UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 25, 1999
Commission file number 1-13507
American Skiing Company
(Exact name of registrant as specified in its charter)
Delaware 7990
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
04-3373730
(I.R.S. Employer
Identification Number)
Sunday River Access Road
Bethel, Maine 04217
(207) 824-8100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of
the Act:
Common Stock, $.01 par value New York Stock Exchange
(Title of Each Class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None None
(Title of Each Class) (Name of exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's outstanding common stock held by
non-affiliates of the registrant on October 20,1999, determined using the per
share closing price thereof on the New York Stock Exchange Composite tape, was
approximately $62.3 million. As of October 20, 1999, 30,286,773 shares of common
stock were issued and outstanding, of which 14,760,530 shares were Class A
common stock.
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American Skiing Company
Form 10-K Annual Report, for the year ended July 25, 1999
American Skiing Company and Consolidated Subsidiaries
Table of Contents
Part I
Page
Item 1 Business .............................................................1
Item 2 Properties ..........................................................14
Item 3 Legal Proceedings....................................................15
Item 4 Submission of Matters to a Vote of Security Holders .................15
Part II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters .................................................16
Item 6 Selected Financial Data .............................................17
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................19
Item 7A Quantitative and Qualitative Disclosures about
Market Risk .........................................................30
Item 8 Financial Statements and Supplementary Data .........................31
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................32
Part III
Item 10 Directors and Executive Officers of the Registrant...................33
Item 11 Executive Compensation...............................................33
Item 12 Security Ownership of Certain Beneficial Owners and
Management...........................................................33
Item 13 Certain Relationships and Related Transactions.......................33
Part IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................................................33
Signatures....................................................................38
(i)
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PART I
Item 1 Business
The Company
American Skiing Company (the "Parent") is organized as a holding
company and operates through various subsidiaries. The Parent and its
subsidiaries (collectively, the "Company") is the largest operator of alpine ski
and snowboard resorts in the United States. In the 1998-99 ski season, the
Company's resorts generated approximately 5.1 million skier visits representing
approximately 9.8% of total skier visits in the United States. The Company's
business includes nine ski resorts, several of which are among the largest in
the United States including: (i) Steamboat, the fourth largest ski resort in the
United States with over 1.0 million skier visits during the 1998-99 ski season,
(ii) Killington, the fifth largest resort in the United States with
approximately 978,000 skier visits during the 1998-99 season, (iii) Heavenly,
which ranked as the second largest resort in the Pacific West region and the
eighth largest resort in the United States with approximately 932,000 skier
visits during the 1998-99 ski season; and (iv) three of the four largest resorts
in the Northeast (Killington, Sunday River, and Mount Snow/Haystack) where THE
COMPANY enjoys a 24% market share. In addition, management believes that its
portfolio of resorts includes one of the most significant growth opportunities
in North American skiing at The Canyons in Utah. The Canyons' dramatic terrain
is favorably located, with direct highway access to the Salt Lake International
Airport, and is in close proximity to most alpine venues of the 2002 Winter
Olympic Games.
In addition to operating alpine resorts, the Company develops
mountainside real estate which complements the expansion of its on-mountain
operations. The Company has created a unique interval ownership product, the
Grand Summit Hotel, in which individuals purchase quartershare interval
interests while the Company retains ownership of core hotel and commercial
properties. The initial sale of quartershare units typically generates a high
profit margin, and the Company derives a continuing revenue stream from
operating the hotel's retail, restaurant and conference facilities and from
renting quartershare interval interests when not in use by their owners. The
Company is developing alpine resort villages at prime locations within five of
its resorts designed to fit that resort's individual characteristics. The
Company currently operates six Grand Summit Hotels -- two hotels at Sunday River
and one hotel each at Attitash, Mount Snow, Sugarloaf and Killington. Two
additional Grand Summit Hotels are under construction at The Canyons and
Steamboat. The Company also operates golf courses at its resorts and conducts
other off-season activities, which accounted for approximately 12% of the
Company's resort revenues for fiscal 1999.
The Company's revenues, earnings before interest expense, income taxes,
depreciation and amortization ("EBITDA") and net loss available to common
shareholders for its 1999 fiscal year were $317.1 million, $40.6 million, and
$32.3 million, respectively. Resort revenues and resort EBITDA for fiscal 1999
were $292.6 million and $42.9 million, respectively . Real estate revenues and
real estate earnings before interest and income taxes ("EBIT") for fiscal 1999
were $24.5 million and a loss of $2.3 million, respectively
Resorts
The Canyons. When acquired in July, 1997, The Canyons, located in the
Wasatch Range of the Rocky Mountains adjacent to Park City, Utah, was primarily
an undeveloped ski resort with significant potential for future operational and
real estate development. The Canyons is one of the most accessible destination
resorts in the world, with the Salt Lake International Airport only 32 miles
away. In its first season of operation under the Company's management (1997-98),
the resort generated over 167,000 skier visits, increasing to over 220,000 in
1998-99. Currently, the resort has approximately 3,300 acres of skiable terrain,
serviced by 13 lifts, with an elevation of 9,990 feet and a 3,190 foot vertical
drop. The area has two new base lodges and two additional on-mountain
restaurants.
Since its acquisition in July, 1997, the Company has invested
approximately $40 million to develop and construct: (i) an eight passenger
high-speed gondola, (ii) seven new quad lifts (including five high-speed quads),
(iii) an increase in skiable terrain to approximately 3,300 acres, and (iv) two
on-mountain lodges. The resort's 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 that The Canyons has significant growth potential
due to its proximity to Salt Lake City and Park City, its undeveloped ski
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terrain and its real estate development opportunities. The resort is located
approximately 25 miles from Salt Lake City and is accessed by a major state
highway. 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.
The Company has invested significant capital and created a substantial
on-mountain skiing infrastructure which management believes is capable of
supporting substantial skier visit growth at The Canyons. The Company intends to
gradually invest additional capital to improve and expand on-mountain facilities
and skiable terrain as skier visits grow. The Company currently has two
significant real estate projects under construction at The Canyons, a Grand
Summit Hotel and the Sundial Lodge. Both are expected to open during the
upcoming ski season. Additional real estate projects at The Canyons are expected
to be launched and begin construction during the 2000 and 2001 fiscal years. The
Company is in the final stages of approval of a master development plan for the
resort which is expected to entitle approximately 5 million square feet of
development.
Steamboat. Steamboat ski area is located in the Medicine Bow/Routt
National Forest, Routt County, Colorado on the westerly slopes of Mt. Werner,
approximately 2.5 miles southeast of downtown Steamboat Springs, Colorado. The
area consists of 2,694 acres of land licensed under a Special Use Permit issued
by the Forest Service and 245 acres of private land owned by Steamboat located
at the base of the ski area. The trail network consists of 141 trails covering
2,939 permit acres that are serviced by 20 ski lifts. Steamboat receives a high
level of natural dry snow, averaging 330 inches annually the past 10 ski
seasons. Steamboat has recorded more than 1 million skier visits in each of the
past ten seasons.
Restaurant facilities are currently located in the base area and at
three other points throughout the resort. Within the ski area, the Company
operates food and beverage outlets at ten restaurants, bars and outdoor serving
facilities with total indoor seating capacity of approximately 1,944 and outdoor
seating capacity of 790. These facilities are complemented by a number of
independently operated bars and restaurants in the base area and in downtown
Steamboat Springs and are considered adequate to meet current skier needs. The
Company is currently constructing a 300 room Grand Summit Hotel at Steamboat,
which will bring both additional beds and enhanced levels of amenities to the
Steamboat base area.
Heavenly. Located on the south shore of Lake Tahoe with three base area
complexes, one in South Lake Tahoe, California and two in Stateline, Nevada,
Heavenly consists of two peaks with a maximum elevation of approximately 10,060
feet, and a 3,500 foot vertical drop with approximately 4,800 acres of skiable
terrain and 82 trails serviced by 27 lifts. Heavenly is the second largest
resort in the Pacific West Region with about 932,000 skier visits for the
1998-99 ski season. Access to the resort is primarily through the Reno Tahoe
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. Heavenly has a well developed bed base in the greater South Lake
Tahoe, Stateline area.
The Company's strategy at Heavenly is to add new accommodations and a
gondola lift system in the South Lake Tahoe commercial area through the
acquisition or control of development rights in the Park Avenue Redevelopment
area. That development is expected to create express gondola service to the
resort from the center of South Lake Tahoe and allow construction of two large
hotel projects over the next three to five years. Pre-sales have commenced for
the first of the two projects, a 194 room Grant Summit Hotel. In addition,
existing development rights may be exploited at Heavenly's Stagecoach base area
with the sale and construction of a mixed use condominium project over the same
period.
Killington. Killington, located in central Vermont, is the largest ski
resort in the northeast and the fifth largest in the United States, with over
978,000 skier visits in 1998-99. Killington is a seven mountain resort
consisting of approximately 1,200 acres with 200 trails serviced by 33 lifts.
The resort has a 4,241 foot summit and a 3,150 foot vertical drop. The resort's
base facilities include eight full-service ski lodges, including one located at
the top of Killington Peak. In December 1996, the Company acquired the Pico
Mountain ski resort located adjacent to Killington and integrated the two
resorts. Management believes the size and diversity of skiable terrain at
Killington make it attractive to all levels of skiers and one of the most widely
recognized of the Company's resorts with regional, national and international
clientele. The Company's real estate strategy at Killington is to expand the
existing Grand Summit Hotel, begin the first phases of a new destination resort
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village and expand the bed base surrounding the company-owned golf course in an
area approved for development. The current master plan for the proposed
Killington resort village development includes over 4,450 units encompassed in
over 5.3 million square feet of total development.
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 526,000 skier visits during the 1998/1999 season. Extending
across eight interconnected mountains, its facilities consist of approximately
654 acres of skiable terrain and 126 trails serviced by 18 lifts, with an
additional 7,000 acres of undeveloped terrain. The resort has a 3,140 foot
summit, a 2,340 foot vertical drop and four lodges. Sunday River is planning and
developing a Resort Village at the Jordan Bowl Area (the most westerly peak).
Plans for the resort village include over 1,350 units and 1.1 million square
feet of total development
Mount Snow/Haystack. Mount Snow, located in West Dover, Vermont, is the
fourth largest ski resort in the Northeast United States with over 513,000 skier
visits in 1998/99, and is the southernmost of the Company's eastern 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 a
three-mile ridge. Its facilities consist of 133 trails and approximately 631
acres of developed skiable terrain serviced by 25 lifts. The resort has a 3,600
foot summit and a 1,700 foot vertical drop. The resort has five full-service
base lodges.
Sugarloaf. Sugarloaf is located in the Carrabassett Valley of Maine.
Sugarloaf is a single mountain with approximately 1,400 acres of terrain and 126
trails and glades covering approximately 530 acres, of which 490 acres have
snowmaking coverage serviced by 14 lifts. 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 East, containing numerous restaurants,
retail shops and an abundance of lodging. Sugarloaf is widely recognized for its
challenging terrain, including its snow fields, which represent the only
lift-serviced above-tree line 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.
Sugarbush. Sugarbush, located in Vermont's Mad River Valley, features
the three highest mountain peaks of any single resort in the East. Extending
over six mountain peaks, its facilities consist of 439 acres of skiable terrain
and 115 trails serviced by 18 lifts. The Slide Brook Express Quad connects the
Lincoln Peak and Mount Ellen base areas via a 9 minute scenic ride through the
Green Mountains. 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 mid-mountain
lodges. The on-mountain accommodations at Sugarbush consist of approximately
2,200 beds. There is also an ample off-mountain bed base within the Mad River
Valley. The resort operates ski shops, full-service and cafeteria-style
restaurants. The Company also owns and operates the Sugarbush Inn, a
championship golf course, a sports center and a conference center and manages
185 condominium units.
Attitash Bear Peak. Attitash Bear Peak is one of New Hampshire's
premier family vacation resorts. Attitash Bear Peak offers 68 trails covering
280 skiable acres on two interconnected mountain peaks. Attitash's 12 lifts
(including three quad chairs) make up one of New Hampshire's largest lift
networks. The summit elevation of 2,350 feet and a base of 600 feet gives the
resort a vertical drop of 1,750 feet. Attitash Bear Peak is located in the heart
of the Mount Washington Valley which boasts over 200 factory outlet stores,
hundreds of bars and restaurants and a large variety of lodging options
including Attitash Bear Peak's own 143 room slopeside Grand Summit Resort Hotel
and Conference Center.
Alpine Resort Industry
There are approximately 750 ski areas in North America. In the United
States, approximately 509 ski areas generated approximately 52 million skier
visits during the 1998-99 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 509 in 1999, 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
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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.
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 1998-99 ski season:
<TABLE>
<CAPTION>
- --------------------- ----------------- ------------------ ----------------- ---------------- ------------------------
Geographic Region 1998-99 Percentage of Skier Visits at Company Company Resorts
Total Skier Total Skier Company Resorts Regional
Visits (in Visits (in millions) Market Share
millions)
- --------------------- ----------------- ------------------ ----------------- ---------------- ------------------------
<S> <C> <C> <C> <C> <C>
Northeast 12.3 23.7% 2.9 23.8% Killington, Sugarbush,
Mount Snow/Haystack,
Attitash/Bear Peak,
Sunday River,
Sugarloaf USA
Southeast 4.3 8.2% --- ---
Midwest 6.0 11.6% --- ---
Rocky Mountain 18.3 35.2% 1.3 6.7% The Canyons, Steamboat
Pacific West 11.1 21.3% 0.9 8.4% Heavenly
- --------------------- ----------------- ------------------ ----------------- ---------------- ------------------------
U.S. Overall 52.0 100.0% 5.1 9.8%
- --------------------- ----------------- ------------------ ----------------- ---------------- ------------------------
(*) Source: Kottke National End of Season Survey 1998/99 Final Report
</TABLE>
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 skiing and travel time, while
destination travelers are attracted to the total ski and riding experience,
including the non-skiing amenities and activities available at the resort, 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 in the United States 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 12.3 million in the 1998-99 ski season, a compound annual growth
rate of approximately 17.8%. 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 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 have
a favorable impact on the ski industry.
Operating Strategy
The Company believes that the following key operating strategies will
allow it to increase revenues and profitability by capitalizing on its position
as a leading mountain resort operator and real estate developer.
Capitalize on Recent Facilities Expansion and Upgrades. The Company
has invested over $145 million in expansion and upgrading of its on-mountain
facilities over the past 2 fiscal years. This investment has substantially
re-tooled the physical plant at all of the Company's recently acquired resorts.
Following this investment, management believes that the Company now offers the
most state-of-the-art on-mountain facilities in each of its markets.
Capitalizing on this investment is one of the primary focuses of the Company's
fiscal 2000 strategic plan.
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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 information and technology systems for application across all
of the Company's resorts.
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 and 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 1998-99 ski season, the Company increased its average yield
per skier visit by approximately 10% as compared to the 1997-98 ski season.
Season pass revenue for the 1998-99 ski season at the resorts increased by 8.5%
as compared to the 1997-98 ski season.
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 utilizes a number of innovative techniques to achieve those goals.
Partnership Marketing: Management believes that joint
marketing programs create a quality image and a strong market presence
on a regional and national basis. The Company, because of the
demographics of its customers and its high profile image, is a very
attractive asset to major marketers. The company has entered into
promotional agreements, some of which include television, radio and
special events programs, with major corporations including Sprint,
Mobil, Budweiser, Pepsi/Mountain Dew, Motorola, Vermont Pure, Veryfine,
Kodak, Swatch, and Green Mountain Coffee Roasters.
Loyalty programs: The Company created the first frequent skier
program in the world, and that program has evolved into The Edge, a
private-label program in which participants receive credits towards
lift tickets across the United States. The Company's new mEticket
program is believed to be the first nation-wide program targeted at
retaining skiers who ski three to fourteen days each season, which the
Company's research indicates represents the majority of the ski
population. By giving guests an incentive to purchase their skiing for
the year up front with the special values offered by mEticket, the
Company believes it can encourage guests to ski more often and do the
majority of their skiing at the Company's resorts.
Broadcast: The Company utilizes a variety of marketing media
including direct mail, radio, television and the Internet. Television
and radio marketing efforts include both strategic and tactical
messaging; the strategic advertising promotes the sports and the
resorts themselves, and the tactical messaging provides current
information related to ski conditions as a means of promoting visits.
In addition, each resort utilizes local cable television networks to
provide current information and cross-sell resort products and
services.
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Internet: The Company's resorts were among the first in the
industry to embrace Internet marketing, and among the first to
successfully engage in on-line sales. Internet activities include
individual resort websites which provide current snow conditions,
special deals and interactive programs, a real estate sales website
promoting the Company's Grand Summit Hotels and Resort Villages, a site
promoting summer vacation activities, a dedicated site for mEticket,
on-line retail sales and a special site promoting learning to ski or
snowboard. All sites are linked through the Company's own site
(www.peaks.com).
Increasing the skier and rider market: The Company has
developed a new and proprietary skier development system. It combines
the unique learning method of the Company's trademarked Perfect Turn
instructional method with graduated length skis, a new sales process
and specially designed Sprint Discovery Centers, which are specifically
designed for first time skiers and riders. Management believes this new
system will significantly increase the retention rate of first time
skiers and riders.
Develop new programs to serve and attract new guests: The
Company has created new programs to augment winter programming and
increase summer visits. Winter activities at Company resorts have been
greatly expanded with the addition of new Fun Centers. These Fun Center
programs are designed to reflect the needs of each individual resort.
Activities offered at the Company's resorts include ice skating,
snowmobiling, snow tubing, snowshoeing, snowcat rides, arcades and
other indoor and outdoor activities. As part of an ongoing effort to
expand summer revenues, the Company has created Grand Summer Vacations,
which package the many summer activities available at Company resorts
including water slides, canoeing, mountain biking, climbing walls,
chairlift rides, golf, tennis, hay rides, alpine slides, BMX parks, and
swimming.
Mountainside Real Estate Development. The Company's real estate
development strategy is designed to capitalize on and support its substantial
investment in its on-mountain facilities over the last several years. The
Company's resort real estate development strategy is centered around the
creation of alpine resort villages at five of its resorts, The Canyons,
Heavenly, Killington, Steamboat and Sunday River. Each village consists of
carefully planned communities integrated with condominiums, luxury townhouses,
single family luxury dwellings or lots and commercial properties. Each village
is anchored by a Grand Summit Hotel, a full service hotel operated in a
quarter-ownership format. 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 Company's primary
focus over the next several years is expected to be capitalizing upon its
opportunities at The Canyons and Heavenly. Development at other villages is
expected to continue, albeit at a slower pace than these two resorts.
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., has
been rated as one of the top 25 upscale courses in the country according to a
Golf Digest magazine survey. 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.
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 produced
approximately 46% of total resort operations revenue for fiscal 1999.
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The following chart reflects the Company's sources of resort revenues
across certain revenue categories as well as the percentage of resort revenues
contributed by each category for the fiscal year ended July 25, 1999.
---------------------------------------------------------------------------
Fiscal Year Ended July 25, 1999
Resort Revenues Percentage of
(in thousands) Resort Revenues
---------------------------------------------------------------------------
Revenue Category:
Lift Tickets $ 134,504 46.0%
Food and beverage 13.1%
38,259
Retail sales 14.2%
41,463
Lodging and property 10.8%
31,672
Skier development 8.3%
24,159
Golf, summer activities and 7.6%
miscellaneous 22,501
---------------------------------------------------------------------------
Total Resort Revenues $ 292,558 100.0%
---------------------------------------------------------------------------
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.
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.
Retail Sales. Across all of its resorts, the Company owns over 80
retail and 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, in 1997,
the Company expanded its retail operations by expanding and opening new off-site
retail facilities in high traffic areas, such as stores on the Killington Access
Road, in downtown South Lake Tahoe, and in the Freeport, Maine and North Conway,
New Hampshire retail districts.
Lodging and Property Management. The Company's lodging and property
management departments manage their own properties as well as properties owned
by third parties. Currently, the Company's lodging departments manage
approximately 1,750 lodging units at the Company's 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.
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. 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. During the
1998-99 season the Company embarked upon a new skier development program that
focused on the marketing and sales of the entire mountain resort experience,
rather than simply traditional learn-to-ski concepts, the Company intends to
continue this plan for the 1999-2000 season.
7
<PAGE>
Real Estate Development
In the spring of 1998, the Company formed American Skiing Company
Resort Properties, Inc. ("Resort Properties") as a real estate development
holding company through which substantially all of the Company's real estate
activities are conducted. As of October 7, 1999, Resort Properties has been
capitalized with $31.2 million in cash and land from the Company, and the
Company currently plans to contribute up to an additional $26 million during the
remainder of Fiscal 2000.
