notify the Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who such Debtor believes is infringing or diluting or otherwise violating
in any material respect any of such Debtor's rights in and to any material Mark,
or with respect to any party claiming that such Debtor's use of any material
Mark violates in any material respect any property right of that party. Each
Debtor further agrees to prosecute any Person infringing any material Mark in
accordance with reasonable business practices.
Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks as
required in each of the applicable jurisdictions during the time in which this
Agreement is in effect, sufficiently to preserve such Marks (and any
registrations thereto) as trademarks or service marks under the laws of the
United States and any other applicable law; provided, that, prior to any
Default, no Debtor shall be obligated to preserve any Mark in the event such
Debtor determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
Section 4.4 Maintenance of Registration. Each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. ss.ss. 1051 et seq. to maintain trademark registrations, including but
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its registered Marks
pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Agent; provided, that, prior to any Default, no Debtor shall be obligated to
maintain any Mark in the event that such Debtor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within 60 days of receipt
of such certificate, such Debtor shall deliver to the Agent a copy of such
certificate, and an assignment for security in such Mark, to the Agent and at
the expense of such Debtor, confirming the assignment for security in such
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Mark to the Agent hereunder, the form of such security to be substantially the
same as the form hereof or in such other form as may be reasonably satisfactory
to the Agent.
Section 4.6 Remedies. If an Event of Default shall occur and be
continuing, the Agent may take any or all of the following actions: (a) declare
the entire right, title and interest of such Debtor in and to each of the Marks,
together with all trademark rights and rights of protection to the same, vested
in the Agent for the benefit of the Lenders, in which event such rights, title
and interest shall immediately vest, in the Agent for the benefit of the
Lenders, and the Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 hereof to execute, cause to be acknowledged and
notarized and record said absolute assignment with the applicable agency; (b)
take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the Marks and the right to carry on the business and use the
assets of such Debtor in connection with which the Marks have been used; and (c)
direct such Debtor to refrain, in which event such Debtor shall refrain, from
using the Marks in any manner whatsoever, directly or indirectly, and, if
requested by the Agent, change such Debtor's corporate name to eliminate
therefrom any use of any Mark and execute such other and further documents that
the Agent may request to further confirm this and to transfer ownership of the
Marks and registrations and any pending trademark application in the United
States Patent and Trademark Office to the Agent.
Section 4.7 Collateral Assignment. In addition to, and not in limitation
of, the grant of the security interest in Article 1 above, each Debtor hereby
grants, assigns, transfers, conveys and sets over to the Agent, for the benefit
of the Lenders, Debtor's entire right, title and interest in and to the Marks
and Proceeds. Debtors have delivered to the Agent an Assignment of Trademarks
(the "Assignment") and the Agent is hereby authorized to file such Assignment
with the United States Patent and Trademark Office. Upon payment in full of all
Obligations, the Agent will assign the Marks to the Debtors.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1 Additional Representations and Warranties. Each Debtor
represents and warrants that, as of the date hereof, it is the true and lawful
owner of all rights in (a) all material Trade Secrets and Proprietary
Information necessary to operate the business of such Debtor, (b) the Patents
listed in Exhibit D hereto for such Debtor and that said Patents constitute all
the patents and applications for patents that such Debtor owns on the date
hereof and (c) the Copyrights listed in Exhibit E hereto for such Debtor and
that said Copyrights constitute all registrations of copyrights and applications
for copyright registrations that such Debtor owns on the date hereof. Each
Debtor further warrants that it has no knowledge of any third party claim that
any aspect of such Debtor's present or contemplated business operations
infringes or will infringe any patent or any copyright or such Debtor has
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misappropriated any Trade Secret or Proprietary Information, in each case in any
respect which could reasonably be expected to have a material adverse effect on
the business, operations, property, assets, liabilities or condition (financial
or otherwise) of the Borrowers and their Restricted Subsidiaries taken as a
whole. Each Debtor hereby grants to the Agent an absolute power of attorney to
sign, upon the occurrence and during the continuance of an Event of Default, any
document which may be required by the United States Patent and Trademark Office
or the United States Copyright Office in order to effect an absolute assignment
of all right, title and interest in each Patent and Copyright, and to record the
same.
Section 5.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to furnish the Agent in writing with all pertinent information
available to such Debtor with respect to any infringement, contributing
infringement or active inducement to infringe in any material respect any
material Patent or Copyright or to any claim that the practice of any material
Patent or the use of any material Copyright violates in any material respect any
property right of a third party, or with respect to any misappropriation of any
material Trade Secret Right or any claim that practice of any material Trade
Secret Right violates in any material respect any property right of a third
party. Each Debtor further agrees, to the extent consistent with reasonable
business practices, to prosecute any Person infringing any Patent or Copyright
or any Person misappropriating any Trade Secret Right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss.
41 to maintain in force rights under each Patent, absent prior written consent
of the Agent; provided, that no Debtor shall be obligated to maintain any Patent
in the event such Debtor determines, in its reasonable business judgment, that
the maintenance of such Patent is no longer necessary or desirable in the
conduct of its business.
Section 5.4 Prosecution of Patent Application. At its own expense, each
Debtor shall diligently prosecute all applications for Patents for such Debtor
and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Agent;
provided, that no Debtor shall be obligated to prosecute any application in the
event such Debtor determines, in its reasonable business judgment, that the
prosecuting of such application is no longer necessary or desirable in the
conduct of its business.
Section 5.5 Other Patents and Copyrights. Within 60 days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the relevant Debtor shall deliver to the Agent a copy
of said Copyright or certificate or registration of said patents, as the case
may be, with an assignment for security as to such Patent or Copyright, as the
case may be, to the Agent and at the expense of such Debtor, confirming the
assignment for security, the form of such assignment for security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Agent.
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Section 5.6 Remedies. If an Event of Default shall occur and be
continuing, the Agent may take any or all of the following actions: (a) declare
the entire right, title, and interest of such Debtor in each of the Patents and
Copyrights vested in the Agent for the benefit of the Lenders, in which event
such right, title, and interest shall immediately vest in the Agent for the
benefit of the Lenders, in which case the Agent shall be entitled to exercise
the power of attorney referred to in Section 5.1 hereof to execute, cause to be
acknowledged and notarized and to record said absolute assignment with the
applicable agency; (b) take and practice or sell the Patents and Copyrights; and
(c) direct such Debtor to refrain, in which event such Debtor shall refrain,
from practicing the Patents and using the Copyrights directly or indirectly, and
such Debtor shall execute such other and further documents as the Agent may
request further to confirm this and to transfer ownership of the Patents and
Copyrights to the Agent for the benefit of the Lenders.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
Section 6.1 Protection of Agent's Security. Each Debtor will at all times
keep its Inventory and Equipment insured in favor of the Agent, at such Debtor's
own expense to the extent and in the manner provided in the Lender Agreements;
all policies or certificates with respect to such insurance (and any other
insurance maintained by such Debtor) (a) shall be endorsed to the Agent's
reasonable satisfaction for the benefit of the Agent (including, without
limitation, by naming the Agent as additional insured and loss payee) and (b)
shall state that such insurance policies shall not be canceled without 30 days'
prior written notice thereof by the insurer to the Agent; and certified copies
of such policies or certificates with respect thereto shall be deposited with
the Agent. If any Debtor shall fail to insure its Inventory and Equipment in
accordance with the preceding sentence, or if any Debtor shall fail to so
endorse and deposit all policies or certificates with respect thereto, the Agent
shall have the right (but shall be under no obligation), upon prior written
notice to such Debtor, to procure such insurance and such Debtor agrees to
promptly reimburse the Agent for all costs and expenses of procuring such
insurance. The Agent shall, at the time any proceeds of such insurance are
distributed to the Lenders, apply such proceeds in accordance with Section 7.4
hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of such Debtor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to such
Debtor.
Section 6.2 Further Actions. Each Debtor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Agent from time to
time such lists, descriptions and designations of its Collateral, warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers
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of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Agent deems
reasonably appropriate or advisable to perfect, preserve or protect its security
interest in the Collateral.
Section 6.3 Financing Statements. Each Debtor agrees to execute and
deliver to the Agent such financing statements, in form reasonably acceptable to
the Agent, as the Agent may from time to time reasonably request or as are
necessary or desirable in the reasonable opinion of the Agent to establish and
maintain a valid, enforceable, first priority perfected security interest in the
Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Debtor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Debtor hereby authorizes the Agent to file any such financing statements
without the signature of such Debtor where permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each Debtor
agrees that, if an Event of Default shall have occurred and be continuing, then
and in every such case, the Agent, in addition to any rights now or hereafter
existing under applicable law, shall have all rights as a secured creditor under
the UCC in all relevant jurisdictions and may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Debtor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such
Debtor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Debtor;
(ii) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and
the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to
the Agent;
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Debtor to sell,
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assign or otherwise liquidate any or all of the Collateral or any part
thereof, and, in each case, take possession of the proceeds of any such
sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Debtor in writing to deliver the same to the Agent
at any place or places reasonably designated by the Agent, in which event
such Debtor shall at its own expense:
(x) forthwith cause the same to be moved to the place or
places so designated by the Agent and there delivered to the Agent;
(y) store and keep any Collateral so delivered to the Agent at
such place or places pending further action by the Agent as provided
in Section 7.2 hereof; and
(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for
such term and on such conditions and in such manner as the Agent shall in
its reasonable judgment determine;
it being understood that each Debtor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by such Debtor of said obligation. The Lenders
agree that this Agreement may be enforced only by the action of the Agent acting
upon the instructions of the Majority Banks and that no other Lender shall have
any right individually to seek to enforce this Agreement or to realize upon the
security to be granted hereby, it being understood and agreed that such rights
and remedies may be exercised by the Agent for the benefit of the Lenders upon
the terms of this Agreement.
Section 7.2 Remedies: Disposition of the Collateral. Any Collateral
repossessed by the Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Agent or after any overhaul or repair
at the expense of the relevant Debtor which the Agent shall determine to be
commercially reasonable. Any such disposition which shall be a private sale or
other private proceedings permitted by such requirements shall be made upon
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not less than 10 days' written notice to the relevant Debtor specifying the time
at which such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the relevant Debtor or any nominee of such
Debtor to acquire the Collateral involved at a price or for such other
consideration at least equal to the intended sale price or other consideration
so specified. Any such disposition which shall be a public sale permitted by
such requirements shall be made upon not less than 10 days' written notice to
the relevant Debtor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Agent's option, be subject to reserve), after publication of notice
of such auction not less than 10 days prior thereto in two newspapers in general
circulation in Boston, Massachusetts. To the extent permitted by any such
requirement of law, the Agent may bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to the relevant Debtor. If, under mandatory requirements
of applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the relevant Debtor as hereinabove specified, the Agent need give such Debtor
only such notice of disposition as shall be reasonably practicable in view of
such mandatory requirements of applicable law.
Section 7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH DEBTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
(b) each Debtor hereby further waives, to the extent permitted by law:
i. all damages occasioned by such taking of possession except any
damages which are determined by a final, non-appealable court
order to have been caused by the Agent's gross negligence or
willful misconduct; and
ii. all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the
Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Debtor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
13
<PAGE>
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Debtor therein and thereto,
and shall be a perpetual bar both at law and in equity against such Debtor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Debtor.
7.4 Application of Proceeds.
(a) All moneys collected by the Agent upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Agent hereunder, shall be applied as provided in Section 10.3 of the Credit
Agreement.
(b) Each of the Lenders agrees and acknowledges that if the Lenders
are to receive a distribution on account of undrawn amounts with respect to
Letters of Credit issued under the Credit Agreement (which shall only occur
after all outstanding Loans and unpaid Reimbursement Obligations with respect to
such Letters of Credit have been paid in full), such amounts shall be paid to
the Agent under the Credit Agreement and held by it, for the equal and ratable
benefit of the Lenders, as cash security for the repayment of Obligations owing
to the Lenders as such. If any amounts are held as cash security pursuant to the
immediately preceding sentence, then upon the termination of all outstanding
Letters of Credit, and after the application of all such cash security to the
repayment of all Obligations owing to the Lenders after giving effect to the
termination of all such Letters of Credit, if there remains any excess cash,
such excess cash shall be distributed in accordance with Section 10.3 of the
Credit Agreement.
(c) It is understood and agreed that the Debtors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
Section 7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the other
Lender Agreements or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Debtor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Agent to any other or further action in any
circumstances without notice or
14
<PAGE>
demand. In the event that the Agent shall bring any suit to enforce any of its
rights hereunder and shall be entitled to judgment, then in such suit the Agent
may recover reasonable expenses, including reasonable attorneys' fees, and the
amounts thereof shall be included in such judgment.
Section 7.6 Discontinuance of Proceedings. In case the Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case the relevant Debtor, the
Agent and each holder of any of the Obligations shall be restored to their
former positions and rights hereunder with respect to the Collateral subject to
the security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted.
ARTICLE 8
DEFINITIONS
In addition to terms defined elsewhere herein, the following terms shall
have the meanings herein specified. Such definitions shall be equally applicable
to the singular and plural forms of the terms defined.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Agent for the benefit of the Lenders.
"Chattel Paper" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the Commonwealth of Massachusetts.
"Contract Rights" shall mean all rights of any Debtor (including, without
limitation, all rights to payment) under each Contract.
"Copyrights" shall mean any United States copyright owned (or subject to
the rights of ownership) by any Debtor, including any registrations of any
copyright, in the United States Copyright Office, as well as any application for
a copyright registration now or hereafter made with the United States Copyright
Office by any Debtor.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
15
<PAGE>
"Documents" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the Commonwealth of Massachusetts.
"Event of Default" shall mean any Event of Default under, and as defined
in, the Credit Agreement and shall in any event, without limitation, include any
payment default on any of the Obligations after the expiration of any applicable
grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Goods" shall have the meaning provided in the Uniform Commercial Code as
in effect on the date hereof in the Commonwealth of Massachusetts.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the Commonwealth of Massachusetts.
"Liens" shall mean any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, title retention agreement, lessor's interest in a financing
lease or analogous instrument, in, of, or on any Debtor's property.
"Marks" shall mean any United States trademarks, service marks and trade
names now owned, subject to a right of ownership or hereafter acquired by any
Debtor, including any registration of, or application for, any trademarks and
service marks in the United States Patent and Trademark Office, and any trade
dress including logos and/or designs used by any Debtor in the United States.
"Obligations" shall mean (a) the full and prompt payment when due (whether
at the stated maturity, by acceleration or otherwise) of all obligations and
liabilities of each Debtor now existing or hereafter incurred under, arising out
of or in connection with any Lender Agreement to which such Debtor is a party
and the due performance and compliance by each Debtor with the terms of each
such Lender Agreement; (b) any and all sums advanced by the Agent in order to
preserve the Collateral or preserve its security interest in the Collateral; (c)
in the event of any proceeding for the collection or enforcement of any
obligations or liabilities referred to in clause (a), after an Event of Default
shall have occurred and be continuing, the reasonable expenses of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Agent of its rights
hereunder, together with reasonable attorneys' fees and court costs; (d) all
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Section 8.1 of this Agreement; and (e) all other Lender
Obligations.
"Patents" shall mean any United States patent owned, subject to a right of
ownership by or hereafter acquired by any Debtor and any divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by any
Debtor or subject to a right of ownership in such Debtor.
16
<PAGE>
"Proceeds" shall have the meaning provided in the Uniform Commercial Code
as in effect in the Commonwealth of Massachusetts on the date hereof or under
other relevant law and, in any event, shall include, but not be limited to, (a)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to the Agent or any Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
govern-mental authority) and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Proprietary Information" means all information and know-how worldwide,
including, without limitation, technical data, manufacturing data, research and
development data, manufacturing data, research and development data, data
relating to compositions, processes and formulations, manufacturing and
production know-how and experience, management know-how, training programs,
manufacturing, engineering and other drawings, specifications, performance
criteria, operating instructions, maintenance manuals, technology, technical
information, software, engineering and computer data and databases, design and
engineering specifications, catalogs, promotional literature and financial,
business and marketing plans, inventions and invention disclosures.
"Termination Date" shall have the meaning provided in Section 10.8(a) of
this Agreement.
"Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of the Debtor worldwide whether written or
not written.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Debtor:
c/o America Skiing Company
P.O. Box 450
17
<PAGE>
Bethel, Maine 04217
Attn: Thomas Richardson
(b) if to the Agent:
Fleet National Bank, as Agent
One Federal Street
Boston, MA 02211
Attention: Mr. David B. Henderson
(c) if to any Lender, at such address as such Lender shall have
specified in the Credit Agreement.
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
Section 9.2 Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Debtor directly affected thereby and the
Agent (with the consent of the Majority Lenders (or, to the extent required by
Section 11.1 of the Credit Agreement, all of the Lenders).
Section 9.3 Obligations Absolute. The obligations of each Debtor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Debtor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Lender Agreement;
or (c) any amendment to or modification of any Lender Agreement or any security
for any of the Obligations whether or not any Debtor shall have notice or
knowledge of any of the foregoing.
Section 9.4 Successors and Assigns. This Agreement shall be binding upon
each Debtor and its successors and assigns and shall inure to the benefit of the
Agent and the Lenders and their respective successors and assigns. All
agreements, statements, representations and warranties made by each Debtor
herein or in any certificate or other instrument delivered by such Debtor or on
its behalf under this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this Agreement and
the other Lender Agreements regardless of any investigation made by the Agent or
the Lenders or on their behalf.
Section 9.5 Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
18
<PAGE>
Section 9.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.
Section 9.7 Debtor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Debtor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Agent shall not have any obligations or liabilities with
respect to any Collateral by reason of or arising out of this Agreement, nor
shall the Agent be required or obligated in any manner to perform or fulfill any
of the obligations of each Debtor under or with respect to any Collateral.
Section 9.8 Termination; Release. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth in the Credit
Agreement shall survive such termination) and the Agent, at the request and
expense of the respective Debtor, will promptly execute and deliver to such
Debtor a proper instrument or instruments (including Uniform Commercial Code
termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Debtor (without recourse and without any representation or warranty) such
of the Collateral as may be in the possession of the Agent and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which all Obligations have been paid in full, all commitments with respect
thereto have terminated, no Note is outstanding (and all Loans have been repaid
in full), all Letters of Credit have been terminated and all other Obligations
then due and payable have been paid in full.
Section 9.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Debtor and the
Agent.
Section 9.10 The Agent. The Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Agent as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Agent shall act hereunder on the
terms and conditions set forth in this Agreement and in Section 12 of the Credit
Agreement.
19
<PAGE>
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTORS:
SUGARLOAF MOUNTAIN CORPORATION
MOUNTAINSIDE
SUGARTECH
By /s/ Thomas M. Richardson
---------------------------
Name: Thomas M. Richardson
Title: Treasurer
AGENT:
FLEET NATIONAL BANK, as Agent
By /s/ David B. Henderson
---------------------------
Name: David B. Henderson
Title: Vice President
20
<PAGE>
EXHIBIT A
to
SECURITY
AGREEMENT
SCHEDULE OF CHIEF EXECUTIVE OFFICES
AND OTHER RECORD LOCATIONS
DEBTOR ADDRESS PRINCIPAL FUNCTION
- --------------------------------------------------------------------------------
Sugarloaf Mountain Corporation RR#1, Box 500,
Kingfield, Maine 04947-9799
21
<PAGE>
EXHIBIT B
to
SECURITY
AGREEMENT
SCHEDULE OF INVENTORY
AND EQUIPMENT LOCATIONS
Principal Owned/
Name Address Function Leased
- --------------------------------------------------------------------------------
Sugarloaf Mountain Corporation
Maine: Newry, Maine 04217 Executive Both
Offices
Maine: Kingfield, Maine 04947 Ski resort Both
Sugartech
Maine: Newry, Maine 04217 Executive Both
Offices
Maine: Kingfield, Maine 04947 Ski Resort Both
Mountainside
Maine: Newry, Maine 04217 Executive Both
Offices
Maine: Kingfield, Maine 04947 Ski resort Both
22
<PAGE>
EXHIBIT C
to
SECURITY
AGREEMENT
LIST OF MARKS
Sugarloaf Mountain Corporation
Serial No. 74-613,971 12/20/94 SUPERQUAD
Registration No. 930,239 2/29/72 SUGARLOAF, U.S.A.
and Design
23
<PAGE>
EXHIBIT D
to
SECURITY
AGREEMENT
LIST OF PATENTS AND APPLICATIONS
NONE
24
<PAGE>
EXHIBIT E
to
SECURITY
AGREEMENT
LIST OF COPYRIGHTS AND APPLICATIONS
NONE
25
<PAGE>
EXHIBIT 10.85
FEE AND LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS, FINANCING STATEMENT
AND SECURITY AGREEMENT
This Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing
Statement and Security Agreement (the "Mortgage") is made as of August __, 1996,
from Sugarloaf Mountain Corporation, a Maine corporation having a place of
business at c/o American Skiing Company, P.O. Box 450, Bethel, Maine 04217 (the
"Mortgagor") to Fleet National Bank, as Agent under the Credit Agreement
referred to below having a place of business at One Federal Street, Boston, MA
02211 the ("Mortgagee"). All capitalized terms used herein without definition
shall have the meanings ascribed to them in the Credit Agreement (as defined
below).
1. Grant of Mortgage. For consideration paid, the Mortgagor, to secure:
(a) The full and prompt payment and performance when due, whether by
acceleration or otherwise, with such interest, commitment fees, prepayment
fees and other charges as may accrue thereon, either before or after
maturity thereof, by Mortgagor, its successors or assigns, and/or American
Skiing Company and the other Borrowers named in the Credit Agreement and
their respective successors or assigns (together with the Mortgagor, are
collectively referred to herein as the "Borrowers") of that certain Credit
Agreement dated as of June 28, 1996, together with any and all renewals,
amendments, modifications, consolidations and extensions thereof (the
"Credit Agreement"), TOGETHER WITH accompanying Revolving Credit Notes and
Swing Line Notes dated as of June 28, 1996 in the principal face amount of
up to SIXTY FIVE MILLION DOLLARS ($65,000,000.00), all together with any
amendments renewals, modifications, consolidations and extensions of the
foregoing (all collectively the "Notes");
(b) Any and all future advances made by Mortgagee to or for the
benefit of the Mortgagor, Borrowers or any one or more of them, whether
jointly or severally liable, direct or indirect, up to a maximum principal
amount outstanding from time to time (exclusive of costs and amounts
advanced to protect the security) of up to ONE HUNDRED MILLION DOLLARS
($100,000,000.00) together with interest, fees, costs, prepayment fees,
and other amounts now existing or hereafter arising:
(c) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations set forth in this
Mortgage (the "Mortgage") or in any other Lender Agreements (as defined in
the Credit Agreement);
(d) Any and all additional advances made to preserve, enforce and
protect the Property, the Leases, the security interest created hereby on
the Property, or this Agreement and the Lender Agreements, including,
without limitation, taxes,
<PAGE>
assessments or insurance premiums or for performance of any of the
Borrowers obligations under the Lender Agreements (whether or not the
original Borrower remains the owner of the Property at the time of such
advances); and
(e) Any and all other indebtedness, however incurred, which may now
or hereafter be due and owing from Borrowers or any one or more of them,
whether joint or several, to Mortgagee, now existing or hereafter coming
into existence, however and whenever incurred or evidenced, whether
expressed or implied, direct or indirect, absolute or contingent, or due
or to become due, and all renewals, modifications, consolidations and
extensions thereof.
(all collectively the "Secured Obligations")
Does hereby GIVE, GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto Mortgagee,
its successors and assigns, forever, WITH MORTGAGE COVENANTS all of the
following described property (hereinafter collectively referred to as the
"Property"):
I. All real estate owned by Mortgagor located in Franklin County, Maine, whether
now owned or hereafter acquired, including, without limitation, the following
described parcels of real estate with the buildings and improvements now or
hereafter situated thereon (the "Owned Property"):
II. Lease by and among Mortgagor and the Town of Carrabassett Valley dated June
3, 1987.
All relating to real estate located in Franklin County, Maine with the
buildings and improvements now or hereafter situated thereon:
SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF
FOR A DESCRIPTION OF SAID OWNED AND LEASED REAL ESTATE
together with all easements and rights relating, arising out of or
appurtenant thereto, including any and all extensions or renewals of the
leases, or substitutions or replacements thereof, and
All rights, privileges and benefits now existing or hereafter arising
under the leases, including, without limitation all rights to exercise
options to extend or renew the leases or to purchase the fee title to the
leasehold estates and appurtenances thereto, and all rights to insurance
proceeds, eminent domain awards or payments in lieu thereof, and
2
<PAGE>
All rights of the Borrower in and to the premises described in Exhibit A
and the buildings, fixtures, improvements, alterations, or additions now
or hereafter acquired or erected on the leased premises
(individually, as amended to date, a "Lease", all collectively the
"Leasehold Estate," or the "Leases" and together with the Owned Property
the "Real Property")
III. Together with:
(a) All right, title and interest of Mortgagor, including, without
limitation, any after-acquired fee title or reversion in and to the said
Real Property and the rights-of-ways, streets and easements adjacent or
appurtenant thereto, and all easements, rights-of-way, licenses, operating
agreements, condominium rights, abutting strips and gores of land,
streets, ways, passages, rights, waters, water courses, water and flowage
rights and powers, minerals and soil, plants, and standing and fallen
timber and other emblements now or hereafter located on the Real Property
or under or above same, and all other appurtenances whatsoever belonging
or relating to said Real Property or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now
owned or hereafter acquired by Mortgagor and the reversion and reversions,
remainder and remainders, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever at law, as well as in
equity, of the Mortgagor of, in and to the same (all hereinafter referred
to as the "Land"); and
(b) All buildings, structures, parking areas, snowmaking and water
rights, landscaping, and other improvements of every nature now or
hereafter situated, erected or placed on the Land or appurtenant thereto,
including, without limitation, all plumbing, electrical, heating,
ventilating, air conditioning, and all other building components, (the
"Improvements"), and all materials intended for construction,
reconstruction, alteration and repairs of the Improvements now or
hereafter erected, all of which materials shall be deemed to be included
within the Improvements immediately upon the delivery thereof to the Land;
and
(c) All fixtures, machinery, equipment, furniture, inventory,
building supplies, skilifts, snowmaking equipment, appliances and other
articles of personal property (the "Personal Property") and all other
fixtures and equipment now or hereafter owned by Mortgagor and located in,
on or about, or used or intended to be used with or in connection with the
Land or the Improvements, whether installed in such a way as to become a
part thereof or not, including all additions, improvements, betterments,
renewals and replacements of any of the foregoing, whether now owned or
hereafter acquired by Mortgagor; and
3
<PAGE>
(d) All right, title and interest of Mortgagor in and to all
policies of insurance, licenses, franchises, permits, leases, approvals,
service and maintenance contracts, property management agreements,
equipment leases, tradenames, trademarks, servicemarks, computer programs,
information and data, logos, goodwill, accounts, chattel paper and general
intangibles as defined in the Uniform Commercial Code as enacted in the
State of Maine, which in any way now or hereafter belong, relate or
appertain to the Land, the Improvements or the Personal Property or any
part thereof, all whether now owned or hereafter acquired by Mortgagor,
including, without limitation, all condemnation payments, insurance
proceeds, accounts and escrow funds and all other property of Mortgagor
deposited with Mortgagee or held by Mortgagee pursuant to the Credit
Agreement or the Lender Agreements (the "Intangible Property"); and
(e) All present and future leases, tenancies, occupancies and
licenses, whether written or oral, of the Land, the Improvements, the
Personal Property and the Intangible Property, or any combination or part
thereof (the "Rental Leases"), and all income, revenues, receipts, rents,
issues, royalties, profits, rent rolls, security deposits and other
benefits of the Land, the Improvements, the Personal Property and the
Intangible Property, from time to time accruing, and all payments under
the Rental Leases (the "Revenues");
(f) All the right, title, interest of Mortgagor in and to all
engineering, survey and architectural specifications, plans and data, all
other records, plans and specifications relating to the Improvements on
the Land and Personal Property (hereinafter collectively referred to as
the "Plans"); and
(g) All proceeds, products, substitutions and accessions of the
foregoing of every type, all whether now owned or hereafter acquired.
(h) All judgments, awards of damages and settlements hereafter made
as a result or in lieu of any taking of the Property under the power of
eminent domain, or for any damage to the Property.
Also granting to Mortgagee hereby the right, upon any default hereunder or
demand upon any of the obligations secured hereby, to foreclose and sell the
aforesaid Property by any means permitted by law, including pursuant to the
STATUTORY POWER OF SALE.
TO HAVE AND TO HOLD the Property, with all the privileges and
appurtenances to the same belonging, to the Mortgagee, its respective successors
and assigns, to Mortgagee and its use and behoof forever;
4
<PAGE>
Advances secured hereby may be made to or for the benefit of the
Mortgagor, any Borrower or any one or more of them.
Mortgagor COVENANTS and AGREES with Mortgagee as follows:
2. Secured Obligations. Mortgagor shall promptly pay and perform the
Secured Obligations. The parties may from time to time extend, renew, alter, and
amend the Secured Obligations secured hereby. All provisions of this Mortgage
shall apply to each further advance as well as to all other Secured Obligations
secured hereby regardless of whether the advance is designated as being secured
hereby. Nothing herein contained, however, shall limit the amount secured by
this Mortgage if such amount is increased by accrued interest, advances made by
Mortgagee, as herein elsewhere provided for to protect the security or is
increased by costs of collection and foreclosure.
3. Representations. The Mortgagor warrants and represents that (i) this
Mortgage has been duly authorized, executed and delivered by and on behalf of
the Mortgagor, (ii) the Mortgagor is duly existing and in good standing with all
power, authority and legal right to engage in the transaction contemplated by
this Mortgage and the Lender Agreements, (iii) the execution and delivery of
this Mortgage and the Lender Agreements and the carrying out of the transaction
contemplated thereby will not conflict with or result in a breach of the terms
of any agreement or law or order of any court or governmental body, (iv) there
are no material actions, suits or proceedings, including, without limitation,
eminent domain proceedings pending, or to the knowledge of the Mortgagor,
threatened before any court or other governmental body or agency which would
have a material adverse effect on the Property or the Mortgagor or the
Mortgagor's ability to perform its obligations under this Mortgage or under the
other Lender Agreements, (v) the Land is in material compliance with applicable
zoning, building, environmental and all other laws, ordinances and regulations
relating to the use and occupancy thereof and the Mortgagor has no knowledge of
any claim of violation of any such legal requirements, (vi) all material
licenses and permits necessary for the use and occupancy of the Land have been
issued and are in full force and effect, (vii) the material improvements on the
Land and the tangible Personal Property are in good working order and free from
structural defects, (viii) the Mortgagor has no knowledge of any claim
challenging the Mortgagor's title to the Real Property, and (ix) the Mortgagor
has no knowledge of any existing default, or claim thereof, under any leases or
other arrangements for the use of the Real Property, either on the part of the
Mortgagor or any other party thereto.
