<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1997
REGISTRATION NO. 333-33483
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
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)
<TABLE>
<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
<TABLE>
<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) Previously paid.
--------------------------
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 10, 1997
PROSPECTUS
, 1997
14,750,000 SHARES
[LOGO]
AMERICAN SKIING COMPANY
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").
Following the Offering (as defined), the outstanding common stock of the
Company will consist of 18,097,578 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 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. 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 directly to the Principal Shareholder at the price to the
public set forth below (the "Concurrent Offering"). The Principal Shareholder
has advised the Company that he intends to purchase a number of shares of Common
Stock in the Concurrent Offering sufficient to maintain ownership of at least a
majority of all outstanding shares of Common Stock and Class A Common Stock.
Assuming that the Underwriters' (as defined) over-allotment option is not
exercised and assuming a price to the public of $18.50 per share, the midpoint
of the range shown below, 810,811 shares of Common Stock are expected to be sold
to the Principal Shareholder in the Concurrent Offering at an aggregate purchase
price of approximately $15 million. Accordingly, upon consummation of the
Concurrent Offering, the Principal Shareholder is expected to 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 approximately 13.8% 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
approximately 51.1% of all outstanding shares of Common Stock and Class A Common
Stock. 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
the 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").
A portion of the proceeds of the Offering, 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." 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 has applied 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.
<TABLE>
<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 OVER-ALLOT 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."
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 NUMBER OF OUTSTANDING SHARES OF COMMON STOCK AND CLASS A COMMON,
(A) ASSUMES THAT ALL STOCK OPTIONS TO PURCHASE SHARES OF COMMON STOCK THAT ARE
EXERCISABLE BELOW THE INITIAL PUBLIC OFFERING PRICE ARE EXERCISED FOR SHARES OF
COMMON STOCK, (B) GIVES EFFECT TO THE ISSUANCE OF THE COMPANY'S 10 1/2%
CONVERTIBLE PREFERRED STOCK (AS DEFINED) AND THE CONVERSION OF SUCH STOCK INTO
2,110,518 SHARES OF COMMON STOCK (C) ASSUMES THAT THE HOLDERS OF COMMON STOCK IN
ASC EAST EXCHANGE SUCH STOCK FOR AN AGGREGATE OF 615,022 SHARES OF COMMON STOCK,
(D) ASSUMES THAT THE PRINCIPAL SHAREHOLDER PURCHASES 810,811 SHARES OF COMMON
STOCK IN THE CONCURRENT OFFERING, (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"). In August 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), the
Company's total revenues, EBITDA (as defined) and net loss for fiscal 1997 would
have been approximately $261.9 million, $57.8 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) as ranked in the 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; (iv) Heavenly, the second largest resort in the Pacific West Region and
the 11th largest resort in the United
3
<PAGE>
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's retail,
restaurant and conference facilities and from 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
pre-construction 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 during the next 15 to 20 years. The
Company also operates golf courses at its resorts and conducts other off-season
activities, which 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
strategies across 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, which
interconnects Sugarbush's North and South mountains. Since 1994, when the
Company began implementing its acquisition strategy, the Company has
significantly increased lift capacity, skiable terrain and snowmaking coverage
at each of its
4
<PAGE>
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 the 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 program at the Acquired
Resorts. In addition to its on-mountain activities, the Company is expanding its
5
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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 programs are 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
implement consumer statistical and usage 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
6
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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
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THE OFFERING
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<S> <C>
Common Stock Offered:
Public Offering(1)(2)......... 13,939,189 shares
Concurrent Offering(2)........ 810,811 shares
Total(1).................... 14,750,000 shares
Common Stock and Class A
Common Stock to be outstanding
after the Offering:
Common Stock(1)(3)(4)......... 18,097,578 shares
Class A Common Stock(3)....... 14,760,530 shares
Total(1)(4)................. 32,858,108 shares
Voting Rights................... The rights and preferences of holders of Common Stock and
Class A Common Stock are identical, except that 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. 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 the Principal Shareholder and
(C) automatically if, at any time, the number of shares of
Class A Common Stock outstanding represent less than 20%
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.
</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) The Principal Shareholder has advised the Company that he intends to
purchase a number of shares of Common Stock in the Concurrent Offering
sufficient to maintain ownership of at least a majority of all outstanding
shares of Common Stock and Class A Common Stock. Assuming that the
Underwriters' over-allotment option is not exercised and assuming a price to
the public of $18.50 per share, the midpoint of the range set forth on the
cover page of this Prospectus, 810,811 shares of Common Stock are expected
to be sold to the Principal Shareholder in the Concurrent Offering at an
aggregate purchase price of approximately $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 32,858,108 shares of Common Stock would be outstanding.
(4) Includes (i) 622,038 shares of Common Stock reserved for issuance pursuant
to the Company's Stock Option Plan (the "Stock Option Plan") which will be
issuable pursuant to options that are exercisable immediately after the
Offering at a price per share below the Public Offering price, (ii)
2,110,518 shares of Common Stock reserved for issuance upon conversion of
the Company's 10 1/2% Convertible Preferred Stock (assuming a price to the
public of $18.50 per share, the midpoint of the range shown on the cover
page of this Prospectus) and (iii) 615,022 shares of Common Stock initially
reserved for issuance upon consummation of the ASC East Exchange Offer (as
defined). Does not include (i) 5,066,661 shares of Common Stock reserved for
issuance pursuant to the Company's Stock Option Plan, 1,853,197 shares of
which will be issuable pursuant to options that are exercisable immediately
after the Offering at a price per share equal to the Public Offering price,
and (ii) up to 1,433,145 additional shares of Common Stock issuable upon
conversion of the Company's 10 1/2% Convertible Preferred Stock as a result
of the payment of in-kind dividends thereon. All of the shares of Common
Stock reserved for issuance under the Stock Option Plan, the ASC East
Exchange Offer and the 10 1/2% Convertible Preferred Stock 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>
Concurrent Offering................. A portion of the 14,750,000 shares of Common Stock
offered hereby are being offered by the Company
directly to the Principal Shareholder at the price to
the public set forth on the cover page of this
Prospectus. The Principal Shareholder has advised the
Company that he intends to purchase a number of
shares of Common Stock in the Concurrent Offering
sufficient to maintain ownership of at least a
majority of the outstanding shares of Common Stock
and Class A Common Stock. Assuming that the
Underwriters' over-allotment option is not exercised
and assuming a price to the public of $18.50 per
share, the midpoint of the range set forth on the
cover page of this Prospectus, 810,811 shares of
Common Stock are expected to be sold to the Principal
Shareholder in the Concurrent Offering at an
aggregate purchase price of approximately $15
million. Accordingly, upon consummation of the
Concurrent Offering, the Principal Shareholder is
expected to 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 on the cover page of this
Prospectus, granted under the Company's Stock Option
Plan) representing approximately 13.8% 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 approximately 51.1% of all
outstanding shares of Common Stock and Class A Common
Stock. 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 the
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>
9
<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 and should be read in conjunction with the financial statements of the
Company and the Acquired Resorts and the notes thereto included elsewhere in
this Prospectus and "Pro Forma Financial Data." 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 unaudited pro forma
summary combined 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
HISTORICAL FISCAL YEAR ENDED(1) ENDED(2)
------------------------------------------------------------ -----------
JULY 25, JULY 31, JULY 30, JULY 28, JULY 27, JULY 27,
1993 1994 1995 1996 1997 1997
----------- ----------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER SKIER VISIT AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net 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(3).......... 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 expenses........................ 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) $ (5,225)
----------- ----------- ----------- --------- ---------- -----------
----------- ----------- ----------- --------- ---------- -----------
Pro Forma loss per share............................ $ (0.38) $ (0.17)
---------- -----------
---------- -----------
Pro Forma weighted average number of shares
outstanding....................................... 15,415,591 30,780,613
---------- -----------
---------- -----------
OTHER DATA:
Resort:
Skier visits (000s)(4)............................ 525 528 1,060 1,290 3,025 4,821
Season pass holders (000s)........................ 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(5)(6)............................... $ 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(7)....................... -- -- -- 109 605 605
Real Estate EBIT(6)(8)............................ $ 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>
(DOLLARS IN THOUSANDS)
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>
10
<PAGE>
THE ACQUIRED RESORTS
<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 (9):
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(10).............. 15,703 14,778 17,075 16,585 17,178
Writedown of assets(11)................................ -- -- -- -- 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 (000s)...................................... 1,867 1,750 1,858 1,732 1,796
Season pass holders (000s)............................... 5.7 6.6 6.9 7.0 7.5
Total revenues per skier visit........................... $ 43.22 $ 45.23 $ 45.49 $ 47.46 $ 47.48
EBITDA(9)(10)(11)........................................ $ 25,929 $ 23,596 $ 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) In the first quarter of fiscal 1998, the Company granted to certain
executive officers and other employees fully vested options to purchase
622,038 shares of Common Stock at an exercise price of $2.00 per share. The
Company also agreed to pay certain tax liabilities which the receipients of
the options expect to incur upon exercise of such options. Because the $2.00
per share exercise price was below the fair market value of a share of
Common Stock on the date of grant, the Company will recognize a one-time
compensation charge of approximately $13.9 million in the first quarter of
fiscal 1998.
(4) 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.
(5) Resort EBITDA represents resort revenues less cost of resort operations and
marketing, general and administrative expense.
(6) Resort EBITDA and Real Estate EBIT (collectively referred herein as
"EBITDA") 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.
(7) 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.
(FOOTNOTES CONTINUED ON NEXT PAGE)
11
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(8) 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.
(9) The statement of operations data include the results of Sabal Point Golf
Course in Orlando, Florida which the Company intends to sell following the
closing of the Acquisition. In fiscal 1997, the Sabal Point Golf Course
generated approximately $1.3 million in revenues.
(10) 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 because such expenses will not be incurred by the
Acquired Resorts following the closing of the Acquisition.
(11) 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.
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 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
and develop 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, $6.5 million of which was financed through the
issuance of a note payable to the seller. 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 net 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 a
purchase price of 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, Utah 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 is expected to
include provisions which permit 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, 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 "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. Because The Canyons is largely undeveloped, management believes that it
presents a unique development opportunity to build a world class destination
resort in one of the fastest growing areas in the United States. An estimated
$60 million (approximately $18 million of which is expected to be spent by
December 1997) for on mountain capital improvements and an estimated $150
million for real estate development will be required to fulfill the Company's
five-year business plan at The Canyons. 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), 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
13
<PAGE>
the Formation, the Company formed its ASC Utah subsidiary for the purpose of
acquiring The Canyons 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 acquire any of the cash or
assume any of the 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 by 8.4% from the 1995-96
ski season 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 facility 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 charge of approximately $4.3 million in connection with the
redemption premium related to 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 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 is expected to be registered with the Securities and
Exchange Commission on a registration statement to be effective concurrently
with the closing of the Offering or as soon as practicable thereafter.
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") the Company's
10 1/2% Repriced Convertible Exchangeable Preferred Stock having an aggregate
liquidation preference upon consummation of the Transaction of approximately
$36.0 million (the "10 1/2% Convertible Preferred Stock") for the Canyons
Securities. Each share of 10 1/2% 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 10 1/2% 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 10 1/2% Convertible Preferred Stock is expected to be registered with
the Securities and Exchange Commission concurrently with the closing of the
Offering or as soon as practicable thereafter. If the holder of the Canyons
Securities does not exchange the 10 1/2% 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 in 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 (approximately $37.9 million as of September 30,
1997). See "Risk Factors--Immediate and Substantial Debt Obligations Upon
Consummation of the Offering" and "Description of Certain
Indebtedness--Exchangeable Notes" and "Description of Capital Stock--Series A
Exchangeable Preferred Stock" and "--10 1/2% 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 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). 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 in 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 would
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 ($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 the Company is required to make the Change of Control Offer and 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."
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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 $62.3 million available for
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 $45.2 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 internally generated
funds and borrowings under its New Credit Facility 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 management, 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, 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 any future acquisitions through a combination of
internally generated funds, additional bank borrowings from existing and new
credit 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 million of which is
expected to be spent by December 1997) for on-mountain capital improvements and
an estimated $150 million for real estate development will be required to
fulfill the Company's five-year business plan at The Canyons. 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, estimated by
the Company to be approximately $2 million in each of fiscal 1997 and fiscal
1996. 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 relating to
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
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number of 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 a 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 $11.9 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 the 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
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addition, Grand Summit Resort Properties, Inc., a subsidiary of ASC East, is
restricted in its ability to pay 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 under "Pro Forma Financial Data."
COMPETITION
The skiing industry is highly competitive and capital intensive. The
Company's competitors include other major ski resorts throughout the United
States, Canada and Europe. The Company's competitors
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also include other worldwide recreation resorts, including warm weather resorts
and various alternative 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 also 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 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, 10 1/2%
Convertible Preferred Stock with rights to elect two directors upon the
occurence of certain events 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 is expected to own shares
of Common Stock and Class A Common Stock representing at least a majority of all
outstanding shares of Common Stock and Class A Common Stock and, accordingly, is
expected to 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 the voting power than that held by Mr. Otten 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 "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 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, the proceeds of
which are expected to be assigned to the lenders under the New Credit Facility.
See "Management."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Transactions, the Company will have outstanding
18,097,578 shares of Common Stock (excluding all shares issuable upon the
exercise of options which are exercisable at a price per share equal to the
Public Offering price and additional shares issuable upon conversion of the
Company's 10 1/2% Convertible Preferred Stock as a result of the payment of
in-kind dividends thereon, 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
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options granted under the Stock Option Plan, 4,585,753 shares of Common Stock
and 14,760,530 shares of Class A Common Stock 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 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 and such volatility 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 is expected to contain, and the 10 1/2% Convertible Preferred
Stock contain, restrictions on the ability of the Company to pay cash dividends
on its Common Stock and 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."
24
<PAGE>
CONCURRENT OFFERING
A portion of the 14,750,000 shares of Common Stock offered hereby are being
offered by the Company directly to the Principal Shareholder at the price to the
public set forth on the cover page of this Prospectus. The Principal Shareholder
has advised the Company that he intends to purchase a number of shares of Common
Stock in the Concurrent Offering sufficient to maintain ownership of at least a
majority of the outstanding Common Stock and Class A Common Stock. Assuming that
the Underwriters' over-allotment option is not exercised and assuming a price to
the public of $18.50 per share, the midpoint of the range set forth on the cover
page of this Prospectus, approximately 810,811 shares of Common Stock are
expected to be sold to the Principal Shareholder in the Concurrent Offering at
an aggregate purchase price of approximately $15 million. The Company has agreed
to pay certain expenses in connection with the Concurrent Offering, expected to
be approximately $0.9 million.
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 $0.25 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 shown on the cover page of this Prospectus) 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 Public
Offering, from the price to be paid by new
25
<PAGE>
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>
<CAPTION>
PER SHARE
----------------------
<S> <C> <C>
Assumed Public Offering price............................................ $ 18.50
Net tangible book value as of July 27, 1997.............................. $ (0.25)
Increase attributable to new investors in the Public Offering............ 8.63
---------
Pro forma net tangible book value........................................ 8.38
-----------
Dilution 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, dilution to the new investors in the Public
Offering would be $10.26 per share.
(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. If all such ASC East
shares were exchanged for 615,022 shares of Common Stock, dilution to the
new investors in the Public Offering would be $10.42 per share.
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(1).................. 14,760,530 49.0% $ 2,796,000(1) 1.0% $ 0.19
Investors in ASC East Exchange Offer...... 615,022 2.0 976,000 0.4 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................................... 30,125,552 100.0% $ 276,647,000 100.0% $ 9.18
------------- ----- -------------- ----- ------
------------- ----- -------------- ----- ------
</TABLE>
- ------------------------
(1) Reflects investments in the Company by the Principal Shareholder between
1980 and 1997.
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 Price to the Public 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
--------- ---------
--------- ---------
Long-term debt:
Existing Credit Facility.......................................................................... $ 30,000 $ --
New Credit Facility (2)........................................................................... -- 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
--------- ---------
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 --
---------
10.5% Convertible Preferred Stock................................................................... -- 36,848
---------
Shareholders' equity:
Common Stock, $.01 par value per share; 1,000,000 shares authorized, no shares issued and
outstanding (actual); 100,000,000 shares authorized, 15,365,022 shares issued and outstanding
(pro forma) (3)................................................................................. -- 154
Class A Common Stock, $.01 par value per share; 15,000,000 shares authorized, 14,760,530 shares
outstanding (actual); 15,000,000 shares authorized, 14,760,530 shares outstanding (pro forma)... 10 148
Additional paid in capital........................................................................ 2,786 275,011
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 Exchangeable Notes
issued on July 28, 1997 in connection with the financing of The Canyons
acquisition, which securities are expected to be converted into 10.5%
Convertible Preferred Stock upon consummation of the Offering, or other
indebtedness incurred subsequent to July 27, 1997.
(2) Total commitments under the New Credit Facility will be $215 million. See
"Description of Certain Indebtedness--New Credit Facility."
(3) Does not include (i) 2,110,518 shares issuable upon conversion of the
10 1/2% Convertible Preferred Stock and (ii) 2,475,235 shares issuable upon
the exercise of outstanding stock options.
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 TRANSACTIONS 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( e,f) $ 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)(f) 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(g) 410,974
Land held for development and sale................ -- 27,382 27,382 7,700(h) 35,082
Assets held for sale.............................. -- -- -- 4,500(i) 4,500
Real estate developed for sale.................... 23,003 -- 23,003 -- 23,003
Other assets, net................................. 17,998 7,110 25,108 (1,285) b,f) 23,823
Goodwill and other intangibles, net............... 10,664 2,027 12,691 88,669(j) 101,360
-------- -------- ------- --------- ------------
Total assets.................................. $337,340 $149,444 $486,784 $167,153 $ 653,937
-------- -------- ------- --------- ------------
-------- -------- ------- --------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Line of credit and current portion of long-term
debt............................................ $ 39,748 $ 5,054 $44,802 $(30,121) f,b) $ 14,681
Accounts payable and other current liabilities.... 25,738 7,828 33,566 3,648(m) 37,214
Accrued interest.................................. -- 1,204 1,204 (1,204)(f) --
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)(f) --
Other long-term debt.............................. 46,833 -- 46,833 (37,286) n,c) 9,547
New Credit Facility............................... -- -- -- 131,801(b) 131,801
Subordinated notes and debentures................. 149,749 -- 149,749 (22,076)(b) 127,673
Other long-term liabilities....................... 7,898 -- 7,898 (1,200) b,d) 6,698
Minority interest in subsidiary................... 626 -- 626 (626)(k) --
-------- -------- ------- --------- ------------
Total long-term liabilities................... 233,620 130,359 363,979 (59,746) 304,233
Mandatorily redeemable preferred stock............ 16,821 -- 16,821 (16,821)(n) --
10 1/2% Convertible Preferred Stock............... -- -- -- 36,848(n) 36,848
Shareholders' Equity
Common and Class A Common Stock................... 10 -- 10 292 302
Additional paid-in capital........................ 2,786 44,400 47,186 227,825( m,s) 275,011
Retained earnings................................. 12,305 (39,401) (27,096) 6,432( k,m) (20,664)
-------- -------- ------- --------- ------------
Total shareholders' equity.................... 15,101 4,999 20,100 234,549 254,649
-------- -------- ------- --------- ------------
Total liabilities, mandatorily 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>
AS OF
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 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 from
property and equipment 4,500
------------
Other assets, net............................ c Fees on Exchangeable Notes 26
b Prepayment 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>
AS OF
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)
------------
Net effect on total current liabilities.... (27,677)
------------
------------
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)
c Issuance of Exchangeable Notes 17,500
b Retirement Sugarbush acquisition debt (7,286)
n Conversion of 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 ASC East Exchange Offer (626)
------------
Net effect on total long-term
liabilities................................ (59,746)
------------
------------
Mandatorily redeemable preferred stock....... n Exchange of mandatory redeemable preferred
stock for 10 1/2% Convertible Preferred Stock (16,821)
------------
10 1/2% Convertible Preferred Stock.......... n Exchange of Canyons Securities for 10 1/2%
Convertible Preferred Stock 36,848
Common and Class A Common Stock.............. s Adjustment to par value pertaining to Stock
Split in Class A common 138
s Increase in issued and outstanding common
stock pertaining to Offering and ASC
Exchange Offer 154
------------
Net effect on Common and Class A Common
Stock...................................... 292
------------
------------
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 ASC East Exchange Offer 11,378
m Effect of stock compensation award on
additional paid-in capital 10,264
s Reflect Stock Split in Class A Commmon (138)
s Reflect increase in issued and outstanding
common stock pertaining to Offering and ASC
Exchange Offer (154)
------------
Net effect on additional paid-in capital... 227,825
------------
------------
Retained earnings............................ f Remove accumulated deficit of Acquired
Resorts 39,401
n Exchange of 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 ASC East Exchange Offer (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>
FISCAL YEAR ENDED FISCAL YEAR ENDED
JULY 27, 1997 MAY 31, 1997 RESULTS OF
----------------- ----------------- OPERATIONS TRANSACTIONS PRO FORMA
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................... 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)(q) 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)(p) 39,464
Depreciation and
amortization................ 18,293 12,516 (265) 5,449(b ,r) 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(f) --
Interest expense.............. 23,730 10,659 (332) (6,730)( ,q) 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(f) (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(k) --
-------- ------- ------------- ------------- --------
Net income (loss) after minority
interest in loss of
subsidiary.................... (5,482) (3,406) 2,593 3,119 (3,176)
-------- ------- ------------- ------------- --------
Accretion of discount and
issuance costs and dividends
accrued on mandatorily
redeemable preferred stock.... 444 -- -- 1,605(n) 2,049
-------- ------- ------------- ------------- --------
Net income (loss) available to
common shareholders........... $ (5,926) $ (3,406) $ 2,593 $ 1,514 $ (5,225)
-------- ------- ------------- ------------- --------
-------- ------- ------------- ------------- --------
Net loss per weighted average
common shares outstanding..... $ (0.38) (t) $ (0.17)
-------- --------
-------- --------
Weighted average common shares
outstanding................... 15,415,591 30,780,613
-------- --------
-------- --------
</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
---------------
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)
o Interest on incremental borrowings under the
New Credit Facility 5,482
n Additional accretion on 10 1/2% Convertible
Preferred Stock 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
---------------
Accretion of discount and issuance costs and
dividends accrued on mandatorily redeemable
preferred stock............................. n Full accretion of discount and issuance costs
pertaining to Mandatorily Redeemable
Preferred Stock 1,605
Net loss available to common
shareholders................................ $ 1,514
---------------
---------------
</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 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 will be
funded from the proceeds of the Offering and borrowings under the New Credit
Facility.
Pro forma adjustments have been made to depreciate the 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 under the Internal Revenue Code of 1986 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 borrowings under 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 but have been reflected
in retained earnings in the unaudited pro forma combined balance sheet data.
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 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 Wolf Mountain (The Canyons) acquisition note required
by the Offering................................................. 4,200
Payment of Sugarbush acquisition notes required by change of
control......................................................... 7,657
Amount required in addition to the Offering to purchase Acquired
Resorts......................................................... 61,602
---------
$ 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. The Company
incurred various fees totaling $26, resulting in net proceeds of $17,474.
(d) The following table sets forth the purchase price of the Acquired Resorts.
<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 Offering 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 and a personal
residence 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.
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 to exchange
Common Stock for all minority interests owned in ASC East. The pro forma
financial data assumes all minority owners exchange their shares. The amount
of $626 represents the elimination of the minority interest.
The fair market value of the minority interest at an assumed initial Public
Offering 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, which has not been reflected
as a pro forma adjustment to the unaudited pro forma combined statement of
operations data 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 expected to be granted. The effect of
the Stock Option Plan has been recorded as an adjustment to the unaudited
pro forma combined balance sheet data.
(n) In July 1997, ASC Utah, a subsidiary of the Company, 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 or as soon as practicable after 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 and Class A
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 is expected to exchange
all of such securities for shares of the
36
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
Company's 10 1/2% Convertible Preferred Stock or an aggregate of 2,110,518
shares of Common Stock at a 5% discount to the initial public offering
price, representing 11.5% of the Common Stock and Class A Common Stock
outstanding after giving effect to the Offering. The effects of such
discount are accounted for in the Pro Forma Financial Data. The Unaudited
Pro Forma Combined Balance Sheet Data includes a charge to retained earnings
of $2,526,000 which represents the recording of the discount of $921,000
pertaining to the debt securities and $1,605,000 which represents the
accretion of the discount and the issuance costs pertaining to the preferred
stock securities. The $921,000 has been reflected in the Unaudited Pro Forma
Combined Statement of Operations Data as a charge to interest expense, while
the $1,605,000 has been reflected in the Unaudited Pro Forma Combined
Statement of Operations Data as accretion of discount and issuance costs.
The pro forma financial data assumes that the Preferred Exchange offer will
occur. If the holders of Series A Exchangeable Preferred Stock and
Exchangeable Notes do not elect to exchange such securities for 10 1/2%
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 Exchangeable Preferred Stock
and Exchangeable Notes. In such event the Securities Purchase Agreement
would require that the Company offer to purchase the Series A Exchangeable
Preferred Stock and 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 (approximately $37.9 million at
September 30, 1997). See "Description of Certain Indebtedness--Exchangeable
Notes" and "Description of Capital Stock--Series A Exchangeable Preferred
Stock" and "--10 1/2% 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. Under the New Credit Facility, interest will be payable
(at the Company's option) at either the Alternate Base Rate, a defined
(option I) or LIBOR (option II) plus the Applicable Margin determined
quarterly through April 1998 and annually thereafter. The Applicable Margin
portion of the interest rate is based on a range of the Company's ratio of
Total Debt to EBITDA (from < 3.50x to >5.50x) as defined in the New Credit
Facility. The pro forma calculation of interest expense in the accompanying
pro form financial statements assumes the use of LIBOR plus the Applicable
Margin for both the Reducing Revolver and the Term Loan portion which
results in an effective interest rate of 8.45%. A 1/8% increase in the
assumed blended rate would increases pro forma interest expense by
approximately $165,000. 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 borrowings of $64.9 million. For purposes of calculating pro
forma interest expense, the interest rate for the New Credit Facility was
assumed to be 8.45%. Pursuant to the terms of the commitment letter with
respect to the New Credit Facility, which the Company entered into on
October 8, 1997, the interest rate is expected to range from LIBOR plus 1.5%
to LIBOR plus 2.75% (at October 9, 1997, the interest rate would have been
8.4%). See "Description of Certain Indebtedness--The New Credit Facility."
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
37
<PAGE>
AMERICAN SKIING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED)
(IN THOUSANDS)
the year ended July 27, 1997 nor will such payments be required by the
Acquired Resorts prospectively.
(q) Management has specifically identified certain costs which will be
eliminated in connection with the Acquisition. Insurance expense will be
reduced by $325 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, which 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 $9.3 million. The depreciation previously
recorded on the Acquired Resorts has been eliminated.
(s) The unaudted pro forma combined financial data gives effect to the
anticipated issuance of 14,750,000 shares to the public in the Offering and
to the anticipated issuance of 615,022 shares to the holders of the minority
interest pursuant to the ASC East Exchange Offer. In connection with the
anticipated issuance of these shares, par value has been increased by and
additional paid-in capital has been decreased by $154,000 to reflect the
$.01 per share par value for the total Common Stock shares outstanding of
15,365,022. In addition, the unaudited pro forma combined financial data
gives effect to the adjustment of the par value pertainint to the
outstanding Class A Common Stock shares of 14,760,530. In connection with
the stock split of the Class A shares, an adjustment has been made in the
unaudited pro forma combined financial data to icnrease par value and
decrease additional paid-in capital by $138,000 to reflect total par value
$.01 per share of $148,000.
(t) Pro forma net loss per weighted average common share outstanding was
calculated by dividing the pro forma net loss available to common
shareholders by the weighted average number of common shares outstanding,
giving effect to the stock split, the 622,038 options (the "Options")
granted to certain executive officers of the Company with an exercise price
below the estimated offering share price, the 615,022 shares into which the
minority interest is convertible, the Securities, and the 14,750,000 shares
to be issued in the Offering. The net loss available to common shareholders
does not reflect the compensation charge of $13.9 million that the Company
will reocrd in fiscal 1998 pertaining to the grant of the Options and the
related income tax gross-up payable by the Company. The weighted average
number of common shares outstanding relating to the Options and the
Securities were determined by including all potentially dilutive instruments
granted or issued within one year prior to an initial public offering,
through the effective date of the offering, at an exercise price less than
the initial public offering price, in accordance with the Scurities and
Exchange Commission Staff Accounting Bulletin No. 83, with the dilutive
effect measured using the treasury stock method. The weighted average number
of shares outstanding for the minority interest shares and offering shares
were considered to have been outstanding since the beginning of the year.
The primary and fully diluted calculations of pro forma net loss per
weighted averrage common share outstanding are the same, as includion of all
other potentially dilutive instruments in the pro forma loss per share
calculation would be anti-dilutive.
38
<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 95.3% $ 253,397 96.8%
Real Estate............................................. 11,877 4.7 8,468 3.2
---------- --------- ---------- ---------
Total revenues...................................... 253,873 100.0 261,865 100.0
Operating Expenses:
Cost of resort operations............................... 151,595 59.7 157,744 60.2
Cost of real estate sold................................ 6,273 2.5 6,813 2.6
Marketing, general and administrative................... 37,302 14.7 39,464 15.1
Depreciation and amortization........................... 34,207 13.5 35,993 13.7
---------- --------- ---------- ---------
Total operating expenses............................ 229,377 90.4 240,014 91.7
---------- ----------
Income from operations.................................... 24,496 9.6 21,850 8.3
Commitment fee............................................ 1,447 .6 -- --
Interest expense.......................................... 26,002 10.2 27,327 10.4
Provision (benefit) for income taxes...................... (344) (.1) (2,300) (.9)
---------- --------- ---------- ---------
Net loss.................................................. $ (2,609) (1.0)% $ (3,177) (1.2)%
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</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 1.5% increase in aggregate skier visits (to approximately 4.8
million from approximately 4.7 million) and a 3.2% 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 0.3% increase in skier visits and a 3.0% 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
39
<PAGE>
increased promotional activity. Notwithstanding an industry-wide 10.6% decrease
in skier visits in the Northeast, skier visits at the Company's Northeastern
resorts declined by only 1.4% on a same-store basis and were further helped by
the November 1996 acquisition of Pico Mountain.
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 sell-out 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 0.5% 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. In the first
quarter of fiscal 1998, the Company granted to certain executive officers and
other employees fully vested options to purchase 622,038 shares of Common Stock
at an exercise price of $2.00 per share. The Company also agreed to pay certain
tax liabilities which the recipients of the options expect to incur upon
exercise of the options. Because the $2.00 per share exercise price was below
the fair market value of a share of Common Stock on the date of grant, the
Company will recognize a one-time compensation charge of approximately $13.9
million in the first quarter of fiscal 1998. Such charge has not been reflected
in pro forma marketing, general and administrative expense in fiscal 1997 or
fiscal 1996. See "Pro Forma Financial Data."
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 primarily to expenditures related to capital
improvements.
40
<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(2)......................... 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 (000s)(3)........................................... 525 528 1,060 1,290 3,025
Season pass holders (000s)....................................... 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(4)(5).............................................. $ 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(6)...................................... -- -- -- 109 605
Real Estate EBIT(5)(7)........................................... $ 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, including current portion........................ 35,056 210,720 236,330
Mandatory redeemable preferred stock............................. -- -- -- -- 16,821
Common shareholders' equity...................................... 23,167 26,212 30,502 21,903 15,101
</TABLE>
41
<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) In the first quarter of fiscal 1997, the Company granted to certain
executive officers and other employees fully vested options to purchase
622,038 shares of Common Stock at an exercise price of $2.00 per share. The
Company also agreed to pay certain tax liabilities which the recipients of
the options expect to incur upon exercise of the options. Because the $2.00
per share exercise price was below the fair market value of a share of
Common Stock on the date of grant, the Company will recognize a one-time
compensation charge of approximately $13.9 million in the first quarter of
fiscal 1998.
(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 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.
42
<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(1):
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(2)...................................... 15,703 14,778 17,075 16,585 17,178
Writedown of assets(3).......................... -- -- -- -- 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 (000s)............................... 1,867 1,750 1,858 1,732 1,796
Season pass holders (000s)........................ 5.7 6.6 6.9 7.0 7.5
Total revenues per skier visit.................... $ 43.22 $ 45.23 $ 45.49 $ 47.46 $ 47.48
EBITDA(1)(2)(3)................................... $ 25,929 $ 23,596 $ 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 statement of operations data include the results of Sabal Point Golf
Course in Orlando, Florida which the Company intends to sell following the
closing of the Acquisition. In fiscal 1997, the Sabal Point Golf Course
generated approximately $1.3 million in revenues.
(2) 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 because such expenses will not
be incurred by the Acquired Resorts following the closing of the
Acquisition.
(3) 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.
43
<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
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.
44
<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>
FISCAL 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
------- ------ ------
Operating 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 operating 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.
45
<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 20,000 skier
visits, or approximately 11%, 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
46
<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 $8.7 million, an increase
of $0.1 million, or 1.2%, as compared to retail and ski rental expenses of $8.6
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.
47
<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>
FISCAL 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
----------- ----------- ----------- --------- --------- --------- --------- ---------
Operating expenses:
Cost of resort 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>
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."
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
48
<PAGE>
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 its subsidiaries. The Company
has received a commitment from a lender with respect to the New Credit Facility
which is subject to various closing conditions, including execution of
definitive loan documents. 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 $62.3 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 under the Facility. Subsequent to year end, the violations were waived
by Fleet as of the balance sheet date and the financial covenants with respect
to which the Company was in default were amended. Subsequent to year end, the
Company received a signed commitment from a lender for a new financing
arrangement to refinance the Facility and, therefore, the amounts due under the
Facility beyond one year from the balance sheet date have been classified as
long term.
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,
49
<PAGE>
$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 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.
Consistent 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 of 5% of the total purchase price) 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."
50
<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 9.4% 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. In August 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, the Company's
total revenues, EBITDA and net loss for fiscal 1997 would have been
approximately $261.9 million, $57.8 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) as ranked in the 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; (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's retail,
restaurant and conference facilities and from 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
pre-construction 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 during the next 15 to 20 years. The
Company also operates golf courses at its resorts and conducts other off-season
activities, which 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/
51
<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
strategies across 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.
52
<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 9.4%
------ ------- ----- -------
------ ------- ----- -------
</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.
53
<PAGE>
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, which
interconnects Sugarbush's North and South mountains. Since 1994, when the
Company began implementing its acquisition strategy, the Company has
significantly increased lift capacity, skiable terrain and snowmaking coverage
at each of 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 the 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
54
<PAGE>
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 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 programs are 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
55
<PAGE>
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 implement consumer statistical and usage 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.
56
<PAGE>
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(6) 59.8% 8 1,000
Sunday River (1980)..................... 654 2,340 126 17(4) 93.3 4 557
Mount Snow/Haystack (1996).............. 766 1,700 134 25(3) 66.0 5 560
Sugarloaf (1996)........................ 1,400 2,820 110 14(2) 35.0 1 336
Sugarbush (1995)........................ 432 2,650 112 18(4) 66.1 5 362
Attitash Bear Peak (1994)............... 273 1,750 60 11(1) 89.7 2 210
The Canyons (1997)...................... 2,200 2,580 63 9(4) 5.0 2 100
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............................... 13,600 1,034 175(33) 38 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)(1)......................................... 11% 13% 1%
Sunday River (1980)(2)....................................... 33 23 26
Mount Snow/Haystack (1996)................................... 7 -- --
Sugarloaf (1996)............................................. 9 -- 4
Sugarbush (1995)............................................. 60 8 44
Attitash Bear Peak (1994).................................... 106 92 79
The Canyons (1997)........................................... 44 29 51
------ ----- ------
Weighted Average......................................... 24% 15% 15%
------ ----- ------
------ ----- ------
</TABLE>
- ------------------------------
(1) Includes statistics for Pico Mountain ski resort.
(2) 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 16 retail shops, 12
rental and repair shops, a travel and reservation agency and a cable television
station. At the base of Pico Mountain, the Company owns a well developed retail
village and a health club. Killington is a year-round resort offering complete
golf amenities including an 18-hole championship golf course, a golf school, a
pro shop, 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 of one
eight-passenger high-speed gondola to service the Peak Restaurant at the
Killington summit and to replace the old Killington Peak double chair, (iii)
construction of a new children's center and related base area improvements and
(iv) an increase in snowmaking capacity and coverage to approximately 60%.
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 and
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 inn 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 skier 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.
58
<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 134 trails
and approximately 762 acres of skiable terrain serviced by 25 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 improvements. The Company's three-year capital program
for the 1998-01 ski seasons includes four new high speed detachable quad lifts,
replacing older existing lifts. The Company plans to expand Mount Snow's lodges
to provide a new children's center, an expanded nightclub and more retail, food
and beverage and guest service space. The Company also plans to expand
snowmaking coverage, adding approximately 100 acres of snow coverage
(representing an increase of approximately 20%).
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 110 trails covering approximately 530 acres, of which
490 acres have snowmaking coverage serviced by 14 lifts. There are approximately
870 additional acres of off-trail skiable terrain. The mountain has a 4,237 foot
summit and a 2,820 foot vertical drop. Sugarloaf offers one of the largest
ski-in/ski-out base villages in the Northeast, containing numerous restaurants,
retail shops and an abundance of lodging. Sugarloaf is widely recognized for its
challenging terrain, including its snowfields, which represent the only
lift-serviced above-treeline skiing in the Northeast. As a destination resort,
Sugarloaf has a broad market, including areas as distant as New York, New
Jersey, Pennsylvania and Canada.
Sugarloaf operates a year-round conference center, a cross-country ski
facility and an 18-hole championship golf course designed by Robert Trent Jones,
Jr., which is rated by both GOLF DIGEST and GOLF magazines as one of the top 25
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, 870 condominium
units and 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 September
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.
The on-mountain accommodations at Sugarbush consist of approximately 2,200
beds. The off-mountain bed base within the Mad River Valley totals approximately
6,600 beds. The resort operates three
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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 44% 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 significant 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 two base lodges and two
additional on-mountain restaurants.
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 major domestic airports. The Salt Lake City area has
been one of the fastest growing regions in the United
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<PAGE>
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 operating 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 snow 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 by non-stop jet
service from nine major United States cities to the Hayden, Colorado airport, 22
miles from the resort. Numerous daily commuter flights from Denver are also
available. 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, additional
snowmaking capacity and up to 260 acres of advanced/ expert terrain in the
Pioneer Ridge area. Lodge facilities are currently located in the base area and
at three other points on the mountain, Thunderhead, Four Points and Rendez Vous
Saddle. Steamboat operates or leases 15 retail shops, four equipment rental
shops and 17 food and beverage operations, having a total seating capacity of
approximately 2,734.
Steamboat's master plan calls for continued expansion to include Pioneer
Ridge which has been approved by the Forest Service, covering a total of 960
acres, which will involve the installation of two detachable chair lifts
servicing 27 open and gladed trails for intermediate and expert skiers.
Expansion of Pioneer Ridge, including snowmaking covering 66 acres, will be
phased in over three years. The new Morningside Park expansion was recently
completed and added one fixed grip chair lift servicing designated tree skiing
and open bowl skiing area for intermediate skiers. Because snowfall averages
more than 335 inches per year, the natural snowpack in Morningside Park is very
high due to snow blowing over a ridge and depositing in the bowl, making
snowmaking unnecessary in this area. 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
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the second largest resort in the Pacific West Region with approximately 700,000
skier visits for the 1996-97 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>
FISCAL YEAR ENDED JULY 27, 1997
--------------------------------------------------------------------
<S> <C> <C>
REVENUE SEGMENT RESORT REVENUES PERCENTAGE OF RESORT REVENUES
- ----------------------------------------------- ------------------------------- -----------------------------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
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 revenues......................... $ 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 over 40
different food and beverage outlets and currently 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 led 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. Most resorts have 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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<PAGE>
MARKETING PROGRAMS
General. The Company's marketing programs are 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 has 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 significant competitive advantage over
traditional timeshare developers due to (i) its inventory of developable real
estate, (ii) the significant existing resort infrastructure in place, (iii) the
relative affluence of its resort guests and (iv) 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 to 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 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 and commercial 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--Required Development at The Canyons; Historical
Losses of Predecessor."
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 approximately 3,000 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.
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 Osguthorpe 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.
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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.
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
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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.
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.
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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................................ 40 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.................................. 34 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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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).
EMPLOYMENT AGREEMENTS
In August 1994, Warren Cook entered into an employment agreement with
Sugarloaf Mountain Corporation ("SMC"). The employment agreement provides that
Mr. Cook will act as President of SMC for a term of five years and a base salary
of $120,000 per year (subject to customary salary increases), plus an annual
bonus. In addition, under Mr. Cook's employment agreement, he is entitled to
participate in SMC's employee benefit plans. If Mr. Cook's employment is
terminated for any reason, other than Mr. Cook's gross mismanagement, he will be
entitled to a cash payment equal to the greater of 50% of the compensation he
would have received over the remaining term of the agreement or his annual
salary and bonus for the year in which the termination occurs.
In August 1996, Christopher Howard entered into an employment agreement with
ASC East. The employment agreement provides that Mr. Howard will act as Chief
Administrative Officer and General Counsel of ASC East for a base salary of
$150,000 per year (subject to salary increases based on inflation reflected in
the Consumer Price Index), plus an annual bonus equal to the greater of $50,000
or .1875% of the combined ski and lodging and real estate EBITDA of ASC East. In
addition, under Mr. Howard's employment agreement, he is entitled to participate
in ASC East's employee benefit plans. If Mr. Howard's employment is terminated
(i) involuntarily, he is entitled to receive his annual salary and bonus for the
year in which the termination occurs or (ii) in connection with a sale of ASC
East, he is entitled to receive two times his annual base salary and bonus for
the year in which the sale occurs.
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.
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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.
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>
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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. The Company
intends to administer the Stock Option Plan in compliance with the requirements
of Sec. 162(m) of the Internal Revenue Code of 1986, as amended, with the
intended result that all amounts paid by the Company pursuant to such Stock
Option Plan will be deductible by the Company for Federal Income Tax purposes.
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. Future grants of stock
options are expected to have an exercise price equal to 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 2,475,235 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.
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
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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 involved in 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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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. Except as indicated below, 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 75.1% 2,664,008 9.2% 14,760,530 100%
Thomas M. Richardson(2)........ 100,334 14.0 100,334 * 0 --
Christopher E. Howard(2)....... 150,493 19.7 150,493 * 0 --
Burton R. Mills(2)............. 80,243 11.5 80,243 * 0 --
G. Christopher Brink(2)........ 80,243 11.5 80,243 * 0 --
Warren C. Cook(2).............. 40,121 6.1 40,121 * 0 --
Madeleine LLC(3)
c/o Cerberus
450 Park Ave.
New York, NY
10022........................ 0 -- 2,110,518 12.1% 0 --
Directors and Executive
Officers as a Group
(8 persons)(4)............... 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(2)........ *
Christopher E. Howard(2)....... *
Burton R. Mills(2)............. *
G. Christopher Brink(2)........ *
Warren C. Cook(2).............. *
Madeleine LLC(3)
c/o Cerberus
450 Park Ave.
New York, NY
10022........................ 6.5%
Directors and Executive
Officers as a Group
(8 persons)(4)............... 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 and 810,811 shares of Common Stock to be
issued in the Concurrent Offering.
(2) All shares of Common Stock beneficially owned by such person are issuable
under exercisable options granted under the Stock Option Plan.
(3) Includes 2,110,518 shares of Common Stock which is issuable upon the
conversion of such holder's shares of 10 1/2% Convertible Preferred.
(4) Includes 2,324,697 shares of Common Stock issuable under exercisable options
granted under the Stock Option Plan.
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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
On October 8, 1997, the Company entered into a commitment letter (the
"Commitment Letter") with respect to the New Credit Facility. The Commitment
Letter contemplates credit facilities providing for borrowings in an aggregate
amount of up to $215 million. Amounts borrowed under the New Credit Facility are
expected to 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 repay approximately $12 million of indebtedness of the
Company and its subsidiaries, (iv) to pay certain fees and expenses relating to
the Acquisition and (v) for ongoing general corporate purposes and capital
expenditures. The New Credit Facility is expected to be divided into two
sub-facilities, $75 million of which is expected to be available for borrowings
by ASC East and its subsidiaries (the "East Facility") and $140 million of which
is expected to be available for borrowings by the Company excluding ASC East and
its subsidiaries (the "West Facility"). The East Facility is expected to consist
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 is
expected to consist 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 $35 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, in each case, plus an applicable margin that is
dependent upon the ratio of the Company's total debt to EBITDA (as defined in
the New Credit Facility).