With the ski industry in a period of consolidation as costs of
infrastructure required to maintain competitiveness have increased, the
Company's acquisitions of large, well-known ski resorts in need of lodging and
after-ski activities is expected to provide a foundation for creating a highly
attractive supply of vacation home products.
The Company's real estate development strategy is centered upon the
creation of "resort villages" at five of the Company's largest resorts.
Development within these resort villages is focused upon projects which
management believes will generate the highest returns to the Company. While the
business plan contemplates the completion of projects at several of the
Company's resorts across the United States, there is a clear focus on The
Canyons and, to a slightly lesser extent, Heavenly. The strength of the existing
market in the Park City, Utah area combined with the impact of the 2002 Winter
Olympic Games makes The Canyons a unique development opportunity. The Salt Lake
City area has been one of the fastest growing regions in the United States over
the last several years. The Park City area is growing even more rapidly, at
twice the State average according to State of Utah authorities. The effect of
this rapid expansion on the real estate market is dramatically compounded by
this area hosting the 2002 Winter Olympic Games. Management believes that this
combination provides a unique real estate development opportunity, and has
adjusted the Resort Properties business plan to account for these factors.
The Resort Properties business plan also requires certain pre-sale
levels to be satisfied for projects prior to the commencement of project
construction, which management believes helps to ensure that projects with a
higher projected return and lower risk level will be developed. Projects are
developed through a combination of equity proceeds, proceeds from the Resort
Properties Term Facility (discussed below) and secured project financing, which
is generally without recourse to the Parent and its resort operating
subsidiaries. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
Resort Villages. The Company's strategy is to respond to the expected
increase in demand for vacation home products with a variety of product types,
from timeshare to whole-ownership, emphasizing the development of slopeside,
ski-in/ski-out real estate that complements the Company's mountain operations.
Key components of the strategy are the creation of "resort villages" at the
following resorts: The Canyons, Heavenly, Killington, Sunday River and
Steamboat. Each resort village is expected to consist of the following products:
o Quartershare hotels: The Company's quartershare hotels, known as "Grand
Summit Hotels", are the anchors of the pedestrian villages.
o Whole and fractional ownership condominium hotels: Whole-ownership
condominiums such as the Sundial Lodge at The Canyons and other fractional
ownership condominiums are expected to fill out the accommodation base in
the pedestrian villages.
o Townhouses and Single Family Homes: Expansion of the breadth and depth of
the real estate product available for purchase or rent through selling and
building stacked townhouses, townhouses, and single family homes at each
resort where market demand presents opportunities.
o Retail. The Company's retail leasing business is expected to directly lease
or sell to third parties for re-leasing all retail space created within the
resort villages. Management believes that retail opportunities present an
essential ingredient that enhances the after-ski experience.
The master plans for each resort village core consist of approximately
1,200 units of accommodation supported by 140,000 square feet of retail space. A
strong component of the retail space is outdoor recreation-related retail. Each
building within a village is expected to consist of at least one level of
underground parking, and will generally include ground floor retail and three to
five stories of residential units. In some cases (such as the Grand Summit
Hotels at The Canyons and Steamboat) heights of buildings will range to nine
stories utilizing steel and concrete construction. As building progresses to the
village periphery, residential density, parking and retail are intended to be
reduced.
8
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Local approvals for these plans are at various stages of completion.
o The Canyons: The first phase of the resort village is fully vested and
approved, and the remainder is expected to be approved in the Fall of 1999.
o Heavenly: The redevelopment area of Park Avenue has already been approved
and the Company expects to sign a development agreement with the City of
South Lake Tahoe and commerce development in fiscal 2000.
o Killington: The master plan has received its initial Act 250 approval, but
must make its way through the appeal process. A re-zoning vote for a major
portion of the village is scheduled for November 1999. Entitlements for
individual projects may be obtained prior to final determination in master
plan approvals.
o Sunday River: The resort village master plan for Jordan Bowl is complete.
Individual permits for projects are all that is required for development.
o Steamboat: The mountain-town planning process will continue through a major
portion of fiscal 2000. No specific schedule has been established for its
conclusion.
The villages are designed to be the focal point of the guest experience
at each resort. Convenient access to the village on arrival, a stress free
walking experience while staying in the village, direct ski and lift access to
the mountains and easy access to golf are expected to characterize each
location.
The villages are each organized around a central plaza, forum or
activity center, with a strongly defined pedestrian retail spine anchored at
each end by either mountain lifts, large hotels or parking and people mover
systems. Pedestrian side streets from the central spine lead to additional
retail and accommodations. Ultimate ownership of infrastructure and public
facilities is expected to be transferred to a resort management company owned or
controlled by the Company.
Grand Summit Hotels. The Grand Summit Hotel is a unique interval
ownership product originated by the Company. Each hotel is a condominium
consisting of fully furnished residential and commercial units with a voluminous
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. Residential units in the hotel are sold in quartershare
interests, and the balance of the hotel is typically retained by the Company.
Ground level hotel street frontage will be utilized as retail space taking
advantage of pedestrian traffic in the village core.
Each quartershare hotel unit consists of a 13-week ownership interest
spread evenly throughout the year. Weeks that are not used by an owner are
typically dedicated to the Company's optional rental program managed on a
traditional hotel format, which allows Resort Properties to retain a portion of
gross rental revenue. Consequently, the Company expects to benefit from revenue
generated by (i) the sale of units, (ii) the recurring revenues from lodging
rental, (iii) other hotel and commercial operations, and (iv) enhanced length of
stay by the ski visitor at the resort.
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<PAGE>
The following table summarizes Grand Summit pre-sales and sales
activity through October 3, 1999:
------------------ --------------- ------------------ --------------
Projects Pre-Sale Pre-Sales / Sales % of Total
Commencement ($000s) Project
Sell-Out(4)
------------------ --------------- ------------------ --------------
GSRCC (1) Dec. 1991 $ 24,451 100%
Attitash Nov. 1995 10,417 49%
Jordan Bowl Nov. 1996 23,795 72%
Mount Snow Nov. 1996 19,345 55%
Killington Nov. 1996 27,473 77%
Steamboat (2) Jan. 1998 30,855 29%
Canyons (2) Feb. 1998 61,781 50%
Heavenly(3) Feb. 1999 34,618 28%
------------------ --------------------- ------------------- --------------
(1) Grand Summit Resort and Conference Center at Sunday River
(2) Projects currently under construction
(3) Represents non-binding reservations, not binding pre-sales.
(4)Percentage of Total Project Sell-Out is an estimate based upon current sales
prices for remaining Project inventory, and actual results may differ based upon
adjustments in sales price of that inventory.
Whole Ownership Condominium Hotels. These hotels consist of fully
furnished upscale condominium units operated on a traditional hotel format. The
whole ownership structure satisfies this market segment's desire for traditional
real estate, but complements this traditional concept with both hotel-type
amenities and easy access to rental income generated through the hotel rental
management program. The Company retains ownership of the front desk and other
common areas of the condo/hotels with the expectation of operating these hotels
over the long term. By integrating the condo/hotels with its central reservation
system, the Company is enhancing its revenue opportunities through vertically
integrated resort operations, simplicity for guest reservations, and the revenue
splits associated with this type of product. The Sundial Lodge at The Canyons,
as in most of the resort village condominium products, also creates retail space
on the ground floor that supports the pedestrian village. The ground floor of
this building houses 31,800 square feet of retail and commercial space. This
space rests at the heart of the resort's retail center.
The condo/hotel product is marketed and sold using an "event marketing"
methodology that results in substantial sales from two marketing "events". The
first event is a reservation day, preceded by several weeks of intense
marketing. In the case of the Sundial Lodge at The Canyons, this event produced
over 225 reservations, each accompanied by a $5,000 deposit, for what was then a
75 unit project. Each reservation holder has the right to purchase two units. At
the second event held in August 1998, a fulfillment weekend, these Sundial Lodge
reservations were converted into sales contracts for 150 units in an expanded
project. For this type of product, the Company generally expects the event
marketing process to result in pre-sales of 80% to 100% of the project before
construction commences. In the case of Sundial Lodge, the marketing process
resulted in the project being 100% sold-out prior to construction.
Retail. The Company has completed retail needs programming studies for
each of the five resort village locations. Each study was conducted by a
consortium of some of the leading experts in retail in North America. The
Company is in the process of lease-up at The Canyons. While there is high
interest in the Company's retail program, identifying the timing of permanent
lease-up is challenging due to the high level of construction expected in the
village core over the next two years and the fact that the village's central
forum will not be completed until fall 2000.
Townhouses and Single Family. There is a component of resort real
estate purchasers that do not prefer core village areas, choosing instead to be
located in an area which is convenient to the resort, but removed from the
center of activity. There is also logical reasoning for decreasing densities of
development as one moves away from the core areas. Within each resort master
plan are areas that can accommodate stacked town houses of a site density of
about 20 to 30 units per acre, town houses ranging from 10 to 20 units per acre,
and single family homes structured as both small and large lot product.
10
<PAGE>
Development Program
The Company's five year real estate business plan consists of the
development of up to 17 projects at its various resorts. This model anticipates
continuing sell-out and development of the Company's 7 existing projects. Four
projects (Grand Summit Hotels at Attitash, Jordan Bowl at Sunday River,
Killington and Mt. Snow) are fully constructed and operational. Three additional
projects are currently under construction: Grand Summit Hotels at The Canyons
and Steamboat, and the Sundial Lodge at The Canyons. An additional seven
projects are expected to commence pre-sales and planning during the Company's
current fiscal year. The remaining projects are expected to be launched in
fiscal 2001 or 2002.
Four Existing Grand Summit Hotels. The Company opened its first Grand
Summit Hotel known as the Grand Summit Resort and Conference Center at Sunday
River in December 1993. The Grand Summit Hotel at Attitash was opened in March
1997. During Fiscal 1998, the Company opened three additional Grand Summit
Hotels (at Jordan Bowl at Sunday River, Mount Snow and Killington). The Company
is currently selling quartershare units at the Attitash Grand Summit and the
three Grand Summits that opened during Fiscal 1998.
Three Projects Under Construction. The Company has commenced
construction of the following three hotels at its western resorts:
o 182 room Grand Summit quartershare (728 quartershares) hotel located
at the Steamboat resort in Steamboat Springs, Colorado;
o 213 room Grand Summit quartershare (852 quartershares) hotel located
at The Canyons resort in Utah;
o 150 unit whole-ownership Sundial Lodge condominium hotel also located
at The Canyons resort.
The conceptual framework for the Company's western Grand Summit Hotel projects
is the existing Grand Summit Hotels at eastern resorts. However, the western
prototype has a more upscale design, taking advantage of the perceived strong
demand for the product and complementing the destination nature of the Company's
western resorts. The Sundial Lodge condo hotel project at The Canyons is further
scaled to account for the expected strong demand surrounding the 2002 Winter
Olympics in Salt Lake City. Management expects that the upscale design at the
western locations will command higher price points, with a significant increase
in the average price per quartershare over eastern property pricing levels.
Multiple Projects Starting in Fiscal 2000. The projects commencing in
fiscal 2000 represent a clear focus on the Company's most substantial immediate
development opportunities at The Canyons and Heavenly, while simultaneously
generating a diversification of real estate product at a broader spectrum of The
Company's resorts. The new fiscal 2000 projects are expected to include several
projects at The Canyons, a Grand Summit Hotel at Heavenly, introduction of
Killington Grand Summit Hotel Phase II to the market in the latter part of the
upcoming ski season and the introduction to the market in the Spring of 2000 of
the Jordan Pond Townhome project at the Company's Sunday River resort.
Leased Properties
The Company's operations are wholly dependent upon its ownership or
control over the real estate constituting each resort. The following summarizes
certain non-owned real estate critical to operations at each of the Company's
resorts. 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.
The Sunday River resort 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. This lease
was amended on January 23, 1998 to allow Sunday River to purchase portions of
the leased property for real estate development at a predetermined amount per
acre. In January 1998, the Company acquired an undivided one-half interest in
the fee title to the leased parcel.
11
<PAGE>
The Sugarbush resort uses approximately 1,915 acres pursuant to a
special use permit issued by the United States Forest Service. 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.
The Mount Snow resort 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. 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 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 the
lessor 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. 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 a 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, LC. 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 5.5% of the full capitalized
cost of such development in the case of property retained by the Company, or 11%
of such cost in the case of property intended for resale. The Canyons also
leases approximately 807 acres, which constitute 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. The lease term
ends in 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 includes a lease of all skiable terrain for a term ending
September 13, 2094.
Heavenly uses approximately 1,543 acres of its skiable terrain located
in California and Nevada pursuant to a special use permit issued by the United
States Forest Service. The permit expires on August 5, 2029. Heavenly uses
12
<PAGE>
approximately 2,000 acres of additional skiable terrain in Nevada pursuant to a
special use permit which 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 which 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.
The Forest Service can terminate most of the foregoing special use
permits if it determines that termination is required in the public interest.
However, to the knowledge of the Company, no recreational Special Use Permit or
Term Special Use Permit for any major ski resort then in operation has ever been
terminated by the Forest Service over the opposition of the permit holder.
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 has substantially implemented a
comprehensive system and technology plan including: (i) an integrated customer
database that tracks information regarding guest preferences and product
purchasing patterns, (ii) an extensive data communications network linking most
point-of-sale locations through a central database, (iii) a central reservations
system for use in the resort's rental management business and (iv) 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, with 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 refers to this ideal quality product
as "Retail Snow," a high quality, durable skiing surface with top to bottom
consistency. 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 instrumentation. 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. 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 is available on the World Wide Web at the
Company's and its individual resorts' web sites.
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.
13
<PAGE>
Employees and Labor Relations
The Company employs approximately 12,140 employees at peak season and
approximately 1,700 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,
regional 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 the Company's future operations. Phase I environmental
assessments have been completed on substantially all of the real estate owned or
controlled by the Company. 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. The
reports did not, however, identify any environmental conditions or
non-compliance at any of the Company's properties, the remediation or correction
of which management believes would have a material adverse impact on the
business or financial condition of the Company or results of operations or cash
flows.
The Company believes it has all permits, licenses and approvals from
governmental authorities material to its operations 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 Company's resort and real estate capital programs require permits
and approvals from certain federal, state, regional 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.
Item 2
Properties
The Company's resorts include several of the top resorts in the United
States, including: (i) Steamboat, the fourth largest ski resort in the United
States with over 1.0 million skier visits in the 1998-99 ski season; (ii)
Killington, the fifth largest resort in the United States with over
approximately 978,000 skier visits in the 1998-99 ski season; (iii) three of the
four largest resorts in the Northeast (Killington, Sunday River and Mount
Snow/Haystack) in the 1998-99 ski season; and (iv) Heavenly, which ranked as the
second largest resort in the Pacific West region for the 1998-99 season with a
resort record 932,000 skier visits. The following table summarizes certain key
statistics of the Company's resorts:
14
<PAGE>
<TABLE>
<CAPTION>
----------------------------- ------------- --------- -------- ------------ -------------- --------- ------------
Skiable Vertical Snowmaking 1998-99
Terrain Drop Total Coverage Ski Skier
Resort (acres) (feet) Trails Lifts (% of acres) Lodges Visits
(high-speed) (000s)
----------------------------- ------------- --------- -------- ------------ -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Killington 1,200 3,150 200 33(6) 70.0% 8 978
Sunday River 654 2,340 126 18(4) 93.3 4 526
Mount Snow/Haystack 631 1,700 133 25(3) 79.0 5 513
Sugarloaf 1,400 2,820 126 14(2) 35.0 1 329
Sugarbush 439 2,650 115 18(4) 66.1 5 368
Attitash Bear Peak 280 1,750 68 12(2) 89.7 2 210
The Canyons 3,300 3,190 63 13(9) 4.5 2 220
Steamboat 2,939 3,668 141 20(4) 14.9 4 1,013
Heavenly 4,800 3,500 82 27(6) 5.7 7 932
----------------------------- ------------- --------- -------- ------------ -------------- --------- ------------
Total 15,643 1,054 180(40) 38 5,089
----------------------------- ------------- --------- -------- ------------ -------------- --------- ------------
</TABLE>
See the Item 1 Section entitled "Business - Resorts" for a more
detailed description of the Company's resorts.
Item 3
Legal Proceedings
The Company currently and from time to time is involved in litigation
arising in the ordinary course of its business. The Company does not believe
that it is involved in any litigation that will, individually or in the
aggregate, have a material adverse effect on its financial condition or results
of operations or cash flows.
Each of the Company's subsidiaries which operate resorts has pending
claims and is regularly subject to suits with respect to personal injury claims
related principally to skiing activities at such resort. Each of these operating
companies maintains liability insurance that the Company considers adequate to
insure claims related to usual and customary risks associated with the operation
of a ski resort. The Company operates a captive insurance company authorized
under the laws of the State of Vermont, which, until early fiscal 1999, provided
liability and workers' compensation coverage for its resorts located in Vermont.
The Company currently does not use the captive insurance subsidiary to provide
liability and workers' compensation insurance coverage, but it is still
responsible for any future claims arising from insurable events which may have
occurred while this coverage was being provided by the captive insurance
subsidiary. The captive insurance subsidiary maintains cash reserves in amounts
recommended by an independent actuarial firm, which management believes to be
adequate to cover any such claims.
The Killington resort has been identified by the U.S. Environmental
Protection Agency (the "EPA") as a potentially responsible party ("PRP") 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
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, on the
basis that Killington disputes its designation as a PRP. In addition, the
Company recently received notification that its Heavenly resort is expected to
be designated as a PRP at a Superfund site in Patterson, CA. The Company has yet
to be officially designated with respect to this site. 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.
Item 4
Submission of Matters to a Vote of Security Holders
Not applicable.
15
<PAGE>
PART II
Item 5
Market for the Registrant's Common Equity and
Related Security Holder Matters.
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "SKI". The Company's Class A Common Stock is not listed on any
exchange and is not publicly traded, but is convertable into Common Stock of the
Company. As of October 20, 1999, 30,286,773 shares of common stock were issued
and outstanding, of which 14,760,530 shares were Class A Common Stock held by
one holder and 15,526,243 shares of Common Stock held by approximately 5,000
holders.
The following table sets forth, for the fiscal quarters indicated, the
range of high and low sale prices of the Company's Common Stock as reported on
the NYSE Composite Tape.
American Skiing Company Common Stock
Fiscal 1999 Fiscal 1998
High Low High Low
1st Quarter $12.50 $ 5.19 ----- -----
2nd Quarter $10.25 $ 4.75 $17.00 $13.00
3rd Quarter $ 5.75 $ 3.06 $16.88 $12.94
4th Quarter $ 5.50 $ 2.38 $14.13 $12.13
Market Information
The Company has not declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support its
capital improvement and growth strategies and does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including the Company's financial
condition, operating results, current and anticipated cash needs and plans for
capital improvements and expansion. Each of (i) the Indenture governing the
Company's 12% Senior Subordinated Notes due 2006, (ii) the Company's $165
million Senior Credit Facility with BankBoston, N.A. (as described below), and
(iii) the terms of the Company's 10.5% Mandatorily Redeemable Preferred Stock
contains certain restrictive covenants that, among other things, limit the
payment of dividends or the making of distributions on equity interests of the
Company. See Part II, Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
16
<PAGE>
Item 6
Selected Financial Data
The following selected historical financial data of the Company have
been derived from the financial statements of the Company audited by Arthur
Andersen LLP, independent accountants as of and for the fiscal year ended July
25, 1999; and for the years ended July 30, 1995, July 28, 1996, July 27, 1997
and July 26, 1998 have been derived from the financial statements of the Company
audited by PricewaterhouseCoopers LLP, independent accountants.