4. Title. Except as disclosed or referred to in Exhibit B, Mortgagor has
good, record and marketable title to an indefeasible estate in fee simple in the
Owned Property and good title to the Personal Property, free and clear of all
liens and encumbrances, except as expressly permitted under the Credit
Agreement. Mortgagor has good right and power to convey the Real Property, Land,
Personal Property and Improvements to Mortgagee to hold
5
<PAGE>
as aforesaid, that this Mortgage is and will remain a valid and enforceable
first lien and security interest on the aforesaid property, and that Mortgagor
shall and will warrant and defend the same to Mortgagee forever against the
claims and demands of all persons except as aforesaid.
5. Leasehold Estate. Mortgagor holds a valid and binding leasehold
interest in the Leasehold Estate, which Leasehold Estate is subject to no prior
liens, conveyances or encumbrances except as set forth on Exhibit B hereto;
Mortgagor may lawfully mortgage and assign the same and this Mortgage does not
violate any other agreement by which the Mortgagor is bound. Mortgagor shall not
hereafter assign, sublease, encumber or transfer any interest in or under the
Leasehold Estate or consent to any subordination of the Leasehold Estate while
the Secured Obligations remain outstanding or committed for, except with the
prior written consent of the Mortgagee.
Each Lease is in full force and effect in accordance with its terms and
there have been no changes, alterations or amendments to the Leases. Mortgagor
will make no material, adverse changes, alterations or amendments to the Leases
without prior written consent of Mortgagee, its successors or assigns; any such
changes to be void and of no effect without such consent. Except as disclosed in
writing to Mortgagee, all rents and payments under the Leases have been paid to
the extent payable to date; and no defaults exist under the Leases, and no event
has occurred or is occurring which, with the passage of time or service of
notice, or both, would constitute an event of default thereunder.
Mortgagor will well and truly perform, or cause to be performed, all its
obligations and agreements as lessee under the Leases, and under any renewals or
extensions thereof and will not do or suffer anything which will impair any
Lease or which would be an event of default thereunder. Mortgagor shall exercise
all renewals of the term of any Lease while the obligations secured hereby
remain outstanding or committed for, except where the failure to so renew would
not constitute a Material Adverse Effect (as defined in the Credit Agreement).
Mortgagor, for itself, its successors and assigns, acknowledges that Mortgagee,
its successors and assigns, shall have no obligation to perform the
responsibilities of the lessee under any Lease, such responsibilities being
those of Mortgagor.
Upon reasonable request of the Mortgagee, Mortgagor shall use its best
efforts to procure from each Landlord to any Lease a certificate stating that
the Lease is in good standing. Mortgagor shall promptly notify Mortgagee of any
default under the Lease or the occurrence of any event under any Lease, which
with the passage of time or service of notice or both, would constitute an event
of default, and of any oral or written claim or notice of default received from
a Landlord under any Lease; and in addition to any other rights contained herein
Mortgagor shall permit the Mortgagee, its agents and employees to enter upon and
inspect the premises subject to such Lease at all reasonable times and upon
reasonable notice.
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6. Taxes and Assessments. Mortgagor shall promptly pay and discharge, when
due, all taxes and assessments of every type or nature levied or assessed
against the Real Property, all water and sewerage charges, and any other
governmental claim, obligation or encumbrance against the Real Property which
may be or become superior to this Mortgage (collectively, the "Impositions")
except as permitted in accordance with the provisions of the Credit Agreement.
Subject to the provisions of the Credit Agreement, if at any time the Mortgagee
does not require the escrow of payments pursuant to Paragraph 7 herein,
Mortgagor shall deliver to Mortgagee receipts evidencing payments of such taxes,
assessments, charges and encumbrances not later than twenty days after the final
date for payment without interest or penalty.
7. Monthly Reserve Payments. Upon the occurrence of an Event of Default,
which has not been waived in writing by the Mortgagee and the Required Lenders,
Mortgagee may require that the Mortgagor pay to the Mortgagee monthly, on the
first day of each month, a sum reasonably determined by the Mortgagee to be
sufficient to provide in the aggregate a fund adequate to pay each Imposition at
least thirty (30) days before it becomes delinquent, and, in addition, shall pay
to the Mortgagee on demand any balance necessary to pay in full each Imposition
at least thirty (30) days before the date on which it becomes due and payable.
Such sums shall not bear interest and may be commingled with the general assets
of the Mortgagee. The Mortgagor shall furnish to the Mortgagee all original
bills relating to any Imposition promptly upon issuance. Mortgagor agrees that
should there be insufficient funds so deposited with Mortgagee for said taxes,
assessments, charges and premiums when due, it will upon demand by Mortgagee
promptly pay to Mortgagee amounts necessary to make such payments in full; any
surplus of such reserve funds may be applied toward the payment of the Secured
Obligations or credited toward such taxes, assessments charges and premiums.
Upon the occurrence of an Event of Default, the Mortgagee may apply such funds
toward the payment of the Secured Obligations without causing thereby a waiver
of any rights, statutory or otherwise, and specifically such application shall
not constitute a waiver of the right of foreclosure hereunder. Mortgagor hereby
pledges to Mortgagee all the foregoing sums so held hereunder for such purposes.
Subject to the above, the Mortgagee may discharge taxes, liens, security
interests, or other encumbrances at any time levied against or placed on the
Property except as noted herein and except those which are permitted or are
being contested in accordance with the provisions of the Credit Agreement, pay
any premiums on any insurance to be carried by Mortgagor, or provide for the
maintenance and preservation of the Real Property and add the expense thereof to
the Secured Obligations secured hereby and charge interest thereon as provided
hereinafter without waiving any default.
The Mortgagor shall have the right, after giving written notice to the
Mortgagee and subject to the conditions stated below, to contest by appropriate
legal proceedings the amount or validity of any Imposition. In no event shall
the Mortgagor be entitled to delay payment of any Imposition if the delay in
payment could subject any portion of the Mortgaged
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Property to possible foreclosure or in any event unless the Mortgagor deposits
with Mortgagee a sum of money or such other security as the Mortgagee deems
reasonable to cover the amount of such Imposition plus any interest or penalty
that may become due as a result of such contest.
8. Insurance.
(a) Mortgagor shall keep the Real Property, Personal Property and
Improvements insured against loss or damage by fire, the perils against
which insurance is afforded by the extended coverage endorsement, and such
other risks and perils as Mortgagee may reasonably require from time to
time, including, without limitation, insurance against flood damage if the
Improvements are located in a flood hazard area or required by federal law
or regulation (to the minimum amount required by federal law or
regulation) and insurance against loss of rental income.
Such policy or policies of such insurance shall be in such form and
shall be in such amounts as Mortgagee may reasonably require. Whenever
requested by Mortgagee, such policies shall be delivered immediately to
Mortgagee. Any and all amounts received by Mortgagee under any of such
policies may be applied by Mortgagee to the Secured Obligations secured
hereby in such manner as Mortgagee may elect, or, at the option of
Mortgagee, the entire amount so received or any part thereof may be
released. Upon foreclosure of this Mortgage or other acquisition of the
Property or any part thereof by Mortgagee, such policies shall become the
absolute property of Mortgagee, but receipt of any insurance proceeds and
any disposition of the same by Mortgagee shall not constitute a waiver of
any rights of Mortgagee, statutory or otherwise, and specifically shall
not constitute a waiver of the right of foreclosure by Mortgagee upon an
Event of Default.
(b) Mortgagor shall pay all premiums on insurance policies, and at
Mortgagee's option, shall pay in the manner provided under Section 7. The
liability insurance policies shall name Mortgagee as an "additional
insured." The property insurance policies shall name Mortgagee as
"mortgagee and loss payee" shall be first payable in case of loss to
Mortgagee, and shall contain mortgage clauses and lender's loss payable
endorsements in form and substance reasonably acceptable to Mortgagee.
Mortgagor shall deliver proof of all such insurance to Mortgagee, and upon
request, Mortgagor shall promptly furnish to Mortgagee all renewal notices
and all receipts of paid premiums.
(c) All policies of insurance required by this Mortgage shall
contain clauses or endorsements to the effect that (i) no act or omission
of either Mortgagor or anyone acting for Mortgagor (including, without
limitation, any representations made by Mortgagor in the procurement of
such insurance), which might otherwise
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result in a forfeiture of such insurance or any part thereof, no occupancy
or use of the Property for purposes more hazardous than permitted by the
terms of the policy, and no foreclosure or any other change in title to
the Property or any part thereof, shall affect the validity or
enforceability of such insurance insofar as Mortgagee is concerned, (ii)
the insurer waives any right of setoff, counterclaim, subrogation, or any
deduction in respect of any liability of Mortgagor and Mortgagee, (iii)
such insurance is primary and without right of contribution from any other
insurance which may be available, (iv) such policies shall not be
modified, canceled or terminated without the insurer thereunder giving at
least thirty (30) days prior written notice to Mortgagee by certified or
registered mail, and (v) that Mortgagee shall not be liable for any
premiums thereon or subject to any assessments thereunder, and shall in
all events be in amounts sufficient to avoid any coinsurance liability.
(d) All policies of insurance required by this Mortgage shall be
issued by companies licensed to do business in the State of Maine and
shall be reasonably acceptable to Mortgagee.
(e) In the event of any loss or damage to the Real Property,
Improvements or Personal Property in excess of One Hundred Thousand
dollars ($100,000.00), Mortgagor shall give immediate written notice to
the insurance carrier and Mortgagee and shall promptly proceed to satisfy
all conditions to the receipt of insurance proceeds. Upon an Event of
Default which has not been waived in writing by the Mortgagee and the
Required Lenders, Mortgagor hereby irrevocably authorizes and empowers
Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion, as
attorney in fact for Mortgagor, to make proof of such loss, to adjust and
compromise any claim under insurance policies, to appear in and prosecute
any action arising from such insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Mortgagee's reasonable
expenses incurred in the collection of such proceeds. Subject to the
foregoing conditions, Mortgagor further authorizes Mortgagee, at
Mortgagee's option, to (i) apply the balance of such proceeds to the
payment of the Secured Obligations whether or not then due, or (ii) if
Mortgagee shall require the reconstruction or repair of the Property, to
hold the balance of such proceeds to be used to pay Impositions and the
Secured Obligations as they become due during the course of reconstruction
or repair of the Property and to reimburse Mortgagor, in accordance with
such terms and conditions as Mortgagee may prescribe, for the costs of
reconstruction or repair of the Property, and upon completion of such
reconstruction or repair to apply any excess to the payment of the Secured
Obligations. If the Property is sold or the Property is acquired by
Mortgagee, all right, title and interest of Mortgagor in and to any
insurance policies and unearned premiums thereon and in and to the
proceeds thereof resulting from loss or damage to the Property prior to
the sale or acquisition shall pass to Mortgagee or any other successor in
interest to Mortgagor or purchaser or grantor of the Property
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but receipt of any insurance proceeds and any disposition of the same by
Mortgagee shall not constitute a waiver of any rights of Mortgagee,
statutory or otherwise, and specifically shall not constitute a waiver of
the right of foreclosure by Mortgagee upon an Event of Default or failure
of performance by Mortgagor of any of the Secured Obligations.
In the event any loss or damage to the Real Property, Improvements
or Personal Property is less than One Hundred Thousand dollars
($100,000.00), the Mortgagor shall promptly restore the damaged property
to its condition prior to such damage.
9. Preservation and Maintenance of the Property.
(a) Mortgagor shall not permit or commit waste, impairment, or
deterioration of the Property or abandon the Property; shall restore or
repair promptly and in a good and workmanlike manner all or any part of
the Property in the event of any material damage, injury or loss thereto,
to the substantial equivalent of its condition prior to such damage,
injury or loss, or such other condition as Mortgagee may approve in
writing (provided, however, the insufficiency of such proceeds shall not
relieve Mortgagor of its obligations to restore hereunder), shall keep the
Property, including the Improvements and the Personal Property, in good
order, repair and working condition and shall replace fixtures, equipment,
machinery and appliances on the Property when necessary to keep such items
in good order, repair, and working condition and in accordance with the
requirements of all fire underwriters and licensing boards, and shall
comply with all laws, ordinances, regulations and requirements of any
governmental body applicable to the Property unless such non-compliance
does not have a Material Adverse Effect.
(b) Mortgagor covenants and agrees that Mortgagor and the Property
shall at all times comply with the requirements of all present and future
federal, state, and local land use and zoning statutes, regulations,
ordinances, licenses, permits, agreements and orders; except as would not
constitute a Material Adverse Effect.
(c) Mortgagor covenants and agrees to give Mortgagee prompt notice
of any non-compliance with such laws, ordinances, regulations or
requirements and of any notice of non-compliance therewith which it
receives or any threatened or pending proceedings in respect thereto or
with respect to the Property (including, without limitation, material
changes in zoning classifications or land use requirements) which, if
adversely determined, would result in a Material Adverse Effect.
(d) Neither Mortgagor nor any tenant or other person shall remove,
demolish or alter any Improvements now existing or hereafter erected on
the Property
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or any Personal Property in or on the Property except when incident to the
replacement of Personal Property with items of like kind and value. Except
as specifically provided in the Credit Agreement, Mortgagor further
covenants and agrees that, without the prior written consent of Mortgagee,
herein, no additional part of the Property shall be declared, or become
the subject of, a condominium under the Maine Condominium Act (33 M.R.S.A.
ss.1601-101), as it may be amended or supplemented, or become the subject
of any covenants or restrictions, or any planned unit development, or any
other type of development that would control or restrict the uses to which
the Land and Improvements may be put or the scheme or arrangement or its
development or the design, location or character of its buildings or
improvements, or which would impose Impositions or assessments of any type
upon any owners or tenants of the Property, or upon any other parties who
may use or enjoy the Property.
(e) If at any time the then existing structure located on or use or
occupancy of the Property shall be permitted pursuant to any zoning or
other law, ordinance or regulation, only so long as such use or occupancy
shall continue, that Mortgagor shall not cause or permit such use or
occupancy to be discontinued without the prior written consent of the
Mortgagee, unless such discontinuance would not result in a Material
Adverse Effect.
10. Inspection. Subject to the provisions of the Credit Agreement,
Mortgagee shall have the right to visit and inspect the Property and any other
of the properties of the Mortgagor, to examine the records and books of account
of the Mortgagor, and to discuss the affairs, finances and accounts of the
Mortgagor with and to be advised as to the same by its and their officers, all
at such reasonable times and intervals as the Mortgagee may desire. Mortgagor
shall permit the Mortgagee and its representatives to examine said books and
records and all supporting vouchers and data any time and from time to time upon
request by the Mortgagee at the mortgaged Property or at such other place as
such books and records are customarily kept; and Mortgagor hereby agrees to
furnish to Mortgagee financial statements in such form and detail as required by
the Credit Agreement.
11. Releases, Amendments, Etc. Without affecting the liability of
Mortgagor or any other person (except any person expressly released in writing)
for payment or for performance of any of the Secured Obligations contained
herein, and without affecting the rights of Mortgagee with respect to any other
security not expressly released in writing, and without impairing the validity
or priority of this Mortgage, Mortgagee may at any time and from time to time,
either before or after the maturity of the Secured Obligations without notice or
consent:
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(i) Release in whole or part the liability of any person or of
any other security for payment or performance of all or any part of
the Secured Obligations,
(ii) Extend the time or otherwise alter, increase or decrease
the terms of payment or interest rate subject to the terms of the
Credit Agreement of all or any part of the Secured Obligations or
modify or waive any Secured Obligations, or subordinate, release,
modify or otherwise deal with the lien or charge hereof,
(iii) Exercise or refrain from exercising or waive any right
Mortgagee may have, including, without limitation, the declaration
of default under and foreclosure of this Mortgage without first
exhausting other remedies or collateral or taking any other action
against any other person,
(iv) Accept additional security of any kind, or
(v) Release or otherwise deal with any property, real or
personal, securing the Secured Obligations, including all or any
part of the Property.
No delay by Mortgagee in exercising any right or remedy hereunder, or
otherwise afforded by law, shall operate as a waiver thereof or preclude the
exercise thereof during the continuance of any default hereunder.
Without limiting the generality of the foregoing, Mortgagor agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with the Secured Obligations, and agrees that the obligations of any
Borrower hereunder shall not be released or discharged, in whole or in part, or
otherwise affected by (i) the failure of the Mortgagee to assert any claim or
demand or to enforce any right or remedy against any other Borrower; (ii) any
extensions or renewals of the Secured Obligations; (iii) any rescissions,
waivers, amendments or modifications of any of the terms or provisions of the
Secured Obligations, the Credit Agreement or of the Lender Agreements or any
other agreement evidencing, securing or otherwise executed in connection with
this Secured Obligations or the Credit Agreement; (iv) the substitution or
release of any entity primarily or secondarily liable for the Secured
Obligations or Credit Agreement or the Lender Agreements; (v) the adequacy of
any rights the Mortgagee may have against any collateral or other means of
obtaining repayment of the Secured Obligations and the Credit Agreement; (vi)
the impairment of any collateral securing the Secured Obligations and the Credit
Agreement, including, without limitation, the failure to perfect or preserve any
rights the Mortgagee might have in such collateral or the substitution,
exchange, surrender, release, loss or destruction of any such collateral; or
(vii) any other act or omission which might in any manner or to any extent
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vary the risk of the Mortgagor or otherwise operate as a release or discharge of
any Borrower, all of which may be done without notice to the Mortgagor.
Any agreement hereafter made by Mortgagor and Mortgagee pursuant to or
amending this Mortgage and the Secured Obligations shall be superior to the
rights of the holder of any intervening lien or encumbrance to the extent
allowed by law.
12. Further Assurances. Mortgagor at Mortgagor's expense will do, execute,
acknowledge and deliver to Mortgagee such further deeds, acts, conveyances,
mortgages, assignments, transfers and assurances as Mortgagee in its discretion
may reasonably require from time to time to better establish and perfect the
property and rights created or intended by Mortgagee to be created hereunder or
to facilitate the Mortgagor's performance hereunder, including, without
limitation, the execution and delivery, recording and/or filing and from time to
time thereafter at such time and in such offices and places as shall be deemed
desirable by Mortgagee, any and all such other and further assignments,
mortgages, security agreements, financing statements, continuation statements,
instruments of further assurance, certificates and other documents as may, in
the opinion of Mortgagee, be necessary or desirable in order to effectuate,
complete, or perfect, or to continue and preserve (a) the obligations of
Mortgagor under this Mortgage, and (b) the lien and security interest created by
this Mortgage upon the Property.
13. Transfers, Etc. Except as expressly permitted in the Credit Agreement,
the Mortgagor herein shall not sell, convey, assign, option, mortgage, encumber,
hypothecate or otherwise dispose of the Property or any portion thereof or
interest therein, whether legal or equitable, either voluntarily or
involuntarily, by any means whatsoever, or create or suffer to exist any lien,
encumbrance, security interest, pledge, restriction, mechanics lien, attachment
or other charge upon the Real Property, Personal Property or Improvements,
including, without limitation, any lease with an option to purchase, bond for
deed, purchase and sale contract coupled with transfer of possession or lease
with a term of more than two (2) years not approved hereunder. This condition
shall continue until all Secured Obligations secured hereby are satisfied, and
permission given or election not to foreclose or accelerate said Secured
Obligations by Mortgagee, its successors or assigns, as to any one such
transfer, shall not constitute a waiver of any rights as to any subsequent such
transfer of title as to which this condition shall fully remain in force and
effect.
14. Events of Default. This Mortgage and the Secured Obligations shall at
the option of the Mortgagee herein become immediately due and payable upon each
of the following (an "Event of Default"):
(a) An Event of Default under the Credit Agreement;
(b) Breach of any covenant contained in Sections 6, 7, 8 or 14
herein.
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(c) Mortgagor fails to duly observe or perform any other term,
covenant, condition or agreement contained in this Mortgage, and the
continuance of such failure for a period of twenty (20) days after written
notice thereof from Mortgagee, except as otherwise provided herein; or
(d) any representation or warranty made in writing by or on behalf
of Mortgagor or any Borrower herein or in connection with any of the
transactions contemplated hereby shall prove to have been false or
incorrect in any material respect on the date as of which made.
15. Remedies. If an Event of Default has occurred which has not been
waived in writing by the Mortgagee and the Required Lenders, Mortgagee may, at
its option, without notice of its election and without demand, do any one or
more of the following, all of which are authorized by Mortgagor:
(a) To the extent not otherwise provided in the Credit Agreement,
declare the Secured Obligations whether evidenced by any instrument or
agreement and whether or not secured hereby, and the underlying agreements
of other parties securing the Secured Obligations, immediately due and
payable.
(b) To the extent not otherwise provided in the Credit Agreement,
cease advancing money or extending credit to or for the benefit of the
Mortgagor under any agreement, whether or not secured hereby without need
for the expiration of any applicable cure period.
(c) Foreclose this Mortgage under any method of foreclosure in
existence at the time or now existing, or under any other applicable law.
The Mortgagee shall have the STATUTORY POWER OF SALE in addition to all
other rights and remedies. Advertising of any foreclosure notice shall be
in any newspaper of state-wide circulation or of general circulation in
the county where the Property is located or as otherwise permitted by law.
Such foreclosure may be against the entire Property or such portions
thereof in such order and at such times as Mortgagee may determine all in
its discretion, and the deferral or delay in foreclosure against any
portion of the Property shall not impair the right of Mortgagee to
subsequently foreclose
(d) To the extent not otherwise provided in the Credit Agreement,
exercise all of the remedies of a secured party under the Uniform
Commercial Code as now in effect in the State of Maine, and such further
remedies as may from time to time hereafter be provided in the State of
Maine for a secured party or creditor. Mortgagor agrees that all rights of
Mortgagee as to Personal Property, Intangible Property and Plans as to the
Land, Improvements and Revenues, and rights and
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interest appurtenant thereto, may be exercised together or separately and
in such order as the Mortgagee may elect. Mortgagor further agrees that in
exercising its power of sale as to the Property constituting personal
property and/or fixtures and rights and interest appurtenant thereto, the
Mortgagee may sell said collateral or any part thereof, either separately
from or together with the said real estate, rights and interests
appurtenant thereto, or any part thereof, all as the Mortgagee may in its
discretion elect. In particular, the Mortgagee may proceed to enforce
rights against, seek the replevin of, and/or sell personal property
collateral prior to or during the pendency of any real estate foreclosure
proceeding, redemption period, or foreclosure sale without waiving said
foreclosure.
(e) Enter upon and take possession of the Property or any part
thereof, either directly or through a receiver, and exclude the Mortgagor,
its agents, managers and servants, and to perform any acts Mortgagee deems
necessary or proper to conserve the security, and to collect and receive
all Revenues, General Intangibles, proceeds and profits thereof, including
those past due as well as those accruing thereafter, and use, manage,
operate and control the Property. Mortgagee or a receiver may also take
possession of, and for these purposes use, any and all Property used by
Mortgagor in the operation, rental or leasing thereof or any part thereof.
The expense (including receiver's fees, counsel fees, costs and agent's
compensation) incurred pursuant to the powers herein contained shall be
secured hereby. Mortgagee shall (after payment of all costs and expenses
incurred) apply such Revenues received by it on the Secured Obligations in
such order as Mortgagee determines; and Mortgagor agrees that exercise of
such rights and disposition of such funds shall not constitute a waiver of
any foreclosure once commenced nor preclude the later commencement of
foreclosure for breach hereof. The right to enter and take possession of
said property, to manage and operate the same, and to collect the income,
rents, issues and profits thereof, whether by a receiver or otherwise,
shall be cumulative to any other right or remedy hereunder or afforded by
law, and may be exercised concurrently therewith or independent thereof.
Mortgagee shall be liable to account only for such income, rents, security
deposits, proceeds and profits actually received by Mortgagee.
(f) Prevent or cure any defaults under the Leases as Mortgagee deems
necessary or desirable in order to preserve the Leases, without awaiting
the expiration of any grace period, including any default specified in a
notice of default from any of the landlords under the Leases;
(g) In the name of the Mortgagor or otherwise perform the
Mortgagor's obligations under the Leases and exercise all rights, options,
powers and privileges of the Mortgagor granted under the Leases without
notice to the Mortgagor and with full power to renew, amend or alter the
Leases or disclaim any subleases;
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(h) Reassign any part or all of the Mortgagor's right, title and
interest in and to the Leases with notice to the Mortgagor, but without
liability on the part of the Mortgagor to cure defaults or to pay damages
relating to the default;
(i) Sell or otherwise dispose of the Property (in its then condition
or after further construction and preparation thereof, utilizing in
connection therewith any of Mortgagor's assets, without charge or
liability therefor), at foreclosure or secured party's sale (which sale
Mortgagee may postpone from time to time to the extent permitted by law),
all as Mortgagee deems advisable, for cash or credit; provided, however,
that Mortgagor shall be credited with the net proceeds of such sale only
when such proceeds are finally collected by Mortgagee and the Mortgagor
shall pay any deficiency on demand. Mortgagee may become the purchaser at
any such sale.
(j) Use or transfer, without charge or liability to Mortgagee
therefore, any of Mortgagor's General Intangibles, Plans, trade names,
service marks, trademarks, licenses, certificates of authority or
advertising materials in advertising for the operation, sale and selling
of the Property.
(k) Mortgagor recognizes that in the event Mortgagor defaults, no
remedy of law will provide adequate relief to Mortgagee, therefore,
Mortgagor agrees that Mortgagee shall be entitled to temporary and
permanent injunctive relief to cure such default in any such case without
the necessity of proving actual damages.
Mortgagor shall pay to Mortgagee, immediately and without demand, all sums
of money advanced by Mortgagee, together with interest on each such advancement
at a rate of interest at the highest interest rate per annum required by the
Credit Agreement secured hereby, and all such sums and interest thereon shall be
secured hereby. Mortgagee in its discretion, after the payment of expenses and
the costs of protection, preservation and sale of the Property, may apply the
net proceeds of the Property to the Secured Obligations. If an Event of Default
shall have occurred which has not been waived in writing by the Mortgagee and
the Required Lenders, Mortgagee, upon application to a court of competent
jurisdiction, shall be entitled as a matter of strict right and without regard
to the asserted value of any security for the Secured Obligations to the
appointment of a receiver to take possession of and to operate the Property and
to collect and apply the Revenues. The receiver shall have all of the rights and
powers permitted under the laws of the State of Maine. Mortgagor will pay to
Mortgagee upon demand, all expenses, including receiver's fees, reasonable
attorneys' fees, costs and agent's compensation, incurred pursuant to such
appointment and all such expenses shall be a portion of the Secured Obligations.
The entering upon and taking possession of and maintaining of control of the
Property by Mortgagee or the receiver and the application of Revenues as
provided herein shall not cure or waive any Event of Default or invalidate any
other right or remedy of Mortgagee hereunder.
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All remedies provided in this Mortgage are distinct and cumulative to any
other right or remedy under this Mortgage, the Notes, the Credit Agreement or
under the other Lender Agreements or afforded by law or equity, and may be
exercised concurrently, independently or successively against Mortgagor or any
Borrower or any other collateral for the Secured Obligations, without waiving or
impairing this Mortgage. All of Mortgagee's rights and remedies are cumulative
and non-exclusive.
16. Expenses. The Mortgagor shall pay to or reimburse the Mortgagee on
demand and as a part of the Secured Obligations secured hereby any and all
reasonable expenses, including, without limitation, reasonable counsel fees and
expenses and/or receiver's expenses, incurred or paid by the Mortgagee in
connection with the preparation, execution, administration, preservation,
collection or enforcement of this Mortgage, the Property or the Secured
Obligations, or such expenses to be paid include without limitation those
incurred in any litigation, contest, dispute, suit or proceeding (whether
instituted by Mortgagee, Mortgagor, any Borrowers or any other party) to
protect, collect, enforce, sell, take possession of or liquidate any of the
Property, to enforce any rights of Mortgagee against Mortgagor, any Borrowers or
against any other person and those expenses incurred by Mortgagee in defending,
settling or satisfying any claim, action or demand asserted by any receiver,
trustee, creditor's committee or debtor-in-possession in any bankruptcy or
reorganization, any assignee or assignee for the benefit of creditors, creditor,
stockholder, or by any other person, whether in connection with the Mortgagor,
any Borrowers, the Secured Obligations or any documents, transaction or
Collateral related thereto, or any alleged theory of preference, fraudulent
conveyance, subordination, usury, ultra vires, invalidity, interference,
control, misrepresentation, conspiracy, or similar theory, or otherwise.
17. Survival. All representations and warranties of Mortgagor, and all
terms, provisions, conditions and agreements to be performed by Mortgagor
contained herein, and in any of the other agreements shall be true and satisfied
at the time of the execution of this Mortgage, and shall survive the closing
hereof and the execution and delivery of this Mortgage.
18. Governing Law. This Mortgage shall be construed in accordance with,
and governed by, the laws of the State of Maine. Wherever possible, each
provision of this Mortgage shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provisions of this Mortgage
shall conflict with, be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Mortgage. In the event that any provision or clause of this Mortgage or
the other Lender Agreements conflicts with applicable law, such conflict shall
not affect other provisions which can be given effect without the conflicting
provision, and to this end, the provisions of this Mortgage are declared to be
severable.
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19. Payments. Mortgagor irrevocably waives the right to direct the
application of any and all payments at any time or times hereafter received by
Mortgagee from Mortgagor, and Mortgagor do hereby irrevocably agree that
Mortgagee shall have the continuing exclusive right to apply and reapply any and
all payments received at any time or times hereafter against the Secured
Obligations hereunder in such manner as Mortgagee may deem advisable.
20. Binding Effect Etc. The covenants and agreements herein contained
shall bind, and the benefits and advantages thereof shall inure to, the
respective heirs, executors, administrators, successors and assigns of the
Mortgagor and Mortgagee. Wherever used, the singular number shall include the
plural, the plural the singular, the use of any gender shall be applicable to
all genders.