The New Credit Facility is expected to require mandatory prepayments with
the net proceeds of any asset sales and new debt and/or equity offerings of the
Company. Beginning in July 1999, the New Credit Facility is expected to 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 is expected to 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
expected to be secured by substantially all the assets of the Company and its
subsidiaries, except ASC East and its subsidiaries.
The New Credit Facility is expected to 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. In addition, the New Credit Facility is
expected to contain financial covenants customary for this type of senior credit
facility, including maintenance of customary financial ratios. 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 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
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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.
EXCHANGEABLE NOTES
Pursuant to the Securities Purchase Agreement, the Company issued $17.5
million aggregate principal amount of its Exchangeable Notes in a private
offering to an institutional investor. The Exchangeable Notes bear interest at a
rate of 14% per annum and mature on July 28, 2002. Interest on the Exchangeable
Notes is payable in cash or additional Exchangeable Notes, at the option of the
Company. The Company intends to offer to exchange all of the Exchangeable Notes
for shares of 10 1/2% Convertible Preferred Stock with an aggregate liquidation
preference of approximately $17.5 million. See "The Transactions-- Exchange
Offers." Upon consummation of the Offering, the 10 1/2% 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 Exchangeable Notes does
not exchange such securities for 10 1/2% Convertible Preferred Stock issued in
exchange for the 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
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--10 1/2%
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 shares of 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, 100,000 shares of
10 1/2% Convertible Preferred Stock, having a liquidation preference of $1,000
per share, approximately 36,041 shares of which will be outstanding, and 100,000
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, Class A Common Stock and 10 1/2% Convertible
Preferred 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
class of capital stock. Thus, the holders of Common Stock are entitled to vote
as a class with respect to, among other things, (i) changes in the designations,
preferences, limitations and relative rights of the Common Stock, (ii) changes
in the aggregate number of authorized shares or par value of the
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Common Stock, (iii) exchanges, reclassifications or cancellations of the Common
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 of the
Common Stock (or an increase in the rights and preferences of any other class).
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, Class A Common
Stock and 10 1/2% Convertible Preferred 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 of the Series A
Exchangeable Preferred Stock for shares of 10 1/2% Convertible Preferred Stock.
If the holder of Series A Exchangeable Preferred Stock does not elect to
exchange such securities for 10 1/2% 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."
10 1/2% CONVERTIBLE PREFERRED STOCK
At the time of Offering, the Company will have authorized 100,000 shares of
10 1/2% Convertible Preferred Stock. The initial liquidation preference of the
10 1/2% Convertible Preferred Stock is $1,000 per share and cumulative dividends
are payable quarterly at a rate of 10 1/2% per annum by adding the amount of
such dividends to the liquidation preference per share of 10 1/2% Convertible
Preferred Stock. The terms of the 10 1/2% 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 10 1/2% Convertible
Preferred Stock have been paid. In addition, the Company may not redeem any
shares of
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Common Stock or Class A Common Stock so long as any 10 1/2% Convertible
Preferred Stock remains outstanding.
Each share of 10 1/2% 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 10 1/2% 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. Upon
consummation of the Transaction, there will be outstanding approximately $37.1
million liquidation preference of 10 1/2% Convertible Preferred Stock which,
assuming a Price to the Public of $18.50, will be convertible into 2,110,518
shares of Common Stock. Assuming the 10 1/2% Convertible Preferred Stock remains
outstanding until its maturity in 2002, it will have a final liquidation
preference of approximately $62.3 million and will be convertible into 3,543,663
shares of Common Stock.
The Company may, at its option, on any dividend payment date, exchange the
shares of 10 1/2% Convertible Preferred Stock, in whole but not in part, for
10 1/2% Convertible Subordinated Debentures due five years from the date of
issuance thereof in a principal amount equal to $1,000 for each share of 10 1/2%
Convertible Preferred Stock, plus cash in an amount equal to all accrued but
unpaid dividends. The 10 1/2% Convertible Subordinated Debentures will bear
interest at a rate of 10 1/2% per annum payable in cash quarterly in arrears.
The terms of the 10 1/2% Convertible Subordinated Debentures as to conversion
and redemption are substantially similar to those contained in the 10 1/2%
Convertible Preferred Stock.
If such shares are not previously converted into Common Stock, the Company
is required to redeem all outstanding shares of 10 1/2% Convertible Preferred
Stock on the fifth anniversary of the date of issuance thereof 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 10 1/2% 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 10 1/2% 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
10 1/2% 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 10 1/2%
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 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 10 1/2% 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, 10 1/2% 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."
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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 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 Boston EquiServe.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding
18,097,578 shares of Common Stock (excluding all shares issuable upon the
exercise of options which are exercisable at a price per share equal to the
Public Offering price 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 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 Common Stock for at
least one year, will be entitled to sell in any three-month
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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 181,000 shares
immediately after the Offering) or (ii) the average weekly trading volume of the
Common Stock on the New York Stock Exchange 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 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 and 10 1/2% Convertible Preferred 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 3,213,464 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 Exchangeable Notes and the Series A Exchangeable
Preferred Stock has certain rights to require the Company to register shares of
10 1/2% Convertible Preferred Stock and Common Stock issuable upon the exchange
or conversion of such securities. See "Description of Capital Stock--10 1/2%
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
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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
(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
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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 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
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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.
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.
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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.................................................................................. 13,939,189
-----------------
-----------------
</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 1,475,000 shares of
Common Stock, representing approximately 10% 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
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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 has applied
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 to the Underwriters in
the Public Offering, the Company is offering a portion of the 14,750,000 shares
of Common Stock offered hereby directly to the Principal Shareholder in the
Concurrent Offering. See "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.
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EXPERTS
The consolidated balance sheet of 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 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.
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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-42
Consolidated Statement of Income--For the nine months ended April 30, 1995 and April 28, 1996
(unaudited)............................................................................................ F-43
Consolidated Statement of Cash Flows--For the nine months ended April 30, 1995 and April 28, 1996
(unaudited)............................................................................................ F-44
Notes to (Unaudited) Condensed Consolidated Financial Statements......................................... F-45
KAMORI COMBINED ENTITIES
Report of Independent Public Accountants................................................................. F-48
Combined Balance Sheets as of May 31, 1996 and 1997...................................................... F-49
Combined Statements of Operations for the years ended May 31, 1995, 1996 and 1997........................ F-50
Combined Statements of Stockholders' Equity for the years ended May 31, 1995,
1996 and 1997.......................................................................................... F-51
Combined Statements of Cash Flows for the years ended May 31, 1995, 1996 and 1997........................ F-52
Notes to Combined Financial Statements................................................................... F-54
</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."
Price Waterhouse LLP
Boston, MA
September 19, 1997, except as to Note 16 which
is as of October 10, 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........... $ (.38)
-------------
-------------
Pro forma weighted average common shares outstanding....................... 15,415,591
-------------
-------------
</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 Principal
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 Principal
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 Principal
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 Principal
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...... -- -- 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
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 'Principal 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. IN OCTOBER, 1997, THE COMPANY
APPROVED AN INCREASE IN AUTHORIZED SHARES OF COMMON STOCK, A NEW ISSUE OF CLASS
A COMMON STOCK AND A 14.76 FOR 1 STOCK SPLIT OF SHARES OF COMMON STOCK FOR
SHARES OF CLASS A COMMON STOCK (Note 16).
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 Principal
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
Given the capital structure of the Company, historical earnings per share
information is not considered meaningful or relevant and, therefore, has not
been presented in the accompanying financial statements.
Unaudited pro forma net loss per weighted average common share outstanding
was calculated by dividing the net loss available to common shareholders by the
weighted average number of common shares outstanding, giving effect to the stock
split (Note 16), the 622,038 options (the "Options") granted to certain
executive officers of the Company with an exercise price below the estimated
Offering share price (Note 16) and the Securities (Note 13). The net loss
available to common shareholders does not reflect the compensation charge of
$13.9 million that the Company will record in fiscal 1998 pertaining to the
grant of the Options and the related income tax gross-up payable by the Company.
The weighted average number of common shares relating to the Options and the
Securities were determined by including all potentially dilutive instruments
granted or issued within one year prior to an initial public offering, through
the effective date of the offering, at an exercise price less than the initial
public offering price, in accordance
F-11
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
with the Securities and Exchange Commission Staff Accounting Bulletin No. 83,
with the dilutive effect measured using the treasury stock method. The primary
and fully diluted calculations of pro forma net loss per weighted average common
share are the same, as inclusion of all other potentially dilutive instruments
in the loss per share calculation would be anti-dilutive.
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 as
presented on the consolidated statements of operations is equivalent to Basic
Earnings Per Share and Diluted Earnings Per Share under SFAS 128.
STOCK COMPENSATION
The Company's stock option plan is accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". The Company has adopted the disclosure requirements of Statement of
Financial Accounting Standards No. 123, ("SFAS 123"), "Accounting for
Stock-Based Compensation" (Note 16).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, restricted cash,
accounts receivable and accounts payable and other current liabilities
approximate fair value due to the short-term nature of these financial
instruments. The fair 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>
F-12
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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>
F-13
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS ACQUISITIONS AND DIVESTMENTS (CONTINUED)
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 July 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.
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.
F-14
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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-15
<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-16
<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 L.B.O. 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-17
<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-18
<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-19
<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-20
<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 as of the balance sheet date and the financial covenants with respect
to which the Company was in default were amended. Subsequent to year end, the
Company received a signed commitment from a lender for a new financing
arrangement to refinance the Facility and, therefore, the amounts due under the
Facility beyond one year from the balance sheet date have been classified as
long term (Note 16).
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-21
<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-22
<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 10 1/2% 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 10 1/2% Convertible Preferred
Stock will be convertible into shares of Common Stock at a 5% discount from the
Offering share price. The 5% discount from the Offering share price is being
accreted from the time of the issuance of the Preferred Stock to the date of
first permitted conversion, which is the date of the Offering. In the event the
Offering is not consummated within one year from the date of the issuance of the
Preferred Stock, the discount from the Offering share price increases annually
from 5% for the period through July 1998 up to 25% for the period through July
2002. If the holder of the Preferred Stock does not elect to exchange such
securities for 10 1/2% 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. On the date of the
offering, the face value of the Preferred Stock plus fully accreted discount of
5% equals the redemption price. 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
F-23
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. MANDATORILY REDEEMABLE SECURITIES (CONTINUED)
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 on July 28, 1997 $17.5
million aggregate principal amount of its 14% Senior Exchangeable Notes Due 2002
(the "Notes") in a private offering to an institutional investor. 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 10 1/2% Convertible Preferred
Stock with an aggregate liquidation preference of $17.5 million. Upon completion
of the Offering each share of 10 1/2% Convertible Preferred Stock will be
convertible into shares of Common Stock. If the holders of Notes do not elect to
exchange such securities for 10 1/2% 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 10 1/2% Convertible Preferred Stock upon consummation of the Offering
(Note 16).
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 adversely 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
F-24
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES (CONTINUED)
location, design and construction of improvements in the permit area and on many
operational matters. The permits can be terminated or modified by the Forest
Service to serve the public interest. A termination or modification of any of
the Company's permits could have a material adverse effect on the results of
operations of the Company. The Company does not anticipate any limitations,
modifications, or non-renewals which would adversely affect the Company's
operations.
In 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 arrangement 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.
F-25
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 November 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.
NEW CREDIT FACILITY
On October 8, 1997, the Company entered into a commitment letter (the
"Commitment Letter") with respect to the New Credit Facility. The Commitment
Letter contemplates credit facilities providing for borrowings in an aggregate
amount of up to $215 million. Amounts borrowed under the New Credit Facility are
expected to 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 repay approximately $12 million of indebtedness of the
Company and its subsidiaries, (iv) to pay certain fees and expenses relating to
the Acquisition and (v) for ongoing general corporate purposes and capital
expenditures. The New Credit Facility is expected to be divided into two
sub-facilities, $75 million of which is expected to be available for borrowings
by ASC East and its subsidiaries (the "East Facility") and $140 million of which
is expected to be available for borrowings by the Company excluding ASC East and
its subsidiaries (the "West Facility").
F-26
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
The East Facility is expected to consist 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 is expected to consist 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 $35 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, in each case, plus an
applicable margin that is dependent upon the ratio of the Company's total debt
to EBITDA (as defined in the New Credit Facility).
The New Credit Facility is expected to require mandatory prepayments with
the net proceeds of any asset sales and new debt and/or equity offerings of the
Company. Beginning in July 1999, the New Credit Facility is expected to 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 is expected to 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
expected to be secured by substantially all the assets of the Company and its
subsidiaries, except ASC East and its subsidiaries.
The New Credit Facility is expected to 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. In addition, the New Credit Facility is
expected to contain financial covenants customary for this type of senior credit
facility including maintenance of customary financial ratios. 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.
CONVERTIBLE DEBT
On July 28, 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 (Note 13).
REDEMPTION OF SUBORDINATED NOTES
A portion of the proceeds from the new credit facility will be used to make
an approximate $27.7 million investment in ASC East to fund the redemption of
all outstanding Subordinated Notes. The indenture relating to the Subordinated
Notes provides for a redemption price equal to 113.75% of the carrying value of
the Subordinated Notes on the redemption date. The Company expects to record a
pretax loss of approximately $4.3 million related to the repayment of the
Subordinated Notes.
STOCK OPTION PLAN
Effective August 1, 1997, the Company established the American Skiing
Company Stock Option Plan (the "Plan") to provide for the grant of incentive
stock options and nonqualified stock options for the purchase of up to an
aggregate of 5,688,699 shares of the Company's common stock by officers and
management employees of the Company and its subsidiaries and other key persons
(eligible for
F-27
<PAGE>
AMERICAN SKIING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
nonqualified stock options only) as designated by the Options Committee. The
Options Committee, which is appointed by the Board of Directors of the Company,
is responsible for the Plan's administration. The Options Committee determines
the term of each option, option exercise price, number of shares for which each
option is granted and the rate at which each option is exerciseable. Options
granted under the Plan generally expire ten years from the date of grant and
vest either immediately or over a five-year term.
Incentive stock options shall not have an exercise price less than the fair
market value of the common stock at the date of grant. Nonqualified stock
options may be granted at an exercise price as determined by the Options
Committee.
No persons shall be granted an incentive stock option, if at the time of
grant, such person owns, directly or indirectly, stock possessing more than 10%
of the total combined voting power of the Company unless the option price is at
least 110% of the fair market value of the common stock.
Subsequent to July 27, 1997, [and concurrent with the effectiveness of the
Offering] the Company will grant to the Principal Shareholder options to
purchase approximately 1,853,000 shares of common stock at an exercise price
equal to the fair market value of the common stock at the date of grant (i.e.,
the Offering price). Additionally, the Company will grant to certain key
management employees options to purchase approximately 622,000 shares of common
stock at an exercise price of $2.00 per share. The difference between the fair
market value at the date of grant and the $2.00 exercise price, as well as the
amount paid to such key management employees by the Company for reimbursement
for personal income taxes, will be recorded as compensation expense upon
consummation of the Offering.
In addition, options to purchase 108,108 shares of Common Stock will be
granted to certain employees of the Company at an exercise price equal to the
fair market value at the date of grant.
STOCK SPLIT
In October 1997, the Board of Directors approved (i) an increase in
authorized shares of Common Stock to 100,000,000, (ii) the creation of Class A
Common Stock with authorized shares totaling 15,000,000 and (iii) a 14.76 for 1
stock split of shares of Common Stock for shares of Class A Common Stock. The
stock split has been given retroactive effect in the accompanying financial
statements as of the balance sheet date. The rights and preferences of holders
of Common Stock and Class A Common Stock are identical, except that 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. 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 the Principal Shareholder and (C)
automatically if, at any time, the number of shares of Class A Common Stock
outstanding represent less that 20% of 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.
F-28
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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-47
<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-48
<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-49
<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-50
<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-51
<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-52
<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-53
<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-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)
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-55
<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-56
<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-57
<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-58
<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-59
<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-60
<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-61
<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-62
<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-63
<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-64
<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-65
<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, 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
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<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 16, 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 $17.5 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.
(4) In August 1997 the Registrant granted 2,475,235 stock options to
employees under its Stock Option Plan.
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 Form of 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>
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<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>
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<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).
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).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
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).
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).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
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 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.*
10.57 Limited Guaranty of Payment and Performance dated as of October 3, 1996 from ASC East to Key Bank
National Association (incorporated by reference to Exhibit 10.60 to ASC East's Registration Statement on
Form S-4, Registration No. 333-9763).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
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 Subordinated 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.*
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>
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<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.78 Second Mortgage Deed, Security Agreement and Financing Statement from Mount 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 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.*
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
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.**
10.101 Lease Agreement dated September 12, 1997, between Grand Summit Resort Properties, Inc. and Sunday River,
Ltd.**
10.102 Lease Agreement dated September 9, 1997, between Grand Summit Resort Properties, Inc. and Killington
Ltd.**
10.103 Lease Agreement dated September 4, 1997, between Grand Summit Resort Properties, Inc. and Mount Snow
Ltd.**
10.104 Commitment Letter dated October 8, 1997, among BankBoston, N.A., BancBoston Securities, Inc. and American
Skiing Company.***
10.105 Irrevocable Option and Real Estate Purchase Agreement Upon Exercise of Option dated January 28, 1997,
between Wolf Mountain Resorts, L.C. and Harry P. Condas, John P. Condas, George P. Condas, Tessie P.
Condas, Margarita C. Ellis and Jack W. Ellis, and Modification thereof dated May 27, 1997, and Second
Modification thereof dated June 2, 1997.**
10.106 Consent Solicitation Advisory Agreement with Donaldson, Lufkin & Jenrette.***
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 Form of Consent of Pierce Atwood (See Exhibit 5.1).
23.3 Consent of Price Waterhouse LLP.**
23.4 Consent of Arthur Andersen LLP.**
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
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
II-9
<PAGE>
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:
(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 10th 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 10, 1997
(Principal Executive Officer)
/s/ THOMAS M. RICHARDSON Chief Financial Officer,
------------------------------------------- Senior Vice President,
Thomas M. Richardson Treasurer and Director October 10, 1997
(Principal Financial and
Accounting Officer)
/s/ CHRISTOPHER E. HOWARD Senior Vice President, Chief
------------------------------------------- Administrative Officer,
Christopher E. Howard General Counsel, Clerk and October 10, 1997
Director
</TABLE>
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
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NO. DESCRIPTION NUMBER
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<C> <S> <C>
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 Form of 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).
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.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NO. DESCRIPTION NUMBER
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<C> <S> <C>
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).
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NO. DESCRIPTION NUMBER
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<C> <S> <C>
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).
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
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<C> <S> <C>
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).
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NO. DESCRIPTION NUMBER
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<C> <S> <C>
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, Bank Boston, 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 Key
Bank National Association (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).
</TABLE>
<PAGE>
<TABLE>
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NO. DESCRIPTION NUMBER
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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 Subordinated 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.*
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 Mount 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.*
</TABLE>
<PAGE>
<TABLE>
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NO. DESCRIPTION NUMBER
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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 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.**
</TABLE>
<PAGE>
<TABLE>
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NO. DESCRIPTION NUMBER
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10.101 Lease Agreement dated September 12, 1997, between Grand Summit Resort Properties, Inc. and
Sunday River, Ltd.**
10.102 Lease Agreement dated September 9, 1997, between Grand Summit Resort Properties, Inc. and
Killington Ltd.**
10.103 Lease Agreement dated September 4, 1997, between Grand Summit Resort Properties, Inc. and Mount
Snow Ltd.**
10.104 Commitment Letter dated October 8, 1997, among BankBoston, N.A., BancBoston Securities, Inc.
and American Skiing Company.***
10.105 Irrevocable Option and Real Estate Purchase Agreement Upon Exercise of Option dated January 28,
1997, between Wolf Mountain Resorts, L.C. and Harry P. Condas, John P. Condas, George P.
Condas, Tessie P. Condas, Margarita C. Ellis and Jack W. Ellis, and Modification thereof dated
May 27, 1997, and Second Modification thereof dated June 2, 1997.**
10.106 Consent Solicitation Advisory Agreement with Donaldson, Lufkin & Jenrette.***
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 Form of Consent of Pierce Atwood (See Exhibit 5.1).
23.3 Consent of Price Waterhouse LLP.**
23.4 Consent of Arthur Andersen LLP.**
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
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* Previously filed.
** Filed herewith.
*** To be filed by amendment.
<PAGE>
EXHIBIT 5.1
, 1997
American Skiing Company
Sunday River Access Road
Bethel, Maine 04217
Re: Registration Statement on Form S-1 (No. 333-33483)
Dear Sirs:
We have assisted in the preparation of a Registration Statement on Form S-1
(the "Registration Statement") filed with the Securities and Exchange Commission
relating to shares of Common Stock, par value $.01 per share (the
"Shares"), of American Skiing Company, a Maine corporation (the "Company").
We have examined and relied upon the Company's Articles of Incorporation and
Bylaws and originals, or copies certified to our satisfaction, of all pertinent
records of the meetings of the directors and stockholders of the Company, the
Registration Statement and such other documents relating to the Company as we
have deemed relevant for the purposes of this opinion.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, and the conformity to original documents of all documents
submitted to us as certified or photostatic copies.
Based on and subject to the foregoing, we are of the opinion that the
Company has duly authorized for issuance the Shares covered by the Registration
Statement and the Shares, when issued as described in the Registration
Statement, will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission in connection with the Registration Statement. We also
consent to the reference to our firm appearing under the caption "Legal Matters"
in the Prospectus forming part of the Registration Statement.
Very truly yours,
<PAGE>
Page 1
Exhibit 10.17
LOAN AND SECURITY AGREEMENT
(A Financing Document combined with a Security Document under 10 VSA,
Chapter 12 and relating to a ski facility capital improvement program in the
Town of Dover)
among
THE STATE OF VERMONT, ACTING BY AND THROUGH
THE VERMONT INDUSTRIAL DEVELOPMENT AUTHORITY
and
MOUNT SNOW LTD.
and
PROCTOR BANK, AS TRUSTEE,
and
THE FIRST NATIONAL BANK OF BOSTON
*******************************************************************************
Providing for the Issue and Security of:
$2,130,000
Vermont Industrial Development Authority Floating/Fixed Rate Industrial
Revenue Bonds (Mount Snow Ltd. Issue--1984 Series)
*****
Dated as of October 1, 1984
*****
Security Interest Grantor Grantee and
as to and Debtor Secured Party
1. Contract Rights The State The Trustee
and Proceeds
Latest mailing addresses of Debtor and Secured Party:
The State of Vermont Proctor Bank
c/o Vermont Industrial 49 Main Street
Development Authority Proctor, Vermont 05765
58 East State Street Attn: Senior Trust Officer
Montpelier, Vermont 05602
Attn: Manager
<PAGE>
Page 2
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (together with any amendments, modifications
or supplements, the "Agreement") is made as of October 1, 1984, among the
State of Vermont (the "State"), acting by and through the Vermont Industrial
Development Authority (the "Authority"), a body corporate and politic and a
public instrumentality of the State created by Chapter 12 of Title 10 of the
Vermont Statutes Annotated (the "Act"); Mount Snow Ltd., a business
corporation organized under the laws of the State of Vermont (the
"Borrower"); Proctor Bank, a bank organized under the laws of the State of
Vermont, which is authorized to execute trusts of the character herein set
out, as trustee (the "Trustee"); and The First National Bank of Boston (the
"Bank").
Terms defined in this agreement are used as defined. Unless otherwise
indicated, references to Articles or Sections refer to those in this
Agreement.
RECITALS:
This Agreement is a financing document combined with a security document as
one instrument in accordance with the Act, and relates to a ski facility
capital improvement program in the Town of Dover, Rutland County, Vermont
(the "Municipality").
The Authority, acting on behalf of the State (referred to in such capacity as
the "Issuer"), has duly determined to issue $2,130,000 principal amount of
industrial revenue bonds (the "Bonds", which term includes bonds issued in
replacement or exchange). The proceeds of the Bonds will be loaned (the
"Loan") hereunder by the Issuer to the Borrower. Such proceeds will be used
to finance permitted costs in connection with industrial facilities owned or
to be owned by the Borrower in the Municipality. To secure the Bonds and the
obligations of the Issuer, the Issuer is herein pledging the Pledged Receipts
and assigning certain of its rights hereunder. The Loan will be repaid
through the Borrower's payment to the Trustee of the amounts required to pay
the Bonds.
Principal of and interest on the Bonds are further secured by moneys which
may be drawn by the Trustee under an irrevocable Letter of Credit (as
hereinafter defined) initially issued by the Bank to the Trustee, to the
extent and in the manner provided therein. The Letter of Credit is being
contemporaneously issued under a Reimbursement Agreement (as hereinafter
defined) of even date between the Borrower and the Bank, and as security for
the performance of the Bank Obligations (as hereinafter defined), the
Borrower has also granted to the Bank a mortgage on and security interest in
certain of its properties. The Bank Obligations are also secured by a
Guaranty of even date (the "Guaranty") by
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Page 3
Sherburne Corporation, the parent of the Borrower (the "Guarantor"). In
connection with the Guarantor's guaranty of the bank obligations, the
Guarantor has granted to the Bank as security for the Bank Obligations a
mortgage on and security interest in certain of its properties.
All things necessary to make the Bonds, when authenticated, the binding,
limited obligations of the Issuer and to create a valid lien and pledge as
herein provided have been accomplished; and the execution and delivery of
this Agreement and the issuance of the Bonds have been duly authorized.
The Authority has determined that the property to be financed hereunder
consists of "industrial facilities" within the meaning of Section 212(6)(F)
of the Act and is an exempt facility within the meaning of Section 103(b)(4)
of the Internal Revenue Code of 1954, as amended, and has made all other
findings required by the Act.
In consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties
hereby agree, covenant, grant, pledge, assign, represent and warrant as
follows (it being understood and agreed that in the performance of the
agreements of the Issuer herein contained, any obligation it may incur for
the payment of money shall not be a general obligation of the Issuer or a
debt or pledge of the faith and credit of the State but shall be payable
solely from the Pledged Receipts):
PART I: PLEDGE AND ASSIGNMENT; DEFINITIONS
Article 1--Pledge and Assignment by Issuer
In order to secure the due payment of principal, interest and any premium of
or on the Bonds, performance of the Bank Obligations and the compliance by
the Borrower and the Issuer with their agreements contained in this Agreement:
Section 101. Pledge and Assignment of Issuer. In order to secure the due
payment of principal, premium, if any, and interest of or on the Bonds and
compliance by the Issuer with its agreements contained in this Agreement, and
to secure the due payment and performance of the Bank Obligations in
accordance with Section 1106, the Issuer hereby grants, pledges and assigns
to the Trustee the Pledged Receipts and all of the Issuer's right, title and
interest in this Agreement, including enforcement rights and remedies
(including the grant herein of a security interest under the Uniform
Commercial Code to the maximum extent possible), but excepting from such
grant, pledge and assignment the right of the Issuer to any payment or
reimbursement pursuant to Section 1001B, Section 1008 or the third sentence
of Section 1111.
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Page 4
Section 102. Defeasance of Lien; Termination of Borrower's Obligations on the
Loan. When (i) the Issuer has paid or has caused to be paid out of Priority
Funds to the holders of all of the Bonds the principal and interest and
premium, if any, due or to become due thereon at the times and in the manner
stipulated therein and herein, (ii) all of the Bank Obligations have been
performed or satisfied in full and (iii) all Additional Payments have been
paid or provided for to the satisfaction of the Issuer and the Trustee, the
lien of this Agreement on the Trust Estate shall terminate and the Borrower's
obligations with respect to the Loan shall terminate. Upon the Borrower's
request, the Trustee shall upon the termination of the lien hereof promptly
execute and deliver to the Borrower and the Issuer an appropriate discharge
hereof and shall assign and deliver to the Borrower any property at the time
subject to the lien of this Agreement which may then be in its possession,
except amounts held by the Trustee pursuant to Section 507 for the payment of
the principal of, premium, if any, and interest on the Bonds and Additional
Payments and payments pursuant to Section 1008.
All the outstanding Bonds shall be deemed to have been paid within the
meaning of this Section if (a) 92 days shall have passed and no Bankruptcy
shall have occurred since the Borrower shall have deposited with the Trustee,
in trust for and irrevocably committed thereto:
(i) sufficient moneys, or
(ii) direct obligations of, or obligations the payment of the principal and
interest on which are unconditionally guaranteed by, the United States of
America to be of such maturities and interest payment dates and to bear such
interest as will, without further investment or reinvestment of either the
principal amount thereof or the earnings therefrom (likewise to be held in
trust and committed, except as hereinafter provided), be sufficient together
with moneys referred to in (i) above, for the payment, at their maturities or
redemption dates, of all principal of and interest and premium, if any, on
such Bonds to the date of maturity or redemption, or if default in such
payment shall have occurred on such date then to the date of the tender of
such payment; provided, that if any such Bonds are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been duly given or
irrevocable provision satisfactory to the Trustee shall have been duly made
for the giving of such notice and the Trustee shall have received an
unqualified opinion of Bond Counsel that such payment shall not cause the
Bonds to become "arbitrage bonds" within the meaning of Section 103(c) of the
Internal Revenue Code of 1954, as amended; or
(b) the Trustee shall have drawn under the Letter of Credit and shall have
paid to the holders of the Bonds, or pursuant to Section 503, 507 or 1106
shall be holding in trust for and
<PAGE>
Page 5
irrevocably committed to the payment of the Bonds, sufficient Priority Funds
for the payment, at their maturities or redemption dates or as provided in
Section 503, of all principal of and interest and premium, if any, on such
Bonds to the date of maturity or redemption or as provided in Section 503, as
the case may be, or if default in such payment shall have occurred on such
date, then to the date of tender of such payment; provided, that if any such
Bonds are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been duly given as provided in this Agreement; and
provided, further, that no Bond shall be deemed to have been paid within the
meaning of this clause (b) if any payment of principal thereof or premium of
interest thereon shall have been made out of funds or securities deposited
with the Trustee by the Borrower and if with respect to any such deposit the
conditions of clause (a) of this Section shall not have been satisfied.
The Trustee shall submit to the Bank such certificates and take such other
action as may be required from time to time to reduce the State Amount of the
Letter of Credit in accordance with the provisions thereof. The Trustee shall
promptly notify the Bank when all outstanding Bonds shall have been paid in
full and 92 days shall have passed without the occurrence of a Bankruptcy in
accordance with the preceding paragraph (as to which the Trustee may rely on
a certificate of an appropriate officer of the Borrower, accompanied by an
opinion of its counsel, that no Bankruptcy has occurred).
The Bank Obligations shall be deemed to have been performed and satisfied in
full within the meaning of this Section if (a) the Letter of Credit is no
longer outstanding, (b) the Borrower shall have paid sufficient moneys to the
Bank for the payment of all of its obligations under the Reimbursement
Agreement and the Standby Credit Agreement and 92 days shall have passed
without the occurrence of a Bankruptcy, and (c) if requested by the Trustee,
the Bank shall have so notified the Trustee of such payment in writing.
Any moneys held by the Trustee in accordance with the provisions of this
Section may be invested by the Trustee, but only in direct obligations of the
United States the maturities or redemption dates, without premium, of which,
at the option of the Trustee, shall coincide as nearly as practicable with,
but not be later than, the time or times at which said moneys will be
required for the aforesaid purposes; provided, however, that moneys drawn
under the Letter of Credit shall be invested only in direct obligations of
the United States with maturities of 30 or fewer days. The making of any such
investments or the sale or other liquidation thereof shall not be subject to
the control of the Issuer or the Borrower. Any income or interest earned by,
or increment to, the investments held under this Section, to the extent
determined from time to time by the Trustee, with the consent of the Bank, to
be in excess of the amount required to be
<PAGE>
Page 6
held by it for the purposes of this Section, shall be paid to the Borrower.
Any amounts remaining in the Project Fund or the Bond Fund, after all of the
outstanding Bonds shall be deemed to have been paid and all other amounts
required to be paid under this Agreement, including without limitation the
Bank Obligations, shall have been paid and after the Trustee shall have been
notified by the Bank that all Bank Obligations have been satisfied, shall be
paid to the Borrower upon the termination of this Agreement.
Article 2--Definitions
The following terms as used in this Agreement, the Bonds and any certificate
or document executed in connection therewith shall have the following
meanings (or are defined elsewhere in this Agreement as indicated below)
unless the context otherwise indicates:
"Act"--See first paragraph of this Agreement.
"Act of Bank Bankruptcy" means the Bank shall become insolvent or fail to pay
its debts generally as such debts become due or shall admit in writing its
inability to pay any of its indebtedness or shall consent to or petition for
or apply to any authority for the appointment of a receiver, liquidator,
trustee or similar official for itself or for all or any substantial part of
its properties or assets or any such trustee, receiver, liquidator or similar
official is otherwise appointed or insolvency, reorganization, arrangement or
liquidation proceedings (or similar proceedings) shall be instituted by or
against the Bank.
"Additional Payments" means the amounts required to be paid by the Borrower
under Section 1001B.
"ARBI" means the rate, calculated as a percentage (the "ARBI Percent") of the
FNBB Base Rate, which is announced by FNBB from time to time, as the annual
rate of interest which, in FNBB's sole judgment, will result in the minimum
yield attainable on tax-exempt adjustable-rate bonds supported by FNBB's
letter of credit or a Substitute Credit Facility. ARBI shall change as and
when the FNBB Base Rate changes, provided that (a) ARBI shall not be lower on
any day during any Variable Rate Interest Period than on the first Wednesday
of such Interest Period, and (b) changes in the FNBB Base Rate of which the
Trustee is given notice after the last Wednesday in any Variable Rate
Interest Period shall become effective on the first Wednesday of the next
succeeding Variable Rate Interest Period. Changes in ARBI which result from a
change in the ARBI Percent shall become effective with respect to a Variable
Rate Interest Period only if the Trustee and each Bondholder is given notice
of such change in the ARBI percent at least seven days prior to the first
Wednesday of such Variable Rate Interest Period. Changes in the FNBB Base
Rate and ARBI
<PAGE>
Page 7
Percent shall be communicated by the Bank to the Trustee, the Depositary and
the Remarketing Agent promptly after they are announced.
The announcement of ARBI, the ARBI, Percent and the FNBB Base Rate from time
to time shall be conclusive and binding upon the Trustee, the Depositary, the
Issuer, the Borrower and each Bondholder.
"Agreement"--See first paragraph of this Agreement.
"Authority"--See first paragraph of this Agreement.
"Bank" means The First National Bank of Boston or, where the context
requires, any bank organized under the laws of the United States of America
or any state thereof issuing a Substitute Letter of Credit.
"Bank Obligations" means any and all obligations of the Borrower to the Bank
under the Reimbursement Agreement, including without limitation the
obligation to reimburse the Bank for amounts drawn under the Letter of Credit
and to pay interest on such amounts until paid, and under the Standby Credit
Agreement, as from time to time amended.
"Bankruptcy" means the filing of a petition in bankruptcy (or the
commencement of a bankruptcy or similar proceeding) by or against the
Borrower, the State or the Authority under any applicable bankruptcy,
insolvency, reorganization or similar law now or hereafter in effect.
"Bond Counsel" means Shipman & Goodwin or any other attorney at law or a firm
of attorneys mutually acceptable to the Trustee, the Bank and the Borrower of
nationally recognized standing in matters pertaining to the tax-exempt nature
of interest on bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.
"Bond Fund"--See Section 502.
"Bondholder" means, as of any time, the registered owner of any Bond as shown
in the register kept by the Bond Registrar.
"Bondholder's Election Notice"--See Section 401(d).
"Bond Registrar" means FNBB or any other Person appointed as bond registrar
pursuant to Section 1207 or 1208.
"Bonds"--See Recitals in this Agreement.
"Borrower"--See first paragraph of this Agreement.
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"Business Day" means any day other than a Saturday, Sunday or ther day on
which banks are authorized or required to be closed in the City of Boston.
"Completion Certificate"--See Section 602.
"Computation Date"--See Section 304(b).
"Conversation Date"--See Section 304(b).
"Cost of Collection" means all attorneys' reasonable fees and out-of-pocket
expenses incurred by the Trustee and all costs and expenses associated with
travel on behalf of the Trustee, which costs and expenses are directly or
indirectly related to the Trustee's efforts to collect and/or enforce the
Bonds, this Agreement, and/or any of the Trustee's rights, remedies, powers,
privileges, or discretions against or in respect of the Borrower and/or any
lessee of the Borrower (whether or not suit is instituted in connection with
any of the foregoing).
"Default" and "event of default"--See Section 1101.
"Depositary" means the First National Bank of Boston as depositary under the
Depositary Agreement and its permitted successors and assigns.
"Depositary Agreement" means the Depositary Agreement of even date herewith
among the Trustee, the Borrower, the Depositary and the Remarketing Agent.
"Determination Date" means each date on which the Remarketing Agent adjusts
the interest rate on the Bonds in connection with the remarketing of one or
more Bonds.
"Determination of Taxability" means a determination that the interest income
on any of the Bonds does not qualify as exempt interest under Section 103 of
the Internal Revenue Code of 1954, as amended ("exempt interest"), for a
reason other than that a Bondholder is a "substantial user" of the Project or
a "related person" of the Borrower within the meaning of Section 103(b)(13)
of said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
(a) the date on which the Trustee receives an opinion of Bond Counsel that
the interest income on any of the bonds does not qualify as exempt interest;
or
(b) the date on which any change in law or regulation becomes effective or on
which the Internal Revenue Service issues any private ruling, technical
advice or any other written communication with or to the effect that the
interest income on any of the Bonds does not qualify as exempt interest; or
(c) the date on which the Borrower shall receive notice from the
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Trustee in writing that the Trustee has been advised by any holder of any
Bonds that the Internal Revenue Service has issued a thirty-day letter or
other notice which asserts that the interest on such Bonds does not qualify
as exempt interest.
"Fixed Interest Index" means the interest rate index, determined by the
Remarketing Agent and announced to the Trustee, the Issuer, the Depositary
and the Borrower from time to time based upon yield evaluations at par (on
the basis of a term approximately equal to the time remaining until the
maturity of the Bonds) of not less than ten (10) component issuers of
comparable credit qualify selected by the Remarketing Agent which may
include, without limitation, issuers of general obligation bonds and
industrial development revenue bonds and other limited and special obligation
bonds, the interest on which is exempt from federal income taxation. In the
event the Letter of Credit will remain outstanding and available on and after
the Conversion Date or a Substitute Credit Facility will be issued and
available on and after the Conversion Date, the component issuers shall be of
the same rating category as shall be assigned to the Bonds (or, if the Bonds
are not rate, the long-term obligations of the issuer of the Letter of Credit
or such Substitute Credit Facility, as the case may be) by Moody's or S&P
based on the availability of either such Letter of Credit of such Substitute
Credit Facility. In the event neither the Letter of Credit will remain
outstanding and available on and after the Conversion Date or a Substitute
Credit Facility will be issued and available on and after the Conversion
Date, the component issuers shall be of the same credit quality as the
Borrower in the judgment of the Remarketing Agent. The specific issuers
included in the component issuers may be changed from time to time by the
Remarketing Agent in its discretion. In the event the Fixed Interest Index
cannot be determined by the aforementioned methods, such Index shall be equal
to 95% of the most recent Bond Buyer Revenue Bonds Index, provided that if
the Bond Buyer Revenue Bond Index is no longer published at the time, then
the Fixed Interest Index shall be equal to 90% of the average of the yield
evaluations at par of United States Treasury obligations having a term to
maturity of the Bonds, as computed by the Remarketing Agent. In the event
that the Fixed Interest Index cannot be determined by any of the
aforementioned methods, the Fixed Interest Index shall be equal to fifteen
percent (15%) per annum.
"Fixed Period Interest Payment Dates" means the July 1 or January 1 next
succeeding the Conversion Date and each July 1 and January 1 thereafter until
the principal of, and premium, if any, and interest on, the Bonds shall have
been made for the payment thereof in accordance with this Agreement.
"Fixed Rate" means the rate of interest certified to the Borrower, the
Issuer, the Depositary and the Trustee by the Remarketing Agent no fewer than
three Business Days prior to the
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Page 10
Conversion Date as the minimum rate of interest which, in the opinion of the
Remarketing Agent, is necessary to sell the Bonds in a secondary sale (by
private placement, so long as the Remarketing Agent shall be an entity not
allowed to sell Bonds publicly) on the Conversion Date at a price equal to
100% of the outstanding principal amount thereof; provided, however, that
such rate of interest shall not be less than 75% nor more than 125% of the
Fixed Interest Index as of the Computation Date.
"Fixed Rate Period" means the period during which interest on the Bonds shall
be payable at the Fixed Rate.
"FNBB" means The First National Bank of Boston.
"FNBB" Base Rate" means the per annum rate of interest from time to time
announced by FNBB at its principal office in Boston, Massachusetts as its
Base Rate.
"Guaranty"--See Recitals in this Agreement.
"Guarantor"--See Recitals in this Agreement.
"Initial Purchaser(s)" means the purchaser(s) designated by the Remarking
Agent pursuant to he Remarketing Agreement.
"Interest Payment Dates" means, collectively, the Variable Period Interest
Payment Dates and the Fixed Period Interest Payment Dates.
"Issuer"--See Recitals in this Agreement.
"Letter of Credit" means the Letter of Credit originally issued under the
Reimbursement Agreement, in substantially the form of Exhibit I thereto and
having an original Stated Amount (as therein defined) of $2,248,171 of which
an amount not exceeding $2,130,000 may be drawn to pay unpaid principal on
the Bonds, and an amount not exceeding $118,171 may be drawn to pay up to 135
days interest accrued on Bonds and any other letter of credit which is a
Substitute Credit Facility.
"Letter of Credit Fund"--See Section 503.
"Loan"--See Recitals in this Agreement.
"Majority of the Bondholders" means the holders of more than fifty percent of
the aggregate principal amount of Bonds at the time outstanding.
"Moody's" means Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns,
and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer
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to any other nationally recognized securities rating agency designated by the
Issuer, with the approval of the Borrower, by notice to the Trustee and the
Borrower.
"Municipality"--See Recitals in this Agreement.
"No Preference Determination" means, with respect to any payments, of
principal of or premium or interest on the Bonds, either (i) a final
determination by a court of competent jurisdiction (subject to no further
appeal) that such payments did not constitute voidable preferences under the
federal Bankruptcy Code or any similar state insolvency law or (ii) the
termination or closing of any bankruptcy, insolvency or other proceeding or
case the institution of which constituted the relevant Bankruptcy, or the
confirmation of a plan of reorganization in any such proceeding or case, in
either case without a determination that such interest payments constituted
such voidable preferences.
"Notice Address" means:
<TABLE>
<S> <C>
(a) As to the Borrower: Mount Snow Ltd.
Killington, Vermont 05751
Attn: Assistant Treasurer
with a copy to:
Scott L. Murphy, Esq.
Shipman & Goodwin
799 Main Street
Hartford, Connecticut 06103
(b) As to the Issuer: Vermont Industrial Development
Authority 58
East State Street
Montpelier, Vermont 05602
Attn: Manager
(c) As to the Trustee: Proctor Bank
49 Main Street
Proctor, Vermont 05765
Attn: Senior Trust Officer
(d) As to the Bank: The First National Bank of
Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Robert S. Ashton,
Vice President
with copies to:
The First National Bank of
Boston
100 Federal Street
<PAGE>
Page 12
Boston, Massachusetts 02110
Attn: Specialized Corporate
Finance
Attn: Municipal Note Desk
(d) As to the Depositary: The First National Bank of
Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Manager, Corporate Trust
Division
</TABLE>
or to such other address or addresses as any such party shall designate by
notice to the other parties.
"Option to Convert" means the Borrower's right and option to convert the rate
of interest payable on the Bonds from the Variable Rate to the Fixed Rate as
provided in Section 304(b).