<TABLE>
Historical Year Ended (1)
<CAPTION>
July 30, 1995 July 28, 1996 July 27, 1997 July 26, 1998 July 25, 1999
(in thousands, except per share, real estate units,
and per skier visit amounts)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Net revenues:
Resort (2) $46,794 $63,489 $163,310 $277,574 $292,558
Real estate 7,953 9,933 10,721 60,992 24,492
------------ ------------ ------------ ------------ ------------
Total net revenues
54,747 73,422 174,031 338,566 317,050
Operating expenses:
Resort 29,725 41,799 107,230 171,246 198,231
Real estate 3,994 5,844 8,950 43,554 26,808
Marketing, general and administrative 9,394 11,289 25,173 40,058 51,434
Stock compensation charge (3) - - - 14,254 -
Depreciation and amortization 3,910 6,783 18,293 37,965 44,202
------------ ------------ ------------ ------------ ------------
Total operating expenses 47,023 65,715 159,646 307,077 320,675
------------ ------------ ------------ ------------ ------------
Income (loss) from operations 7,724 7,707 14,385 31,489 (3,625)
Other expenses:
Commitment fee - 1,447 - - -
Interest expense 2,205 4,699 23,730 34,575 39,382
------------ ------------ ------------ ------------ ------------
Income (loss) before provision (benefit)
for income taxes and minority interest in
loss of subsidiary 5,519 1,561 (9,345) (3,086) (43,007)
Provision (benefit) for income taxes 400 3,906 (3,613) (774) (15,057)
Minority interest in loss of subsidiary - (108) (250) (445) -
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary items 5,119 (2,237) (5,482) (1,867) (27,950)
Extraordinary loss, net of income tax
benefit - - - 5,081 -
------------ ------------ ------------ ------------ ------------
Income (loss) before preferred stock
dividends 5,119 (2,237) (5,482) (6,948) (27,950)
Accretion of discount and issuance costs
and dividends accrued on mandatorily
redeemable preferred stock - - 444 5,346 4,372
------------ ------------ ------------ ------------ ------------
Net income (loss) available to common
shareholders $5,119 ($2,237) ($5,926) ($12,294) ($32,322)
============ ============ ============ ============ ============
Basic and fully diluted loss per share:
Loss before extraordinary items - ($2.37) ($6.06) ($0.28) ($1.07)
Extraordinary loss - - - (0.20) -
------------ ------------ ------------ ------------ ------------
Net loss available to common shareholders - ($2.37) ($6.06) ($0.48) ($1.07)
============ ============ ============ ============ ============
Weighted average shares outstanding - 942 978 25,809 30,286
============ ============ ============ ============ ============
17
<PAGE>
Other Data:
Resort:
Skier visits (000's)(4) 1,060 1,290 3,025 5,319 5,089
Season pass holders (000's) 11.2 13.2 30.9 44.1 44.2
Resort revenues per skier visit $44.15 $49.22 $53.99 $52.19 $57.48
Resort EBITDA(5)(6) $7,675 $10,401 $30,907 $66,270 $42,893
Real estate:
Number of units sold 163 177 123 1,009 1,290
Number of units pre-sold(7) - 109 605 861 1,151
Real estate EBIT(6)(8) $3,959 $4,089 $1,771 $17,438 ($2,316)
Statement of Cash Flows Data:
Cash flows from (used in) operations $12,593 $7,465 $6,788 $8,708 ($77,235)
Cash flows used in investing activities (13,843) (122,583) (14,070) (384,303) (37,486)
Cash flows from financing activities 2,399 116,941 19,655 375,407 108,354
Balance Sheet Data:
Total assets $72,434 $298,732 $337,340 $780,899 $907,502
Mandatorily redeemable preferred stock - - 16,821 39,464 43,836
Long term debt, including current
maturities - 210,720 236,330 383,220 502,461
Common shareholders' equity 30,502 21,903 15,101 268,204 236,655
<FN>
(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 Mount Cranmore ski resort from its acquisition in
June 1995 through its divestiture in November 1996, the results of operation of
S-K-I Ltd. since its acquisition in June 1996, the results of operation of Pico
Mountain since its acquisition in November 1996, the results of operations of
The Canyons resort since its acquisition in July 1999 and the results of
operations of the Steamboat and Heavenly resorts since their acquisition in
November 1997.
(2) Resort revenues represents all revenues excluding revenues generated by the
sale of real estate interests.
(3)In the first quarter of fiscal 1998, the Company granted to certain executive
officers and other employees fully vested options to purchase 511,530 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 recognized a one-time compensation charge of $14.3 million in 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 that
approximates 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 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.
(7)Pre-sold units represent quartershare and other residential units 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.
(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.
</FN>
</TABLE>
18
<PAGE>
Item 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following is management's discussion and analysis of financial
condition and results of operations for the twelve months ended July 25, 1999.
As you read the material below, we urge you to carefully consider our
Consolidated Financial Statements and related notes contained elsewhere in this
report.
The Oak Hill Transaction. On August 9, 1999, the Company consummated
the sale of 150,000 shares of its Series B Convertible Exchangeable Preferred
Stock (the "Series B Preferred Stock") to Oak Hill Capital Partners, L.P. and
certain related entities ("Oak Hill"). The Company realized gross proceeds of
$150 million on the Series B Preferred Stock sale. The Company used $128.6
million of the proceeds to reduce indebtedness under its Senior Credit Facility
(as described below), approximately $30 million of which will be reborrowed and
invested in the Company's principal real estate development subsidiary, American
Skiing Company Resort Properties, Inc., ("Resort Properties"). The remainder of
the proceeds were used to (1) pay approximately $16 million in fees and expenses
in connection with the Series B Preferred Stock sale and related transactions,
and (2) acquire from the Company's principal shareholder certain strategic
assets and to repay a demand note issued by a subsidiary of the Company to the
Company's principal shareholder, in the aggregate amount of $5.4 million. As a
result of these transactions, management believes that its current capital
resources are sufficient both to fund operations at its resorts and to complete
those real estate projects which are currently under construction. As more fully
discussed below, the Company's ability to commence and complete new real estate
development projects will be dependent upon the Company's ability to raise
additional capital and Resort Properties' ability to obtain additional
non-recourse financing.
In connection with the Series B Preferred Stock sale, the Company
obtained consents (1) from lenders and creditors of the Company stating that the
Series B Preferred Stock sale would not constitute a "change of control" under
the relevant loan agreements, (2) from the holders of the 10.5% Senior Preferred
Stock of the Company approving the issuance of the Series B Preferred Stock and
the terms of such stock and (3) from noteholders under the Indenture relating to
the 12% Senior Subordinated Notes due 2006 of the Company's subsidiary, ASC East
(the "Indenture"), approving the merger of ASC East into the Company and certain
other amendments to the Indenture.
In connection with the Series B Preferred Stock sale, the Company
simplified its capital structure by merging its two principal subsidiaries, ASC
East and ASC West, with and into the Parent. In connection with the merger, the
Parent assumed all liabilities of ASC East and ASC West and became the primary
obligor under certain credit facilities and under the Indenture. In addition,
the then current subsidiaries of the Parent and ASC West, as well as ASC Utah,
also became additional guarantors under the Indenture. As a result of the
merger: (a) ASC East is no longer required to file annual reports and make other
filings under the regulations of the Securities Exchange Act of 1934; (b) the
Company's capital structure has been simplified, which is expected to make it
easier to raise capital in the future and administer the operations of the
Company; (c) the capital and assets of ASC East and its subsidiaries are
available to satisfy the obligations of ASC West and its subsidiaries under the
Company's Senior Credit Facility (described below); and (d) the Parent and its
subsidiaries are now subject to the covenants and other restrictions contained
in the Indenture.
As a result of the additional guarantee given by certain subsidiaries
of the Company, the noteholders under the Indenture will have priority over the
equity holders of the Company with respect to any claims made on the assets of
those subsidiaries until the obligations under the Indenture have been
satisfied.
Liquidity and Capital Resources
Short-Term. The Company's primary short-term liquidity needs are
funding seasonal working capital requirements, continuing and completing real
estate development projects presently under construction, funding its fiscal
2000 capital improvement program and servicing indebtedness. Cash requirements
for ski-related and real estate development activities are provided by separate
sources. The Company's primary sources of liquidity for ski-related working
capital and ski-related capital improvements are cash flow from operations of
its non-real estate subsidiaries and borrowings under the Senior Credit Facility
(as hereinafter defined). Real estate development and real estate working
capital is funded primarily through (i) construction financing facilities
established for major real estate development projects, (ii) the expected $30
million equity contribution made available from the proceeds of the Series B
Preferred Stock sale and (iii) through a $58 million term loan facility
established through Resort Properties (the "Resort Properties Term Facility").
These construction financing facilities and Resort Properties Term Facility
(collectively, the "Real Estate Facilities") are without recourse to the Company
and its resort operating subsidiaries. The Real Estate Facilities are
collateralized by significant real estate assets of Resort Properties and its
subsidiaries, including, without limitation, the assets and stock of Grand
Summit Resort Properties, Inc. ("GSRP"), the Company's primary hotel development
subsidiary. As of July 25, 1999, the book value of the total assets that
collateralized the Real Estate Facilities, and are included in the accompanying
consolidated balance sheet, were approximately $247.3 million.
Resort Liquidity. The Company established a senior credit facility on
November 12, 1997. On October 7, 1999, this senior credit facility was amended,
restated and consolidated from two sub-facilities totaling $215 million to a
single facility totaling $165 million ($74.1 million of which was available for
borrowings at October 7, 1999, which includes $25 million the Company intends to
19
<PAGE>
transfer to Resort Properties in fiscal 2000) (the "Senior Credit Facility").
The Senior Credit Facility consists of a revolving credit facility in the amount
of $100 million and a term facility in the amount of $65 million. The revolving
portion of the Senior Credit Facility matures on May 30, 2004, and the term
portion matures on May 31, 2006.
The Senior Credit Facility contains restrictions on the payment of
dividends by the Company on its common stock. Those restrictions prohibit the
payment of dividends in excess of 50% of the Company's consolidated net income
after July 31, 1997, and further prohibit the payment of dividends under any
circumstances when the effect of such payment would be to cause the Company's
debt to EBITDA ratio (as defined within the credit agreement) to exceed 4.0 to
1. Based upon these restrictions (as well as additional restrictions discussed
below), the Company does not expect that it will be able to pay cash dividends
on its common stock, 10.5% Senior Preferred Stock or Series B Senior Preferred
Stock in the foreseeable future.
The maximum availability under the revolving facility will reduce over
the term of the Senior Credit Facility by certain prescribed amounts. The term
facility amortizes at an annual rate of approximately 1.0% of the principal
amount for the first four years with the remaining portion of the principal due
in two substantially equal installments in years five and six. The Senior Credit
Facility requires mandatory prepayment of 50% of the Company's 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 the revolving facility commitment below $74.8 million. Management does
not presently expect to generate excess cash flows, as defined in the Senior
Credit Facility, during fiscal 2000 or fiscal 2001.
The Senior Credit Facility contains affirmative, negative and financial
covenants customary for this type of credit facility, including maintenance of
certain financial ratios. The Senior Credit Facility is collateralized by
substantially all the assets of the Company, except its real estate development
subsidiaries (consisting of Resort Properties and its subsidiaries), which are
not borrowers under the Senior Credit Facility. The revolving facility is
subject to an annual 30-day clean down requirement to an outstanding balance of
not more than $35 million, which clean down period must include April 30 of each
fiscal year.
Based upon historical operations, management presently anticipates that
the Company will be able to meet the financial covenants of the Senior Credit
Facility. Failure to meet one or more of these covenants could result in an
event of default under the Senior Credit Facility. In the event that such
default were not waived by the lenders holding a majority of the debt under the
Senior Credit Facility, such default would also constitute defaults under one or
more of the Textron Facility, the Key Facility (each as hereinafter defined),
the Resort Properties Term Facility and the Indenture, the consequences of which
would likely be material and adverse to the Company.
The Senior Credit Facility also places a maximum level of non-real
estate capital expenditures for fiscal 2000 of $23.1 million (exclusive of
certain capital expenditures in connection with the sale of the Series B
Preferred Stock). Following fiscal 2000, annual resort capital expenditures
(exclusive of real estate capital expenditures) are capped at the lesser of (i)
$35 million or (ii) the total of consolidated EBITDA (as defined therein) for
the four fiscal quarters ended in April of the previous fiscal year less
consolidated debt service for the same period. In addition to the foregoing
amounts, the Company is permitted to and expects to make capital expenditures of
up to $30 million for the purchase and construction of a new gondola at its
Heavenly resort in Lake Tahoe, Nevada, which the Company currently plans to
construct during the 2000 and 2001 fiscal years.
20
<PAGE>
The Company intends to use borrowings under the Senior Credit Facility
for seasonal working capital needs, certain capital improvements and to build
retail and other inventories prior to the start of the 1999-2000 ski season. The
Company expects to maximize borrowings under the Senior Credit Facility sometime
between October and November of 1999. During this period, the Company
historically has had little, if any, borrowing availability under the Senior
Credit Facility. However, as a result of the sale of the Series B Preferred
Stock and the resulting paydown in the balance of the revolving portion of the
Senior Credit Facility, in Fiscal 2000 management expects that the Company will
have significant additional borrowing availability under the Senior Credit
Facility during this period.
The Company's liquidity is significantly affected by its high leverage.
As a result of its leveraged position, the Company will have significant cash
requirements to service interest and principal payments on its debt.
Consequently, cash availability for working capital needs, capital expenditures
and acquisitions is very limited, outside of the availability under the Senior
Credit Facility. Furthermore, the Senior Credit Facility and the Indenture each
contain significant restrictions on the ability of the Company and its
subsidiaries to obtain additional sources of capital and may affect the
Company's liquidity. These restrictions include restrictions on the sale of
assets, restrictions on the incurrence of additional indebtedness and
restrictions on the issuance of preferred stock.
On October 6, 1999, the Parent merged with two of its subsidiaries, ASC
East, Inc. and ASC West, Inc. In connection with this merger, the Parent assumed
the obligations of ASC East, Inc. under the Indenture, and each of the material
subsidiaries of ASC West, Inc. granted guarantees to secure the obligations of
the Parent under the Indenture. Each of the material subsidiaries of ASC East,
Inc. had previously granted guarantees to secure the obligations under the
Indenture. By assuming the obligations of ASC East under the Indenture, the
Company removed a significant impediment to the free flow of cash among its
subsidiaries and allowed for the consolidation of the Senior Credit Facility.
The assumption also subjects the Parent and its subsidiaries, ASC Utah and the
subsidiaries of ASC West, Inc. to the restrictions on dividends, indebtedness,
and other covenants contained in the Indenture. Management believes that the
simplified capital structure which resulted from the merger and the assumption
of the Indenture obligations will benefit the Company as it pursues additional
financing or other capital sources.
Under the Indenture, the Company is prohibited from paying cash
dividends or making other distributions to its shareholders, except under
certain circumstances (which are not currently applicable and are not
anticipated to be applicable in the foreseeable future).
The Company issued $17.5 million of convertible preferred stock and
$17.5 million of convertible notes in July, 1997 to fund development at The
Canyons. These securities were converted on November 12, 1997 into Mandatorily
Redeemable 10 1/2% Preferred Stock of the Company. The Mandatorily Redeemable 10
1/2% Preferred Stock is exchangeable at the option of the holder into shares of
the Company's common stock at a conversion price of $17.10 for each common
share. In the event that the Mandatorily Redeemable 10 1/2% Preferred Stock is
held to its maturity date of November 15, 2002, the Company will be required to
pay the holders the face value of $36.6 million plus dividends in arrears. So
long as the Mandatorily Redeemable 10 1/2% Preferred Stock remains outstanding,
the Company may not pay any cash dividends on its common stock or Series B
Preferred Stock unless accrued and unpaid dividends on the Mandatorily
Redeemable 10 1/2% Preferred Stock have been paid in cash on the most recent due
date. Because the Company has been accruing unpaid dividends on the Mandatorily
Redeemable 10 1/2% Preferred Stock, the Company is not presently able to pay
cash dividends on its common stock or Series B Preferred Stock and management
does not expect that the Company will have this ability in the near future.
Real Estate Liquidity: Interim funding of working capital for Resort
Properties and its fiscal 1999 real estate development program was obtained
through a loan from BankBoston, N.A. in the maximum amount of $30 million, which
closed on September 4, 1998 (the "Bridge Loan"). On January 8, 1999, the Bridge
Loan was repaid with proceeds from a term loan facility between BankBoston and
Resort Properties in the maximum principal amount of $58 million (the "Resort
Properties Term Facility"). The Resort Properties Term Facility bears interest
at a variable rate equal to BankBoston's base rate plus 8.25%, or a current rate
of 16.5% per annum (payable monthly in arrears), and matures on June 30, 2001.
As of October 1, 1999, $52.8 million was outstanding under the Resort Properties
Term Facility. The Resort Properties Term Facility is collateralized by security
interests in, and mortgages on, substantially all of Resort Properties' assets,
which primarily consist of undeveloped real property and the stock of its real
estate development subsidiaries (including GSRP). As of July 25, 1999, the book
value of the total assets that collateralized the Resort Properties Term
Facility, and are included in the accompanying consolidated balance sheet, was
approximately $247.3 million. The Resort Properties Term Facility is
non-recourse to the Company and its resort operating subsidiaries.
In conjunction with the Resort Properties Term Facility, Resort
Properties entered into a syndication letter with BankBoston (the "Syndication
Letter") pursuant to which BankBoston agreed to syndicate up to $43 million of
the Resort Properties Term Facility. Under the terms of the Syndication Letter,
one or more of the terms of the Resort Properties Term Facility (excepting
certain terms such as the maturity date and commitment fee) may be altered
depending on the requirements for syndication of the facility. However, no
alteration of the terms of the facility may occur without the consent of Resort
Properties. Although Resort Properties expects the terms of the Resort
Properties Term Facility to remain substantially similar to those discussed
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<PAGE>
above, one or more of such terms could be altered in order to syndicate the
facility, and such alterations could be material and adverse to the Company. As
of October 1, 1999, BankBoston was actively engaged in syndicating the Resort
Properties Term Facility, however, no syndication participants were committed as
of that date. The Syndication Letter also provides that, in the event that
BankBoston is unable to syndicate at least $33 million of the Resort Properties
Term Facility, then BankBoston may at its option, require repayment of the
outstanding balance of the facility within 120 days of its request for repayment
by Resort Properties If the syndication is unsuccessful and BankBoston were to
require repayment, there can be no assurance that the Company could secure
replacement financing for the Resort Properties Term Facility. The failure to
secure replacement financing on terms similar to those existing under the Resort
Properties Term Facility could result in a material adverse effect on the
liquidity of Resort Properties and its subsidiaries, including GSRP, and could
also result in a default under the Indenture and the Senior Credit Facility.
The Company runs substantially all of its real estate development
through single purpose subsidiaries, each of which is a wholly-owned subsidiary
of Resort Properties. In its fourth fiscal quarter of 1998, the Company
commenced construction on three new hotel projects (two at The Canyons in Utah
and one at Steamboat in Colorado). Two of these new hotel projects are Grand
Summit Hotels which are being constructed by GSRP. The Grand Summit Hotels at
The Canyons and Steamboat are being financed through a construction loan
facility among GSRP and various lenders, including TFC Textron Financial, the
syndication agent and administrative agent, which closed on September 25, 1998
(the "Textron Facility").
As of October 1, 1999, the amount outstanding under the Textron
Facility was $75.2 million. The Textron Facility matures on September 24, 2002
and bears interest at the rate of prime plus 2.5% per annum. The principal of
the Textron Facility is payable incrementally as quartershare sales are closed
based on a predetermined per unit amount, which approximates 80% of the net
proceeds of each closing. The Textron Facility is collateralized by mortgages
against the project sites (including the completed Grand Summit Hotels at
Killington, Mt. Snow, Sunday River and Attitash Bear Peak), and is subject to
covenants, representations and warranties customary for this type of
construction facility. The Textron Facility is non-recourse to the Company and
its resort operating subsidiaries (although it is collateralized by substantial
assets of GSRP, $165.7 million as of July 25, 1999) which comprise substantial
assets of the Company.
The remaining hotel project commenced by the Company in 1998, the
Sundial Lodge project at The Canyons, is being financed through a construction
loan facility between Canyons Resort Properties, Inc., (a wholly-owned
subsidiary of Resort Properties) and KeyBank, N.A. (the "Key Facility"). The Key
Facility has a maximum principal amount of $29 million, bears interest at a rate
of prime plus 1/4% per annum (payable monthly in arrears), and matures on June
30, 2000. Additional costs (approximately $8 million) for the Sundial Lodge
project have been financed through proceeds of the Resort Properties Term
Facility, which have been loaned on an intercompany basis by Resort Properties
to Canyons Resort Properties, Inc. The Key Facility closed on December 19, 1998.
The Company began drawing under the Key Facility in late April of 1999,
following completion of the required equity contribution (approximately $8
million) of the Company in the Sundial Lodge project. The Company had $12.3
million in advances outstanding under the Key Facility as of October 1, 1999.
The Key Facility is collateralized by a mortgage and security interest in the
Sundial Lodge project, a $5.8 million payment guaranty of Resort Properties, and
a full completion guaranty of Resort Properties. The Key Facility is
non-recourse to the Company and its resort operating subsidiaries (although it
is collateralized by substantial assets of Resort Properties and its
subsidiaries). As of July 25, 1999, the book value of the total assets that
collateralized the Real Estate Facilities, and are included in the accompanying
consolidated balance sheet, were approximately $247.3 million.
Long-Term. The Company's primary long-term liquidity needs are to fund
skiing related capital improvements at certain of its resorts and development of
its slope side real estate. The Company has invested over $145.5 million in
skiing related facilities in fiscal years 1998 and 1999 combined. As a result,
the Company expects its resort capital programs for the next several fiscal
years will be more limited in size. The Company's fiscal 2000 resort capital
program is estimated at approximately $23 million, plus such additional amounts
as are expended on the Heavenly Gondola project.