21. Notices. Except as otherwise specified in this Mortgage, any and all
notices, demands, elections or requests provided for or permitted to be given
pursuant to this Mortgage (hereinafter in this Section referred to as "Notice")
shall be in writing to the parties at the addresses provided in the introductory
paragraph and shall otherwise be given in accordance with the provisions of the
Credit Agreement.
22. Collateral Agent/Administration. The Lenders have authorized Mortgagee
to act as Agent as attorney in fact for the Lenders in order to represent and
act on behalf of the Lenders in the administration, enforcement, collection, and
foreclosure of this Mortgage and the Lender Agreements, with the specific right
and authority to execute releases, discharges, partial releases, joinders, and
consents hereunder in the name of and on behalf of the Lenders. This power of
attorney and the authority conferred thereby shall remain in effect until
written notice to the contrary is recorded in the Registry in which this
Mortgage is recorded. No person dealing with Mortgagee shall be required to
inquire further as to the scope of said authority until and unless such notice
is recorded.
The relationship between Mortgagee in its capacity as collateral agent to
the Lenders is and shall be that of agent and principal only, and nothing
contained in this Mortgage or any of the other Lender Agreements shall be
construed to constitute a trust for or to establish any confidential or
fiduciary relationship with respect to any Lender or Mortgagor.
23. Waivers. No delay or omission of Mortgagee or of any holder of the
Note to exercise any right, power or remedy accruing upon any Event of Default
shall exhaust or impair any such right, power or remedy or shall be construed to
be a waiver of any such default, or acquiescence therein; and every right, power
and remedy given by this Mortgage to Mortgagee may be exercised from time to
time and as often as may be deemed expedient by Mortgagee. No consent or waiver,
expressed or implied, by Mortgagee to or of any Event of Default shall be deemed
or construed to be a consent or waiver to or of any other Event of Default.
Failure on the part of Mortgagee to complain of any act or failure to act
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which constitutes an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Mortgagee of Mortgagee's rights
hereunder or impair any rights, powers or remedies consequent on any Event of
Default. No act or omission of Mortgagee shall preclude Mortgagee from
exercising any right, power or privilege herein granted or intended to be
granted in the event of any Event of Default then made or of any subsequent
Event of Default; nor, except as otherwise expressly provided in an instrument
or instruments executed by Mortgagee, shall the lien of this Mortgage be altered
thereby. No acceptance of partial payment or performance shall waive, affect or
diminish any right of Mortgagee or Mortgagor's duty of compliance and
performance therewith. Any Secured Obligation which this Mortgage secures is a
separate instrument and may be negotiated, extended or renewed by Mortgagee
without releasing Mortgagor or any Borrower. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Property,
Mortgagee, without notice, is hereby authorized and empowered to deal with any
such vendee or transferee with reference to the Property or the Secured
Obligations or with reference to any of the terms, covenants, conditions or
agreements hereof, as fully and to the same extent as it might deal with the
original parties hereto and without in any way releasing or discharging any
liabilities, obligations or undertakings.
24. Time of the Essence. Time is of the essence with respect to each and
every covenant, agreement and obligation of Mortgagor under this Mortgage, the
Note, the Credit Agreement and any and all other Lender Agreements.
25. Indemnification; Subrogation; Waiver of Offset.
(a) Mortgagor shall indemnify, defend and hold Mortgagee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar
fees which may be made relating to the Property or the Secured
Obligations, and (ii) any and all liability, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses (including
Mortgagee's reasonable attorneys' fees, together with reasonable appellate
counsel fees, if any) of whatever kind or nature which may be asserted
against, imposed on or incurred by Mortgagee in connection with this
Mortgage, the Property, or any part thereof, or the exercise by Mortgagee
of any rights or remedies granted to it under this Mortgage; provided,
however, that nothing herein shall be construed to obligate Mortgagor to
indemnify, defend and hold harmless Mortgagee from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses enacted against, imposed on or incurred by
Mortgagee by reason of Mortgagee's willful misconduct or gross negligence.
(b) If Mortgagee is made a party defendant to any litigation or any
claim is threatened or brought against Mortgagee concerning the Secured
Obligations, this Mortgage, the Property, or any part thereof, or any
interest therein, or the maintenance, operation or occupancy or use
thereof, then Mortgagor shall indemnify,
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defend and hold Mortgagee harmless from and against all liability by
reason of said litigation or claims, including reasonable attorneys' fees
(together with reasonable appellate counsel fees, if any) and expenses
incurred by Mortgagee in any such litigation or claim, whether or not any
such litigation or claim is prosecuted to judgment excepting claims
arising from the willful misconduct or gross negligence of Mortgagee. If
Mortgagee commences an action against Mortgagor to enforce any of the
terms hereof or to prosecute any breach by Mortgagor of any of the terms
hereof or to recover any sum secured hereby, Mortgagor shall pay to
Mortgagee its reasonable attorneys' fees (together with reasonable
appellate counsel, fees, if any) and expenses. The right to such
attorneys' fees (together with reasonable appellate counsel fees, if any)
and expenses shall be deemed to have accrued on the commencement of such
action, and shall be enforceable whether or not such action is prosecuted
to judgment. If Mortgagor breaches any term of this Mortgage, Mortgagee
may engage the services of an attorney or attorneys to protect its rights
hereunder, and in the event of such engagement following any breach by
Mortgagor, Mortgagor shall pay Mortgagee reasonable attorneys' fees
(together with reasonable appellate counsel fees, if any) and expenses
incurred by Mortgagee, whether or not an action is actually commenced
against Mortgagor by reason of such breach. All references to "attorneys"
in this Subsection and elsewhere in this Mortgage shall include without
limitation any attorney or law firm engaged by Mortgagee and Mortgagee's
in-house counsel, and all references to "fees and expenses" in this
Subsection and elsewhere in this Mortgage shall include without limitation
any fees of such attorney or law firm and any allocation charges and
allocation costs of Mortgagee's in-house counsel.
(c) All sums payable by Mortgagor hereunder shall be paid without
notice (except as may otherwise be provided herein or in the Credit
Agreement), demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Mortgagor hereunder shall in no way be
released, discharged or otherwise affected by reason of: (i) any damage to
or destruction of or any condemnation or similar taking of the Property or
any part thereof; (ii) any restriction or prevention of or interference
with any use of the Property or any part thereof; (iii) any title defect
or encumbrance or any eviction from the Land or the Improvements on the
Land or any part thereof by title paramount or otherwise; (iv) any
bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation, or other like proceeding relating to Mortgagee,
or any action taken with respect to this Mortgage by any trustee or
receiver of Mortgagee, or by any court, in such proceeding; (v) any claim
which Mortgagor has, or might have, against Mortgagee; (vi) any default or
failure on the part of Mortgagee to perform or comply with any of the
terms hereof or of any other agreement with Mortgagor; or (vii) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Mortgagor shall have notice or
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knowledge of any of the foregoing. Mortgagor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution, or reduction of any sum secured hereby and payable
by Mortgagor.
26. Future Advances by Mortgagee. Mortgagee may from time to time, at its
sole option, make further advances to Mortgagor and/or any other Borrower, or
any one or more of them to be secured hereby; provided, however, that the total
principal secured hereby and remaining unpaid, including any such advances,
shall not at any time exceed the sum of ONE HUNDRED MILLION DOLLARS
($100,000,000.00). Mortgagor and/or such other Borrower shall execute and
deliver to Mortgagee a note or other agreement evidencing each and every such
further advance which Mortgagee may make, which note or agreement shall contain
such terms and conditions as Mortgagee may require. Mortgagor and/or such other
Borrower shall pay when due all such further advances with interest and other
charges thereon, as applicable, and the same, and each note and agreement
evidencing the same, shall be fully secured hereby. All provisions of this
Mortgage shall apply to each such further advance as well as to any other
indebtedness secured hereby. Nothing herein contained, however, shall limit the
amount secured by this Mortgage if such amount is increased by advances make by
Mortgagee to protect or preserve the Property as provided elsewhere herein. Any
future advances made hereunder may be made to Mortgagor or to any successor to
Mortgagor in ownership of the Property and/or to any other Borrower.
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IN WITNESS WHEREOF, the said authorized officer of Sugarloaf Mountain
Corporation has signed this Mortgage as of the date first set forth above.
SIGNED, SEALED & DELIVERED
in the presence of: SUGARLOAF MOUNTAIN
CORPORATION
/s/ [Illegible] By: /s/ Thomas M. Richardson
- ---------------------------- -------------------------------
Witness Name: Thomas M. Richardson
Title:
STATE OF MAINE
Cumberland, ss August 27, 1996
Then personally appeared the within named Thomas M. Richardson, as
Treasurer of Sugarloaf Mountain Corporation, and acknowledged the above
instrument to be his free act and deed and the free act and deed of said
corporation.
Before me,
/s/ Foster A. Stewart, Jr.
-------------------------------
Maine Attorney
Print Name Foster A. Stewart, Jr.
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EXHIBIT 10.86
COLLATERAL ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (hereinafter referred to as this
"Assignment"), is made and entered into by Sugarloaf Mountain Corporation, a
Maine corporation with a mailing address of c/o American Skiing Company, P.O.
Box 450, Bethel, Maine 04217 (hereinafter referred to as "Borrower"), to Fleet
National Bank, as Agent for itself and the other Lenders party to the Credit
Agreement (as defined herein) with a mailing address of One Federal Street,
Boston, MA 02211 (hereinafter referred to as "Assignee").
WITNESSETH:
THAT FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable considerations, the receipt and sufficiency
whereof are hereby acknowledged, and in order to secure the Obligations as
hereinafter set forth, Borrower does hereby grant, transfer and assign to
Assignee, its successors, successors-in-title and assigns, all of Borrower's
right, title and interest in, to and under any and
A. All leases, tenancies, agreements or licenses, written or oral, now
existing or hereafter entered into by Borrower as "landlord", "lessor" or
"licensor", for the use or occupancy of all or any portion of the Borrower's
property (hereinafter referred to as the "Property") located on or about
Franklin County, Maine, including, without limitation, the premises more
particularly described in Exhibit A attached hereto and by this reference made a
part hereof, including any and all extensions, renewals and modifications
thereof and guaranties of the performance or obligations of any tenants, lessees
or licensees thereunder (said leases, tenancies, agreements and licenses are
hereinafter referred to collectively as the "Leases," and said tenants, lessees
and licensees are hereinafter referred to collectively as "Tenants" or
individually as a "Tenant" as the context requires), which Leases include those
certain leases more particularly described in Exhibit B attached hereto and by
this reference made a part hereof, together with all of Borrower's right, title
and interest in and to all payments, rents, issues and profits from the Leases
and from the Property, and all fees, charges, accounts or other payments for the
use or occupancy of rooms and other public facilities in hotels, motels or other
lodging properties located on the Property, including without limitation, all
income, fees, charges, revenues, receipts, fees, payments, rentals, rights,
contracts, leases, tenancies, rents, agreements, licenses, general intangibles,
cash collateral, accounts and accounts receivable, or other payments, whether
written or oral, now existing or hereafter arising or entered into by Borrower
as "operator", "landlord", "lessor" or "licensor" or otherwise, arising out of
or relating in any way to Borrower's hotel, motel, lodging, restaurant, and/or
conference center business or otherwise arising out of or relating to the
operation, use, lease, and/or occupancy of all or any portion of the Property,
and all room, restaurant, banquet, recreational, parking and other facilities
located on the Property.
B. All rights, privileges and benefits now existing or hereafter arising
under the Leases, including, without limitation, all rights to exercise options
to extend or renew the
<PAGE>
Leases or to purchase the Property and appurtenances thereto, and all rights to
insurance proceeds, eminent domain awards or payments in lieu thereof; and
C. All rights of the Borrower in and to the fixtures, improvements,
alterations, or additions now or hereafter erected on the Property; and
D. All subleases of the Property or any portion thereof, and all monies,
rents, incomes, cash collateral as that term is defined in the U.S. Bankruptcy
Code (Title 11 of United States Code) and profits from the Property or subleases
thereof and rights derived therefrom all whether now existing or hereafter
arising, provided that the Borrower shall not sublease the Premises or any
portion thereof without Assignee's prior written consent except in the ordinary
course of business.
TO HAVE AND TO HOLD unto Assignee, its successors and assigns forever,
subject to and upon the terms and conditions set forth herein.
This Assignment is made for the purpose of securing:
(a) The full and prompt payment and performance when due, whether by
acceleration or otherwise, with such interest, commitment fees, prepayment fees
and other charges may accrue thereon, either before or after maturity thereof,
by Borrower, its successors or assigns, and/or American Skiing Company and the
other Borrowers named in the Credit Agreement and their respective successors or
assigns (together with the Borrower, are collectively referred to herein as the
"Borrowers") of that certain Credit Agreement dated as of June 28, 1996,
together with any and all renewals, amendments, modifications, consolidations
and extensions thereof (the "Credit Agreement"), TOGETHER WITH accompanying
Revolving Credit Notes and Swing Line Notes dated as of June 28, 1996 in the
principal face amount of up to SIXTY FIVE MILLION DOLLARS ($65,000,000.00), all
together with any amendments renewals, modifications, consolidations and
extensions of the foregoing (all collectively the "Notes");
(b) Any and all future advances made by Assignee to or for the benefit of
the Borrower, Borrowers or any one or more of them, whether jointly or severally
liable, direct or indirect, up to a maximum principal amount outstanding from
time to time (exclusive of costs and amounts advanced to protect the security)
of up to ONE HUNDRED MILLION DOLLARS ($100,000,000.00) together with interest,
fees, costs, prepayment fees, and other amounts now existing or hereafter
arising:
(c) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations set forth in this Assignment (the
"Assignment") the mortgage granted to the Assignee encumbering the Property (the
"Mortgage") or in any other Lender Agreement (as defined in the Credit
Agreement);
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(d) Any and all additional advances made to preserve, enforce and protect
the Property, the Leases, the security interest created hereby on the Property,
or this Agreement and the Lender Agreements, including, without limitation,
taxes, assessments or insurance premiums or for performance of any of the
Borrowers obligations under the Lender Agreements or for any other purpose
(whether or not the original Borrower remains the owner of the Property at the
time of such advances); and
(e) Any and all other indebtedness, however incurred, which may now or
hereafter be due and owing from Borrowers or any one or more of them, whether
joint or several, to Lenders, now existing or hereafter coming into existence,
however and whenever incurred or evidenced, whether expressed or implied, direct
or indirect, absolute or contingent, or due or to become due, and all renewals,
modifications, consolidations and extensions thereof.
(all collectively the "Obligations")
As further security for the Obligations and the full and prompt payment
and performance of any and all obligations of Borrower to Assignee under the
Lender Agreements, Borrower hereby assigns to Assignee any awards or payments
which may be made in respect of Borrower's interest in any of the Leases in any
bankruptcy, insolvency or reorganization proceedings in any state or federal
court. Borrower hereby appoints Assignee as its attorney-in-fact to appear in
any such proceeding and/or to collect any such award or payment.
ARTICLE I - WARRANTIES AND COVENANTS
1.01 Representations and Warranties of Borrower. Borrower hereby represents and
warrants as follows:
(a) Borrower is the sole and absolute owner of the entire landlord's
or lessor's interest in the leases and said rents, issues and profits;
(b) Borrower has made no prior assignment of any of the Leases or
with respect to any of said rents, issues or profits which has not been
terminated;
(c) Borrower has neither done any act nor omitted to do any act
which might prevent Assignee from, or limit Assignee in, acting under any of the
provisions of this Assignment;
(d) Neither the execution and delivery of this Assignment or any of
the Leases, the performance of each and every covenant of Borrower under this
Assignment and the Leases, nor the meeting of each and every condition contained
in this Assignment, conflicts with, or constitutes a breach or default under,
any agreement, indenture or other
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instrument to which Borrower is a party, or any law, ordinance, administrative
regulation or court decree which is applicable to Borrower;
(e) No action has been brought or, so far as is known to Borrower,
is threatened, which would interfere in any way with the right of Borrower to
execute this Assignment and perform all of Borrower's obligations contained in
this Assignment and in the Leases;
(f) Correct and complete copies of all material Leases and all
material amendments, exhibits, addenda and schedules thereto have been
heretofore delivered by Borrower to Assignee;
(g) The Leases existing as of the date of this Assignment were duly
executed and delivered, pursuant to authority legally adequate therefor, are now
in full force and effect, and are the legal, valid and binding obligations of
the parties thereto, enforceable in accordance with their terms; and
(h) No material default exists on the part of Borrower in the
fulfillment, performance or observance of any of the terms, conditions or
covenants of landlord or lessor contained in any of the Leases, and, to the best
of Borrower's knowledge, no material default exists on the part of any Tenant in
the fulfillment, performance or observance of any of the terms, conditions or
covenants of tenant or lessee contained in any of the Leases.
1.02 Covenants of Borrower. Borrower hereby covenants and agrees as
follows:
(a) Borrower shall (i) fulfill, perform and observe each and every
material term, condition and covenant of landlord or lessor contained in each of
the Leases; (ii) give prompt notice to Assignee of any claim of default under
any of the Leases, whether given by the Tenant to Borrower, or given by Borrower
to the Tenant, together with a complete copy of any such notice; (iii) at no
cost or expense to Assignee, enforce, short of termination, the performance and
observance of each and every material term, condition and covenant of each of
the Leases to be performed or observed by the Tenant thereunder; and (iv) appear
in and defend any action arising out of, or in any manner connected with, any of
the Leases, or the obligations or liabilities of Borrower as the landlord or
lessor thereunder, or of the Tenant or any guarantor thereunder;
(b) Borrower shall not, without the prior written consent of
Assignee, (i) permit the prepayment of any rents under any of the Leases for
more than one (1) month prior to the accrual thereof; or (ii) assign its
interest in, to or under any of the Leases or the rents, issues and profits from
any of the Leases or from the Property to any person or entity other than
Assignee;
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(c) Borrower shall not, without the prior written consent of
Assignee, except where doing so would not result in a Material Adverse Effect
(as defined in the Credit Agreement) (i) enter into any new Lease of all or any
part of the Property; (ii) materially modify any of the Leases; (iii) terminate
the term or accept the surrender of any of the Leases; (iv) waive or release the
Tenant from the performance or observation by the Tenant of any obligation or
condition of any of the Leases; (v) give any consent to any assignment or
sublease by the Tenant under any of the Leases; (vi) agree to subordinate any of
the Leases to any mortgage or other encumbrance; or (viii) modify the terms of
any guaranty of any of the Leases, or terminate any such guaranty;
(d) Borrower does hereby authorize and empower Assignee to collect
all rents, issues and profits arising or accruing under the Leases or from the
Property as they become due, and does hereby irrevocably authorize and direct,
each and every present and future Tenant of the whole or any part of the
Property, upon receipt of written notice from Assignee, to pay all rents, issues
and profits thereafter arising or accruing under the Leases or from the Property
to Assignee and to continue to do so until otherwise notified by Assignee, and
Borrower agrees that each and every Tenant shall have the right to rely upon
such notice by Assignee without any obligation or right to inquire as to whether
any Event of Default exists and notwithstanding any notice or claim of Borrower
to the contrary, and that Borrower shall have no right or claim against any
Tenant for any rents paid by such Tenant to Assignee following receipt of such
notice.
(e) Borrower does hereby agree that Assignee shall have the right to
the appointment of a receiver to collect all rents, issues and profits and to
carry out any other actions which Assignee has the right to carry out under the
terms of this Assignment.
1.03 Covenants of Assignee. Assignee hereby covenants and agrees with
Borrower as follows:
(a) Although this Assignment constitutes a present, current and
absolute assignment of all Leases and all rents, issues and profits from the
Property, so long as no Event of Default has occurred which has not been waived
in writing by the Assignee and the Required Lenders (as defined in the Credit
Agreement), Assignee shall not demand that such rents, issues and profits be
paid directly to Assignee, and Borrower shall have the right to collect, but not
more than one (1) month prior to accrual, all such rents, issues and profits
from the Property (including, but not by way of limitation, all rents payable
under the Leases), provided, however, that Borrower shall collect and receive
all such rents, issues and profits from the Property as trustee for the benefit
of Assignee, and shall apply such rents, issues and profits so collected to the
Obligations, to the extent then due, with the balance, so long as no Event of
Default has occurred which has not been waived in writing by the Assignee and
the Required Lenders, to the account of Borrower; and
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(b) Upon the payment in full of the Obligations, as evidenced by the
recording or filing of an instrument of satisfaction or full release of the
Mortgage without the recording of another mortgage in favor of Assignee
affecting the Property, this Assignment shall be terminated and released of
record by Assignee and shall thereupon be of no further force or effect.
ARTICLE II - DEFAULT
2.01 Event of Default. The term "Event of Default," wherever used in this
Assignment, shall mean any one or more of the following conditions or events:
(a) An Event of Default under the Credit Agreement; or
(b) Failure by Borrower to observe, perform or discharge any
obligation, covenant, condition or agreement contained in paragraph 1.02(b) or
(c) of this Assignment; or
(c) Failure by Borrower to observe, perform or discharge any
obligation, covenant, condition or agreement of this Assignment and the
continuance of such failure for a period of fifteen (15) days after written
notice thereof from Assignee; or
(d) Any representation or warranty of Borrower in this Assignment
shall prove to have been false or incorrect in any material respect upon the
date when made.
2.02 Remedies. Upon the occurrence of any Event of Default which has not
been waived in writing by the Assignee and the Required Lenders, Assignee may at
its option, with or without notice or demand of any kind (except as may be
provided herein or in any of the Lender Agreements), and without waiving such
Event of Default, exercise any or all of the following rights and remedies:
(a) Either with or without entry or taking possession of the
Property, give or require Borrower to give notice to any or all Tenants under
the Leases authorizing and directing such Tenants to pay all rents, issues and
profits and any other sums due under their Leases directly to Assignee, and
collect and receive all rents, issues and profits and other sums due under the
Leases with respect to which such notice is given;
(b) Either with or without entry or taking possession of the
Property, perform any and all obligations of Borrower under any or all of the
Leases or this Assignment and exercise any and all rights of Borrower herein or
therein as fully as Borrower itself could do, including, without limiting the
generality of the foregoing, enforcing, modifying, extending or terminating any
or all of the Leases, collecting, modifying, compromising, waiving or increasing
any or all of the rents payable thereunder, and obtaining new Tenants and
entering into new Leases on the Property on any terms and
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conditions deemed desirable by Assignee, and, to the extent Assignee shall incur
any costs in connection with the performance of any such obligations of
Borrower, including costs of litigation, then all such costs shall become a part
of the Obligations, shall bear interest from the incurring thereof at the
default interest rate specified in the Notes, and shall be due and payable on
demand;
(c) Either with or without entry or taking possession of the
Property, in Borrower's or Assignee's name, institute any legal or equitable
action which Assignee in its sole discretion deems desirable to collect and
receive any or all of the rents, issues and profits assigned herein or to evict
or remove any Tenants;
(d) Enter upon, take possession of, and use and operate all or any
portion of the Property which Assignee in its sole discretion deems desirable to
effectuate any or all of the foregoing remedies, with full power to make
alterations, renovations, repairs or replacements thereto.
Assignee shall have full right to exercise any or all of the foregoing
remedies and rights without regard to the adequacy of security for any or all of
the Obligations, and with or without the commencement of any legal or equitable
action or the appointment of any receiver or trustee.
2.03 Application of Rents. All rents, issues and profits and any other
sums due under the Leases and with respect to the Property which are collected
by Assignee shall be applied by Assignee in such order as Assignee in its sole
discretion may elect against: (i) all actual costs and expenses, including
reasonable attorneys' fees, incurred in connection with the operation of the
Property, the performance of Borrower's obligations under the Leases or the
collection of the rents thereunder; (ii) all actual costs and expenses,
including reasonable attorneys' fees, incurred in the collection of any of all
of the Obligations, including all costs, expenses and attorneys' fees incurred
in seeking to realize on or to protect or preserve Assignees interest in any
other collateral securing any or all of the Obligations; (iii) any or all unpaid
principal of and interest on the Obligations; and (iv) upon payment in full of
the Obligations, the balance, if any, shall be paid to the Assignor.
2.04 No Liability of Assignee. Assignee shall not be obligated to perform
or discharge, nor does Assignee hereby undertake to perform or discharge, any
obligation, duty or liability of Borrower under any of the Leases or under or by
reason of this Assignment, except those arising from and after Assignee takes
possession of the Property after an Event of Default. Prior to Assignee taking
possession of the Property after an Event of Default, this Assignment shall not
operate to place upon Assignee responsibility for the control, care, management
or repair of the Property, nor for the carrying out of any of the terms and
conditions of any of the Leases, nor shall it operate to make Assignee
responsible or liable for any waste committed on the Property, for any dangerous
or defective condition of the Property, or for any negligence in the management,
upkeep, repair or control of the Property
7
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resulting in loss or injury or death to any person. Assignee shall not be liable
for any loss sustained by Borrower resulting from Assignee's failure to let the
Property after taking possession of the Property after an Event of Default,
unless such loss is caused by the willful misconduct or gross negligence of
Assignee.
2.05 Indemnification. Borrower shall and does hereby agree to indemnify
and to hold Lenders harmless of and from any and all claims, demands, liability,
loss or damage (including all costs, expenses, and reasonable attorneys' fees
incurred in the defense thereof) asserted against, imposed on or incurred by
Lenders in connection with or as a result of this Assignment or the exercise of
any rights or remedies under this Assignment or under any of the Leases or by
reason of any alleged obligations or undertakings of Lenders to perform or
discharge any of the terms, covenants or agreements contained in any of the
Leases; provided, however, that nothing herein shall be construed to obligate
Borrower to indemnify and hold Lenders harmless from and against any and all
claims, demands, liability, loss or damage enacted against, imposed on or
incurred by Lenders by reason of Lender's willful misconduct or gross
negligence. Should Lenders incur any such liability, loss or damage, or in the
defense of any such claims or demands, for which it is to be indemnified by
Borrower as aforesaid, the amount thereof shall be added to the Obligations,
shall bear interest at the default rate specified in the Note from the date
incurred until paid, shall be secured by this Assignment, the Mortgage and the
other Lender Agreements, and shall be payable immediately upon demand.
ARTICLE III - GENERAL PROVISIONS
3.01 Successors and Assigns. This Assignment shall inure to the benefit of
and be binding upon Borrower and Assignee and their respective heirs, executors,
legal representatives, successors and assigns (but in the case of assigns of
Borrower, only if and to the extent that Assignee has consented in writing to
Borrower's assignment of its rights or obligations hereunder to such assigns).
Whenever a reference is made in this Assignment to "Borrower" or "Assignee",
such reference shall be deemed to include a reference to the heirs, executors,
legal representatives, successors and assigns of Borrower or Assignee.
3.02 Assignee's Rights of Assignment; Rights of Assignees. Assignee may
assign to any subsequent holder of the Note or the Mortgage, or to any person
acquiring title to the Property, all of Assignee's right, title and interest in
any of the Leases and rents, issues and profits from the Property. No such
assignee shall have any liability for any obligation which accrued under any of
the Leases prior to the assignment to such assignee nor shall such assignee have
any obligation to account to Borrower for any rental payments which accrued
prior to such assignment. After Borrower's right, title and interest in the
Property has been foreclosed or otherwise terminated, no assignee of Borrower's
interest in the Leases shall be liable to account to Borrower for any rents,
issues or profits thereafter accruing.
8
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3.03 Terminology. All personal pronouns used in this Assignment, whether
used in the masculine, feminine or neuter gender, shall include all other
genders, and the singular shall include the plural, and vice versa. Titles of
Articles are for convenience only and neither limit nor amplify the provisions
of this Assignment.
3.04 Severability. If any provision of this Assignment or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Assignment and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
3.05 Applicable Law. This Assignment shall be interpreted, construed and
enforced according to the laws of the State of Maine.
3.06 No Third Party Beneficiaries. This Assignment is made solely for the
benefit of Assignee and its assigns. No Tenant under any of the Leases nor any
other person shall have standing to bring any action against Assignee as the
result of this Assignment, or to assume that Assignee will exercise any remedies
provided herein, and no person other than Assignee shall under any circumstances
be deemed to be a beneficiary of any provision of this Assignment.
3.07 No Oral Modifications. Neither this Assignment nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
3.08 Cumulative Remedies. The remedies herein provided shall be in
addition to and not in substitution for the rights and remedies vested in
Assignee in any of the Lender Agreements or in law or equity, all of which
rights and remedies are specifically reserved by Assignee. The remedies herein
provided or otherwise available to Assignee shall be cumulative and may be
exercised concurrently. The failure to exercise any of the remedies herein
provided shall not constitute a waiver thereof, nor shall use of any of the
remedies herein provided prevent the subsequent or concurrent resort to any
other remedy or remedies. It is intended that this clause shall be broadly
construed so that all remedies herein provided or otherwise available to
Assignee shall continue and be each and all available to Assignee until the
Obligations shall have been paid in full.
3.09 Counterparts. This Assignment may be executed in any number of
counterparts all of which taken together shall constitute one and the same
instrument, and any of the parties or signatories hereto may execute this
Assignment by signing any such counterpart.
3.10 Further Assurance. At any time and from time to time, upon request by
Assignee, Borrower will make, execute and deliver, or cause to be made, executed
and
9
<PAGE>
delivered, to Assignee and, where appropriate, cause to be recorded and/or filed
and from time to time thereafter to be re-recorded and/or refiled at such time
and in such offices and places as shall be deemed desirable by Assignee, any and
all such other and further assignments, deeds to secure debt, mortgages, deeds
of trust, security agreements, financing statements, continuation statements,
instruments of further assurance, certificates and other documents as may, in
the opinion of Assignee, be necessary or desirable in order to effectuate,
complete, or perfect, or to continue and preserve (a) the obligations of
Borrower under this Assignment and (b) the security interest created by this
Assignment as a first and prior security interest upon the Leases and the rents,
issues and profits from the Property. Upon any failure by Borrower so to do,
Assignee may make, execute, record, file, re-record and/or refile any and all
such assignments, deeds to secure debt, mortgages, deeds of trust, security
agreements, instruments, certificates, and documents for and in the name of
Borrower, and Borrower hereby irrevocably appoints Assignee the agent and
attorney-in-fact of Borrower so to do.