"Outstanding Bonds" or "Bonds Outstanding" means the amount of principal of
the Bonds which has not at the time been paid, exclusive of (a) Bonds in lieu
of which others have been authenticated under Section 303 and (b) the
principal of any Bond which has become due (whether by maturity, call for
redemption or otherwise) and for which provision for payment as required
herein has been made.
"Paying Agent" means FNBB or any other paying agent appointed in accordance
with Section 1210 hereof.
"Payment Date" means each date on which any principal of, premium, if any, or
interest on any Bond is due and payable for any reason.
"Persons" means natural persons, firms, associations, partnerships, trusts,
corporations, public bodies and other legal entities.
"Plans and Specifications" means the Project Information Statement.
"Pledged Receipts" means all of the Issuer's right, title and interest in the
Loan and all payments and other revenues received or receivable by the
Issuer, or the Trustee for the account of the Issuer, in respect of the Loan,
including without limitation moneys, investments and proceeds in the Bond
Fund and Project Fund, except for payments to the issuer under clauses (a)
and (b) of Section 1001B or under Section 1008, and subject to the provisions
of Section 507 regarding moneys for the benefit of the holders of particular
Bonds.
"Preference Determination" means a final determination by a court of
competent jurisdiction (which is subject to no further appeal) that any
payment or payments of principal of premium or interest
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on the Bonds made within a period of 92 days immediately preceding any
Bankruptcy constituted, with respect to the Borrower, a voidable preference
under the federal Bankruptcy Code or any similar state insolvency law.
"Principal Office" when used with respect to the Trustee, means the office
located at 80 West Street, Rutland, Vermont 05701 and, when used with respect
to the Payment Agent, the Bond Registrar and the Depositary means the office
hereof designated in writing to the Trustee.
"Priority Funds" means (i) moneys deposited in the Bond Fund pursuant to
subsection (a) of Section 502 and any earnings thereon, (ii) moneys deposited
in the Letter of credit Fund pursuant to Section 503 and (iii) moneys
deposited in the Bond Fund pursuant to subsection (b), (c), (d), (e) or (f)
of Section 502, and any earnings thereon, which have been held by the
Trustee, as agent and bailee, for at least 92 consecutive days, but only if
no Bankruptcy has occurred prior to or during such 92-day period and if the
Borrower shall have delivered to the Trustee a certificate stating that no
Bankruptcy has occurred.
"Project" means the industrial facilities acquired and installed with the
Loan, including without limitation the facilities described in the Project
Information Statement and any permitted modification, substitutions and
additions.
"Project Fund"--See Section 501.
"Project Information Statement" means the Application for the Project
submitted to the Issuer on June 1, 1984 and an addendum thereto dated June 5,
1984, including all other amendments thereto and revised versions thereof.
"Project Supervisor" means the person and each alternate designated to
supervise the Project hereunder by written certificate furnished to the
Issuer, the Trustee and the Bank, containing the specimen signature of such
person and signed on behalf of the Borrower by an appropriate officer. If the
Borrower fails to designate at least one replacement within ten days after
the unavailability or inability of all such persons to act, the Trustee may,
but shall have no obligation to, appoint a successor who shall be any
engineer qualified to, appoint a successor who shall be any engineer
qualified to practice the profession of engineering in the State of Vermont.
"Purchaser"--See Section 401(e).
"Qualified Investments" means (i) any bonds or obligations which as to
principal and interest constitute direct obligations of or are guaranteed by
the United States of America, (ii) certificates of deposit or banker's
acceptance of the Trustee or the Bank and banks affiliated with the Trustee
or the Bank, and banks or trust
<PAGE>
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companies organized under the laws of the United States of America or any
state thereof, which have capital and surplus of at least $14,000,000, (iii)
commercial paper or finance company paper, including that of any affiliate of
the Trustee or the Bank, which is rated not less than prime-one or A-1 or
their equivalents by Moody's Investors Service, Inc. or Standard & Poor's
Corporation of their successors, (iv) any repurchase agreement (including a
repurchase agreement by the Trustee or the Bank) secured by any one or more
of the foregoing, (v) shares of any so-called "money market fund" that has at
least % of its assets invested in investments of the types described in
clauses (i), (ii) and (iii) above, and (vi) in the case of funds in an
aggregate amount of $50,000 or less, in interest-bearing savings account in a
bank or trust company described in clause (ii), the interest on which is
payable at least as often as quarterly and withdrawal from which is
unrestricted as to prior notice; provided that such investment or deposit is
not prohibited by federal or state banking laws applicable to the Trustee.
"Record Date" means (a) with respect to any Variable Rate Interest Payment
Date, the first day next preceding such Interest Payment Date, or (b) with
respect to any Fixed Period Interest Payment Date, the fifteenth day of the
month next preceding such Interest Payment Date, or, if such day shall not be
a Business Day, the next preceding Business Day.
"Reimbursement Agreement" means the Reimbursement Agreement of even date
herewith between the Borrower and the Bank, as from time to time amended, and
any agreement to which the Borrower and any Bank are parties and pursuant to
which a Substitute Credit Facility is issued.
"Remarketing Agent" means The First National Bank of Boston or such other
remarketing agent as may be appointed from time to time pursuant to the
Remarketing Agreement.
"Remarketing Agreement" means the Placement and Remarketing Agreement of even
date herewith between the Borrower and the Remarketing Agent, as from time to
time amended, pursuant to which the Borrower has appointed the Remarketing
Agent as the exclusive agent for the initial placement of the Bonds and for
the remarketing of Bonds delivered by Bondholders to the Issuer for
redemption by the issuer pursuant to Sections 401(d)and 401(e) and such other
agreement appointing a Remarketing Agent as may be in effect from time to
time.
"Required Property Insurance Coverage" means a policy or policies of
insurance insuring against loss or damage of the kinds usually insured
against by similar businesses in the area, including without limitation
insurance with respect to the property comprising the Project against loss or
damage by fire, earthquake and other risks from time to time included under
extended
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coverage policies and federal flood insurance (if available), and insuring
against such other risks as the Bank may from time to time reasonable
request, all such insurance to be in amounts and with such deductibles as the
Bank may from time to time reasonably request or approve.
"Required Public Liability Insurance" means insurance against death or bodily
injury and property damage in such amounts and with such deductibles as the
Bank from time to time may reasonable request or agree to.
"S&P" means Standard & Poor's Corporation, a corporation organized and
existing under the laws of the State of New York, its successors and assigns,
and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "S&P" shall be deemed to
refer to any other nationally recognized securities rating agency designated
by the Issuer, with the approval of the Borrower, by notice to the Trustee
and the Borrower.
"Standby Bank" means the lender at the time party to the Standby Credit
Agreement.
"Standby Credit Agreement" means the Standby Agreement among the Borrower,
The First National Bank of Boston and the Trustee, as from time to time
amended, pursuant to which The First National Bank of Boston has agreed,
subject to certain conditions, to extend credit to the Borrower to finance
the purchase at a price equal to principal plus accrued interest to the date
of purchase of the Bonds which the Remarketing Agent has failed or is unable
to remarket on or prior to the applicable date for redemption thereof by the
Issuer.
"State"--See first paragraph of this Agreement.
"Substitute Credit Facility" means any letter of credit or equivalent Credit
facility substituted for the Letter of Credit, having terms substantially the
same as or similar to those of the Letter of Credit and provided by the
Company or the Bank in accordance with Section 509.
"Trust Estate" means the Pledged Receipts and other rights assigned by the
Issuer to the Trustee hereunder.
"Trustee"--See first paragraph of this Agreement.
"Uniform Commercial Code" means Title 9A of the Vermont Statutes Annotated.
"Variable Period Interest Payment Date" means (i) the first Wednesday in each
calendar month during the Variable Rate Period, and (ii) the Conversion Date.
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"Variable Rate" means the lesser of (i) 15% per annum and (ii) a floating
rate established as herein provided. Except as provided in the last sentence
hereof, the floating rate shall be equal to ARBI plus a fixed interest
component ("FIC") equal to one-quarter of one percent (1/4 of 1%), provided
that:
(i) if the Depositary shall have received a notice requiring the redemption
of any Bonds as described in Section 401(d) and if the Remarketing Agent
shall remarket all or a portion of such Bonds pursuant to the Remarketing
Agreement, the floating rate of interest for all Bonds shall be the equal to
the sum of (A) ARBI, plus (B) the FIC plus, (C) if required to enable the
Remarketing Agent to remarket such tendered Bonds at par plus accrued
interest, an additional interest component ("AIC") determined as hereinafter
provided. The AIC shall be equal to that percentage of interest, determined
by the Remarketing Agent in connection with any remarketing effort and
expressed in increments of 1/8th of 1% per annum, which when added to the sum
of ARBI plus the FIC at the time applicable to the Bonds, will produce the
interest rate per annum necessary to enable the Remarketing Agent to remarket
such Bonds at par plus accrued interest. The AIC shall become effective with
respect to all Bonds as of the date of issue of the remarketed Bonds, unless
such date occurs after the last Wednesday of a Variable Rate Interest Period,
in which case such AIC shall become effective as of the first Wednesday of
the next Variable Rate Interest Period; and
(ii) if an AIC is added to the floating rate pursuant to the preceding clause
(i), such AIC shall remain in effect until the end of the Variable Rate
Interest Period following the Variable Rate Interest Period in which the
Bonds were remarketed (except as provided in clause (iii) below), until a
further adjustment to the floating rate is made pursuant to the preceding
clause (i) or until the interest rate on the Bonds is otherwise determined as
provided in this Agreement; and
(iii) if the Remarketing Agent shall have advised the Borrower, the Issuer,
the Trustee and each Bondholder not less than seven days prior to the first
Wednesday of any Variable Rate Interest Period that the discontinuance of the
AIC would result in the Bonds bearing interest at a rate different from the
interest rate per annum necessary to enable the Remarketing Agent to remarket
the Bonds at par plus accrued interest, the floating rate shall be equal to
the floating rate as last adjusted pursuant to the preceding clause (i) until
such time as the floating rate may again be adjusted pursuant to such clause
(i) or until the interest rate on the Bonds is otherwise determined as
provided for in this Agreement.
In the event that FNBB discontinues the announcement of ARBI, the floating
rate shall be equal to the annual rate of interest, expressed as a percentage
of the average yield evaluations at par for the preceding week of United
States Treasury obligations
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having a maturity of 91 days, which is determined by the Remarketing Agent as
necessary to remarket the Bonds at par plus accrued interest, and which shall
be announced by the Remarketing Agent to the Trustee, the Issuer, the
Depositary and the Borrower on Wednesday following the discontinuance of
ARBI. Such floating rate shall be effective from and including the next
Wednesday after it is announced to and including the following Tuesday.
"Variable Rate Interest Period" means each of the periods commencing on the
Variable period Interest Payment Date and ending on the day immediately
preceding the next Variable Period Interest Payment Date.
"Variable Rate Period" means the period from the date of issuance and
delivery of the Bonds to and including the earlier of (i) the Conversion Date
and (ii) the date the principal of and interest on the Bonds shall have been
paid in full or provision shall have been made for the payment thereof in
accordance with this Agreement.
Any reference in this Agreement to the Borrower, the Issuer, the Trustee, the
Bank, the Remarketing Agent, the Depositary or the Standby Bank shall include
those which succeed to their functions, duties or responsibilities pursuant
to or by operation of law or who are lawfully performing their functions. Any
reference in this Agreement to any statute or law or chapter or section
thereof shall include all amendments, supplements or successor provisions
thereto.
PART II: THE BONDS
Article 3--the Bonds
Section 301. Issuance of Bonds. The bonds shall be designated Vermont
Industrial Development Authority Floating/Fixed Rate Industrial Revenue Bonds
(Mount Snow Ltd. Issue--1984 Series); shall be numbered consecutively from
R-1 upwards; shall be issued in fully registered form; shall mature on April
1, 1999, except as provided herein; shall be substantially in the form set
forth in Exhibit 301 attached hereto, with such variations, omissions and
insertions as are permitted or required hereby; and shall be dated as of
October 1, 1984 if authenticated prior to the first Interest Payment Date and
otherwise shall be dated as of the Interest Payment Date next preceding the
date of their authentication; provided that if at the time of authentication
interest thereon is in default, they shall be dated as of the date to which
interest has been paid or if not interest has been paid, they shall be dated
as of October 1, 1984. Unless otherwise requested by the Remarketing Agent
pursuant to the Remarketing Agreement, the Bonds shall be issued initially to
the Initial Purchase(s) as fully registered Bonds without coupons numbered
R-1 through R-3, one of which shall be in the denomination of $1,000,000, one
in the denomination of $600,000,
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and one in the denomination of $530,000.
Interest on each Bond shall accrue from its date (unless the date of such
Bond is as of October 1, 1984, in which event such bond shall bear interest
from the date of its delivery to the original purchaser thereof).
Section 302. Delivery of Bonds. Upon the execution and delivery of this
Agreement, the Issuer shall execute and deliver the Bonds to the Trustee and
the Trustee shall have the Bonds authenticated by the Bond Registrar, and
deliver them to the Initial Purchasers upon the direction of the Issuer.
Prior to delivery by the Trustee of the Bonds, there shall be filed with the
Trustee:
(a) A copy, duly certified on behalf of the Issuer, of the resolutions
adopted by the members of the Issuer authorizing the execution and delivery
of this Agreement and the issuance and sale of Bonds.
(b) The Letter of Credit.
(c) An executed counterpart of this Agreement and the Guaranty.
(d) The Issuer's due request and authorization to the Trustee to have
authenticated and deliver Bond Nos. R-1 through R-3 to the Initial
Purchaser(s) upon payment of a specified sum to the Trustee for the account
of the Issuer.
Section 303. Execution; Authentication. Bonds shall be executed on behalf of
the Issuer by the manual signature of the Manager or Treasurer of the Issuer
and by the manual or facsimile official signature of its Chairman or Vice
Chairman. The official seal (which may be facsimile) of the Issuer shall be
impressed or imprinted on all Bonds. In case any officer whose signature
shall appear on the Bonds shall cease to be such officer before the delivery
of such Bonds, such signature shall nevertheless be valid and sufficient.
No Bond shall be valid or obligatory until authenticated as provided in
Exhibit 301 by the Bond Registrar. Such authentication shall be conclusive
evidence that such Bond has been authenticated and delivered hereunder. The
certificate of authentication on any Bond shall be deemed to have been
executed by the Bond Registrar if manually signed by an authorized officer of
the Bond Registrar, but it shall not be necessary that the same Person sign
the certificate of authentication on all of the bonds issued hereunder.
Section 304. Interest on Bonds. (a) The Bonds shall bear interest from and
including the date thereof (except as herein provided) until payment of the
principal thereof shall have been
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made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise. Prior to the Conversion Date interest
accrued on the Bonds shall be computed on the basis of a 365 or 366-day year,
as applicable, for the number of days actually elapsed. On and after the
Conversion Date interest accrued on the Bonds shall be computed upon the
basis of a 360-day year, consisting of twelve (12) thirty (30) day months.
During the Variable Rate Period, the Bonds will bear interest at the Variable
Rate. Subsequent to the Conversion Date, the Bonds shall bear interest at the
Fixed Rate. Interest will be payable as provided in Exhibit 301 on each
Interest Payment Date.
(b) The Bonds will be issued subject to the provision that the interest rate
on the Bonds will cease to be at the Variable Rate and will become fixed
until maturity at the Fixed Rate upon the election by the Borrower to
exercise its Option to Convert as herein provided on such date which is a
Business Day as the Borrower shall select, subject to the terms and
conditions hereof (the "Conversion Date"). The Borrower may exercise the
Option to Convert at any time by giving written notice to the Issuer, the
Trustee and the Bank stating (A) its election to convert to the Fixed Rate,
which notice shall specify the date as of which the Fixed Interest Index was
or shall be computed (the "Computation Date"), which date shall be not more
than 5 Business Days from the date of such notice, (B) the Conversion Date,
which date shall not be less than 20 nor more than 60 days from the date of
such notice, and (C) whether the Letter of Credit has been extended and the
terms thereof, or whether a Substitute Credit Facility has been obtained and
the terms thereof. Such notice shall be accompanied by an opinion of Bond
Counsel stating that the establishment of the Fixed Rate and the purchase and
resale of the Bonds in connection therewith are authorized and permitted by
this Agreement and the Act, have been approved by the Issuer, if required, in
accordance with the Act (a certified copy of which approval shall be
attached), and will not have an adverse effect on the income tax exemption of
interest on the Bonds. Upon receipt of such written notice the Trustee in the
name of the Issuer shall call all the Bonds for redemption or purchase as
provided in Sections 401(e) and 403 hereof. At the option of the Remarketing
Agent, Bonds issued upon the exercise of the Option to Convert may be issued
as serial bonds having the maturities set forth in Section 402 hereof.
(c) No interest, principal or premium shall be paid on Bonds purchased by the
Borrower with funds advanced pursuant to the Standby Credit Agreement for so
long as such Bonds shall not have been resold to a Person other than an
affiliate of the Borrower or purchased by the Standby Bank pursuant to
Section 3.7 of the Standby Credit Agreement.
Section 305. Lost Bonds; Exchange and Transfer of Bonds;
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Additional Interest Only Assignable by Separate Writing. If any of the Bonds
are lost, wrongfully taken, mutilated, destroyed or improperly cancelled, the
Issuer shall authorize the issuance of new Bonds to replace them upon proof
satisfactory to the Issuer and the Bond Registrar and (except in the case of
mutilated or improperly cancelled Bonds which are surrendered to the Bond
Registrar) upon giving to the Issuer and Bond Registrar an indemnity bond in
such amount as the Issuer and Bond Registrar may require (except as to any
institutional holder, in which case its own agreement of indemnity shall be
sufficient). Each new Bond shall in all respects be identical with the
mutilated, lost, stolen, destroyed or improperly cancelled Bond, except that
it shall include a notation of all principal previously advanced, paid or
redeemed and, unless contrary to applicable law, shall bear on its face the
following additional legend:
"This Bond is issued to replace a mutilated, lost, stolen, destroyed or
improperly cancelled Bond under the authority of Title 10, Chapter 12 of the
Vermont Statutes Annotated."
Each such new Bond shall be signed by the same officers of the Issuer and the
Bond Registrar who signed the original Bond; provided that if an officer who
executed the original Bond no longer occupies the same office with the Issuer
or the Bond Registrar or is otherwise unavailable, then such new Bond shall
be signed by a duly authorized officer then in office. The obligation of the
Issuer upon the new Bond shall be identical with its obligation upon the
original Bond, and the rights of the holder shall be the same as those
conferred by the original Bond. The Issuer and the Bond Registrar may charge
the owner of the Bond with their reasonable fees and expenses in connection
with the issuance of a new Bond under this Section 305.
The person in whose name a Bond is registered on the Bond register maintained
by the Bond Registrar shall be deemed the absolute owner for all purposes;
and payment of any principal of or interest on any Bond shall be made only to
or upon the order of the registered owner thereof or the owner's attorney or
legal representative. Such payments shall fully discharge the liability on
the Bond to the extent of the sums so paid.
At the option of the Bondholder, any Bond may be presented at the Principal
Office of the Bond Registrar for endorsement showing the balance of principal
due thereon and the date to which interest has been paid.
Upon surrender of a Bond at the Principal Office of the Bond Registrar,
together with an assignment duly executed by the registered owner or its
attorney or legal representative in form satisfactory to the Bond Registrar,
the Bond may be exchanged for fully registered Bonds of denominations of
$100,000 or integral multiples thereof during the Variable Rate Period and
$5,000 during the Fixed Rate Period, in the same form (and, if applicable,
the same series) as the
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Bond surrendered for exchange and aggregating in amount the then unpaid
principal amount of the Bond surrendered, or (ii) transferred upon the Bond
register. Upon any such transfer, the Bond Registrar shall endorse the name of
the transferee, the date to which interest has been paid thereon and the balance
of principal due thereon.
For the purpose of registration of transfers of Bonds purchased in lieu of
redemption in accordance with Section 401(e), each Bondholder, by its
acceptance of such Bond, appoints the Bond Registrar as its duly authorized
representative for purposes of endorsing such Bond so purchased for transfer
to the purchaser thereof in accordance with said Section 401(e).
In all cases in which Bonds shall be issued in exchange for or in replacement
of other Bonds, the Bonds to be issued shall be signed and sealed on behalf
of the Issuer, and authenticated by the Bond Registrar as provided in Section
303. The obligation of the Issuer and the rights of the holders with respect
to such Bonds shall be the same as with respect to the Bonds being exchanged
or replaced. The Issuer and the Bond Registrar may charge the Borrower their
reasonable fees and expenses for effecting such exchange or replacement.
Whenever any outstanding Bond shall be delivered to the Bond Registrar for
cancellation pursuant to this Agreement, or for exchange and transfer
pursuant to this Section, such Bond shall be promptly cancelled and destroyed
by the Bond Registrar and counterparts of a certificate of destruction
evidencing such destruction shall be furnished by the Bond Registrar to the
Issuer and the Borrower.
Section 306. Temporary Bonds. Pending the preparation of definitive Bonds,
the Issuer may execute, and upon its request in writing, the Bond Registrar
shall authenticate and deliver one or more printed, lithographed or
typewritten temporary Bonds. Temporary Bonds shall be issuable as registered
Bonds without coupons, of any authorized denomination, and substantially in
the form of definitive Bonds but with such omissions, insertions and
variations as may be appropriate for temporary Bonds, all as may be
determined by the Issuer. Temporary Bonds may contain such reference to any
provisions of this Agreement as may be appropriate. Every temporary Bond
shall be executed by the Issuer and be authenticated by the Bond Registrar
upon the same conditions and insubstantially the same manner, and with like
effect, as the definitive Bonds. As promptly as practicable the Issuer shall
execute and shall furnish definitive registered Bonds without coupons and
thereupon temporary Bonds may be surrendered in exchange therefor without
charge at the Principal Office of the Bond Registrar, and the Bond Registrar
shall authenticate and deliver in exchange for such temporary bonds a like
aggregate principal amount of definitive Bonds of authorized denominations.
Until so exchanged the temporary Bonds shall be
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entitled to the same benefits under this Agreement as definitive Bonds.
Article 4--Redemption of Bonds Before Maturity
Section 401. Redemption of Bonds. The Bonds are subject to redemption prior
to maturity as follows:
(a) Optional Redemption. The Bonds shall be subject to redemption by the
Issuer, at the direction of the Borrower, as provided in this Section 401(a):
(i) During the Variable Rate Period, the Bonds shall be subject to
redemption by the Issuer, at the direction of the Borrower, on any Variable
Period Interest Payment Date in each January, April, July and October, beginning
on the first such date which occurs more than six months after the date of issue
of each Bond to be redeemed, as a whole or in part in the amount of $500,000 or
any integral multiple of $100,000 above $500,000 from time to time, at a
redemption price equal to the principal amount thereof, plus accrued interest to
the Variable Period Interest Payment Date fixed for redemption; provided,
however, that the Bonds shall not be subject to redemption as provided in this
subparagraph (i) at any time after the Conversion Date.
(ii) Beginning on the fifth anniversary of the Conversion Date, the Bonds
shall be subject to redemption by the Issuer, at the direction of the Borrower,
at any time in whole or in part from time to time on any Interest Payment Date,
at a redemption price equal to the principal of and accrued interest on the
Bonds to the date fixed for redemption by the Borrower plus a premium equal to
3% during the first twelve months the Bonds are so subject to redemption,
declining 0.50% per year thereafter until the premium equals zero.
(b) Extraordinary Optional Redemption. The Bonds may be redeemed in whole
but not in part by the Issuer at any time, at the written direction of the
Borrower, at a redemption price equal to 100% of the principal amount thereof
plus accrued interest thereon to the redemption date, without premium, under any
of the following conditions:
(i) The project or any related facility served thereby shall have been
damaged or destroyed to such extent that (a) the Project cannot be reasonably
restored within a period of six months from the date of such damage or
destruction, or (b) the Borrower is thereby prevented from carrying on its
normal operation of the Project for a period of six months from the date of such
damage or destruction; or
(ii) Title to, or the temporary use of all or substantially all of the
Project or any related facility served thereby shall have been taken or
condemned by a competent authority, which taking or
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condemnation results or is likely to result in the Borrower being thereby
prevented or likely to be prevented from carrying on its normal operation of
the Project for a period of six months; or
(iii) As a result of changes in the Constitution of the United States of
America or of the State or of legislature or executive action (whether state
or federal) or by final decree or judgment or any court or administrative
body (whether state or federal), the Bonds or this Agreement become void or
unenforceable or impossible of performance in accordance with the intent and
purpose of the parties as expressed therein or herein or unreasonable burdens
or excessive liabilities are imposed upon the Borrower by reason of the
operation of the Project.
(c) Mandatory Redemption. The Bonds shall be subject to mandatory
redemption as provided in this Section 401(c):
(i) At any time upon the occurrence of a Determination of Taxability the
Bonds shall be redeemed in whole at a redemption price equal to 100% of the
principal amount thereof during the Variable Rate Period, and 103% of the
principal amount thereof during the Fixed Rate Period, in each case plus
accrued and unpaid interest to the redemption date.
(ii) Pursuant to Section 3.6 of the Standby Credit Agreement, Pledged Bonds
(as defined therein) purchased with an advance thereunder may be required at
the option of the Standby Bank to be redeemed by a draw under the Letter of
Credit at any time on or after the 90th day such advance is outstanding. Upon
receiving notice from the Standby Bank of its exercise of such option, the
Trustee forthwith shall draw upon the Letter of Credit in an amount equal to
the principal amount of such Pledged Bonds plus accrued interest thereon, if
any.
(iii) Mandatory redemptions may also be required pursuant to the terms of
paragraph (e) of this Section 401 and to the terms of Sections 501B and
Article 7.
(d) Tender for Redemption of Purchase upon Election of Bondholder.
(i) On or prior to the Conversion Date any Bond shall be redeemed by the
Issuer or purchased in accordance with the terms of the Depositary Agreement
on the demand of the registered owner thereof, on any Business Day at a price
equal to the principal amount thereof plus accrued interest, if any, to the
date of redemption or purchase, upon: (A) delivery to the Depositary at its
Principal Office of a written notice (which shall include a telex confirmed
in writing within 24 hours) in the form of Exhibit 401 hereto (a
"Bondholder's Election Notice") which (i) states the principal amount of such
Bond, (ii) states the date on which such Bond shall be redeemed or purchased
pursuant to this Section, which date shall be a Business Day not prior to the
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seventh day next succeeding the date of the delivery of such notice to the
Depositary, (iii) irrevocably requests such redemption and (iv) contains an
undertaking of the registered owner to deliver the Bond to the Depositary in
accordance with this Agreement; and (B) delivery of such Bond duly endorsed
in blank for transfer at the office of the Depositary designated in the
Bondholder's Election Notice at or prior to 10:00 A.M., Boston time, on the
date for redemption specified in the aforesaid notice, together with a
due-bill check for accrued interest to the redemption date if such day be
after the Record Date of the Variable Period Interest Payment Date next
preceding the date of such notice to the Trustee and prior to such Interest
Payment Date; provided, however, that such Bond shall be so redeemed or
purchased only if the Bond delivered to the Depositary shall conform in all
respects to the description thereof in the Bondholder's Election Notice. If
the Bondholder fails to deliver its Bond in accordance with clause (B) above,
such Bond shall cease to be Outstanding for the purposes of this Agreement,
and the provisions of Section 507 shall apply, immediately upon the deposit
with the Trustee of funds sufficient to pay principal of and interest on such
Bond. Such Bond shall cease to bear interest on the specified redemption date.
(ii) No later than the close of business on the next Business Day following
the Depositary's receipt of a Bondholder's Election Notice delivered pursuant to
the provisions of clause (i) of this paragraph (d), the Depositary shall notify
the Depositary, the Borrower, the Bank and the Remarketing Agent by telephone,
promptly confirmed in writing, of such receipt, specifying the contents thereof,
and, upon delivery by such Bondholder pursuant to the terms of said clause (i)
of the Bond which is the subject of such redemption, the Depositary shall hold
such Bond pending delivery in accordance with the terms of the Depositary
Agreement.
(iii) By the acceptance of each Bond, the registered owner thereof agrees
that if there are funds available for such purpose in the Bond Purchase Fund
established with the Depositary under the Depositary Agreement, then any Bond
so tendered to the depositary in accordance with this Section 401(d) shall
be, on the date specified in the Bondholder's Election Notice, purchased and
not redeemed at a purchase price equal to the principal amount thereof plus
accrued interest, if any, to the date of purchase; provided, however, that,
if the purchase date for any Bond is an Interest Payment Date, the purchase
price thereof shall be the principal amount thereof and interest on such Bond
shall be paid to the registered owner of such Bond in the normal course. All
Bonds purchased with moneys in the Standby Account in the Bond Purchase Fund
referred to above shall remain duly authorized, issued and outstanding bonds,
and shall remain the valid and binding special obligations of the Issuer,
enforceable in accordance with their respective terms.
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(iv) If the funds in the Bond Purchase Fund at 11:00 A.M., Boston time, on
said date are insufficient to pay the aforesaid purchase price of any Bond in
full, the Depositary shall immediately notify the Trustee and the Trustee
shall thereupon, and in no event later than 11:30 A.M., Boston time, on said
date draw moneys under the Letter of Credit in accordance with the amounts
available thereunder as shall be necessary to effect the redemption by the
Issuer of such bond. If the amounts available under the Letter of Credit
issued in respect of the Bonds being redeemed hereunder are insufficient for
such purpose, the Borrower shall furnish to the Trustee in immediately
available funds a sum equal to the difference between the amount available
for such purpose and the redemption price of such Bond.
(e) Tender for Redemption or Purchase upon Expiration of Letter of Credit or
Occurrence of Conversion Date.
(i) The Bonds shall be redeemed by the Issuer on the Interest Payment Date
next preceding the date of expiration of the Letter of Credit (but only in
circumstances where the same is not being renewed or replaced as contemplated
by Section 509), unless such date of expiration is the Conversion Date or
such Bonds are purchased in lieu of redemption in accordance with the terms
of subparagraph (ii) hereof, at a price equal to 100% of the principal amount
thereof plus accrued interest to the redemption date. Unless purchased as
contemplated by subparagraph (ii) hereof, the Bonds shall be subject to
mandatory redemption on the Conversion Date even if the Letter of Credit has
not expired or been terminated. (The date of redemption or purchase referred
to in the previous two sentences is herein referred to as the "Redemption
Date"). No redemption shall take place with respect to Bonds purchased as
contemplated by subparagraph (ii) hereof, or Bonds issued in exchange for or
upon the registration or transfer of such Bonds.
(ii) (A) Bonds called for and subject to redemption during the Variable
Rate Period pursuant to this paragraph (e) may be purchased, in lieu of
redemption, by the Borrower's designee, which may be the Remarketing Agent
(the "Purchaser"), if notice to that effect is given to the Trustee by the
Borrower no later than the close of business on the second Business Day
preceding the Redemption Date, which notice shall include the identity of the
Purchaser, and the conditions set forth in this subparagraph (ii) are
satisfied.
(B) By 2:00 P.M., Boston time, on the Business Day next preceding the
Redemption Date, the Trustee shall give notice, by telephone, telegram, telex or
other electronic wire transmission, promptly confirmed in writing, to the
Borrower and the Remarketing Agent as to the number of the account of the
Trustee to which the purchase price for Bonds to be purchased pursuant to this
subparagraph (ii) should be sent. To the extent the Purchaser identified by the
Borrower in its notice given pursuant
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to subclause (A) above has deposited in the account designated by the Trustee
for such purpose, prior to 10:30 on the Redemption date, an amount equal to
or greater than the aggregate principal amount of Bonds called for redemption
pursuant to this paragraph (e) plus interest thereon to the date of payment,
the tendered Bonds shall be purchased on the Redemption Date, and not
redeemed, with funds deposited in the aforesaid account at a purchase price
for each Bond equal to the principal amount thereof plus interest, if any,
thereon to the date of payment.
(C) Any moneys remaining in the aforesaid account at the close of business
on the Redemption Date after making the payments specified in this
subparagraph (ii), shall be wired by the Trustee to such account as may be
designated by the depositor thereof as promptly as practicable. All Bonds
purchased as herein provided in the event of a call for redemption upon the
termination of the Letter of Credit (unless the termination date is the
Conversion Date) shall be registered by the Trustee for transfer (pursuant to
the authority contained in Section 305) and redelivered to such Person or
Persons as shall be designated by the Purchaser. All Bonds purchased as
herein provided following the exercise of an Option to Convert shall be
exchanged for Bonds of denominations of $5,000 and delivered to such Person
or Persons as shall be designated by the Purchaser.
(iii) If the funds in the aforesaid account at 10:00 A.M., Boston time, on
the Redemption Date are insufficient to pay the aforesaid purchase price of any
Bond in full, the Trustee shall immediately, and in no event later than 11:00
A.M., Boston time, on said date draw moneys under the Letter of Credit in
accordance with the amounts available thereunder as shall be necessary to effect
the redemption by the Issuer of such Bond. If the amounts available under the
Letter of Credit issued in respect of the Bonds being redeemed hereunder are
insufficient for such purpose, the Borrower shall furnish to the Trustee in
immediately available funds a sum equal to the difference between the amount
available for such purpose and the redemption price of such Bond.
(iv) The Trustee shall notify the Bondholders promptly if it receives notice
from the Bank of the termination of the Letter of Credit pursuant to Section
12(d) of the Reimbursement Agreement.
Section 402. Sinking Fund. As mandatory sinking fund requirements, there
shall be redeemed on the first Wednesday of April in each year, commencing
April, 1985, the principal amount of Bonds set forth below, at a redemption
price equal to 100% of the principal amount redeemed plus accrued interest to
the redemption date:
<PAGE>
Page 27
<TABLE>
<CAPTION>
DATE AMOUNT
- ------- ---------
<S> <C>
April, 1985......................................................... $ 70,000
April, 1986......................................................... 80,000
April, 1987......................................................... 90,000
April, 1988......................................................... 100,000
April, 1989......................................................... 110,000
April, 1990......................................................... 120,000
April, 1991......................................................... 130,000
April, 1992......................................................... 140,000
April, 1993......................................................... 150,000
April, 1994......................................................... 160,000
April, 1995......................................................... 170,000
April, 1996......................................................... 180,000
April, 1997......................................................... 195,000
April, 1998......................................................... 210,000
</TABLE>
For the purpose of effecting mandatory redemption the Trustee, on behalf of
the Issuer, and without necessity for further action by the Issuer or the
Borrower, shall call for redemption and shall cause to be redeemed on each
such date an aggregate principal amount of the Project Bonds as equals the
applicable mandatory sinking fund requirement. There shall not be any sinking
fund requirements with respect to serial Bonds issued after the exercise of
the Option to Convert.
Section 403. Selection of Bonds to be Redeemed. A redemption of Bonds shall
be a redemption of the whole or of any part of the Bonds from any funds
available for that purpose in accordance with the provisions of this
Agreement, provided, that there shall be no partial redemption of less than
$100,000 or an integral multiple of $5,000 in excess of $100,000 in principal
amount of Bonds during the Variable Rate Period and $5,000 in principal
amount of Bonds during the Fixed Rate Period. If less than all the Bonds
shall be called for redemption under any provision of this Agreement
permitting such partial redemption other than Section 401(c)(ii) or 401(d),
the particular Bonds to be redeemed shall be selected by the Trustee by
lottery, provided that if serial Bonds have been issued after the exercise of
the Option to Convert, the particular Bonds to be redeemed shall be selected
in the order of their maturities, and provided, further, (a) that the portion
of any Bond to be redeemed shall be in the principal amount of $100,000, or
an integral multiple of $5,000 in excess of $100,000 during the Variable Rate
Period or $5,000 during the Fixed Rate Period or some integral multiple
thereof, (b) that, in selecting Bonds for redemption, the Trustee shall treat
each Bond as representing that number of Bonds which is obtained by dividing
the principal amount of such Bond by $100,000 or $5,000 as the case may be,
and (c) that during the Variable Rate Period no partial redemption of a Bond
may reduce the principal amount thereof to less than $100,000. If there shall
be called for redemption less than all of a Bond, the Issuer shall execute
and deliver and the Bond Registrar shall authenticate, upon surrender of such
Bond, and at the expense of the Borrower and without charge to the owner
thereof, for the unredeemed balance of the Bond so surrendered, Bonds of like
series.
<PAGE>
Page 28
At its option, to be exercised on or before the forty-fifth day next
preceding any mandatory redemption date pursuant to Section 402, the Issuer,
or the Borrower on behalf of the Issuer, may (a) deliver to the Trustee for
cancellation Bonds in any aggregate principal amount which have been
purchased in the open market or (b) receive a credit against the current
mandatory sinking fund requirement (and corresponding mandatory redemption
obligation) of the Issuer under Section 402 for any Bonds which at least 92
days prior to such date have been redeemed (other than through the operation
of the mandatory sinking requirements provided for in Section 402) or
purchased for cancellation and cancelled by the Trustee and not theretofore
applied as a credit against any mandatory sinking fund requirement (and
corresponding mandatory redemption obligation) under the preceding paragraph.
Each Bond so delivered or previously redeemed or purchased for cancellation
shall be credited by the Trustee at 100% of the principal amount redeemed
against the mandatory sinking fund requirement (and corresponding mandatory
redemption obligation) of the Issuer on such mandatory redemption date, and
any excess of such amount shall be credited against future mandatory sinking
fund requirements (and corresponding mandatory obligations) in chronological
order. The Borrower on behalf of the Issuer, will, on or before the
forty-fifth day preceding each mandatory redemption date, furnish the Trustee
with a certificate, signed by an appropriate officer, stating the extent to
which the provisions of (a) and (b) of the first sentence of this paragraph
are to be availed of with respect to such mandatory sinking fund requirements
(and corresponding mandatory redemption obligations) for such mandatory
redemption date; unless such certificate is so timely furnished to the
Trustee, such requirements and obligations provided for in Section 402 shall
not be reduced.
Section 404. Procedure for Redemption. (a) Except for redemptions of Bonds
pursuant to Section 401(c)(ii) or 401(d), in the event any of the Bonds are
called for redemption, the Trustee shall give notice, in the name of the
Issuer, of the redemption of such Bonds, which notice shall (i) specify the
Bonds to be redeemed, the redemption date, the redemption price, and the
place or places where amounts [ ] upon such redemption will be payable (which
shall be the Principal Office of the Trustee or the Paying Agent) and, if
less than all of the Bonds are to be redeemed, the numbers of the Bonds, and
the portion of Bonds, so to be redeemed, (ii) [ ] state any condition to such
redemption, and (iii) state that [ ] the redemption date, and upon the
satisfaction of any such condition, the Bonds to be redeemed shall cease to
bear interest. Such notice may set forth any additional information relating
to such redemption. Such notice shall be given by mail at least thirty (30)
days prior to the date fixed for redemption pursuant to Section 401(a), and
at least ten (10) days prior to the date fixed for redemption pursuant to any
other Section, to the registered owners of Bonds to be redeemed at the
address shown on the registration books kept by the Trustee; provided,
however, that failure to give such
<PAGE>
Page 29
notice to any Bondholder or any defect in such notice shall not affect the
validity of the proceedings for the redemption thereof.
(b) Any Bonds and portions of Bonds which have been duly selected for
redemption and which are deemed to be paid in accordance with Section 507
shall cease to bear interest on the specified redemption date.
Section 405. No Partial Redemption After Default. Anything in this Agreement
to the contrary notwithstanding, if there shall have occurred and be
continuing an Event of Default, there shall be no redemption of less than all
of the Bonds at the time outstanding.
Section 406. Trustee to Notify Bank of Redemption of Principal. Promptly
after 92 days have passed since any redemption of principal of the Bonds made
from moneys other than Priority Funds, if no Bankruptcy shall have occurred
prior to the end of such 92-day period, the Trustee shall certify such
redemption to the Bank in writing, designating the amount of such redemption,
the date on which such redemption was made, the nonoccurrence of a Bankruptcy
during such 92-day period and the amount by which the Stated Amount of the
Letter of Credit (as defined in the Letter of Credit shall be reduced by
reason of such redemption. As to whether a Bankruptcy shall not have occurred
prior to the end of such 92-day period the Trustee may rely on a certificate
of an appropriate officer of the Borrower, accompanied by an opinion of its
counsel, that no Bankruptcy has occurred.
Promptly after any redemption of principal of the Bonds made from Priority
Funds other than amounts drawn under the Letter of Credit, the Trustee shall
certify such redemption to the Bank in writing designating the amount of such
redemption, the date on which such redemption was made and the amount by
which the Stated Amount of the Letter of Credit shall be reduced by reason of
such redemption.
Article 5--Source and Application of Funds
Section 501. Project Fund. A Project Fund is hereby established by the
Issuer with the Trustee. Deposit of Bond proceeds into the Project Fund shall
constitute the Loan.
A. Source and Disbursement. Proceeds of the issuance of the Bonds (other
than any accrued interest required to be deposited in the Bond Fund) shall be
deposited in the Project Fund.
Disbursements from the Project Fund shall be applied for the payment or
reimbursement of the following costs:
(a) Costs incurred directly or indirectly for or in connection with the
acquisition and installation of the Project, including
<PAGE>
Page 30
preliminary planning and studies, architectural, legal, engineering and
supervisory services, other labor and services, materials acquisition and
installation.
(b) Financial, legal, accounting, and printing and engraving fees, charges
and expenses, and all other such fees, charges and expenses incurred in
connection with the authorization, sale, issuance and delivery of the Bonds
and the preparation and delivery of any contract and instrument by which the
Borrower obtained title to the Project, this Agreement, and other related
documents.
(c) Fees and expenses of the Trustee properly incurred hereunder that may
become due prior to completion of the Project.
(d) Any other incidental and necessary costs and expenses relating to the
acquisition of the Project which constitute "project costs" as that term is
defined in Section 212(19) of the Act.
Such disbursements shall be made only upon receipt of the Trustee of a
written requisition signed by the Project Supervisor and in substantially the
form of Exhibit 01A and in compliance with the Construction Loan
Disbursement Procedures set forth in Exhibit 501B; provided that, without
requisition, the Trustee shall at the written direction of the Borrower
transfer funds to the Bond Fund to pay construction interest. No requisition
shall be submitted to the Trustee which requests reimbursement for payments
or payment for obligations originally paid or incurred before June 22, 1984.
B. Transfer of Funds from Project Fund to Bond Fund. All moneys in the
Project Fund (including moneys earned thereon by investment) remaining after
delivery of the Completion Certificate and payment or provision for payment
in full of the costs referred to above in this Section which are then due and
payable shall be paid into the Bond Fund. However, amounts approved by the
Project Supervisor shall be retained in the Project Fund for payment of such
costs not then due and payable. Any such retained funds remaining after full
payment of all such costs shall be likewise deposited in the Bond Fund.
Amounts deposited pursuant to this paragraph shall be held in the Bond Fund
in a separate account in escrow and used by the Trustee in accordance with
Section 403 for the redemption, without penalty, of principal of the Bonds
immediately upon the earliest practicable redemption date selected by the
Trustee for such redemption without further authorization from the Borrower
or the Issuer so as, to the extent possible, to exhaust such amount. Any
balance remaining after such application shall be deemed part of the Bond
Fund and available for all purposes of the Bond Fund. The balance of the
separate account shall at no time be invested to produce a yield higher than
the yield on the Bonds.
<PAGE>
Page 31
C. Borrower Required to Pay Costs if Project Fund Insufficient. if the
moneys in the Project Fund are not sufficient to pay in full the costs to be
paid therefrom, the Borrower agrees, in order to fulfill the purposes of the
Act, to complete the acquisition of the Project and to pay all costs therefor
in excess of the moneys available in the Project Fund. The Issuer makes no
warranty, express or implied, that moneys paid into the Project Fund or
otherwise available to complete the Project will be sufficient to pay all
costs therefor.
D. Obligation of the Parties to Furnish Documents. The Issuer and the
Borrower agree to cooperate in furnishing to the Trustee the documents that
are required to effect payments out of the Project Fund. Such obligation is
subject to any provisions of this Agreement requiring additional
documentation with respect to payments and shall not extend beyond the moneys
in the Project Fund available for payment under the terms of this Agreement.