The Company's largest long-term capital needs relate to certain resort
capital expenditure projects and the Company's real estate development program.
For the next two fiscal years, the Company anticipates its annual maintenance
capital needs to be approximately $12 million. There is a considerable degree of
flexibility in the timing and, to a lesser degree, scope of the Company's growth
capital program. Although specific capital expenditures can be deferred for
extended periods, continued growth of skier visits, revenues and profitability
will require continued capital investment in on-mountain improvements. The
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<PAGE>
Company's practice is to finance on-mountain capital improvements through resort
cash flow and its Senior Credit Facility. The size and scope of the capital
improvement program will generally be determined annually depending upon future
availability of cash flow from each season's resort operations and future
borrowing availability and covenant restrictions under the Senior Credit
Facility. The Senior Credit Facility places a maximum level of non-real estate
capital expenditures for fiscal 2001 and beyond at the lesser of (i) $35 million
or (ii) the total of (a) consolidated EBITDA (as defined therein) for the four
fiscal quarters ended in April of the previous fiscal year less (b) consolidated
debt service for the same period. Management believes that these capital
expenditure amounts will be sufficient to meet the Company's needs for non-real
estate capital expenditures for the near future.
The Company's business plan anticipates the development of both Grand
Summit hotels and condominium hotels at several resorts, as well as resort
villages at Sunday River, Killington, The Canyons, Steamboat and Heavenly. The
timing and extent of these projects are subject to local and state permitting
requirements which may be beyond the Company's control, as well as to the
Company's cash flow requirements and availability of external capital.
Substantially all of the Company's real estate development is undertaken through
the Company's real estate development subsidiary, Resort Properties. Recourse on
indebtedness incurred to finance this real estate development is limited to
Resort Properties and/or its subsidiaries (including GSRP). Such indebtedness is
generally collateralized by the projects financed under the particular
indebtedness which, in some cases, constitutes a significant portion of the
assets of the Company. As of July 25, 1999, the total assets that collateralized
the Real Estate Facilities, and are included in the accompanying consolidated
balance sheet, totaled approximately $247.3 million. Resort Properties' seven
existing development projects are currently being funded by the Resort
Properties Term Facility, the Textron Facility and the Key Facility.
The Company expects to undertake future real estate development
projects through special purpose subsidiaries with financing provided
principally on a non-recourse basis to the Company and its resort operating
subsidiaries. Although this financing is expected to be non-recourse to the
Company and its resort subsidiaries, it will likely be collateralized by
existing and future real estate projects of the Company which may constitute
significant assets of the Company. Required equity contributions for these
projects must be generated before those projects can be undertaken, and the
projects are subject to mandatory pre-sale requirements under the Resort
Properties Term Facility. Potential sources of equity contributions include
sales proceeds from existing real estate projects and assets, (to the extent not
applied to the repayment of indebtedness) and potential sales of equity
interests in Resort Properties and/or its real estate development subsidiaries.
Financing commitments for future real estate development do not currently exist,
and no assurance can be given that they will be available on satisfactory terms.
The Company will be required to establish both equity sources and construction
facilities or other financing arrangements for these projects before undertaking
each development.
The Company from time to time considers potential acquisitions which,
based upon the historical performance of the target entities, are expected to be
accretive to earnings. There are not currently any funding sources immediately
available to the Company for such acquisitions. The Company would need to
establish such sources prior to consummating any such acquisition.
23
<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>
Fiscal Year Ended
<CAPTION>
July 27,1997 July 26,1998 July 25,1999
<S> <C> <C> <C>
Net revenues:
Resort 93.8% 82.0% 92.3%
Real estate 6.2% 18.0% 7.7%
--------------- -------------- --------------
Total net revenues 100.0% 100.0% 100.0%
--------------- -------------- --------------
Operating expenses:
Resort 61.6% 50.6% 62.5%
Real estate 5.1% 12.9% 8.5%
Marketing, general and administrative 14.5% 11.8% 16.2%
Stock compensation charge 0.0% 4.2% 0.0%
Depreciation and amortization 10.5% 11.2% 13.9%
--------------- -------------- --------------
Total operating expenses 91.7% 90.7% 101.1%
--------------- -------------- --------------
Income (loss) from operations 8.3% 9.3% (1.1%)
Interest expense 13.6% 10.2% 12.4%
--------------- -------------- --------------
Loss before benefit from income taxes
And minority interest in loss of subsidiary (5.4%) (0.9%) (13.5%)
Benefit from income taxes (2.1%) (0.2%) (4.7%)
Minority interest in loss of subsidiary (0.1%) (0.1%) 0.0%
--------------- -------------- --------------
Loss before extraordinary items (3.2%) (0.6%) (8.8%)
Extraordinary loss 0.0% 1.5% 0.0%
--------------- -------------- --------------
Net loss (3.2%) (2.1%) (8.8%)
Accretion of discount and dividends accrued
on mandatorily redeemable preferred stock 0.3% 1.6% 1.4%
--------------- -------------- --------------
Net loss available to common shareholders (3.4%) (3.6%) (10.2%)
=============== ============== ==============
</TABLE>
24
<PAGE>
Fiscal Year Ended July 25, 1999 ("Fiscal 1999")
Versus Fiscal Year Ended July 26, 1998 ("Fiscal 1998")
The actual results of Fiscal 1999 versus the actual results of Fiscal
1998 discussed below are not comparable due to the acquisition of the Steamboat
and Heavenly resorts on November 12, 1997. Accordingly, the usefulness of the
comparisons presented below is limited, as the Fiscal 1998 results include the
results of Steamboat and Heavenly since November 12, 1997, while the Fiscal 1999
results include all twelve months of results of Steamboat and Heavenly. The
following table illustrates the pro forma effect of the results of Steamboat and
Heavenly as if the purchase had occurred at the beginning of Fiscal 1998:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Actual Year Pro Forma Pro Forma Actual Pro Forma Increase/
Ended Effect on Year Ended Year Ended (Decrease)
Year Ended
July 26,1998 July 26,1998 July 26,1998 July 25,1999 Dollar Percent
- -----------------------------------------------------------------------------------------------------------------
Revenue category:
<S> <C> <C> <C> <C> <C> <C> <C>
Lift Tickets $ 135.9 $ 0.0 $ 135.9 $ 134.5 $ (1.4) (1.0%)
Food and beverage 34.0 0.5 34.5 38.3 3.8 10.9%
Retail sales 37.4 1.6 39.0 41.5 2.5 6.4%
Lodging and property 27.5 0.1 27.6 31.6 4.0 14.4%
Skier development 22.4 0.0 22.4 24.2 1.8 8.0%
Golf, summer activities and
other 20.4 1.4 21.8 22.5 0.7 3.3%
------------- ----------- ------------- ------------ ---------- ---------
Total resort revenues $ 277.6 $ 3.6 $ 281.2 $ 292.6 $ 11.4 4.0%
------------- ----------- ------------- ------------ ---------- ---------
Cost of resort operations $ 171.2 $ 8.6 $ 179.8 $ 198.2 $ 18.4 10.2%
Marketing, general and
administrative 40.1 5.0 45.1 51.4 6.3 14.0%
Depreciation and amortizaiton 38.0 1.6 39.6 44.2 4.6 11.6%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Resort revenues increased $15.0 million or 5.4% from $277.6 million for
Fiscal 1998 to $292.6 million for Fiscal 1999. The pro forma effect of the
inclusion of the results from Steamboat and Heavenly resorts for the first
fiscal quarter of 1999 accounts for $3.6 million of the increase. The remaining
$11.4 million increase in resort revenues is broken out by revenue category in
the above table. The decrease in lift ticket revenues is derived from two
factors: 1) a 4.3% decrease in skier visits, due to unfavorable weather
conditions in New England and Colorado, resulted in an approximately $6.1
million decrease in lift ticket revenues; and 2) a 3.5% increase in lift ticket
yield, due mainly to price increases at Steamboat and Heavenly, offset this
decrease by approximately $4.7 million. Increases in food and beverage and
retail sales revenues are primarily attributable to additional food and beverage
and retail outlets. The increase in skier development revenues is mainly
associated with a new skier development program instituted in Fiscal 1999, which
corresponded with the opening of new Sprint Discovery Centers at four of the
Company's eastern resorts. The increase in lodging revenue is primarily due to
the full year of operations in Fiscal 1999 of three new Grand Summit Hotels
which opened during Fiscal 1998 (one each at Killington, Mount Snow and Sunday
River).
Real estate revenues decreased $36.5 million for Fiscal 1999 as
compared to Fiscal 1998. The decrease is attributable to the substantial
revenues recognized in Fiscal 1998 from closings on pre-sold quartershare units
at the Company's Grand Summit Hotels at Killington and Mt. Snow, and the Jordan
Grand Hotel at Sunday River. These projects were completed during the second and
third fiscal quarters of Fiscal 1998, and the Company realized $55.4 million in
sales revenue from these projects in Fiscal 1998. For Fiscal 1999 the Company
realized $18.4 million in on-going sales of quartershare units.
Cost of resort operations increased $27.0 million or 15.8% from $171.2
million to $198.2 million. The pro forma effect of the inclusion of the results
of Steamboat and Heavenly resorts for the first fiscal quarter of 1999 accounts
for $8.6 million of the increase. The majority of the remaining increase is
attributable to the following: a) $4.8 million in lodging costs associated with
a full year of operation of three new hotels; b) $1.2 million increase
associated with a new skier development program which included the operation of
four new Sprint Discovery Centers; c) $3.6 million in food and beverage and
retail costs associated with additional outlets and higher sales volume and the
liquidation of excess inventory during the fourth quarter of fiscal 1999; d)
$1.1 million increase in snowmaking due to the lack of natural snow at the
Company's eastern resorts; e) $1.5 million increase in property taxes due to
increased tax rates in Vermont and an increased asset base at The Canyons; and
f) $1.0 million increase in event costs associated with marketing sponsorship.
Cost of real estate sold decreased $16.7 million in Fiscal 1999
compared to Fiscal 1998. The decrease is attributable to the substantial cost
recognized in the third quarter of Fiscal 1998 from closings of pre-sold
quartershare units at the Company's Grand Summit Hotels at Killington and Mt.
Snow and the Jordan Grand Hotel at Sunday River. The cost associated with the
revenue realized for Fiscal Year 1998 totaled $32.0 million. The cost associated
with the on-going sales of these units in Fiscal 1999 totaled $10.9 million. The
$21.0 million decrease related to sales of quartershare units was offset by
other increases, due mainly to the following: a) $3.5 million of cost recognized
relating to the sale of land which was not of strategic importance to the
Company's real estate development plan or resort operations; b) the write-off of
$0.7 million in prepaid advertising and commission charges incurred in
generating pre-sale contracts, some of which have subsequently expired, for a
Grand Summit Hotel at the Company's Sugarbush resort (the timing of development
for the Sugarbush project is expected to be re-evaluated by the Company during
next year's skiing season); and c) $0.8 million of expenses were incurred during
the second quarter of Fiscal 1999 relating to the Company's unsuccessful $300
million bond offering which was undertaken to provide additional financing for
the Company's real estate projects.
Marketing, general and administrative expenses increased $11.3 million
or 28.2% from $40.1 million to $51.4 million. The inclusion of the results of
Steamboat and Heavenly resorts for the first fiscal quarter of 1999 accounts for
$5.0 million of the increase. The majority of the remaining increase is
attributable to the following: a) a planned increase in marketing expense at all
the resorts of $2.9 million; b) a stock compensation charge of $0.8 million
relating to the vesting of additional management stock options; c) $0.6 million
of additional expenses resulting from the expansion of management information
services; d) $2.0 million of severance payments and restructuring of management
compensation; and e) additional costs associated with being a public company.
Depreciation and amortization increased $6.2 million for Fiscal 1999
compared to Fiscal 1998. The inclusion of the Steamboat and Heavenly resorts for
26
<PAGE>
the first fiscal quarter of 1999 accounts for $1.6 million of the increase. The
remaining increase is primarily due to additional depreciation on capital
improvements of approximately $53 million made this year. These increases are
slightly offset by the change in the estimated useful lives of certain of the
Company's ski-related assets, which decreased depreciation expense by $0.7
million.
Interest expense increased from $34.6 million for Fiscal 1998 to $39.4
million for Fiscal 1999. The increase is principally attributable to increased
debt levels associated with financing the Company's recent capital improvements
and real estate projects.
The benefit for income taxes increased from $0.8 million for Fiscal
1998 to $15.1 million for Fiscal 1999 due to the increase in the loss before
income taxes. The effective income tax rate increased from 25.1% in Fiscal 1998
to 35.0% in Fiscal 1999 due to the non-recurring stock option compensation
charge of $14.3 million in Fiscal 1998, not all of which was deductible for
income tax purposes.
Accretion of discount and dividends accrued on mandatorily redeemable
preferred stock decreased $0.9 million, or 17.0%, from $5.3 million for Fiscal
1998 to $4.4 million for Fiscal 1999. The decrease is primarily attributable to
$0.9 million in additional accretion recognized during Fiscal 1998 relating to a
conversion feature on the Company's Series A 14% Exchangeable Preferred Stock
that allowed holders of these securities to convert to shares of the Company's
Common Stock at a 5% discount to the Company's initial public offering price. An
additional $0.9 million of the decrease is due to amortization of issuance costs
recognized in Fiscal 1998 related to the Company's Series A 14% Exchangeable
Preferred Stock upon its conversion into 10 1/2 % Mandatorily Redeemable
Preferred Stock. These decreases were offset by an increase resulting from the
full twelve months accretion for Fiscal 1999 related to the 10 1/2 % Mandatorily
Redeemable Preferred Stock (as compared to only nine months in Fiscal 1998), and
the compounding effect of the dividend accrual.
Fiscal Year Ended July 26, 1998 ("Fiscal 1998")
Versus Fiscal Year Ended July 27, 1997 ("Fiscal 1997")
The actual results of Fiscal 1998 versus the actual results of Fiscal
1997 discussed below are not comparable due to the acquisition of the Steamboat
and Heavenly resorts on November 12, 1997, and the acquisition of The Canyons
resort in July 1997. Accordingly, the usefulness of the comparisons presented
below is limited, as the Fiscal 1998 results include the results of Steamboat
and Heavenly since November 12, 1997, while the Fiscal 1997 results do not
include any results for Steamboat and Heavenly. Likewise, the Fiscal 1998
results include the results of The Canyons for the entire year while the Fiscal
1997 results do not include any results for The Canyons.
Resort revenues increased $114.3 million or 70.0% from $163.3 million
for Fiscal 1997 to $277.6 million for Fiscal 1998. The Steamboat and Heavenly
resorts acquired on November 12, 1997, and The Canyons resort acquired in July
1997, accounted for $88.6 million of the increase. The remaining $25.7 million
represents an increase of 15.7% and is principally attributable to increases in
skier visits, the acquisition of new retail and food and beverage outlets, the
opening of three new hotels, and increased yields per skier visit at the
Company's pre-acquisition group of resorts.
Real estate revenues increased $50.3 million for Fiscal 1998 as
compared to Fiscal 1997. The increase is attributable to completion of the
Company's new quartershare condominium hotels at Killington, Mount Snow and
Sunday River and closings of quartershare sales at those projects.
Cost of resort operations increased $64.0 million or 59.7% from $107.2
million to $171.2 million. The acquisition of Steamboat, Heavenly, and The
Canyons resorts accounted for $53.9 million of the increase. The remaining $10.1
million represents an increase of 9.4% and is principally attributable to the
increases in skier visits, business volume, and new operations at the Company's
pre-acquisition resorts.
Cost of real estate sold increased $34.6 million in Fiscal 1998
compared to Fiscal 1997. The increase is attributable principally to increased
sales, as outlined above, and to non-capitalizeable costs associated with new
projects under development at Killington, The Canyons and Steamboat.
Marketing, general and administrative expenses increased 59.1% from
$25.2 million to $40.1 million. The inclusion of Steamboat, Heavenly and The
Canyons accounted for approximately $11.9 million of this increase. The
remaining $3.0 million represents a 11.9% increase attributable to increased
27
<PAGE>
costs associated with the establishment of public holding company corporate
functions, including legal, accounting, shareholder relations, financial
analysis, management information system support functions, corporate marketing
initiatives involving the Edge card direct to lift and corporate wide
sponsorship programs.
The Company incurred a stock compensation charge of $14.3 million in
Fiscal 1998 associated with the grant of non-qualified stock options to certain
key members of senior management.
Depreciation and amortization increased $19.7 million for Fiscal 1998
compared to Fiscal 1997. The increase is principally attributable to the
acquisitions of Steamboat, Heavenly and The Canyons and the additional plant and
equipment related to the summer 1997 capital improvement program.
Interest expense increased from $23.7 million for Fiscal 1997 to $34.6
million for Fiscal 1998. The increase is principally attributable to the
Company's Senior Credit Facility, which was established contemporaneously with
the closing of its initial public offering and the acquisition of Steamboat and
Heavenly on November 12, 1997.
The benefit for income taxes decreased from $3.6 million for Fiscal
1997 to $0.8 million for Fiscal 1998 due to a decrease in the loss before income
taxes. The effective income tax rate decreased from 38.7% in Fiscal 1997 to
25.1% in Fiscal 1998 due to the non-recurring stock option compensation charge
of $14.3 million, not all of which is deductible for income tax purposes.
The extraordinary loss recorded by the Company results from the early
retirement of certain indebtedness in conjunction with the Company's initial
public offering in November, 1997, including the Company's then-existing
revolving line of credit, junior subordinated discount notes, and certain
indebtedness established upon acquisition of Sugarbush.
Accretion of discounts and dividends accrued on the mandatorily
redeemable preferred stock of $5.3 million in Fiscal 1998 represents the
accretion of the exchange feature, the amortization of the issuance costs and
the accrual of dividends relating to the Series A Exchangeable Preferred Stock
prior to its exchange. The activity in this component for Fiscal 1998 also
includes $2.8 million of dividends accrued on the 10 1/2% Mandatorily Redeemable
Preferred Stock subsequent to its exchange for the Series A Exchangeable
Preferred Stock on November 12, 1997.
Year 2000 Disclosure
Background. The "Year 2000 Problem" is the result of many existing
computer programs and embedded chip technologies containing programming code in
which calendar year data is abbreviated by using only two digits rather than
four to refer to a year. As a result of this, some of these programs fail to
operate or may not properly recognize a year that begins with "20" instead of
"19". This may cause such software to recognize a date using "00" as the year
1900 rather than the year 2000. Even systems and equipment that are not
typically thought of as computer-related often contain embedded hardware or
software that may improperly understand dates beginning with the year 2000.
Inability of systems to properly recognize the year 2000 could result in system
failure or miscalculations causing disruptions to operations, including
temporary inability to process transactions or engage in normal business
activities.
The Company has developed a Year 2000 task force with representation
throughout the organization. The task force has developed a comprehensive
strategy to systematically evaluate and update systems as appropriate. In some
cases, no system changes are necessary or the changes have already been made. In
all other cases, modifications are planned to prepare the Company's systems to
be Year 2000 compliant by November 1, 1999. The disclosure below addresses the
Company's Year 2000 Project.
28
<PAGE>
Company's state of readiness. The Year 2000 Project is divided into
three initiatives: (i) Information Technology ("IT") Systems, (ii) Non-IT
Systems and (iii) related third party providers. The Company has identified the
following phases with actual or estimated dates of completion: 1) identify an
inventory of systems, (completed April 30, 1999), 2) gather certificates and
warranties from providers, (completed April 30, 1999), 3) determine required
actions and budgets, (completed April 30, 1999), 4) perform remediation and
tests (expected to be completed by November 1, 1999) and 5) designing
contingency and business continuation plans for each Company location (plans are
complete and are expected to be implemented by December 1, 1999).
The following is a summary of the different phases and progress to date
for each initiative identified above:
IT Systems: The Company has continuously updated or replaced older
technology with more current technology. As the Company has acquired ski
resorts, it updated certain technology at these resorts. The Company's main IT
systems include an enterprise-wide client server financial system, an
enterprise-wide client server ticketing and direct to lift system, a mid-range
enterprise-wide payroll system, various point of sale and property management
systems, upgraded personal computers, wide area networking and local area
networking. Phases 1 through 3 are complete. During phase 1 and 2, the Company
determined that its Sugarloaf and Sugarbush resorts had not yet converted to
Year 2000 compliant lodging systems. The Company has subsequently converted
these two resorts to Year 2000 compliant systems. The Company has developed
contingency and business contingency plans for its crucial IT systems and
expects to have these ready for implementation at each Company location by
December 1, 1999.