3.11 Notices. Any and all notices, elections, demands or requests provided
for or permitted to be given pursuant to this Assignment (hereinafter in this
paragraph 3.12 referred to as "Notice") shall be given in accordance with the
provisions of the Credit Agreement.
3.12 Modifications, Etc. Borrower hereby consents and agrees that Assignee
may at any time and from time to time, without notice to or further consent from
Borrower, either with or without consideration, surrender any property or other
security of any kind or nature whatsoever held by it or by any person, firm or
corporation on its behalf or for its account, securing the Obligations;
substitute for any collateral so held by it, other collateral of like kind, or
of any kind; agree to modification of the terms of the Notes or the Lender
Agreements; extend or renew the Notes or any of the Lender Agreements for any
period; grant releases, compromises and indulgences with respect to the Notes or
the Lender Agreements to any persons or entities now or hereafter liable
thereunder or hereunder; release any guarantor or endorser of the Notes, the
Mortgage, the Credit Agreement, or any other Lender Agreements; or take or fail
to take any action of any type whatsoever; and no such action which Assignee
shall take or fail to take in connection with the Lender Agreements, or any of
them, or any security for the payment of the Obligations or for the performance
of any obligations or undertakings of Borrower, nor any course of dealing with
Borrower or any other person, shall release Borrower's obligations hereunder,
affect this Assignment in any way or afford Borrower any recourse against
Assignee. The provisions of this Assignment shall extend and be applicable to
all renewals, amendments, extensions, consolidations and modifications of the
Lender Agreements and the Leases, and any and all references herein to the
Lender Agreements or the Leases shall be deemed to include any such renewals,
amendments, extensions, consolidations or modifications thereof.
3.13 Collateral Agent/Administration. The Lenders have authorized Assignee
to act as Agent as attorney in fact for the Lenders in order to represent and
act on behalf of the Lenders in the administration, enforcement, collection, and
foreclosure of this Assignment
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and the Lender Agreements, with the specific right and authority to execute
releases, discharges, partial releases, joinders, and consents hereunder in the
name of and on behalf of the Lender. This power of attorney and the authority
conferred thereby shall remain in effect until written notice to the contrary is
recorded in the Registry in which this Assignment is recorded. No person dealing
with Assignee shall be required to inquire further as to the scope of said
authority until and unless such notice is recorded.
The relationship between Assignee in its capacity as collateral agent to
the Lenders is and shall be that of agent and principal only, and nothing
contained in this Assignment or any of the other Lender Agreements shall be
construed to constitute a trust for or to establish any confidential or
fiduciary relationship with respect to any Lender or Borrower.
[Remainder of Page Intentionally Left Blank]
11
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Collateral Assignment under
seal, as of August 27, 1996.
SUGARLOAF MOUNTAIN CORPORATION
/s/ [Illegible] By: /s/ Thomas M. Richardson
- ---------------------------- -------------------------------
Witness Name: Thomas M. Richardson
Title: Treasurer
STATE OF MAINE
Cumberland, ss August 27, 1996
Personally appeared the within named Thomas M. Richardson, as Treasurer of
Sugarloaf Mountain Corporation, and acknowledged the above instrument to be his
free act and deed and the free act and deed of said Corporation.
Before me,
/s/ Foster A. Stewart, Jr.
-------------------------------
Maine Attorney
Print Name: Foster A. Stewart, Jr.
12
<PAGE>
EXHIBIT 10.87
HAZARDOUS MATERIALS INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is entered into as of August 30, 1996 by
and among AMERICAN SKIING COMPANY, a Maine corporation ("American Ski"), SUNDAY
RIVER SKIWAY CORPORATION, a Maine corporation ("SRSC"), SUNDAY RIVER LTD., a
Maine corporation ("SRL"), PERFECT TURN, INC., a Maine corporation ("PTI"),
SUNDAY RIVER TRANSPORTATION INC., a Maine corporation ("SRT"), LBO HOLDING,
INC., a Maine corporation ("LBOH"), CRANMORE, INC., a Maine corporation
("Cranmore"), SUGARBUSH RESORT HOLDINGS INC., a Vermont corporation
("Sugarbush"), SUGARBUSH LEASING COMPANY, a Vermont corporation ("SLC"),
SUGARBUSH RESTAURANTS, INC., a Vermont corporation ("SRI"), S-K-I LTD., a
Delaware corporation ("S-K-I"), KILLINGTON, LTD., a Vermont corporation, MOUNT
SNOW LTD., a Vermont corporation, WATERVILLE VALLEY SKI AREA LTD., a New
Hampshire corporation ("Waterville Valley"), PICO SKI AREA MANAGEMENT COMPANY, a
Vermont corporation, RESORT SOFTWARE SERVICES, INC., a Vermont corporation,
KILLINGTON RESTAURANTS, INC., a Vermont corporation, RESORTS TECHNOLOGIES, INC.,
a Vermont corporation, DOVER RESTAURANTS, INC., a Vermont corporation, and
DEERFIELD OPERATING COMPANY, a Vermont corporation, SUGARLOAF MOUNTAIN
CORPORATION, a Maine corporation, SUGARTECH, a Maine corporation, MOUNTAINSIDE,
a Maine corporation and MOUNTAIN WASTEWATER TREATMENT, INC., a Vermont
corporation (each a "Borrower" and collectively, the "Borrowers"), and FLEET
NATIONAL BANK, a national banking association, as Agent for the lenders from
time to time party to the Credit Agreement referred to below (the "Agent").
Recitals
Pursuant to that certain Credit Agreement dated as of June 28, 1996 (as
amended, modified or supplemented, the "Credit Agreement") among the Borrowers,
the Lenders from time to time party thereto (the "Lenders") and the Agent, the
Borrowers, jointly and severally, have arranged for a $65,000,000 reducing
revolving credit facility (the "Credit Facility") financed by the Lenders. As a
material inducement to Lenders' financing the Credit Facility, the Borrowers
have covenanted to provide the indemnities described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE 1. DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
"Environment" means soil, surface waters, groundwaters, land, stream
sediments,
<PAGE>
surface or subsurface strata, ambient air, and any environmental medium.
"Environmental Law" means any judgment, decree, order, common law rule,
statute, act, law, code, ordinance, permit, license, rule or regulation
pertaining to environmental matters, or any federal, state, county or local
statute, regulation, code, ordinance, order or decree relating to public health,
welfare, the environment, or to the storage, handling, treatment,
transportation, use or generation of hazardous materials in or at the workplace,
or to worker health or safety, whether now existing or hereafter enacted.
"Hazardous Material" means any pollutant, contaminant, toxic substance,
chemical substance or mixture, hazardous waste, hazardous material, or hazardous
substance, or any oil, petroleum, or petroleum product, as defined in or
pursuant to the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, the Superfund Amendment and Reauthorization Act, as amended, the
Federal Clean Water Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Toxic Substances Control Act, as amended, any regulations
promulgated under these Acts, or any other Environmental Law.
"Indemnitees" means Lenders, Agent, and Lenders' and Agent's respective
parents, subsidiaries, affiliates, shareholders, directors, officers, employees
and agents, and the successors and assigns of any of them.
"Permit" means any permit, license, approval, consent, or authorization
issued by a federal, state, or local governmental entity under any Environmental
Law.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping of any Hazardous Material into the Environment, or the uncontained
presence of any Hazardous Material in the Environment.
"Threat of Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the Environment which may
result from such Release.
ARTICLE 2. BORROWERS' INDEMNITIES
Section 2.1. The Borrowers, jointly and severally, agree to
indemnify and hold harmless Indemnitees against and in respect of any and all
damages, losses, liabilities, expenses, costs, claims, actions, suits,
proceedings, assessments, orders, judgments, fines, and penalties (including,
without limitation, reasonable legal, accounting, consulting, engineering, and
other expenses), which may be incurred by any of the Indemnitees, or imposed
upon or asserted against any of the Indemnitees by any other party or parties
(including, without limitation, a governmental entity), arising out of, in
connection with, or
2
<PAGE>
relating to the subject matter of: (a) conditions, circumstances, or occurrences
which constitute or result in a breach of any of the representations,
warranties, and obligations set forth in Section 5.17 of the Credit Agreement or
relating to any matter or thing covered by any such representation, warranty, or
obligation; (b) any actual or alleged violation of an Environmental Law
occurring at any time with respect to any property owned or operated by any
Borrower, formerly owned or operated by any Borrower or subsequently owned or
operated by any Borrower (collectively the "Sites") or any facility or
improvement or any operation or activity thereon or any other property owned or
operated by any Borrower; (c) the actual or alleged presence of any Hazardous
Material on, in, under, adjacent to, emanating from, or affecting the Sites or
any other property now, subsequently or formerly owned or operated by any
Borrower; or (d) any liability that may be incurred as a result of any
Borrower's, or of a predecessor of any Borrower's, generation of Hazardous
Materials. Any such damage, loss, liability, expense, cost, claim, action, suit,
proceeding, assessment, order, judgment, fine, or penalty is hereinafter
referred to as an "Environmental Liability"; provided, however, that the
Borrowers shall not be obligated to indemnify or hold harmless any Indemnitee
for any matter to the extent that the Indemnitee's liability for the same is due
to the Indemnitee's gross negligence or willful misconduct.
Section 2.2. The Borrowers shall be given prompt written notice
after any Environmental Liability, with respect to which indemnification is to
be claimed hereunder, comes to the attention of Lender. Notwithstanding the
prior sentence, the Borrowers shall not be relieved of their obligations under
this agreement if the Agent's or a Lender's failure to notify Borrowers of an
Environmental Liability does not prejudice the Borrowers' rights or materially
increase their liabilities and obligations hereunder.
ARTICLE 3. MISCELLANEOUS
Section 3.1.Notices. All notices and other communications made or required
to be given pursuant to this Agreement shall be in writing and shall be mailed
by United States mail, postage prepaid, or sent by hand, by telecopy or by
nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at One Federal Street, Boston, MA, 02211
Telecopier No. (617) 346-0595, Attention: Mr. David B. Henderson, Vice
President, with a copy to: Goodwin, Procter & Hoar LLP, Exchange Place, Boston,
MA 02109, Telecopier No. 617-523-1231, Attention: Edward Matson Sibble, Jr.,
P.C. or at such other address(es) or to the attention of such other Person(s) as
the Agent shall from time to time designate in writing to the Borrowers and the
Lenders.
(b) If to the Borrowers, c/o American Skiing Company, P.O. Box 450,
Bethel, ME 04217, or for overnight delivery service, Sunday River Road, Newry,
ME, Telecopier No. 207-824-0192, Attention: Leslie B. Otten/Thomas M.
Richardson/Jolan Ippolito, or at such other address(es) or to the attention of
such other Person(s) as the
3
<PAGE>
Borrowers shall from time to time designate in writing to the Agent and the
Lenders.
(c) If to any Lender, at the address(es) and to the attention of the
Person(s) specified in the Credit Agreement or in an Assignment and Acceptance
Agreement executed by a Successor Lender, or at such other address(es) and to
the attention of such other Person(s) as any Lender shall from time to time
designate in writing to the Agent and the Borrowers.
Any notice so addressed and mailed by registered or certified mail shall
be deemed to have been given when mailed. Any notice so addressed and sent by
hand, by telecopy or by overnight carrier service shall be deemed to have been
given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Borrowers as having been given by the
Lenders.
Section 3.2.Entire Agreement. This Agreement, the Credit Agreement
and the other Lender Agreements and documents contemplated by the Credit
Agreement contain the entire understanding between the parties and supersede any
prior understanding and agreements between them with respect to the subject
matter hereof.
Section 3.3.Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts. Each Borrower hereby irrevocably submits itself
to the non-exclusive jurisdiction of the courts of The Commonwealth of
Massachusetts and to the non-exclusive jurisdiction of any Federal court of the
United States located in the District of Massachusetts for the purpose of any
suit, action or other proceeding arising out of this Agreement or any other
Lender Agreement or any of the transactions contemplated hereby or thereby.
Section 3.4.Counterparts. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
Section 3.5.Expenses. The Borrowers agree, jointly and severally, to
pay, on demand, all of the Agent's reasonable expenses in preparing, executing,
delivering and administering this Agreement, all related instruments and
documents and any requested amendment, waiver or consent relating hereto or
thereto, including, without limitation, the reasonable fees and out-of-pocket
expenses of the Agent's third-party consultants, special counsel, Goodwin,
Procter & Hoar LLP, and local counsel in each jurisdiction in which any Borrower
has assets and the Agent's and Lenders' expenses in connection with periodic
audits of any Borrower. The Borrowers also agree, jointly and severally, to pay,
on demand, all reasonable out-of-pocket expenses incurred by the Agent and the
Lenders, including, without limitation, reasonable legal, accounting and
third-party consultant fees, in connection with the collection of amounts due
hereunder upon the occurrence of a Default under the Credit Agreement, the
revision, protection or enforcement of any of the Agent's or
4
<PAGE>
the Lenders' rights against the Borrowers under this Agreement, and the
administration of special problems that may arise under this Agreement. The
Borrowers also agree to pay all stamp and other taxes in connection with the
execution and delivery of this Agreement and related instruments and documents.
Section 3.6. Confidentiality. The Agent agrees to keep all
information obtained pursuant to this Agreement confidential in a manner
consistent with the provisions of the Credit Agreement.
IN WITNESS WHEREOF, the Borrowers and the Agent have caused this Hazardous
Materials Indemnification Agreement to be executed by their duly authorized
officer as of the date set forth above.
AMERICAN SKIING COMPANY
SUNDAY RIVER SKIWAY CORPORATION
SUNDAY RIVER LTD.
PERFECT TURN, INC.
SUNDAY RIVER TRANSPORTATION INC.
LBO HOLDING, INC.
CRANMORE, INC.
SUGARBUSH RESORT HOLDINGS INC.
SUGARBUSH LEASING COMPANY
SUGARBUSH RESTAURANTS, INC.
S-K-I LTD.
KILLINGTON, LTD.
MOUNT SNOW LTD.
WATERVILLE VALLEY SKI AREA LTD.
PICO SKI AREA MANAGEMENT COMPANY
RESORT SOFTWARE SERVICES, INC.
KILLINGTON RESTAURANTS, INC.
RESORTS TECHNOLOGIES, INC.
DOVER RESTAURANTS, INC.
DEERFIELD OPERATING COMPANY
SUGARLOAF MOUNTAIN COPRORATION
SUGARTECH
MOUNTAINSIDE
MOUNTAIN WASTEWATER TREATMENT,
INC.
By: /s/ Thomas M. Richardson
-------------------------------
Name: Thomas M. Richardson
Title: Treasurer
5
<PAGE>
FLEET NATIONAL BANK, as Agent
By: /s/ David B. Henderson
--------------------------------
Name:
Title:
6
<PAGE>
EXHIBIT 10.88
ASSIGNMENT OF AGREEMENTS, PERMITS
AND CONTRACTS
THIS ASSIGNMENT OF AGREEMENTS, PERMITS AND CONTRACTS
(hereinafter referred to as this "Assignment"), is made and entered into as of
this 30 day of August, 1996 by Sugarloaf Mountain Corporation (hereinafter
referred to as "Borrower"), to Fleet National Bank, as Agent for itself and the
other Lender's party to the Credit Agreement (as defined herein) with a mailing
address of One Federal Street, Boston, Massachusetts, 02210 (hereinafter
referred to as "Lender").
W I T N E S S E T H :
WHEREAS Borrower is the owner of the fee/leasehold estate in the premises
described in Exhibit A attached hereto (hereinafter referred to as the
"Premises");
WHEREAS, the Lender has made a loan in the principal amount of up to
$65,000,000.00 to Borrower (the "Loan"), pursuant to that certain Credit
Agreement dated as of June 28, 1996, together with any and all renewals,
amendments, modifications, consolidations and extensions thereof (the "Credit
Agreement");
WHEREAS the Lender was unwilling to make the Loan to the Borrower unless
the Borrower in the manner hereinafter set forth assigned to Lender as
additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Lender
Agreements (as defined in the Credit Agreement) on the part of the Borrower to
be observed and performed, all of the Borrower's right, title and interest in
and to all permits, license agreements, operating contracts, licenses (to the
extent assignable by Borrower), franchise agreements and all management,
service, supply and maintenance contracts and agreements, and any other
agreements, permits or contracts of any nature whatsoever now or hereafter
obtained or entered into by the Borrower with respect to the operation of the
Premises, including without limitations those documents and agreements described
in Exhibit B attached hereto and made a part hereof (collectively, the
"Agreements");
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10) and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Borrower hereby assigns to Lender as additional security for
the payment of the Loan and the observance and performance by the Borrower of
the terms, covenants and conditions of the Lender Agreements on the part of the
Borrower to be observed or performed, all of the Borrower's right, title and
interest in and to the Agreements.
Subject to the provisions of the Credit Agreement, the Borrower covenants
and agrees that the Borrower will (a) fulfill and perform each and every term,
covenant and provision of the Agreements to be fulfilled or performed by the
Borrower thereunder, if any, except where the failure to so act would not have a
material adverse effect on the business, assets or
2
<PAGE>
financial condition of the Borrower (b) give prompt notice to the Lender of any
material notice received by the Borrower under any of the Agreements, together
with a complete copy of any such notice, (c) enforce, short of termination
thereof, the performance and observance of each and every term, covenant and
provision of the Agreements to be performed or observed, if any except where the
failure to so act would not have a material adverse effect on the business,
assets or financial condition of the Borrower and (d) not terminate any of the
Agreements without the prior written consent of the Lender, except where such
termination would not have a material adverse effect on the business, assets or
financial condition of the Borrower.
This Assignment is given as collateral security for the obligations of the
Borrower to the Lender pursuant to the Lender Agreements.
IN WITNESS WHEREOF, the Borrower has duly executed this instrument as of
the day and year first above written.
SUGARLOAF MOUNTAIN
CORPORATION
By: /s/ Thomas M. Richardson
----------------------------------
Name: Thomas M. Richardson
Title: Treasurer
STATE OF Maine)
Cumberland ) SS: August 27, 1996
Personally appeared the within named Thomas M. Richardson, as
Vice President of Sugarloaf Mountain Corporation, and acknowledged the above
instrument to be his free act and deed and the free act and deed of said
Corporation.
Before me,
/s/ Foster A. Stewart, Jr.
-------------------------------
Maine Attorney-at-Law
Print Name Foster A. Stewart, Jr.
My Commission Expires:
----------------
<PAGE>
EXHIBIT A
(Description of the Premises)
(to be attached)
<PAGE>
EXHIBIT B
Description of Certain Agreements, Permits and Contracts
<PAGE>
Exhibit 10.89
ASC HOLDINGS, INC.
AMERICAN SKIING COMPANY STOCK OPTION PLAN
Effective August 1, 1997
1. PURPOSE
This Stock Option Plan, effective August 1, 1997 (the "Option Plan"), is
established by ASC Holdings, Inc., a Maine corporation (the "Company"), to
provide a performance incentive program for, and to encourage stock ownership in
the Company by, officers and management employees of the Company and its
subsidiaries (as defined below), as well as other key persons whose efforts
contribute to the success of the Company and its subsidiaries. The Company
intends that the persons to whom options are granted (the "Optionee") will
acquire a proprietary interest in the success of the Company (or increase such
an existing interest). The Company also wishes to encourage Optionees to remain
in the employ or service of the Company and its subsidiaries.
Options granted under this Option Plan to officers and other employees of
the Company and its subsidiaries are intended to qualify as incentive stock
options (the "Incentive Options"), within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), unless otherwise
specifically designated in the grant of the options or unless otherwise required
under the Code. However, options other than Incentive Options ("Non-Qualified
Options") may also be granted hereunder, and any options, regardless of
designation, that shall not qualify as Incentive Options shall be deemed
Non-Qualified Options. Incentive Options and Non-Qualified Options are sometimes
together referred to as "options."
2. ADMINISTRATION
(a) Options Committee. This Option Plan shall be administered by a
committee appointed by the board of directors of the Company (the "Options
Committee" or "Committee"). Initially, the Options Committee may consist of one
or more directors of the Company. On and after the Company becomes subject to
the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall be
constituted so as to comply with the requirements of Code Section 162(m) and
Rule 16b-3 promulgated under the Exchange Act. All determinations and rulings of
the Committee shall be binding and conclusive on the Company, all affected
Optionees, and all other interested persons.
(b) Authority of the Committee. In addition to (and in furtherance of) any
other powers and authority granted under the Option Plan, the Committee shall
have responsibility and
<PAGE>
authority, subject to the express limitations of the Option Plan:
(i) To grant options, in its sole discretion, to eligible persons
hereunder from time to time, to determine the number of shares of Common Stock
(as defined below) as to which such options shall be exercisable, to determine
the time or times when an option or options shall be exercisable by Optionees,
and to determine whether options granted shall be Incentive Options or
Non-Qualified Options (subject to the limitations of Section 5 below);
(ii) To prescribe the other terms (which need not be identical) of
each option granted under the Option Plan to eligible persons and terms of the
associated option agreement, including, without limitation, any vesting or
special exercise requirements that it may impose;
(iii) To construe and interpret all of the terms of this Option Plan
(including eligibility to participate) and options granted under it, and to
establish, amend and revoke rules and regulations for administration. The
Committee, in the exercise of this power, may correct any defect or supply any
omission, or reconcile any inconsistency in the Option Plan, or in any option
agreement, in the manner and to the extent it shall deem necessary or expedient
to make the Option Plan fully effective;
(iv) To determine whether leaves of absence which may be granted to
an Optionee shall constitute a termination of his or her employment or service
for purposes of the Option Plan;
(v) To determine the fair market value of the Common Stock subject
to options on the date of the grant of any such option (subject to the
limitations of Section 6(d) hereof); and
(vi) Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the Company
with respect to the Option Plan.
Notwithstanding the foregoing, the Option Committee shall: (1) be under no
obligation to grant options to any eligible person; and (2) not have the
authority to grant new options in exchange for the cancellation of options
previously granted under this Option Plan or any other stock option plan of the
Company. No member of the Board or of the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Option Plan or
any option granted hereunder.
3. STOCK SUBJECT TO OPTION PLAN
(a) The stock subject to the options granted hereunder shall be shares of
the Company's Common Stock, par value $.01 per share (the "Common Stock"). The
maximum aggregate number of shares of Common Stock for which options may be
granted hereunder, excluding the shares involved in the unexercised portion of
any cancelled, terminated or expired options, shall not exceed 4,000,000 shares
of the Common Stock. Such number shall be subject
<PAGE>
to adjustment as provided in Section 9 hereof.
(b) Whenever any outstanding option under the Option Plan expires, is
cancelled or is otherwise terminated, the shares of Common Stock allocable to
the unexercised portion of such option may again become subject to options under
the Option Plan.
4. ELIGIBILITY
All officers and full-time management employees (i.e., persons performing
1,000 or more hours of service per year in a management capacity) of the Company
or its subsidiaries, as identified by the Committee from time to time, shall be
eligible to receive grants of options under this Option Plan. Such officers and
management employees may receive grants of Incentive Options and/or
Non-Qualified Options. Key persons (including directors) selected by the
Committee, in its sole discretion, shall be eligible to receive grants of
Non-Qualified Options only. Members of the Committee shall not be eligible to
receive options hereunder.
The Committee may, in its sole discretion, from time to time grant options
to one or more eligible persons. An Optionee may hold more than one option.
5. CERTAIN LIMITATIONS ON GRANTS
(a) No person shall be granted an Incentive Option if, at the time of the
grant, such person owns, directly or indirectly, stock possessing more than ten
percent (10%) of the total combined voting power of the Company, unless the
option price is at least one hundred and ten percent (110%) of the fair market
value of the Common Stock and the exercise period of such Incentive Option is by
its terms limited to five (5) years.
(b) To the extent that the aggregate fair market value of the Common Stock
with respect to which options under this Option Plan and all other such option
plans of the Company (or a "parent corporation" or "subsidiary corporation" as
defined in Section 424 of the Code) are exercisable for the first time by an
Optionee in any calendar year exceeds $100,000, such options shall not be
treated as Incentive Options and shall instead be considered Non-Qualified
Options. Nothing contained herein shall prohibit a grant of a Non-Qualified
Option regardless of whether Incentive Options are granted to such person in
such year.
(c) No employee shall, during any one-year period, be granted options to
acquire more than 500,000 shares of Common Stock.
6. TERMS OF OPTIONS AND OPTION AGREEMENTS
Options issued hereunder shall contain the applicable terms set forth
below (in addition to such other terms as may be required by other provisions of
this Option Plan), and each Optionee shall be required to execute an option
agreement as a condition to the grant of his or her options hereunder. The
option agreement shall contain such provisions as the Committee shall from time
to time deem necessary or appropriate to give effect to the purposes and terms
of the Option
<PAGE>
Plan. Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
(a) Any option shall expire on the date specified in the option agreement,
which date shall not be later than the tenth (10th) anniversary of the date on
which the option was granted (or not later than the 5th anniversary of the date
of the grant for options granted to persons who at the time of the grant own,
directly or indirectly, stock possessing more than 10% of the total combined
voting power of the Company). All options must be granted by the tenth (10th)
anniversary of the effective date of the Option Plan as specified in Section 15
hereof.
(b) The total number of shares with respect to which an option may be
exercised shall be as specified by the Committee; provided, however, that the
minimum number of shares with respect to which an option may be exercised at any
one time shall be five (5) shares, and all exercises shall be in integral
multiples thereof, unless the number purchased is the total number at the time
available for purchase under the option.
(c) Each option shall be exercisable in such installments (which need not
be equal) and at such times as designated by the Committee. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
option expires. No Incentive Option shall be exercisable within two (2) years of
the date on which such option was granted, and no Non-Qualified Option shall be
exercisable within six (6) months of the date on which the option was granted,
except in the event of a change in control of the Company (as defined in Section
6(g) hereof). In such event, all options granted prior to such change in control
shall become immediately exercisable.
(d) The purchase price per share of Common Stock under each Incentive
Option shall not be less than the fair market value of the Common Stock subject
to the option on the date the option is granted. For this purpose, the fair
market value of the Common Stock shall be determined by the Committee; provided,
however, that if, at the time of the grant, the Optionee owns, directly or
indirectly, stock possessing more than ten percent (10%) of the total combined
voting power of the Company, the option price shall be at least one hundred and
ten percent (110%) of the fair market value of the Common Stock. Notwithstanding
the foregoing, (i) if the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System on the date the
option is granted, fair market value of Incentive Options shall not be less than
the average of the highest bid and lowest asked prices of the Common Stock on
such System on such date or the last date preceding such date on which a sale
was reported, or (ii) if the Common Stock is admitted to trading on a national
securities exchange on the date the option is granted, fair market value shall
not be less than the last sale price reported for the Common Stock on such
exchange on such date or, if there was no sale on such date, the last date
preceding such date on which a sale was reported.
(e) Except as provided in Section 10 hereof:
(i) No option granted pursuant to the Option Plan shall be
transferable except by will or the laws of descent and distribution, and options
granted hereunder shall be exercisable
<PAGE>
during the Optionee's lifetime only by the Optionee; and
(ii) No assignment or transfer of any option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, shall vest in the assignee or transferee any interest or right in the
option whatsoever, but immediately upon any attempt to assign or transfer any
option the same shall terminate and be of no force or effect.
(f) The option shall be subject to any provision necessary to assure
compliance with federal and state securities laws.
(g) For purposes of the Option Plan, a "change in control" shall be deemed
to have taken place in the event of (i) a merger or other reorganization after
which the shareholders of the Company prior to such transaction own less than a
majority of the outstanding stock of the surviving entity following the
consummation of the transaction, (ii) a sale of all or substantially all of the
assets of the Company, or (iii) a sale, transfer or other disposition of more
than 50% of the Common Stock of the Company, other than in connection with any
public offering of the Common Stock.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) An Optionee may exercise an option by delivering to the Committee on
any business day a written notice specifying the number of shares of Common
Stock the Optionee then desires to purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made in full either in cash in an amount equal to
the option price for the number of shares specified in the Notice or in shares
of Common Stock having an aggregate fair market value equal to such option
price.
8. USE OF PROCEEDS FROM SALE OF STOCK
Proceeds from the sale of Common Stock pursuant to options granted under
the Option Plan shall constitute general funds of the Company to be used
primarily for its general business activities.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the outstanding shares of the Company's Common Stock as a whole are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Company, whether through merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kinds of shares subject to the Option Plan, and
in the number, kinds, and per share exercise price of shares subject to
unexercised options or portions thereof granted prior to any such change. Any
such adjustment in an outstanding option, however, shall
<PAGE>
be made without a change in the total price applicable to the unexercised
portion of the option, but with an adjustment in the price for each share of
Common Stock covered by the option.
(b) Upon a change in control (as defined in Section 6(g) above), the
Option Plan and the options issued thereunder shall terminate, unless provision
is made in connection with such transaction for the assumption of options
theretofore granted, or the substitution for such options of new options of the
successor employer corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and the per share
exercise prices. In the event of such termination, all outstanding options shall
be exercisable in full for at least thirty (30) days prior to the termination
date whether or not otherwise exercisable during such period.
(c) Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustment shall be made shall be conclusive. The
Committee shall have the discretion and power in any such event to determine and
to make effective provision for the acceleration of the time during which an
option may be exercised, notwithstanding the provisions of the option setting
forth the date or dates of which all or any part of it may be exercised. No
fractional shares of Common Stock shall be issued under the Option Plan on
account of any adjustment specified above.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE
(a) In the event of the death of an Optionee while in the employ or
service of the Company, the option, whether or not exercisable at the time of
the death of the Optionee, may be exercised, as provided in Section 6 hereof, by
the estate of the Optionee or by a person who acquired the right to exercise
such option by bequest or inheritance from such Optionee, in the case of an
Incentive Option, within one (1) year after the date of such death but not later
than the date on which the option would otherwise expire, and, in the case of a
Non-Qualified Option, for the remaining term of the option.
(b) If the employment or service of an Optionee is terminated by reason of
disability as defined in Code Section 22(e)(3), the options held by such
Optionee may be exercised, whether or not exercisable at the time of such
termination, in the case of an Incentive Option, within one (1) year after such
termination but not later than the date on which the option would otherwise
expire, and, in the case of a Non-Qualified Option, at any time during the
remaining term of the option.