Section 502. Bond Fund. A Bond Fund is hereby established by the Issuer
with the Trustee. The Depositary is hereby appointed Paying Agent for the
purpose of paying interest during the Variable Rate Period and purchasing
Bonds in accordance with Section 401(d). Except as provided below and in
Section 103, the Bond Fund shall be used solely for the payment of the
principal (including redemptions), interest and any premium on the Bonds and,
to the extent permitted hereunder, Additional Payments. Moneys shall be
deposited in the Bond Fund from time to time as follows:
(a) Proceeds equal to any accrued interest and premium paid by purchasers
of any Bonds shall be deposited into the Bond Fund.
(b) Upon completion of the Project, funds shall be transferred from the
Project Fund to the Bond Fund and applied as provided in Section 501B.
(c) Payments of construction interest pursuant to Section 501A and Loan
payments by the Borrower pursuant to Section 1001A shall be deposited into
the Bond Fund.
(d) Sums for the redemption of Bonds as described in Exhibit 301 other than
moneys drawn by the Trustee under the Letter of Credit shall be deposited
into the Bond Fund for use for such redemption as provided in Section 403.
(e) Sums received upon exercise of remedies by the Trustee or the Issuer
after an event of default shall be deposited in the Bond Fund, except sums
received by the Issuer pursuant to (i) the third sentence of Section 1111 or
(ii) rights not assigned hereunder.
Section 503. Letter of Credit Fund. (a) A Letter of Credit Fund is hereby
established with the Trustee for the benefit of
<PAGE>
Page 32
the Bondholders. The moneys deposited in the Letter of Credit Fund pursuant
to Section 401(c)(ii) and this Section 503 shall be held in escrow by the
Trustee and shall consist solely of sums drawn by the Trustee under the
Letter of Credit and any earnings thereon. Upon any acceleration of the Bonds
pursuant to Section 1102 the Trustee shall immediately draw on the Letter of
Credit, in an amount equal to the lesser of (I) the then undrawn amount of
the Letter of Credit or (II) an amount equal to (x) the sum of (i) the
aggregate unpaid principal of and premium, if any, and interest for up to 135
days on the Bonds then outstanding plus (ii) the aggregate amount of
principal of and premium, if any, and interest on the Bonds for which payment
was made (A) if Bankruptcy shall have occurred on or before such draw, during
the period commencing 92 days prior to Bankruptcy and ending immediately
prior to such draw or (B) during the period commencing 92 days prior to the
date of such draw and ending immediately prior to such draw, less (y) the
amount of Priority Funds then held by the Trustee; and the Trustee shall
immediately take such actions and give such notice as may be required to pay
the outstanding Bonds no later than five Business Days after the drawing on
the Letter of Credit out of the proceeds of such drawing or otherwise out of
Priority Funds.
(b)(i) If a Bankruptcy shall occur within the period of 92 days immediately
after any payment of principal or premium, if any, or interest is made on the
Bonds (excluding payments made wholly with Priority Funds and purchases
pursuant to Section 401(d) or (e) above) then, on the earlier of (A) the date
of expiration or termination of the Letter of Credit (giving effect to any
extensions from time to time by the Bank of such date of expiration or
termination) or (B) the day immediately following the date of a Preference
Determination with respect to such payments, the Trustee shall, without
making any prior demand or claim upon the Borrower, make a drawing under and
in accordance with the Letter of Credit so as to receive moneys thereunder in
an amount which will be sufficient, together with any Priority Funds then on
deposit in the Bond Fund and available for application to the Bonds (which
Priority Funds have not been taken into account in determining the amount of
any drawing pursuant to Section 503(a) above), for the payment of an amount
equal to all such payments (or, in the case of a drawing pursuant to clause
(B) above, an amount equal to all such payments which were held to have
constituted voidable preferences in such Preference Determination); provided,
however, that if at any time a No Preference Determination occurs with
respect to all such payments, then the requirement for the Trustee to make a
drawing under the Letter of Credit pursuant to this clause (i) shall lapse
and the Trustee shall not thereafter make any drawing under the Letter of
Credit pursuant to this clause (i).
(ii) If the Letter of Credit shall terminate or expire within the period of
92 days immediately after any payment of principal or premium, if any, or
interest is made on the Bonds (excluding
<PAGE>
Page 33
payments made wholly with Priority Funds and purchases pursuant to Section
401(d) or (e) above), then, on the date of expiration or termination of the
Letter of Credit, the Trustee shall, without making any prior demand or claim
upon the Borrower, make a drawing under and in accordance with the Letter of
Credit so as to receive moneys thereunder in an amount which will be
sufficient, together with any Priority Funds then on deposit in the Bond Fund
and available for application to the Bonds (which Priority Funds have not
been taken into account in determining the amount of any drawing pursuant to
Section 503(a) above), for the payment of an amount equal to all such
payments.
(c) All amounts drawn by the Trustee on the Letter of Credit pursuant to
subsection (a) or (b) of this Section 503 which are not used to pay principal
of and premium, if any, and interest on the Bonds shall be held in the Letter
of Credit Fund to reimburse the Trustee or any Bondholder for the amount, if
any, repaid by the Trustee or such holder pursuant to a Preference
Determination. However, such money and investments held in the Letter of
Credit Fund shall be returned to the Bank (i) in the case of a drawing under
subsection (b), if the period of 92 days referred to in clause (ii) thereof
shall expire without a Bankruptcy having occurred (as certified to the
Trustee by a certificate signed by an appropriate officer of the Borrower
accompanied by an opinion of the Borrower's counsel to the same effect), (ii)
if and to the extent that a No Preference Determination shall occur with
respect to the payments covered thereby, (iii) if the bankruptcy proceedings
are terminated without a Preference Determination or (iv) if one year shall
have elapsed from the date moneys were drawn under the Letter of Credit by
the Trustee and no Preference Determination has been issued.
(d) Any Bonds the principal of which is paid out of proceeds from the
Letter of Credit shall be redeemed and shall not be remarketed.
Section 504. Investment of Moneys in Funds. The Trustee shall invest
moneys in the Project Fund in any Qualified Investments upon the written
direction of the President, Treasurer or Assistant Treasurer of the Borrower,
if the Borrower is not then in default hereunder. Moneys in the Bond Fund and
Letter of Credit Fund may be invested by the Trustee in its discretion, but
only in direct obligations of, or obligations the payment of the principal of
and interest on which are unconditionally guaranteed by, the United States of
America, the maturities or prepayment dates of which, at the option of the
Trustee, shall coincide as nearly as practicable with, but not be later than,
the time or times at which said moneys will be required for the purposes of
this Agreement; provided, however, that moneys drawn under the Letter of
Credit shall be invested only in such obligations with maturities of 30 or
fewer days. The making of any such investments or the sale or other
liquidation thereof shall not be
<PAGE>
Page 34
subject to the control of the Borrower. Any investments pursuant to this
Section may be purchased from the Trustee or the Bank. The Trustee is
authorized to sell or otherwise convert into cash investments credited to any
Fund at the times and in the amounts necessary to meet payments when due from
such Fund. No order of the Borrower shall restrict such authorization, and
the Trustee shall not be liable for any loss occurring from such sale or
conversion to cash. Each Fund shall include all investments made from moneys
credited to such Fund and shall include all proceeds from such investments.
For purposes of this Agreement, such investments shall be valued at face
amount or market value, whichever is less.
Section 505. Avoidance of Arbitrage. The Borrower agrees to restrict the
use of Bond proceeds in such manner and to such extent, as many be necessary,
after taking into account reasonable expectations at the time of issuance of
the Bonds, so that the Bonds will not constitute arbitrage bonds under
Section 103(c) of the Internal Revenue Code and the regulations prescribed
under that Section. Any officer of the Issuer (including its Manager,
Treasurer, Chairman and Vice Chairman) having responsibility with respect to
the issuance of the Bonds is authorized and directed, alone or in conjunction
with any other officer, employee or consultant of the Issuer or the Borrower,
to give an appropriate certificate on behalf of the Issuer, for inclusion in
the transcript of proceedings for the Bonds, setting forth the facts,
estimates and circumstances and reasonable expectations pertaining to Section
103(c) of the Internal Revenue Code of 1954, as amended and the regulations
hereunder.
Section 506. Authorized Application of Funds; Moneys to be Held in Trust.
The Trustee is authorized to apply each Bond as provided in this Agreement.
All moneys deposited with the Trustee hereunder shall be held by the Trustee
in trust but need not be segregated from other funds except as required by
law. The Trustee will withdraw sufficient funds from the Bond Fund to pay
principal of and premium, if any, and interest on the Bonds on behalf of the
Issuer as the same become due and payable. If and to the extent that,
following acceleration, by declaration or otherwise, under Section 02,
sufficient Priority Funds, including moneys drawn under a Letter of Credit,
are not available to pay principal of, premium, if any, and interest on the
Bonds, then other available moneys, including amounts realized pursuant to
Article 11, shall be used to pay principal of and premium, if any, and
interest on the Bonds.
Section 507. Nonpresentment of Bonds. If funds sufficient to pay principal
of and interest on any Bond have been deposited with the Trustee and
irrevocably committed thereto, all liability of the Issuer and the Borrower
for the payment of such amount shall forthwith cease. The Trustee shall hold
such funds, without liability for interest thereon, for the benefit of the
<PAGE>
Page 35
holder of the Bond, who shall thereafter be restricted exclusively to such
funds for any claim with respect to such amount. Any such funds which remain
unclaimed for four years after such due date shall upon request in writing by
the Borrower be paid to the Borrower without any interest thereon, and the
Trustee shall have no further responsibility with respect to such moneys.
Section 508. Bonds Are Not General Obligations. The Bonds do not now and
shall never constitute a general obligation of the Issuer nor a debt or
pledge of the faith and credit of the State, and each covenant and
undertaking by the Issuer herein and in the Bonds to make payments is not a
general obligation of the Issuer or of the State or a debt or a pledge of the
faith and credit of the State, but is a special obligation payable solely
from the Pledged Receipts and is a valid claim of the holders only against
such Pledged Receipts. Nothing herein shall be construed as requiring the
Issuer to use any funds or revenues from any source other than the Pledged
Receipts.
Section 5.09. Substitute Credit Facility. At any time prior to the
expiration of the Letter of Credit, either the Borrower or the Bank may, at
its option provide for the delivery to the Trustee of a Substitute Credit
Facility. Such Substitute Credit Facility shall be an irrevocable letter of
credit issued by a commercial bank or a substantially equivalent irrevocable
credit facility, including but not limited to a surety bond, the terms of
which shall in all material respects be the same as or substantially
equivalent to the Letter of Credit; provided, that any Substitute Credit
Facility provided for the Fixed Rate Period or any portion thereof shall
provide for the payment of at least 285 days interest accrued on the Bonds
(calculated on the basis of a year having 360 days) and a redemption premium
in the amount of 3% of the outstanding principal amount of the Bonds. On or
prior to the date of the delivery of such Substitute Credit Facility to the
Trustee, the Borrower shall furnish to the Trustee and the Issuer (i) an
opinion of Bond Counsel stating that the delivery of such Substitute Credit
Facility to the Trustee is authorized under this Agreement and complies with
the terms hereof, (ii) an opinion of counsel in form and substance reasonably
satisfactory to the Trustee (and substantially similar in content with
respect to the Substitute Credit Facility as those opinions originally
rendered with respect to the Letter of Credit in connection with the original
issuance of the Bonds) to the effect that the Substitute Credit Facility is
the valid, binding and enforceable obligation of the bank or other
institution issuing it and that payments on the Bonds out of the proceeds of
a drawing on the Substitute Credit Facility will not constitute voidable
preferences under the federal Bankruptcy Code or other applicable laws and
regulations, and (iii) either (A) written evidence from Moody's if the Bonds
are rated by Moody's and S&P, if the Bonds are rated by S&P, to the effect
that such rating agency has reviewed the proposed Substitute Credit Facility
<PAGE>
Page 36
and that the substitution of the proposed Substitute Credit Facility for the
Letter of Credit will not, by itself, result in a reduction of its ratings of
the Bonds from those which then prevail, or (B) written evidence satisfactory
to the Trustee that the commercial bank or other institution issuing such
Substitute Credit Facility has a rating on its long-term obligations from
Moody's and/or S&P which is (x) equal to or better than the second highest
long-term debt rating category, or (y) equal to or better than such ratings
of long-term obligations of the issuer of the credit facility being replaced
by such Substitute Credit Facility.
The Letter of Credit may by its terms provide for extensions thereof and the
Borrower may, at its election, and with the consent of the Bank, provide for
one or more additional extensions of the Letter of Credit for any period
commencing after the expiration of such Letter of Credit.
PART III: THE PROJECT
Article 6--Completion of the Project
Section 601. Borrower's Obligations to Complete Project, etc. The Borrower
shall cause the Project to be completed as promptly as feasible and shall at
its expense do or cause to be done all things necessary or proper for such
completion in accordance with applicable law and regulations.
All material changes in the Plans and Specifications after the delivery of
the Bonds shall be approved by the Bank. Any change or changes in the Plans
and Specifications which would result in a payment of more than $25,000 for
any single item or more than $100,000 in the aggregate shall be deemed a
"material change" for purposes of this paragraph.
Until completion of the Project, the Borrower shall make no changes in the
Plans and Specifications or take any other action which would affect the
qualification of the Project as an "industrial facility", as defined in the
Act, or would affect in any material respect the description of the Project
approved by the Issuer.
Section 602. Completion Certificate. Completion of the Project shall be
evidenced to the Trustee by a Completion Certificate signed by the Project
Supervisor and approved by the Bank (i) stating that the Project or such
additional facilities, as the case may be, has been substantially completed
in accordance with the Plans and Specifications so as to permit efficient
operation thereof, and all costs then due and payable in connection therewith
have been paid, and that completion has been accomplished in such a manner as
to conform with all applicable zoning, planning, building, environmental and
other regulations of all governmental authorities having jurisdiction;
<PAGE>
Page 37
(ii) specifying the date by which the foregoing events had occurred; (iii)
stating that there is no laborer, supplier, materialman, or other person then
entitled to assert a materialman's or other similar lien upon the Project;
(iv) indicating the nature and estimated cost of any work to be done on the
property comprising the Project which is ancillary or supplemental to the
Project; and (v) stating that it is given without prejudice to any rights
against third parties which then exist or may subsequently come into being.
Article 7--Damage and Destruction
Section 701. Damage and Destruction. If the Project shall be damaged or
destroyed by fire, flood, or other casualty, there shall be no abatement or
reduction in the payments required to be made by the Borrower hereunder, and
within a period of six months from the date of such damage or destruction,
either (i) the Borrower shall repair, replace, restore or reconstruct the
Project so as to restore it to substantially its prior value and to a state
suitable for its continued use as an industrial facility, or (ii) the
Borrower shall notify the Issuer, the Trustee and the Bank in writing of its
intention to redeem all of the Bonds pursuant to Section 401(b).
Section 702. Eminent Domain. If title to or the temporary use of all or
part of the Project shall be taken or condemned under exercise of any power
of eminent domain, there shall be no abatement or reduction in the payments
required to be made by the Borrower hereunder, and within a period of six
months following entry of a final order in any eminent domain proceedings
granting condemnation, either (i) the Borrower shall restore the Project to
an economic unit comparable to its previous state, or acquire or construct
other land and improvements deemed by the Borrower to be adequate for the
continuance of its business operations at the Project site (which
improvements shall be deemed a part of the Project); or the Borrower shall
notify the Issuer, the Trustee and the Bank in writing of its intention to
redeem all of the Bonds pursuant to Section 401(b).
Part IV: REPRESENTATIONS AND AGREEMENTS
OF ISSUER AND BORROWER
Article 8--Representations and Agreements of Issuer
Section 801. Due Organization, etc. The issuer represents and warrants as
follows:
(a) It is a body politic and corporate and a political instrumentality of
the State established under Chapter 12 of the Vermont Statutes Annotated,
with the power under and pursuant to the Act, to execute, deliver and perform
its obligations under this Agreement, and to issue and sell the Bonds.
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(b) It has taken all necessary action and has complied with all provisions
of the Constitution of the State and the Act, including but not limited to
the making of the findings required by Section 246 of Chapter 12 of the
Vermont Statutes Annotated, required to make this Agreement and the Bonds the
valid obligations of the Issuer which they purport to be; and, when executed
and delivered by the parties thereto, this Agreement will constitute a valid
and binding agreement of the Issuer and be enforceable in accordance with its
terms, except as enforceability may be subject to the exercise of judicial
discretion in accordance with general equitable principles and to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws for the
relief of debtors heretofore or hereafter enacted to the extent that the same
may be constitutionally applied.
(c) When delivered to and paid for by the Purchaser in accordance with the
terms of this Agreement, the Bonds will constitute valid and binding special
obligations of the Issuer enforceable in accordance with their terms, except
as enforceability may be subject to the exercise of judicial discretion in
accordance with general equitable principles and to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws for the relief of
debtors heretofore or hereafter enacted to the extent that the same may be
constitutionally applied, and will be entitled to the benefits of this
Agreement.
The Issuer makes no representation or warranty that interest on the Bonds is
or will continue to be exempt from federal or state income taxation.
Section 802. Payment of Bonds; Trustee's Rights with Respect to the Loan;
Cooperation with Trustee. The Issuer agrees that it will promptly pay or
cause to be paid the principal of and interest on all Bonds as herein
provided. The Issuer agrees that the Trustee may enforce all rights of the
Issuer (except those rights not assigned under this Agreement) and all
obligations of the Borrower with respect to the Loan for and on behalf of the
Bondholders, whether or not the Issuer is in default hereunder. The Issuer
agrees that, except as provided herein, it will not mortgage, encumber or
alienate any part of the Pledged Receipts. The Issuer further agrees to
provide assurances to the same extent as required of the Borrower under the
first paragraph of Section 1006.
All agreements of the Issuer in this Section 802 are subject to the
limitation described in Section 508.
Article 9--Representations of the Borrower
The Borrower hereby confirms to the Issuer and the Trustee its
representations and warranties made or incorporated by reference in Section 4
of the Reimbursement Agreement, and hereby further
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represents and warrants and, as to Section 904, covenants as follows:
Section 901. Legal Proceedings. Except as otherwise disclosed to the Bank
in writing, there is no action, suit, proceeding or investigation at law or
in equity before or by any court or public board or body pending or, to the
knowledge of the Borrower, threatened against the Borrower, wherein an
unfavorable decision, ruling or finding would in any material respect
adversely affect the business, assets or condition (financial or otherwise)
of the Borrower or the transactions contemplated by this Agreement, or the
Reimbursement Agreement, or which in any way would adversely affect the
validity of the Bonds, this Agreement, the Reimbursement Agreement or the
Security Credit Agreement.
Section 902. Compliance with Law; Consents, etc. The Borrower is not in
violation of any terms or provision of its charter or by-laws or in material
violation of any term or provision of any mortgage, lease, agreement or other
instrument which is material to its business or assets, or of any judgment,
decree, governmental order, statute, rule or regulation by which it is bound
or to which it or any of its assets is subject. The execution, delivery and
performance of and compliance with this Agreement, the Reimbursement
Agreement and the Standby Credit Agreement will not violate or constitute a
default under the charter or by-laws of the Borrower or of any term or
provision of any mortgage, lease, agreement or other instrument, or of any
judgment, decree, governmental order, statute, rule or regulation by which
the Borrower is bound or to which any of its assets is subject. No approval
by, authorization of, or filing with any federal, state, or municipal or
other governmental commission, board, or agency or other governmental
authority is necessary in connection with the execution and delivery of this
Agreement, the Reimbursement Agreement and the Standby Credit Agreement by
the Borrower, except for necessary approvals under the Act and the Internal
Revenue Code of 1954, as amended, which have been, or by the time of delivery
of the Bonds will have been obtained.
Section 903. No Adverse Tax Actions. The Borrower has not taken and has no
present intention of taking any action, and knows of no action taken or
intended, which would cause interest on the Bonds to be includable in the
gross income of any Bondholders for federal income tax purposes (unless such
Bondholder is a "substantial user" or a "related person" within the meaning
of Section 103(b)(13) of the Internal Revenue Code of 1954, as amended).
Section 904. The Project, etc.
(a) The Loan will induce the Borrower to expand, improve and renovate its
industrial enterprise in the Town of Dover.
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(b) The Project is and at all times while the Bonds are outstanding will be
used in such a manner as to be included within the definition of an
"industrial facility" in the Act and will be acquired, improved and equipped
substantially as described in the Project Information Statement furnished to
the Issuer, and the terms of the Bonds will not exceed the useful life of the
Project.
(c) Substantially all of the proceeds of the Bonds (accounting for more
than 90 percent of the proceeds of the Bonds, after deducting expenses of
issuing the Bonds) will be used to provide an "exempt facility" as that term
is defined in Section 103(b)(4) of the Internal Revenue Code of 1954, as
amended.
(d) All of the proceeds of the Bonds will be used for the acquisition,
construction, expansion, improvement or renovation of the Project.
(e) The Borrower shall complete and operate the Project for the purposes
and in a manner consistent with the Plans and Specifications and shall not
allow a change in the nature of the use or operation of the project which is
inconsistent therewith or which would disqualify the Project as an
"industrial facility" within the meaning of Section 212(b) of the Act or as
an "exempt facility" within the meaning of Section 103(b)(4) of the Internal
Revenue Code of 1954, as amended.
Section 905. Adequacy of Disclosure. Neither this Agreement nor the
Reimbursement Agreement, the Standby Credit Agreement, or any other document,
certificate or statement furnished to the Purchasers or the Issuer by or on
behalf of the Borrower in connection with the transactions contemplated
hereby or thereby contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained
herein and therein not misleading.
Article 10--Certain Agreements of Borrower
The Borrower agrees as follows:
Section 1001. Borrower to Make Loan Payments Sufficient to Meet Debt Service
on Bonds and Additional Payments.
A. Borrower's Loan Payments. No later than 12:00 P.M. on the Business Day
preceding each Payment Date, the Borrower agrees to pay as a Loan payment to
the Trustee a sum in immediately available funds which, when added to the
balance then in the Bond Fund excluding amounts which are then held for
purposes other than the next succeeding payment of principal, premium, if
any, and interest on the Bonds, equals all payments due on the Bonds on such
Payment Date (excluding amounts excluded pursuant to Section 304(c) hereof).
No later than 3:00 p.m. on the Business Day preceding the Payment Date, the
Trustee shall wire transfer
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to the Depositary in immediately available funds, an amount equal to all
payments due on the Bonds on such Payment Date, provided that the Trustee
shall be required to transfer only those funds received from the Borrower on
deposit in the Bond Fund. If requested by the Borrower, the Trustee will
notify the Borrower by telephone of the amount of accrued interest due on an
Interest Payment Date at least two days prior to such Interest Payment Date.
In any event the Loan payments payable under this Section shall be sufficient
to pay the total amount due with respect to such principal of and interest
and any premium on the Bonds as and when due. If at any time when said
payments are due the balance in the Bond Fund available for said purpose is
insufficient to make such payments, the Borrower will forthwith pay to the
Trustee any such deficiency. Subject to such obligation, the Borrower shall
not be required to make any Loan payment to the extent its application would
result in an excess in the Bond Fund over the amount necessary to meet
obligations then due and payable from the Bond Fund plus any additional
amounts then required to be maintained in the Bond Fund.
B. Additional Payments. The Borrower agrees duly to make on demand (by the
Issuer or the Trustee, as the case may be) Additional Payments as follows:
(a) To the Issuer, as reimbursement for all costs, expenses and liabilities
paid or incurred by the Issuer in satisfaction of any obligations of the
Borrower not performed by the Borrower as required thereunder.
(b) To the Issuer, as reimbursement for or prepayment of all costs,
expenses and liabilities paid or incurred or to be paid or incurred by the
Issuer or any of its members, directors, officers, employees or agents at the
request of the Borrower or as required by this Agreement or the Act.
(c) To the Trustee, its reasonable fees and expenses as trustee, and to the
extent applicable as bond registrar and paying agent, including the
reasonable fees and expenses of its attorneys and agents, and any other
amounts due to the Trustee under this Agreement.
C. Bank Obligations. The Borrower agrees to pay all Bank Obligations when
due.
D. Obligations Unconditional. The Borrower's obligations to make the
payments required by this Agreement shall be absolute and unconditional and
shall not be subject to any right of recoupment or set-off. Until the lien of
this Agreement has terminated and ceased to have effect, the Borrower will
not (i) suspend or discontinue any payments required by this Agreement or
(ii) fail to fulfill its other agreements herein for any cause
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including without limitation failure fully to acquire and install the
Project, or damage to the Project, any failure or consideration or commercial
frustration of purpose, any change in federal or state or other laws or
administrative rulings or actions or any failure of the Issuer to fulfill any
agreement, duty, liability or obligation related to this Agreement.
Section 1002. Borrower to Maintain its Legal Existence; Conditions Under
Which Exceptions Permitted. The Borrower will maintain its legal existence
and qualification under the laws of its jurisdiction of incorporation.
Section 1003. Financial and Other Information. The Borrower will keep books
and records in accordance with sound accounting practice and permit
representatives o the Trustee and the Bank to examine and audit such books
and records and inspect any of its properties at reasonable times.
Section 1004. Borrower Not to Adversely Affect Tax-Exempt Status of Interest
on Bonds. The Borrower will not take any action which would adversely affect
the exemption from federal income taxation of the interest paid on the Bonds,
and will take, or require to be taken, such acts as may be reasonably within
its ability and as may from time to time be required under applicable law or
regulation to continue to exempt from federal income taxation the interest on
the Bonds, including the preparation and filing of any statements required to
be filed by it in order to maintain the tax-exempt status of the interest on
the Bonds. The Borrower will notify promptly the Trustee and the Bank of the
occurrence of any Determination of Taxability or any basis therefor, and of
any allegation by any federal or state agency that any such event has
occurred, of which the Borrower has or acquires knowledge.
Section 1005. Covenants Related to the Project.
A. Maintenance and Modifications of Project by Borrower; Restrictions on
Prior Liens, etc. Subject to the provisions of this Section 1005 and Article
7 (dealing with damage and destruction), the Borrower will maintain the
Project in good repair, working order and condition and will from time to
time make or cause to be made all necessary and proper repairs, replacements
and renewals.
The Project and any use thereof by the Borrower shall conform with all
applicable zoning, planning, building, environmental and other regulations of
governmental authorities having jurisdiction over the Borrower, and the
Borrower shall not permit a nuisance thereon.
Except as expressly permitted hereunder, the Borrower will not sell or
transfer any part of the Project, or create, incur, assume or permit to exist
any encumbrance, lien or charge of any kind on the Project, without the
written consent of the Bank,
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except (a) those in favor of the Bank, and (b) involuntary liens and
encumbrances which the Borrower is contesting in good faith and for which
adequate reserves have been established.
B. Disposition of Portions of the Project. The Borrower in its sound
discretion may sell or otherwise dispose of any machinery or equipment or
other personal property included in the Project which it determines has
become inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary, provided:
(a) substitute property having equal or greater utility (but not necessarily
having the same function) in the operation of the facility at which the
replaced property was located is installed anywhere at such facility; such
removal and substitution will not impair operating utility or change the
nature of such facility to the extent that it would not constitute the type
of facility operated prior to such replacement; and such property shall be
free of all liens and encumbrances, other than those in favor of the Bank,
and shall become a part of the Project; or
(b) in the opinion of the Project Supervisor, removal of such property,
together with any substitution, will not materially impair the efficiency of
the Borrower's operations or adversely affect the structural integrity of
such facility or change the nature of such facility to the extent that it
would not constitute the type of facility operated prior to such replacement.
Any damage to structures not being removed shall be repaired at the cost of
the Borrower.
Except as may be waived in writing by the Bank, the Borrower shall promptly
report to the Trustee and the Bank each such removal, substitution, sale and
other disposition, but no such report need be made unless the aggregate fair
market value of all machinery, equipment or other personal property included
in the Project which is sold or otherwise disposed of in any fiscal year of
the Borrower exceeds $100,000.
Notwithstanding any other provision in this Agreement, the Borrower, with the
written approval of the Bank, may sell or dispose of all or any part of the
Project.
C. Taxes, Other Governmental Charges and Utility Charges. The Borrower shall
duly pay or cause to be paid all taxes and governmental charges of any kind
that may at any time be lawfully assessed or levied against or with respect
to the Project, all utility and other charges incurred in the operation,
maintenance, use, occupancy and upkeep of the Project, and all assessments
and charges lawfully made by any governmental body for public improvements
that may be secured by a lien on the Project. However, the Borrower may
contest in good faith any such items, assessments and other charges and, in
such event, may permit the
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taxes, assessments or other charges so contested to remain unpaid during any
period, including appeals, when the Borrower is in good faith contesting the
same, so long as adequate reserves have been established and enforcement of
the contested item is effectively stayed.
D. Right of Access. The Borrower agrees that the Issuer, the Trustee and the
Bank and their representatives may at all reasonable times examine and
inspect the Project.
E. Location. The Borrower will not change its name or the location of its
principal place of business without notice to the Trustee and the Bank at
least thirty days prior to such change.
Section 1006. Instruments of Further Assurance; Recordings and Filings. The
Borrower will do, execute, acknowledge and deliver or cause to be so
performed such supplemental agreements and such further acts, instruments and
transfers as the Trustee or the Bank may reasonably require for the better
assuring, transferring, pledging, assigning and conferring unto the Trustee
and the Bank the property and rights herein described and the income and
revenue pledged hereby.
The Borrower will cause this Agreement and any necessary financing
statements, and other instruments (and supplements and amendments to any of
the foregoing) to be recorded and filed as may be required by law in order to
preserve fully and protect the security of the Bank and the holders of the
Bonds and the rights of the Trustee hereunder.
The Trustee shall cause to be filed any continuation statements or
instruments of a similar character which, in its opinion, are required by law
in order to preserve and protect the security of the Bondholders and the Bank.
Section 1007. Insurance and Worker's Compensation Coverage. The Borrower will
insure or cause to be insured the Project in the amount and with the coverage
of the Required Property Insurance Coverage. The Borrower will carry or cause
to be carried Required Public Liability Insurance applicable to the Project.
The Borrower will maintain the worker's compensation coverage required of it
by the applicable laws of the State.
All insurance acquired hereunder shall be with generally recognized
responsible insurance companies authorized to do business in the State, as
selected by the Borrower. Such insurance may be blanket insurance and shall
provide that it may not be cancelled or materially altered without 15 days'
prior written notice to the Trustee and the Bank (and keep updated) evidence
of such insurance in such form as the Trustee or the Bank may require.
Substitutions for or omissions from the coverage required by this
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Article may be made upon the written consent of the Bank.
Section 1008. Indemnification of Issuer, Bank and Trustee. Notwithstanding
its insurance agreements, the Borrower shall to the extent legally
permissible indemnify and save harmless the Issuer, the Bank (which term, for
the purposes of this Section 1008, shall include FNBB acting as Bond
Registrar, Depositary and Paying Agent) and the Trustee and their respective
members, directors, officers, employees and agents against and from (a) all
claims by or on behalf of any person arising out of (i) any condition of the
Project, or (ii) the acquisition, installation or use of it, or (iii) any
accident, injury or damage to any person occurring in or about the Project;
or (iv) any breach or default by the Borrower of any of its obligations
hereunder, or (v) any act or omission of the Borrower or any of its agents,
contractors, servants, employees, or licensees, or (vi) the offering,
issuance, sale or resale of the Bonds, and (b) all costs, counsel fees,
expenses or liability reasonably incurred in connection with any such claim
or any action or proceeding brought thereon. If any action or proceeding is
brought against the Issuer, the Bank or the Trustee or any such director,
officer, employee or agent by reason of any indemnified claim, the Borrower
upon notice from the affected party shall resist or defend such action or
proceeding. Subject to the foregoing, the Issuer, the Bank and the Trustee
shall cooperate and join with the Borrower at the expense of the Borrower as
may be required in connection with any action taken or defended by the
Borrower.
The Issuer, the Bank and the Trustee and their respective members, directors,
officers, employees and agents shall be entitled to the advice of counsel
(who may also be counsel for the Borrower or any Bondholder) and shall be
wholly protected as to action taken or omitted to be taken in good faith in
reliance on such advice. They may rely conclusively on any communication or
other document furnished to them hereunder and reasonably believed by them to
be genuine. They shall not be liable for any action (i) taken by them in good
faith and reasonably believed by them to be within the discretion or powers
conferred upon them, or (ii) in good faith not taken by them because
reasonably believed to be beyond the discretion or powers conferred upon
them, or (iii) taken by them pursuant to any direction or instruction by
which they are governed hereby, or (iv) omitted to be taken by them by reason
of the lack of any direction or instruction required hereby for such action;
nor shall they be responsible for the consequences of any error or judgment
reasonably made by them. The Issuer, the Bank and the Trustee shall in no
event be liable for the application or misapplication of funds, or for other
acts or defaults, by any Person, except their own directors, officers and
employees and others specified in Section 1201(a). When any consent or other
action by them is called for hereby, they may defer such action pending such
investigation, inquiry, or supporting evidence as they may
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require. They shall not be required to take any remedial action (other than
the giving of notice) unless indemnity reasonably satisfactory to them is
furnished for any expense or liability to be incurred thereby. They shall be
entitled to reimbursement for expenses reasonably incurred or advances
reasonably made, with interest at the FNBB Base Rate, in the exercise of
their rights or the performance of their obligations hereunder, to the extent
that they act without previously obtaining indemnity. No permissive right or
power to act which they may have shall be construed as a requirement to act;
and no delay in the exercise of a right or power shall affect the subsequent
exercise of that right or power. The Issuer shall not be required to take
notice of any breach or default by the Borrower hereunder, except when given
notice thereof by the Trustee. No recourse shall be had by the Borrower, the
Trustee, the Bank or any Bondholder for any claim based on this Agreement or
the Bonds against any director, officer, employee or agent of the Issuer
alleging personal liability on the part of such person unless such claim is
based upon the willful dishonesty of or intentional violation of law by such
person.
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PART V: EVENTS OF DEFAULT
Article 11--Default Provisions and Remedies of Trustee, Bank, Bondholders and
Issuer
Section 1101. Events of Default, Defaults. The occurrence of any of the
following events shall constitute an "event of default" hereunder:
(a) Failure by the Issuer to pay interest on any Bond when due and payable.
(b) Failure by the Issuer to pay any principal or premium on any Bond when
due and payable, whether at stated maturity or by acceleration or pursuant to
any redemption requirements.
(c) Failure by the Borrower to make any Loan payment or Additional Payment
when due and payable.
(d) Failure by the Borrower or the Issuer to observe or perform any other
covenant, condition or agreement on its part to be observed or performed in
this Agreement or the Bonds, for a period of 30 days after written notice of
such failure such have been given to the Borrower by the Trustee or the
Issuer or to the Issuer by the Trustee, except that violation of Section 1004
(Borrower not to adversely affect tax-exempt status of interest on the Bonds)
shall not constitute a default or event of default hereunder.
(e) Receipt by the Trustee of notice from the Bank that an "Event of Default"
within the meaning of the Reimbursement Agreement has occurred.
(f) The Letter of Credit shall be revoked or terminated for any reason prior
to its stated expiration date and a Substitute Credit Facility shall not have
been issued within 45 days after such revocation or termination, or the Bank
shall wrongfully refuse to honor the Letter of Credit.
(g) The material inaccuracy or incompleteness of any material representation
or warrant made in writing by or on behalf of the Borrower in connection with
the transactions contemplated hereby.
(h) The occurrence of a Bankruptcy.
(i) An occurrence of an Act of Bank Bankruptcy unless a Substitute Credit
Facility has been issued within 45 days of such event.
The term "default" hereunder means the occurrence of any of the foregoing
events prior to the passage of time or giving of notice or both, if
applicable, which would cause such occurrence to constitute an event of
default.
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The Borrower agrees to notify the Issuer and the Trustee promptly in writing
of the occurrence of any default or event of default of which it has
knowledge or has received notice.
Within five days after knowledge of an event of default under subsection (a),
(b), (c), or (e) above, the Trustee shall give written notice, by registered
or certified mail, to the Issuer, the Borrower, the Bank and all of the
Bondholders, and upon notice as provided in Section 1201(c) shall give
similar notice of any other event of default.
Section 1102. Acceleration. Upon the occurrence of any event of default
described in Section 1101 the Trustee shall, upon and only upon the written
request of the Bank, declare all Bonds then outstanding to be due and payable
immediately, and upon the declaration, all principal and interest accrued
thereon shall become immediately due and payable, and there shall be an
automatic corresponding acceleration of the Borrower's indebtedness on the
Loan; provided, however, that if there shall have occurred any event of
default under subsection (h) or (i) of Section 1101, the principal of and
premium, if any, on all Bonds then outstanding and the interest accrued
thereon automatically shall become immediately due and payable without the
action by the Trustee. Interest shall accrue to the payment date determined
by the Trustee (which payment date shall be not later than 15 days following
the acceleration) or the actual payment date, if later.
The provisions of this Section 1102 are subject to the condition that with
respect to an event of default under subsection (e) of Section 1101, any
waiver by the Bank of any "Event of Default" under the Reimbursement
Agreement and rescission and annulment of its consequences shall constitute a
waiver of the corresponding event of default under this Indenture and a
rescission and annulment of the consequences thereof. No such waiver,
rescission and annulment shall extend to or affect any subsequent event of
default or impair any right or remedy consequent thereon.
Notwithstanding the foregoing, no waiver, rescission or annulment of an event
of default hereunder shall be made if the Bank shall theretofore have honored
in full a drawing under the Letter of Credit in respect of such event of
default.
Section 1103. Other Remedies; Rights of Bank and Bondholders. Upon the
acceleration under Section 1102, the Trustee immediately shall draw upon the
Letter of Credit as provided in Section 503.
Upon the continuance of an event of default, if so requested by the Bank or,
unless and until the principal of and interest on the Bonds shall be paid in
full, a Majority of the Bondholders, and if satisfactory indemnity has been
furnished to it, the
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Trustee shall exercise such of the rights and powers conferred by this
Agreement as the Trustee, being advised by counsel, shall deem most effective
to enforce and protect the interests of the Bondholders and the Bank.
No remedy under this Agreement is intended to be exclusive, and to the extent
permitted by law each remedy shall be cumulative and in addition to any other
remedy hereunder or now or hereafter existing; provided, however, that upon
acceleration under Section 1102 the Trustee shall first draw upon the Letter
of Credit as provided in Section 503.
No delay or omission to exercise any right of power shall impair such right
or power or constitute a waiver of any default or event of default or
acquiescence therein; and each such right and power may be exercised as often
as deemed expedient.
No waiver by the Trustee, the Bank or the Bondholders of any default or event
of default shall extend to any subsequent default or event of default.
Section 1104. Right of Bank and Bondholders to Direct Proceedings. Anything
in this Agreement to the contrary notwithstanding, the Bank and, so long as
Bonds are outstanding, a Majority of the Bondholders shall have the right at
any time, by an instrument or instruments in writing executed and delivered
to the Trustee, to direct the method and place of conducting all proceedings
to be taken in connection with the enforcement of the terms and conditions of
this Agreement, or for the appointment of a receiver or any other proceedings
hereunder; provided that such direction shall be in accordance with
applicable law and this Agreement, and provided that the Trustee shall be
indemnified to its satisfaction. In the event of a disagreement between the
Bank and a Majority of the Bondholders in the exercise of their rights
hereunder, then so long as the Bonds are outstanding, the direction of a
Majority of the Bondholders shall be controlling.
Section 1105. Appointment of Receiver. Upon the occurrence and continuance of
an event of default and commencement of judicial proceedings to enforce the
rights of the Trustee and of the Bondholders and the Bank under this
Agreement, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the Trust Estate, pending such
proceedings, with such power as the court making such appointment shall
confer.
Section 1106. Application of Moneys. Upon the occurrence and continuance of
an event of default, there shall be deposited in the Bond Fund all moneys and
proceeds held or received by the Trustee or any receiver pursuant to this
Agreement or any related document or the exercise of any rights granted
hereby or thereby, except amounts drawn under the Letter of Credit, which
amounts shall be deposited in the Letter of Credit Fund, and all moneys
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in the Letter of Credit Fund shall be applied to the payment of interest
(including interest on overdue principal) on and principal of (and, during
the Fixed Rate Period, premium, if any, on) the Bonds, and all moneys in the
Bond Fund (except funds for which provision has been made under Section 507)
shall be applied after payment of all Costs of Collection incurred by the
Trustee or any receiver (i) to the payment of any amounts due as Additional
Payments under Section 1001B, (ii) then to the payment of interest, including
interest on overdue principal, then due on the Bonds, without regard to when
such interest became due, (iii) then to the payment of principal and premium,
if any, then due on the Bonds, without regard to when such principal became
due, and (iv) then to the payment of any Bank Obligations then remaining due;
or in such other order as may be determined by the Trustee with the written
consent of all of the Bondholders and, if the Issuer is affected thereby, the
written consent of the Issuer. Payments shall be made ratably, according to
the amounts due respectively for interest and principal and premium, if any,
among Bondholders entitled to receive the payment being made.
Section 1107. Remedies Vested in Trustee. All rights of action (including the
right to file proofs of claim) under this Agreement or under any of the Bonds
may be enforced by the Trustee without the possession of any of the Bonds or
their production in any proceeding; and any such proceeding instituted by the
Trustee shall be brought in its name, as Trustee, without the necessity of
joining as plaintiffs or defendants the Bank or any holders of the Bonds; and
any recovery of the judgment shall be for the benefit of the holders of the
outstanding Bonds, subject, however, to the provisions of this Agreement.
Section 1108. Rights and Remedies of Bank and Bondholders. Neither the Bank
nor any holder of any Bond shall have any right to institute any proceeding
for the enforcement of this Agreement or any right or remedy granted hereby
unless (i) an event of default is continuing, (ii) the Trustee has due notice
thereof and has been notified as provided in Section 1201(c), (iii) the Bank
or the holders of at least 25% in aggregate principal amount of Bonds then
outstanding shall have made written request to the Trustee and shall have
afforded the Trustee reasonable opportunity to exercise its powers or to
institute such proceeding in its own name, and have offered to the Trustee
indemnity satisfactory to it, and (iv) the Trustee shall have failed or
refused to exercise its power or to institute such proceeding. Such notice,
request and offer of indemnity shall at the option of the Trustee be
conditions precedent to the execution of the powers and trusts of this
Agreement, and to any action for the enforcement of this Agreement or of any
right or remedy granted hereby, it being understood and intended that neither
the Bank nor any one or more holders of the Bonds shall have any right to
affect or prejudice the lien of this Agreement by its or their action or to
enforce any right hereunder except in the manner herein provided and that
proceedings shall be
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instituted and maintained in the manner herein provided and for the benefit
of the Bank and the holders of the all Bonds then outstanding.
Notwithstanding the foregoing, each Bondholder shall have a right of action
to enforce the payment of the principal of and premium, if any, and interest
on any Bond held by it at and after the maturity thereof at the place, from
the sources and in the manner expressed in such Bond.
Section 1109. Waivers of Event of Default. The Trustee shall waive (in
advance or otherwise) any event of default of its consequences and rescind
any declaration of maturity of principal upon the written request of all of
the Bondholders (or, if the Bonds are no longer outstanding, the Bank) and,
with respect to any right of the Issuer to payment or reimbursement pursuant
to Section 1001B or 1008, the written consent of the Issuer, but no such
waiver (except as specifically provided therein) or rescission shall extend
to any subsequent or other event of default. Notwithstanding the foregoing,
the Trustee shall waive an event of default under Section 1101(e) and its
consequences and rescind any declaration of maturity of principal only upon
the express written consent of the Bank.
Section 1110. Intervention by Trustee. In any judicial proceeding which the
Trustee believes has a substantial bearing on the interests of the Bank or
the Bondholders, the Trustee may intervene on behalf of the Bank or the
Bondholders.
Section 1111. Remedies of Issuer on Event of Default. Upon the occurrence and
continuance of an event of default, the Issuer (i) shall, if requested by the
Trustee, confirm in writing any acceleration of Loan indebtedness, (ii) may,
upon the request of the Trustee, take such action in law or equity as may
appear desirable to collect any past due or accelerated Loan indebtedness or
other payments hereunder or to enforce compliance with any obligation or
agreement of the Borrower in this Agreement and (iii) shall have access to
and may examine and make copies of the books, accounts and other data and tax
returns of the Borrower insofar as they pertain to the Project or to the
Borrower's operation thereof. However, the Issuer shall not be required to
take any action which in its opinion might cause it to expend time or money
or otherwise incur any liability unless satisfactory indemnity has been
furnished to it. Anything in this Agreement to the contrary notwithstanding,
the Issuer may enforce its rights under Sections 1001B and 1008 of this
Agreement by any lawful available remedy.