Non-IT Systems: Internal non-IT systems are comprised of faxes,
copiers, printers, postal systems, security systems, ski lifts, elevators and
telecommunication systems. Phases 1 through 5 are complete for all systems
except telecommunication. These systems are expected to be completed by December
1, 1999.
Related third party providers: The Company has identified its major
related third party providers as certain utility providers, employee benefit
administrators and supply vendors. Phases 1 through 4 are complete. Phase 5 is
expected to be completed by December 1, 1999.
Actual and anticipated costs. The total cost associated with required
modifications to become Year 2000 compliant is not expected to be material to
the Company's financial position. The estimated total cost of the Year 2000
Project is approximately $295,000. This estimate includes Information System
conversions for Year 2000 compliant lodging systems at Sugarloaf and Sugarbush.
The Company had planned to update these systems regardless of Year 2000 issues
to standardize systems within the Company's resorts. The total amount expended
on the Year 2000 Project through July 25th, 1999 was $220,000. As of July 25,
1999, the estimated future costs of the Year 2000 Project are $75,000 all of
which relate to replacement costs of non-compliant IT systems. The anticipated
costs related to non-IT systems is deemed by management to be immaterial.
Risks. The failure to correct a material Year 2000 problem could result
in an interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
problem. The Company believes that, with the implementation of new business
systems and completion of the Year 2000 Project as scheduled, the possibility of
significant interruptions of normal operations should be reduced. Readers are
cautioned that forward-looking statements contained in the "Year 2000
Disclosures" should be read in conjunction with the Company's disclosures under
the heading "Forward-Looking Statements".
Contingency plans. The Company has completed the development of a
contingency plan related to Year 2000. The Company is actively engaged in
implementing the contingency plan to be prepared for any issues that may arise
on January 1, 2000.
29
<PAGE>
Forward-Looking Statements -
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act Of 1995
Certain information contained herein includes forward-looking
statements, the realization of which may be impacted by the factors discussed
below. The forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 (the "Act").
This report contains forward looking statements that are subject to risks and
uncertainties, including, but not limited to, uncertainty as to future financial
results; substantial leverage of the Company; the capital intensive nature of
development of the Company's ski resorts; rapid and substantial growth that
could place a significant strain on the Company's management, employees and
operations; uncertainties associated with fully syndicating the Resort
Properties Term Facility; uncertainties associated with obtaining additional
financing for future real estate projects and to undertake future capital
improvements; demand for and costs associated with real estate development;
changes in market conditions affecting the interval ownership industry;
regulation of marketing and sales of the Company's quartershare interests;
seasonality of resort revenues; fluctuations in operating results; dependence on
favorable weather conditions; the discretionary nature of consumers' spending
for skiing, destination vacations and resort real estate; regional and national
economic conditions; laws and regulations relating to the Company's land use,
development, environmental compliance and permitting obligations; termination,
renewal or extension terms of the Company's leases and United States Forest
Service permits; industry competition; the adequacy of water supply at the
Company's properties; the ability of the Company to make its information
technology assets and systems year 2000 compliant and the costs of any
modifications necessary in that regard; and other risks detailed from time to
time in the Company's filings with the Securities and Exchange Commission. These
risks could cause the Company's actual results for fiscal year 2000 and beyond
to differ materially from those expressed in any forward looking statements made
by, or on behalf of, the Company. The foregoing list of factors should not be
construed as exhaustive or as any admission regarding the adequacy of
disclosures made by the Company prior to the date hereof or the effectiveness of
said Act.
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
The Company's market risk sensitive instruments do not subject the
Company to material market risk exposures, except for such risks related to
interest rate fluctuations. As of July 25, 1999, the Company has long term debt
and subordinated notes outstanding with a carrying value of $502 million and an
estimated fair value of $495 million.
The Company has entered into two interest rate protection agreements.
These agreements are in connection with the Company's Senior Credit Facility and
effectively swap variable interest rate borrowings to fixed rate borrowings. The
total amount of the Senior Credit Facility that is effected by this agreement is
$102.5 million. The rate for this portion of the Senior Credit Facility is fixed
at 5.68% plus an incremental rate based on the Company's leverage, and expires
November 17, 2005. Total borrowings under the Senior Credit Facility are $200.5
million, leaving $98.0 million at a variable rate for which, depending on the
Company's leverage, the interest rate will be LIBOR plus 1.5% to 3.5%.
The Company has three other variable-rate facilities associated with
its real estate activities: 1) the Textron Facility, which has an interest of
rate of prime plus 2.5% per annum, with an outstanding balance of $55.8 million
as of July 25, 1999; 2) the Resort Properties Term Facility, which has an
interest rate equal to BankBoston's base rate plus 8.25%, with an outstanding
balance of $52.7 million as of July 25, 1999; and 3) the Key Facility, which
bears an interest rate of prime plus 1/4% per annum and had a balance of $6.9
million as of July 25, 1999.
Fixed interest rate debt outstanding as of July 25, 1999, excluding the
Senior Credit Facility debt, was $186.7 million, carries a weighed average
interest rate of 10.98%, and matures as follows: $16.8 million in fiscal 2000,
$10.2 million in fiscal 2001, $15.7 million in fiscal 2002, $9.2 million in
fiscal 2003, and $12.7 million in fiscal 2004 and $129.5 million in fiscal 2005
and after.
30
<PAGE>
The Company has also entered into two non-cancellable interest rate
swap agreements. The notional amount of both agreements is $120 million. The
first swap agreement matures on July 15, 2001. With respect to this swap
agreement, the Company receives interest at a rate of 12% per annum and pays
interest out at a variable rate based on the notional amount of the swap
agreement. The second swap agreement expires July 15, 2006 and requires the
Company pay interest at a rate of 9.01% per annum and receive interest at a
variable rate based on the notional amount of the swap agreement. The two
variable portions of the swap agreements offset each other until July 15, 2001.
After that date the Company will be paying interest at a fixed rate of 9.01% per
annum and receiving interest at a variable rate. The variable rate of interest
the Company would receive is based on the six month LIBOR, and as of October 12,
1999 that rate was 6.095% per annum.
Item 8
Financial Statements and Supplementary Data
Selected Quarterly Operating Results
The following table presents certain unaudited quarterly financial
information of the Company for the eight quarters ended July 25, 1999. In the
opinion of the Company's management, this information has been prepared on the
same basis as the Consolidated Financial Statements appearing elsewhere in this
Form 10-K and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial results set forth herein.
Results of operations for any previous quarters are not necessarily indicative
of results for any future period.
<TABLE>
Quarter Ended
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Oct.26,1997 Jan.25,1998 Apr.26,1998 Jul.26,1998 Oct.25,1998 Jan.24,1999 Apr.25,1999 Jul.25,1999
(in thousands)
Net revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Resort $ 13,716 $106,181 $144,244 $ 13,433 $ 20,311 $103,205 $154,317 14,725
Real estate 710 7,990 40,914 11,378 4,485 6,300 10,324 3,383
----------- ----------- ----------- ------------ ----------- ---------- ---------- ----------
Total net revenues 14,426 114,171 185,158 24,811 24,796 109,505 164,641 18,108
----------- ----------- ----------- ------------ ----------- ---------- ---------- ----------
Operating expenses:
Resort 17,890 63,328 66,096 23,932 28,073 69,251 74,573 26,334
Real estate 832 5,423 28,451 8,848 4,040 7,865 8,554 6,349
Marketing, general
and administrative 6,661 13,193 11,427 8,777 10,826 17,922 14,519 8,167
Stock compensation
charge 14,254 - - - - - - -
Depreciation and
amortization 1,506 15,009 17,959 3,491 2,709 19,010 19,731 2,752
----------- ----------- ----------- ------------ ----------- ---------- ---------- ----------
Total operating
expenses 41,143 96,953 123,933 45,048 45,648 114,048 117,377 43,602
----------- ----------- ----------- ------------ ----------- ---------- ---------- ----------
Income(loss) from
operations $(26,717) $ 17,218 $ 61,225 $(20,237) $(20,852) $(4,543) $ 47,264 $(25,494)
=========== =========== =========== ============ =========== ========== ========== ==========
</TABLE>
31
<PAGE>
Item 9
Changes in and Disagreements with Accountants over
Accounting and Financial Disclosures
The consolidated financial statements of the Company for the year ended
July 25, 1999 have been audited and reported upon by Arthur Andersen LLP ("AA").
Similarly, AA is expected to serve as the independent auditors of the Company
for fiscal 2000.
For fiscal years prior to 1999, the consolidated financial statements
of the Company were audited and reported on by PricewaterhouseCoopers LLP
("PwC"). On March 13, 1999, the Company was informed by PwC that they were
resigning as independent accountants of the Company effective March 13, 1999. On
March 31, 1999 the Audit Committee of the Board of Directors of the Company
approved the hiring of AA as the independent auditors of the Company.
In connection with the audits of the Company's consolidated financial
statements for the two fiscal years ended July 27, 1997 and July 26, 1998, and
the subsequent interim period through March 13, 1999, there were no
disagreements between the Company and PwC on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to PwC's satisfaction would have caused PwC
to make reference to the subject matter of the disagreement in connection with
PwCs audit report on the consolidated financial statements of the Company. In
addition, the audit reports of PwC on the consolidated financial statements of
the Company as of and for the two fiscal years ended July 26, 1998 did not
contain any adverse opinion or disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope, or accounting principles.
32
<PAGE>
PART III
Pursuant to General Instruction G of Form 10-K, the information
contained in Part III (Items 10, 11, 12 and 13) is incorporated by reference
from the Company's Definitive Proxy Statement, which is expected to be filed
with the Commission on or before November 22, 1999.
PART IV
Item 14
Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report: Page
1. Index to financial statements, financial statement schedules, and
supplementary data, filed as part of this report:
Report of Independent Accountants..................................F-1
Consolidated Balance Sheet.........................................F-2
Consolidated Statement of Operations...............................F-3
Consolidated Statement of Changes in Shareholders' Equity .........F-4
Consolidated Statement of Cash Flows...............................F-5
Notes to Consolidated Financial Statements.........................F-7
2 Financial Statement Schedules: All other schedules are omitted because
they are not applicable or the required information is shown in the consolidated
financial statements or notes thereto.
3. Exhibits filed as part of this report:
Exhibit
No. Description
3.1 Certificate of Incorporation of the Company
3.2 By-laws of the Company
3.3 Articles of Merger ASC East, Inc. and ASC West, Inc. into American
Skiing Company dated October 5, 1999 with Plan of Merger (incorporated
by reference to Exhibit 4.3 to the Company's Form 8K for the Report
date of October 6, 1999).
3.4 Articles of Merger American Skiing Company into ASC Delaware, Inc.
dated October 12, 1999 with Agreement and Plan of Merger (incorporated
by reference to Exhibit 4.3 to the Company's Form 8K for the Report
date of October 6, 1999).
4.1. Specimen Certificate for shares of Common Stock, $.01 par value, of the
Company
33
<PAGE>
4.2 Form of Indenture relating to 10 1/2% Repriced Convertible Subordinated
Debentures (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-1, Registration No. 333-33483).
10.1 Preferred Stock Subscription Agreement dated July 9, 1999 between the
Registrant and the Purchasers listed on Annex A thereto, including a
form of Stockholders' Agreement, Voting Agreement and Certificate of
Designation relating to the preferred stock to be issued (incorporated
by reference to Exhibit 2.1 to the Company's Form 8K for the Report
Date of July 9, 1999).
10.2 Stockholders' Agreement dated as of August 6, 1999 among Oak Hill
Capital Partners, L.P., and the other entities identified in Annex A
attached thereto, Leslie B. Otten and the Registrant
10.3 Stock Purchase Agreement dated as of August 1, 1997, among Kamori
International Corporation, ASC West and the Company (incorporated by
reference to Exhibit 2.1 of the Company's Registration Statement on
Form S-1, Registration No. 333-33483).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 Purchase and Sale Agreement dated July 3, 1997, between Wolf Mountain
Resorts, L.C., and ASC Utah (incorporated by reference to Exhibit 10.74
to the Company's Registration Statement on Form S-1, Registration No.
333-33483).
10.10 Letter of Agreement dated August 27, 1996, among SKI Ltd and certain
shareholders of Sugarloaf Mountain Corporation (incorporated by
reference to Exhibit 10.63 to ASC East's Registration Statement on Form
S-4, Registration No. 333-9763).
10.11 Amended, Restated and Consolidated Credit Agreement dated as October
12, 1999, among the Company, certain Subsidiaries as Borrowers, the
Lenders party thereto, BankBoston, N.A. as Agent for the Lenders.
10.12 Indenture dated as of June 28, 1996 among ASC East, certain of its
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).
34
<PAGE>
10.13 First Supplemental Indenture dated as of November 12, 1997 among ASC
East, Inc., its subsidiaries party thereto, and United States Trust
Company of New York as Trustee (incorporated by reference to Exhibit
10.3 to the Company's quarterly report on Form 10-Q for the quarter
ended October 25, 1998).
10.14 Second Supplemental Indenture dated as of September 4, 1998 among ASC
East, Inc., its subsidiaries party thereto, and United States Trust
Company of New York as Trustee (incorporated by reference to Exhibit
4.3 to the Company's Form 8K for the Report date of October 6, 1999).
10.15 Third Supplemental Indenture dated as of August 6, 1999 among ASC East,
Inc., its subsidiaries party thereto, and United States Trust Company
of New York as Trustee (incorporated by reference to Exhibit 4.3 to the
Company's Form 8K for the Report date of October 6, 1999).
10.16 Fourth Supplemental Indenture dated as of October 6, 1999 among
Supplemental Indenture dated as of November 12, 1997 among ASC East,
Inc., its subsidiaries party thereto, and United States Trust Company
of New York as Trustee (incorporated by reference to Exhibit 4.3 to the
Company's Form 8K for the Report date of October 6, 1999).
10.17 Credit Agreement among American Skiing Company Resort Properties, Inc.,
certain lenders and BankBoston, N.A. as agent dated as of January 8,
1999 (incorporated by reference to Exhibit 10.1 to the Company's
quarterly report on Form 10-Q for the quarter ended January 24, 1999).
10.18 Forbearance Agreement date as of March 8, 1999, between American Skiing
Company Resort Properties, Inc. and BankBoston, N.A., as Agent
(incorporated by reference to Exhibit 10.2 to the Company's quarterly
report on Form 10-Q for the quarter ended April 25, 1999)
10.19 Amended and Restated Forbearance Agreement dated as of April 20, 1999
between American Skiing Company Resort Properties, Inc. and BankBoston,
N.A., as Agent (incorporated by reference to Exhibit 10.3 to the
Company's quarterly report on Form 10-Q for the quarter ended April 25,
1999).
10.20 Loan and Security Agreement among Grand Summit Resort Properties, Inc.,
Textron Financial Corporation and certain lenders dated as of September
1, 1998 (incorporated by reference to Exhibit 10.1 to the Company's
quarterly report on Form 10-Q for the quarter ended October 25, 1998).
10.21 First Amendment Agreement Re: Loan and Security Agreement Among Grand
Summit Resort Properties, Inc., as Borrower and Textron Financial
Corporation, as Administrative Agent dated as of April 5, 1999
(incorporated by reference to Exhibit 10.1 to the Company's quarterly
report on Form 10-Q for the quarter ended April 25, 1999) . 10.22
Accession, Loan Sale and Second Amendment Agreement Re: Loan and
Security Agreement among Grand Summit Resort Properties, Inc. and
Textron Financial Corp. and The Lenders Listed therein dated June 24,
1999.
10.23 ISDA Master Agreement between BankBoston, N.A. and the Company dated as
of May 12, 1998 (incorporated by reference to Exhibit 10.38 to the
Company's annual report on Form 10-K for the year ended July 26, 1998).
.
10.24 Credit Support Annex to ISDA Master Agreement between BankBoston, N.A.
and the Company dated as of May 12, 1998 (incorporated by reference to
Exhibit 10.39 to the Company's annual report on Form 10-K for the year
ended July 26, 1998).
10.25 Unlimited Guaranty by the Company in favor of BancBoston Leasing, Inc.,
dated as of July 20, 1998 (incorporated by reference to Exhibit 10.40
to the Company's annual report on Form 10-K for the year ended July 26,
1998).
.
10.26 Form of Master Lease Agreement dated as of various dates among
BancBoston Leasing, Inc. as Lessor and Heavenly Valley Limited
Partnership, Killington, Ltd., Mount Snow, Ltd., ASC Leasing, Inc.,
Steamboat Ski & Resort Corporation, and Sunday River Skiway Corp. as
Lessees (incorporated by reference to Exhibit 10.41 to the Company's
annual report on Form 10-K for the year ended July 26, 1998).
35
<PAGE>
10.27 $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 (incorporated by reference
to Exhibit 10.72 to the Company's Registration Statement on Form S-1,
Registration No. 333-33483).
10.28 Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and
ASC Utah (incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-1 Registration No.
333-33483).
10.29 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).
10.30 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).
10.31 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).
10.32 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).
10.33 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).
10.34 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).
10.35 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).
10.36 Lease Agreement dated as of June 21, 1994, between the Town of
Wilmington, Vermont 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).
10.37 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).
10.38 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).
36
<PAGE>
10.39 Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf
Mountain Resorts, L.C. (incorporated by reference to Exhibit 10.64 to
the Company's Registration Statement on Form S-1, Registration No.
333-33483).
10.40 Ground Lease Guaranty dated July 3, 1997, from the Company to Wolf
Mountain Resorts, L.C. (incorporated by reference to Exhibit 10.65 to
the Company's Registration Statement on Form S-1, Registration No.
333-33483).
10.41 Stock Option Plan (incorporated by reference to Exhibit 10.89 to the
Company's Registration Statement on Form S-1, Registration No.
333-33483).
10.42 Form of Non-Qualified Stock Option Agreement (Five-Year Vesting
Schedule) (incorporated by reference to Exhibit 10.90 to the Company's
Registration Statement on Form S-1, Registration No. 333-33483).
10.43 Form of Non-Qualified Stock Option Agreement (Fully-Vested)
(incorporated by reference to Exhibit 10.91 to the Company's
Registration Statement on Form S-1, Registration No. 333-33483).
10.44 Form of Incentive Stock Option Agreement (incorporated by reference to
Exhibit 10.92 to the Company's Registration Statement on Form S-1,
Registration No. 333-33483).
10.45 Registration Rights Agreement dated November 10, 1997 by and between
American Skiing Company and ING (U.S.) Capital Corporation
(incorporated by reference to Exhibit 3 to the Company's quarterly
report on Form 10-Q for the quarter ended October 26, 1997).
10.46 Purchase and Development Agreement by and among the Company, American
Skiing Company Resort Properties, Inc., and Marriott Ownership Resorts,
Inc., dated as of July 22, 1998 (incorporated by reference to Exhibit 1
to the Company's Form 8-K dated July 27, 1998).
10.47 Construction Loan Agreement between The Canyons Resort Properties, Inc.
and KeyBank National Association dated as of December 18, 1998
10.48 First Amendment to Construction Loan Agreement between The Canyons
Resort Properties, Inc.and KeyBank National Association dated as of
April, 1999
22.1 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Arthur Anderson LLP
23.3 Report of Independent Accountants for fiscal 1998
24.1 Power of Attorney
27.1 Financial Data Schedule.
(b) Reports filed on Form 8-K.
The Company filed a Form 8-K on July 9, 1999, reporting a Preferred
Stock Subscription Agreement between the Company and the Purchasers listed on
Annex A thereto.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this instrument to be signed on its behalf
by the undersigned, thereunto duly authorized, in the Town of Bethel, State of
Maine, on this 22nd day of October, 1999.
American Skiing Company
By: /s/ Leslie B. Otten
--------------------------------
Leslie B. Otten
Director, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Christopher E. Howard
--------------------------------
Christopher E. Howard
Director, Executive Vice President,
By: /s/ Mark J. Millerr
--------------------------------
Mark J. Miller
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
By: /s/ Christopher D. Livak
--------------------------------
Christopher D. Livak
Vice President-Accounting
(Principal Accounting Officer)
By: /s/ Martel D. Wilson, Jr.
--------------------------------
Martel D. Wilson, Jr., Director
By: /s/
--------------------------------
Gordon M. Gillies, Director
By: /s/ Daniel Duquette
--------------------------------
Daniel Duquette, Director
By: /s/ David Hawkes
--------------------------------
David Hawkes, Director
By: /s/
--------------------------------
Bradford E. Bernstein, Director
By: /s/ Steven B. Gruber
--------------------------------
Steven B.Gruber, Director
By: /s/
--------------------------------
J. Taylor Crandall, Director
By: /s/ William Janes
--------------------------------
William Janes, Director
38
<PAGE>
Report of Independent Public Accountants
To American Skiing Company
We have audited the accompanying consolidated balance sheet of American
Skiing Company and its subsidiaries as of July 25, 1999, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements of the
Company as of July 27, 1997 and July 26, 1998, were audited by other auditors
whose report dated October 14, 1998, expressed an unqualified opinion on those
statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Skiing Company as of
July 25, 1999 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
//Arthur Andersen LLP//
Boston, MA
October 1, 1999
(Except with respect to the matters discussed in Note 17, as to which the date
is October 12, 1999.)