(c) If the employment or service of an Optionee is terminated for any
reason other than such death or disability, options held by such Optionee shall,
to the extent not vested under the terms of the applicable Option Agreement, be
cancelled upon such termination and shall not thereafter be exercisable, except
as provided in paragraph (d) of this section.
(d) An Optionee whose employment or service is involuntarily terminated in
connection with or within one (1) year after a change in control of the Company
(as defined in Section 6(g) hereof) shall be permitted to exercise his options,
whether or not exercisable at the date of such termination as follows: (i) in
the case of an Incentive Option, within three (3)
<PAGE>
months after the date of such termination, but not later than the date on which
the option would otherwise expire, and (ii) in the case of a Non-Qualified
Option, at any time during the remaining term of the option.
(e) An Optionee who is not a director of the Company and whose employment
is voluntarily terminated due to early retirement may request a waiver from the
Committee in order to exercise all unexercised and outstanding options. The
Committee will determine whether such waiver will be granted or not and, if
granted, the period of time in which such options may be exercised.
(f) Notwithstanding the foregoing, an option be terminated by mutual
agreement of the Company and the Optionee.
11. AMENDMENT OF OPTION PLAN
At any time, and from time to time, the Board of Directors of the Company
may amend the Option Plan, subject to any required regulatory approval and to
the limitation that, except as provided in Section 9 hereof, no amendment shall
be effective unless approved by the affirmative vote of the holders of a
majority of the outstanding shares of the Company at an annual or special
meeting held within twelve (12) months before or after the date of such
amendment's adoption, where such amendment will:
(a) Increase the number of shares of Common Stock as to which options may
be granted under the Option Plan;
(b) Change in substance Section 4 hereof relating to eligibility to
participate in the Option Plan;
(c) Change the minimum option price limitations; or
(d) Increase the maximum term of any option granted herein.
Except as provided in Section 9 hereof, rights and obligations under any
option granted before amendment of the Option Plan shall not be altered or
impaired by amendment of the Option Plan, except with the consent of the person
to whom the option was granted.
12. TERMINATION OR SUSPENSION OF THE OPTION PLAN
The Board of Directors of the Company at any time may terminate or suspend
the Option Plan in its sole discretion. Unless sooner terminated, the Option
Plan shall terminate on the tenth anniversary of the effective date specified in
Section 15 hereof, but such termination shall not affect any option theretofore
granted. An option may not be granted while the Option Plan is suspended or
after it is terminated.
Rights and obligations under any option granted while the Option Plan is
in effect shall not
<PAGE>
be altered nor impaired by suspension or termination of the Option Plan except
with the consent of the Optionee. An option may be terminated by agreement
between an Optionee and the Company and, in lieu of the terminated option, a new
option may be granted with an exercise price which may be higher or lower than
the exercise price of the terminated option.
13. SECURITIES LAW MATTERS; ISSUANCE OF SHARES
The obligation of the Company to sell and deliver shares of Common Stock
under options granted under the Option Plan shall be subject to all applicable
federal and state securities laws, rules and regulations and the obtaining of
all such approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee. The issuance of shares of Common Stock on the
exercise of an option shall be conditioned on obtaining such appropriate
representations, warranties, restrictions and agreements of the Optionee as the
Committee may require. Additionally, the shares, when issued upon the exercise
of an option, shall be subject to other transfer restrictions, rights of first
refusal and rights of repurchase (as set forth in the Articles of Incorporation
or Bylaws of the Company, or as incorporated by reference into any applicable
stock purchase agreement). Notwithstanding the foregoing, all shares of Common
Stock issued by the Company to an optionee upon the exercise of his options
shall be registered under the Securities Act of 1933, as amended (the
"Securities Act").
14. MISCELLANEOUS
(a) The Optionee shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common Stock subject to
such option unless and until the option shall have been exercised pursuant to
the terms thereof, the Company shall have issued and delivered the shares to the
Optionee, and the Optionee's name shall have been entered as a stockholder of
record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Common Stock.
(b) Neither the adoption of the Option Plan by the Board of Directors nor
the submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board (or any
person or committee to which it may delegate authority) to adopt such other
incentive arrangements as may be either applicable generally or only in specific
cases.
(c) Upon the grant of options hereunder and the issuance of shares of
Common Stock pursuant to the exercise thereof, the Company (or applicable
subsidiary) shall withhold from any compensation or other amounts payable to the
Optionee, any taxes required to be withheld under federal,
<PAGE>
state or local law as a result of the grant or exercise of such option or the
sale of the shares issued upon exercise thereof. To the extent that compensation
or other amounts, if any, payable to the Optionee is insufficient to pay any
taxes required to be so withheld, the Company (or subsidiary) may, in its sole
discretion, require the Optionee (or such other person entitled herein to
exercise the option), as a condition of the exercise of an option, to pay in
cash to the Company (or subsidiary) an amount sufficient to cover such tax
liability or otherwise to make adequate provision for the Company's satisfaction
of its withholding obligations under federal, state and local law.
(d) This Option Plan is purely voluntary on the part of the Company, and
the continuance of the Plan shall not be deemed to constitute a contract between
the Company (or subsidiary) and any employee or other eligible person, or to be
consideration for or a condition of the employment or service of any employee.
Nothing contained in this Plan shall be deemed to give any employee the right to
be retained in the employ or service of the Company (or subsidiary) or a
successor corporation, or to interfere with the right of the Company (or
subsidiary) or any such corporation to discharge or retire any employee thereof
at any time. No employee shall have any right to or interest in options
authorized hereunder prior to the grant thereof to such employee, and upon such
grant he shall have only such rights and interests as are expressly provided
herein.
(e) In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
(f) This Plan shall be governed by and construed in accordance with the
laws of the State of Maine.
15. EFFECTIVE DATE
The Option Plan shall become effective on August 1, 1997, having been
approved by the sole shareholder and the sole director on July 31, 1997.
ASC Stock Option Plan
<PAGE>
Exhibit 10.90
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the 1st day of August, 1997 by and between
ASC HOLDINGS, INC., a Maine corporation ("Company"), and ___________________ of
__________________ ("Optionee").
W I T N E S S E T H :
WHEREAS, the Company has established the American Skiing Company Stock
Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible
officers, full-time management employees, and other key persons identified under
the Plan;
WHEREAS, the Company's Options Committee has authority under the Plan to
award options to eligible employees, to designate the type of options to be
granted, and any terms and conditions relating to the award or exercise or
options by an Optionee (subject to the limitations set forth in the Option
Plan); and
WHEREAS, the Optionee has been determined to be eligible to receive a
grant of non-qualified stock options under the Plan and the Committee as
determined that options shall be granted to Optionee.
NOW, THEREFORE, it is agreed between Company and Optionee as follows:
1. Grant of Non-Qualified Stock Options
(a) Subject to the terms and conditions herein and to the provisions of
the Plan, the provisions of which are incorporated herein by reference, Company
hereby grants to Optionee the right and option to purchase from Company up to
_____ shares of the Company's Common Stock ("Stock"), par value $.01 per share,
at a price of $______ per share.
(b) The option granted hereunder is intended to constitute a non-qualified
stock option, which shall not qualify as an incentive stock option as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). ---
(c) This option is not exercisable after the tenth (10th ) anniversary of
the date on which this option was granted to Optionee, which was August 1, 1997
(the "Grant Date").
(d) The options granted hereunder shall vest, and become exercisable, in
accordance with the following schedule:
Percentage Vested Period After Grant Date
----------------- -----------------------
20% Immediately
40% After 1 year
60% After 2 years
80% After 3 years
100% After 4 years
For purposes of applying the foregoing vesting schedule, the percentages shall
be applied to the total number of shares with respect to which this Option has
been granted, as set forth in subsection (a) above.
(e) Optionee, from time to time during the period when the option may be
exercised hereunder, may so exercise the option in whole or in part, in
accordance with the terms and conditions hereof, by delivering to Company,
Attention: Options Committee.
(i) a written notice signed by Optionee stating the number of shares
of Stock that Optionee has elected to purchase at any time, which number must be
an integral multiple of five (5), unless the number
<PAGE>
equals the total number of shares then available to be purchased hereunder; and
(ii) Optionee's certified or cashier's check in an amount equal to
the option price of the shares of Stock then to be purchased.
2. Restrictions on Transferability. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Subject to the foregoing and the terms of the
Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3. Adjustment in Number of Shares and Option Prices; Reserved Option
Shares. Subject to the applicable terms of the Plan, in the event that there are
any changes in the outstanding Common Stock of Company by reason of stock
dividends, splits, combinations of shares, recapitalizations, reorganizations,
mergers, consolidations, combinations, or exchanges of shares or the like, the
number of shares subject to the option and the option price shall be
appropriately adjusted by the Options Committee, if necessary, to reflect
equitably such change or changes. The determination of such committee in this
regard shall be conclusive.
The Company shall at all times during the term of this Agreement reserve
and keep available such number of shares of Stock as will be sufficient to
satisfy the requirements of this Agreement.
4. Investment Representations. The Optionee represents and warrants as
follows:
(a) The Optionee is acquiring this option for investment for his own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors officers or controlling persons and by
reason of his business financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this option.
5. No Guarantee of Continued Employment. Neither the Plan nor this option
shall confer upon any Optionee any right to continue in the employment of the
Company or any subsidiary or limit in any respect the right of the Company or
subsidiary to discharge the Optionee at any time, with or without cause and with
or without notice.
6. General. Words used in this Agreement shall have the same meaning as
the same words used in the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan shall govern. This Agreement,
together with the Plan, constitute the parties' entire agreement with respect to
the subject matter hereof, and supersede any and all prior and or written
agreements or understandings with respect thereto. This Agreement may be
modified only by a writing executed by both parties.
IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as
of the date first above written. By executing this Agreement, Optionee hereby
acknowledges that he has received a copy of the Plan document and agrees to be
bound by the terms thereof.
ASC HOLDINGS, INC.
By:
-------------------------------
Its:
----------------------------------
Optionee:
<PAGE>
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND
ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE CLERK OF THE COMPANY.
5 Year Vesting
<PAGE>
Exhibit 10.91
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the 1st day of August, 1997 by and between
ASC HOLDINGS, INC., a Maine corporation ("Company"), and ______________________
of ___________________ ("Optionee").
W I T N E S S E T H :
WHEREAS, the Company has established the American Skiing Company Stock
Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible
officers, full-time management employees, and other key persons identified under
the Plan;
WHEREAS, the Company's Options Committee has authority under the Plan to
award options to eligible employees, to designate the type of options to be
granted, and any terms and conditions relating to the award or exercise or
options by an Optionee (subject to the limitations set forth in the Option
Plan); and
WHEREAS, the Optionee has been determined to be eligible to receive a
grant of non-qualified stock options under the Plan and the Committee as
determined that options shall be granted to Optionee.
NOW, THEREFORE, it is agreed between Company and Optionee as follows:
1. Grant of Non-Qualified Stock Options
(a) Subject to the terms and conditions herein and to the provisions of
the Plan, the provisions of which are incorporated herein by reference, Company
hereby grants to Optionee the right and option to purchase from Company up to
_____ shares of the Company's Common Stock ("Stock"), par value $.01 per share,
at a price of $______ per share.
(b) The option granted hereunder is intended to constitute a non-qualified
stock option, which shall not qualify as an incentive stock option as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). ---
(c) This option is not exercisable after the tenth (10th ) anniversary of
the date on which this option was granted to Optionee, which was August 1, 1997
(the "Grant Date").
<PAGE>
(d) Except as expressly limited under the Plan, the option granted
hereunder may be exercised immediately.
(e) Optionee, from time to time during the period when the option may be
exercised hereunder, may so exercise the option in whole or in part, in
accordance with the terms and conditions hereof, by delivering to Company,
Attention: Options Committee.
(i) a written notice signed by Optionee stating the number of shares
of Stock that Optionee has elected to purchase at any time, which number must be
an integral multiple of five (5), unless the number equals the total number of
shares then available to be purchased hereunder; and
(ii) Optionee's certified or cashier's check in an amount equal to
the option price of the shares of Stock then to be purchased.
2. Restrictions on Transferability. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Subject to the foregoing and the terms of the
Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3. Adjustment in Number of Shares and Option Prices; Reserved Option
Shares. Subject to the applicable terms of the Plan, in the event that there are
any changes in the outstanding Common Stock of Company by reason of stock
dividends, splits, combinations of shares, recapitalizations, reorganizations,
mergers, consolidations, combinations, or exchanges of shares or the like, the
number of shares subject to the option and the option price shall be
appropriately adjusted by the Options Committee, if necessary, to reflect
equitably such change or changes. The determination of such committee in this
regard shall be conclusive.
The Company shall at all times during the term of this Agreement reserve
and keep available such number of shares of Stock as will be sufficient to
satisfy the requirements of this Agreement.
4. Investment Representations. The Optionee represents and warrants as
follows:
(a) The Optionee is acquiring this option for investment for his own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors officers or controlling persons and by
reason of his business financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this option.
<PAGE>
5. No Guarantee of Continued Employment. Neither the Plan nor this option
shall confer upon any Optionee any right to continue in the employment of the
Company or any subsidiary or limit in any respect the right of the Company or
subsidiary to discharge the Optionee at any time, with or without cause and with
or without notice.
6. Distribution of Cash to Pay Taxes. If the exercise of the option
granted hereunder (or any portion thereof) is expected to result in the
recognition of taxable income by Optionee, the Company shall distribute to
Optionee (on or before the end of the calendar year in which the exercise
occurs): (a) an amount of cash sufficient to pay the federal and state income
taxes payable by Optionee in respect of such income plus (b) an amount of cash
sufficient to pay any federal and state income taxes payable by Optionee in
respect of the amount payable under the foregoing clause (a) and this clause
(b). The amount of the distributions to be made under this Section 6 shall be
determined by applying the Optionee's combined (federal and state) marginal rate
of tax for such calendar year.
7. General. Words used in this Agreement shall have the same meaning as
the same words used in the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan shall govern. This Agreement,
together with the Plan, constitute the parties' entire agreement with respect to
the subject matter hereof, and supersede any and all prior and or written
agreements or understandings with respect thereto. This Agreement may be
modified only by a writing executed by both parties.
IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as
of the date first above written. By executing this Agreement, Optionee hereby
acknowledges that he has received a copy of the Plan document and agrees to be
bound by the terms thereof.
ASC HOLDINGS, INC.
By:
-------------------------------
Its:
----------------------------------
Optionee:
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND
ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE
<PAGE>
HOLDER OF THIS OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF
WHICH AGREEMENT IS ON FILE WITH THE CLERK OF THE COMPANY.
Vested+Gross Up
<PAGE>
Exhibit 10.92
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the 1st day of August, 1997 by and between
ASC Holdings, Inc., a Maine corporation ("Company"), and
__________________________ of ___________________ ("Optionee").
W I T N E S S E T H :
WHEREAS, the Company has established the American Skiing Company Stock
Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible
officers, full-time management employees, and other key persons; and
WHEREAS, the Optionee has been determined to be eligible to receive a
grant of incentive stock options under the Plan; and
WHEREAS, Company desires to provide a financial incentive to Optionee to
remain in its employ, to encourage stock ownership by Optionee, and thereby to
increase such Optionee's proprietary interest in Company's success;
NOW, THEREFORE, it Company and Optionee hereby agree as follows:
1. Grant of Incentive Stock Option
(a) Subject to the terms and conditions herein and to the provisions of
the Plan, the provisions of which are incorporated herein by reference, Company
hereby grants to Optionee the right and option to purchase from Company up to
_____ shares of the Company's Common Stock ("Stock"), par value $.01 per share,
at a price of $______ per share.
(b) The option granted hereunder is intended to qualify as an incentive
stock option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
(c) This option is not exercisable after the tenth (10th) anniversary of
the date on which this option was granted to Optionee, which was August 1, 1997
(the "Grant Date").
(d) Except as expressly provided in the Plan, no portion of the option may
be exercised until after the second (2nd) anniversary of the Grant Date.
(e) Optionee, from time to time during the period when the option may be
exercised hereunder, may so exercise the option in whole or in part, in
accordance with the terms and conditions hereof, by delivering to Company,
Attention: Options Committee.
(i) a written notice signed by Optionee stating the number of shares
of Stock that Optionee has elected to purchase at any time, which number must be
an integral multiple of five (5), unless the number equals the total number of
shares then available to be purchased hereunder; and
(ii) Optionee's certified or cashier's check in an amount equal to
the option price of the shares of Stock then to be purchased.
2. Restrictions on Transferability. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Subject to the foregoing and the terms of the
Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3. Adjustment in Number of Shares and Option Prices; Reserved Option
Shares. Subject to the
<PAGE>
provisions of Section 9 of the Plan, in the event that there are any changes in
the outstanding Common Stock of Company by reason of stock dividends, splits,
combinations of shares, recapitalizations, reorganizations, mergers,
consolidations, combinations, or exchanges of shares or the like, the number of
shares subject to the option and the option price shall be appropriately
adjusted by the Options Committee, if necessary, to reflect equitably such
change or changes. The determination of such committee in this regard shall be
conclusive.
The Company shall at all times during the term of this Agreement reserve
and keep available such number of shares of Stock as will be sufficient to
satisfy the requirements of this Agreement.
4. Investment Representations. The Optionee represents and warrants as
follows:
(a) The Optionee is acquiring this option for investment for his own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship with
the Company or one of its directors officers or controlling persons and by
reason of his business financial experience, has, and could be reasonably
assumed to have, the capacity to protect his interests in connection with the
acquisition of this option.
5. No Guarantee of Continued Employment. Neither the Plan nor this option
shall confer upon any Optionee any right to continue in the employment of the
Company or any subsidiary or limit in any respect the right of the Company or
subsidiary to discharge the Optionee at any time, with or without cause and with
or without notice.
6. Conversion to Non-Qualified Option. Notwithstanding anything to the
contrary set forth herein, this option is being granted subject to the condition
that in the event the Plan is not approved by the stockholders of the Company
within one (1) year of the date that the Plan was adopted by the Board of
Directors of the Company, this option shall automatically be converted into a
non-qualified stock option.
7. Early Disposition of Stock. Subject to the fulfillment by Optionee of
any conditions upon the disposition of Stock received under this option,
Optionee hereby agrees that if he disposes of any Stock received under this
option within one (1) year after such Stock was transferred to him, he will
notify the Company in writing within thirty (30) days after the date of such
disposition. Optionee acknowledges that disposition by him within such one (1)
year period would disqualify him from capital gain treatment for any gain
realized upon such disposition.
8. General. Words used in this Agreement shall have the same meaning as
the same words used in the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan shall govern. This Agreement,
together with the Plan, constitute the parties' entire agreement with respect to
the subject matter hereof, and supersede any and all prior and or written
agreements or understandings with respect thereto. This Agreement may be
modified only by a writing executed by both parties.
IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as
of the date first above written. By executing this Agreement, Optionee hereby
acknowledges that he has received a copy of the Plan document and agrees to be
bound by the terms thereof.
ASC HOLDINGS, INC.
By:
-------------------------------
Its:
----------------------------------
Optionee:
<PAGE>
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE,
TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND
ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT
IS ON FILE WITH THE CLERK OF THE COMPANY.
<PAGE>
Exhibit 10.93
RECEIVED
CARROLL COUNTY REGISTRY
009969 1997 AUG 21 PM 3:51
/s/ Lillian O. Brookes
REGISTER OF DEEDS
ASSIGNMENT OF RENTS AND LEASES
(Attitash Project)
This ASSIGNMENT OF RENTS AND LEASES (this "Assignment") is made as
of August 1, 1997, by GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation
("Assignor"), having a mailing address of P.O. Box 450, Sunday River Road,
Bethel, ME 04217 in favor of TEXTRON FINANCIAL CORPORATION, a Delaware
corporation, as administrative agent for the Lenders (as hereinafter defined)
(in such capacity herein referred to as the "Assignee"), having a mailing
address of 40 Westminster Street, Providence, Rhode Island 02903.
R E C I T A L S:
A. Assignor has entered into a certain Loan and Security Agreement (as
amended from time to time, the "LSA"), dated as of August 1, 1997, with Assignee
and the Lenders identified therein (the "Lenders"), pursuant to which, among
other things, the Lenders have agreed, subject to the terms and conditions
therein stated, to make one or more loan advances (collectively, the "Loan") to
the Assignor in the aggregate maximum principal amount of FIFTY-FIVE MILLION
DOLLARS ($55,000,000), as evidenced by Assignor's promissory notes dated August
15, 1997 in said aggregate principal amount (as amended, restated, extended,
renewed or otherwise modified from time to time, collectively, the "Note"),
which Note is due and payable not later than December 1, 2000 ("Maturity Date").
All capitalized terms that are not otherwise defined herein shall have the
meanings ascribed to such terms in the LSA.
B. In order to secure the Loan, Assignor has executed and delivered, among
other things, the following: (i) a Mortgage, Assignment of Rents and Security
Agreement (as amended from time to time, the "Mortgage"), dated as of August 1,
1997, encumbering the real property located in the Town of Bartlett, in Carroll
County, New Hampshire, more particularly described in Exhibit A attached hereto
and made a part hereof, and certain other property therein described, relating
to the property commonly known as The Grand Summit Hotel and Crown Club at
Attitash (collectively, the "Mortgaged Property"), and (ii) certain other
Security Documents. All amounts owing or to be owed from time to time under the
Note, the LSA, the Mortgage or any of the other Security Documents, together
with all other obligations of Assignor in respect thereof are hereinafter
collectively referred to as the "Indebtedness".
C. The Lenders as a condition to making the Loan, have required the
execution and delivery of this Assignment.
ACCORDINGLY, in consideration of the foregoing premises and in
further consideration of the sum of One Dollar paid to Assignor, the receipt of
which is hereby acknowledged, and to secure the payment and performance of the
Indebtedness and all other amounts and obligations secured by the LSA, the
Mortgage or the other Security Documents, Assignor does hereby grant, transfer
and assign to Assignee, as administrative agent for the Lenders, all of the
right, title and interest of Assignor in and to (i) all leases, subleases, use
or occupancy agreements or other agreements affecting the Mortgaged Property,
heretofore or hereafter made and entered into by Assignor (collectively, the
"Leases"), and (ii) all rents, profits and other income, revenues or payments of
any kind due
<PAGE>
or payable or to become due or payable to Assignor as the result of any use,
possession or occupancy of all or any portion of the Mortgaged Property or as
the result of the use of or lease of any personal property constituting a part
of the Mortgaged Property (all of which are hereinafter collectively referred to
as "Rents"), whether the Rents accrue before or after foreclosure of the
Mortgage or during the period of redemption thereof. This Assignment is a
present and absolute assignment of the Rents and Leases with all such Rents and
Leases being pledged primarily and on a parity with the real estate and not
secondarily), provided, however, that prior to the existence of an Event of
Default and subject to the Assignor's undertakings and the rights and remedies
of the Assignee in the LSA, Assignor is authorized to collect Rents and other
things of value payable under the Leases.
ASSIGNOR WARRANTS AND COVENANTS that it is and will remain the
absolute owner of the Rents and Leases free and clear of all liens and
encumbrances other than the rights assigned hereby, that it has not heretofore
assigned or otherwise encumbered its interest in any of the Rents or Leases to
any person; that it has the right under applicable law, under the Leases, under
its articles of incorporation and by-laws, and otherwise to execute and deliver
this Assignment and keep and perform all of its obligations hereunder; and that
it will warrant and defend the Leases and Rents against all adverse claims,
whether now existing or hereafter arising.
Assignor further covenants and agrees with Assignee and each of the
Lenders as follows:
1. Affirmative Covenants. Assignor hereby covenants and agrees that
it will:
(a) Perform Obligations. Observe, perform, and discharge, duly and
punctually, all and each obligation of any and all Leases on the part of
Assignor to be kept, observed, and performed;
(b) Enforce Leases. Enforce the performance of each and every
material obligation, term, covenant, condition, and agreement in each
material Lease by any tenant to be performed;
(c) Defend Actions. Appear in and defend any action or proceeding
arising under, occurring out of, or in any manner connected with, any
Lease or the obligations, duties, or liabilities of Assignor or any tenant
thereunder, or under this Assignment;
(d) Execute Further Instruments. At the request of Assignee, execute
and deliver to Assignee, such further instruments and do and perform, such
other acts and things as Assignee may reasonably deem necessary or
appropriate, from time to time, to confirm, evidence or make effective
this Assignment and the various covenants of Assignor herein contained and
to more effectively vest in and secure to Assignee the sums due or
hereafter to become due under the Leases, including, without limitation,
the execution of such additional assignments as shall be deemed advisable
by Assignee to effectively vest in and secure to Assignee all Rents and
all Leases; and Assignor shall pay all costs and expenses (including
attorneys' fees) incurred in
2
<PAGE>
connection with the preparation of such instruments (including additional
assignments) and the recording of the same.
2. Negative Covenants. Assignor hereby covenants and agrees that it
will not:
(a) New Leases. Except as permitted under the LSA, enter into any
lease for space in the Mortgaged Property;
(b) Accept Prepayment. Accept, or permit acceptance of, payment of
any rents or any other payment under any Lease more than one month in
advance of the due date thereof;
(c) Assign Lease. Assign, pledge, encumber, or otherwise transfer,
or permit to be assigned, pledged, encumbered or otherwise transferred,
any Lease or any right or interest of Assignor thereunder or in any rents
or other payments thereunder; or
(d) Amend or Terminate Lease. Except as permitted in the LSA, amend
any Lease, or terminate any Lease, whether by voluntary agreement, for
default by tenant or otherwise, or accept a surrender of any Lease.
3. Protecting Assignee's Rights Under This Assignment. Should
Assignor fail to perform or observe any covenant or agreement contained in this
Assignment, then Assignee or any Lender, but without obligation to do so and
without releasing Assignor from any obligation hereunder or under the Mortgage
or LSA, may make or do the same in such manner and to such extent as Assignee or
such Lender may deem appropriate, including, specifically, without limiting
their general powers, the right to appear in and defend any action or proceeding
purporting to affect the right to perform and discharge each and every
obligation, covenant and agreement of Assignor contained in the Leases, or
purporting to affect the right of Assignor to enforce each and every obligation,
covenant and agreement in the Leases, and in exercising any such powers to pay
necessary costs and expenses, employ counsel and pay attorneys' fees. Assignor
will pay immediately upon demand all sums expended by Assignee or any such
Lender under the authority of this Assignment, together with interest thereon at
the Default Rate, and the same shall be added to said indebtedness and shall be
secured hereby and by the Mortgage and the LSA.
4. Election of Remedies. All rights, remedies and powers conferred
or granted hereby may be exercised whether or not proceedings to foreclose the
Mortgage are pending or have been concluded and whether or not Assignee or any
Lender has exercised or enforced any other right, remedy or power available to
them under or with respect to the Mortgage or the LSA. Neither Assignee nor the
Lenders shall be required to resort first to their rights under this Assignment
or under the Mortgage or the LSA before resorting to one of the other, or any
other security, and Assignee may exercise their right hereunder and under the
Mortgage and the LSA, and any other security concurrently or independently and
in such order or preference as they desires.
3
<PAGE>
5. Survival of Obligation to Comply with Mortgage and This
Assignment. All of Assignor's obligations under this Assignment shall survive
foreclosure of the Mortgage and Assignor covenants and agrees to observe and
comply with all terms and conditions of this Assignment throughout any period of
redemption after foreclosure of the Mortgage.
6. Appointment of Receiver. To the fullest extent permitted by law,
and without regard to whether an action or proceeding has been commenced to
foreclose the Mortgage; whether the security is adequate; whether the premises
are in danger of being materially injured or reduced in value as security by
removal, destruction, deterioration, accumulation of prior liens, or otherwise,
so as to render the security inadequate; or whether Assignor has committed waste
or there is a danger of waste; Assignee or any Lender may request (upon the
occurrence of an Event of Default), and Assignor agrees that Assignee or any
such Lender shall as a matter of right be entitled to, the ex parte appointment
of a receiver or receivers for all or any part of the Mortgaged Property,
whether such receivership be incident to a proposed sale of the Mortgaged
Property or otherwise. Assignor agrees that the appointment of such receiver by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Assignee to receive payment of the rents and
income.
7. Assignment of Specific Leases. If Assignee or any Lender at any
time shall request in writing, Assignor will at its own cost and expense
execute, deliver and record an instrument of further assurance assigning, or
confirming the assignment of, one or more specific Leases, Rents or other
interests transferred hereby. The failure of Assignee or any Lender to request
or procure or record such an instrument of further assurance shall not affect or
impair the validity or efficacy of this Assignment as it applies to any such
interest.
8. Application of Rents, Profits and Income. All Rents and other
amounts payable under the Leases and collected by Assignee or the receiver each
month shall be applied first to pay the costs and expenses of Assignee or the
receiver, as the case may be, of management and operation of the Mortgaged
Property and of collection of the Rents (including, without limitation, the fees
and expenses of a managing agent, the expenses incident to taking and retaining
possession of the Mortgaged Property, the cost of all alterations, renovations,
repairs, and replacements, and all attorneys' fees) and then to pay the
Indebtedness and any and all other indebtedness of Assignor secured by the
Mortgage or the LSA then due and payable (as provided in the LSA). Any Rents
actually collected by Assignee in excess of such amount shall be remitted by
Assignee to Assignor, as provided in the LSA. The receipt by Assignee or the
Lenders of Rents pursuant hereto shall not act as a payment or discharge of any
indebtedness of Assignor, including, without limitation, the Indebtedness or any
other indebtedness secured by the Mortgage or the LSA, except to the extent of
Rents actually received by Assignee or the Lenders hereunder and applied to
payment of such indebtedness.
9. No Liability for Assignee. Neither Assignee nor the Lenders shall
be obligated to perform or discharge, nor do they hereby undertake to perform or
discharge, any obligation, duty or liability of Assignor under the Leases; and
this Assignment and the exercise of any rights hereunder shall not operate to
place upon Assignee or the Lenders responsibility for the control, care,
management or repair of the Mortgaged Property or for the
4
<PAGE>
carrying out of any of the terms and conditions of the Leases. Neither Assignee
nor the Lenders shall be responsible or liable for any waste committed on the
Mortgaged Property, for any negligence in the management, upkeep, repair or
control of said Mortgaged Property or for failure to collect the Rents. The sole
obligation of Assignee and the Lenders hereunder shall be to account for Rents
actually received by Assignee and the Lenders hereunder.