PART VI: THE TRUSTEE
Article 12--The Trustee
Section 1201. Acceptance of Trusts. The Trustee agrees to perform the trusts
imposed upon it by this Agreement and agrees to perform such trusts as an
ordinarily prudent trustee, but only
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upon the terms and conditions contained herein and in Section 1008.
(a) The Trustee may execute any of its trusts or powers and perform any of
its duties through attorneys, agents, receivers or employees but shall be
answerable for their conduct in accordance with the above standard, except
that as attorneys, agents and receivers the Trustee shall be answerable only
as to the selection of same in accordance with said standards. The Trustee
shall be entitled to advice of counsel concerning all matters of trust duties
hereunder, and may pay reasonable compensation to all such attorneys, agents,
receivers, employees and counsel as may reasonably be employed.
(b) Any action taken by the Trustee pursuant to this Agreement upon the
request or 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 Bond shall
be conclusive and binding upon all future holders of such Bond.
(c) The Trustee shall not be required to take notice or be deemed to have
notice of any default hereunder, except defaults described in Section
1101(a), (b), (c) or (e), unless the Trustee shall be notified in writing of
such default by the Borrower, the Issuer, the Bank or by the holders of at
least 25% in aggregate principal amount of Bonds then outstanding. Until such
notice is received, the Trustee may conclusively assume there is no such
default.
(d) The Trustee shall not be required to give any bond or surety.
Section 1202. Fees and Expenses of Trustee. The Trustee shall be entitled to
reasonable fees for its services rendered hereunder and all advances, counsel
fees and other expenses reasonably made or incurred by the Trustee in
connection with such services. The Trustee shall be entitled to payment and
reimbursement, but only from the Additional Payments required to be made by
the Borrower hereunder or from the Pledged Receipts, for its reasonable fees
and expenses.
Section 1203. Successor Trustee. Any corporation or association into which
the Trustee may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer all or substantially all its trust
business and assets, and any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer, ipso facto, shall
be and become successor Trustee hereunder and vested with all the trusts,
powers, discretions, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act on the part of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that any such successor Trustee shall be
a
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trust company or bank in good standing having trust powers and located in the
State or in the Commonwealth of Massachusetts.
Section 1204. Resignation by Trustee; Removal. The Trustee may at any time
resign from the trusts hereby created by giving 30 days' written notice to
the Issuer, to the Borrower, to the Bank and to each Bondholder, but such
resignation shall not take effect until the appointment of a successor
Trustee and acceptance by the successor Trustee of such trusts. The Trustee
may be removed at any time by an instrument or concurrent instruments in
writing delivered to the Trustee and to the Issuer and signed by the holders
of a majority in aggregate principal amount of Bonds then outstanding or, if
the Bonds are no longer outstanding, the Bank.
Section 1205. Appointment of Successor Trustee. If the Trustee hereunder
shall resign or be removed, or be dissolved, or otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any
public officer or officers, or of a receiver appointed by a court, a
successor shall be appointed by the Borrower. At any time within one year
after any such vacancy shall have occurred, a Majority of the Bondholders or,
if the Bonds are no longer outstanding, the Bank may appoint a successor
Trustee by an instrument or concurrent instruments in writing signed by or on
behalf of such holders, which appointment shall supersede any Trustee
theretofore appointed by the Borrower. Each successor Trustee shall be a
trust company or bank in good standing having trust powers and located in the
State or in the Commonwealth of Massachusetts, having a reported capital and
surplus of not less than $25,000,000. Any such successor Trustee shall become
Trustee upon giving notice to the Borrower, the Issuer, the Bank and the
Bondholders, if any, of its acceptance of the appointment, vested with all
the property, rights and powers of the Trustee hereunder, without any further
act or conveyance. Any predecessor Trustee shall execute, deliver and record
and file such instruments as the Trustee may reasonably require to confirm or
perfect any such succession.
Section 1206. Dealing in Bonds. The Trustee and any of its directors,
officers, employees or agents may become the owners of any or all of the
Bonds secured hereby.
Section 1207. Depositary or Trustee as Bond Registrar; List of Bondholders.
Subject to the further provisions hereof, the Depositary is hereby designated
as bond registrar for the Bonds and, as such, will keep on file a list of
names and addresses of the holders of all Bonds; provided, however, that the
Bond Registrar shall be under no responsibility with regard to the accuracy
of the address of any Bondholder. At reasonable times and under reasonable
regulations established by the Bond Registrar, such list may be inspected and
copied by the Borrower or by owners (or a designated representative thereof)
of Bonds
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then outstanding, such ownership and the authority of any such designated
representative to be evidenced to the satisfaction of the Bond Registrar.
Following the earlier of the time at which FNBB ceases to be the Depositary
or the Conversion Date, the Trustee shall automatically be designated as Bond
Registrar, and shall be subject to the provisions of this Section 1207.
Section 1208. Successor Trustee as Custodian of Funds, Bond Registrar and
Paying Agent. In the event of a change in the office of Trustee, the
predecessor Trustee which has resigned or been removed shall cease to be
custodian of any funds it may hold pursuant to this Agreement, and, if
applicable, cease to be the bond registrar and Paying Agent for any of the
Bonds, and the successor trustee shall become such custodian, and if
applicable, bond registrar and Paying Agent.
Section 1209. Adoption of Authentication. In case any Bonds shall have been
authenticated but not delivered, any successor Bond Registrar may adopt the
certificate of authentication of the predecessor Bond Registrar and deliver
the Bonds as so authenticated.
Section 1210. Designation and Succession of Paying Agents. The Depositary is
hereby designated as Paying Agent for the Bonds for the purpose of purchasing
Bonds pursuant to Section 401(d) and making payments of interest during the
Variable Rate Period, which designation shall terminate upon the earliest to
occur of an Event of Default, the Conversion Date or the termination of FNBB
as Depositary. After 15 days' written notice to the Borrower and subject to
the Borrower's approval, the Trustee may designate any other banks or trust
companies as Paying Agents.
Any bank or trust company with or into which any Paying Agent other than the
Trustee may be merged or consolidated, or to which the assets and business of
such Paying Agent may be sold, shall be deemed the successor of such Paying
Agent for the purposes of this Agreement. If the position of such Paying
Agent shall become vacant for any reason, the Trustee shall, within 30 days
thereafter, appoint a bank or trust company located in the same state as such
Paying Agent to fill such vacancy.
The Paying Agents shall enjoy the same protective provisions in the
performance of their duties hereunder as are specified in Section 1201 with
respect to the Trustee, insofar as such provisions may be applicable.
PART VII: AMENDMENTS AND WAIVERS; MISCELLANEOUS
Article 13--Amendments and Waivers
Section 1301. Amendments Not Requiring Consent of Bondholders. The parties
may without the consent of, or notice to, any of the Bondholders, enter into
amendments, modifications and supplements
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Page 55
to this Agreement and financing statements or other instruments evidencing
the existence of a lien as shall not, in their opinion, be inconsistent with
the terms and provisions hereof for any one or more of the following purposes:
(a) To cure any ambiguity, inconsistency or formal defect or omission in this
Agreement;
(b) To grant to or confer upon the Trustee for the benefit of the Bondholders
and the Bank any additional rights, remedies, powers, or authority that may
lawfully be granted to or conferred upon the Bondholders, the Bank or the
Trustee;
(c) To subject to the lien and pledge of this Agreement additional revenues,
properties or collateral;
(d) To evidence any succession to the Issuer and the assumption by such
successor of the agreements of the Issuer contained in this Agreement and the
Bonds;
(e) To the extent required by law, to permit registration of the Bonds under
the federal Securities Act of 1933, as amended, and the federal Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to permit
qualification of the Agreement under the Trust Indenture Act; and
(f) To provide for uncertificated Bonds or, to the extent permitted by law,
for the issuance of coupons and bearer Bonds or Bonds registered only as to
principal without causing interest on such Bonds to be subject to federal
income taxation;
(g) To effect any other change herein which, in the judgment of the Trustee
and the Bank, is not to the prejudice of the holders of the Bonds.
Section 1302. Amendments Requiring Consent of Bondholders. In addition to
amendments, modifications and supplements permitted by Section 1301, a
Majority of the Bondholders shall have the right, from time to time, to
consent to and approve the execution by the parties hereto of such other
amendments, modifications or supplements hereto for the purpose of modifying,
altering, amending, adding to or rescinding, in any particular, any of the
terms or provisions contained in this Agreement; provided, however, that
nothing in this Section contained shall permit (a) an extension of the stated
maturity of the principal of or the interest on any Bond without the consent
of the holder of such Bond; (b) a reduction in the principal amount of any
Bond, the rate of interest thereon or the premium to be paid upon the
prepayment thereof prior to maturity without the consent of the holder of
such Bond; (c) the establishment of a privilege or priority of any Bond or
Bonds over any other Bond or Bonds without the consent of all the
Bondholders; (d) a reduction in the aggregate principal amount of Bonds the
holders of which are
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required to consent to any such amendment, modification or supplement without
the consent of the holders of all the Bonds at the time outstanding which
would be affected by the action to be taken; (e) a modification of the
rights, duties or immunities of the Issuer, the Trustee or the Bank without
the written consent of the affected party and all the Bondholders; (f) any
amendment of the provisions of this Agreement pertaining to the drawing and
application of proceeds of the Letter of Credit or the definition or
application of Priority Funds without the consent of the holders of all the
Bonds outstanding; or (g) any modification, amendment or revocation of the
Letter of Credit without the consent of the holders of all of the Bonds
secured thereby.
If at any time the Issuer shall request the Trustee to enter into any
amendment, modification or supplement pursuant to this Section, the Trustee
shall, upon being satisfactorily indemnified with respect to expenses, cause
notice of the proposed execution to be made in the manner required for
redemptions of principal of Bonds pursuant to Section 402; provided, however,
that failure to give such notice, or any defect therein, shall not affect the
validity of the proceedings.
Such notice shall briefly set forth the nature of the proposed amendment,
modification or supplement and shall state that copies thereof are on file at
the Principal Office of the Trustee for inspection by all Bondholders. Except
as otherwise provided in this Section 1302, if, within 60 days or such longer
period (not to exceed two years) as shall be prescribed by the Issuer
following the final mailing of such notice, not less than a Majority of the
Bondholders at the time of the execution of any such amendment, modification
or supplement, shall have consented to and approved the execution thereof, no
holder of any Bond shall have any right to object to any of the terms and
provisions contained therein, or the operation thereof, or in any manner to
question the propriety of the execution thereof, or to enjoin or restrain the
Trustee or the Issuer from executing the same or from taking any action
pursuant to the provisions thereof. Upon the execution of any such amendment,
modification or supplement as in this Section permitted and provided, this
Agreement shall be and be deemed to be amended, modified or supplemented in
accordance therewith.
Section 1303. Opinion of Counsel. The Trustee shall be entitled to receive,
and shall be fully protected in relying upon, the opinion of any counsel
approved by it, who may be counsel for the Issuer or the Bank, as conclusive
evidence that any such proposed amendment, modification or supplement
complies with the provisions of this Agreement and that it is proper for the
Trustee, under the provisions of this Article, to join in the execution of
such amendment, modification or supplement.
Section 1304. Consent of Bank; Amendments to Letter of Credit. Anything
herein to the contrary notwithstanding, an amendment,
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Page 57
modification or supplement under this Article shall not become effective
unless and until the Bank shall have consented in writing to the execution
and delivery of such amendment, modification or supplement. The Letter of
Credit may not be amended (other than to extend the expiration date thereof)
without the consent of the holders of all of the Bonds secured thereby.
Subject to the foregoing sentence, the Reimbursement Agreement may be amended
without notice to or consent of any Person other than the Borrower.
Section 1305. Modification by Unanimous Consent. Notwithstanding anything
contained elsewhere in this Agreement, the rights and obligations of the
Issuer and of the holders of the Bonds, and the terms and provisions of the
Bonds and this Agreement or any amendment, modification, or supplement
hereto, may be modified or altered in any respect with the consent of the
Borrower, the Issuer, the Trustee, the holders of all of the Bonds then
outstanding and the Bank.
Article 14--Miscellaneous
Section 1401. Consents, etc., of Bondholders. Any consent, request,
direction, approval, objection or other instrument required by this Agreement
to be executed by the Bondholders may be in any number of concurrent writings
of similar tenor and may be executed by such Bondholders in person or by
agent appointed in writing.
Section 1402. Limitation of Rights. With the exception of rights herein
expressly conferred, nothing expressed or implied from this Agreement or the
Bonds shall give to any Persons other than the parties hereto and the holders
of the Bonds any right or remedy with respect to this Agreement. This
Agreement and all of the covenants, conditions and provisions hereof are for
the sole and exclusive benefit of the parties hereto and the holders of the
Bonds as herein provided.
Section 1403. Severability. In the event that any provision of this Agreement
shall be held to be invalid in any circumstance, such invalidity shall not
affect any other provision or circumstance.
Section 1404. Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and except as provided in Section
1201(c) hereof shall be deemed given when mailed by registered or certified
mail, postage prepaid, or sent by telegram addressed to the appropriate
Notice Address, with a copy to each other party hereto.
Section 1405. Payments Due on Saturdays, Sundays and Holidays. In any case
where a Payment Date is a Saturday or Sunday or a day on which the Trustee is
required, or authorized or not prohibited, by law (including executive
orders) to close and is
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closed, then payment of interest or principal and any premium due on such day
need not be made by the Trustee on such date but may be made on the next
succeeding business day on which the Trustee is open for business with the
same force and effect as if made on the Payment Date.
Section 1406. Extent of Covenants; No Personal Liability. No covenant,
stipulation, obligation or agreement of the Issuer contained in this
Agreement shall be deemed to be a covenant, stipulation, obligation or
agreement of any present or future director, officer, employee or agent of
the Issuer in his individual capacity; and no such person (including any such
person executing the Bonds) shall be liable personally on the Bonds or be
subject to any personal liability by reason of their issuance.
No shareholder, director, officer or employee of the [ ] Borrower for the
satisfaction of any obligation of the Borrower hereunder.
Section 1407. Bonds Owned by Issuer, Borrower or Bank. In determining whether
Bondholders of the requisite aggregate principal amount of the Bonds have
concurred in any direction, consent or waiver under this Agreement, Bonds
which are owned by the Issuer, the Borrower, the Bank or any Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Borrower (unless the Issuer, the Borrower, the Bank or such
Person owns all Bonds which are then outstanding determined without regard to
this Section 1407) shall be disregarded and deemed not to be outstanding for
the purpose of any such determination, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Bonds which the Trustee knows are so owned
shall be so disregarded. Bonds so owned which have been pledged in good faith
(except under the Standby Credit Agreement) may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Bonds and that the pledgee is not the
Issuer, the Borrower, the Bank or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Borrower (unless such pledgee owns all Bonds which are then outstanding,
determined without regard to this Section 1407). In case of a dispute as to
such right, any decision by the Trustee taken in good faith upon the advice
of counsel shall be full protection to the Trustee in accordance with its
standards of performance hereunder.
Section 1408. Captions; Index. The captions, headings and index in this
Agreement are for convenience only and in no way define or describe the scope
or content of any provision of this Agreement.
Section 1409. Counterparts. This Agreement may be executed in
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several counterparts, each of which shall be an original and all of which
shall constitute but one and the same Agreement.
Section 1410. Governing Law; Sealed Instrument. The validity and
interpretation of this Agreement and the Bonds shall be governed by the laws
of the State of Vermont. It is intended that this Agreement shall have the
effect of a sealed instrument.
Section 1411. Agreements to Constitute Covenants. Words of agreement and
promises shall also Constitute covenants.
IN WITNESS WHEREOF, each of the Borrower, the Issuer and the Bank has caused
this Agreement to be executed and delivered in its name and behalf by its
authorized officers and to evidence its acceptance of the trusts hereby
created, the Trustee has caused this Agreement to be executed in its name and
behalf by its authorized officer, all as of the date appearing on page 1.
State of Vermont, acting by
and through The Vermont
Industrial Development Authority
By--------------------------
Chairman/Vice Chairman
Mount Snow Ltd.
By--------------------------
[Title]
Proctor Bank as Trustee
By--------------------------
[Title]
The First National Bank of Boston
By--------------------------
Vice President
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EXHIBIT 301
FORM OF BOND
The form of the Bonds is, for the sake of convenience, shown as a single,
fully registered Bond. Appropriate and necessary changes should be made in
any Bond or Bonds subsequently issued.
UNITED STATES OF AMERICA
STATE OF VERMONT
VERMONT INDUSTRIAL DEVELOPMENT AUTHORITY
FLOATING/FIXED RATE INDUSTRIAL REVENUE BOND
(MOUNT SNOW LTD. ISSUE--1984 SERIES)
No. 1 R- $
THIS BOND IS NOT A GENERAL OBLIGATION OF THE VERMONT INDUSTRIAL DEVELOPMENT
AUTHORITY NOR A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF
VERMONT, BUT IS PAYABLE SOLELY FROM THE REVENUES PLEDGED FOR ITS PAYMENT IN
ACCORDANCE WITH THE LOAN AND SECURITY AGREEMENT REFERRED TO BELOW.
1. Payment Provisions. The State of Vermont, acting and through the Vermont
Industrial Development Authority (the "Issuer"), for value received, promises
to pay to , or registered assigns or legal representatives (but only from
the limited sources and in the manner hereinafter described), on April 1,
1999 the principal sum of ( ) Dollars and except as provided below,
interest from the date of delivery of this Bond at the rates, and payable on
the dates, set forth below on the unpaid principal amount outstanding from
time to time.
The final payment of principal and premium, if any, and interest shall be
payable at the principal office of the Paying Agent (as defined in the
Agreement) upon surrender of this Bond, and other payments (except as
otherwise provided herein) shall be payable by wire transfer in immediately
available funds by the Paying Agent to the registered owner of this Bond at
the account designated by the registered owner to the Paying Agent, as of the
close of business on the Record Date, which when used herein shall mean (a)
with respect to any Variable Period Interest Payment Date (as hereinafter
defined), the first day next preceding such Variable Period Interest Payment
Date (or the next business day if such Wednesday is not a business day), or
(b) with respect to any Fixed Period Interest Payment Date (as hereinafter
defined), the fifteenth day of the month next preceding such Fixed Period
Interest Payment Date, or, if such day shall not be a business day, the next
preceding business day.
Principal and premium, if any, and interest are payable in lawful money of
the United States of America.
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Page 61
(a) Variable Rate Period. This Bond shall bear interest from and including
the date hereof (except as herein provided) until payment of the principal
hereof shall have been made or provided for in accordance with the provisions
hereof and of the Agreement (hereinafter defined) whether at maturity, upon
redemption or otherwise. Prior to the date on which Mount Snow, Ltd., a
Vermont corporation (the "Borrower") elects to exercise its option under the
Agreement to convert the interest rate hereon to a fixed rate as hereinbelow
described (the "Conversion Date"), this Bond shall bear interest at a rate
(the "Variable Rate") equal to the lesser of (a) 15% per annum and (b) a
floating rate established as herein provided. Except as provided in the
second paragraph hereof, the floating rate shall be equal to ARBI plus a
fixed interest component ("FIC") equal to one-quarter of one percent (1/4 of
1%), provided that:
(i) if the Depositary (as defined in the Agreement) shall have received a
notice requiring the redemption of any Bonds as described in the Agreement
and if the Remarketing Agent shall remarket all or a portion of such Bonds
pursuant to the Remarketing Agreement (as defined in the Agreement), the
floating rate of interest for all Bonds shall be equal to the sum of (A)
ARBI, plus (B) the FIC, plus (C) if required to enable the Remarketing Agent
to remarket such tendered Bonds at par plus accrued interest, an additional
interest component ("AIC") determined as hereinafter provided. The AIC shall
be equal to that percentage of interest, determined by the Remarketing Agent
in connection with any remarketing effort and expressed in increments of
1/8th of 1% per annum, which when added to the sum of ARBI plus the FIC at
the time applicable to the Bonds, will produce the interest rate per annum
necessary to enable the Remarketing Agent to remarket such Bonds at par plus
accrued interest. The AIC shall become effective with respect to all Bonds as
of the date of issue of the remarketed Bonds, unless such date occurs after
the last Wednesday of a Variable Rate Interest Period (as defined in the
Agreement), in which case such AIC shall become effective as of the first
Wednesday of the next Variable Rate Interest Period; and
(ii) if an AIC is added to the floating rate pursuant to the preceding clause
(i), such AIC shall remain in effect until the end of the Variable Rate
Interest Period following the Variable Rate Interest Period in which the
Bonds were remarketed (except as provided in clause (iii) below), until a
further adjustment to the floating rate is made pursuant to the preceding
clause (i) or until the interest rate on the Bonds is otherwise determined as
provided in this Agreement; and
(iii) if the Remarketing Agent shall have advised the Borrower, the Issuer,
the Trustee and each Bondholder not less than seven days prior to the first
Wednesday of any Variable Rate Interest Period that the discontinuance of the
AIC would result in the
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Page 62
Bonds bearing interest at a rate different from the interest rate per annum
necessary to enable the Remarketing Agent to remarket the Bonds at par plus
accrued interest, the floating rate shall be equal to the floating rate as
last adjusted pursuant to the preceding clause (i) until such time as the
floating rate may again be adjusted pursuant to such clause (i) or until the
interest rate on the Bonds is otherwise determined as provided for in this
Agreement.
In the event that FNBB discontinues the announcement of ARBI, the floating
rate shall be equal to the annual rate of interest, expressed as a percentage
of the average yield evaluations at par for the preceding week of United
States Treasury obligations having a maturity of 91 days, which is determined
by the Remarketing Agent as necessary to remarket the Bonds at par plus
accrued interest, and which shall be announced by the Remarketing Agent to
the Trustee, the Issuer, the Depositary and the Borrower on Wednesday of each
week, beginning on the first such Wednesday following the discontinuance of
ARBI. Such floating rate shall be effective from and including the next
Wednesday after it is announced to and including the following Tuesday.
"ARBI" means the rate calculated as a percentage (the "ARBI Percent") of the
FNBB Base Rate, which is announced by FNBB from time to time, as the annual
rate of interest which, in FNBB's sole judgment, will result in the minimum
yield attainable on tax-exempt adjustable-rate bonds supported by FNBB's
Letter of Credit or a Substitute Credit Facility (as defined in the
Agreement). ARBI shall change as and when the FNBB Base Rate changes,
provided that (a) ARBI shall not be lower on any day during any Variable Rate
Interest Period than on the first Wednesday of such Interest Period, and (b)
changes in the FNBB Base Rate of which the Trustee is given notice after the
last Wednesday in any Variable Rate Interest Period shall become effective on
the first Wednesday of the next succeeding Variable Rate Interest Period.
Changes in ARBI which result from a change in the ARBI Percent shall become
effective with respect to a Variable Rate Interest Period only if the Trustee
and each Bondholder is given notice of such change in the ARBI Percent at
least seven days prior to the first Wednesday of such Variable Rate Interest
Period. Changes in the FNBB Base Rate and ARBI Percent shall be communicated
by the Bank to the Trustee, the Depositary and the Remarketing Agent promptly
after they are announced [ ] in accordance with the Agreement (each such
date being herein referred to as a "Fixed Period Interest Payment Date").
Notwithstanding anything herein contained to the contrary, the interest rate
on this Bond shall be established at a fixed rate (the "Fixed Rate") upon the
election by the Borrower to exercise its Option to Convert (as hereinafter
defined) on such date which is a business day as the Borrower shall select,
subject to the terms and conditions of the 7 48 Agreement. Following such
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Page 63
election, the Bond Registrar shall endorse this Bond with the amount and the
effective date of the Fixed Rate. The Fixed Rate will be the rate of interest
certified to the Borrower, the Issuer, the Depositary and the Trustee by the
Remarketing Agent no fewer than three Business Days prior to the Conversion Date
as the minimum rate of interest which, in the opinion of the Remarketing Agent,
is necessary to sell the Bonds in a secondary sale (by private placement, so
long as the Remarketing Agent shall be an entity not allowed to the sell the
Bonds publicly) on the Conversion Date at a price equal to 100% of the
outstanding principal amount thereof; provided, however, that such rate of
interest shall not be less than 75% nor more than 125% of an index computed as
hereinafter described (the "Fixed Interest Index") as of the Computation Date
(as hereinafter defined). The Fixed Interest Index shall mean the interest rate
index, determined by the Remarketing Agent and announced to the Trustee, the
Issuer, the Depositary and the Borrower from time to time, based upon yield
evaluations at par (on the basis of a term approximately equal to the time
remaining until the maturity of the Bonds) of not less than ten (10) component
issuers of comparable credit quality selected by the Remarketing Agent which may
include, without limitation, issuers of general obligations bonds and industrial
development revenue bonds and other limited and special obligation bonds, the
interest on which is exempt from federal income taxation. In the event the
Letter of Credit (hereinafter defined) remains outstanding and available on and
after the Conversion Date or a Substitute Credit Facility is issued and
available on and after such date, the component issuers are required to be of
the same rating category as shall then be assigned to the Bonds (or, if the
Bonds are not rated, the long-term obligations of the issuer of the Letter of
Credit or such Substitute Credit Facility, as the case may be) by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"). In
the event the Letter of Credit will not remain outstanding and available on and
after the Conversion Date and no Substitute Credit Facility will be issued and
available on and after the Conversion Date, then the component issuers shall be
of the same credit quality as the Borrower in the judgment of the Remarketing
Agent. The specific issuers included in the component issuers may be changed
from time to time by the Remarketing Agent in its discretion. In the event the
Fixed Interest Index cannot be determined by the aforementioned method, such
Index will be equal to 95% of the most recent Bond Buyer Revenue Bond Index;
provided that if the Bond Buyer Revenue Bond Index is no longer published, then
such Index will be equal to 90% of the average of the yield evaluations at par
of the United States Treasury obligations having a term to maturity within one
year of the remaining time to maturity of the Bonds as computed by the
Remarketing Agent; and provided further that if such Index cannot be determined
by any of such methods, then it will be equal to 15%.
(c) Option to Convert. The Borrower may exercise its right to
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convert to a fixed rate (the "Option to Convert") at any time by giving
written notice to the Issuer, the Trustee and the LOC Bank (hereinafter
defined) stating (i) its election to convert to the Fixed Rate, which notice
shall specify the date as of which the Fixed Interest Index shall be computed
(the "Computation Date") (which date shall not be more than five business
days from the date of such notice), (ii) the Conversion Date, which date
shall not be less than 20 nor more than 60 days from the date the Borrower
gives such notice, (iii) whether the Letter of Credit has been extended and
the terms thereof, or whether a Substitute Credit Facility has been obtained
and the terms thereof, (iv) a debt service schedule for the Bonds and (v) a
form of notice of redemption satisfying the requirements of the Agreement and
containing all the information required to be included in such notice. Such
notice shall be accompanied by an opinion of Bond Counsel stating that the
establishment of the Fixed Rate and the purchase and resale of the Bonds in
connection therewith are authorized and permitted by the Agreement and the
Act, have been approved by the Issuer, if required (a certified copy of which
approval shall be attached) and will not have an adverse effect on the
exemption from federal income tax of interest on the Bonds.
The Borrower has caused the Letter of Credit to be delivered to the Trustee
pursuant to the requirements of the Agreement, which permits a substitution of a
Substitute Credit Facility if the Borrower shall furnish to the Trustee (i) an
opinion of Bond Counsel stating that the delivery of such Substitute Credit
Facility to the Trustee is authorized under the Agreement and complies with the
terms thereof, (ii) an opinion of counsel in form and substance reasonably
satisfactory to the Trustee (and substantially similar in content with respect
to the Substitute Credit Facility as those opinions originally rendered with
respect to the Letter of Credit in connection with the original issuance of the
Bonds) to the effect that the Substitute Credit Facility is the valid, binding
and enforceable obligation of the bank or other institution issuing it and that
payments on the bonds out of the proceeds of a drawing on the Substitute Credit
Facility will not constitute voidable preferences under the federal Bankruptcy
Code or other applicable laws and regulations and (iii) written evidence from
Moody's, if this Bond is rated by such rating agency, and S&P, if this Bond is
rated by such rating agency, in each case to the effect that such rating agency
has reviewed the proposed Substitute Credit Facility and that the substitution
of the proposed Substitute Credit Facility for the Letter of Credit will not, by
itself, result in a reduction of its rating of this Bond from that which then
prevails. The Borrower, at its election, may, with the consent of the LOC Bank,
extend the Letter of Credit or may provide another credit facility for the
period after the expiration of the Letter of Credit.
2. Effect of Determination of Taxability. Upon a determination
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that the interest on any Bond is subject to federal income taxation for any
reason other than that such Bond is or was held for any period by a
"substantial user" of the Project or a "related person" within the meaning of
Section 103(b)(13) of the Internal Revenue Code of 1954, as amended, the
Bonds shall be redeemed by the Issuer (but only from the limited sources and
in the manner hereinafter described), prior to stated maturity, in whole,
upon the occurrence of a Determination of Taxability. The redemption price
for the Bonds to be redeemed in such event shall be equal to the sum of the
outstanding principal amount thereof during the Variable Rate Period, and
103% of the principal amount thereof during the Fixed Rate Period, in each
case plus accrued and unpaid interest thereon to the redemption date, at the
Variable Rate or the Fixed Rate, as the case may be.
"Determination of Taxability" means a determination that the interest income
on any of the Bonds does not qualify as exempt interest under Section 103 of the
Internal Revenue Code of 1954, as amended ("exempt interest"), for a reason
other than that a Bondholder is a "substantial user" of the Project or a
"related person" of the Borrower within the meaning of Section 103(b)(13) of
said Code, which determination shall be deemed to have been made upon the
occurrence of the first to occur of the following:
(a) the date on which the Trustee receives an opinion of Bond Counsel that
the interest income on any of the Bonds does not qualify as exemp interest; or
(b) the date on which any change in law or regulation becomes effective or
on which the Internal Revenue Service issues any private ruling, technical
advice or any other written communication with or to the effect that the
interest income on any of the Bonds does not qualify as exempt interest; or
(c) the date on which the Borrower shall receive notice from he Trustee in
writing that the Trustee has been advised by any holder of any Bonds that the
Internal Revenue Service has issued a thirty-day letter or other notice which
asserts that the interest on such Bonds does not qualify as exempt interest.
Any such redemption shall be made not more than 30 days after the
Determination of Taxability. Any Determination of Taxability shall be conclusive
as to the Issuer, the Borrower and any registered owner or former registered
owner of this Bond.
3. Description of Bond Issue. This Bond is one of an issue of $2,130,000
industrial revenue bonds (the "Bonds") issued under a Loan and Security
Agreement dated as of October 1, 1984 (together with any modifications,
amendments or supplements, the "Agreement") among the Borrower, the Issuer,
Proctor Bank, as Trustee (the "Trustee", which term includes any successor in
said trust), and The First National Bank of Boston ("FNBB" or the "Bank"). The
proceeds of the Bonds will be loaned (the "Loan")
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by the Issuer to the Borrower under the Agreement to finance costs of
acquiring, improving and equipping industrial facilities (the "Project"),
including costs incidental thereto and to the financing thereof, for use by
the Borrower within the Town of Dover, Vermont (the "Municipality") in order
to expansion of an industrial enterprise in the Municipality and thereby
provide for industrial development and employee opportunities. The Bonds are
issued pursuant to and in full compliance with the Constitution and laws of
the State of Vermont and pursuant to Chapter 12 of the Vermont Statutes
Annotated and resolutions duly adopted by the members of the Issuer, which
resolutions also authorize the execution and delivery of the Agreement. Loan
payments sufficient for the prompt payment when due of the principal of,
premium, if any, and interest on the Bonds are to be paid by the Borrower to
the Trustee for the account of the Issuer and deposited in the Bond Fund
established by the Agreement and have been duly pledged for that purpose.
Principal of and interest on the Bonds are further secured by moneys which
may be drawn by the Trustee under an irrevocable letter of credit issued by
the Bank to the Trustee (or any substituted letter of credit issued in
accordance with Section 509 of the Agreement) to the extent and in the manner
provided therein. References herein to the "Letter of Credit" shall mean said
letter of credit issued by the Bank, or a substituted letter of credit,
whichever is then in effect, and references herein to the "LOC Bank" shall
mean The First National Bank of Boston, or, where appropriate, the issuer of
a substituted letter of credit. The Letter of Credit has been issued under a
Reimbursement Agreement dated as of October 1, 1984 (the "Reimbursement
Agreement") between the Borrower and the LOC Bank, and as security for the
performance by the Borrower of its obligations under the said Reimbursement
Agreement to reimburse the LOC Bank with respect to any drawing upon the
Letter of Credit, the Borrower has also granted to the LOC Bank a mortgage on
and security interest in certain of its properties. Such obligations are also
secured by a Guaranty of even date (the "Guaranty") by Sherburne Corporation,
the parent of the Borrower (the "Guarantor"). In connection with the
Guarantor's guaranty of the obligations to the LOC Bank, the Guarantor has
granted to the LOC Bank a mortgage on and security interest in certain of its
properties.
The Trustee is entitled under the Letter of Credit (which is scheduled to
expire 105 days after April 1, 1991, but may be extended, renewed or replaced by
a substitute Letter of Credit, on or before such date) upon the occurrence of an
event of default under the Agreement to draw up to (a) the aggregate principal
amount of the Bonds then outstanding to pay the principal of the Bonds, and (b)
an amount equal to up to 135 days' interest accrued on the Bonds on or prior to
the maturity thereof, during the period the Bonds bear interest at a variable
rate as herein provided (the "Variable Rate Period") and up to
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285 days' interest accrued on the Bonds on or prior to the maturity thereof,
during the period the Bonds bear interest at a fixed rate as herein provided
(the "Fixed Rate Period")(at the maximum rate of interest thereon permitted
under the Agreement).
The Bonds are to be equally and ratably secured and entitled to the
protection given by the Agreement and the Letter of Credit or any Substitute
Credit Facility. Reference is hereby made to such documents for a description of
the nature and the extent of the security for the Bonds, the rights, duties and
obligations and immunities of the Issuer, the Trustee and the holders of the
Bonds and the terms upon which the Bonds are or may be issued and secured.
4. Exchange and Transfer. This Bond is exchangeable for fully registered
bonds in denominations of $100,000 or integral multiples of $5,000 in excess of
$100,000 during the Variable Rate Period and $5,000 during the Fixed Rate
Period, as provided in the Agreement.
This Bond is transferable on the Bond register upon its surrender at the
principal office of the Bond Registrar, accompanied by a written instrument of
transfer in form satisfactory to the Bond Registrar, duly executed by the
registered owner of its attorney or legal representative, for notation by the
Bond Registrar indicating the name of the transferee, the date to which interest
has been paid, and the balance of principal due hereon. The Issuer and the Bond
Registrar may treat the person in whose name this Bond is registered as the
absolute owner hereof for all purposes and shall not be affected by any notices
to the contrary.
5. Redemption. Principal of the Bonds is subject to redemption as follows:
(a) Optional Redemption. The Bonds may be called for redemption on or prior
to the Conversion Date, as provided by Section 401(a) of the Agreement, by the
Issuer at the direction of the Borrower (but only from the limited sources and
in the manner hereinabove described) in whole or in part, from time to time on
any Variable Period Interest Payment Date, beginning on the first such date
which occurs more than six months after the date of issuance of his Bonds, at a
redemption price equal to the principal amount thereof together with accrued
interest thereon to the Variable Period Interest Payment Date fixed for
redemption.
The Bonds may be called for redemption beginning on the fifth anniversary of
the Conversion Date, as provided by Section 401(a) of the Agreement, by the
Issuer at the direction of the Borrower (but only from the limited sources and
in the manner hereinabove described) at any time in whole or in part, from time
to time on any Fixed Period Interest Payment Date, at a redemption price equal
to the principal of and accrued interest on the Bonds to
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the date fixed for redemption plus a premium equal to 3% in the first year
the Bonds are so subject to redemption, declining 0.50% per year thereafter
until the premium equals zero.
(b) Extraordinary Redemption. Principal of the Bonds shall be redeemed in
whole but not in part by the Issuer (but only from the limited sources and in
the manner hereinbelow described), at the option and direction of the Borrower,
on any date at a redemption price of 100% of the principal amount redeemed, plus
accrued interest to the redemption date, if any of the following events shall
have occurred:
(i) The Project or any production facility served thereby shall have been
damaged or destroyed to such extent that, in the opinion of the Borrower, the
Project cannot be reasonably restored within a period of six months from the
date of such damage or destruction, or the Borrower is thereby prevented from
carrying on its normal operation of the Project for a period of six months from
the date of such damage or destruction; or
(ii) Title to or the temporary use of all or substantially all of the
Project or any production facility served thereby shall have been taken or
condemned by a competent authority, which taking or condemnation results or is
likely to result in the Borrower being thereby prevented from carrying on its
normal operation of the Project for a period of six months; or
(iii) As a result of changes in the Constitution of the United States of
America or of the State of Vermont or of legislative or administrative action
(whether state or federal) or by final decree or judgment of any court or
administrative body (whether state or federal), the Bonds or the Agreement
become void or unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed therein or unreasonable burdens
or excessive liabilities are imposed upon the Borrower, by reason of the
operation of the Project.
To exercise its option pursuant to subparagraph (b) above the Borrower shall
give notice of its intention to redeem to the Issuer and the Trustee within
six months after the occurrence of an event described above. The notice shall
refer to the applicable section of this paragraph, describe and give the date
of such event and direct the redemption of all outstanding Bonds on a
specified date which shall not be earlier than 30 days following the date of
such notice.
(c) Mandatory Redemption. Principal of the Bonds shall be redeemed without
premium from funds deposited in the Bond Fund pursuant to Section 501B of the
Agreement to the extent, in the manner and at the times provided for therein at
100% of the principal amount redeemed in whole and not in part, plus accrued
interest to the redemption date. The Bonds shall be redeemed, as provided in
paragraph 2 above, upon a Determination of
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Taxability.
(d) Tender for Redemption or Purchase upon Election of Bondholder. As
provided in Section 401(d) of the Agreement, on or prior to the Conversion
Date this Bond shall be redeemed by the Issuer, on the demand of the
registered owner hereof (but only from the limited sources and in the manner
hereinabove described) on any business day at a redemption price equal to the
principal amount hereof plus accrued interest, if any, to date of redemption
upon:
(x) delivery to the Depositary at its principal office of a written notice
(which shall include a telex confirmed in writing within 24 hours) in the form
of such notice appended hereto at the time of issuance of this Bond (a
"Bondholder's Election Notice") which (i) states the principal amount of this
Bond, (ii) states the date on which this Bond shall be redeemed, which date
shall be a business day not prior to the seventh day next succeeding the date of
the delivery of such notice to the Depositary, (iii) irrevocably requests such
redemption, and (iv) contains an undertaking of the registered owner hereof to
deliver this Bond to The First National Bank of Boston, as depositary (the
"Depositary") or its agent, as provided in paragraph (y) below; and
(y) delivery of this Bond duly endorsed in blank for transfer at the office
of the Depositary or its agent designated in the Bondholder's Election Notice at
or prior to 10:00 A.M., Boston time, on the date for redemption specified in the
notice given pursuant to paragraph (x) above, together with a due-bill check for
accrued interest if such day be after the Record Date for the Variable Period
Interest Payment Date next succeeding the date of such notice to the Trustee and
prior to such Interest Payment Date; provided, however, that this Bond shall be
so redeemed only if the bond delivered to the Depositary shall conform in all
respects to the description thereof in the Bondholder's Election Notice.
If the Bondholder fails to deliver its Bond in accordance with clause (y)
above, such Bond shall cease to be Outstanding for purposes of the Agreement,
and the provisions of Section 507 shall apply, immediately upon the deposit with
the Trustee of funds sufficient to pay principal of and interest on such Bond.
Such Bond shall cease to bear interest on the specified redemption date. By the
acceptance of this Bond, the registered owner hereof agrees that if there are
funds available for such purpose in the Bond Purchase Fund established with the
Depositary under the Depositary Agreement dated as of October 1, 1984 among the
Trustee, the Borrower and the Depositary, then any Bond tendered to the
Depositary for redemption as provided in the preceding paragraph shall be, on
the date specified in the Bondholder's Election Notice, purchased and not
redeemed at a purchase price equal to the principal amount thereof plus accrued
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Page 70
interest, if any, to the date of purchase; provided, however, that if the
purchase date for any Bond is an Interest Payment Date, the purchase price
thereof shall be the principal amount thereof and interest on such Bond shall
be paid to the registered owner of such Bond in the normal course.
Prior to the Conversion Date any redemption, either as a whole or in part,
other than a redemption at the demand of a registered owner hereof, shall be
made upon notice given by mail at least thirty (30) days prior to the date
fixed for redemption pursuant to Section 401(a) of the Loan and Security
Agreement, and at least ten (10) days prior to the date fixed for redemption
pursuant to any other Section to the owners of Bonds to be redeemed;
provided, however, that, after the Conversion Date, failure duly to give such
notice by mail to any Bondholder, or any defect therein, shall not affect the
validity of the proceedings for such redemption. On the date designated for
redemption, notice having been given as provided in the Agreement, the Bonds
or portions thereof so called for redemption shall become and be due and
payable at the redemption price provided for redemption of such Bonds or such
portions thereof on such date, and, if moneys for payment of the redemption
price and the accrued interest shall be held by the Trustee or any paying
agent, all as provided in the Agreement, interest on such Bonds or such
portions thereof so called for redemption shall cease to accrue, such Bonds
or such portions thereof so called for redemption shall cease to be entitled
to any benefit or security for redemption under the Agreement, and the owners
thereof shall have no rights in respect of such Bonds or such portions
thereof so called for redemption except to receive payment of the redemption
price thereof and the accrued interest so held by the Trustee or by any
paying agent. If a portion of this Bond shall be called for redemption, a new
registered Bond without coupons in principal amount equal to the unredeemed
portion hereof will be issued to the registered owner upon the surrender
hereof.
(e) Tender for Redemption or Purchase upon Expiration of Letter of Credit or
Occurrence of Conversion Date. As provided in Section 401(e) of the
Agreement, this Bond shall be redeemed by the Issuer or purchased in
accordance with the terms of the Depositary Agreement at a price equal to the
principal amount thereof plus accrued interesb to the redemption date on the
Interest Payment Date next preceding the date of expiration of the Letter of
Credit unless such date of expiration is the Conversion Date, in which case
such redemption shall take place on the Conversion Date even if the Letter of
Credit has not expired or been terminated. No redemption shall take place
with respect to Bonds purchased by the Borrower's designee in accordance with
the Agreement.
By acceptance of this Bond, the registered owner hereof agrees that any
Bonds called for redemption pursuant to Section 401(e) of the Agreement may be
purchased in lieu of redemption, by the
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Borrower's designee, which may not be the Borrower or a subsidiary or
affiliate of the Borrower at a purchase price for each bond equal to the
principal amount thereof plus interest, if any, thereon to the date of
payment. The purchase price will be paid from moneys deposited by the
purchaser into an account designated by the Trustee.
(f) Redemption Pursuant to Mandatory Sinking Fund Requirements. The Bonds are
also subject to mandatory redemption pursuant to the terms of the mandatory
sinking fund requirements and mandatory redemption obligations provided in
Section 402 of the Agreement on the first Wednesday in April in each year
commencing April, 1985, requiring redemption of the principal amounts set
forth below, at a redemption price of 100% of the principal amount redeemed,
plus accrued interest to the redemption date:
DATE AMOUNT
- ---- -------
April, 1985.................. $ 70,000
April, 1986.................. 80,000
April, 1987.................. 90,000
April, 1988.................. 100,000
April, 1989.................. 110,000
April, 1990.................. 120,000
April, 1991.................. 130,000
April, 1992.................. 140,000
April, 1993.................. 150,000
April, 1994.................. 160,000
April, 1995.................. 170,000
April, 1996.................. 180,000
April, 1997.................. 195,000
April, 1998.................. 210,000
If less than all of the Bonds shall be called for redemption pursuant to the
foregoing subparagraph (a), (c) or (f), the particular Bonds or portions of
Bonds to be redeemed shall be selected by the Trustee in the manner provided in
Section 403 of the Agreement. All payments upon partial redemption of the Bonds
shall be of amounts of not less than $100,000 or an integral multiple of $5,000
in excess of $100,000 during the Variable Rate Period or $5,000 during the Fixed
Rate Period. Notice of any redemption shall be given to the extent, and in the
manner, required by the Agreement. That portion of this Bond called for
redemption shall cease to bear interest on the specified redemption date
provided sufficient Priority Funds (as defined in the Agreement) to redeem such
portion and to pay accrued interest thereon to the redemption date are on
deposit with the Trustee at that time. Thereafter such portion shall cease to be
outstanding under the Agreement.