F-1
<PAGE>
<TABLE>
American Skiing Company
Consolidated Balance Sheet
(in thousands, except share and per share amounts)
<CAPTION>
July 26, 1998 July 25, 1999
------------- -------------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents $ 15,370 $ 9,003
Restricted cash 4,946 5,480
Accounts receivable 7,538 6,474
Inventory 13,353 10,837
Prepaid expenses 3,709 5,309
Deferred financing costs 1,246 1,530
Deferred income taxes 1,413 4,273
--------------- -----------------
Total current assets 47,575 42,906
Property and equipment, net 521,139 529,154
Real estate developed for sale 78,636 207,745
Goodwill 78,687 76,672
Intangible assets 23,706 22,987
Deferred financing costs 7,966 7,749
Long-term investments 7,397 669
Other assets 14,479 18,472
Restricted cash 1 ,314 1,148
--------------- -----------------
Total assets $ 780,899 $ 907,502
=============== =================
Liabilities, Mandatorily Redeemable Preferred Stock and
Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 43,698 $ 60,882
Current portion of subordinated notes and debentures 455 673
Accounts payable and other current liabilities 44,372 77,951
Deposits and deferred revenue 8,895 19,710
Demand note, Principal Shareholder 1,846 1,830
--------------- -----------------
Total current liabilities 99,266 161,046
Long-term debt, excluding current portion 211,570 313,844
Subordinated notes and debentures, excluding current portion 127,497 127,062
Other long-term liabilities 10,484 13,461
Deposits and deferred revenue 1,320 1,140
Deferred income taxes 22,719 10,062
Minority interest in subsidiary 375 396
--------------- -----------------
Total liabilities 473,231 627,011
Mandatorily Redeemable 10 1/2% Preferred Stock
par value $1,000 per share; 40,000 shares authorized;
36,626 issued and outstanding; including cumulative
dividends in arrears (redemption value of $39,464 at July
26, 1998 and $43,836 at July 25, 1999) 39,464 43,836
Shareholders' Equity
Common stock, Class A, par value $.01 per share;
15,000,000 shares authorized; 14,760,530 issued and
outstanding at July 26, 1998 and July 25, 1999 148 148
Common stock, par value of $.01 per share; 100,000,000
shares authorized; 15,525,022 and 15,526,243 issued and
outstanding at July 26, 1998 and July 25, 1999,
respectively 155 155
Additional paid-in capital 267,890 268,663
Retained earnings (deficit) 11 (32,311)
--------------- -----------------
Total shareholders' equity 268,204 236,655
--------------- -----------------
Total liabilities, mandatorily redeemable
preferred stock and shareholders' equity $ 780,899 $ 907,502
=============== =================
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
American Skiing Company
Consolidated Statement of Operations
(in thousands, except share and per share amounts)
<CAPTION>
Year Ended
----------------------------------------------
July 27, July 26, July 25,
1997 1998 1999
------------ ------------- -------------
<S> <C> <C> <C>
Net revenues:
Resort $ 163,310 $ 277,574 $ 292,558
Real estate 10,721 60,992 24,492
------------ ------------- -------------
Total net revenues 174,031 338,566 317,050
------------ ------------- -------------
Operating expenses:
Resort 107,230 171,246 198,231
Real estate 8,950 43,554 26,808
Marketing, general and administrative 25,173 40,058 51,434
Stock compensation charge - 14,254 -
Depreciation and amortization 18,293 37,965 44,202
------------ ------------- -------------
Total operating expenses 159,646 307,077 320,675
------------ ------------- -------------
Income (loss) from operations 14,385 31,489 (3,625)
Interest expense 23,730 34,575 39,382
------------ ------------- -------------
Loss before benefit from income taxes
and minority interest in loss of subsidiary (9,345) (3,086) (43,007)
Benefit from income taxes (3,613) (774) (15,057)
Minority interest in loss of subsidiary (250) (445) -
------------ ------------- -------------
Loss before extraordinary items (5,482) (1,867) (27,950)
Extraordinary loss, net of income tax benefit
of $3,248 - 5,081 -
------------ ------------- -------------
Loss before preferred stock dividends (5,482) (6,948) (27,950)
Accretion of discount and dividends accrued on
mandatorily redeemable preferred stock 444 5,346 4,372
------------ ------------- -------------
Net loss available to common shareholders $ (5,926) $ (12,294) $ (32,322)
============ ============= =============
Basic and fully diluted loss per share:
Loss before extraordinary items ($6.06) ($0.28) ($1.07)
Extraordinary loss - (0.20) -
------------ ------------- -------------
Net loss available to common shareholders ($6.06) ($0.48) ($1.07)
============ ============= =============
Weighted average shares outstanding 978 25,809 30,286
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
American Skiing Company
Consolidated Statement of Changes in Shareholders' Equity
(in thousands, except share amounts)
Class A Additional
Common stock Common stock paid-in Retained
------------------------- ------------------------
Shares Amount Shares Amount capital earnings Total
------------ ----------- ------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Netloss - - - - - (5,482) (5,482)
------------ ----------- ------------- ---------- ------------- ------------ ------------
Balance at July 27, 1997 - - 14,760,530 10 2,786 12,305 15,101
============ =========== ============= ========== ============= ============ ============
Shares issued pursuant to
initial public offering 14,750,000 148 - - 244,181 - 244,329
Issuance of Common Stock
options - - - - 8,538 - 8,538
Conversion of Class A Common
Stock - - - 138 (138) - -
Purchase of minority interest
in subsidiary 615,022 6 - - 8,648 - 8,654
Original issue discount on
Series A 14% Exchangeable
Preferred Stock and 14%
Senior Exchangeable
Notes - - - - 1,841 - 1,841
Shares issued to purchase
subsidiary 140,000 1 - - 1,994 - 1,995
Exercise of Common Stock
options 20,000 - - - 40 - 40
Accretion of discount and
issuance costs and
dividends accrued on
mandatorily redeemable
preferred stock - - - - - (5,346) (5,346)
Net loss - - - - - (6,948) (6,948)
------------ ----------- ------------- ---------- ------------- ------------ ------------
Balance at July 26, 1998 15,525,022 155 14,760,530 148 267,890 11 268,204
============ =========== ============= ========== ============= ============ ============
Exercise of Common Stock
options 1,221 - - - - - -
Issuance of Common Stock
options - - - - 773 - 773
Accretion of discount and
issuance costs and
dividends accrued on
mandatorily redeemable
preferred stock - - - - - (4,372) (4,372)
Net loss - - - - - (27,950) (27,950)
------------ ----------- ------------- ---------- ------------- ------------ ------------
Balance at July 25, 1999 15,526,243 $ 155 14,760,530 $ 148 $268,663 $ (32,311) $236,655
============ =========== ============= ========== ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
American Skiing Company
Consolidated Statement of Cash Flows
(in thousands)
<CAPTION>
Year Ended
---------------------------------------------------
July 27, July 26, July 25,
1997 1998 1999
------------- ------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (5,482) $ (6,948) $ (27,950)
Adjustments to reconcile net loss to net cash used in
operating activities:
Minority interest in loss of subsidiary (250) (445) -
Depreciation and amortization 18,293 37,966 44,202
Discount on convertible debt 3,300 3,159 333
Deferred income taxes (3,332) (3,910) (15,517)
Stock compensation charge - 14,254 773
Extraordinary loss - 8,329 -
(Gain)loss from sale of assets - (773) 2,426
Decrease (increase) in assets:
Restricted cash 12,587 (3,448) (368)
Accounts receivable (1,343) (3,608) 1,090
Inventory (2,257) (2,088) 2,516
Prepaid expenses 1,792 (1,644) (1,600)
Real estate developed for sale (21,976) (25,950) (125,331)
Other assets (872) (10,319) (5,000)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities 6,794 2,413 33,579
Deposits and deferred revenue 838 (866) 10,635
Other long-term liabilities (1,304) 2,586 2,977
------------- ------------- ----------------
Net cash provided from (used in) operating activities 6,788 8,708 (77,235)
------------- ------------- ----------------
Cash flows from investing activities
Payments for purchases of businesses, net of cash
acquired (6,959) (291,773) -
Capital expenditures (23,267) (106,917) (46,007)
Long-term investments 836 1,110 1,222
Proceeds from sale of assets 2,626 7,227 7,198
Proceeds from sale of business 14,408 5,702 -
Other, net (1,714) 348 101
------------- ------------- ----------------
Net cash used in investing activities (14,070) (384,303) (37,486)
------------- ------------- ----------------
Cash flows from financing activities
Net borrowings under Senior Credit Facility - 194,227 7,308
Net proceeds (repayment of) Old Credit Facility 14,766 (59,623) -
Proceeds from long-term debt 1,079 1,568 20,145
Proceeds from non-recourse real estate debt 3,504 71,462 115,909
Repayment of long-term debt (11,237) (15,793) (10,466)
Repayment of non-recourse real estate debt - (45,551) (23,088)
Deferred financing costs (1,567) (4,355) (1,438)
Net proceeds from initial public offering - 244,329 -
Repayment of subordinated notes - (23,223) -
Proceeds from issuance of mandatorily redeemable
securities 16,377 17,500 -
Payments on demand note, Principal Shareholder (3,267) (87) (16)
Proceeds from exercise of stock options - 40 -
Cash payment in connection with early retirement of
debt - (5,087) -
------------- ------------- ----------------
Net cash provided by financing activities 19,655 375,407 108,354
------------- ------------- ----------------
Net decrease in cash and cash equivalents 12,373 (188) (6,367)
Cash and cash equivalents, beginning of period 3,185 15,558 15,370
------------- ------------- ----------------
Cash and cash equivalents, end of period $ 15,558 $ 15,370 $ 9,003
============= ============= ================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
<TABLE>
American Skiing Company
Consolidated Statement of Cash Flows (continued)
(in thousands)
<CAPTION>
Year Ended
---------------------------------------------------
July 27, July 26, July 25,
1997 1998 1999
------------- ------------- ----------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information
Cash paid for interest $ 20,998 $ 36,583 $41,295
Cash paid (refunded) for income taxes (1,492) 43 (10)
Supplemental schedule of noncash investing
and financing activities
Property acquired under capital leases $ 7,824 $ 9,832 $ 7,425
Notes payable issued for purchase of assets - 14,232 1,395
Liabilities assumed associated with purchased companies 1,826 17,205 -
Deferred tax asset (liability) associated with purchased
companies - 1,650 -
Purchase price adjustments 1,541 - -
Purchase price adjustments related to deferred taxes 1,317 1,226 -
Note payable issued for purchase of a business 6,500 - -
Note receivable received for sale of a business 2,750 - -
Purchase of minority interest 626 375 -
Accretion of discount and issuance costs and dividends
accrued on mandatorily redeemable preferred stock 444 5,346 4,372
Exchange of mandatorily redeemable securities for 10 1/2%
Repriced Convertible Preferred Stock - 36,626 -
Intangible asset assumed to purchase subsidiary - 1,883 -
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<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 in two business segments, ski resorts and real estate
development. ASC East and ASC West are holding companies which are wholly-owned
subsidiaries of ASC. ASC East and its wholly-owned subsidiaries (collectively
"ASC East") operate the following resorts: Sugarloaf/USA and Sunday River in
Maine, Attitash Bear Peak in New Hampshire, and Killington, Mount Snow/Haystack
and Sugarbush in Vermont. ASC West and its subsidiaries (collectively "ASC
West") operate the following resorts: The Canyons in Utah, Steamboat Ski &
Resort Corporation ("Steamboat") in Colorado, and Heavenly Valley Ski & Resort
Corporation ("Heavenly") in California/Nevada. The Company performs its real
estate development through its wholly-owned subsidiary, American Skiing Company
Resort Properties, Inc. ("Resort Properties"), and Resort Properties'
subsidiaries, including Grand Summit Resort Properties, Inc. ("GSRP")and Canyons
Resort Properties, Inc. The Company owns and operates resort facilities, real
estate development companies, golf courses, ski and golf schools, retail shops
and other related companies. For periods prior to June 17, 1997, the term "the
Company" refers to ASC East and its subsidiaries, and after such date, to
American Skiing Company and its subsidiaries (including ASC East). In 1997, the
Company formed ASC Utah, a wholly-owned subsidiary, for the purpose of acquiring
the Wolf Mountain ski area in Utah, which was subsequently renamed The Canyons.
In August 1997, the Company formed ASC West for the purpose of acquiring
Steamboat and Heavenly.
ASC was formed on June 17, 1997, when Leslie B. Otten (the "Principal
Shareholder") exchanged his 96% ownership interest in ASC East for 100% of the
Common Stock of ASC. In conjunction with the formation of ASC, the Company
recorded the 4% minority interest in ASC East. On January 23, 1998, the Company
and the holders of the minority interest in ASC East entered into an agreement
whereby the Company issued 615,022 shares of Common Stock in exchange for all
shares of ASC East common stock held by the minority shareholders.
On October 10, 1997, the Company approved an increase in authorized
shares of Common Stock, a new issue of Class A Common Stock, the conversion of
100% of the outstanding Common Stock to Class A Common Stock and a 14.76 for 1
stock split of Class A Common Stock. The stock split was given retroactive
effect in the accompanying consolidated financial statements as of July 27,
1997.
The Company consummated an initial public offering (the "Offering") on
November 6, 1997. The Company sold 14.75 million shares of common stock in the
Offering at a price of $18.00 per share. Net proceeds to the Company after
expenses of the Offering totaled $244.3 million. Of the 14.75 million shares
sold in the Offering, 833,333 shares were purchased by the Principal
Shareholder.
The Company acquired Heavenly and Steamboat on November 12, 1997 for
approximately $300.5 million, including closing costs and adjustments. The
acquisition was accounted for using the purchase method of accounting. The
accompanying consolidated financial statements reflect the results of operations
of Steamboat and Heavenly subsequent to November 12, 1997.
2. Summary of Significant Accounting Principles
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 1997, 1998 and 1999
consisted of fifty-two weeks.
F-7
<PAGE>
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a
remaining maturity of three months or less to be cash equivalents.
Restricted Cash
Restricted cash represents deposits that relate to pre-sales of real
estate developed for sale held in escrow and guest advance deposits for lodging
reservations. The cash will be available to the Company when the real estate
units are sold or the lodging services are provided. Restricted cash classified
as long-term represents deposits held in escrow relating to pre-sales with
anticipated closing dates subsequent to fiscal 2000.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist primarily of retail goods, food and beverage products and
mountain operating supplies.
Property and Equipment
Property and equipment are carried at cost, net of accumulated
depreciation. Depreciation is calculated using the straight-line method over the
assets' estimated useful lives which range from 9 to 40 years for buildings, 3
to 12 years for machinery and equipment, 10 to 50 years for leasehold
improvements and 5 to 30 years for lifts, lift lines and trails. Assets under
capital leases are amortized over the shorter of their useful lives or their
respective lease lives. Due to the seasonality of the Company's business, the
Company records a full year of depreciation relating to its operating assets
over the second and third quarters of its fiscal year.
Real Estate Developed for Sale
The Company capitalizes as real estate developed for sale the original
acquisition cost of land, direct construction and development costs, property
taxes, interest incurred on costs related to real estate under development, and
other related costs (engineering, surveying, landscaping, etc.) until the
property reaches its intended use. The cost of sales for individual parcels of
real estate or quartershare units within a project is determined using the
relative sales value method. Selling costs are charged to expense in the period
in which the related revenue is recognized. Interest capitalized on real estate
development projects during fiscal years 1997, 1998, and 1999 totaled $473,000,
$2.4 million and $6.4 million, respectively.
Intangible Assets
Intangible assets consist of goodwill and various other intangibles.
The Company has classified as goodwill the excess of fair value of the net
assets (including tax attributes) of companies acquired in purchase transactions
and also the purchase of a minority interest. Intangible assets are recorded net
of accumulated amortization in the accompanying consolidated balance sheet and
are amortized using the straight-line method over their estimated useful lives
as follows:
Goodwill up to 40 years
Tradenames 40 years
Other intangibles 16 - 20 years
Deferred Financing Costs
Costs incurred in connection with the issuance of debt are included in
deferred financing costs, net of accumulated amortization. Amortization is
calculated using the straight-line method over the respective original lives of
the applicable issues. Amortization calculated using the straight-line method is
not materially different from amortization that would have resulted from using
the interest method.
F-8
<PAGE>
Long-Term Investments
Long-term investments are comprised of U.S. Treasury Securities,
Obligations of U.S. Government corporations and agencies and corporate bonds. It
is management's intent to hold these securities until maturity. These securities
are carried at amortized cost, which approximates quoted market values at July
26, 1998 and July 25, 1999. Contractual maturities relating to these investments
range from less than one year to five years at July 25, 1999.
Long-Lived Assets
The Company evaluates potential impairment of long-lived assets and
long-lived assets to be disposed of in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121
establishes procedures for review of recoverability and measurement of
impairment if necessary, of long-lived assets, goodwill and certain identifiable
intangibles held and used by an entity. SFAS 121 requires that those assets be
reviewed for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS 121 also requires that
long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of their carrying amount or fair value less estimated
selling costs. As of July 25, 1999, management believes that there has not been
any impairment of the Company's long-lived assets, real estate developed for
sale, goodwill or other identifiable intangibles.
Revenue Recognition
Resort revenues include sales of lift tickets, tuition from ski
schools, golf course fees and other recreational activities, sales from
restaurants, bars and retail shops, and real estate rentals. Daily lift ticket
revenue is recognized on the day of purchase. Lift ticket season pass revenue is
recognized in equal amounts over the ski season, which is the Company's second
and third quarters of its fiscal year. The Company's remaining revenue is
generally recognized as the services are performed. Real estate revenues are
recognized under the full accrual method when title has been transferred.
Amounts received from pre-sales of real estate are recorded as deposits and
deferred revenue in the accompanying consolidated balance sheet until the
revenue is recognized. Deposits and deferred revenue classified as long-term
represent deposits held in escrow relating to pre-sales with anticipated closing
dates subsequent to fiscal 2000.
Interest
Interest is expensed as incurred except when it is capitalized in
connection with major capital additions and real estate developed for sale. The
amounts of interest capitalized are determined by applying current interest
rates to the funds required to finance the construction. During 1997, 1998 and
1999, the Company incurred total interest cost of $24.3 million, $37.5 million,
and $46.4 million respectively, of which $575,000, $2.9 million and $7.1
million, respectively, have been capitalized to property and equipment and real
estate developed for sale.
Employee Benefits
As of July 27, 1997, the Company maintained a number of profit sharing
and savings plans pursuant to Section 401(k) of the Internal Revenue Code. In
August 1997, the Company established the ASC 401(k) Retirement Plan pursuant to
Section 401(k) of the Internal Revenue Code (the "Plan") and subsequently merged
the previously existing plans into the Plan. The Plan allows employees to defer
up to 15% of their income and provides for the matching of participant
contributions at the Company's discretion. The Company made no contributions to
the profit sharing plans for 1997, 1998 and 1999. Contributions to the savings
plans for 1997, 1998 and 1999 totaled $301,000, $225,000 and $395,000, excluding
contributions to the Steamboat and Heavenly plans. On January 1, 1998, the
Heavenly profit sharing plan was merged into the Plan and the Steamboat 401(k)
plan was merged into the Plan on October 1, 1998. Contributions to the Steamboat
and Heavenly plans for Fiscal 1998 were $220,000 and $43,000, respectively.
Contributions to the Steamboat plan for Fiscal 1999 were $7,000.
F-9
<PAGE>
Advertising Costs
Advertising costs are expensed the first time the advertising takes
place. At July 26, 1998 and July 25, 1999, advertising costs of $407,000 and
$244,000, respectively, were recorded in prepaid expenses in the accompanying
consolidated balance sheet. Advertising expense for the years ended July 27,
1997, July 26, 1998 and July 25, 1999 was $5.2 million, $7.6 million and $9.5
million, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts and disclosures reported in the accompanying
consolidated financial statements.
Actual results could differ from those estimates.