10. No Liability. Neither Assignee nor the Lenders shall have any
liability to Assignor in connection with or as a result of this Assignment or
the exercise of any rights or remedies under this Assignment or under the Leases
or by reason of any alleged obligations or undertakings of Assignee or the
Lenders to perform or discharge any of the terms, covenants or agreements
contained in the Leases.
11. Authority to Tenant. Upon notice from Assignee, the tenants
under the Leases and any other party liable to pay Rents are hereby irrevocably
authorized and directed by Assignor to pay to Assignee (for the benefit of the
Lenders) all sums due under the Leases or other agreements upon the written
request of Assignee, and Assignor hereby consents and directs that said sums
shall be paid to Assignee without the necessity of a determination or inquiry by
the tenant that an Event of Default has occurred or that Assignee is entitled to
exercise its rights hereunder, and to the extent such sums are paid to Assignee,
Assignor agrees that the tenant shall have no further liability to Assignor for
the same. The signature of Assignee alone shall be sufficient for the exercise
of any rights under this Assignment and the receipt of Assignee alone for any
sums received shall be a full discharge and release therefor to any such tenant
or occupant of the Mortgaged Property. Checks for all or any part of the Rents
collected under this Assignment shall upon notice from Assignee be drawn to the
exclusive order of Assignee. Assignee may not give notice to tenants requiring
payment of Rents and other sums to Assignee unless an Event of Default exists.
12. Satisfaction. Upon the payment in full of all Indebtedness
secured hereby as evidenced by a recorded release of the Mortgage, this
Assignment shall, without the need for any further satisfaction or release,
become null and void and be of no further effect. If requested by Assignor, upon
the payment in full of all Indebtedness secured hereby, Assignee will execute
and deliver to Assignor a release of this Assignment.
13. Assignee as Attorney-In-Fact. Assignor hereby irrevocably
appoints Assignee, and its successors and assigns, as its agent and
attorney-in-fact, which appointment is coupled with an interest, with the right
but not the duty to exercise any rights or remedies hereunder and to execute and
deliver during the term of this Assignment such instruments as Assignee or the
Lenders may deem appropriate to make this Assignment and any further assignment
effective, including without limiting the generality of the foregoing, the
right, upon an Event of Default to endorse on behalf and in the name of Assignor
all checks from tenants in payment of Rents that are made payable to Assignor.
14. Assignee Not a Mortgagee in Possession. Nothing herein contained
and no actions taken pursuant to this Assignment shall be construed as
constituting Assignee or the Lenders a mortgagee in possession.
15. Unenforceable Provisions Severable. All rights, powers and
remedies provided herein may be exercised only to the extent that the exercise
thereof does not violate
5
<PAGE>
any applicable law, and are intended to be limited to the extent necessary so
that they will not render this Assignment invalid, unenforceable or not entitled
to be recorded, registered or filed under any applicable law. In the event that
any provision or clause of this Assignment conflicts with applicable law, or the
application thereof under any particular circumstance to any particular person
or entity conflicts with applicable law, such conflict shall not affect other
provisions of this Assignment which can be given effect without the conflicting
provisions or the applicability of such provisions to other persons or entities
or to such persons or entities under other circumstances and to this end the
provisions of this Assignment are declared to be severable.
16. Successors and Assigns. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to the benefit of,
the legal representatives, successors and assigns of Assignor, Assignee and the
Lenders. All references to Assignee, the Lenders and/or Assignor contained in
this Assignment are deemed to include any such representatives, successors and
assigns.
17. Captions; Amendments; Notices; Governing Law. The captions and
headings of the paragraphs of this Assignment are for convenience only and shall
not be used to interpret or define the provisions of this Assignment. This
Assignment may be amended only in writing signed by Assignor and Assignee. Any
notice under this Assignment shall be deemed to have been given when given in
accordance with the requirements for notice under the LSA. The substantive laws
of the State of New Hampshire shall govern the validity, construction,
enforcement and interpretation of this Assignment to the extent required by
principles of conflicts of laws recognized in such State; otherwise, the laws of
the State of Maine shall govern.
18. Reproduction as Financing Statement. A carbon, photographic or
other reproduction of this Assignment or any financing statement relating to
this Assignment shall be sufficient to be effective as a financing statement.
19. Counterparts. This Assignment may be executed in any number of
counterparts, each of which shall be an original but all of which shall
constitute one instrument.
[Remainder of page intentionally blank; next page is signature page]
6
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed and delivered as a sealed instrument as of the date first above
written.
Signed and Acknowledged GRAND SUMMIT RESORT PROPERTIES, INC.
in the Presence of:
/s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard
- ---------------------------- ----------------------------
Name: Deirdre M. O'Callaghan Name: Mark P. Girard
Its: Vice President
[Sign in black ink]
STATE OF CONNECTICUT )
) ss.
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 14th day of
August, 1997, by Mark P. Girard, the Vice President of GRAND SUMMIT RESORT
PROPERTIES, INC., a Maine corporation, on behalf of said corporation.
/s/ Lori L. Bridwell
---------------------------------------
Notary Public
My Commission Expires: Nov. 30, 2000
LORI L BRIDWELL
NOTARY PUBLIC
MY COMMISSION EXPIRES NOV. 30, 2000
[Seal of Notary Public]
7
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Certain condominium quarter-share units in Grand Summit Hotel and Crown Club at
Attitash/Bear Peak, A Condominium, Bartlett, Carroll County, New Hampshire, as
established by a Declaration of Condominium, Grand Summit Hotel and Crown Club
at Attitash/Bear Peak, A Condominium, dated March 26, 1997, recorded at Book
1692, Page 989, being more particularly described in said Declaration, and as
more particularly shown on As-Built Site Plans prepared by Thaddeus
Thorne-Surveys, Inc., and As Built Floor Plans, prepared by JSA, Inc., all dated
March 27, 1997, recorded March 28, 1997, at Plan Book 159, Pages 53 through 65,
as Units:
Unit 1 (Commercial Unit)
Unit Number Quarter-share Intervals
102 1, 2 & 3
103/105 2, 3 & 4
104 1, 2, 3 & 4
107 1, 2, 3 & 4
109/111 1, 2, 3 & 4
110 1, 2, 3 & 4
114/116 1, 2, 3 & 4
118 1, 2, 3 & 4
120 1, 2, 3 & 4
122/124 1, 2, 3 & 4
125/127 1,3 & 4
126 1, 2, 3 & 4
128 1, 2, 3 & 4
129 1, 2, 3 & 4
130 1 & 2
131 1, 2, 3 & 4
132 3
134/136 1 & 3
137 1, 2, 3 & 4
138 3
139 1, 2, 3 & 4
140/142 1, 2, 3 & 4
EXHIBIT A-1
<PAGE>
Unit Number Quarter-share Intervals
141/143 1, 2, 3 & 4
144 1, 2, 3 & 4
145/147 1, 2, 3 & 4
149 1, 2, 3 & 4
150 2
152 1, 2, 3 & 4
201/203 2
202 1, 2, 3 & 4
204 1, 2, 3 & 4
205 3 & 4
206/208 1, 2, 3 & 4
207 1, 2, 3 & 4
209/211 1, 3 & 4
210/212 1 & 4
213 1, 2, 3 & 4
214 1, 2, & 3
216 1, 2, 3 & 4
219 1, 2, 3 & 4
220 3 & 4
221 1, 2, 3 & 4
222 1, 2, 3 & 4
223/225 1 & 2
224/226 1, 2, & 3
228/230 1, 2, 3 & 4
232/234 1, 2, 3 & 4
235/237 1, 2, 3 & 4
236 1, 3 & 4
238 1, 2, 3 & 4
239 1
240 1, 2, 3 & 4
241 1, 2, 3 & 4
243 1 & 2
244 1, 2, 3 & 4
245 1, 2, 3 & 4
246/248 1, 2, 3 & 4
247/249 1, 2, 3 & 4
EXHIBIT A-2
Unit Number Quarter-share Intervals
<PAGE>
250 1, 2, 3 & 4
251 1, 2, 3 & 4
252/254 4
253/255 1, 2, 3 & 4
256/258 1, 2 & 4
260 3 & 4
301 1, 2 & 3
302 2, 3 & 4
304/306 1, 2, 3 & 4
305/307 1, 2, 3 & 4
308 1, 2, 3 & 4
309 1, 2, 3 & 4
310/312 3 & 4
311 1, 2, 3 & 4
314/316 1, 2, 3 & 4
315 1, 2, 3 & 4
317 1
318/320 1, 2, 3 & 4
322/324 1, 2, & 3
326 1 & 2
328 1 & 3
330/332 2
331 2 & 4
333 1, 2, 3 & 4
335 1, 2 & 4
337 1, 2, 3 & 4
333/340 1, 2, 3 & 4
339 1, 3 & 4
341 1, 2, 3 & 4
342/344 1, 2, 3 & 4
343 1, 2 & 3
345 1 & 3
346 1, 2, 3 & 4
348 1, 2, 3 & 4
350/352 1
354 1, 2, 3 & 4
EXHIBIT A-3
<PAGE>
Exhibit 10.94
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (as amended from time to time, "this Agreement"),
made as of the 1st day of August, 1997, among GRAND SUMMIT RESORT PROPERTIES,
INC., a Maine corporation (the "Borrower") and L.B.O. HOLDING, INC. (the
"Subordinated Lender"), and TEXTRON FINANCIAL CORPORATION, a Delaware
corporation, not in its individual capacity but as Administrative Agent (the
"Administrative Agent") for those certain lenders (the "Lenders") under that
certain Loan and Security Agreement, dated as of August 1, 1997, among Borrower,
Lenders and Textron Financial Corporation (as amended from time to time, the
"LSA"),
W I T N E S S E T H :
WHEREAS, pursuant to the LSA and subject to the terms and conditions
thereof, the Lenders have agreed to make a revolving credit facility available
to the Borrower in an aggregate principal amount of up to $55,000,000 (the
"Loan");
WHEREAS, all of the Borrower's indebtedness, liabilities and obligations
to the Lenders, whether now existing or hereafter arising, under the LSA, the
Notes (as defined in the LSA), and all other instruments and documents executed
and delivered in connection therewith are hereinafter referred to collectively
as the "Senior Debt";
WHEREAS, to the extent provided in the LSA, the Senior Debt is or shall be
secured by first security interests and liens on the Borrower's Property now
owned or hereafter acquired, which are and will be evidenced by collateral
assignments and security agreements, all in favor of the Administrative Agent on
behalf of the Lenders (such documents are hereinafter referred to collectively,
together with all other documents now or hereafter creating or granting to the
Lender collateral security for payment of the Senior Debt, as the "Senior
Security Documents");
WHEREAS, all of the indebtedness, liabilities and obligations of the
Borrower to the Subordinated Lender, whether now existing or hereafter arising,
resulting from loans or credit extended to the Borrower from the Subordinated
Lender or otherwise are hereinafter referred to collectively as the
"Subordinated Debt"; and
WHEREAS, these recitals are, and shall be deemed to be, a part of this
Agreement;
NOW THEREFORE, in consideration of the foregoing and of the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
1. Subordination
(a) The payment of any and all of the Subordinated Debt is hereby
expressly made subordinate and junior in right of payment to the payment of the
principal amount of, and all interest and premium on, and all other amounts in
respect of, the Senior Debt, to the extent and in the manner set forth herein.
<PAGE>
(b) In the event of (1) any insolvency, bankruptcy, receivership,
liquidation, reorganization, arrangement, assignment for the benefit of
creditors, or other similar proceeding relative to the Borrower, its creditors
or its Property, or (2) any proceeding for the voluntary or involuntary
liquidation, dissolution or other winding up of the Borrower whether or not
involving insolvency or bankruptcy proceedings, then and in any such event:
(i) the principal amount of, and all interest and premium on, and
all other amounts in respect of, the Senior Debt (including interest
thereon accruing after the commencement of any such proceeding) shall be
paid in full before any payment or distribution of any character, whether
in cash, securities or other Property, shall be made in respect of the
Subordinated Debt;
(ii) any payment or distribution of any character, whether in cash,
securities or other Property, which would otherwise (but for the terms
hereof) be payable or deliverable in respect of the Subordinated Debt
(including any payment or distribution in respect of the Subordinated Debt
by reason of any other indebtedness of the Borrower being subordinated to
the Subordinated Debt), shall be paid or delivered directly to the
Administrative Agent on behalf of the Lenders, or its representatives,
until the principal amount of, and all interest and premium on, and all
other amounts in respect of, the Senior Debt shall have been paid in full
and the Subordinated Lender or any other holder of the Subordinated Debt
irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, conservators and others having authority in the premises to
effect all such payments and deliveries;
(iii) the Subordinated Lender or any other holder of the
Subordinated Debt shall (1) execute and deliver to the Administrative
Agent on behalf of the Lenders or its representative or agent all such
further instruments confirming the authorization referred to in the
foregoing clause (ii) above, (2) execute and deliver to the Administrative
Agent on behalf of the Lenders or its representative or agent any powers
of attorney specifically confirming the rights of the Administrative Agent
(or such representative or agent) arising hereunder, (3) execute and
deliver to the Administrative Agent on behalf of the Lenders or its
representative or agent all proofs of claim, assignments of claim and
other instruments as may be requested by the Administrative Agent or any
Lender to enforce all claims upon or in respect of the Subordinated Debt,
and (4) shall take all other actions as may be requested by the
Administrative Agent or any Lender to enforce all claims upon or in
respect of the Subordinated Debt.
(c) Until and unless the principal amount of, and all interest and premium
on, and all other amounts in respect of, the Senior Debt shall have been paid in
full, the Borrower shall not make, and the Subordinated Lender shall not
receive, accept or retain, any payments of principal or interest or other amount
on account of the Subordinated Debt; provided, however, that the Borrower may
make and the Subordinated Lender may receive, accept and retain such payments so
long as no Default or Event of Default under, and as defined, in the LSA shall
have occurred and be continuing and so long as the Borrower would not be
rendered insolvent, made unable to pay its debts as they come due or be left
without adequate capital to pursue its business after giving effect to such
payment.
2
<PAGE>
(d) The Borrower agrees that, in the event that any note or other
obligation of the Borrower not evidencing Senior Debt, or any portion thereof,
shall become due and payable before its expressed maturity for any reason, the
Borrower will give prompt notice, in writing, of such happening to the
Administrative Agent.
(e) So long as any of the Senior Debt shall remain unpaid, the
Administrative Agent and the Lenders may at all times exercise any and all
powers and rights which they now have or may hereafter acquire under, or with
respect to any of the collateral subject to, the Senior Security Documents
without having to obtain any consent or approval of the Subordinated Lender and
without any accountability to the Subordinated Lender, nor shall it have any
liability to the Subordinated Lender for any action taken or failure to act with
respect to any of such powers, rights or collateral.
(f) Until the entire principal amount of, and all interest and premium on,
and all other amounts in respect of, the Senior Debt shall have been finally and
indefeasibly paid in full, the Subordinated Lender shall not enforce any right
or remedy (other than requiring payments in the absence of an Event of Default)
or cause the Subordinated Debt to be accelerated or otherwise to become due
prior to its expressed maturity, which it now has or may hereafter have against
the Borrower or its Property, including without limitation, rights and remedies
under any mortgage, deed of trust or security agreement.
(g) If, notwithstanding the provisions of this Agreement, any payment or
distribution of any character (whether in cash, securities or other Property) or
any security shall be received by the Subordinated Lender in contravention of
the terms of this Agreement, and before the entire principal amount of, and all
interest and premium on, and all other amounts in respect of, the Senior Debt
shall have been finally and indefeasibly paid in full, such payment,
distribution or security shall not be commingled with any asset of the
Subordinated Lender, but shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the Administrative Agent, or its
representatives or agents, for application to the payment of all Senior Debt
remaining unpaid, until the principal amount of, and all interest and premium
(including interest thereon accruing after the commencement of any proceedings
described in Section 1(b) hereof) on, and all other amounts in respect of, the
Senior Debt shall have been finally and indefeasibly paid in full.
(h) Until the principal amount of, and all interest and premium on, and
all other amounts in respect of, the Senior Debt shall have been finally and
indefeasibly paid in full, the Subordinated Lender shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to any assets or Property of the Borrower or to any collateral
for the Senior Debt.
(i) This Agreement, without further reference, shall pass to and may be
relied on and enforced by any transferee or subsequent holder of the Senior
Debt. In the event of any sale, assignment, disposition or other transfer of the
Subordinated Debt, the Subordinated Lender shall cause the transferee thereof to
execute and deliver to the Administrative Agent a written instrument signed by
the transferee, in form and substance satisfactory to the Administrative Agent,
providing for the continued subordination of the Subordinated Debt to the Senior
Debt as provided for herein and for the continued effectiveness of all of the
rights of the Administrative Agent and the Lenders arising under this Agreement.
3
<PAGE>
2. Continued Effectiveness of This Agreement.
The terms of this Agreement, the subordination effected hereby, and the
rights of the Administrative Agent and the Lenders and the obligations of the
Subordinated Lender arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by: (i) any amendment or modification of
or supplement to the LSA, the Notes, the other Senior Security Documents or any
instrument or document executed or delivered pursuant thereto, including,
without limitation, the extension of the term of the Senior Debt and/or the
increase in the amount of the Senior Debt; (ii) the lack of validity, legality
or enforceability of any of such documents; (iii) any exercise or non-exercise
of any right, power or remedy under or in respect of the Senior Debt or any of
such instruments or documents referred to in clause (i) above or arising at law;
or (iv) any waiver, consent, release, indulgence, extension, renewal,
modification, delay or other action, inaction or omission in respect of the
Senior Debt or any of the instruments or documents referred to in clause (i)
above or in respect of any of the properties or assets now or hereafter affected
by any of the Senior Security Documents, whether or not the Subordinated Lender
shall have had notice or knowledge of any of the foregoing and whether or not it
shall have consented thereto.
3. Delivery of Promissory Note.
In order to more fully implement the subordination effected hereby, the
Subordinated Lender shall deliver to the Administrative Agent or its agent all
promissory notes of the Borrower payable to the order of Subordinated Lender.
The Subordinated Lender agrees to take such other action as may be reasonably
necessary or appropriate to effectuate, as between the Administrative Agent and
the Lenders, on the one side, and the Subordinated Lender, on the other side,
the subordination provided for herein.
4. Miscellaneous.
(a) The Subordinated Lender shall join with the Administrative Agent in
executing one or more financing statements pursuant to the Uniform Commercial
Code or other notices appropriate under applicable law, in form satisfactory to
the Lender, for filing in all public offices where such filings are deemed by
the Administrative Agent to be necessary or desirable.
(b) All communications under this Agreement shall be in writing, shall be
deemed given (1) when personally delivered at the following address, (2) one (1)
Business Day after being deposited with a nationally recognized overnight
courier, all delivery fees prepaid, and addressed as follows, (3) or five (5)
Business Days after being deposited in the United States mail (first class,
registered or certified mail), postage prepaid, and addressed as follows:
4
<PAGE>
(1) if to the Lenders, to:
Textron Financial Corporation
Resort Receivables Finance Division
333 East River Drive, Suite 305
East Hartford, CT 06108
Attention: Mr. Richard Mitterling
with a copy to:
Textron Financial Corporation
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attn: Vice President - Law
Green Tree Financial Servicing Corporation
100 North Point Center, East
Suite 200
Alpharette, GA 30202
Attn: Christopher Gouskos
Vice President
(2) if to the Borrower, to:
Grand Summit Resort Properties, Inc.
P.O. Box 450
Sunday Rover Road
Bethel, Maine 04217
(3) if to the Subordinated Lender, to:
L.B.O. Holding, Inc.
P.O. Box 450
Sunday Rover Road
Bethel, Maine 04217
or to such other address as any of the parties shall have furnished in writing
to the other parties. Any notice so addressed and otherwise delivered shall be
deemed to be given when actually received by the addressee.
(c) This Agreement may not be amended or modified orally but may be
amended or modified only in a writing, signed by all parties hereto. No waiver
of any term or provision of this Agreement shall be effective unless it is in
writing, making specific reference to this Agreement and signed by the party
against whom such waiver is sought to be enforced. This
5
<PAGE>
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. This Agreement shall be binding upon the
parties hereto and their respective heirs, legal representatives, successors and
assigns. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maine.
(d) Terms used in this Agreement and not defined herein shall have the
respective meanings ascribed to them in the LSA.
(e) This Agreement shall terminate upon the final and indefeasible payment
in full of the principal amount of, and all interest and premium on, and all
other amounts in respect of, the Senior Debt.
(f) Two or more duplicate originals of this Agreement may be signed by the
parties hereto, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(g) All right, powers and remedies hereunder of the Administrative Agent
and the Lenders are cumulative and in addition to any rights, power or remedies
that it may have in respect of any subordination agreement executed and
delivered by the Subordinated Lender in respect of the LSA.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GRAND SUMMIT RESORT PROPERTIES, INC.
By /s/ Mark P. Girard
--------------------------------------
Name: Mark P. Girard
Title: Vice President
TEXTRON FINANCIAL CORPORATION,
as Administrative Agent
By
--------------------------------------
Name:
Title:
L.B.O. HOLDING, INC.
By /s/ Christopher E. Howard
--------------------------------------
Name: Christopher E. Howard
Title: Chief Administrative Officer
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GRAND SUMMIT RESORT PROPERTIES, INC.
By
--------------------------------------
Name:
Title:
TEXTRON FINANCIAL CORPORATION,
as Administrative Agent
By David F. Brede
--------------------------------------
Name: David F. Brede
Title: Assistant Vice President
L.B.O. HOLDING, INC.
By
--------------------------------------
Name:
Title:
<PAGE>
AGREED AND CONSENTED TO:
TEXTRON FINANCIAL CORPORATION, as a Lender
By /s/ David F. Brede
---------------------------------------------
Name: David F. Brede
Title: Assistant Vice President
GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender
By
---------------------------------------------
Name:
Title:
<PAGE>
AGREED AND CONSENTED TO:
TEXTRON FINANCIAL CORPORATION, as a Lender
By
---------------------------------------------
Name:
Title:
GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender
By /s/ Christopher A. Gouskos
---------------------------------------------
Name: Christopher A. Gouskos
Title: V.P., GENERAL MANAGER
<PAGE>
Exhibit 10.95
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (as amended from time to time, "this Agreement"),
made as of the 1st day of August, 1997, among GRAND SUMMIT RESORT PROPERTIES,
INC., a Maine corporation (the "Borrower") and AMERICAN SKIING COMPANY (the
"Subordinated Lender"), and TEXTRON FINANCIAL CORPORATION, a Delaware
corporation, not in its individual capacity but as Administrative Agent (the
"Administrative Agent") for those certain lenders (the "Lenders") under that
certain Loan and Security Agreement, dated as of August 1, 1997, among Borrower,
Lenders and Textron Financial Corporation (as amended from time to time, the
"LSA"),
W I T N E S S E T H :
WHEREAS, pursuant to the LSA and subject to the terms and conditions
thereof, the Lenders have agreed to make a revolving credit facility available
to the Borrower in an aggregate principal amount of up to $55,000,000 (the
"Loan");
WHEREAS, all of the Borrower's indebtedness, liabilities and obligations
to the Lenders, whether now existing or hereafter arising, under the LSA, the
Notes (as defined in the LSA), and all other instruments and documents executed
and delivered in connection therewith are hereinafter referred to collectively
as the "Senior Debt";
WHEREAS, to the extent provided in the LSA, the Senior Debt is or shall be
secured by first security interests and liens on the Borrower's Property now
owned or hereafter acquired, which are and will be evidenced by collateral
assignments and security agreements, all in favor of the Administrative Agent on
behalf of the Lenders (such documents are hereinafter referred to collectively,
together with all other documents now or hereafter creating or granting to the
Lender collateral security for payment of the Senior Debt, as the "Senior
Security Documents");
WHEREAS, all of the indebtedness, liabilities and obligations of the
Borrower to the Subordinated Lender, whether now existing or hereafter arising,
resulting from loans or credit extended to the Borrower from the Subordinated
Lender or otherwise are hereinafter referred to collectively as the
"Subordinated Debt"; and
WHEREAS, these recitals are, and shall be deemed to be, a part of this
Agreement;
NOW THEREFORE, in consideration of the foregoing and of the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
1. Subordination
(a) The payment of any and all of the Subordinated Debt is hereby
expressly made subordinate and junior in right of payment to the payment of the
principal amount of, and all interest and premium on, and all other amounts in
respect of, the Senior Debt, to the extent and in the manner set forth herein.
<PAGE>
(b) In the event of (1) any insolvency, bankruptcy, receivership,
liquidation, reorganization, arrangement, assignment for the benefit of
creditors, or other similar proceeding relative to the Borrower, its creditors
or its Property, or (2) any proceeding for the voluntary or involuntary
liquidation, dissolution or other winding up of the Borrower whether or not
involving insolvency or bankruptcy proceedings, then and in any such event:
(i) the principal amount of, and all interest and premium on, and
all other amounts in respect of, the Senior Debt (including interest
thereon accruing after the commencement of any such proceeding) shall be
paid in full before any payment or distribution of any character, whether
in cash, securities or other Property, shall be made in respect of the
Subordinated Debt;
(ii) any payment or distribution of any character, whether in cash,
securities or other Property, which would otherwise (but for the terms
hereof) be payable or deliverable in respect of the Subordinated Debt
(including any payment or distribution in respect of the Subordinated Debt
by reason of any other indebtedness of the Borrower being subordinated to
the Subordinated Debt), shall be paid or delivered directly to the
Administrative Agent on behalf of the Lenders, or its representatives,
until the principal amount of, and all interest and premium on, and all
other amounts in respect of, the Senior Debt shall have been paid in full
and the Subordinated Lender or any other holder of the Subordinated Debt
irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, conservators and others having authority in the premises to
effect all such payments and deliveries;
(iii) the Subordinated Lender or any other holder of the
Subordinated Debt shall (1) execute and deliver to the Administrative
Agent on behalf of the Lenders or its representative or agent all such
further instruments confirming the authorization referred to in the
foregoing clause (ii) above, (2) execute and deliver to the Administrative
Agent on behalf of the Lenders or its representative or agent any powers
of attorney specifically confirming the rights of the Administrative Agent
(or such representative or agent) arising hereunder, (3) execute and
deliver to the Administrative Agent on behalf of the Lenders or its
representative or agent all proofs of claim, assignments of claim and
other instruments as may be requested by the Administrative Agent or any
Lender to enforce all claims upon or in respect of the Subordinated Debt,
and (4) shall take all other actions as may be requested by the
Administrative Agent or any Lender to enforce all claims upon or in
respect of the Subordinated Debt.
(c) Until and unless the principal amount of, and all interest and premium
on, and all other amounts in respect of, the Senior Debt shall have been paid in
full, the Borrower shall not make, and the Subordinated Lender shall not
receive, accept or retain, any payments of principal or interest or other amount
on account of the Subordinated Debt; provided, however, that the Borrower may
make and the Subordinated Lender may receive, accept and retain such payments so
long as no Default or Event of Default under, and as defined, in the LSA shall
have occurred and be continuing and so long as the Borrower would not be
rendered insolvent, made unable to pay its debts as they come due or be left
without adequate capital to pursue its business after giving effect to such
payment.
2
<PAGE>
(d) The Borrower agrees that, in the event that any note or other
obligation of the Borrower not evidencing Senior Debt, or any portion thereof,
shall become due and payable before its expressed maturity for any reason, the
Borrower will give prompt notice, in writing, of such happening to the
Administrative Agent.
(e) So long as any of the Senior Debt shall remain unpaid, the
Administrative Agent and the Lenders may at all times exercise any and all
powers and rights which they now have or may hereafter acquire under, or with
respect to any of the collateral subject to, the Senior Security Documents
without having to obtain any consent or approval of the Subordinated Lender and
without any accountability to the Subordinated Lender, nor shall it have any
liability to the Subordinated Lender for any action taken or failure to act with
respect to any of such powers, rights or collateral.
(f) Until the entire principal amount of, and all interest and premium on,
and all other amounts in respect of, the Senior Debt shall have been finally and
indefeasibly paid in full, the Subordinated Lender shall not enforce any right
or remedy (other than requiring payments in the absence of an Event of Default)
or cause the Subordinated Debt to be accelerated or otherwise to become due
prior to its expressed maturity, which it now has or may hereafter have against
the Borrower or its Property, including without limitation, rights and remedies
under any mortgage, deed of trust or security agreement.
(g) If, notwithstanding the provisions of this Agreement, any payment or
distribution of any character (whether in cash, securities or other Property) or
any security shall be received by the Subordinated Lender in contravention of
the terms of this Agreement, and before the entire principal amount of, and all
interest and premium on, and all other amounts in respect of, the Senior Debt
shall have been finally and indefeasibly paid in full, such payment,
distribution or security shall not be commingled with any asset of the
Subordinated Lender, but shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the Administrative Agent, or its
representatives or agents, for application to the payment of all Senior Debt
remaining unpaid, until the principal amount of, and all interest and premium
(including interest thereon accruing after the commencement of any proceedings
described in Section 1(b) hereof) on, and all other amounts in respect of, the
Senior Debt shall have been finally and indefeasibly paid in full.
(h) Until the principal amount of, and all interest and premium on, and
all other amounts in respect of, the Senior Debt shall have been finally and
indefeasibly paid in full, the Subordinated Lender shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to any assets or Property of the Borrower or to any collateral
for the Senior Debt.
(i) This Agreement, without further reference, shall pass to and may be
relied on and enforced by any transferee or subsequent holder of the Senior
Debt. In the event of any sale, assignment, disposition or other transfer of the
Subordinated Debt, the Subordinated Lender shall cause the transferee thereof to
execute and deliver to the Administrative Agent a written instrument signed by
the transferee, in form and substance satisfactory to the Administrative Agent,
providing for the continued subordination of the Subordinated Debt to the Senior
Debt as provided for herein and for the continued effectiveness of all of the
rights of the Administrative Agent and the Lenders arising under this Agreement.