6. Additional Provisions. The holder of this Bond shall have no right to
enforce the provisions of the Agreement or to institute or appear in proceedings
with respect to the Agreement
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or its enforcement except as provided in the Agreement. In certain events as
provided in the Agreement, the principal of all the Bonds then outstanding
under the Agreement may become or be declared due and payable before their
stated maturity, together with interest accrued thereon. Modifications or
alterations of the Agreement or of any amendments or supplements thereto, may
be made only as provided by the Agreement.
The Bonds shall not constitute the personal obligation, either jointly or
severally, of any member, director, officer, employee or agent of the Issuer.
This Bond shall not be valid or entitled to any security or benefit under
the Agreement until the certificate of authentication hereon shall have been
signed by the Trustee.
IN WITNESS WHEREOF, the Vermont Industrial Development Authority, acting in
the name of the State of Vermont and on its behalf, has caused this Bond to be
duly executed, and its corporate seal to be hereunto affixed by its Manager or
Treasurer and its Chairman or Vice Chairman, as of October 1, 1984.
[Seal] STATE OF VERMONT, ACTING BY AND
THROUGH THE VERMONT INDUSTRIAL
DEVELOPMENT AUTHORITY
By
-----------------------------
Manager or Treasurer
By
-----------------------------
Chairman or Vice Chairman
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CERTIFICATION OF AUTHENTICATION
This Bond is the Bond described in the aforementioned Agreement. The date of
delivery of this Bond is
The First National Bank of
Boston, as Bond Registrar
By
----------------------------
Authorized Officer
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Page 74
SCHEDULE OF PAYMENTS
NOTE: At any time at the option of the Bondholder his Bond may be submitted
to the Bond Registrar for endorsement showing the balance of principal due
thereon and the date to which interest has been paid.
Date of Balance of Date to which Signature of
Entry Principal Due Interest Paid Bond Registrar
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Page 75
ENDORSEMENT OF FIXED INTEREST RATE
NOTE: Promptly following the Borrower's exercise of its Option to Convert,
the Bondholder shall submit this Bond to the Bond Registrar for endorsement by
the Bond Registrar of the amount of the Fixed Rate and the effective date of the
Fixed Rate.
Date of Effective Date Signature of
Entry Fixed Rate of Fixed Rate Bond Registrar
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EXHIBIT 401
FORM OF BONDHOLDER'S ELECTION NOTICE
DATE
To: The First National Bank of Boston,
as Depositary under the Loan and
Security Agreement dated as of
October 1, 1984 (the "Agreement")
among the State of Vermont,
acting by and through the Vermont
Industrial Development Authority,
Mount Snow Ltd., and The First
National Bank of Boston
Attention: Manager, Corporate Trust Division
Gentlemen:
Pursuant to the provisions of the Agreement, the undersigned hereby
irrevocably request(s) the redemption of the Bond described below.
1. The Bond is one of the Vermont Industrial Development Authority
Floating/Fixed Rate Industrial Development Revenue Bonds (Mount Snow Ltd.
Issue-1984 Series), numbered R- , the principal amount of which is $ .
2. The date on which the Bond shall be redeemed (a day other than a
Saturday, Sunday or other day on which banks are authorized or required to be
closed in the City of Boston, but not prior to the seventh calendar day
immediately following the date of delivery of this Notice) shall be .
3. The name of the registered owner or owners is and the address or
addresses of such owner(s) is .
4. The person or persons to whom or to whose order the proceeds of the
redemption or purchase of the Bond are to be paid, and the address or addresses
of such payee or payees is .
I (we) hereby undertake to deliver such Bond, together (if the date set for
redemption is after a Record Date and before an Interest Payment Date) with a
due-bill check for accrued interest to such date, to the Depositary at its
principal office at 100 Federal Street, Boston, Massachusetts 02110 [or to the
Depositary's Agent, First National Boston Clearance Corporation, 55 Broadway,
3rd floor, New York, New York 10006] no later than 10:00 A.M., Boston time, on
the business day set forth in paragraph 2 above.
Name and signature of holder or holder's duly authorized
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attorney-in-fact:
Name Signatures
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Page 78
EXHIBIT 501A
FORM OF REQUISITION FOR PAYMENT
FROM PROJECT FUND
To: Proctor Bank,
Trustee under the Loan and Security
Agreement dated as of October 1, 1984
(the "Agreement") among Mount Snow
Ltd. Trust (the "Borrower"), the State
of Vermont, acting by and through the
Vermont Industrial Development
Authority, The First National Bank of
Boston and such Trustee
Requisition No.
This requisition is made pursuant to Section 501A of the Agreement. Terms
used in this requisition shall have the meanings specified for them in the
Agreement.
The Trustee is hereby authorized and directed to make payment from the
Project Fund as follows:
Amount:
Name and address of payee:
Description of use of proceeds (attach copies of invoices or statements,
where available, from a contractor, vendor or other payee for the acquisition
and installation or other costs of the Project; if unavailable, provide other
evidence satisfactory to the Trustee):
Applicable subsection of Section 501A (circle one or more):
(a) (b) (c) (d)
1. The undersigned Project Supervisor hereby certifies to and
Specifications, and the obligations have not been the basis for a prior
requisition which has been paid.
2. This requisition contains no items representing payment on account of any
retained percentage entitled to be retained by the Borrower at the date hereof.
3. The payment of this requisition will not result in less than 90% of the
proceeds of the Bonds expended or to be expended under this requisition and all
prior requisitions (after deducting expenses of issuing the Bonds) being
considered as having been used to provide an "exempt facility" as that term is
defined in Section 103(b)(4) of the Internal Revenue Code of 1954, as amended.
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Page 79
4. This requisition does not request reimbursement for any payments or
payment for any obligations originally paid or incurred before June 22, 1984.
5. Any item of machinery or equipment described herein for which payment is
proposed to be made has been delivered to and accepted by the Borrower, or such
item has not been so delivered and accepted as of this date and there is
delivered herewith an opinion of nationally recognized bond counsel acceptable
to you that the payment proposed to be made for such item will not adversely
affect the exemption from federal income taxation of the interest paid on the
Bonds.
6. The obligation for which payment is proposed to be made does not
represent a material change from the plans and Specifications on file with the
Trustee as of the date of delivery of the Bonds, or payment for such obligation
has been approved in writing by the Issuer and a copy of such approval filed
concurrently with the Trustee.
Dated: , 19
Project Supervisor
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EXHIBIT 501B
CONSTRUCTION LOAN DISBURSEMENT PROCEDURES
1. Requests for Disbursements. (a) Requests upon the Trustee for
disbursements may be made by the Borrower and (with the exception of the
disbursement described in subsection (d), below) not less than five business
days prior to the date on which the Borrower desires a disbursement to be made.
(b) Each request for a disbursement shall
(i) be in the form of Exhibit 501A to the Agreement, with such additional
information as the Trustee or the Bank may designate from time to time
hereafter; and
(ii) be certified by the Project Supervisor.
2. Suspension of Disbursements. The Trustee and the Bank shall not be
obligated to approve of any disbursement which is requested pursuant to Section
1 above, which otherwise would be subject to such approval, if at that time, any
of the following have occurred or are occurring:
(a) Any Event of Default under the Agreement;
(b) Any occurrence which, solely with the passage of time or the giving of
notice (or both), would be such an Event of Default;
(c) Substantial suspension of the prosecution of the Project to completion
for a period of thirty (30) or more consecutive days, other than by reason of
strike, fire, Act of God, or other cause beyond the control of the Borrower;
(d) Determination by the Trustee or the Bank that the then remaining
principal balance of the Project Fund is not sufficient to cover the costs to be
incurred to complete the Project.
<PAGE>
Exhibit 10.18
LEASE AGREEMENT
This Lease is made in duplicate this 2nd day of April, 1997, by and
between Grand Summit Resort Properties, Inc., a Maine corporation with its
principal place of business in the Town of Newry, Maine, hereinafter referred to
as "LESSOR" and LBO Holding, Inc., a Maine corporation with its offices in
Bartlett, New Hampshire, hereinafter referred to as "LESSEE".
For the consideration hereinafter set forth and reserved, LESSOR has agreed
to demise and let, and hereby does demise and let to LESSEE, and LESSEE has
agreed to take, and hereby does take from LESSOR, certain lands and Premises
situated in the Town of Bartlett, County of Carroll and State of New Hampshire,
described as follows:
The commercial condominium units at the Grand Summit Resort
Properties, Inc. Condominium located in Bartlett, New Hampshire, as
more particularly described in Exhibit "A" attached hereto and made
a part hereof, hereinafter the "Premises".
TO HAVE AND TO HOLD the Premises with all the privileges and appurtenances
thereof, to LESSEE subject to the following terms and conditions:
1. TERM AND RENT. This Lease shall be in effect for a term of five years,
beginning on the 1st day of March, 1997 and ending on the 30th day of April,
2002. The rent due hereunder shall be paid as follows:
An amount equal to EBITDA from operation of the Premises, less 15%. For
purposes of this Lease, EBITDA shall mean for each fiscal quarter assuming
a fiscal year end of July 31. Net income or loss resulting from the
operations of the Premises by the LESSEE determined independently for those
operations which shall be accounted for separately from the LESSEE'S other
operations in accordance with generally accepted accounting principals
without giving effect to extraordinary gains and losses from sales,
exchanges or other dispositions of property not in the ordinary course of
business, and nonrecurring items, plus, to the extent deducted in
calculating net income, the sum of, without duplication, (i) depreciation
expense, (ii) amortization expense, (iii) consolidated interest expense
plus the non-cash portion of consolidated interest expense on debt related
to such Premises, (iv) income tax expense and (v) other non-cash items.
The foregoing adjustments to net income shall be made solely with respect
to operations at the Premises, which, in accordance with the provisions of
this Lease Agreement, shall be accounted for separately from Lessee's other
operations.
The LESSEE does hereby covenant with the LESSOR that the LESSEE, during the
term of said Lease and for such further time as it or any other person or
persons claiming under it shall hold the said Premises or any part thereof, will
pay unto the LESSOR the said rent at times and in the manner aforesaid.
<PAGE>
LATE CHARGE: At the option of the LESSOR, the LESSSEE agrees and
shall pay a "late charge" of two percent (2%) of any monthly rental
installment when paid more than (7) days after the due date thereof. Said
late charge shall be added to the next succeeding month's regular rent.
2. PERMITTED USE. LESSEE shall use and occupy the Premises for any
purpose permitted under applicable zoning and land use regulations.
The Premises shall not be used for any illegal purpose, nor in violation of
any valid regulation of any governmental body, nor in any manner to create any
nuisance or trespass, nor in any manner to cause cancellation of the insurance
on the Premises or on the building.
3. ACCEPTANCE OF PREMISES: ALTERATIONS OR ADDITIONS. The LESSEE, by
taking possession of the Premises, shall accept and shall be held to have
accepted the same as suitable for the use intended by the LESSEE. The LESSOR
shall not be required after possession of the Premises has been delivered to the
LESSEE, to make any structural repairs or improvements to the Premises, except
those outlined herein. The LESSEE shall not make alterations or additions,
without written permission of the LESSOR, which shall not be unreasonably
withheld, however, such alterations shall be at the sole cost and expense of the
LESSEE. In connection therewith, LESSEE shall comply with all applicable rules,
regulations, laws or orders of any governmental authority or any rules of
LESSOR'S insurance carrier. LESSEE will pay any and all expenses necessary to
bring or keep the Premises in compliance with federal, state or local laws,
rules, ordinances and building codes.
LESSOR specifically covenants and agrees to be responsible for all exterior
maintenance and repair limited to structural repairs, replacement or repair of
plumbing, electrical or heating systems, site improvements such as sewer and
water, roof, exterior walls and foundation, on the subject Premises. LESSOR
shall have the responsibility of exterior painting which obligation shall be no
more than once every eight (8) years. Exterior painting shall utilize a color
using the current decorating scheme or any other color agreed upon between
LESSOR and LESSEE provided, however, that color shall be in conformity with all
local zoning regulations.
4. DUTY TO KEEP PREMISES IN GOOD ORDER. The LESSEE hereby covenants and
agrees to keep the interior Premises in as good order, repair and conditions as
the same area at the commencement of the term thereof, or may be put in
thereafter, damage by fire or unavoidable casualty and reasonable wear and tear
excepted; and at the termination hereof, to peaceably yield up said Premises and
all additions, alterations and improvements thereto, in such good order and
repair and conditions, leaving the premise clean, neat and tenantable.
5. MAINTENANCE. LESSEE shall, at their own expense, keep and maintain the
interior surfaces of the Premises in good order and repair and shall not damage
or deface said Leased Premises. LESSEE shall be obligated to maintain the
exterior and
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common areas of said Premises including the entry ways. Parking areas,
hallways, and walkways. It shall be the obligation of LESSEE to make any
repairs to the building including, windows, interior glass and walls, elevator
system, alarm system, lighting, carpeting and flooring. Said repairs and
maintenance shall also include, but not limited to, repairs, cleaning and snow
and ice removal. LESSEE shall maintain said Premises and otherwise operate said
Premises in conformity in all material respects, with all existing land use
permits currently governing the Leased Premises.
6. CAPITAL IMPROVEMENTS AND REPAIRS BY LESSEE. Subject to the other
provisions of this Lease concerning repairs, improvements, alterations or
additions required to be made by the LESSEE or LESSOR, the LESSEE shall yield up
the Premises to LESSOR at the expiration of this Lease in the same condition as
when it was received by LESSEE, normal wear and tear excepted and excepting any
improvements made by LESSEE.
7. UTILITIES. LESSEE shall be responsible to supply and pay for all
utilities to the subject Premises including, but not limited to, heat,
electricity, garbage removal, and snow plowing. LESSEE shall be responsible for
its own telephone usage and/or other communication systems utilized at the
Premises. Damage caused by a failure to provide adequate heat to the Premises
shall be the sole responsibility of LESSEE who shall indemnify and hold LESSOR
harmless therefrom.
8. PERSONAL PROPERTY TAXES. LESSEE shall be responsible for any and all
personal property taxes levied upon the Premises due to inventory, equipment or
machinery maintained upon the Premises by LESSEE.
9. REAL ESTATE TAXES. LESSEE shall be solely responsible for payment when
due of real estate taxes assessed by the Town of Bartlett in reference to the
Leased Premises and tax increases as may be levied by the Town of Bartlett.
10. SIGNS. LESSEE shall conform with the Town of Bartlett Zoning
Regulations regarding signs, displays, advertising devices or other things upon
or about the exterior Premises of the building. LESSOR warrants that signage
existing at the time of execution of this Lease complies with such requirements.
11. PARKING. LESSEE shall be entitled to all parking associated with the
Premises.
12. FIXTURES AND EQUIPMENT. Also included in this Lease are all fixtures
and equipment currently in place at said Premises. Said inventory and fixtures
include, but are not limited to, counters, display racks, security system,
storage shelving, mirrors and soft good bins. LESSEE shall be obligated to
maintain said fixtures or their reasonable equivalent and shall turn over to
LESSOR said fixtures upon expiration of this Lease which shall be in good,
workable condition, normal wear and tear excepted.
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13. INSURANCE.
a) LIABILITY INSURANCE. LESSEE shall maintain at LESSEE'S expense,
public liability insurance covering the Premises and the use and occupancy
of same for the mutual benefit of LESSOR and LESSEE naming LESSOR as an
additional named insured and combined single limits coverage of not less
than $3,000,000 for death, personal injury, or property damage. Said
insurance shall be written on a comprehensive general liability form and
include the broad form general liability endorsement. A copy of the
declaration page of said insurance shall be provided to LESSOR and LESSOR
shall specifically require notification by the insurer to LESSOR of any
failure to pay or other breach of the terms of said insurance. A copy of
said insurance declaration sheet or other insurance documents required by
LESSOR'S mortgage bank shall be provided by LESSEE or its agent to said
bank.
b) HAZARD INSURANCE. LESSEE shall protect the Premises including the
exterior grounds, parking area and improved areas with casualty insurance
for the benefit of LESSOR including loss against damage by fire, wind,
storm, earthquake and similar hazards. Such policy of insurance shall be
for the full insurable replacement value of the building and improvements
contained thereon. A copy of the declaration sheet of said policy shall
likewise be provided by LESSEE'S insurance to LESSOR's naming the LESSOR as
an additional insured party and identifying LESSOR as a party to be
notified in the event of any insurance laps or any claim made thereon.
c) The failure of LESSEE to maintain and pay for said insurance when due
or otherwise comply with the terms of said insurance policy shall
constitute a material breach of this Lease.
d) A copy of said insurance policy(ies) obtained and maintained by LESSEE
shall be provided by LESSEE to LESSOR upon LESSOR'S request.
e) LESSEE shall likewise maintain similar casualty insurance to cover the
replacement cost of all inventory owned by LESSEE in the subject Premises.
LESSEE shall be named insured in regard to said inventory, however, LESOR
shall also be named as an additional insured party.
Said insurance(s) procured by LESSEE as herein required, shall be issued by
a company licensed to do business in the State of Vermont and shall contain
endorsements that:
(i) such insurance(s) may not be canceled or amended with respect to
LESSOR by the insurance company without notice to the LESSOR;
(ii) LESSOR shall be named as an additional insured with respect to
any and all public liability; and
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(iii) LESSEE shall be solely responsible for payment or premiums for
such insurance.
14. DESTRUCTION AND CONDEMNATION OF PREMISES. In the event that said
Premises, or any substantial part of the building to which they are a part,
shall be destroyed or damaged by fire or other unavoidable casualty, or by the
action of the Town or other authorities, after the execution thereof, and before
the expiration of said term, and the Leased Premises have not been restored to
their original condition within ninety (90) days of said taking, destruction or
action, then this Lease and the said terms shall terminate at the election of
either party. A "substantial part" means a sufficient portion of the Premises
such that use of the Premises for its then current purposes is materially
impaired and cannot be restored. LESSEE and LESSOR shall both be obligated to
restore the Premises as nearly as possible to pre-condemnation condition and
apply the net proceeds of any applicable insurance to that restoration. Neither
LESSOR nor LESSEE shall be obligated to expend in excess of net insurance
proceeds to restoration, although each shall have the option to do so without
any changes in base rent or additional rent hereunder, except as provided
immediately below. A "just proportion" of the rent hereinafter reserved,
according to the nature or the extent of the injury sustained by the demised
Premises, shall be immediately suspended and abated while the demised Premises
are being restored. The term "just proportion" as used herein shall be a
fraction, the numerator of which shall be the total retail revenues produced by
the Premises destroyed or rendered unusable and the denominator of which shall
be the total revenues produced by the Leased Premises as expressed as a
percentage. In the event of a dispute regarding this provision, the parties
shall arbitrate the issues.
15. BREACH. Except for monetary default by LESSEE, which LESSEE shall
have no right to cure, if the LESSEE should neglect or fail to perform or
observe any of the covenants contained herein which are required of LESSEE, and
if such failure is not cured within thirty (30) days after written notice by
LESSOR, or if such breach cannot by its nature be cured within 30 days, then
LESSEE shall commence to cure such default and shall pursue such cure to
conclusion within a reasonable period in light of the nature of the default, or
if the LESSEE shall be declared bankrupt or insolvent accordance to the law,
reorganized under the Bankruptcy Act, or if any assignment shall be made of its
property for the benefit of creditors then and in any time thereafter, and
without demand or notice, LESSOR may enter into and upon the same Premises or
any part thereof, and repossess the same as of their former estate and expel the
LESSEE and those claiming through or under it and remove their effects by proper
legal process, without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant and upon entry of, as aforesaid, this Lease shall
terminate, and the LESSEE covenant that in case of such termination it will
indemnify the LESSOR against all loss of rent and other payment which they may
incur by reason of such termination during the residue of the time first above
specified for the duration of the said term. The LESSOR shall be obligated to
take reasonable steps to obtain other tenants, the rents from whom shall be set
off against rents due from LESSEE.
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<PAGE>
16. ASSIGNMENT OR SUBLEASE. This Lease shall not be assigned nor can the
Premises be sublet prior to written consent of the LESSOR, which consent shall
not be unreasonable withheld or delayed. An assignment to any corporation or
entity which is affiliated with or under management and control of LESSEE is
hereby expressly permitted by LESSOR, however, LESSOR shall remain primarily
liable upon the Lease unless expressly released in writing by LESSOR. LESSOR
agrees that LESSEE may collaterally assign this Lease to its senior lenders and
LESSOR shall execute and deliver such consents to assignment as may be required
by LESSEE'S senior lending institutions.
17. COMPLIANCE WITH LAW AND LIEN PREVENTION. LESSEE agrees that it shall
promptly comply at its own expense with all requirements of any governmental
authority having competent jurisdiction which requirements are made necessary by
reason of LESSEE'S occupancy of said Premises. Further, LESSEE agrees to pay
all contractors and subcontractors for any improvements or additions to the
Leased Premises contracted for by the LESSEE with LESSOR'S consent as required
hereinabove. LESSOR shall include similar provision in Leases issued to other
tenants.
18. SUBORDINATION. LESSEE agrees, at the request of the LESSOR, to
subordinate this Lease to any mortgages placed upon the Premises, to agree not
to prepay rent more than ten (10) days in advance, except as otherwise agreed by
the parties in writing, provided that the holder of such mortgage or mortgagees
enter into any agreement with LESSEE by the terms of which such party agrees not
to disturb the LESSEE in its possession of the Premises so long as LESSEE
continues to perform its obligations hereunder, and in the event of acquisition
of title by said party through foreclosure proceedings or otherwise, to accept
LESSEE as LESSEE of the Premises under terms and conditions of this Lease to
perform LESSOR'S obligations hereunder (but only while owner of the Premises),
and LESSEE agrees to recognize such party or any other person acquiring title to
the Premises as LESSOR. LESSEE and LESSOR agree to execute and deliver any
appropriate instruments necessary to carry out the foregoing provisions. LESSEE
shall have the right upon receiving a judgment of foreclosure upon the Premises
to at LESSEE'S option and upon thirty (30) days notice to terminate this Lease.
19. INDEMNITY. LESSEE will indemnify and hold the LESSOR harmless against
tall claims and demands for loss or damage, including property damage, normal
wear and tear excepted, personal injury and wrongful death, arising out of or
caused by the negligent act or omissions LESSEE will reimburse LESSOR for their
costs, expenses, judgments, executions or claims in connection with the defense
of any such actions.
LESSEE shall give prompt notice to the LESSOR in case of fire or accident
in the demised Premises or in the building of which the demised Premises are a
part of or defects therein or in any fixtures or equipment.
20. ATTORNEYS FEES. If LESSEE defaults, fails to pay rent or breaches any
of the terms herein and damages are collected through any attorney-at-law,
LESSEE
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agrees to pay all reasonable attorneys fees and related costs of collection.
Likewise, a breach by LESSOR shall result in LESSOR being responsible for
reasonable attorneys fees and related costs relating to remedying such breach.
21. RECORDING. LESSOR and LESSEE agree that a Memorandum of Lease shall
be recorded. LESSOR and LESSEE shall enter into an agreement in recordable
form, setting forth actual commencement and termination dates of this Lease.
Said Memorandum is attached hereto and made a part hereof as Exhibit "B".
22. INTENT. The parties hereto intend that the terms and conditions of
this Lease are for commercial purposes.
23. NOTICE. Any notice required to be given by the terms hereof shall be
deemed duly served if sent by certified mail, return receipt request, through
the United States Postal Service, after the term of this Lease has commenced or
to the LESSOR at the said Premises, or to either party at such place as may from
time to time be established in the manner
Philip T. Gravink
Attitash Bear Peak
Route 302
Bartlett, New Hampshire 03612
24. SEVERAILITY. If any provision of this Lease or its application to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
25. RIGHT OF FIRST REFUSAL. In consideration of value recited herein,
LESSOR grants to LESSEE a Right of First Refusal to purchase the Leased Premises
under the same terms and conditions contained in any bona fide offer to purchase
received by LESSOR subject to the following terms and conditions:
(a) LESSOR shall notify LESSEE of the terms of any bona fide offer to
purchase the subject Premises received by LESSOR which LESSOR is prepared
to accept. Said notice shall be in writing and mailed certified mail,
return receipt requested, to LESSEE'S business Premises located at
Bartlett, New Hampshire, or to any other address given in writing by LESSEE
for the purpose of notice.
(b) Upon receipt of said notice of offer, LESSEE shall have thirty (30)
days to notify LESSOR of its intent to exercise its right of first refusal.
Said thirty day period shall run from midnight of the date of delivery of
said notice until midnight of the thirtieth (30th) day thereafter.
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(c) Said responsive notice by LESSEE shall be mailed certified mail,
return receipt requested, to LESSOR'S principal place of business in Newry,
Maine or such other address as directed in writing by LESSOR.
(d) LESSEE shall have forty-five (45) days from receipt by LESSEE under
Paragraph 25(a) of said notice to enter into a binding written contract for
the purchase of said Leased Premises, the terms of which shall correspond
to those contained in the bona fide offer received by LESSOR.
(e) LESSEE shall have sixty (60) days from the execution of said written
contract, under Paragraph 25(d) to close the purchase and meet the terms of
said contract.
(f) The right of first refusal contained herein shall expire upon the
expiration of this Lease or any renewal thereof. It shall be contained in
the Memorandum of Lease recorded in connection herewith.
Dated this 2nd day of April, 1997.
IN PRESENCE OF: GRAND SUMMIT RESORT
PROPERTIES, INC.
/s/ [ILLEGIBLE] /s/ Christopher E. Howard
- --------------------------- -----------------------------
Witness By: Christopher E. Howard
Its: Senior Vice President and
Chief Administrative Officer
- -------------------------
Witness
LBO HOLDING, INC.
/s/ Rebecca Garland /s/ Philip T. Gravink
- ------------------------- -------------------------------
Witness By: Philip T. Gravink
Its: COO/Managing Director
- -------------------------
Witness
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STATE OF MAINE
OXFORD COUNTY, ss
At Bethel, Maine, this 2nd day of April, 1997, personally appeared
Christopher E. Howard, Sr. V.P. and duly authorized agent of Grand Summit
Resort Properties, Inc. and acknowledged this instrument by him/her , sealed
and subscribed to be his/her free act and deed and the free act and deed of
Grand Summit Resort Properties, Inc.
Before me,
/s/ Jennifer S. Giles
---------------------------
Notary Public
Jennifer S. Giles, Notary Public
State of Maine
My Commission expires 6/2/2001
STATE OF NEW HAMPSHIRE,
CARROLL COUNTY, ss
At Bartlett, N. H., this 3rd day of April, 1997, personally appeared
Philip Gravink, ________ and duly authorized agent of LBO Holding, Inc. and
acknowledged this instrument by him/her, sealed and subscribed to be his/her
free act and deed and the free act and deed of LBO Holding, Inc.
Before me,
/s/ Joanne Campbell
-------------------------------
Notary Public
Joanne Campbell, Notary Public
My Commission Expires January 9, 2002
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Exhibit 10.47
EXHIBIT 6
COMMERCIAL LEASE
THIS LEASE is entered into this 7th day of August, 1997, by and between
L.B.O. HOLDING, INC., a Maine corporation with a mailing address of P. O. Box
308, Bartlett, New Hampshire, 03812 ("Lessor") and Grand Summit Hotel
Condominium Unit Owners' Association, Inc. of Bartlett, Carroll County, New
Hampshire ("Lessee").
1. Leased Premises.
A. In consideration of the rents and agreements contained herein, to be
observed and performed by the Lessee, the Lessor leases and lets to the
Lessee, and the Lessee leases and takes from the Lessor the premises
described in Appendix A attached hereto and made a part hereof (hereinafter
called "Leased Premises").
B. The demised premises are leased subject to existing encumbrances of
record none of which will materially interfere with the Lessee's beneficial
use and occupancy of the demised premises during the term hereof.
C. Lessee has had reasonable opportunity to examine, and has examined the
demised premises, and accepts the same in their existing condition. No
representation, statement or warranty, express or implied, has been made by
or on behalf of the Lessor as to such condition or fitness for intended
use.
D. The Lessee's use of the premises shall be in common with Lessor and
its members, guests and invitees.
2. Term of Lease.
The term of this Lease shall be Two (2) years and shall commence on the
28th day of March, 1997 and shall expire upon the 27th day of March, 1999.
3. Rent.
The Lessee covenants and agrees to pay as rent for the leased premises:
A. for the first twelve months hereof, the fixed sum of $5,333.33 per
month.
B. for the thirteenth through the twenty-fourth months hereof, the fixed
sum of $5,333.33 per month.
C. Rental payments shall be due and payable on the 1st day of each month,
in advance.
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4. Right to Inspect Lessor's Books.
The Lessee shall have the privilege at all times, by itself or by an
auditor or auditors selected by it, of examining all such books or accounts,
or other records of the Lessor, kept either at said premises or at other
premises maintained by it, as shall be necessary or useful for the purpose of
enabling the Lessee to verify the amount of the actual cost of operation and
maintenance of the leased premises.
5. Holding Over.
If the Lessee continues to occupy the demised premises after the
termination hereof, it shall have no more rights than a tenant by sufferance,
but shall be liable for aggregate rental as determined herein during such
occupancy and shall be liable for any loss, expense or consequential damages
due to such holding over. Nothing in this article shall be construed to
permit such holding over.
6. Taxes.
The Lessor shall cause to be paid all real estate taxes which may be
levied against the demised premises and the land on which they are situated
during the term hereof, provided, however, that the prorated amount of those
taxes shall be included in the actual costs described in Paragraph 12 hereof.
7. Use of Demised Premises.
The demised premises shall be used only as a health club.
The Lessee and its members, guests or invitees shall faithfully obey all
rules and regulations which may be adopted by the Lessor pertaining to the
premises and shall only be entitled to use of the premises subject to the
same restrictions as Lessor, its members, guests or invitees.
8. Utilities.
The Lessor shall not be liable for an interruption of any utilities or
services in the leased premises nor for any interruption in the availability
for use of the premises.
9. Destruction of Leased Premises.
If the leased premises are damaged to the extent of sixty percent (60%)
or more of the sound value, the premises may, at the option of the Lessee, be
deemed totally destroyed, and the Lease may then be cancelled by the Lessee
and of no effect. Lessor and Lessee, notwithstanding the provisions of this
Articles, may elect to continue this Lease upon such terms and conditions as
the parties may mutually agree until the premises can be restored or rebuilt.
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10. Assignment or Subletting.
This Lease may not be assigned. No portion of the premises may be sublet.
11. Default of the Lessee.
In the event of failure of Lessee to pay when due the rent provided
herein or to observe and perform its obligations under this Lease then Lessor
shall give Lessee written notice of such failure and Lessee shall have ten
(10) days to cure such failure or to commence such cure if not reasonably
curable within thirty (30) days. If Lessee shall fail to cure or commence
the cure of any default in accordance with this paragraph, the Lessor, in
addition to any other rights or remedies it may have, may terminate this
Lease upon seven (7) days written notice to Lessee provided that such rental
termination shall not relieve Lessee from any other liability arising under
this Lease.
12. Renewal.
This Lease may be renewed by the Lessee, with prior approval of the
Lessor, upon identical terms and conditions for up to six (6) additional
three (3) year terms, except that the fixed sum rent provided for in
paragraph 3 shall be adjusted on the first day of every year during any
renewal term to equal the actual cost of operating the premises for the prior
year plus fifteen percent (15%). The resulting figure, shall be the rent for
the ensuing one year period. This Lease shall be automatically so extended
unless either party notifies the other in writing to the contrary at least
thirty (30) days prior to the commencement of a renewal term.
13. Notices.
Any notice, demand, request or other instrument which may be or is
required to be given under this Lease shall be deemed to have been properly
given if given in writing and as of the date of mailing and if mailed,
postage prepaid, by certified mail, return receipt requested (a) if to Lessor
at Bartlett, New Hampshire; (b) if to Lessee at Bartlett, New Hampshire.
14. Amendments.
This Lease may be modified or amended only by a writing duly authorized
and executed by both Lessor and Lessee.
15. Default of the Lessor.
Lessor and Lessee further agree that in the event of Lessor's failure to
perform its obligations under the terms of this Lease then Lessee shall give
Lessor written notice of such default and Lessor shall have thirty (30) days
to cure such default, or to commence such cure if not reasonably curable
within thirty (30) days. If Lessor shall fail to cure, or commence the cure
of, any default in accordance with this paragraph, then Lessee may cure such
default and
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upon submitting to Lessor receipts for any expenses therein incurred, deduct
such expenses from its next annual rental.
16. Recording.
The Lessee agrees that it will not record this Lease. Either party
shall, upon request of the other, execute and deliver to said requesting
party, a short form of this Lease suitable for recording.
IN WITNESS WHEREOF, L.B.O. Holding, Inc., Lessor herein, has hereunto
caused its name to be subscribed and its seal affixed by its Managing
Director, C.O.O., thereunto duly authorized this 7th day of August, 1997.
LESSOR:
L.B.O. Holding, Inc.
/s/ Illegible By: /s/ Philip T. Gravink
- ---------------------------------- -------------------------------------
-------------------------------------
Its Duly Authorized Managing
Director, C.O.O.
IN WITNESS WHEREOF, Grand Summit Hotel Condominium Unit Owners'
Association, INC, Lessee herein, has hereunto caused its name to be
subscribed and its seal affixed by its Managing Director, C.O.O., thereunto
duly authorized this 7th day of August, 1997.
LESSEE:
Grand Summit Hotel Condominium Unit
Owners' Association, INC.
/s/ Donna C. Fresco By: /s/ Illegible
- ---------------------------------- -------------------------------------
Notary Public -------------------------------------
Its Duly Authorized Vice President
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CERTIFICATION
I hereby certify that the Management Agreement dated August 7, 1997
attached hereto is a true and accurate copy.
/s/ Mark Girard
----------------------------------------
Mark Girard, Vice President
Grand Summit Resort Properties, Inc.
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Exhibit 10.73
MANAGEMENT AGREEMENT
THIS AGREEMENT by and between Grand Summit Hotel Condominium Unit Owners'
Association, Inc., a New Hampshire not for profit corporation located at Route
30, Bartlett, New Hampshire (the "Association"), and L.B.O. Holding, Inc., a
Maine corporation with a mailing address of P.O. Box 450, Bethel, Maine 04217
(hereinafter referred to as "Manager").
W I T N E S S E T H :
WHEREAS, the Association desires to have Manager act as Manager of Grand
Summit Hotel and Crown Club at Attitash/Bear Peak, a Condominium on the terms
and conditions hereinafter set forth,
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE ONE
Definitions
Terms as used in this Agreement shall be defined as follows, unless the
context clearly indicates a different meaning:
"Condominium" shall mean the Grand Summit Hotel and Crown Club at Attitash/Bear
Peak, a Condominium created by the Declaration.
"Owner" shall mean any person or legal entity who is the owner of any Unit in
the Condominium.
"Common Elements" shall mean the Common Elements as defined in the Declaration.
"Declaration" shall mean the Declaration of the Grand Summit Hotel and Crown
Club at Attitash/Bear Peak, a Condominium duly recorded in the Carroll County
Registry of Deeds as amended.
"Bylaws" shall mean the Bylaws of the Association.
"Board" shall mean the Board of Directors of the Association.
"Property" shall mean the Property as more particularly defined in the
Declaration.
"Common Charges" shall mean all assessments payable by Unit Owners as more
particularly defined in the Declaration.
"Common Expenses" shall mean the expenses of administration, reserves, operation
and other expenses provided in the Declaration and Bylaws of the Condominium.
<PAGE>
"Units" for purposes of this Agreement, shall mean all residential and
commercial units in the Condominium.
"Checking Account" shall mean the operating account established by the
Association and under the control of the Manager.
"Management Fee" shall be as defined in Section 3.4 of this Agreement.
"Reserve Account" shall mean the separate account under the control of the
Association established and separately funded by the Association for the repair,
replacement and restoration of the Common Elements.
ARTICLE TWO
Manager's Responsibilities
2.1 Management & Operation of the Condominium
As agent for the Owners, Manager shall carry out the following duties in
order to generally manage the Units and the Common Elements and administer the
Association based on standards and policies established by the Board.
A. Arrange and supervise all repairs and replacements, maintenance,
cleaning and decorating of the Common Elements to assure their proper use,
operation and appearance in accordance with the By-Laws of the Association;
B. Provide general administrative services including the following:
general accounting and record keeping, preparation of financial statements,
insurance supervision and administration, preparation of payroll and related
records, and general administrative services;
C. Collect and deposit into the Checking Account all payments which shall
become due and owing to the Association as a result of Common Charges or
otherwise and, at the direction of the Board, make payments into the Reserve
Account, out of funds available from the Checking Account; in the event that any
portion of Common Charges collected by the Manager is allocable to payment of
real estate taxes, the Manager shall segregate such funds in a separate,
interest bearing escrow account, and the funds shall be used solely for the
purpose of payment of real estate taxes;
D. Maintain accounting records of all receipts and expenditures and
furnish the Board with an annual statement of the operations;
E. Prepare a proposed annual budget for the operation of the Association;
F. Upon the instruction of the Board, obtain such insurance coverage as
called for in the Bylaws and as the Board shall deem necessary;
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<PAGE>
G. Investigate, hire, pay all personnel related costs (such as by way of
example, benefits, unemployment charges, social security, workers' compensation
insurance and payroll taxes), supervise and discharge when necessary all
personnel required to manage the Association. Manager shall be reimbursed for
all costs of such personnel and personnel related costs; including their base
compensation and the cost of all forms of employee benefits;
H. Obtain surety and fidelity bonds or appropriate insurance if required
by the Board for persons handling the Association funds;
I. Negotiate and enter into on behalf of the Association such service and
maintenance contracts as may be required in the ordinary course of business
including, without limitation, contracts for grounds maintenance, electricity,
gas, water, snowplowing, telephone cleaning, decorating, extermination,
equipment maintenance, and other services reasonably necessary to the operation
of the Association;
J. Assist in with the preparation for meetings of Owners, including the
preparation and delivery of notices of meetings, preparation of proxy forms,
preparation of the agenda and the conduct of the meetings;
K. Take action as requested by the Board to recover assessments or other
sums that may be owing to the Association, and when expedient, settle,
compromise and release such actions or suits;
M. Take other actions which are in Manager's opinion reasonably necessary
for the proper, efficient and economical management and operation of the
Association and implement such operating procedures, controls and regulations,
as Manager, in its reasonable judgment, deems to be in the best interests of the
parties hereto or to the successful management of the Association. The duties
and responsibilities set forth in the Agreement shall not serve to limit such
rights.
Special services rendered by Manager at the request of any Owner or his
family, employees, tenants, or guests which are not covered by the Association
shall be charged directly to and paid by such Owner or his family, employees,
tenants, or guests.
ARTICLE THREE
Terms of Employment
3.1 Agreement. The Association hereby retains Manager as the
Association's agent and manager and Manager hereby agrees to manage the
Condominium in accordance with this Agreement.
3.2 Term. The term of this Agreement shall commence on February 1, 1997
and terminate on April 30, 1998, which term may be extended by Manager, at its
sole option, for Two (2) additional terms of one (1) year each upon ninety (90)
days prior notice by Manager
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<PAGE>
to the Board, subject to such increases in the Maangement Fee provided under
Section 3.4. Notwithstanding the foregoing, the parties acknowledge that
this Agreement may be terminated by majority vote of the Owners upon the
first to occur of the third anniversary of the recording of the Declaration
of Condominium or the sale of Units to which 75% of the undivided interests
in the common area appertain.
3.3 Actual Cost; Reimbursement. The term "Actual Cost" shall mean the
total cost to Manager of operating the Condominium, including: all labor, all
associated payroll costs and personnel related costs, the cost of all supplies,
the cost of outside services, the cost of utilities, costs and equipment rental
incurred for the landscaping, snowplowing, repair, decoration or cleaning of the
Property, legal, accounting and other similar professional expense, and overhead
costs allocated to the management of this Association, (such as by way of
example manager's office costs, equipment and vehicle costs) and all other third
party costs and expenses fairly attributable to the maintenance and operation of
the Association, as defined in the Bylaws. The intent of the parties is that
all costs, charges, and expenses of every kind and description fairly
attributable to the operation, management or maintenance of the Associations
shall be charged to and paid by the Association from the Checking Account.
Manager shall be entitled to reimburse itself for its Actual Costs as
defined above and to collect its Management Fee from the Checking Account.
The Board shall be responsible for the creation and funding of the Reserve
Account.
3.4 Management Fee. The Association shall pay Manager a Management Fee
equal to 10% of the budgeted total cost to the Manager of operating the
Condominium. The Management Fee to be paid to Manager shall be included in the
annual budget and assessed as part of the Common Charges. The Management Fee
shall be paid by paying the Manager one-twelfth of the Management Fee set forth
in the annual budget on the first day of each month. It is the understanding of
the parties that the figure set forth in the annual budget as the Management Fee
is the fixed fee for the year. If the actual costs of operating the Condominium
exceed the annual budget, or are less than the annual budget, so that the
Management fee paid by the Association is either more or less than 10% of the
actual costs of operating the Condominium for the prior year, there shall be no
adjustment made to the Management Fee for the prior year.
3.5 Disputes. The Board shall have thirty (30) days from the rendition of
a statement by Manager for both the Management Fee or of the Actual Cost within
which to protest the nature, amount or method by which such amount was
determined. If the matter cannot be resolved by the parties within thirty (30)
days thereafter, it shall be rendered to an independent public accountant for
decision, which decision shall be binding on both parties.
3.6 Interest. Manager shall be entitled to payment of simple interest at
the base rate of annual interest as charged by Fleet Bank, at the time such
interest becomes payable plus two percent (2%) in any and all sums advanced by
Manager on behalf of the Association. Nothing provided herein, however, shall
obligate Manager to make any such
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<PAGE>
advances but Manager may do so as and to the extent (i) that there are
insufficient funds in the Checking Account and (ii) that Manager determines,
in its sole discretion, that to do so would be in the best interests of the
Association.
ARTICLE FOUR
Cancellation
4.1 By the Board. Except as to the accrued liabilities of either party,
the Board shall have the right upon thirty (30) days advance written notice to
Manager to cancel this Agreement upon the happening of any of the following
events: (A) if Manager shall fail to keep, observe, or perform any material
covenant, agreement, term or provision of this agreement to be kept, observed,
or performed by Manager and such default shall not be cured within a period of
ninety (90) days after written notice thereof by the Board to Manager; or (B)
Manager shall apply for or consent to the appointment of a receiver, trustee, or
liquidator of Manager or of all or a substantial part of its assets or file a
voluntary petition in bankruptcy.
In addition upon the termination of the Declarant Control Period as defined
in the Maine Condominium Act, the Board may terminate this agreement at any time
upon 90 days written notice to Manager with the consent of the requisite
percentage of Eligible Mortgage Holders as required by the Declaration and the
terms of mortgages on individual Condominium Units.
4.2 By Manager. Except as to accrued liabilities of either party hereto,
Manager shall have the right upon thirty (30) days advance written notice to the
Board to cancel this Agreement upon the happening of any of the following events
of default: (A) if the Board shall fail to keep, observe, or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed, or performed by the Board, and such default shall continue for a
period of ninety (90) days after written notice thereof by Manager to the Board;
or (B) if all or a portion of the Common Elements shall be damaged or destroyed
by fire or other casualty, and if the Board gives Manager written notice within
ninety (90) days that it does not intend to repair, restore, rebuild or replace
any such damage or destruction after such fire or other casualty.
4.3 Grace Period. If the defaulting party shall cure any default under
Paragraph 4.1 or 4.2 within the notice period, then such notice shall be of no
further force and effect. In event of any default which is not susceptible of
being cured with diligence within the notice period, if the defaulting party
shall proceed promptly and with due diligence to cure the same, then,
notwithstanding the giving of any such notice of default, the time within which
to cure such default shall be extended for such period as may be necessary to
cure the same with all due diligence.