Seasonality
The occurrence of adverse weather conditions during key periods of the
ski season could adversely affect the Company's operating results. In addition,
the Company's revenues are highly seasonal in nature, with the majority of its
revenues historically being generated in the second and third fiscal quarters,
of which a significant portion is produced in two key weeks - the Christmas and
Presidents' Day vacation weeks.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). This pronouncement supersedes the previous methodology for the
calculation of earnings per share as promulgated under APB Opinion No. 15. SFAS
128 requires presentation of "basic" earnings per share (which excludes dilution
as a result of unexercised stock options and the Mandatorily Redeemable 10 1/2%
Preferred Stock) and "diluted" earnings per share. The Company adopted SFAS 128
in fiscal 1998 and all prior periods presented were retroactively restated. For
the years ended July 27, 1997, July 26, 1998 and July 25, 1999, basic and
diluted loss per share are as follows:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
July 27, 1997 July 26, 1998 July 25, 1999
-------------- -------------- ---------------
Income (loss) (in thousands, except per share amounts)
<S> <C> <C> <C>
Income (loss) before preferred stock dividends and
accretion and extraordinary items $ (5,482) $ (1,867) $ (27,950)
Accretion of discount and dividends accrued on
mandatorily redeemable preferred stock 444 5,346 4,372
-------------- -------------- ---------------
Income (loss) before extraordinary items (5,926) (7,213) (32,322)
Extraordinary loss - 5,081 -
-------------- -------------- ---------------
Net income (loss) available to common shareholders $ (5,926) $ (12,294) $ (32,322)
============== ============== ===============
Shares
Total weighted average shares outstanding (basic
and diluted) 978 25,809 30,286
============== ============== ===============
Basic and diluted loss per common share
Loss before extraordinary items $ (6.06) $ (0.28) $ (1.07)
Extraordinary loss - 0.20 -
-------------- -------------- ---------------
Net loss available to common shareholders $ (6.06) $ (0.48) $ (1.07)
============== ============== ===============
</TABLE>
The Company currently has outstanding 36,626 shares of Mandatorily
Redeemable Convertible Preferred Stock which are convertible into shares of the
Company's common stock. The common stock shares into which these securities are
convertible have not been included in the dilutive share calculation as the
impact of their inclusion would be anti-dilutive. The Company also has 2,746,048
exercisable options outstanding to purchase shares of its common stock under the
Company's stock option plan as of July 25, 1999. These shares are also excluded
from the dilutive share calculation as the impact of their inclusion would also
be anti-dilutive.
F-10
<PAGE>
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 13).
Fair Value of Financial Instruments
The recorded amounts for cash and cash equivalents, restricted cash,
accounts receivable and accounts payable and other current liabilities
approximate fair value due to the short-term nature of these financial
instruments. The fair value of amounts outstanding under the Company's Senior
Credit Facility and certain other debt instruments approximates their recorded
values in all material respects, as determined by discounting future cash flows
at current market interest rates as of July 25, 1999. The fair value of the
Company's Senior Subordinated Notes has been estimated using quoted market
values. The fair value of the Company's other subordinated debentures have been
estimated using discounted cash flow analyses based on current borrowing rates
for debt with similar maturities and ratings.
The estimated fair values of the Senior Subordinated Notes and other
subordinated debentures at July 26, 1998 and July 25, 1999 are
presented below (in thousands):
<TABLE>
<CAPTION>
July 26, 1998 July 25, 1999
Carrying Fair Carrying Fair
amount value amount value
<S> <C> <C> <C> <C>
12% Senior Subordinated Notes $ 117,002 $ 134,400 $ 117,240 $ 110,400
Other subordinated debentures $ 10,950 $ 8,667 $ 10,495 $ 9,417
</TABLE>
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes, as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial statement and tax
bases of assets and liabilities, utilizing currently enacted tax rates. The
effect of any future change in tax rates is recognized in the period in which
the change occurs.
Reclassifications
Certain amounts in the prior year financial statements and related notes
have been reclassified to conform with the fiscal 1999 presentation.
Recently Issued Accounting Standards
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". As of July 25, 1999, the
Company has no such items that would necessitate disclosure of comprehensive
income. As such, the Company's adoption of SFAS 130 had no effect on the
accompanying consolidated financial statements.
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). This statement established standards for reporting
information on operating segments in interim and annual financial statements.
The Company had previously disclosed segment information under SFAS 14,
"Financial Reporting for Segments of a Business Enterprise". The adoption of
SFAS 131 did not result in a change in the composition of the Company's
operating segments, or in the previously reported net income for each segment.
F-11
<PAGE>
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities". At adoption, SOP 98-5 requires the Company to write-off
any unamortized start-up costs as a cumulative effect of change in accounting
principle and, going forward, expense all start-up activity costs as they are
incurred. The Company is required to and will adopt SOP 98-5 in the first
quarter of fiscal 2000 and estimates that it will recognize a corresponding
charge of approximately $1 million as a change in accounting principle.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivatives and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 extends the
effective date of SFAS 133 to all fiscal years beginning after June 15, 2000
(fiscal year 2001 for the Company). SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Management of
the Company is currently reviewing the impact of SFAS 133 on its consolidated
financial statements. 3. Business Acquisitions and Divestments
Kamori Combined Enterprises Acquisition
On November 12, 1997, the Company acquired all of the outstanding
shares of common stock of Kamori Combined Entities (the "Kamori Acquisition")
which included the Steamboat Ski & Resort Corporation in Steamboat Springs,
Colorado ("Steamboat"), the Heavenly Valley Ski & Resort Corporation in Lake
Tahoe, California/Nevada ("Heavenly") and the Sabal Point Golf Course in
Orlando, Florida ("Sabal Point") for approximately $300.5 million, including
closing costs and adjustments. Steamboat and Heavenly are major destination ski
resorts while Sabal Point is a golf, tennis and swimming club. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
results of operations subsequent to November 12, 1997 are included in the
accompanying consolidated financial statements. The purchase price was allocated
to the assets acquired and the liabilities assumed based on their fair market
values at the date of acquisition as follows (in thousands):
Fair value
of
net assets
acquired
-------------
Cash $ 8,771
Accounts receivable 129
Inventory 3,983
Prepaid expenses 486
Property and equipment, net 183,922
Asset held for sale 5,780
Real estate developed for sale 25,624
Goodwill 60,177
Intangible assets 22,200
Long-term investments 5,000
Other assets 177
Deferred income taxes 2,443
-------------
Total assets 318,692
-------------
Accounts payable and other current liabilities (10,289)
Deposits and deferred revenue (6,702)
Deferred income taxes (793)
Minority interest (364)
-------------
Total liabilities (18,148)
-------------
Net assets acquired $ 300,544
=============
Amortization of goodwill and intangible assets charged to depreciation
and amortization was $1.3 million and $544,000, respectively, for fiscal 1998,
and $1.3 million and $545,000, respectively, for fiscal 1999.
F-12
<PAGE>
The asset held for sale per above of $5.8 million represents the
carrying value of Sabal Point. Sabal Point was subsequently sold on February 2,
1998 for total proceeds of $5.7 million. As Sabal Point was identified as held
for sale as of the Kamori Acquisition date, the operating results of Sabal Point
from that date through February 2, 1998 were excluded from the Company's
consolidated operating results and were included in the determination of the
carrying value of $5.8 million. No gain or loss was recognized from the sale of
Sabal Point as the difference between the carrying value and the proceeds was
treated as an adjustment to the original purchase price allocation.
The minority interest of $396,000 at July 25, 1999 is comprised of the
balance of $364,000 as of the Kamori Acquisition date and the minority interest
in the income of the subsidiary of $11,000 for fiscal 1998 and $21,000 for
Fiscal 1999.
The following unaudited pro forma financial information for the
Company gives effect to the Kamori Acquisition as if the transaction had
occurred on July 29, 1996 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year ended Year ended
July 27, 1997 July 26, 1998
(unaudited) (unaudited)
-------------- --------------
<S> <C> <C>
Revenues $ 262,566 $ 342,172
Loss from continuing operations (3,874) (9,416)
Net loss (4,318) (19,843)
Basic and diluted loss per common share:
Loss before extraordinary items ($0.15) ($0.49)
Extraordinary loss - (0.17)
-------------- --------------
Net loss available to common shareholders ($0.15) ($0.66)
============== ==============
</TABLE>
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the transactions occurred on the date
indicated.
Other Acquisitions
On August 30, 1996, the Company purchased the remaining 49% minority
interest in Sugarloaf/USA for $2.0 million cash. The Company had originally
purchased 51% of Sugarloaf/USA in connection with its acquisition of all the
outstanding common stock of S-K-I on June 28, 1996 (the "S-K-I Acquisition"). In
connection with the purchase of the minority interest, the Company recorded a
liability in the amount of $492,000 to provide for contingent consideration that
may be paid pursuant to the purchase agreement. During fiscal 1998 and fiscal
1999, the Company paid contingent consideration of approximately $492,000, thus
exhausting the liability established for such payments. The Company anticipates
that it will be required to make additional future contingent payments pursuant
to the purchase agreement over the next three fiscal years. Such future payments
will be treated in accordance with APB 16, which requires that contingent
consideration be recorded as an additional cost of the acquired enterprise and
amortized over the remaining life of the acquired asset. In connection with the
purchase of Sugarloaf, the Company paid certain debt in advance of its maturity
and incurred a prepayment penalty of $600,000. The prepayment penalty is
recorded in interest expense in the accompanying consolidated statement of
operations for the year ended July 27, 1997.
In November 1996, the Company purchased the Pico Ski Resort for a
total purchase price of $5.0 million. The purchase price includes a cash payment
of $3.4 million and assumed liabilities of $1.6 million.
Pursuant to a consent decree with the U.S. Department of Justice in
connection with the S-K-I Acquisition, the Company sold the assets constituting
the Mt. Cranmore and Waterville Valley resorts for $17.2 million on November 27,
1996.
In July 1997, the Company purchased The Canyons for a total purchase
price of $8.3 million. The purchase price includes a cash payment of $1.6
million, assumed liabilities of $200,000 and the issuance of a note payable in
the amount of $6.5 million.
F-13
<PAGE>
4. Property and Equipment
Property and equipment consists of the following (in thousands):
July 26, July 25,
1998 1999
---- ----
Buildings and grounds $ 159,841 $ 176,952
Machinery and equipment 117,704 166,475
Lifts and lift lines 158,074 161,102
Trails 36,072 37,130
Land improvments 14,954 19,006
------------ ------------
486,645 560,665
Less: accumulated depreciation 69,817 111,288
------------ ------------
416,828 449,377
Land 73,755 72,249
Construction-in-process 30,556 7,528
------------ ------------
Property and equipment, net $ 521,139 $ 529,154
============ ============
Property and equipment includes approximately $19.3 million and $52.3
million of machinery and equipment and lifts held under capital leases at July
26, 1998 and July 25, 1999, respectively. At July 26, 1998 and July 25, 1999,
related accumulated amortization on property and equipment under capital leases
was approximately $3.8 million and $9.0 million, respectively. Amortization
expense for property and equipment under capital leases was approximately $1.6
million, $2.2 million and $4.4 million for 1997, 1998 and 1999, respectively.
Total depreciation and amortization expense relating to all property and
equipment was $34.0 million and $40.4 million for 1998 and 1999, respectively.
5. Demand Note, Principal Shareholder
In June 1996, prior to the S-K-I Acquisition, the Company delivered to
the Principal Shareholder a demand note in the principal amount of $5.2 million
for the amount expected to become payable by the Principal Shareholder in 1996
and 1997 for income taxes with respect to the Company's income as an S
Corporation through the date of the S-K-I Acquisition. The demand note is
unsecured and bears interest at 5.4% per annum, the applicable federal rate in
effect at the time of issuance. The amount in the accompanying consolidated
balance sheet at July 25, 1999 of $1.8 million was repaid by the Company
subsequent to the end of fiscal 1999 (see Note 17 - Subsequent Events).
6. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of (dollar amounts in thousands):
July 26, July 25,
1998 1999
----------- ------------
<S> <C> <C>
Senior Credit Facility (Note 8) $194,227 $200,485
Real estate development note payable with a face value of $105,000. The note bears
interest at a variable rate of prime plus 2.5% per annum which is accrued monthly.
Principal and interest on the note are payable as real estate quartershares are sold. Any
remaining principal and accrued interest are due in March 2002. The note is collateralized
by the real estate developed for sale of GSRP. 31,411 55,796
Real estate development term loan facility with a face value of $58,000 to finance the
working capital of the Company's real estate subsidiaries. The facility bears interest at
a variable rate equal to the lender's base rate plus 8.25% or a current rate of 16%.
Interest is payable monthly in arrears. Any remaining principal is due June 30, 2001. This
facility is underwritten by substantially all the Resort Properties subsidiaries. - 52,654
Note payable in an aggregate principal amount of $3,530 for forbearance fees for the
amended and restated real estate development term loan facility described above. The note
bears interest at 12% per annum and is payable at maturity. The Balance is due in full at
February 2002. - 3,530
F-14
<PAGE>
Note payable with a face value of $2,250. The note bears interest at 9% per annum which is
payable monthly beginning January 1998 for a 15-year term. The principal is due in full in
December 2012. 2,250 2,250
Note payable with a face value of $2,000. The note bears interest at 10% per annum which
is payable upon the maturity of the note. A principal payment of $1,000 was made in June
1999. The remaining principal and accrued interest are due in June 2000. 2,000 1,000
Subordinated debentures issued with an original face value of $2,101. The initial coupon
rate is 6% per annum and is adjusted annually in accordance with the agreement. Interest
is payable annually in May beginning in 1995. The debentures mature in April 2002. 1,844 1,912
Note payable with a face value of $1,720. The note bears interest at 12% per annum which
is payable quarterly, in arrears, beginning October 1998. The principal is due in full in
July 2000. 1,720 1,720
Note payable with a face value of $1,600. Interest is payable monthly beginning January
1998 for a 30-year term. The interest rate is 7% per annum for the first 10 years, 8.44%
per annum for the second 10 years and 10.55% per annum for the final 10 years. The
principal is due in full in December 2027. 1,600 1,600
Note payable with a face value of $1,000. The note bears interest at 14% per annum which
is payable monthly beginning in August 1997. The principal is due in full in July 2000. 1,000 1,000
Note payable with a face value of $2,097 and bearing interest at the rate of 8.25% per
annum. The principal and interest are payable upon completion of the Sundial Lodge at the
Canyons resort, which is expected in the Company's fiscal year 2000. - 2,097
Note payable with a face value of $6,600. The note bears interest at a rate of 8.5% per
annum which is paid quarterly, in arrears. Principal payments of $4,720 were made in
fiscal 1999. The remaining balance is payable upon completion of the Grand Summit Hotel at
the Canyons resort, which is expected in the Company's fiscal year 2000. - 1,880
Real estate development note payable with a face value of $29,000. The note bears interest
at a variable rate of prime plus1/4% and is payable monthly. The principal is due upon
completion of the Sundial Lodge project at the Company's Canyons resort. This project is
expected to be completed in Fiscal 2000. - 6,858
Real estate development note payable with a face value of $2,500 for the construction of
employee housing at the Company's Steamboat resort. The note bears interest at a variable
rate of prime plus1/4%. Principal and interest of $17 are payable monthly. The loan will be
converted to a 15 year amortization when the project is completed. 467 1,831
Note payable with face value of $1,000 to finance the purchase of a retail store. The note
does not accrue interest. The principal is due as follows: $200 in August 1999; $200 in
August 2000 and $300 in August 2001. 1,000 700
Note payable with face value of $2,294. The note bears interest at 7.83% per annum.
Interest and principal payments of $22 are payable monthly beginning March 1998. The
remaining principal and accrued interest are due in February 2003. 2,255 2,154
Obligations under capital leases 12,664 33,642
Other notes payable 2,830 3,617
----------- ------------
255,268 374,726
----------- ------------
Less: current portion 43,698 60,882
----------- ------------
Long-term debt, excluding current portion $211,570 $313,844
=========== ============
</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 25, 1999.
At July 25, 1999, the Company had letters of credit outstanding totaling $2.5
million.
F-15
<PAGE>
The non-current portion of long-term debt matures as follows (in
thousands):
Long-term Subordinated Total
debt notes debt
------------- ------------ ------------
2001 $ 62,561 $ 525 $ 63,086
2002 70,624 549 71,173
2003 15,752 1,074 16,826
2004 12,238 1,466 13,704
2005 and
thereafter 160,038 123,448 283,486
Interest related to capitalized
leases (7,124) - (7,124)
Debt discount (245) - (245)
------------- ------------ ------------
$ 313,844 $ 127,062 $ 440,906
============= ============ ============
7. Subordinated Notes and Debentures
On June 25, 1996, in connection with the S-K-I Acquisition, ASC East
issued $120.0 million of 12% Senior Subordinated Notes (the "Notes"). Pursuant
to a registration rights agreement, ASC East filed a registration statement with
respect to an offer to exchange the 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 are general
unsecured obligations of ASC East, subordinated in right of payment to all
existing and future senior debt of ASC East, including all borrowings of the
Company under the Senior Credit Facility. The Notes mature July 15, 2006, 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 $6.7
million in connection with the issuance of the Notes which are recorded as
deferred financing costs, net of accumulated amortization, in the accompanying
consolidated balance sheet. Amortization expense included in the accompanying
consolidated statement of operations for the years ended July 27, 1997, July 26,
1998 and July 25, 1999 amounted to $781,000, $713,000 and $668,600,
respectively. (See Note 17 - Subsequent Events)
The Notes were issued with an original issue discount of $3.4 million.
Interest on the Notes is payable semi-annually on January 15 and July 15 of each
year, commencing on January 15, 1997. Interest expense on the Notes amounted to
$14.6 million in 1997, 1998, and 1999.
Concurrently with the Offering, the Company solicited and received the
required consents from the holders of the Notes to amend the Notes indenture to
permit the consummation of the Offering without requiring the Company to make a
Change of Control Offer (as defined). In connection with the consent
solicitation, the Company paid a customary fee to the consenting holders of the
Notes.
The Company entered into two non-cancelable interest rate swap
agreements (the "Swap Agreements") with BankBoston, N.A. ("BankBoston") with an
effective date of February 9, 1998 (the "Effective Date") to manage the interest
rate risk associated with the Notes. The notional amount of both Swap Agreements
of $120.0 million is equal to the face value of the Notes. The first Swap
Agreement matures on July 15, 2001, the date on which the related Notes first
become redeemable at the option of the Company. The second Swap Agreement
matures on July 15, 2006, the date on which the related Notes mature. From the
Effective Date through July 15, 2001, the Swap Agreements effectively reduce the
Company's cash outflow relating to the payment of interest on the Notes from 12%
to 9.01%, with the Company's payment of interest to BankBoston at 9.01% of the
notional amount and BankBoston's payment of interest to the Company at 12% of
the notional amount. The reduction in the net cash outflow for interest had no
impact on the accompanying consolidated statement of operations as the net swap
receipt from BankBoston of $5.1 million for the period from the Effective Date
through July 25, 1999 is included in other long-term liabilities in the
accompanying consolidated balance sheet. The Company will accrue interest
expense on the cumulative net swap receipt over the period of the first Swap
Agreement. This other long-term liability, including accrued interest thereon,
will be amortized as a credit to interest expense over the period from July 15,
2001 to July 15, 2006. Under the second Swap Agreement, which will remain in
effect for the period from July 15, 2001 to July 15, 2006, the Company will make
interest payments to BankBoston at 9.01% of the notional amount while BankBoston
will make interest payments back to the Company at the LIBOR rate in effect at
that time. Depending on the LIBOR rate in effect during the second Swap
Agreement, the Company's interest rate exposure and its related impact on
interest expense and net cash outflow may increase or decrease from the fixed
rate under the Notes of 12%. The Company is exposed to credit loss in the event
of nonperformance by the other party to the Swap Agreements; however,
nonperformance is not anticipated.
F-16
<PAGE>
On January 26, 1998, the Company and the holders of the 4% of the
outstanding shares of ASC East entered into an agreement whereby the Company
issued 615,022 shares of its Common Stock in exchange for all ASC East common
stock shares not owned by the Company. In connection with the exchange, the
Company recorded $8.5 million of goodwill which represented the excess of the
fair market value of the common stock exchanged relative to the carrying value
of the minority interest. Amortization expense relating to the goodwill was
$127,000 and $228,000 for the years ended July 26, 1998 and July 25, 1999,
respectively.
A portion of the proceeds from the Senior Credit Facility (Note 8) were
used to redeem all of the Company's outstanding 13.75% Subordinated Discount
Notes ("Subordinated Notes"). The indenture relating to the Subordinated Notes
provided for a redemption price equal to 113.75% of the carrying value of the
Subordinated Notes on the redemption date. The Company recorded extraordinary
losses before any benefit for income taxes in Fiscal 1998 of approximately $4.3
million related to the prepayment of the Subordinated Notes and $1.0 million
related to the write-off of deferred financing costs. These losses are included
in the total extraordinary loss in the accompanying consolidated statement of
operations for the year ended July 26, 1998.