3
<PAGE>
2. Continued Effectiveness of This Agreement.
The terms of this Agreement, the subordination effected hereby, and the
rights of the Administrative Agent and the Lenders and the obligations of the
Subordinated Lender arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by: (i) any amendment or modification of
or supplement to the LSA, the Notes, the other Senior Security Documents or any
instrument or document executed or delivered pursuant thereto, including,
without limitation, the extension of the term of the Senior Debt and/or the
increase in the amount of the Senior Debt; (ii) the lack of validity, legality
or enforceability of any of such documents; (iii) any exercise or non-exercise
of any right, power or remedy under or in respect of the Senior Debt or any of
such instruments or documents referred to in clause (i) above or arising at law;
or (iv) any waiver, consent, release, indulgence, extension, renewal,
modification, delay or other action, inaction or omission in respect of the
Senior Debt or any of the instruments or documents referred to in clause (i)
above or in respect of any of the properties or assets now or hereafter affected
by any of the Senior Security Documents, whether or not the Subordinated Lender
shall have had notice or knowledge of any of the foregoing and whether or not it
shall have consented thereto.
3. Delivery of Promissory Note.
In order to more fully implement the subordination effected hereby, the
Subordinated Lender shall deliver to the Administrative Agent or its agent all
promissory notes of the Borrower payable to the order of Subordinated Lender.
The Subordinated Lender agrees to take such other action as may be reasonably
necessary or appropriate to effectuate, as between the Administrative Agent and
the Lenders, on the one side, and the Subordinated Lender, on the other side,
the subordination provided for herein.
4. Miscellaneous.
(a) The Subordinated Lender shall join with the Administrative Agent in
executing one or more financing statements pursuant to the Uniform Commercial
Code or other notices appropriate under applicable law, in form satisfactory to
the Lender, for filing in all public offices where such filings are deemed by
the Administrative Agent to be necessary or desirable.
(b) All communications under this Agreement shall be in writing, shall be
deemed given (1) when personally delivered at the following address, (2) one (1)
Business Day after being deposited with a nationally recognized overnight
courier, all delivery fees prepaid, and addressed as follows, (3) or five (5)
Business Days after being deposited in the United States mail (first class,
registered or certified mail), postage prepaid, and addressed as follows:
4
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(1) if to the Lenders, to:
Textron Financial Corporation
Resort Receivables Finance Division
333 East River Drive, Suite 305
East Hartford, CT 06108
Attention: Mr. Richard Mitterling
with a copy to:
Textron Financial Corporation
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attn: Vice President - Law
Green Tree Financial Servicing Corporation
100 North Point Center, East
Suite 200
Alpharette, GA 30202
Attn: Christopher Gouskos
Vice President
(2) if to the Borrower, to:
Grand Summit Resort Properties, Inc.
P.O. Box 450
Sunday Rover Road
Bethel, Maine 04217
(3) if to the Subordinated Lender, to:
American Skiing Company
P.O. Box 450
Sunday Rover Road
Bethel, Maine 04217
or to such other address as any of the parties shall have furnished in writing
to the other parties. Any notice so addressed and otherwise delivered shall be
deemed to be given when actually received by the addressee.
(c) This Agreement may not be amended or modified orally but may be
amended or modified only in a writing, signed by all parties hereto. No waiver
of any term or provision of this Agreement shall be effective unless it is in
writing, making specific reference to this Agreement and signed by the party
against whom such waiver is sought to be enforced. This
5
<PAGE>
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. This Agreement shall be binding upon the
parties hereto and their respective heirs, legal representatives, successors and
assigns. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maine.
(d) Terms used in this Agreement and not defined herein shall have the
respective meanings ascribed to them in the LSA.
(e) This Agreement shall terminate upon the final and indefeasible payment
in full of the principal amount of, and all interest and premium on, and all
other amounts in respect of, the Senior Debt.
(f) Two or more duplicate originals of this Agreement may be signed by the
parties hereto, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(g) All right, powers and remedies hereunder of the Administrative Agent
and the Lenders are cumulative and in addition to any rights, power or remedies
that it may have in respect of any subordination agreement executed and
delivered by the Subordinated Lender in respect of the LSA.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GRAND SUMMIT RESORT PROPERTIES, INC.
By /s/ Mark P. Girard
--------------------------------------
Name: Mark P. Girard
Title: Vice President
TEXTRON FINANCIAL CORPORATION,
as Administrative Agent
By
--------------------------------------
Name:
Title:
AMERICAN SKIING COMPANY
By /s/ Christopher E. Howard
--------------------------------------
Name: Christopher E. Howard
Title: Chief Administrative Officer
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GRAND SUMMIT RESORT PROPERTIES, INC.
By
--------------------------------------
Name:
Title:
TEXTRON FINANCIAL CORPORATION,
as Administrative Agent
By /s/ David F. Brede
--------------------------------------
Name: David F. Brede
Title: Assistant Vice President
AMERICAN SKIING COMPANY
By
--------------------------------------
Name:
Title:
<PAGE>
AGREED AND CONSENTED TO:
TEXTRON FINANCIAL CORPORATION, as a Lender
By /s/ David F. Brede
---------------------------------------------
Name: David F. Brede
Title: Assistant Vice President
GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender
By
---------------------------------------------
Name:
Title:
<PAGE>
AGREED AND CONSENTED TO:
TEXTRON FINANCIAL CORPORATION, as a Lender
By
---------------------------------------------
Name:
Title:
GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender
By /s/ Christopher A. Gouskos
---------------------------------------------
Name: Christopher A. Gouskos
Title: V.P., GENERAL MANAGER
<PAGE>
EXHIBIT 10.97
COLLATERAL ASSIGNMENT OF DECLARANT'S RIGHTS
This COLLATERAL ASSIGNMENT OF DECLARANT'S RIGHTS (this "AGREEMENT") is made
as of the 1st day of August, 1997.
1. BACKGROUND. Textron Financial Corporation, a Delaware corporation
having a principal place of business at 333 East River Drive, Suite 305, East
Hartford, Connecticut 06108 ("ADMINISTRATIVE AGENT"), in its capacity as
Administrative Agent under that certain Loan and Security Agreement (as amended,
the "LSA"), dated as of August 1, 1997 among Grand Summit Resort Properties,
Inc., a Maine corporation having a principal place of business at P.O. Box 450,
Sunday River Road, Bethel, ME 04217 (the "BORROWER"), and the lenders that are
parties thereto, is the holder (on behalf of the aforesaid lenders) of a certain
Mortgage, Assignment of Rents and Security Agreement given by the Borrower,
dated as of August 1, 1997, and recorded in Carroll County, New Hampshire (the
"LAND RECORDS") in Book 1711, Page 590 (the "MORTGAGE"). The Borrower is the
declarant (the "DECLARANT") under that certain Declaration of Condominium for
Grand Summit Hotel and Crown Club at Attitash Bear Peak, a condominium more
particularly described on Schedule 1 attached hereto, as amended from time to
time in accordance with the terms and provisions thereof and hereof (the
"DECLARATION"), relating to the Attitash Project, as defined in the LSA and more
particularly described on Exhibit A hereto (the "PROJECT").
Except as otherwise specifically stated herein, capitalized terms used
herein without definition shall have the meaning given to such terms in the
Declaration.
In consideration of the foregoing, and of the mutual promises and covenants
herein contained and contained in the LSA, the Administrative Agent and the
Declarant have entered into this Agreement.
2. CONFIRMATION OF THE MORTGAGE. The Declarant hereby acknowledges and
confirms that in granting the Mortgage to the Administrative Agent and entering
into the LSA with the Administrative Agent and the lenders that are parties
thereto, Declarant granted to the Administrative Agent a security interest in
all of Declarant's rights and interests with respect to the property described
in the Mortgage and the LSA. Declarant does hereby unconditionally and
irrevocably grant to Administrative Agent a security interest in and a lien upon
Declarant's rights as a declarant under the Declaration and all other rights
which are reserved to the Declarant in the Declaration, including, but not
limited to, any and all rights in and to the Convertible Land and any and all
development rights or special declarant's rights, whether relating to the
Convertible Land or otherwise (collectively, the "DECLARANT'S RIGHTS"). The
aforesaid grant is hereby made subject to the Mortgage and shall be deemed to
have been made in accordance with all of the terms and conditions thereof and
for the purpose of securing the payment and performance of the obligations of
Declarant under the Mortgage and the LSA, and the terms and provisions of the
Mortgage and the LSA are incorporated herein by reference, as if set forth at
length herein. Such grant is in addition to and not in substitution for any
rights which the Administrative Agent and/or the lenders that are parties to the
LSA may now have or hereafter acquire under the law of the State in which the
Project is situated.
<PAGE>
3. ADDITIONAL COVENANTS OF DECLARANT. The Declarant hereby further
covenants and agrees with Administrative Agent as follows:
3.1 That the Declarant will not, without the prior written consent of
Administrative Agent: (a) exercise any of the Declarant's Rights in any
manner that materially and adversely affects the operation of Mortgaged
Property (as defined in the Mortgage) or the Project situated thereon, (b)
take any action, or omit any action, the result of which taking or omission
would be the loss, abridgment or termination of any of such Declarant's
Rights or (c) amend or modify, or approve any amendment or modification of,
the Declaration that would (in the opinion of Administrative Agent)
adversely affect the operation and prospects of the Mortgaged Property, the
aforesaid Project or the security interests of Administrative Agent
therein.
3.2 That the Declarant shall fully perform all obligations, duties,
agreements and conditions to be performed by the Declarant under the terms
and provisions of the Declaration and under the laws of the State in which
the Project is situated, and that the Declarant shall provide
Administrative Agent with such evidence of such performance as
Administrative Agent may reasonably request from time to time.
3.3 The Declarant acknowledges and agrees that Administrative Agent
is not responsible for any of the obligations or liabilities of the
Declarant under the Declaration and the applicable laws of the State in
which the Project is situated, including without limitation, any obligation
or liability of any kind to any purchaser of quartershare interests,
residential units or commercial units at the Mortgaged Property, and
Declarant specifically acknowledges and agrees that in executing this
Agreement Administrative Agent makes no warranties or covenants to any
person or party as to title, merchantability, fitness for any particular
purpose, physical condition, or otherwise, as to the Mortgaged Property, or
any portion thereof, whether such be express or implied. The Declarant
further acknowledges and agrees that neither the execution of this
Agreement by Administrative Agent nor the execution of the Mortgage, the
LSA or any other agreement or instrument in connection therewith shall
relieve the Declarant from any of its obligations or duties under the
Declaration or the applicable laws of the State in which the Project is
situated, and that Administrative Agent shall have no duties or obligations
under the Declaration or under the applicable laws of the State in which
the Project is situated until such time as it should succeed to the status
of Declarant in accordance with the Declaration or pursuant to a deed in
lieu of foreclosure under the Mortgage.
3.4 The Declarant hereby warrants to Administrative Agent that as of
the date hereof (a) it has not executed any prior conveyance or assignment
of any Declarant's Rights or other rights reserved by it in the
Declaration; (b) that it has not performed any acts nor executed any
instruments which might prevent Administrative Agent from exercising the
terms and provisions of the Mortgage, the LSA, this Agreement or any other
document executed and delivered by Declarant to Administrative Agent or
which would limit Administrative Agent in the exercise of its rights
thereunder or hereunder; (c) that as of the date hereof, the Declarant is
the sole owner of the Declarant's Rights; and (d) that
2
<PAGE>
the Declarant's Rights have been validly created and reserved in accordance
with all applicable requirements of the laws of the State in which the
Project is situated.
4. MISCELLANEOUS. This Agreement, and the covenants, conditions,
warranties, and representations herein contained, shall inure to and bind the
successors and assigns of the Declarant and Administrative Agent. Wherever
used, the singular number shall include the plural, and the use of any gender
shall be applicable to all genders. If any obligation or portion of this
Agreement is determined to be invalid or unenforceable under law, it shall not
affect the validity or enforcement of the remaining obligations or portions
hereof. This Agreement is to be construed under the laws of the State of in
which the Project is situated. All covenants, conditions, provisions,
warranties, and other undertakings of Declarant contained in this Agreement, or
in the Mortgage, LSA or any other agreement executed and delivered by Declarant
in connection therewith, heretofore, concurrently or hereafter entered into,
shall be deemed cumulative to and not in derogation or substitution of any of
the terms, covenants, conditions or agreements of Declarant herein contained.
The failure or delay of Administrative Agent to exercise or enforce any rights,
liens, powers or remedies hereunder or under any of the aforesaid agreements
shall not operate as a waiver of such liens, rights, powers and remedies, but
all such liens, rights, powers and remedies shall continue in full force and
effect. All liens, rights, powers and remedies herein provided for are
cumulative and none are exclusive. Declarant shall do any and all things
necessary, or take any action requested by Administrative Agent, to carry out
the intent of this Agreement.
5. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART. Two or more duplicate
originals hereof may be signed by the parties, each of which shall be an
original but all of which together shall constitute one and the same instrument.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts which, collectively, show execution by each
party hereto shall constitute one duplicate original.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
executed as of the date and year first above written.
Signed and Acknowledged in the GRAND SUMMIT RESORT PROPERTIES, INC.
Presence of:
/s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard
- ------------------------------- -----------------------------
Name: Deirdre M. O'Callaghan Its: Vice President
/s/ Ellen M. Grace
- ------------------------------
Name: Ellen M. Grace
STATE OF MAINE )
) SS.
COUNTY OF )
PERSONALLY APPEARED the above-named Mark P. Girard, Vice President of
Grand Summit Resort Properties, Inc. and acknowledged the foregoing
instrument to be his/her free act and deed in said capacity and the free act
and deed of said corporation.
Before me,
/s/ Lori L. Bridwell
------------------------------------
Notary Public/Attorney at Law
Print Name: Lori L. Bridwell
My commission expires: November 30, 2000
4
<PAGE>
Signed and Acknowledged TEXTRON FINANCIAL CORPORATION, as in the
Presence of: Administrative Agent
/s/ Joseph L. Labbodie By /s/ Nicholas L. Mecca
- ------------------------------- --------------------------------
Name: Joseph L. Labbodie Its: V. P.
/s/ Jennifer L. Sauer
- -------------------------------
Name: Jennifer L. Sauer
STATE OF CONNECTICUT )
) SS.
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 12 day of
August, 1996, by Nicholas L. Mecca, the V. P. of Textron Financial
Corporation, a Delaware corporation, on behalf of said corporation.
/s/ Christine M. Cordeira
---------------------------------
Notary Public
My Commission Expires: April 30, 2002
5
<PAGE>
SCHEDULE 1
The condominium established pursuant to that certain Declaration of Condominium
Grand Summit Hotel and Crown Club at Attitash Bear Peak, A Condominium, dated
March 26, 1997, recorded on March 28, 1997, in Book 1692, at Page 989, of the
Office of the Registry of Deeds of Carroll County, New Hampshire, and according
to that certain map entitled "Condominium Plan Grand Summit Hotel and Crown Club
at Attitash Bear Peak, A Condominium", dated March 27, 1997, and recorded as
Plan Number 159 / 53-65 in the Office of the Registry of Deeds of Carroll
County, New Hampshire.
Schedule 1-1
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
Exhibit A-1
<PAGE>
Exhibit 10.99
EXHIBIT D
SKI LEASE
This Ski Lease is entered into as of September __, 1997 between ASC Utah,
a Maine corporation ("ASC") and Iron Mountain Associates, LLC. ("IMA") a
Utah limited liability company, WPA, LTD. ("WPA"), a Utah limited
partnership, Iron Mountain Holding Group, LC ("IMHG") a Utah limited
liability company and Iron Mountain Alliance, Inc. ("IMAI") a Utah
corporation (WPA, IMHG and IMAI being collectively referred to as "Members"),
all collectively referred to as the Parties, and is intended to implement the
provisions of the certain Development Agreement executed by the Parties on
this same date (the "Development Agreement").
1. DEFINITIONS, REFERENCES AND EXHIBITS. Capitalized terms used but not
defined herein shall have the meaning ascribed to those terms in the
Development Agreement among the parties dated as of the date hereof.
References to Sections and Exhibits or Schedules shall be the same as those
in the Development Agreement.
2. LEASE ESTABLISHED. This Lease Agreement is a lease to ASC by IMA and
its Members (the "Lease") on those portions of the IMA Fee Property
hereinafter described for the purposes of operating a commercial alpine ski
resort (the "IMA Ski Lease Property"). The Parties shall execute and deliver,
concurrently herewith, a short form "Notice of Lease" in recordable form,
which conforms with the provisions set forth herein. At the expiration or
termination of this Lease, ASC shall, promptly upon IMA's request, sign such
documents and take such actions as are necessary to remove the recorded
Notice of Lease as a matter of record against the Leased Premises.
3. TRUST LANDS SKI LEASE. IMA hereby agrees that Trust Lands and ASC
shall have the right to establish a separate ski lease agreement between
those two parties with respect to the IMA Lease Property and the BLM Lands,
or other property which may be leased to IMA by Trust Lands in the future.
Rather than including those leased properties in this Lease on a sublease
basis, the Parties agree that ASC should establish a separate lease with
Trust Lands for ski development on those properties, and IMA hereby consents
to that arrangement.
4. LEASED PREMISES. IMA and its Members hereby lease and let to ASC, and
ASC hereby takes and hires from IMA and its Members, upon and subject to the
terms, conditions, covenants and provisions set forth herein, all of those
tracts, pieces and parcels of land, situated in White Pine Canyon, Summit
County, Utah (the "IMA Ski Lease Property"), more particularly identified
using a procedure set forth in Section 7.01, together with any and all
improvements, appurtenances, rights, privileges and easements benefiting,
belonging or pertaining thereto (all of the foregoing hereinafter sometimes
referred to as the "Leased Premises"). Each party's respective rights to use
the Leased Premises shall be limited in the manner described in Section 5
hereof.
<PAGE>
5. USE. Except as expressly set forth herein, all rights to the use
of the Leased Premises are reserved by IMA, its successors and assigns,
including without limitation extending or granting such rights to purchasers
of lots in the IMA Project. The use of the Leased Premises by ASC shall be
limited to the construction and operation of an alpine ski resort consisting
essentially of the following uses:
(a) Construction of ski lifts and related improvements of such size,
type and with such attributes and amenities as are consistent with the
Preliminary Development Plan, as amended or revised in a manner specified
in Section 7.01.
(b) Construction and maintenance of ski trails of a size, location
and nature consistent with the provisions of the Preliminary Development
Plan, as amended or revised in the manner set forth in Section 7.01 of the
Development Agreement.
(c) Construction and installation of snowmaking pipes, lines,
nozzles and related infrastructure improvements required for the operation
of such systems, which improvements shall include state-of-the-art
technology reducing noise levels to the greatest extent possible.
(d) Construction and operation of only the day skiing lodges
described in Schedule B, warming huts and other buildings associated with
the improvements described herein, provided that IMA and ASC must agree
upon the location, type and design of any such buildings prior to their
construction using the methodology set forth in Sections 1.01 and 7.01.
With respect to day skiing lodges, ASC and IMA agree that the Preliminary
Development Plan shall limit utilization of the Leased Premises for
construction and operation of day skiing lodges to the greatest extent
reasonably possible consistent with providing a premier, world-class, ski-
resort experience. Day skiing lodges may contain any of the uses that are
customary for such facilities at the finest ski resorts in the United
States.
(e) Any commercial real estate development other than the day skiing
lodges specifically referred to in Schedule C, for which lease terms are
set forth in Section 7(e) below, will be permitted only pursuant to a
separate lease agreement specifically addressing those activities.
6. EXCLUDED USES. Notwithstanding the foregoing, without IMA's consent,
the Leased Premises shall not be used for any of the following enumerated
uses:
(a) Ski lift operation for commercial purposes during any period
when the resort is not open for alpine skiing. Lifts may be operated during
this period for maintenance and improvement activities.
(b) Mountain biking and other summer commercial recreation activities
shall be limited exclusively to areas identified for such use on the
Preliminary Development Plan, as amended or revised pursuant to Section
7.01.
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<PAGE>
(c) Disruptive conduct which constitutes a nuisance and which is
sponsored by, or under the authority and control of, ASC.
7. TERM. The term of the Lease shall commence as of the date hereinabove
first written ("Commencement Date") and shall continue until September 13,
2094 (the "Term").
8. CONSIDERATION. As consideration for this Lease, ASC agrees to provide
to IMA (1) full and complete performance of all of the terms and conditions
of the Development Agreement; and (2) full and complete performance of all
the terms and conditions of the Lease, the monetary portions of which
collectively shall be referred to as rent ("Rent"), including specifically
the following:
(a) TAXES. ASC shall, during the term of the Lease, as additional
Rent, pay and discharge punctually, as and when the same shall become due
and payable, all taxes, special and general assessments, water rents,
rates and charges, sewer rents and other governmental impositions and
charges of every kind and nature whatsoever, extraordinary as well as
ordinary, (hereinafter referred to as "Taxes"), and each and every
installment thereof which shall or may during the Term of the Lease be
charged, levied, laid, assessed imposed, become due and payable, or a lien
upon, or for, or with respect to, the Leased Premises or any part
thereof, or any buildings, appurtenances, equipment, or other personal
property owned or operated by ASC thereon or therein or any part thereof,
together with all interest and penalties thereon, under or by virtue of
all present or future laws, ordinances, requirements, orders,
directives, rules or regulations of the federal, state, county and
municipal governments and of all other governmental authorities
whatsoever (all of which shall also be included in the term "Taxes" as
heretofore defined).
(i) ASC or its designee shall have the right to contest or
review all such Taxes by legal proceedings, or in such other manner
as it may deem suitable (which, if instituted, ASC or its designees
shall conduct promptly at its own cost and expense, and, if
necessary, in the name of IMA with the cooperation of IMA and IMA
shall execute all documents reasonable necessary to accomplish the
foregoing). Notwithstanding the foregoing, ASC shall promptly pay
all such Taxes if at any time the Leased Premises or any part
thereof shall then be immediately subject to forfeiture, or if IMA
shall be subject to any criminal liability arising out of the
nonpayment. Such legal proceedings shall include appropriate
certiorari proceedings, and appeals from orders therein and appeals
from any judgments, decrees, or orders. In the event of any
reduction, cancellation or discharge, ASC shall pay the amount
finally levied or assessed against the Leased Premises or
adjudicated to be due and payable on any such contested Taxes.
(ii) IMA covenants and agrees that if there shall be any refunds
or rebates on account of the Taxes paid by ASC under the provisions
of the Lease, such
3
<PAGE>
refund or rebate shall belong to ASC, except those taxes
pro-rated as provided in Section 8(d)(ii) below. Any refunds
received by IMA shall be deemed trust funds and as such are to be
received by IMA in trust and paid to ASC forthwith. IMA will,
upon the written request of ASC, sign any receipts which may be
necessary to secure the payment of any such refund or rebate, and
will pay over to ASC such refund or rebate as received by IMA.
(iii) The Parties covenant and agree that either of them
may, at any time, and from time to time, but without cost to IMA,
make application individually (if legally required) or to join in
the application of the other (if legally required) for separate
tax assessments for such portions of the Leased Premises as
either shall at any time, and from time to time, designate. The
Parties hereby agree, upon reasonable request of the other, to
execute such instruments and to give such assistance in
connection with such applications as shall be required.
(iv) Nothing herein, or in the Lease otherwise contained,
shall require or be construed to require ASC to pay any sales,
rent, inheritance, estate, succession, transfer, gift, franchise,
income or profit taxes, by whatever name the same may be called,
that are or may be imposed upon IMA, its successor or assigns.
(v) Without limiting the foregoing, IMA shall exercise
commercially reasonable efforts and cooperate fully with ASC in
having the Leased Premises categorized in the most favorable
fashion for property tax purposes consistent with the uses
contemplated and their respective projects.
(b) UTILITY EXPENSES. All sewer rents and charges for water,
steam, gas, heat, hot water, electricity, light and power, and other
services or services furnished to the Leased Premises or the occupants
thereof during the Term of the Lease (hereinafter referred to as
"Utility Expenses").
(c) ROLLBACK TAXES/TAX EXEMPTIONS. The term Taxes used in this
Section 7 shall include any "rollback taxes" resulting from the Leased
Premises or any portion of the IMA Property losing any agricultural
status under the provisions of the Utah Farmland Assessment Act, or
other favorable tax status (such as a conservation easement) due to
ASC's actual or intended use of, or activities conducted upon the Leased
Premises, provided that any taxes resulting from a termination of any
beneficial tax status which occurs through the actions of IMA shall not
be included in Taxes, and shall be the responsibility of IMA. The
Parties acknowledge that commencement of ski resort activity on the IMA
Ski Lease Property may not be consistent with the historical sheep
grazing operation and may trigger a mandatory cessation of such grazing
which in turn may result in an obligation to pay rollback taxes. To the
extent that the same may be permitted by law, ASC or its designees shall
have the right to apply for the conversion of any assessment for local
improvements assessed during the term of the Lease in order to cause the
same to be payable in annual installments, and upon such conversion, ASC
shall pay and discharge punctually said installments as they shall
become due and
4
<PAGE>
payable during the Term of the Lease. IMA or its successors and assigns
shall agree to permit the application for the foregoing conversion to be
filed in its name, if necessary, and shall execute any and all documents
requested by ASC to accomplish the foregoing result.
(d) PAYMENTS. ASC shall be deemed to have complied with the
covenants of this Section if:
(i) Payment of all Taxes shall have been made either within
any period allowed by law or by the governmental authority
imposing the same during which payment is permitted without
penalty or interest or before the same shall become a lien upon
the Leased Premises, and ASC shall produce and exhibit to IMA
satisfactory evidence of such payment, if IMA shall demand the
same in writing.
(ii) Payment of all Taxes shall have been made and the
assessments which have been converted into installments as set
forth in the preceding paragraph (a), which shall become payable
during each of the calendar or fiscal tax years, as the case may
be, in which the Term of the Lease commences or terminates, shall
have been apportioned pro rata between IMA and ASC in accordance
with the respective portions of each such year during which such
Term shall be in effect.
(iii) Payment of all Additional Consideration in (e) below
shall have been made.
(e) ADDITIONAL CONSIDERATION. As additional consideration of this
Lease and its inclusion of day lodges as a permitted use, and if any
additional use subsequently approved by IMA, ASC shall pay to IMA, an
amount equal to three percent (3%) of gross sales revenues generated
through all sales whether wholesale or retail, less sales tax and
returned items, related to any commercial activity of any type
whatsoever at the day lodges or on the IMA Property other than
commercial activity which is permitted under Section 5 above, whether
such activity is conducted by ASC or any of its sub-lessees,
sub-tenants, licensees, concessionaires and the like (the "Additional
Consideration"). The Additional Consideration shall be paid to IMA
within thirty (30) days following the close of each quarter of ASC's
fiscal year and shall be accompanied by an accounting using Generally
Accepted Accounting Principles of all sales generated from the permitted
commercial uses on the IMA Property. ASC shall provide IMA with monthly
reports of all such sales and commercial activity. IMA shall have the
right to verify the ASC calculations of the Additional Consideration
through annual audit of the ASC books of account.
(f) LINE OF CREDIT. As consideration for that certain "Ski Lift
and Trail Lease Agreement" executed by the Parties on July 24, 1997, ASC
agreed to provide and herewith agrees to provide as additional Rent a
revolving line of credit (the "Line") with the following terms and
conditions:
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(i) Principal Amount: $1,000,000.
(ii) Maturity: The Line shall mature upon delivery by ASC of the
100 Units as required in Article II, provided, however, that the Line
shall not mature until all the terms and conditions precedent to the
delivery of the 100 Units set forth in Article II and Article VII shall
have been satisfied by ASC.
(iii) Interest: IMA shall have the right to draw $100,000 per year
from the Line without interest. Draws in excess of $100,000 per year
shall bear interest at the most-favorable blended rate available to ASC
and to its affiliates, ASC Holdings, Inc. and American Skiing Company,
based on a direct pass through of the cost of funds. After 36 months
from the date of this Lease and prior to maturity, ASC shall waive and/or
shall assume full responsibility for the payment of all interest on the
entire outstanding balance on the Line. Interest owed by IMA, but not by
ASC, may be paid from advances on the Line.
(iv) Availability: Funds may be drawn down from time to time by
IMA as needed to fund IMA Project related expenses identified in a draw
down schedule which shall be provided to ASC by IMA on a periodic basis.
The draw down schedule shall not be binding on IMA, but shall be a good
faith estimate of the need for funding.
(v) Repayment: At maturity, the outstanding principal balance on
the Line plus any interest owed by IMA shall become due and payable,
provided, however, that an amount equal to Fifty-thousand Dollars
($50,000) per year, times the number of years pro-rated until ASC
delivers the 100 Units, shall be forgiven. Payments on the Line shall be
applied first to accrued and unpaid interest, then to principal
outstanding.
(vi) Security: As security for the amounts outstanding under the
Line, IMA hereby pledges and grants a security interest in its rights to
the 100 Units identified above under the Development Agreement.
9. ALTERATIONS TO SKI IMPROVEMENTS. ASC may, at its option and at its
own cost and expense, at any time and from time to time, make such
alterations, changes, replacements, improvements and additions in and to the
Ski Improvements located on the Leased Premises, subject to the conditions
specified in Section 5, including the removal or demolition of any Ski
Improvement(s) that now or hereafter may be situated or erected on the Leased
Premises.
ASC agrees that it will maintain the Leased Premises in a good condition
and upon removal or demolition of any of the Ski Improvements, and in any
event upon the termination of this Lease, ASC shall restore the Leased
Premises to a condition as near as reasonably possible to the pre-improved
condition.
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10. TITLE TO SKI IMPROVEMENTS. Until the expiration or termination of
the Lease (subject, however, to the rights of the holder of any leasehold
Mortgagee(s) to obtain a new lease as set forth in Section 22 hereof), title
to any Ski Improvements situated or erected on the Leased Premises and the
personal property located or installed thereon and any alterations, changes
or additions thereto shall remain solely in ASC; and ASC alone shall be
entitled to deduct all depreciation on ASC's income tax returns for any such
Ski Improvements, additions, changes or alterations and any personal property
associated therewith.
11. REMOVAL OF SKI IMPROVEMENTS. On the last day or upon termination of
the term of the Lease, ASC shall quit and surrender to IMA the Leasehold
Premises, and any Ski Improvements then located thereon, provided, however,
that notwithstanding anything in the Lease to the contrary, ASC shall have
the right, and the obligation if requested by IMA, at the end of the term, to
remove any buildings or other Ski Improvements then located thereon, provided
that such removal shall be accomplished within one hundred twenty (120) days
following the end of the term or the termination. ASC agrees that it will
maintain the Leased Premises in a good condition and upon removal or
demolition of any of the Ski Improvements, and in any event upon the
termination of this Lease, ASC shall restore the Leased Premises to a
condition as near as reasonably possible to the pre-improved condition.