ARTICLE FIVE
Miscellaneous Provisions
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<PAGE>
5.1 Consent. The Manager will designate a representative to act as the
liaison with the Association's Board of Directors in determining the duties of
Manager and in giving all consents or instructions on behalf of the Association:
Manager shall not be required to recognize instructions from any source other
than the Board of Directors acting as a whole.
5.2 Insurance. In fulfilling its duties hereunder the Board agrees to
save Manager harmless from liability or injury suffered by Manager or its
employees or other agents except in cases of willful misconduct or gross
negligence or actions taken in violation of this Agreement after written notice
of default. The Association shall name Manager in its capacity as agent for the
Association as a co-insured party under its public liability in the same manner
and to the same extent as Owners. Manager also shall not be liable for any
error of judgment or for any mistake of fact of law, or for anything which it
may do or refrain from doing hereinafter in good faith or in response to
instructions from the Association, its officers and directors. Manager may act
as manager hereunder and manage the rental of units owned by affiliates of
Manager or others without being charged with self-dealing or breach of
obligation, fiduciary or otherwise.
5.3 Modifications. This Agreement cannot be changed or modified, except
by another agreement in writing signed by all parties hereto or by their
respective successors in interest.
5.5 Headings. The Article and paragraph headings contained herein are for
convenience of reference only and are not intended to defined, limit or describe
the scope or intent of any provisions of this Agreement.
5.6 Governing Law. This Agreement shall be governed by the laws of the
State of New Hampshire.
5.7 Successors and Assigns; Construction. This Agreement shall benefit
and be binding upon the parties hereto and their respective successors and
assigns. Wheresoever applicable the singular number shall include the plural,
the plural the singular, and the use of any gender shall be deemed applicable to
all genders.
5.8 Liability of the Board of Trustees. This Agreement is executed by the
Board as agent of the Owners on behalf of the Association. Each Owner's
liability hereunder shall be limited to such proportion of the total liability
hereunder as his interest in the Common Elements bears to the interest of all
Owners in the Common Elements. Otherwise the members of the Board shall have no
personal liability hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers and their seals affixed hereto on this 7th
day of August, 1997.
GRAND SUMMIT HOTEL UNIT OWNERS' ASSOCIATION,
INC.
/s/ Donna C. Fresco by: /s/ Illegible
- ------------------------------ -------------------------------------
Witness its Vice President
-------------------------------------
MANAGER
L.B.O. HOLDING, INC.
/s/ Donna C. Fresco by: /s/ Philip T. Gravink
- ------------------------------ ------------------------------------
- ----------------
Witness its MD COO
------------------------------------
7
<PAGE>
Exhibit 10.77
AGREEMENT IN TRUST
FOR VALUE RECEIVED, receipt whereof is hereby acknowledged, Waterville
Valley Ski Resort, Inc., a Delaware corporation with a place of business in
Waterville Valley, New Hampshire (the "Assignor"), hereby assigns, transfers
and sets over to American Skiing Company, with a mailing address of P.O. Box
450, Bethel, Maine 04217 (hereinafter referred to as "Assignee"), in trust as
security for the Obligations hereinafter referred to, all of its interest,
rights and obligations under and by virtue of a Term Special Use Permit No.
4002-01, issued November 27, 1996 for the Waterville Valley Resort, issued to
the Assignor by the Forest Service of the United States Department of
Agriculture, together with any extensions, supplements, or amendments related
to said permit (collectively, the "Forest Service Use Permits").
This assignment is made in trust to secure the payment of the
indebtedness of the Assignor under and with respect to:
(i) 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 Assignor, its successors or assigns ("Borrower") of that
certain Note dated as of November 27, 1996, together with any and all
renewals, amendments, modifications, consolidations and extensions thereof
(the "Note");
(ii) The full and prompt payment and performance of all the provisions,
agreements, covenants and obligations set forth in this Assignment or in
the Note or Mortgage and Security Agreement given as security therefor;
(iii) Any and all additional advances made to preserve, enforce and
protect the Property, the security interest created hereby on the Property,
or this Assignment and the Note, including, without limitation, taxes,
assessments or insurance premiums or for performance of any of the
Borrower's obligations under the Note or Mortgage or for any other purpose.
(Collectively, the "Obligations").
It is understood and agreed that the Assignee shall not be liable for,
nor have any responsibility for, the performance of any of the obligations
undertaken, made, or assumed by Assignor under the Forest Service Use Permit,
so long as Assignee has not entered into actual possession of Assignee's
interest and rights under the Forest Service Use Permit and until such
possession, the Assignor shall remain fully responsible and liable for the
performance of any and all obligations under the Forest Service Use Permit,
and the Assignor hereby agrees to fully conform and comply with all such
obligations of the Forest Service Use Permit so long as any of the
Obligations secured by this assignment remains outstanding.
<PAGE>
Further, the Assignor appoints the Assignee as its agent but only for
purposes of the Forest Service Use Permit and only effective upon the
occurrence of a default or an event of default under the Obligations referred
to above.
Dated as of this 27th day of November, 1996.
WATERVILLE VALLEY SKI
RESORT, INC.
/s/ Christopher E. Howard By: /s/ Jeffrey Joyce
- ------------------------------- -------------------------------------
Witness Name:
Title:
/s/ Illegible Signatory
- -------------------------------
Witness
STATE OF MASSACHUSETTS
COUNTY OF SUFFOLK November 27, 1996
Personally appeared the above-named Jeffrey J. Joyce and acknowledged
that he is the duly authorized officer of Waterville Valley Ski Resort, Inc.,
and being authorized to do so, executed the foregoing instrument for the
purpose therein contained as his free act and deed in his said capacity.
Before me,
/s/ Saundra L. O'Malley
-------------------------------------
Saundra L. O'Malley Notary Public
Notary Public Print Name
My Commission Expires Feb. 7, 1997 My Commission Expires:
<PAGE>
EXHIBIT 10.100
AGREEMENT CONCERNING AMERICAN SKIING COMPANY
FOR HOLDER OF SPECIAL USE PERMIT NO. 4002-01
This Agreement ("Agreement") is made by the UNITED STATES DEPARTMENT OF
AGRICULTURE FOREST SERVICE (the "Forest Service"), AMERICAN SKIING COMPANY, a
Maine corporation (the "Lender"), and WATERVILLE VALLEY SKI RESORT, INC., a
Delaware corporation with a place of business in Waterville Valley, New
Hampshire (the "Borrower").
RECITALS
1. On November 27, 1996, the Forest Service issued Term Special Use
Permit No. 4002-01 to the Borrower (the "Permit").
2. The Permit authorizes the Borrower to use and occupy certain National
Forest System land for the purpose of constructing, operating and maintaining a
four season resort. The Permit covers National Forest Service System land in the
town of Waterville, Grafton County, New Hampshire (the "Property").
3. The Property is owned by the United States and managed under statutory
authority granted to the Forest Service.
4. Under the Permit, physical improvements owned by the Borrower that are
located on the Property (the "Improvements") shall be considered personal
property, not fixtures.
5. The Borrower provides products and services to the public under the
terms of the Permit.
6. The Lender has extended credit to Borrower.
7. The Lender has agreed to make a loan to the Borrower in the original
principal amount of $2,750,000 plus interest, costs and other fees pursuant to a
certain Purchase and Sale Agreement, a certain Subordinated Promissory Note and
related documents which may now or hereafter evidence, govern or secure the
foregoing obligations and any amendments, extensions, renewals, replacements or
substitutions of any of the foregoing (all collectively, the "Loan," and the
documents relating thereto the "Loan Documents").
PURPOSE OF THIS AGREEMENT
WHEREAS, the Forest Service believes that the public will benefit from the
products and services provided by the Borrower under the terms of the Permit.
<PAGE>
WHEREAS, the Lender desires the cooperation of the Forest Service in
connection with the financing by the Lender of the acquisition of the
Improvements.
WHEREAS, the Lender desires the cooperation of the Forest Service if the
Borrower defaults on the Loan and the Lender forecloses on the Improvements.
WHEREAS, the Forest Service desires to cooperate with the Lender under the
terms of this Agreement.
AGREEMENT
In consideration of the foregoing, the parties agree as follows:
1. The Permit is revocable, terminable, and not transferable in accordance
with its terms and federal regulations. The Permit is not real property, does
not convey any interest in real property, and may not be used as collateral for
the Loan.
2. As collateral for the Loan, the Borrower agrees to give the Lender a
security interest in the Improvements, and the Forest Service acknowledges the
creation of that security interest at the request of the Lender. No security
interest is created in the Property or in any improvements owned by the United
States.
3. The Borrower is in compliance with the terms of the Permit.
4. The United States receives permit fees from the Borrower based on a fee
system contained in the Permit. The fee system and other Permit provisions may
be adjusted or replaced under the terms of the Permit or federal regulations.
5. The Permit by its terms is not transferable. Any change of title to the
Improvements shall result in termination of the Permit. Prior to any transfer of
title to the Improvements, the Forest Service shall cooperate with the Lender in
obtaining an acceptable permit holder. Issuance of a new permit shall be at the
sole discretion of the Forest Service. The Forest Service shall determine that
the prospective holder meets requirements under Forest Service regulations,
including financial and technical capability. As part of this cooperation, the
Forest Service shall not issue a new permit for a four season resort to any
individual or entity that does not hold title to the Improvements.
6. If the Borrower fails to comply with the terms of the Permit and the
noncompliance could lead to suspension or revocation of the Permit, the Forest
Service shall: (1) notify the Lender in writing of the noncompliance provided,
however that prior notice is not required under this clause where immediate
action is deemed necessary under federal regulations; (2) inform the Lender of
any action taken in response to the noncompliance; and (3) apprise the Lender of
the resolution of any disputes with the Borrower or any proposed agreement to
modify the terms of the Permit arising out of the
2
<PAGE>
noncompliance. Notice shall be mailed "certified return receipt requested," to
the following address: American Skiing Company, P.O. Box 450, Bethel, ME 04217
Attn: Christopher E. Howard.
The Lender shall not have any claim for legal or equitable remedies if the
Forest Service fails to comply with any part of this clause. Nothing in this
clause impinges on any of the Forest Service's rights in administering the
Permit under the federal regulations on termination, revocation, and suspension.
7. The Lender shall advise the Forest Service of impending servicing
actions which may be taken against the Borrower, if the Lender deems such notice
legal and advisable.
8. All the provisions of paragraph 5 above apply to a transfer of title
resulting from a default by the Borrower.
9. If the Lender forecloses on the Improvements, the Forest Service shall,
to the extent permitted under applicable law, allow physical access to the
Improvements by the Lender as is necessary to liquidate the Loan or secure the
Improvements. The Lender shall give prior notice to the Forest Service of such
access to the Improvements. The Lender shall obtain a temporary authorization
from the Forest Service in accordance with federal regulations in order to
operate a business in or otherwise occupy the Improvements.
10. If the Permit is revoked, the Forest Service shall cooperate with the
Lender in obtaining an acceptable permit holder. Issuance of a new permit shall
be at the sole discretion of the Forest Service. The Forest Service shall
determine that the prospective holders meet requirements under Forest Service
regulations, including financial and technical capability. As part of this
cooperation, the Forest Service shall not issue a new permit for a four season
resort to any individual or entity that does not hold title to the Improvements.
11. Nothing in this Agreement precludes the Lender from exercising
remedies against the Borrower associated with other security interests.
12. If the Borrower has satisfied all of its obligations to the Forest
Service, any money payable from the Forest Service to the Borrower under the
Permit by reason of termination of the Permit shall be paid to the Lender until
the Loan is fully satisfied.
13. Nothing in this Agreement confers any rights on any third party as a
beneficiary under this Agreement. In addition, nothing in this Agreement confers
any rights on the Lender or any third party as a beneficiary under the Permit.
14. The Borrower and Lender acknowledge that the Permit and the Property
are not encumbered by any of the Loan Documents and are not subject to
foreclosure if
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<PAGE>
the Borrower defaults. Any statement in the Permit or the Loan Documents that
creates or appears to create a security interest in the Permit or the Property
is ineffective and contrary to law.
15. If any provision in the Loan Documents, security agreement, or any
other documentation made or executed in conjunction with the Loan conflicts with
the terms of this Agreement, the terms of this Agreement shall prevail.
16. This Agreement shall terminate automatically on final repayment of the
Loan, and readvances under the Loan are no longer committed for. The Lender
shall give the Forest Service notice of such repayment of the Loan.
17. Nothing in this Agreement shall be construed to limit in any way the
sole discretion of the Forest Service to determine the allocation of National
Forest System land, including decisions not to reauthorize any use which may be
inconsistent with a forest land and resource management plan or applicable law.
18. This Agreement is intended to foster consultation among the parties in
order to coordinate more effectively the fulfillment of their respective rights
and obligations.
19. The Borrower warrants that it has full authority to enter into this
Agreement, and covenants that it shall be binding on its representatives,
successors, and assigns.
20. The undersigned officials of the Lender and the Forest Service warrant
that they have the delegated authority to execute this Agreement.
21. Lender and Borrower represent to the Forest Service that the Loan is
junior in priority to a secured first mortgage loan in the original principal
amount of $10 million (as such loan may be modified, increased, replaced or
refinanced from time to time, so long as such loan continues to satisfy the
definition of "Senior Debt" set forth in the Subordinated Promissory Note
evidencing the Loan, the "First Mortgage Loan") extended to Borrower by The
First National Bank of Boston (including its successors and assigns, any lender
or lenders that replace or refinance the First Mortgage Loan in whole or in
part, the "Bank"), securing certain physical improvements owned by the Borrower
that are located on the Property, including the Improvements. As of the date
hereof, the Bank, Borrower and the Forest Service entered into an agreement
concerning the Bank with respect to Borrower's Special Use Permit No. 4002-01 on
terms materially similar to this Agreement. The Forest Service acknowledges and
agrees that until such time as it receives written notice from Borrower, the
Bank and Lender that the First Mortgage Loan has been paid and the collateral
therefor released, this Agreement and all the rights and benefits that run to
Lender hereunder shall be subordinate to the rights and benefits that run to the
Bank under the Agreement concerning the Bank for Holder of Special Use
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<PAGE>
Permit No. 4002-01, and the Forest Service shall bear no liability for and shall
treat and deal with the Bank as the first priority lender with respect to the
Improvements.
UNITED STATES DEPARTMENT OF
AGRICULTURE - FOREST SERVICE
By: /s/ Beth LeClair
-------------------------------
Title: FOR/Forest Supervisor
Date: January 2, 1997
WATERVILLE VALLEY SKI RESORT, INC.
By: /s/ Jeffrey Joyce
--------------------------------
Title: ____________________________
Date: ___________________, 1996
AMERICAN SKIING COMPANY
By: /s/ Christopher E. Howard
--------------------------------
Title: Chief Administrator Officer
Date: November 27, 1996
STATE OF MASSACHUSETTS
County of Suffolk Nov. 27, 1996
Then personally appeared before me the above-named Jeffrey J. Joyce
in his/her said capacity and acknowledged the foregoing to be his/her free act
and deed and the free act and deed of the United States Department of
Agriculture - Forest Service.
Before me,
/s/ Saundra L. O'Malley
----------------------------------
Saundra L. O'Malley Notary Public
Notary Public Print Name:
My Commission expires
Feb. 7, 1997
STATE OF MASSACHUSETTS
County of Suffolk Nov. 27, 1996
<PAGE>
Then personally appeared before me the above-named Christopher E. Howard
in his/her said capacity and acknowledged the foregoing to be his/her free act
and deed and the free act and deed of Waterville Valley Ski Resort, Inc.
Before me,
/s/ Saundra L. O'Malley
--------------------------------
Saundra L. O'Malley Notary Public
Notary Public Print Name:
My Commission Expires
Feb. 7, 1997
STATE OF VERMONT
County of Windsor Jan. 2 , 1997
Then personally appeared before me the above-named Beth LeClair
in his/her said capacity and acknowledged the foregoing to be his/her free act
and deed and the free act and deed of United States Department of Agriculture,
Forest Service.
Before me,
/s/ Frances Guilmette
---------------------------
Notary Public
Print Name: Frances Guilmette
<PAGE>
EXHIBIT 10.101
LEASE AGREEMENT
This Lease is made in duplicate this 12th day of September, 1997, by and
between Grand Summit Resort Properties, Inc., a Maine corporation with its
principal place of business in the Town of Newry, Maine, hereinafter referred to
as "LESSOR" and Sunday River, Ltd, a Maine corporation with its offices in
Newry, Maine, hereinafter referred to as "LESSEE".
For the consideration hereinafter set forth and reserved, LESSOR has agreed
to demise and let, and hereby does demise and let to LESSEE, and LESSEE has
agreed to take, and hereby does take from LESSOR, certain lands and Premises
situated in the Town of Newry, County of Oxford and State of Maine, described as
follows:
The commercial condominium units at the Jordan Grand Summit Resort
Properties, Inc. Condominium at Jordan Bowl, to be located in Newry,
Maine, as more particularly described in Exhibit "A" attached hereto
and made a part hereof, hereinafter the "Premises".
TO HAVE AND TO HOLD the Premises with all the privileges and appurtenances
thereof, to LESSEE subject to the following terms and conditions:
1. TERM AND RENT. This Lease shall be in effect for a term of five
years, beginning on the 1st day of December, 1997 and ending on the 30th day of
November, 2002. The rent due hereunder shall be paid as follows:
An amount equal to Positive EBITDA from operation of the Premises, less
15%. For purposes of this Lease, Positive EBITDA shall mean for each
fiscal quarter assuming a fiscal year end of July 31. Net income or loss
resulting from the operations of the Premises by the LESSEE determined
independently for those operations which shall be accounted for separately
from the LESSEE'S other operations in accordance with generally accepted
accounting principals without giving effect to extraordinary gains and
losses from sales, exchanges or other dispositions of property not in the
ordinary course of business, and nonrecurring items, plus, to the extent
deducted in calculating net income, the sum of, without duplication, (i)
depreciation expense, (ii) amortization expense, (iii) consolidated
interest expense plus the non-cash portion of consolidated interest expense
on debt related to such Premises, (iv) income tax expense and (v) other
non-cash items. The foregoing adjustments to net income shall be made
solely with respect to operations at the Premises, which, in accordance
with the provisions of this Lease Agreement, shall be accounted for
separately from Lessee's other operations.
The LESSEE does hereby covenant with the LESSOR that the LESSEE, during the
term of said Lease and for such further time as it or any other person or
persons claiming under it shall hold the said Premises or any part thereof, will
pay unto the LESSOR the said rent at times and in the manner aforesaid.
<PAGE>
LATE CHARGE: At the option of the LESSOR, the LESSEE agrees and shall
pay a "late charge" of two percent (2%) of any monthly rental installment
when paid more than (7) days after the due date thereof. Said late charge
shall be added to the next succeeding month's regular rent.
2. PERMITTED USE. LESSEE shall use and occupy the Premises for any
purpose permitted under applicable zoning and land use regulations.
The Premises shall not be used for any illegal purpose, nor in violation of
any valid regulation of any governmental body, nor in any manner to create any
nuisance or trespass, nor in any manner to cause cancellation of the insurance
on the Premises or on the building.
3. ACCEPTANCE OF PREMISES: ALTERATIONS OR ADDITIONS. The LESSEE, by
taking possession of the Premises, shall accept and shall be held to have
accepted the same as suitable for the use intended by the LESSEE. The LESSOR
shall not be required after possession of the Premises has been delivered to the
LESSEE, to make any structural repairs or improvements to the Premises, except
those outlined herein. The LESSEE shall not make alterations or additions,
without written permission of the LESSOR, which shall not be unreasonably
withheld, however, such alterations shall be at the sole cost and expense of the
LESSEE. In connection therewith, LESSEE shall comply with all applicable rules,
regulations, laws or orders of any governmental authority or any rules of
LESSOR'S insurance carrier. LESSEE will pay any and all expenses necessary to
bring or keep the Premises in compliance with federal, state or local laws,
rules, ordinances and building codes.
LESSOR specifically covenants and agrees to be responsible for all exterior
maintenance and repair limited to structural repairs, replacement or repair of
plumbing, electrical or heating systems, site improvements such as sewer and
water, roof, exterior walls and foundation, on the subject Premises. LESSOR
shall have the responsibility of exterior painting which obligation shall be no
more than once every eight (8) years. Exterior painting shall utilize a color
using the current decorating scheme or any other color agreed upon between
LESSOR and LESSEE provided, however, that color shall be in conformity with all
local zoning regulations.
4. DUTY TO KEEP PREMISES IN GOOD ORDER. The LESSEE hereby covenants and
agrees to keep the interior Premises in as good order, repair and conditions as
the same area at the commencement of the term thereof, or may be put in
thereafter, damage by fire or unavoidable casualty and reasonable wear and tear
excepted; and at the termination hereof, to peaceably yield up said Premises and
all additions, alterations and improvements thereto, in such good order and
repair and conditions, leaving the premise clean, neat and tenantable.
5. MAINTENANCE. LESSEE shall, at their own expense, keep and maintain
the interior surfaces of the Premises in good order and repair and shall not
damage or deface said Leased Premises. LESSEE shall be obligated to maintain
the exterior and common areas of said Premises including the entry ways.
Parking areas, hallways, and walkways. It shall be the
2
<PAGE>
obligation of LESSEE to make any repairs to the building including, windows,
interior glass and walls, elevator system, alarm system, lighting, carpeting and
flooring. Said repairs and maintenance shall also include, but not limited to,
repairs, cleaning and snow and ice removal. LESSEE shall maintain said Premises
and otherwise operate said Premises in conformity in all material respects, with
all existing land use permits currently governing the Leased Premises.
6. CAPITAL IMPROVEMENTS AND REPAIRS BY LESSEE. Subject to the other
provisions of this Lease concerning repairs, improvements, alterations or
additions required to be made by the LESSEE or LESSOR, the LESSEE shall yield up
the Premises to LESSOR at the expiration of this Lease in the same condition as
when it was received by LESSEE, normal wear and tear excepted and excepting any
improvements made by LESSEE.
7. UTILITIES. LESSEE shall be responsible to supply and pay for all
utilities to the subject Premises including, but not limited to, heat,
electricity, garbage removal, and snow plowing. LESSEE shall be responsible for
its own telephone usage and/or other communication systems utilized at the
Premises. Damage caused by a failure to provide adequate heat to the Premises
shall be the sole responsibility of LESSEE who shall indemnify and hold LESSOR
harmless therefrom.
8. PERSONAL PROPERTY TAXES. LESSEE shall be responsible for any and all
personal property taxes levied upon the Premises due to inventory, equipment or
machinery maintained upon the Premises by LESSEE.
9. REAL ESTATE TAXES. LESSEE shall be solely responsible for payment
when due of real estate taxes assessed by the Town of Newry in reference to the
Leased Premises and tax increases as may be levied by the Town of Newry.
10. SIGNS. LESSEE shall conform with the Town of Newry Zoning Regulations
regarding signs, displays, advertising devices or other things upon or about the
exterior Premises of the building.
11. PARKING. LESSEE shall be entitled to all parking associated with the
Premises.
12. FIXTURES AND EQUIPMENT. Also included in this Lease are all fixtures
and equipment currently in place at said Premises. Said inventory and fixtures
include, but are not limited to, counters, display racks, security system,
storage shelving, mirrors and soft good bins. LESSEE shall be obligated to
maintain said fixtures or their reasonable equivalent and shall turn over to
LESSOR said fixtures upon expiration of this Lease which shall be in good,
workable condition, normal wear and tear excepted.
13. INSURANCE.
(a) LIABILITY INSURANCE. LESSEE shall maintain at LESSEE'S expense,
public liability insurance covering the Premises and the use and occupancy
of same for the mutual benefit of LESSOR and LESSEE naming LESSOR as an
additional named
3
<PAGE>
insured and combined single limits coverage of not less than $3,000,000 for
death, personal injury, or property damage. Said insurance shall be
written on a comprehensive general liability form and include the broad
form general liability endorsement. A copy of the declaration page of said
insurance shall be provided to LESSOR and LESSOR shall specifically require
notification by the insurer to LESSOR of any failure to pay or other breach
of the terms of said insurance. A copy of said insurance declaration sheet
or other insurance documents required by LESSOR'S mortgage bank shall be
provided by LESSEE or its agent to said bank.
(b) HAZARD INSURANCE. LESSEE shall protect the Premises including the
exterior grounds, parking area and improved areas with casualty insurance
for the benefit of LESSOR including loss against damage by fire, wind,
storm, earthquake and similar hazards. Such policy of insurance shall be
for the full insurable replacement value of the building and improvements
contained thereon. A copy of the declaration sheet of said policy shall
likewise be provided by LESSEE'S insurance to LESSOR's naming the LESSOR as
an additional insured party and identifying LESSOR as a party to be
notified in the event of any insurance laps or any claim made thereon.
(c) The failure of LESSEE to maintain and pay for said insurance when due
or otherwise comply with the terms of said insurance policy shall
constitute a material breach of this Lease.
(d) A copy of said insurance policy(ies) obtained and maintained by LESSEE
shall be provided by LESSEE to LESSOR upon LESSOR'S request.
(e) LESSEE shall likewise maintain similar casualty insurance to cover the
replacement cost of all inventory owned by LESSEE in the subject Premises.
LESSEE shall be named insured in regard to said inventory, however, LESSOR
shall also be named as an additional insured party.
Said insurance(s) procured by LESSEE as herein required, shall be issued by
a company licensed to do business in the State of Maine and shall contain
endorsements that:
i. such insurance(s) may not be canceled or amended with respect to
LESSOR by the insurance company without notice to the LESSOR;
ii. LESSOR shall be named as an additional insured with respect to
any and all public liability; and
iii. LESSEE shall be solely responsible for payment or premiums for
such insurance.
14. DESTRUCTION AND CONDEMNATION OF PREMISES. In the event that said
Premises, or any substantial part of the building to which they are a part,
shall be destroyed or damaged by fire or other unavoidable casualty, or by the
action of the Town or other
4
<PAGE>
authorities, after the execution thereof, and before the expiration of said
term, and the Leased Premises have not been restored to their original condition
within ninety (90) days of said taking, destruction or action, then this Lease
and the said terms shall terminate at the election of either party. A
"substantial part" means a sufficient portion of the Premises such that use of
the Premises for its then current purposes is materially impaired and cannot be
restored. LESSEE and LESSOR shall both be obligated to restore the Premises as
nearly as possible to pre-condemnation condition and apply the net proceeds of
any applicable insurance to that restoration. Neither LESSOR nor LESSEE shall
be obligated to expend in excess of net insurance proceeds to restoration,
although each shall have the option to do so without any changes in base rent or
additional rent hereunder, except as provided immediately below. A "just
proportion" of the rent hereinafter reserved, according to the nature or the
extent of the injury sustained by the demised Premises, shall be immediately
suspended and abated while the demised Premises are being restored. The term
"just proportion" as used herein shall be a fraction, the numerator of which
shall be the total retail revenues produced by the Premises destroyed or
rendered unusable and the denominator of which shall be the total revenues
produced by the Leased Premises as expressed as a percentage. In the event of a
dispute regarding this provision, the parties shall arbitrate the issues.
15. BREACH. Except for monetary default by LESSEE, which LESSEE shall
have no right to cure, if the LESSEE should neglect or fail to perform or
observe any of the covenants contained herein which are required of LESSEE, and
if such failure is not cured within thirty (30) days after written notice by
LESSOR, or if such breach cannot by its nature be cured within 30 days, then
LESSEE shall commence to cure such default and shall pursue such cure to
conclusion within a reasonable period in light of the nature of the default, or
if the LESSEE shall be declared bankrupt or insolvent accordance to the law,
reorganized under the Bankruptcy Act, or if any assignment shall be made of its
property for the benefit of creditors then and in any time thereafter, and
without demand or notice, LESSOR may enter into and upon the same Premises or
any part thereof, and repossess the same as of their former estate and expel the
LESSEE and those claiming through or under it and remove their effects by proper
legal process, without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant and upon entry of, as aforesaid, this Lease shall
terminate, and the LESSEE covenant that in case of such termination it will
indemnify the LESSOR against all loss of rent and other payment which they may
incur by reason of such termination during the residue of the time first above
specified for the duration of the said term. The LESSOR shall be obligated to
take reasonable steps to obtain other tenants, the rents from whom shall be set
off against rents due from LESSEE.
16. ASSIGNMENT OR SUBLEASE. This Lease shall not be assigned nor can the
Premises be sublet prior to written consent of the LESSOR, which consent shall
not be unreasonable withheld or delayed. An assignment to any corporation or
entity which is affiliated with or under management and control of LESSEE is
hereby expressly permitted by LESSOR, however, LESSOR shall remain primarily
liable upon the Lease unless expressly released in writing by LESSOR. LESSOR
agrees that LESSEE may collaterally assign this Lease to its senior lenders and
LESSOR shall execute and deliver such consents to assignment as may be required
by LESSEE'S senior lending institutions.
5
<PAGE>
17. COMPLIANCE WITH LAW AND LIEN PREVENTION. LESSEE agrees that it shall
promptly comply at its own expense with all requirements of any governmental
authority having competent jurisdiction which requirements are made necessary by
reason of LESSEE'S occupancy of said Premises. Further, LESSEE agrees to pay
all contractors and subcontractors for any improvements or additions to the
Leased Premises contracted for by the LESSEE with LESSOR'S consent as required
hereinabove. LESSOR shall include similar provision in Leases issued to other
tenants.
18. SUBORDINATION. LESSEE agrees, at the request of the LESSOR, to
subordinate this Lease to any mortgages placed upon the Premises, to agree not
to prepay rent more than ten (10) days in advance, except as otherwise agreed by
the parties in writing, provided that the holder of such mortgage or mortgagees
enter into any agreement with LESSEE by the terms of which such party agrees not
to disturb the LESSEE in its possession of the Premises so long as LESSEE
continues to perform its obligations hereunder, and in the event of acquisition
of title by said party through foreclosure proceedings or otherwise, to accept
LESSEE as LESSEE of the Premises under terms and conditions of this Lease to
perform LESSOR'S obligations hereunder (but only while owner of the Premises),
and LESSEE agrees to recognize such party or any other person acquiring title to
the Premises as LESSOR. LESSEE and LESSOR agree to execute and deliver any
appropriate instruments necessary to carry out the foregoing provisions. LESSEE
shall have the right upon receiving a judgment of foreclosure upon the Premises
to at LESSEE'S option and upon thirty (30) days notice to terminate this Lease.
19. INDEMNITY. LESSEE will indemnify and hold the LESSOR harmless against
tall claims and demands for loss or damage, including property damage, normal
wear and tear excepted, personal injury and wrongful death, arising out of or
caused by the negligent act or omissions LESSEE will reimburse LESSOR for their
costs, expenses, judgments, executions or claims in connection with the defense
of any such actions.
LESSEE shall give prompt notice to the LESSOR in case of fire or accident
in the demised Premises or in the building of which the demised Premises are a
part of or defects therein or in any fixtures or equipment.
20. ATTORNEYS FEES. If LESSEE defaults, fails to pay rent or breaches any
of the terms herein and damages are collected through any attorney-at-law,
LESSEE agrees to pay all reasonable attorneys fees and related costs of
collection. Likewise, a breach by LESSOR shall result in LESSOR being
responsible for reasonable attorneys fees and related costs relating to
remedying such breach,
21. RECORD. LESSOR and LESSEE agree that a Memorandum of Lease shall be
recorded. LESSOR and LESSEE shall enter into an agreement in recordable form,
setting forth actual commencement and termination dates of this Lease. Said
Memorandum is attached hereto and made a part hereof as Exhibit "B".
22. INTENT. The parties hereto intend that the terms and conditions of
this Lease are
6
<PAGE>
for commercial purposes.
23. NOTICE. Any notice required to be given by the terms hereof shall be
deemed duly served if sent by certified mail, return receipt request, through
the United States Postal Service, after the term of this Lease has commenced or
to the LESSOR at the said Premises, or to either party at such place as may from
time to time be established in the following manner:
Daniel Seme
Sunday River, Ltd.
P.O. Box 450
Sunday River Road
Newry, Maine 04217
Mark Girard
Grand Summit Resort Properties, Inc.
P.O. Box 450
Bethel, ME 04217
24. SEVERALTY. If any provision of this Lease or its application to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
25. RIGHT OF FIRST REFUSAL. In consideration of value recited herein,
LESSOR grants to LESSEE a Right of First Refusal to purchase the Leased Premises
under the same terms and conditions contained in any bona fide offer to purchase
received by LESSOR subject to the following terms and conditions:
(a) LESSOR shall notify LESSEE of the terms of any bona fide offer to
purchase the subject Premises received by LESSOR which LESSOR is prepared
to accept. Said notice shall be in writing and mailed certified mail,
return receipt requested, to LESSEE'S business Premises located at Newry,
Maine or to any other address given in writing by LESSEE for the purpose of
notice.
(b) Upon receipt of said notice of offer, LESSEE shall have thirty (30)
days to notify LESSOR of its intent to exercise its right of first refusal.
Said thirty day period shall run from midnight of the date of delivery of
said notice until midnight of the thirtieth (30th) day thereafter.
(c) Said responsive notice by LESSEE shall be mailed certified mail,
return receipt requested, to LESSOR'S principal place of business in Newry,
Maine or such other address as directed in writing by LESSOR.
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<PAGE>
(d) LESSEE shall have forty-five (45) days from receipt by LESSEE under
Paragraph 25(a) of said notice to enter into a binding written contract for
the purchase of said Leased Premises, the terms of which shall correspond
to those contained in the bona fide offer received by LESSOR.
(e) LESSEE shall have sixty (60) days from the execution of said written
contract, under Paragraph 25(d) to close the purchase and meet the terms of
said contract.
(f) The right of first refusal contained herein shall expire upon the
expiration of this Lease or any renewal thereof. It shall be contained in
the Memorandum of Lease recorded in connection herewith.
Dated this 12th day of September, 1997.
IN PRESENCE OF: GRAND SUMMIT RESORT
PROPERTIES, INC.
/s/ Paula M. Perry /s/ Mark P. Girard
- ------------------------------ ------------------------------
Witness By: Mark P. Girard
Its: Vice President
/s/ Christi Jones
- ------------------------------
Witness
SUNDAY RIVER, LTD.
/s/ [Illegible] /s/ Christopher E. Howard
- ------------------------------ -----------------------------------
Witness By: Christopher E. Howard
Its: Chief Administrative Officer
/s/ Jennifer S. Giles
- ------------------------------
Witness
8
<PAGE>
STATE OF MAINE
OXFORD COUNTY, ss
At Newry, Maine, this 12th day of September, 1997, personally appeared Mark
Girard, Vice President and duly authorized agent of Grand Summit Resort
Properties, Inc. and acknowledged this instrument by him/her, sealed and
subscribed to be his/her free act and deed and the free act and deed of Grand
Summit Resort Properties, Inc.
Before me,
/s/ Deirdre M. O'Callaghan
-----------------------------------
Attorney at Law
Deirdre M. O'Callaghan
STATE OF MAINE
OXFORD COUNTY, ss
At Newry, Maine, this 12th day of September, 1997, personally appeared
Chris Howard, Chief Admin. Officer and duly authorized agent of Sunday River,
Ltd. and acknowledged this instrument by him/her, sealed and subscribed to be
his/her free act and deed and the free act and deed of Sunday River, Ltd.
Before me,
/s/ Deirdre M. O'Callaghan
-----------------------------------
Attorney at Law
Deirdre M. O'Callaghan
9
<PAGE>
EXHIBIT A
Grand Summit Hotel at Jordan Bowl
Commercial Lease Area
SQUARE FEET
Administration 1,777
Real Estate 962
Business Office 231
Restaurant 3,534
Slopeside Restaurant 4,042
Health Club 4,046
Arcade 520
Retail Shops 4,850
Ballroom 2,995
Conference Rooms 2,758
Kitchen Space 5,501
Day Care 989
Ski Check 469
Sales Office 1,710
-------
33,884
10
<PAGE>
EXHIBIT 10.102
LEASE AGREEMENT
This Lease is made in duplicate this 9th day of Sept., 1997, by and between
Grand Summit Resort Properties, Inc., a Maine corporation with its principal
place of business in the Town of Newry, Maine, hereinafter referred to as
"LESSOR" and Killington Ltd., a Vermont corporation with its offices in
Sherburne, Vermont, hereinafter referred to as "LESSEE".
For the consideration hereinafter set forth and reserved, LESSOR has agreed
to demise and let, and hereby does demise and let to LESSEE, and LESSEE has
agreed to take, and hereby does take from LESSOR, certain lands and Premises
situated in the Town of Sherburne, County of Rutland and State of Vermont,
described as follows:
The commercial condominium units at the Grand Summit Resort
Properties, Inc. Condominium, to be located in Sherburne,
Vermont, as more particularly described in Exhibit "A"
attached hereto and made a part hereof, hereinafter the
"Premises".
TO HAVE AND TO HOLD the Premises with all the privileges and appurtenances
thereof, to LESSEE subject to the following terms and conditions:
1. TERM AND RENT. This Lease shall be in effect for a term of five
years, beginning on the 1st day of December, 1997 and ending on the 30th day of
November, 1997 and ending on the 30th day of November, 2002. The rent due
hereunder shall be paid as follows:
An amount equal to Positive EBITDA from operation of the Premises,
less 15%. For purposes of this Lease, Positive EBITDA shall mean for
each fiscal quarter assuming a fiscal year end of July 31. Net income
or loss resulting from the operations of the Premises by the LESSEE
determined independently for those operations which shall be accounted
for separately from the LESSEE'S other operations in accordance with
generally accepted accounting principals without giving effect to
extraordinary gains and losses from sales, exchanges or other
dispositions of property not in the ordinary course of business, and
nonrecurring items, plus, to the extent deducted in calculating net
income, the sum of, without duplication, (i) depreciation expense,
(ii) amortization expense, (iii) consolidated interest expense plus
the non-cash portion of consolidated interest expense on debt related
to such Premises, (iv) income tax expense and (v) other non-cash
items. The foregoing adjustments to net income shall be made solely
with respect to operations at the Premises, which, in accordance with
the provisions of this Lease Agreement, shall be accounted for
separately from Lessee's other operations.
The LESSEE does hereby covenant with the LESSOR that the LESSEE, during the
term of said Lease and for such further time as it or any other person or
persons claiming
<PAGE>
under it shall hold the said Premises or any part thereof, will pay unto the
LESSOR the said rent at times and in the manner aforesaid.
LATE CHARGE: At the option of the LESSOR, the LESSEE agrees and shall
pay a "late charge" of two percent (2%) of any monthly rental installment
when paid more than (7) days after the due date thereof. Said late charge
shall be added to the next succeeding month's regular rent.
2. PERMITTED USE. LESSEE shall use and occupy the Premises for any
purpose permitted under applicable zoning and land use regulations.
The Premises shall not be used for any illegal purpose, nor in violation of
any valid regulation of any governmental body, nor in any manner to create any
nuisance or trespass, nor in any manner to cause cancellation of the insurance
on the Premises or on the building.
3. ACCEPTANCE OF PREMISES: ALTERATIONS OR ADDITIONS. The LESSEE, by
taking possession of the Premises, shall accept and shall be held to have
accepted the same as suitable for the use intended by the LESSEE. The LESSOR
shall not be required after possession of the Premises has been delivered to the
LESSEE, to make any structural repairs or improvements to the Premises, except
those outlined herein. The LESSEE shall not make alterations or additions,
without written permission of the LESSOR, which shall not be unreasonably
withheld, however, such alterations shall be at the sole cost and expense of the
LESSEE. In connection therewith, LESSEE shall comply with all applicable rules,
regulations, laws or orders or any governmental authority or any rules of
LESSOR'S insurance carrier. LESSEE will pay any and all expenses necessary to
bring or keep the Premises in compliance with federal, state or local laws,
rules, ordinances and building codes.
LESSOR specifically covenants and agrees to be responsible for all exterior
maintenance and repair limited to structural repairs, replacement or repair of
plumbing, electrical or heating systems, site improvements such as sewer and
water, roof, exterior walls and foundation, on the subject Premises. LESSOR
shall have the responsibility of exterior painting which obligation shall be no
more than once every eight (8) years. Exterior painting shall utilize a color
using the current decorating scheme or any other color agreed upon between
LESSOR and LESSEE provided, however, that color shall be in conformity with all
local zoning regulations.
4. DUTY TO KEEP PREMISES IN GOOD ORDER. The LESSEE hereby covenants and
agrees to keep the interior Premises in as good order, repair and conditions as
the same area at the commencement of the term thereof, or may be put in
thereafter, damage by fire or unavoidable casualty and reasonable wear and tear
excepted; and at the termination hereof, to peaceably yield up said Premises and
all additions, alterations and improvements thereto, in such good order and
repair and conditions, leaving the premise clean, neat and tenantable.
2
<PAGE>
5. MAINTENANCE. LESSEE shall, at their own expense, keep and maintain
the interior surfaces of the Premises in good order and repair and shall not
damage or deface said Leased Premises. LESSEE shall be obligated to maintain
the exterior and common areas of said Premises including the entry ways.
Parking areas, hallways, and walkways. It shall be the obligation of LESSEE to
make any repairs to the building including, windows, interior glass and walls,
elevator system, alarm system, lighting, carpeting and flooring. Said repairs
and maintenance shall also include, but not limited to, repairs, cleaning and
snow and ice removal. LESSEE shall maintain said Premises and otherwise operate
said Premises in conformity in all material respects, with all existing land use
permits currently governing the Leased Premises.
6. CAPITAL IMPROVEMENTS AND REPAIRS BY LESSEE. Subject to the other
provisions of this Lease concerning repairs, improvements, alterations or
additions required to be made by the LESSEE or LESSOR, the LESSEE shall yield up
the Premises to LESSOR at the expiration of this Lease in the same condition as
when it was received by LESSEE, normal wear and tear excepted and excepting any
improvements made by LESSEE.
7. UTILITIES. LESSEE shall be responsible to supply and pay for all
utilities to the subject Premises including, but not limited to, heat,
electricity, garbage removal, and snow plowing. LESSEE shall be responsible for
its own telephone usage and/or other communication systems utilized at the
Premises. Damage caused by a failure to provide adequate heat to the Premises
shall be the sole responsibility of LESSEE who shall indemnify and hold LESSOR
harmless therefrom.
8. PERSONAL PROPERTY TAXES. LESSEE shall be responsible for any and all
personal property taxes levied upon the Premises due to inventory, equipment or
machinery maintained upon the Premises by LESSEE.
9. REAL ESTATE TAXES. LESSEE shall be solely responsible for payment
when due of real estate taxes assessed by the Town of Sherburne in reference to
the Leased Premises and tax increases as may be levied by the Town of Sherburne.
10. SIGNS. LESSEE shall conform with the Town of Sherburne Zoning
Regulations regarding signs, displays, advertising devices or other things upon
or about the exterior Premises of the building.
11. PARKING. LESSEE shall be entitled to all parking associated with the
Premises.
12. FIXTURES AND EQUIPMENT. Also included in this Lease are all fixtures
and equipment currently in place at said Premises. Said inventory and fixtures
include, but are not limited to, counters, display racks, security system,
storage shelving, mirrors and soft good bins. LESSEE shall be obligated to
maintain said fixtures or their reasonable equivalent and shall turn over to
LESSOR said fixtures upon expiration of this Lease which shall be in good,
workable condition, normal wear and tear excepted.
3
<PAGE>
13. INSURANCE.
(a) LIABILITY INSURANCE. LESSEE shall maintain at LESSEE'S expense,
public liability insurance covering the Premises and the use and occupancy
of same for the mutual benefit of LESSOR and LESSEE naming LESSOR as an
additional named insured and combined single limits coverage of not less
than $3,000,000 for death, personal injury, or property damage. Said
insurance shall be written on a comprehensive general liability form and
include the broad form general liability endorsement. A copy of the
declaration page of said insurance shall be provided to LESSOR and LESSOR
shall specifically require notification by the insurer to LESSOR of any
failure to pay or other breach of the terms of said insurance. A copy of
said insurance declaration sheet or other insurance documents required by
LESSOR's mortgage bank shall be provided by LESSEE or its agent to said
bank.