12. TIMING OF SKI IMPROVEMENTS. ASC agrees that it shall apply for, and
exercise its best efforts to gain, all necessary permits and approvals from
all applicable governmental authorities for development of the Ski
Improvements on a basis consistent in all material aspects with the
Preliminary Development Plan. ASC will exercise its best and most diligent
efforts to construct the Ski Improvements as expeditiously as reasonably
possible consistent with receipt of governmental approvals. With the
exception of lift replacement, ASC will give priority to construction of
those lifts and trail systems that service phases of the IMA Project as
developed such that to the extent possible, lifts will be constructed prior
to or contemporaneously with the phase serviced thereby.
13. REQUIREMENTS OF PUBLIC AUTHORITIES. During the term of the Lease,
ASC shall, at its own cost and expense, promptly observe and comply with all
present and future laws, ordinances, requirements, orders, directives, rules
and regulations of the federal, state, county and municipal governments and
of all other governmental authorities affecting the Leased Premises, the Ski
Improvements or appurtenances thereto or any part thereof whether the same
are in force at the commencement of the term of the Lease or may in the
future be passed, enacted or directed.
(a) ASC shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of ASC, or
IMA (if legally required), or both (if legally required), without cost or
expense to IMA, the validity or application of any law, ordinance, rule,
regulation or requirement of the nature referred to in paragraph (a) of
this Section and, if by the terms of any such law, ordinance, order, rule,
regulation or requirement, compliance therewith may legally be delayed
pending the prosecution of any such proceeding, ASC may delay such
compliance therewith until the final determination of such proceeding.
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<PAGE>
(b) IMA agrees to execute and deliver any appropriate papers or
other instruments which may be necessary or proper to permit ASC so to
contest the validity or application of any such law, ordinance, order,
rule, regulation or requirement and to fully cooperate with ASC in such
contest.
14. COVENANT AGAINST LIENS. If, because of any act or omission of
ASC, any mechanic's or materialman's lien or other encumbrance shall be filed
against IMA or any of its Members or against any portion of the Leased
Premises, ASC shall (1) inform IMA immediately upon the filing of any such
lien or encumbrance, (2) at its own cost and expense, cause the same to be
discharged of record or bonded within one hundred twenty (120) days of the
filing thereof, and (3) indemnify and save harmless IMA against and from all
costs, liabilities, suits, penalties, claims and demands resulting therefrom.
15. ACCESS TO PREMISES. IMA and its Members and lot owners in the IMA
Project shall have the right to enter upon the Leased Premises at all
reasonable times to use, enjoy and examine the same provided such entry shall
not interfere with the commercial alpine resort business then being
conducted on the Leased Premises. IMA lot owners shall have the right to
utilize Ski Improvements only on the same basis as the general public,
provided, however, ASC shall, as additional Rent, provide to IMA a total of
twelve (12) season lift passes for each year of the Lease which shall be used
exclusively by those IMA affiliates identified in writing by IMA prior to the
beginning of each ski season. Further, when requested by IMA for marketing
purposes, ASC shall permit representatives of IMA and prospective purchasers
of lots within the IMA Project and their agents to utilize the lift
facilities for marketing purposes in order to show the properties within the
IMA Project, at no cost to IMA, subject to ASC's approval of the terms of
said use.
16. ASSIGNMENT AND SUBLETTING. ASC may assign or sublease (in whole
or in part or parts), the Lease only upon obtaining IMA's prior written
consent therefor, which consent shall not be unreasonably withheld or
delayed. ASC agrees to furnish to IMA written notice via certified U.S. Mail,
return receipt requested, of its intent to assign or sublease any interest in
the Lease, together with the name and address of the proposed assignee or
sublessees, and such further information as IMA may reasonably request
regarding the proposed assignee or sublessee and shall enter into good faith
discussions with ASC regarding its decision. Failure to respond within 30
days of receipt of written notice by IMA shall be deemed an approval. Upon
any assignment made in accordance with the terms hereof, but not with respect
to subleasing, ASC shall be relieved of all further obligations under the
portion(s) of the Lease so assigned and shall have no further liabilities
hereunder.
The Members may, without approval from any other party, assign their
rights and obligations under this Ski Lease to IMA at any time after receipt
of all required development approvals for the IMA Project.
17. INDEMNITY. ASC shall indemnify and save harmless IMA from and
against any and all liability, damage, penalties or judgments arising from
injury to person or property sustained by anyone in and about the Leased
Premises resulting from any act or omission or
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<PAGE>
omissions of ASC, or ASC's officers, agents, servants, employees or
contractors. ASC shall, at its own cost and expense, defend any and all suits
or actions which may be brought against IMA or in which IMA may be named with
others upon any such above-mentioned matter, claim or claims, except as may
result from the IMA's affirmative acts or negligence or the affirmative acts
or negligence of its officers, agents, servants, employees or contractors.
The foregoing indemnity shall include indemnification for any environmental
damage or contamination resulting from ASC's use of, or activities on the
Leased Premises. Excepting such acts, IMA shall not be responsible or liable
for any damage or injury to any property, fixtures, buildings or other
improvements, or to any person or persons, at any time on the Leased
Premises, including any damage or injury to ASC or to any of ASC's officers,
agents, servants, employees, contractors, customers or sublessees.
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<PAGE>
18. INSURANCE.
(a) ASC shall provide at its expense, and keep in force during
the term of the Lease, general liability insurance in a good and solvent
insurance company or companies licensed to do business in the State of
Utah, selected by ASC, and reasonably satisfactory to IMA, or through a
self insurance program approved by all necessary governmental authorities,
in the amount of at least Fifty Million Dollars ($50,000,000) with
respect to injury to or death of any one person, more than one person
in any one accident or other occurrence, and damages to property. Such
policy, policies or programs shall include IMA, and any Members which
IMA from time-to-time may designate, as an additional insured. ASC
agrees to deliver certificates of such insurance to IMA at the beginning
of the term of the Lease and thereafter not less than ten (10) days prior
to the expiration of any such policy. Such insurance shall not be canceled
without ten (10) days' written notice to IMA.
(b) During the term of the Lease, ASC shall keep all buildings and
improvements presently at the Leased Premises or hereafter erected by ASC
on the Leased Premises at any time insured for the benefit of IMA and ASC
and the holder of any leasehold mortgage permitted pursuant to Section 22
hereof, as their respective interests may appear, against loss or damage
by fire, and those casualties covered by the customary extended coverage
endorsements, in a minimum amount equal to the greater of replacement
value or the amount necessary to avoid the effect of coinsurance
provisions of the applicable policies. All proceeds payable at any time
and from time to time by any insurance company under such policies shall
be payable to such leasehold mortgagee, if any, or, if none, to ASC. Any
proceeds paid to ASC shall be retained by ASC and IMA shall not be
entitled to, and shall have no interest in, such proceeds or any part
thereof, except as IMA may be entitled due to loss or damage by fire
sustained by IMA as a result of a fire occasioned by ASC or activities
related to the commercial operations of the resort. IMA shall, at ASC's
cost and expense, cooperate fully with ASC in order to obtain consents
and other instruments and take all other actions necessary or desirable
in order to effectuate the same and to cause such proceeds to be paid
as herein before provided and IMA shall not carry any insurance concurrent
in coverage and contributing in the event of loss with any insurance
required to be furnished by ASC hereunder if the effect of such separate
insurance would be to reduce the protection or the payment to be made
under ASC's insurance.
(c) Any insurance required to be provided by ASC pursuant to the
Lease may be provided by a blanket insurance program covering the Leased
Premises and other locations of ASC provided such blanket insurance
complies with all of the other requirements of the Lease with respect to
the insurance involved.
(d) All insurance policies carried by either party covering the
Leased Premises, including but not limited to contents, fire and
casualty insurance, shall expressly waive any right on the part of the
insurer against the other party. The parties
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<PAGE>
hereto agree that their policies will include such waiver clause or
endorsement so long as the same shall be obtainable without extra cost,
or if extra cost shall be charged therefor, so long as the other party
pays such extra cost. If extra cost shall be chargeable therefor, each
party shall advise the other thereof and of the amount of the extra cost,
and the other party, as its election, may pay the same, but shall not be
obligated to do so.
(e) ASC shall obtain and maintain combined rental income and/or
business interruption and extra expense insurance against loss of ASC's
income from the Leased Premises for a period of 12 months due to the
perils covered by the insurance described above, in an amount sufficient
to cover the Rent payable under the terms of this Lease. If the Ski
Improvements are destroyed or damaged resulting in any reduction of
income received by ASC from the Leased Premises, the proceeds of such
rental income and/or business interruption insurance shall be assigned,
subject to the rights of any leasehold Mortgagee, to IMA, as its interest
may appear, to be applied in payment of such Rent until such time as the
Ski Improvements so damaged or destroyed have been fully restored and
placed in full operation.
(f) All policies of insurance provided for herein shall be written
as primary policies with responsible and solvent insurance companies
authorized to do business in Utah with a policyholder's rating of "A"
(Excellent) or better and a financial rating of "A" or better in the
most recent Bests' Key Rating Guide.
19. CASUALTY LOSS.
(a) In the event that, at any time during the term of the Lease,
any one or more of the Ski Improvements shall be destroyed or damaged in
whole or in part by fire or other cause within the extended coverage of
the Lease, then, ASC, at its own cost and expense, shall, subject to the
provisions of paragraph (b) of this Section cause the same to be repaired,
replaced or rebuilt within a period of time which, under all prevailing
circumstances, shall be reasonable.
(b) In the event that at any time during the term of the
Lease any one or more of the Ski Improvements shall have been
damaged or destroyed by fire or any other cause whatsoever, and
such damage or destruction shall amount to fifteen percent (15%) or
more of the sound insurable value of Ski Improvements, or if such damage
or destruction shall occur during the last ten (10) years of the term,
ASC shall have the right, but not the obligation, to elect not to repair,
replace or rebuild such building or improvements. If ASC shall elect not
to restore any damaged property, it shall, prior to, or immediately
commence and diligently prosecute to completion, the demolition and
removal of any damaged Ski Improvements which are upon the Leased
Premises, and shall remove all rubble and revegetate the site(s).
(c) ASC shall not be entitled to any suspension or abatement of
Rent by reason of any destruction or damage to the Leased Premises.
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20. EMINENT DOMAIN. If the whole or any part of the Leased Premises
shall be taken for any public or quasi-public use under any statute or by
right of eminent domain or by private purchase in lieu thereof, then the
Lease shall continue and the taking shall be administered in the manner
specified below.
In the event of a condemnation or taking by any governmental authority,
IMA shall be entitled to the full value of all condemnation parcels,
including any bonus value, excepting only the value of any Ski Improvements
taken. The Parties shall independently have the right to apply for and
prosecute any claim for such taking as it relates to each of their respective
interests in the Leased Premises. Each party shall bear its own costs and
expenses associated with any such effort and shall be entitled to all (100%)
of any award resulting from such efforts.
21. UTILITY LOCATION. ASC shall have the right to negotiate agreements
with utility companies and/or public authorities which provide necessary
utilities. Creating easements, subleases or other necessary property
interests in favor of such companies and/or authorities as are required in
order to service the occupants of the buildings and the improvements on the
IMA Property or ASC Property shall be valid only after approval by IMA, which
approval shall not be unreasonably withheld or delayed. IMA and its Members
covenant and agree to execute any and all documents, agreements and
instruments, to dedicate to any applicable governmental body, without
compensation therefor, utility easements which are usual and ordinary for
commercial alpine ski resort developments and which are otherwise reasonably
acceptable to IMA, and to take all other actions in order to effectuate the
same, all at ASC's cost and expense. All ASC's utility lines shall be located
underground and the location of the same shall have been approved by IMA as
provided in Section 7.01. The terms of each utility agreement, easement,
dedication or other property interest shall provide that all rights conveyed
are to be extinguished on the last day of the term or upon termination of the
Lease.
22. LEASEHOLD MORTGAGES. ASC, and every successor and assign of ASC,
is hereby given the right by IMA in addition to any other rights herein
granted, subject to IMA's prior written consent which shall not be
unreasonably withheld, to mortgage its interests in the Lease, or any part
or parts thereof, under one or more leasehold Mortgage(s), and to assign the
Lease, or any part or parts thereof, and any subleases, or parts thereof, as
collateral security for such Mortgage(s), upon the condition that all rights
acquired under such Mortgage(s) shall be subject to each and every one of the
covenants, conditions and restrictions set forth in the Lease, and to all
rights and interests of IMA herein, none of which covenants, conditions
or restrictions is or shall be waived by IMA by reason of the right given so to
mortgage such interest in the Lease, except as expressly provided herein. If
ASC and/or ASC's successors and assigns shall mortgage this leasehold or
any part or parts thereof, and if the holder(s) of such Mortgage(s) shall send
to IMA written notice of such Mortgage(s) specifying the name and address of
the Mortgagee(s) and the pertinent recording data with respect to such
Mortgage(s), IMA agrees that so long as any such leasehold Mortgage(s) shall
remain unsatisfied of record or until written notice of satisfaction is given
by the holder(s) to IMA, the following provisions shall apply:
(a) There shall be no cancellation, surrender or modification of
the Lease by joint action of IMA and ASC without the prior consent in
writing of the leasehold
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Mortgagee(s); provided that termination upon default shall be governed by
the following provisions of this Section 22.
(b) IMA shall, upon serving ASC with any notice of default,
simultaneously serve a copy of such notice upon the holder(s) of such
leasehold Mortgagee(s), provided IMA shall be kept informed in writing by
ASC of current addresses of all Mortgagees and no such notice of default
to ASC shall be effective as to any person or entity unless and until a
copy of such notice is served upon each such person or entity;
however, the failure of ASC to provide IMA with the name of any
Mortgagee(s) shall constitute a waiver of IMA's requirement to provide
notice. The leasehold Mortgagee(s) shall thereupon have the same period as
ASC, after service of such notice upon it, to remedy or cause to be
remedied the defaults complained of, and IMA shall accept such performance
by or at the instigation of such leasehold Mortgagee(s) as if the same had
been done by ASC.
(c) Anything herein contained notwithstanding, while such leasehold
Mortgage(s) remains unsatisfied of record, or until written notice of
satisfaction is given by the holder(s) to IMA, if any default shall occur
which, pursuant to any provision of the Lease, entitles IMA to terminate
the Lease, and if before the expiration of ten (10) days from the date of
service of notice of termination upon such leasehold Mortgagee(s) such
leasehold Mortgagee(s) shall have notified IMA of its desire to nullify
such notice and shall have paid to IMA all Rent and additional Rent and
other payments herein provided for, and then in default, and shall have
complied or shall commence the work of complying with all of the other
requirements of the Lease, if any are then in default, and shall
prosecute the same to completion with reasonable diligence, then in such
event IMA shall not be entitled to terminate the Lease and any notice of
termination theretofore given shall be void and of no effect.
(d) If IMA shall elect to terminate the Lease by reason of any
default of ASC, the leasehold Mortgagee(s) shall not only have the
right to nullify any notice of termination by curing such default, as
aforesaid, but shall also have the right to postpone and extend the
specified date for the termination of the Lease as fixed by IMA in its
notice of termination, for a period of not more than six (6) months,
provided that such leasehold Mortgagee(s) shall cure or cause to be cured
any then existing monetary defaults and meanwhile pay the Rent,
additional Rent and comply with and perform all of the other terms,
conditions and provisions of the Lease on ASC's part to be complied with
and performed, other than past non-monetary defaults, and provided
further, that the leasehold Mortgagee(s) shall forthwith take steps to
acquire or sell ASC's interest in the Lease by foreclosure of the
Mortgage(s) or otherwise and shall prosecute the same to completion with
all due diligence. If at the end of said six (6) month period the
leasehold Mortgagee(s) shall be actively engaged in steps to acquire or
sell ASC's interest herein, the time of said Mortgagee to comply with
the provisions of this Section shall be extended for such period as shall
be reasonably necessary to complete such steps with reasonable diligence
and continuity, provided the quality of the commercial alpine ski resort
operator shall not have been reduced or impaired.
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(e) IMA agrees that in the event of termination of the Lease by
reason of any default by ASC other than for nonpayment of Rent or
additional Rent and other payments herein provided for, that IMA will
enter into a new lease of the Leased Premises with the leasehold
Mortgagee(s) or its nominee(s), provided reasonable assurances of the
capability of the new operator are provided, for the remainder of the
Term, effective as of the date of such termination, at the Rent and
additional Rent and upon the terms, provisions, covenants and agreements
as herein contained and subject only to the same conditions of title as
the Lease is subject to on the date of the execution hereof, and to the
rights, if any, of the parties then in possession of any part of the
Leased Premises, provided:
(i) Said Mortgagee(s) or its nominee(s) shall make written
request upon IMA for such new lease within fifteen (15) days after
the date of such termination and such written request shall be
accompanied by payment to IMA of all sums then due to IMA under
the Lease.
(ii) Said Mortgagee(s) or its nominee(s) shall pay to IMA at
the time of the execution and delivery of said new lease, any and
all sums which would at the time of the execution and delivery
thereof, be due pursuant to the Lease but for such termination, and
in addition thereto, any expenses, including reasonable attorney's
fees, to which IMA shall have been subjected by reason of such
default.
(iii) Said Mortgagee(s) or its nominee(s) shall perform and
observe all covenants herein contained on ASC's part to be performed
and shall further remedy any other conditions which ASC under the
terminated lease was obligated to perform under the terms of the
Lease.
(iv) IMA shall not warrant possession of the Leased Premises to
ASC under the new Lease.
(v) Such new lease shall be expressly made subject to the
rights, if any, of ASC under the terminated Lease.
(vi) The Mortgagee, or its nominee, under such new lease shall
have the same right, title and interest in and to the Ski Improvements
on the Leased Premises as ASC had under the terminated Lease.
(vii) Nothing herein contained shall require the leasehold
Mortgagee(s) or its nominee(s) to cure any default of ASC, except as
a condition of exercising its rights hereunder.
(viii) IMA agrees promptly after submission to execute,
acknowledge and deliver any agreements modifying the Lease requested
by any leasehold Mortgagee(s), provided that such modification does
not decrease ASC's obligations or decrease IMA's rights pursuant to
the Lease.
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(ix) The proceeds from any insurance policies or arising from
a condemnation are to be held by any leasehold Mortgagee(s)
and distributed pursuant to the provisions of the Lease, but
the leasehold Mortgagee(s) may reserve its right to apply to
the mortgage debt all, or any part, of ASC's share of such
proceeds pursuant to such mortgage(s).
(x) The leasehold Mortgagee(s) shall be given notice of
any arbitration proceedings by the parties hereto and shall
have the right to intervene therein and be made a party to
such proceedings, and the parties hereto do hereby consent to
such intervention. In the event that the leasehold
Mortgagee(s) shall not elect to intervene or become a party
to such proceedings, the leasehold Mortgagee(s) shall receive
notice of, and a copy of any award or decision made in said
arbitration proceedings.
IMA, upon request, shall execute, acknowledge and deliver to each
leasehold Mortgagee(s), an agreement prepared at the sole cost and expense of
ASC in form satisfactory to such leasehold Mortgagee(s) between IMA, ASC and
the leasehold Mortgagee(s), agreeing to (a) all of the provisions of this
Section 22 and (b) such other provisions as are customary and acceptable to
all parties in mortgaging long-term leaseholds in connection with large
commercial development projects.
23. QUIET ENJOYMENT. ASC, upon paying the Rent and additional Rent and all
other sums and charges to be paid by it as herein provided, and observing and
keeping all covenants, warranties, agreements and conditions of the Lease on
its part to be kept, shall quietly have and enjoy the Leased Premises during
the times permitted by and during the Term of the Lease, without hindrance or
molestation. The quiet enjoyment is subject to the rights of usage reserved
by IMA in paragraph 5 above.
24. BANKRUPTCY, INSOLVENCY. If, during the Term of the Lease, (a) ASC
shall be adjudicated a bankrupt or adjudged to be insolvent; (b) a receiver
or trustee shall be appointed for ASC's property and affairs; (c) ASC shall
make an assignment for the benefit of creditors or shall file a petition in
bankruptcy or insolvency or for reorganization or shall make application for
the appointment of a receiver; or (d) any execution or attachment shall be
issued against ASC or any of ASC's property, whereby the Leased Premises or
any Ski Improvements thereon shall be taken or occupied or attempted to be
taken or occupied by someone other than ASC, except as may herein be
permitted, and such adjudication, appointment, assignment, petition,
execution or attachment shall not be set aside, vacated, discharged or bonded
within one hundred eighty (180) days after the issuance of the same, then a
default hereunder shall be deemed to have occurred so that the provisions of
Section 13.01 of the Development Agreement shall become effective and IMA
shall have the right and remedies provided for therein. Notwithstanding
anything to the contrary hereinabove contained, upon the occurrence of a
default pursuant to this Section 24, if the Rent or additional Rent due and
payable hereunder shall continue to be paid and the other covenants,
conditions and agreements of the Lease on ASC's part to be kept and performed
shall continue to be kept and performed, the quality of the commercial alpine
ski resort operation shall not have been reduced and no other event of
default shall have occurred, then no event of default
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shall have been deemed to have occurred and the provisions of Section 13.01
shall not become effective.
25. DEFAULT AND REMEDIES. Any default under the Development Agreement
shall constitute a default hereunder for which the Parties shall have all of
the rights and remedies specified in Section 13.05 of the Development
Agreement.
26. IMA RIGHTS UPON TERMINATION. Upon any termination of the term of the
Lease pursuant this Article, or at any time thereafter, IMA may, in addition
to and without prejudice to any other rights and remedies IMA shall have at
law or in equity, reenter the Leased Premises, and recover possession thereof
and dispossess any or all occupants of the Leased Premises in the manner
prescribed by the statute relating to summary proceedings, or similar
statutes; but ASC in such case shall remain liable to IMA as hereinafter
provided, and to recover any costs associated therewith.
In case of any such default, reentry, expiration and/or dispossession by
summary proceedings: (i) the Rent shall become due thereupon and be paid up
to the time of such reentry, expiration and/or dispossession; (ii) IMA may
relet the Leased Premises or any part or parts thereof, either in the name of
IMA or otherwise, for a term or terms which may, at IMA's option, be less
than or exceed the period which would otherwise have constituted the balance
of the term of the Lease and may grant concessions of free rent; and (iii)
ASC or the legal representatives of ASC shall also pay IMA as liquidated
damages for failure of ASC to observe and perform ASC's covenants herein
contained any deficiency between the Rent hereby required and/or covenanted
to be paid and the net amount, if any, of the rents collected on account of
the sub-lease or sub-leases of the Leased Premises or net revenues otherwise
generated at or in connection with the Leased Premises for each month of the
period which would otherwise have constituted the balance of the Term of the
Lease. In computing such liquidated damages, there shall be added to the said
deficiency such reasonable expenses as IMA may incur in connection with
reletting. Any such liquidated damages shall be paid in monthly installments
by ASC on the day specified in the Lease and any suit brought to collect the
amount of the deficiency for any month shall not prejudice in any way the
rights of IMA to collect the deficiency for any subsequent month by a similar
proceeding. IMA, at IMA's option, may make such alteration, repairs, and/or
replacements in the Leased Premises as IMA, in IMA's sole judgment, considers
advisable and necessary for the purpose of reletting the Leased Premises; and
the making of such alterations, repairs, replacements and/or decorations
shall not operate or be construed to release ASC from liability hereunder as
aforesaid. IMA agrees to use commercially reasonable efforts to mitigate all
damages and to relet the Leased Premises in the event of any default
specified herein.
27. MISCELLANEOUS. Each of the terms and provisions of Article XIV of the
Development Agreement are incorporated herein by reference as though more
specifically set forth herein.
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IN WITNESS WHEREOF, the parties have executed and delivered this Ski Lease as
of the day and year first above written.
ASC UTAH
By: /s/ Christopher E. Howard
------------------------------------
Christopher E. Howard
Chief Administrative Officer
IRON MOUNTAIN ASSOCIATES, LLC.
By: WPA, LTD.
Its Manager
By: White Pine Associates, Inc.
Its General Partner
By: /s/ Keith R. Kelley
---------------------------
Keith R. Kelley
Vice-President/Secretary
WPA, LTD.
By: White Pine Associates, Inc.
Its General Partner
By: /s/ Keith R. Kelley
-------------------------
Keith R. Kelley
Vice-President/Secretary
IRON MOUNTAIN HOLDING GROUP, LC.
By: /s/ Alexandra C. Ockey
----------------------------------
Alexandra C. Ockey
Chairman, Managing Committee
IRON MOUNTAIN ALLIANCE, INC.
By: /s/ Alexandra C. Ockey
---------------------------------
Alexandra C. Ockey
President
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EXHIBIT 11.1
AMERICAN SKIING COMPANY
PRO FORMA EPS EXHIBIT
JULY 27, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 27,
1997
PRIMARY CALCULATION
<S> <C> <C>
Pro forma net loss (3,177)
Accretion of mandatorily redeemable preferred stock discount (921)
Accretion of mandatorily redeemable preferred stock issuance costs (1,123)
-----------
Pro forma net loss available to common shareholders (5,221)
-----------
Weighted average shares outstanding 1,000,000
Effect of stock split (note 16) 14.76053
-----------
14,760,530
Leslie B. Otten stock options 1,853,197 -
Management stock options 622,038 622,038
Minority interest shareholders 615,022 -
Employee stock options 108,108 -
Mandatorily redeemable preferred stock 2,110,518 -
Offering shares 14,750,000 14,750,000
-----------
30,132,568
-----------
Primary earnings per share (0.17)
-----------
FULLY DILUTED CALCULATION
Net loss (3,177)
Accretion of preferred stock discount (921)
Accretion of issuance costs (1,123)
-----------
Net loss available to common shareholders (5,221)
-----------
Weighted average shares outstanding 1,000,000
Effect of stock split (note 16) 14.76053
-----------
14,760,530
Leslie B. Otten stock options 1,853,197 -
Management stock options 622,038 622,038
Minority interest shareholders 615,022 615,022
Employee stock options 108,108 -
Mandatorily redeemable preferred stock 2,110,518 2,110,518
Offering shares 14,750,000 14,750,000
-----------
32,858,108
-----------
Fully diluted earnings per share (0.16)
------------
</TABLE>
Page 1
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF AMERICAN SKIING COMPANY, A MAINE CORPORATION:
ASC Utah, a wholly-owned Maine corporation;
ASC West, a wholly-owned Maine corporation; and
ASC East, a 96%-owned Maine corporation.
SUBSIDIARIES OF ASC EAST:
Sunday River Skiway Corporation, a wholly-owned Maine corporation;
Sunday River Transportation, Inc., a wholly-owned Maine corporation;
Sunday River, Ltd., a wholly-owned Maine corporation;
Perfect Turn, Inc., a wholly-owned Maine corporation;
L.B.O. Holding, Inc., a wholly-owned Maine corporation;
Sugarbush Resort Holdings, a wholly-owned Vermont corporation;
Grand Summit Resort Properties, Inc., a wholly-owned Maine corporation;
Sugarbush Leasing Company, a wholly-owned Vermont corporation; and
S-K-I Ltd., a wholly-owned Delaware corporation.
SUBSIDIARY OF L.B.O. HOLDING, INC.:
Cranmore, Inc., a wholly-owned Maine corporation.
SUBSIDIARIES OF SUGARBUSH RESORT HOLDINGS:
Sugarbush Restaurants, Inc., a wholly-owned Vermont corporation;
Club Sugarbush, a wholly-owned Vermont corporation;
Mountain Water Company, a wholly-owned Vermont corporation; and
Mountain Wastewater Treatment, Inc., a wholly-owned Vermont
corporation.
SUBSIDIARIES OF S-K-I LTD.:
Killington, Ltd., a wholly-owned Vermont corporation;
Sugarloaf Mountain Corporation, a wholly-owned Maine corporation;
SKI Insurance Company, a wholly-owned Vermont corporation;
Mount Snow, Ltd., a wholly-owned Vermont corporation;
Pico Ski Area Management Company, a wholly-owned Vermont corporation;
Waterville Valley Ski Area, Ltd., a wholly-owned New Hampshire
corporation;
Killington West, Ltd., a wholly-owned California corporation; and
Resorts Software Services, Inc., a wholly-owned Vermont corporation.
SUBSIDIARIES OF KILLINGTON, LTD.:
Killington Restaurants, Inc., a wholly-owned Vermont corporation;
and
Resort Technologies, Inc., a wholly-owned Vermont corporation.
SUBSIDIARIES OF SUGARLOAF MOUNTAIN CORPORATION:
Mountainside, a wholly-owned Maine corporation; and
Sugartech, a wholly-owned Maine corporation.
SUBSIDIARIES OF MOUNT SNOW, LTD.:
Dover Restaurants, Inc., a wholly-owned Vermont corporation; and
Deerfield Operating Company, a wholly-owned Vermont corporation.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of American Skiing Company of our report
dated September 19, 1997 relating to the financial statements of American Skiing
Company, which appears in such Prospectus. We also consent to the references to
us under the headings "Experts" and "Selected Historical Financial Data of the
Company" in such Prospectus. However, it should be noted that Price Waterhouse
LLP has not prepared or certified such "Selected Historical Financial Data of
the Company."
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of American Skiing Company of our report
dated August 31, 1995 relating to the financial statements of S-K-I Ltd., which
appears in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Historical Financial Data of the Company" in
such Prospectus. However, it should be noted that Price Waterhouse LLP and Pro
Forma has not prepared or certified such "Selected Historical Financial Data of
the Company."
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 1, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
October 1, 1997
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of American Skiing Company of our report
dated December 22, 1995 relating to the combined financial statements of
American Skiing Company and affiliates, which appears in such Prospectus. We
also consent to the references to us under the headings "Experts", "Summary
Historical and Pro Forma Financial Data" and "Selected Historical Financial
Data" in such Prospectus. However, it should be noted that Berry, Dunn, McNeil &
Parker has not prepared or certified such "Summary Historical and Pro Forma
Financial Data" or "Selected Historical Financial Data of the Company."
BERRY, DUNN, MCNEIL & PARKER
Portland, Maine
October 1, 1997