(b) HAZARD INSURANCE. LESSEE shall protect the Premises including the
exterior grounds, parking area and improved areas with casualty insurance
for the benefit of LESSOR including loss against damage by fire, wind,
storm, earthquake and similar hazards. Such policy of insurance shall be
for the full insurable replacement value of the building and improvements
contained thereon. A copy of the declaration sheet of said policy shall
likewise be provided by LESSEE'S insurance to LESSOR's naming the LESSOR as
an additional insured party and identifying LESSOR as a party to be
notified in the event of any insurance laps or any claim made thereon.
(c) The failure of LESSEE to maintain and pay for said insurance when due
or otherwise comply with the terms of said insurance policy shall
constitute a material breach of this Lease.
(d) A copy of said insurance policy(ies) obtained and maintained by LESSEE
shall be provided by LESSEE to LESSOR upon LESSOR'S request.
(e) LESSEE shall likewise maintain similar casualty insurance to cover the
replacement cost of all inventory owned by LESSEE in the subject Premises.
LESSEE shall be named insured in regard to said inventory, however, LESSOR
shall also be named as an additional insured party.
Said insurance(s) procured by LESSEE as herein required, shall be issued by
a company licensed to do business in the State of Vermont and shall contain
endorsements that:
i. such insurance(s) may not be canceled or amended with respect to
LESSOR by the insurance company without notice to the LESSOR;
ii. LESSOR shall be named as an additional insured with respect to
any and all public liability; and
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<PAGE>
iii. LESSEE shall be solely responsible for payment or premiums for
such insurance.
14. DESTRUCTION AND CONDEMNATION OF PREMISES. In the event that said
Premises, or any substantial part of the building to which they are a part,
shall be destroyed or damaged by fire or other unavoidable casualty, or by the
action of the Town or other authorities, after the execution thereof, and before
the expiration of said term, and the Leased Premises have not been restored to
their original condition within ninety (90) days of said taking, destruction or
action, then this Lease and the said terms shall terminate at the election of
either party. A "substantial part" means a sufficient portion of the Premises
such that use of the Premises for its then current purposes is materially
impaired and cannot be restored. LESSEE and LESSOR shall both be obligated to
restore the Premises as nearly as possible to pre-condemnation condition and
apply the net proceeds of any applicable insurance to that restoration. Neither
LESSOR nor LESSEE shall be obligated to expend in excess of net insurance
proceeds to restoration, although each shall have the option to do so without
any changes in base rent or additional rent hereunder, except as provided
immediately below. A "just proportion" of the rent hereinafter reserved,
according to the nature or the extent of the injury sustained by the demised
Premises, shall be immediately suspended and abated while the demised Premises
are being restored. The term "just proportion" as used herein shall be a
fraction, the numerator of which shall be the total retail revenues produced by
the Premises destroyed or rendered unusable and the denominator of which shall
be the total revenues produced by the Leased Premises as expressed as a
percentage. In the event of a dispute regarding this provision, the parties
shall arbitrate the issues.
15. BREACH. Except for monetary default by LESSEE, which LESSEE shall
have no right to cure, if the LESSEE should neglect or fail to perform or
observe any of the covenants contained herein which are required of LESSEE, and
if such failure is not cured within thirty (30) days after written notice by
LESSOR, or if such breach cannot by its nature be cured within 30 days, then
LESSEE shall commence to cure such default and shall pursue such cure to
conclusion within a reasonable period in light of the nature of the default, or
if the LESSEE shall be declared bankrupt or insolvent accordance to the law,
reorganized under the Bankruptcy Act, or if any assignment shall be made of its
property for the benefit of creditors then and in any time thereafter, and
without demand or notice, LESSOR may enter into and upon the same Premises or
any part thereof, and repossess the same as of their former estate and expel the
LESSEE and those claiming through or under it and remove their effects by proper
legal process, without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant and upon entry of, as aforesaid, this Lease shall
terminate, and the LESSEE covenant that in case of such termination it will
indemnify the LESSOR against all loss of rent and other payment which they may
incur by reason of such termination during the residue of the time first above
specified for the duration of the said term. The LESSOR shall be obligated to
take reasonable steps to obtain other tenants, the rents from whom shall be set
off against rents due from LESSEE.
5
<PAGE>
16. ASSIGNMENT OR SUBLEASE. This Lease shall not be assigned nor can the
Premises be sublet prior to written consent of the LESSOR, which consent shall
not be unreasonable withheld or delayed. An assignment to any corporation or
entity which is affiliated with or under management and control of LESSEE is
hereby expressly permitted by LESSOR, however, LESSOR shall remain primarily
liable upon the Lease unless expressly released in writing by LESSOR. LESSOR
agrees that LESSEE may collaterally assign this Lease to its senior lenders and
LESSOR shall execute and deliver such consents to assignment as may be required
by LESSEE'S senior lending institutions.
17. COMPLIANCE WITH LAW AND LIEN PREVENTION. LESSEE agrees that it shall
promptly comply at its own expense with all requirements of any governmental
authority having competent jurisdiction which requirements are made necessary by
reason of LESSEE'S occupancy of said Premises. Further, LESSEE agrees to pay
all contractors and subcontractors for any improvements or additions to the
Leased Premises contracted for by the LESSEE with LESSOR'S consent as required
hereinabove. LESSOR shall include similar provision in Leases issued to other
tenants.
18. SUBORDINATION. LESSEE agrees, at the request of the LESSOR, to
subordinate this Lease to any mortgages placed upon the Premises, to agree not
to prepay rent more than ten (10) days in advance, except as otherwise agreed by
the parties in writing, provided that the holder of such mortgage or mortgagees
enter into any agreement with LESSEE by the terms of which such party agrees not
to disturb the LESSEE in its possession of the Premises so long as LESSEE
continues to perform its obligations hereunder, and in the event of acquisition
of title by said party through foreclosure proceedings or otherwise, to accept
LESSEE as LESSEE of the Premises under terms and conditions of this Lease to
perform LESSOR'S obligations hereunder (but only while owner of the Premises),
and LESSEE agrees to recognize such party of any other person acquiring title to
the Premises as LESSOR. LESSEE and LESSOR agree to execute and deliver any
appropriate instruments necessary to carry out the foregoing provisions. LESSEE
shall have the right upon receiving a judgment of foreclosure upon the Premises
to at LESSEE'S option and upon thirty (30) days notice to terminate this Lease.
19. INDEMNITY. LESSEE will indemnify and hold the LESSOR harmless against
tall claims and demands for loss or damage, including property damage, normal
wear and tear excepted, personal injury and wrongful death, arising out of or
caused by the negligent act or omissions LESSEE will reimburse LESSOR for their
costs, expenses, judgments, executions or claims in connection with the defense
of any such actions.
LESSEE shall give prompt notice to the LESSOR in case of fire or accident
in the demised Premises or in the building of which the demised Premises are a
part of or defects therein or in any fixtures or equipment.
20. ATTORNEYS FEES. If LESSEE defaults, fails to pay rent or breaches any
of the terms herein and damages are collected through any attorney-at-law,
LESSEE agrees to pay all reasonable attorneys fees and related costs of
collection. Likewise, a breach by
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LESSOR shall result in LESSOR being responsible for reasonable attorneys fees
and related costs relating to remedying such breach.
21. RECORDING. LESSOR and LESSEE agree that a Memorandum of Lease shall
be recorded. LESSOR and LESSEE shall enter into an agreement in recordable
form, setting forth actual commencement and termination dates of this Lease.
Said Memorandum is attached hereto and made a part hereof as Exhibit "B".
22. INTENT. The parties hereto intend that the terms and conditions of
this Lease are for commercial purposes.
23. NOTICE. Any notice required to be given by the terms hereof shall be
deemed duly served if sent by certified mail, return receipt request, through
the United States Postal Service, after the term of this Lease has commenced or
to the LESSOR at the said Premises, or to either party at such place as may from
time to time be established in the manner
Allen Wilson
Killington Ltd.
Killington Road
Killington, Vermont 05751
Mark Girard
Grand Summit Resort Properties, Inc.
P.O. Box 450
Bethel, ME 04217
24. SEVERALTY. If any provision of this Lease or its application to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
25. RIGHT OF FIRST REFUSAL. In consideration of value recited herein,
LESSOR grants to LESSEE a Right of First Refusal to purchase the Leased Premises
under the same terms and conditions contained in any bona fide offer to purchase
received by LESSOR subject to the following terms and conditions:
(a) LESSOR shall notify LESSEE of the terms of any bona fide offer to
purchase the subject Premises received by LESSOR which LESSOR is prepared
to accept. Said notice shall be in writing and mailed certified mail,
return receipt requested, to LESSEE'S business Premises located at
Killington, Vermont, or to any other address given in writing by LESSEE for
the purpose of notice.
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<PAGE>
(b) Upon receipt of said notice of offer, LESSEE shall have thirty (30)
days to notify LESSOR of its intent to exercise its right of first refusal.
Said thirty day period shall run from midnight of the date of delivery of
said notice until midnight of the thirtieth (30th) day thereafter.
(c) Said responsive notice by LESSEE shall be mailed certified mail,
return receipt requested, to LESSOR'S principal place of business in Newry,
Maine or such other address as directed in writing by LESSOR.
(d) LESSEE shall have forty-five (45) days from receipt by LESSEE under
Paragraph 25(a) of said notice to enter into a binding written contract for
the purchase of said Leased Premises, the terms of which shall correspond
to those contained in the bona fide offer received by LESSOR.
(e) LESSEE shall have sixty (60) days from the execution of said written
contract, under Paragraph 25(d) to close the purchase and meet the terms of
said contract.
(f) The right of first refusal contained herein shall expire upon the
expiration of this Lease or any renewal thereof. It shall be contained in
the Memorandum of Lease recorded in connection herewith.
Dated this 9th day of Sept., 1997.
IN PRESENCE OF: GRAND SUMMIT RESORT
PROPERTIES, INC.
/s/ Christi Jones /s/ Mark P. Girard
- ------------------------ -----------------------------
Witness By: Mark P. Girard
Its: Vice President
/s/ Linda M. Perry
- -------------------------
Witness
KILLINGTON LTD.
/s/ [Illegible] /s/ Allen W. Wilson
- ------------------------- ------------------------------
Witness By:
Its: Managing Director
/s/ [Illegible]
- -------------------------
Witness
8
<PAGE>
STATE OF MAINE
OXFORD COUNTY, ss
At Newry, Maine, this 2nd day of September, 1997, personally appeared Mark
Girard, Vice President and duly authorized agent of Grand Summit Resort
Properties, Inc. and acknowledged this instrument by him/her, sealed and
subscribed to be his/her free act and deed and the free act and deed of Grand
Summit Resort Properties, Inc.
Before me,
/s/ Deirdre M. O'Callaghan
-----------------------------------------
Deirdre M. O'Callaghan
Attorney at Law
STATE OF VERMONT
RUTLAND COUNTY, ss
At Sherburne, Vermont, this 9th day of September, 1997, personally appeared
Allen Wilson, Managing Director and duly authorized agent of Killington, Ltd.
and acknowledged this instrument by him/her, sealed and subscribed to be his/her
free act and deed and the free act and deed of Killington Ltd.
Before me,
/s/ [Illegible]
--------------------------------
Notary Public
9
<PAGE>
EXHIBIT A
Grand Summit Hotel at Killington
Commercial Lease Area
SQUARE FEET
Administration 1,296
Real Estate 926
Sales Office Space 1,813
Restaurant 3,664
Cafe 1,306
Health Club 4,661
Arcade 556
Retail Shop 932
Day Care 865
Ski Check 388
Grand Ballroom 12,096
Ballroom 2,996
Conference Rooms 1,300
Function Rooms 1,132
Kitchen Space 4,331
------
38,627 Square Feet
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<PAGE>
EXHIBIT 10.103
LEASE AGREEMENT
This Lease is made in duplicate this 4th day of September, 1997, by and
between Grand Summit Resort Properties, Inc., a Maine corporation with its
principal place of business in the Town of Newry, Maine, hereinafter referred to
as "LESSOR" and Mount Snow Ltd., a Vermont corporation with its offices in
Dover, Vermont, hereinafter referred to as "LESSEE".
For the consideration hereinafter set forth and reserved, LESSOR has agreed
to demise and let, and hereby does demise and let to LESSEE, and LESSEE has
agreed to take, and hereby does take from LESSOR, certain lands and Premises
situated in the Town of Dover, County of Windham and State of Vermont, described
as follows:
The commercial condominium units at the Grand Summit Resort
Properties, Inc. Condominium, to be located in Dover, Vermont, as
more particularly described in Exhibit "A" attached hereto and made a
part hereof, hereinafter the "Premises".
TO HAVE AND TO HOLD the Premises with all the privileges and appurtenances
thereof, to LESSEE subject to the following terms and conditions:
1. TERM AND RENT. This Lease shall be in effect for a term of five
years, beginning on the 1st day of December, 1997 and ending on the 30th day of
November, 2002. The rent due hereunder shall be paid as follows:
An amount equal to Positive EBITDA from operation of the Premises, less
15%. For purposes of this Lease, Positive EBITDA shall mean for each
fiscal quarter assuming a fiscal year end of July 31. Net income or loss
resulting from the operations of the Premises by the LESSEE determined
independently for those operations which shall be accounted for separately
from the LESSEE'S other operations in accordance with generally accepted
accounting principals without giving effect to extraordinary gains and
losses from sales, exchanges or other dispositions of property not in the
ordinary course of business, and nonrecurring items, plus, to the extent
deducted in calculating net income, the sum of, without duplication, (i)
depreciation expense, (ii) amortization expense, (iii) consolidated
interest expense plus the non-cash portion of consolidated interest expense
on debt related to such Premises, (iv) income tax expense and (v) other
non-cash items. The foregoing adjustments to net income shall be made
solely with respect to operations at the Premises, which, in accordance
with the provisions of this Lease Agreement, shall be accounted for
separately from Lessee's other operations.
The LESSEE does hereby covenant with the LESSOR that the LESSEE, during the
term of said Lease and for such further time as it or any other person or
persons claiming under it shall hold the said Premises or any part thereof, will
pay unto the LESSOR the said rent at times and in the manner aforesaid.
<PAGE>
LATE CHARGE: At the option of the LESSOR, the LESSEE agrees and shall
pay a "late charge" of two percent (2%) of any monthly rental installment
when paid more than (7) days after the due date thereof. Said late charge
shall be added to the next succeeding month's regular rent.
2. PERMITTED USE. LESSEE shall use and occupy the Premises for any
purpose permitted under applicable zoning and land use regulations.
The Premises shall not be used for any illegal purpose, nor in violation of
any valid regulation of any governmental body, nor in any manner to create any
nuisance or trespass, nor in any manner to cause cancellation of the insurance
on the Premises or on the building.
3. ACCEPTANCE OF PREMISES: ALTERATIONS OR ADDITIONS. The LESSEE, by
taking possession of the Premises, shall accept and shall be held to have
accepted the same as suitable for the use intended by the LESSEE. The LESSOR
shall not be required after possession of the Premises has been delivered to the
LESSEE, to make any structural repairs or improvements to the Premises, except
those outlined herein. The LESSEE shall not make alterations or additions,
without written permission of the LESSOR, which shall not be unreasonably
withheld, however, such alterations shall be at the sole cost and expense of the
LESSEE. In connection therewith, LESSEE shall comply with all applicable rules,
regulations, laws or orders of any governmental authority or any rules of
LESSOR'S insurance carrier. LESSEE will pay any and all expenses necessary to
bring or keep the Premises in compliance with federal, state or local laws,
rules, ordinances and building codes.
LESSOR specifically covenants and agrees to be responsible for all exterior
maintenance and repair limited to structural repairs, replacement or repair of
plumbing, electrical or heating systems, site improvements such as sewer and
water, roof, exterior walls and foundation, on the subject Premises. LESSOR
shall have the responsibility of exterior painting which obligation shall be no
more than once every eight (8) years. Exterior painting shall utilize a color
using the current decorating scheme or any other color agreed upon between
LESSOR and LESSEE provided, however, that color shall be in conformity with all
local zoning regulations.
4. DUTY TO KEEP PREMISES IN GOOD ORDER. The LESSEE hereby covenants and
agrees to keep the interior Premises in as good order, repair and conditions as
the same area at the commencement of the term thereof, or may be put in
thereafter, damage by fire or unavoidable casualty and reasonable wear and tear
excepted; and at the termination hereof, to peaceably yield up said Premises and
all additions, alterations and improvements thereto, in such good order and
repair and conditions, leaving the premise clean, neat and tenantable.
5. MAINTENANCE. LESSEE shall, at their own expense, keep and maintain
the interior surfaces of the Premises in good order and repair and shall not
damage or deface said Leased Premises. LESSEE shall be obligated to maintain
the exterior and common areas of said Premises including the entry ways.
Parking areas, hallways, and walkways. It shall be the obligation of LESSEE to
make any repairs to the building including, windows, interior glass and
2
<PAGE>
walls, elevator system, alarm system, lighting, carpeting and flooring. Said
repairs and maintenance shall also include, but not limited to, repairs,
cleaning and snow and ice removal. LESSEE shall maintain said Premises and
otherwise operate said Premises in conformity in all material respects, with all
existing land use permits currently governing the Leased Premises.
6. CAPITAL IMPROVEMENTS AND REPAIRS BY LESSEE. Subject to the other
provisions of this Lease concerning repairs, improvements, alterations or
additions required to be made by the LESSEE or LESSOR, the LESSEE shall yield up
the Premises to LESSOR at the expiration of this Lease in the same condition as
when it was received by LESSEE, normal wear and tear excepted and excepting any
improvements made by LESSEE.
7. UTILITIES. LESSEE shall be responsible to supply and pay for all
utilities to the subject Premises including, but not limited to, heat,
electricity, garbage removal, and snow plowing. LESSEE shall be responsible for
its own telephone usage and/or other communication systems utilized at the
Premises. Damage caused by a failure to provide adequate heat to the Premises
shall be the sole responsibility of LESSEE who shall indemnify and hold LESSOR
harmless therefrom.
8. PERSONAL PROPERTY TAXES. LESSEE shall be responsible for any and all
personal property taxes levied upon the Premises due to inventory, equipment or
machinery maintained upon the Premises by LESSEE.
9. REAL ESTATE TAXES. LESSEE shall be solely responsible for payment
when due of real estate taxes assessed by the Town of Dover in reference to the
Leased Premises and tax increases as may be levied by the Town of Dover.
10. SIGNS. LESSEE shall conform with the Town of Dover Zoning Regulations
regarding signs, displays, advertising devices or other things upon or about the
exterior Premises of the building.
11. PARKING. LESSEE shall be entitled to all parking associated with the
Premises.
12. FIXTURES AND EQUIPMENT. Also included in this Lease are all fixtures
and equipment currently in place at said Premises. Said inventory and fixtures
include, but are not limited to, counters, display racks, security system,
storage shelving, mirrors and soft good bins. LESSEE shall be obligated to
maintain said fixtures or their reasonable equivalent and shall turn over to
LESSOR said fixtures upon expiration of this Lease which shall be in good,
workable condition, normal wear and tear excepted.
13. INSURANCE.
(a) LIABILITY INSURANCE. LESSEE shall maintain at LESSEE'S expense,
public liability insurance covering the Premises and the use and occupancy
of same for the mutual benefit of LESSOR and LESSEE naming LESSOR as an
additional named insured and combined single limits coverage of not less
than $3,000,000 for death,
3
<PAGE>
personal injury, or property damage. Said insurance shall be written on a
comprehensive general liability form and include the broad form general
liability endorsement. A copy of the declaration page of said insurance
shall be provided to LESSOR and LESSOR shall specifically require
notification by the insurer to LESSOR of any failure to pay or other breach
of the terms of said insurance. A copy of said insurance declaration sheet
or other insurance documents required by LESSOR'S mortgage bank shall be
provided by LESSEE or its agent to said bank.
(b) HAZARD INSURANCE. LESSEE shall protect the Premises including the
exterior grounds, parking area and improved areas with casualty insurance
for the benefit of LESSOR including loss against damage by fire, wind,
storm, earthquake and similar hazards. Such policy of insurance shall be
for the full insurable replacement value of the building and improvements
contained thereon. A copy of the declaration sheet of said policy shall
likewise be provided by LESSEE'S insurance to LESSOR's naming the LESSOR as
an additional insured party and identifying LESSOR as a party to be
notified in the event of any insurance laps or any claim made thereon.
(c) The failure of LESSEE to maintain and pay for said insurance when due
or otherwise comply with the terms of said insurance policy shall
constitute a material breach of this Lease.
(d) A copy of said insurance policy(ies) obtained and maintained by LESSEE
shall be provided by LESSEE to LESSOR upon LESSOR'S request.
(e) LESSEE shall likewise maintain similar casualty insurance to cover the
replacement cost of all inventory owned by LESSEE in the subject Premises.
LESSEE shall be named insured in regard to said inventory, however, LESSOR
shall also be named as an additional insured party.
Said insurance(s) procured by LESSEE as herein required, shall be issued by
a company licensed to do business in the State of Vermont and shall contain
endorsements that:
i. such insurance(s) may not be canceled or amended with respect to
LESSOR by the insurance company without notice to the LESSOR;
ii. LESSOR shall be named as an additional insured with respect to
any and all public liability; and
iii. LESSEE shall be solely responsible for payment or premiums for
such insurance.
14. DESTRUCTION AND CONDEMNATION OF PREMISES. In the event that said
Premises, or any substantial part of the building to which they are a part,
shall be destroyed or damaged by fire or other unavoidable casualty, or by the
action of the Town or other authorities, after the execution thereof, and before
the expiration of said term, and the Leased
4
<PAGE>
Premises have not been restored to their original condition within ninety (90)
days of said taking, destruction or action, then this Lease and the said terms
shall terminate at the election of either party. A "substantial part" means a
sufficient portion of the Premises such that use of the Premises for its then
current purposes is materially impaired and cannot be restored. LESSEE and
LESSOR shall both be obligated to restore the Premises as nearly as possible to
pre-condemnation condition and apply the net proceeds of any applicable
insurance to that restoration. Neither LESSOR nor LESSEE shall be obligated to
expend in excess of net insurance proceeds to restoration, although each shall
have the option to do so without any changes in base rent or additional rent
hereunder, except as provided immediately below. A "just proportion" of the
rent hereinafter reserved, according to the nature or the extent of the injury
sustained by the demised Premises, shall be immediately suspended and abated
while the demised Premises are being restored. The term "just proportion" as
used herein shall be a fraction, the numerator of which shall be the total
retail revenues produced by the Premises destroyed or rendered unusable and the
denominator of which shall be the total revenues produced by the Leased Premises
as expressed as a percentage. In the event of a dispute regarding this
provision, the parties shall arbitrate the issues.
15. BREACH. Except for monetary default by LESSEE, which LESSEE shall
have no right to cure, if the LESSEE should neglect or fail to perform or
observe any of the covenants contained herein which are required of LESSEE, and
if such failure is not cured within thirty (30) days after written notice by
LESSOR, or if such breach cannot by its nature be cured within 30 days, then
LESSEE shall commence to cure such default and shall pursue such cure to
conclusion within a reasonable period in light of the nature of the default, or
if the LESSEE shall be declared bankrupt or insolvent accordance to the law,
reorganized under the Bankruptcy Act, or if any assignment shall be made of its
property for the benefit of creditors then and in any time thereafter, and
without demand or notice, LESSOR may enter into and upon the same Premises or
any part thereof, and repossess the same as of their former estate and expel the
LESSEE and those claiming through or under it and remove their effects by proper
legal process, without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant and upon entry of, as aforesaid, this Lease shall
terminate, and the LESSEE covenant that in case of such termination it will
indemnify the LESSOR against all loss of rent and other payment which they may
incur by reason of such termination during the residue of the time first above
specified for the duration of the said term. The LESSOR shall be obligated to
take reasonable steps to obtain other tenants, the rents from whom shall be set
off against rents due from LESSEE.
16. ASSIGNMENT OR SUBLEASE. This Lease shall not be assigned nor can the
Premises be sublet prior to written consent of the LESSOR, which consent shall
not be unreasonable withheld or delayed. An assignment to any corporation or
entity which is affiliated with or under management and control of LESSEE is
hereby expressly permitted by LESSOR, however, LESSOR shall remain primarily
liable upon the Lease unless expressly released in writing by LESSOR. LESSOR
agrees that LESSEE may collaterally assign this Lease to its senior lenders and
LESSOR shall execute and deliver such consents to assignment as may be required
by LESSEE'S senior lending institutions.
5
<PAGE>
17. COMPLIANCE WITH LAW AND LIEN PREVENTION. LESSEE agrees that it shall
promptly comply at its own expense with all requirements of any governmental
authority having competent jurisdiction which requirements are made necessary by
reason of LESSEE'S occupancy of said Premises. Further, LESSEE agrees to pay
all contractors and subcontractors for any improvements or additions to the
Leased Premises contracted for by the LESSEE with LESSOR'S consent as required
hereinabove. LESSOR shall include similar provision in Leases issued to other
tenants.
18. SUBORDINATION. LESSEE agrees, at the request of the LESSOR, to
subordinate this Lease to any mortgages placed upon the Premises, to agree not
to prepay rent more than ten (10) days in advance, except as otherwise agreed by
the parties in writing, provided that the holder of such mortgage or mortgagees
enter into any agreement with LESSEE by the terms of which such party agrees not
to disturb the LESSEE in its possession of the Premises so long as LESSEE
continues to perform its obligations hereunder, and in the event of acquisition
of title by said party through foreclosure proceedings or otherwise, to accept
LESSEE as LESSEE of the Premises under terms and conditions of this Lease to
perform LESSOR'S obligations hereunder (but only while owner of the Premises),
and LESSEE agrees to recognize such party or any other person acquiring title to
the Premises as LESSOR. LESSEE and LESSOR agree to execute and deliver any
appropriate instruments necessary to carry out the foregoing provisions. LESSEE
shall have the right upon receiving a judgment of foreclosure upon the Premises
to at LESSEE'S option and upon thirty (30) days notice to terminate this Lease.
19. INDEMNITY. LESSEE will indemnify and hold the LESSOR harmless against
tall claims and demands for loss or damage, including property damage, normal
wear and tear excepted, personal injury and wrongful death, arising out of or
caused by the negligent act or omissions LESSEE will reimburse LESSOR for their
costs, expenses, judgments, executions or claims in connection with the defense
of any such actions.
LESSEE shall give prompt notice to the LESSOR in case of fire or accident
in the demised Premises or in the building of which the demised Premises are a
part of or defects therein or in any fixtures or equipment.
20. ATTORNEYS FEES. If LESSEE defaults, fails to pay rent or breaches any
of the terms herein and damages are collected through any attorney-at-law,
LESSEE agrees to pay all reasonable attorneys fees and related costs of
collection. Likewise, a breach by LESSOR shall result in LESSOR being
responsible for reasonable attorneys fees and related costs relating to
remedying such breach,
21. RECORD. LESSOR and LESSEE agree that a Memorandum of Lease shall be
recorded. LESSOR and LESSEE shall enter into an agreement in recordable form,
setting forth actual commencement and termination dates of this Lease. Said
Memorandum is attached hereto and made a part hereof as Exhibit "B".
22. INTENT. The parties hereto intend that the terms and conditions of
this Lease are
6
<PAGE>
for commercial purposes.
23. NOTICE. Any notice required to be given by the terms hereof shall be
deemed duly served if sent by certified mail, return receipt request, through
the United States Postal Service, after the term of this Lease has commenced or
to the LESSOR at the said Premises, or to either party at such place as may from
time to time be established in the following manner:
Chris Diamond
Mount Snow Ltd.
Mount Snow, VT 05356
Mark Girard
Grand Summit Resort Properties, Inc.
P.O. Box 450
Bethel, ME 04217
24. SEVERALTY. If any provision of this Lease or its application to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
25. RIGHT OF FIRST REFUSAL. In consideration of value recited herein,
LESSOR grants to LESSEE a Right of First Refusal to purchase the Leased Premises
under the same terms and conditions contained in any bona fide offer to purchase
received by LESSOR subject to the following terms and conditions:
(a) LESSOR shall notify LESSEE of the terms of any bona fide offer to
purchase the subject Premises received by LESSOR which LESSOR is prepared
to accept. Said notice shall be in writing and mailed certified mail,
return receipt requested, to LESSEE'S business Premises located at Dover,
Vermont, or to any other address given in writing by LESSEE for the purpose
of notice.
(b) Upon receipt of said notice of offer, LESSEE shall have thirty (30)
days to notify LESSOR of its intent to exercise its right of first refusal.
Said thirty day period shall run from midnight of the date of delivery of
said notice until midnight of the thirtieth (30th) day thereafter.
(c) Said responsive notice by LESSEE shall be mailed certified mail,
return receipt requested, to LESSOR'S principal place of business in Newry,
Maine or such other address as directed in writing by LESSOR.
(d) LESSEE shall have forty-five (45) days from receipt by LESSEE under
Paragraph
7
<PAGE>
25(a) of said notice to enter into a binding written contract for the
purchase of said Leased Premises, the terms of which shall correspond to
those contained in the bona fide offer received by LESSOR.
(e) LESSEE shall have sixty (60) days from the execution of said written
contract, under Paragraph 25(d) to close the purchase and meet the terms of
said contract.
(f) The right of first refusal contained herein shall expire upon the
expiration of this Lease or any renewal thereof. It shall be contained in
the Memorandum of Lease recorded in connection herewith.
Dated this 12th day of September, 1997.
IN PRESENCE OF: GRAND SUMMIT RESORT
PROPERTIES, INC.
/s/ Christi Jones /s/ Mark P. Girard
- --------------------------- ----------------------------
Witness By: Mark P. Girard
Its: Vice President
/s/ Linda M. Perry
- ----------------------------
Witness
SUNDAY RIVER, LTD.
/s/ [Illegible] /s/ Chris Diamond
- ---------------------------- -----------------------------
Witness By: Chris Diamond
Its: Managing Director
/s/ [Illegible]
- --------------------------------
Witness
8
<PAGE>
STATE OF MAINE
OXFORD COUNTY, ss
At Newry, Maine, this 2nd day of September, 1997, personally appeared Mark
Girard, Vice President and duly authorized agent of Grand Summit Resort
Properties, Inc. and acknowledged this instrument by him/her, sealed and
subscribed to be his/her free act and deed and the free act and deed of Grand
Summit Resort Properties, Inc.
Before me,
/s/ Deirdre M. O'Callaghan
---------------------------------
Attorney at Law
Deirdre M. O'Callaghan
STATE OF MAINE
OXFORD COUNTY, ss
At Concord, New Hampshire, this 4th day of September, 1997, personally
appeared Chris Diamond, Managing Director and duly authorized agent of Mount
Snow Ltd. and acknowledged this instrument by him/her, sealed and subscribed to
be his/her free act and deed and the free act and deed of Mount Snow Ltd.
Before me,
/s/ Deirdre M. O'Callaghan
---------------------------------
Attorney at Law
Deirdre M. O'Callaghan
9
<PAGE>
EXHIBIT A
Grand Summit Hotel at Mount Snow
Commercial Lease Area
SQUARE FEET
Administration 1,770
Real Estate 919
Sales Office Space 1,497
Restaurant 3,259
Cafe 655
Health Club 3,383
Arcade 503
Retail Shops 9,205
Grand Ballroom 12,030
Ballroom 2,995
Conference Rooms 1,677
Function Rooms 1,230
Kitchen Space 3,978
-------
43,041
10
<PAGE>
EXHIBIT 10.105
IRREVOCABLE OPTION AND REAL ESTATE PURCHASE AGREEMENT UPON EXERCISE OF OPTION
In consideration of TWENTY FIVE THOUSAND DOLLARS ($25,000.00) paid to Harry
P. Condas, John P. Condas, George P. Condas, Tessie P. Condas, Margarita C.
Ellis and Jack W. Ellis (hereinafter referred to as "sellers") receipt of which
is acknowledged, hereby jointly and severally grant to Wolf Mountain Resorts,
L.C., (its successors and assigns, hereinafter referred to as "buyer"), the
exclusive irrevocable option to purchase the real and personal property
described as:
PARCEL NO. 1: Lot 4, the West half of Southeast quarter, the Southwest 1/4 of
Section 12, Township 2 South, Range 3 East of the Salt Lake Base and Meridian.
PARCEL NO. 2: The West half of the Northwest quarter of Section 13, Township 2
South, Range 3 East of the Salt of the Salt Lake Base and Meridian, PARCEL NO.
3: That portion of the following lying within the bounds of Summit County,
State of Utah. The Northeast quarter of the Northeast quarter, the West half of
the Northeast quarter and the Northwest quarter of Section 14, Township 2 South,
Range 3 East of the Salt Lake Base and Meridian, totaling 649.73 acres, subject
to and including all easements, rights of way, water rights (including, but not
limited to, water rights #489 and #490 appropriated on or about November 12,
1930), and appurtenances, and all of the sellers right title and interest in all
public ways adjoining the property (hereinafter referred to as "subject
property"). See Exhibit "A".
OPTION MONEY AS NON REFUNDABLE: In consideration for the promises made herein,
buyer and seller acknowledge and agree that all money paid for and during the
period of this option by buyer, to seller, are considered non refundable.
Seller agrees to credit any option monies paid against the purchase price upon
exercise of the option.
PERIOD OF OPTION: This option may be exercised by giving notice of exercise to
George P. Condas, at any time within any option period. The option periods
include: January 28, 1997 through February 28, 1997 for the initial payment of
TWENTY FIVE THOUSAND DOLLARS ($25,000.00). For the payment of an additional sum
of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), per each thirty (30) day option
period, the option period shall be extended as follows: February 28, 1997
through March 28, 1997; March 28, 1997 through April 28, 1997; and April 28,
1997 through May 28, 1997. Payments shall be made to seller prior to the first
day of the extended option periods.
PRICE AND TERMS OF PAYMENT: Upon exercise of the this option during any option
period described above, buyer agrees to buy and sellers agree to sell the
subject property described above upon the following terms:
The price to purchase the subject property shall be the principal sum of FOUR
MILLION DOLLARS ($4,000,000.00) payable BY BUYER to SELLERS as follows:
<PAGE>
ONE MILLION DOLLARS ($1,000,000.00) upon the exercise of this irrevocable
option ("the exercise date");
ONE MILLION DOLLARS ($1,000,000.00) upon each of the three (3) subsequent
annual anniversaries of the "exercise date".
Interest at the rate of TEN (10) percent per annum on any unpaid principal,
accruing from the "exercise date". Said interest shall be due and payable upon
the third anniversary of the "exercise date".
The three (3) annual payments of ONE MILLION DOLLARS ($1,000,000.00) each and
the interest due thereon shall be secured by irrevocable letters of credit in
favor of the sellers issued by a financial institution possessing a Best rating
of "A" or better, mutually acceptable to buyer and sellers.
TITLE: Title to be conveyed as provided in this option shall be by warranty
deed, with merchantable title free and clear of all liens and encumbrances,
other than those liens, encumbrances and exceptions of record, as disclosed in a
preliminary title report issued by Founders' Title on 7/31/95. Sellers shall
provide title insurance to buyer at sellers expense.
NOTICE OF EXERCISE: Buyer shall give written notice of the exercise of this
option by hand delivery or by certified mail to:
GEORGE P. CONDAS
4474 So. Larch Way
Salt Lake City, Utah 84123
Said exercise of this option, and the "exercise date" shall be either the date
that the written notice of exercise of the option is hand delivered, or the date
the notice is mailed, whichever is applicable.
INTEGRATION OF AGREEMENT: This document, consisting of three (3) pages, and
exhibit constitutes the entire agreement between buyer and sellers. No
modification of this agreement shall be valid unless done in writing and signed
by both buyer and sellers
Executed this 28th day of January, 1997, at Park City, Utah.
BUYER: SELLERS:
WOLF MOUNTAIN RESORTS, L.C. GEORGE P. CONDAS, et al
BY /s/ Kenneth Griswold BY /s/ George P. Condas
-------------------------- ------------------------------------
Kenneth W. Griswold George P. Condas
President and C.E.O. Authorized Family Representative
(Page 2 of 3)
<PAGE>
STATE OF UTAH
ss
COUNTY OF SUMMIT
On the 28th day of January, 1997, personally appeared before me Kenneth W.
Griswold who, being by me duly sworn, did say that he is the managing member of
WOLF MOUNTAIN RESORTS, L.C., and that the forgoing instrument was signed on
behalf of said company, and said Kenneth W. Griswold acknowledged to me that
said company executed the same.
NOTARY PUBLIC
CATHERINE DALYAI
1912 Sidewinder Dr. #104
Park City, UT 84060
My Commission Expires /s/ Catherine Dalyai
----------------------------------
May 25, 2000 Notary Public in and for said County and State
STATE OF UTAH
STATE OF UTAH
ss
COUNTY OF SUMMIT
On the 28th day of January, 1997, personally appeared before me George P. Condas
who, being by me duly sworn, did say that he is the authorized representative
for the CONDAS FAMILY, sellers, and that the forgoing instrument was signed on
behalf of said family, and said George P. Condas acknowledged to me that said
family have agreed to the same.
NOTARY PUBLIC
CATHERINE DALYAI
1912 Sidewinder Dr. #104
Park City, UT 84060
My Commission Expires /s/ Catherine Dalyai
-----------------------------------
May 25, 2000 Notary Public in and for said County and State
STATE OF UTAH
(Page 3 of 3)
<PAGE>
MODIFICATION OF IRREVOCABLE AND REAL ESTATE PURCHASE AGREEMENT UPON EXERCISE OF
OPTION DATED JANUARY 28, 1997
In consideration of TEN DOLLARS, receipt of which is hereby acknowledged, the
parties hereto modify the Irrevocable Option and Real Estate Purchase Agreement
between them dated January 28, 1997 (the "Agreement") as follows (terms defined
therein having the same meaning in this document):
1. That the date upon which the Buyer may exercise its option to purchase
the Property shall be extended to June 2, 1997;
2. That Buyer may, in is discretion, by paying to Sellers the initial
payment described in the Agreement, in lieu of delivering the letters
of credit ton or before June 2, 1997, cause Sellers to enter into an
escrow agreement on or before such date whereby Sellers shall deliver
the warranty deed for the Property covered by the Agreement into
escrow to be delivered to Buyer upon such escrow agent's receipt of
the letters of credit referred to in the Agreement; provided, however,
that such deed shall be returned to Sellers if such letters of credit
are not delivered on or before September 2, 1997, and that after said
date, such escrow may be canceled by Sellers without further
instructions or consent of Buyer and Sellers shall have no further
obligation to Buyer under this Agreement;
3. That the initial payment, as described in the Agreement and referred
to in Paragraph 2 above, shall be, when made, deemed by the parties to
be non-refundable, even should Buyer fail to deposit into escrow the
three (3) letters of credit called for in the Agreement and this
Modification;
4. That the cost of the escrow described above shall be borne by Buyer;
and
5. That all other terms and conditions stated in the Agreement shall
remain the same.
AGREED AND ENTERED INTO this 27th date of May, 1997.
SELLERS:
By: /s/ George P. Condas
----------------------------------
GEORGE P. CONDAS
Authorized Representative
on Behalf of Sellers
BUYERS:
By: /s/ Kenneth Griswold
--------------------------------
KENNY GRISWOLD
Authorized Representative
for Wolf Mountain
<PAGE>
SECOND MODIFICATION OF IRREVOCABLE OPTION AND EXERCISE OF OPTION
The parties hereto, in consideration for the mutual promises made herein, modify
the Irrevocable Option and Real Estate Purchase Agreement between them dated
January 28, 1997 as modified May 27, 1997 (the "Agreement") as follows (the
terms defined therein having the same meaning in this document):
1. The Agreement is subject to the Assignment of May 30, 1997, by and
between Wolf Mountain Resorts and ASC Utah, a Maine corporation;
2. That Buyer intends on maintaining the Green Belt exemption currently
enjoyed by Sellers. Should Buyer no longer maintain said exemption, Buyer and
Seller shall pay their proportionate share of any taxes or retroactive taxes
assessed as determined by the exercise date of June 2, 1997; with any payments
made by Buyers for Sellers pro-rata share to be offset against any future
payment due Sellers from Buyers.
3. That the property is sold by seller as raw land, with Buyer taking
said property in its "AS IS PHYSICAL CONDITION";
4. That Buyers will not make or allow any improvements of the property
until such time as title passes from Sellers to Buyer;
5. That Sellers and Buyers hereby appoint First American Title Company of
Utah to act as escrow holder for the consummation of the Agreement;
6. Escrow holder is hereby instructed to:
a. Hold in escrow a duly executed Warranty Deed granting the subject
property, Grantee is to be left blank, with the name of Grantee to be
filled in at the direction of the holder of the Agreement upon delivery of
the Letters of Credit;
b. Escrow holder shall release said Warranty Deed upon the delivery
into escrow the Letters of Credit required pursuant to the Agreement;
c. That the Agreement of January 28, 1997, and all relative
documents and modifications thereto are expressly incorporated and are a
part of this escrow;
d. Seller shall deposit into escrow the premium for the title
insurance policy. Said insurance policy is to be issued upon delivery of
the Warranty Deed to Buyer.
The Buyer herein, by its signature below, hereby exercises the Irrevocable
Option and Real Estate Purchase Agreement dated January 28, 1997, on and as of
the date indicated below.
Dated: June 2, 1997
Sellers:
By: /s/ George P. Condas
-----------------------------------
GEORGE P. CONDAS
Authorized Representative
on Behalf of Sellers
Buyers:
By: /s/ Kenneth Griswold
-----------------------------------
KENNY GRISWOLD
Authorized Representative
for Buyer Wolf Mountain
Resorts, L.C. - Managing Member
<PAGE>
See Acknowledgment attached hereto and made a part hereof.
STATE OF UTAH )
(ss.
COUNTY OF SUMMIT )
On the 2nd day of June, 1997, personally appeared before me Kenneth W. Griswald,
who being by me duly sworn did say that he is the Authorized Representative of
Wolf Mountain Resorts, L.C. and Managing Member, the corporation that executed
the foregoing instrument, and acknowledged to me that the within and foregoing
instrument was signed in behalf of said corporation by authority of a resolution
of its Board of Directors, and the said Kenneth W. Griswald duly acknowledged to
me that said corporation executed the same.
NOTARY PUBLIC
SUSAN L. TOLLIVER
1745 Sidewinder Drive
Park City, UT 84068
My Commission Expires /s/ Susan L. Tolliver
-----------------------------------
June 7, 2000 Susan L. Tolliver, Notary Public
STATE OF UTAH My Commission Expires June 7, 2000
STATE OF UTAH )
(ss.
COUNTY OF SUMMIT )
On the 2nd day of June, 1997, personally appeared before me George P. Condas,
the signer of the within instrument, who duly acknowledged to me that he
executed the same.
NOTARY PUBLIC
SUSAN L. TOLLIVER
1745 Sidewinder Drive
Park City, UT 84068
My Commission Expires /s/ Susan L. Tolliver
------------------------------------
June 7, 2000 Susan L. Tolliver, Notary Public
STATE OF UTAH My Commission Expires June 7, 2000
<PAGE>
Exhibit 11.1
AMERICAN SKIING COMPANY
PRO FORMA LOSS PER SHARE EXHIBIT
JULY 27, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 27,
1997
<S> <C> <C>
Pro forma net loss available to common shareholders (5,225)
----------
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 622,038 554,791
Minority interest shareholders 615,022 615,022
Employee stock options 108,108 -
Mandatorily redeemable preferred stock 2,110,518 100,270
Offering shares 14,750,000 14,750,530
----------
30,780,613
----------
Pro forma loss (0.17)
----------
</TABLE>
4<PAGE>
Exhibit 23.1
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square
225 Asylum Street
Hartford, CT 06103
(860) 293-3500
October 10, 1997
American Skiing Company
P.O. Box 450
Sunday River Access Road
Bethel, ME 04217
Re: REGISTRATION STATEMENT NO. 333-33483
Gentlemen:
We refer to the Registration Statement on Form S-1, No. 333-33483 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), filed by American Skiing Company, a Maine corporation (the
"Company"), with the Securities and Exchange Commission (the "Commission").
We consent to the reference to our firm appearing under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement.
In giving this consent, we do not hereby admit that we are within the
category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Commission.
Very truly yours,
/s/ LeBoeuf, Lamb, Greene & MacRae, L.L.P.
-------------------------------------------
LeBoeuf, Lamb, Greene &
MacRae, L.L.P.
<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, except as to Note 16 which is as of October 10, 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 has not
prepared or certified such "Selected Historical and Pro Forma Financial Data of
the Company."
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 10, 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 10, 1997