Other subordinated debentures owed by the Company at July 25, 1999 are
due as follows (in thousands):
Interest Principal
Year Rate Amount
------------------------------------
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
-----------
$ 10,495
===========
8. Senior Credit Facility
In connection with the Offering, the Company entered into a new credit
facility (the "Senior Credit Facility") with BankBoston on November 12, 1997 and
repaid the indebtedness under the Company's then existing credit facility (the
"Old Credit Facility"). In connection with the repayment of the Old Credit
Facility, the Company wrote-off deferred financing costs of $1.2 million and
incurred prepayment penalties of $433,000. These amounts are included in the
total extraordinary loss in the accompanying consolidated statement of
operations for the year ended July 26, 1998. On November 13, 1997, BankBoston,
as agent, syndicated the Senior Credit Facility to a group of participating
lenders (the "Banks").
The Senior Credit Facility is divided into two sub-facilities, $64.6
million of which is available for borrowings by ASC East and its subsidiaries
(the "East Facility") and $149.0 million of which is available for borrowings by
the Company excluding ASC East and its subsidiaries (the "West Facility"). The
East Facility consists of a six-year revolving credit facility in the amount of
$34.9 million and an eight-year term facility in the amount of $29.7 million.
The West Facility consists of a six-year revolving facility in the amount of
$74.7 million and an eight-year term facility in the amount of $74.3 million
The revolving facilities are subject to an annual requirement to reduce
the outstanding debt to a balance of not more than $9.9 million for the East
Facility and not more that $44.7 million for the West Facility for a period of
30 days. The maximum availability under the revolving facilities will reduce
over the term of the Senior 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
F-17
<PAGE>
substantially equal installments in years seven and eight. Beginning July 1999,
the Senior Credit Facility requires mandatory prepayment of 50% of excess cash
flows during any period in which the ratio of the Company's total senior debt to
earnings before interest expense, income taxes, depreciation and amortization
("EBITDA") exceeds 3.50 to 1. In no event, however, will such mandatory
prepayments reduce either revolving facility commitment below $35.0 million. The
Senior Credit Facility contains affirmative, negative and financial covenants
including maintenance of debt to EBITDA, minimum net worth, EBITDA to interest
expense, and cash flow to debt service financial ratios. Except for the debt to
EBITDA and minimum net worth ratios, which are calculated at both the ASC
consolidated level and at the ASC East and ASC West levels, compliance with
financial covenants is determined on a consolidated basis notwithstanding the
bifurcation of the Senior Credit Facility into sub-facilities.
At July 25, 1999, the revolving portion of the East and West Facilities
had outstanding borrowings of $30.0 million and $64.0 million, respectively
under LIBOR contracts which bear interest at rates ranging from 8.64% to 8.69%
per annum. At July 25, 1999, the East and West Facilities had outstanding
borrowings of $1.9 million and $700,000, respectively, in Money Market accounts
which bear interest at 8.50%. The balance of the borrowings outstanding at year
end under the West Facility of $48,000 bears interest at the greater of
BankBoston's base rate or the Federal Funds Rate plus 2% per annum. There were
no borrowings outstanding under the East Facility at July 25, 1999 other than
those described above under LIBOR contracts and Money Market accounts. At July
25, 1999, the LIBOR, Money Market and Base rates were 8.68%, 8.50% and 10.00%,
respectively. At July 25, 1999, the term portion of the East and West Facilities
had outstanding borrowings of $29.7 million and $74.3 million, respectively, and
bear interest at rates ranging from 9.18% to 10.5%. Both the revolving and term
portions of the Senior Credit Facility accrue interest daily and pay interest
quarterly, in arrears. At July 25, 1999, accrued interest for the East and West
Facilities was $1.2 million and $2.8 million, respectively. The East Facility is
secured by substantially all the assets of ASC East and its subsidiaries, except
the real estate development subsidiaries, which are not borrowers under the
Senior Credit Facility. The West Facility is secured by substantially all the
assets of ASC West and its subsidiaries.
The Company negotiated an amendment to the Senior Credit Facility on
March 3, 1999 (the "Credit Facility Amendment") which significantly modified the
covenant requirements on a prospective basis. The Credit Facility Amendment
requires minimum quarterly EBITDA levels and places a maximum range of non-real
estate capital expenditures for fiscal 2000 of between $15 and $20 million, with
maximum levels depending on the Company's ability to consummate sales of certain
non-strategic assets, as defined in the Credit Facility Amendment. Following
fiscal 2000, annual resort capital expenditures (exclusive of real estate) are
capped at the lesser of (i) $35 million or (ii) the total of consolidated EBITDA
for the four fiscal quarters ended April of the previous fiscal year less
consolidated debt service for the same period.
In November 1997, the Company paid financing fees with respect to the
Senior Credit Facility of 1.75% of the total commitment, or $3.8 million to the
Banks. In March 1999, the Company also paid additional financing fees of
$806,000 with respect to the Credit Facility Amendment. The Company has
capitalized these fees and certain other debt related costs and is amortizing
them over the term of the Senior Credit Facility. Total unamortized financing
fees relating to the Senior Credit Facility recorded in deferred financing costs
in the accompanying consolidated balance sheet were $4.3 million at July 25,
1999.
The Senior Credit Facility was restructured subsequent to the end of fiscal
1999 pursuant to a fourth amendment entered into by the Company (see Note 17 -
Subsequent Events).
F-18
<PAGE>
9. Income Taxes
The provision (benefit) for income taxes charged to continuing
operations was as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
------------- --- ------------ --- --------------
July 27, 1997 July 26, 1998 July 25, 1999
------------- ------------ --------------
<S> <C> <C> <C>
Current tax provision
Federal $ - $ - $ -
State - - -
Deferred tax provision (benefit)
Federal (2,815) 580 (11,939)
State (798) (1,354) (3,118)
------------- ------------ --------------
Total provision (benefit) $ (3,613) $ (774) $ (15,057)
============= ============ ==============
</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.
Deferred tax liabilities (assets) are comprised of the following at July
26, 1998 and July 25, 1999 (in thousands):
<TABLE>
<CAPTION>
July 26, 1998 July 25, 1999
------------- -------------
<S> <C> <C>
Property and equipment basis differential $ 43,992 $ 53,814
Other 880 640
------------- -------------
Gross deferred tax liabilities 44,872 54,454
Tax loss and credit carryforwards (15,017) (30,887)
Capitalized cost (1,042) (1,856)
Deferred revenue and contracts (259) (10,536)
Stock compensation charge (4,939) (3,112)
Reserves and accruals (3,527) (4,239)
Other (1,229) (661)
------------- -------------
Gross deferred tax assets (26,013) (51,291)
Valuation allowance 2,447 2,626
------------- -------------
Net deferred tax liability (asset) $ 21,306 $ 5,789
============= =============
</TABLE>
The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory income tax rate
of 35% to income (loss) before provision (benefit) for income taxes, minority
interest in loss of subsidiary and extraordinary loss as a result of the
following differences (in thousands):
<TABLE>
<CAPTION>
Year ended
------------- -- -------------- -- --------------
July 27, 1997 July 26, 1998 July 25, 1999
------------- -------------- --------------
<S> <C> <C> <C>
Income tax provision (benefit) at the statutory U.S. tax
rates $ (3,271) $ (1,080) $ (15,052)
Increase (decrease) in rates resulting from:
State taxes, net (798) (1,354) (3,118)
Change in valuation allowance 71 250 -
Stock option compensation - 1,019 1,623
Nondeductible items 243 634 848
Other 142 (243) 642
------------- ------------- --------------
Income tax provision (benefit) at the effective tax rates $ (3,613) $ (774) $ (15,057)
============= ============== ==============
</TABLE>
At July 25, 1999, the Company has federal net operating loss ("NOL")
carryforwards of approximately $67.3 million which expire in varying amounts
though the year 2019 and a federal capital loss carryover of approximately
$700,000 that expires in the year 2003. Internal Revenue Code Section 382 limits
the amount of NOL carryforwards incurred before a change in ownership, as
defined, that can be used annually against income generated after the change in
F-19
<PAGE>
ownership. In November of 1997 as a result of the Offering, the Company
experienced a change in ownership. Approximately $27.5 million of the federal
NOL carryforwards were incurred prior to the Offering and are subject to an
overall annual limitation under Section 382 of approximately $14 million.
Because of recent acquisitions, the limitation is required to be allocated to
the various subsidiaries based on their relative fair market values. In
addition, certain subsidiaries have separate pre-change in ownership losses
which are subject to lower annual limitations as a result of previous changes in
ownership. Subsequent changes in ownership could further affect the limitation
in future years.(See Note 17 - Subsequent Events).
In addition to the limitations under Section 382, approximately $7
million of the federal NOL carryovers are from separate return years, as defined
in the regulations to the Internal Revenue Code, of certain subsidiaries (or
sub-groups), and may only be used to offset each subsidiary's (or sub-group'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 $2.6 million is appropriate because,
due to the change of ownership and the resulting annual limitations, the Company
will not be able to use all of the potential tax benefits from existing NOL
carryforwards and tax credits as of July 25, 1999.
10. 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 14% 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.
Pursuant to the Agreement, the Company issued $17.5 million aggregate
principal amount of its 14% Senior Exchangeable Notes Due 2002 (the
"Exchangeable Notes") on July 28, 1997 in a private offering to an institutional
investor. The Company incurred deferred financing costs totaling $1.1 million in
connection with the issuance of the Exchangeable Notes. The Exchangeable Notes
bore interest at a rate of 14% per annum and mature on July 28, 2002. Interest
on the Exchangeable Notes was payable in cash or additional Exchangeable Notes,
at the option of the Company.
On November 15, 1997, subsequent to the completion of the Offering,
each share of Preferred Stock and the Exchangeable Notes were converted into
shares of Mandatorily Redeemable 10 1/2% Preferred Stock. The total number of
Mandatorily Redeemable 10 1/2% Preferred Stock shares issued in association with
the exchange were 36,626 and have a face value of $1,000 per share. The carrying
value of the Preferred Stock and Exchangeable Notes just prior to the conversion
were $18.4 million and $18.2 million, respectively. The Company incurred an
extraordinary loss before income tax benefit of $1.0 million upon the conversion
of the Preferred Stock and Exchangeable Notes as a result of the write-off of
unamortized deferred financing costs relating to the Exchangeable Notes.
Under the Agreement, the Mandatorily Redeemable 10 1/2% Preferred
Stock shares are exchangeable at the option of the holder into shares of the
Company's Common Stock at a conversion price of $17.10 for each common share. In
the event the Mandatorily Redeemable 10 1/2% Preferred Stock is held to the
maturity date of November 15, 2002, the Company will be required to pay the
holder in cash the face value of $36.6 million plus cumulative dividends in
arrears.
In the event of a default, as defined in the Agreement, there shall be
a mandatory redemption of the Mandatorily Redeemable 10 1/2% Preferred Stock by
the Company unless the holder of the stock elects instead to have visitation
rights to meetings of both the Board of Directors and Management Committees
until the event of default is cured.
The Mandatorily Redeemable 10 1/2% Preferred Stock ranks senior in
liquidation preference to all Common Stock and Class A Common Stock outstanding
at July 25, 1999 as well as any Common Stock and Class A Common Stock issued in
the future.
F-20
<PAGE>
11. Related Party Transactions
The Principal Shareholder's wife is employed by the Company as
director of retail purchasing and is actively involved in the Company's retail
sales activities. During fiscal 1997, 1998 and 1999, the Principal Shareholder's
wife received total compensation of $52,000, $52,000 and $54,000, respectively.
During the first quarter of fiscal 1998, the Company granted the Principal
Shareholder's wife fully vested options to purchase up to 20,060 shares of
Common Stock at a price of $2.00 per share. During 1999 the Company granted the
Principal Shareholder's wife options to purchase up to 750 shares of Common
Stock at a price of $7.00 per share that will vest over the next four years.
Western Maine Leasing Co., a corporation wholly-owned by the Principal
Shareholder, leases heavy equipment to Sunday River under short-term leases. In
fiscal 1997, 1998 and 1999, payments under such leases totaled $24,000, $17,000
and $0 respectively.
Sunday River provided lodging management services for Ski Dorm, Inc.
("Ski Dorm"), a corporation owned by the Principal Shareholder and his mother,
which owns a ski dorm located near the Sunday River resort. During fiscal 1997,
1998 and 1999, payments by Ski Dorm to Sunday River totaled $258,000, $2,000 and
$ 65,000, respectively. In addition, Ski Dorm issued to Sunday River a
promissory note in 1995 with a principal amount of $265,000, of which $250,000
was outstanding at July 25, 1999. This note is secured by a mortgage on real
estate and related improvements owned by Ski Dorm. Interest on the note is
charged at the prime rate plus 1 1/2% and principal and any accrued interest are
due in December 1999. The Company purchased Ski Dorm from the Principal
Shareholder (among other assets) subsequent to the end of fiscal 1999 (see Note
17 - Subsequent Events).
The Company provided an interest free construction loan to Mr. Rich
McGarry, Senior Vice President and General Manager of Killington Ski Resort. The
Company relocated Mr. McGarry to Killington during fiscal 1999 and agreed to
provide financing on the construction of a home in the Killington area until his
previous residence was sold. As of July 25, 1999 the balance of the loan was
$316,027 which was the largest amount advanced during fiscal 1999.
The Principal Shareholder is the obligor under a margin loan (the
"Margin Loan") with ING (U.S.) Capital Corporation. The Margin Loan has two
different maintenance bases: (i) one which requires that the aggregate market
value of the collateral be at a certain level in order to take additional
advances under the arrangement to make interest payments (the "Advance Base")
and (ii) one which requires that the aggregate market value of the collateral be
at a certain level in order to avoid a default under the terms of the Margin
Loan (the "Minimum Base"). The Margin Loan is collateralized by the Principal
Shareholder's 833,333 shares of the Company's Common Stock and 14,760,530 shares
of the Company's Class A Common Stock. At any time that the aggregate market
value of the collateral is below the Minimum Base, the Principal Shareholder is
required to either pay down the balance of the Margin Loan or to pledge
additional collateral. The Company is not liable for nor do any of its assets
collateralize the Margin Loan.
12. 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 1997, 1998 and 1999
was $2.2 million, $2.5 million and $2.6 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
F-21
<PAGE>
substantial portion of the land constituting skiable terrain at Attitash Bear
Peak, Sugarbush, Mount Snow/Haystack and Steamboat is located on federal land
that is used under the terms of the permits with the United States Forest
Service (the "Forest Service"). Generally, under the terms of such permits, the
Forest Service has the right to review and comment on the location, design and
construction of improvements in the permit area and on many operational matters.
The permits can be terminated or modified by the Forest Service to serve the
public interest. A termination or modification of any of the Company's permits
could have a material adverse effect on the results of operations of the
Company. The Company does not anticipate any limitations, modifications, or
non-renewals which would adversely affect the Company's operations.
In connection with the purchase of The Canyons, the Company entered
into an operating lease arrangement with the seller for the lease of certain
land 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 a fee of $1.0
million for each extension period. Lease payments are based on a percentage of
gross skiing and lodging revenues. The arrangement also provides for additional
one-time payments ranging from $250,000 to $3.0 million upon achievement of
annual skier visit level increases in 100,000 visit increments up to 1,000,000.
Total rent expense under this arrangement, as recorded in resort operating
expenses in the accompanying consolidated statement of operations for 1997, 1998
and 1999 was $0, $473,000, and $311,000, respectively. In addition, the Company
has the option to purchase parcels of land covered under the operating lease for
real estate development. Payments for these options total $19.0 million and are
payable at various times and in varying amounts, at the Company's discretion,
through July 2001. The Company is not required to make the option payments for
all parcels of land in order to develop and sell real estate on the land covered
under the lease. Option payments for the year ended July 26, 1998 and July 25,
1999 were $7.6 million and $3.6 million, respectively, and are included in other
assets in the accompanying consolidated balance sheet.
In addition to the leases described above, the Company is committed
under several operating and capital leases for various facilities, machinery and
equipment. Rent expense under all operating leases was $4.2 million $6.4 million
and $6.1 million for the years ended 1997, 1998 and 1999, respectively.
Future minimum lease payments for lease obligations at July 25, 1999
are as follows (in thousands):
Capital Operating
leases leases
------------ ------------
2000 $ 8,349 $ 5,410
2001 8,503 2,122
2002 8,791 1,646
2003 6,025 1,242
2004 and thereafter 11,639 25,418
------------ ------------
Total payments 43,307 $ 35,838
============
Less interest 9,665
------------
Present value of net minimum payments 33,642
Less current portion 5,761
------------
Long-term obligations $ 27,881
============
In the fourth quarter of fiscal 1998, the Company began construction
on two quartershare hotel projects, one at The Canyons, one at Steamboat and a
whole ownership hotel project at The Canyons. Total construction costs for these
three projects are estimated to be $244.8 million. These projects are primarily
being financed through a $110.0 million revolving construction loan facility
with TFC Textron for the quarter share projects and a $29 million construction
loan from Key Bank for the whole ownership hotel. The Company also has a $58
million term facility with BankBoston that can be used for these projects as
well as general and operating expenditures. As of July 25, 1999 the Company had
drawn outstanding $55.8 million on the Textron facility and $6.9 million on the
Key Bank facility. The Company estimates that total costs to complete these
projects will be approximately $129.3 million dollars, with available drawings
of $125.8 million. The additional funds will be generated from the net proceeds
of the sale of existing inventory.
On July 22, 1998, the Company entered into an agreement with Marriott
Ownership Resorts, Inc. ("Marriott") for the future sale of land parcels at the
F-22
<PAGE>
Company's Killington, Sunday River, The Canyons, Steamboat and Heavenly resorts
(the "Marriott Agreement"). Under the Marriott Agreement, Marriott has the right
to develop luxury vacation ownership properties at each of the five
aforementioned properties. In accordance with the Marriott Agreement, the
Company has granted to Marriott certain development and marketing rights at the
related resorts. In return, in the event that Marriott elects to develop
properties at the resorts, the Company will receive proceeds for the sale of the
land parcels and will receive a percentage of the Marriott sales of the luxury
vacation ownership properties. The Company has received a cash deposit of $1.6
million from Marriott relating to the future land sales, and because none of the
parcels have yet to be sold, the deposit is recorded as deposits and deferred
revenue in the accompanying consolidated balance sheet at July 25, 1999.
The Killington resort has been identified by the U.S. Environmental
Protection Agency (the "EPA") as a potentially responsible party ("PRP") 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
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, on the
basis that Killington disputes its designation as a PRP. In addition, the
Company recently received notification that its Heavenly resort is expected to
be designated as a PRP at a Superfund site in Patterson, CA. The Company has yet
to be officially designated with respect to this site. 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.
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 or cash flows of the
Company if disposed of unfavorably.
13. Stock Option Plan
Effective August 1, 1997, the Company established a fixed stock option
plan, the American Skiing Company Stock Option Plan (the "Plan"), to provide for
the grant of incentive and non-qualified stock options for the purchase of up to
5,688,699 shares of the Company's common stock by officers, management employees
of the Company and its subsidiaries and other key persons (eligible for
nonqualified stock options only) as designated by the Options Committee. The
Options Committee, which is appointed by the Board of Directors, 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 exercisable. 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 shall be granted at an exercise price as determined
by the Options Committee. The status of the Company's stock option plan is
summarized below:
Weighted
Average
Number Exercise
of Shares Price
------------------------------------------------------------
Outstanding at July 27, 1997 ---- ----
Granted 2,716,057 $14.01
Exercised (20,000) 2.00
------------------------------------------------------------
Outstanding at July 26, 1998 2,696,057 $14.10
Granted 1,196,000 7.17
Exercised (1,221) 2.00
------------------------------------------------------------
Outstanding at July 25, 1999 3,890,836 $11.97
------------------------------------------------------------
During fiscal 1998, the Company granted nonqualified options under the
Plan to certain key members of management to purchase 672,010 shares of common
F-23
<PAGE>
stock with an exercise price of $2.00 per share when the fair market value of
the stock was estimated to be $18.00 per share. The majority of these options
(511,530 shares) were granted to members of senior management and were 100%
vested on the date of grant. Accordingly, the Company recognized stock
compensation expense of $8.1 million relating to the grants based on the
intrinsic value of $16.00 per share. Under these senior management grant
agreements, the Company also agreed to pay the optionees a fixed tax "bonus" in
the aggregate of $5.7 million to provide for certain fixed tax liabilities that
the optionees will incur upon exercise. The remainder of these options (160,480
shares) were granted under the Plan to certain members of management and were
vested 20% on the date of grant and will vest ratably to 100% over the following
four years. For fiscal 1998 and fiscal 1999, the Company recognized $500,000 and
$773,000, respectively, of stock compensation expense relating to these options.
The total stock compensation charge, including the tax bonus, of $14.3 million
recorded in fiscal 1998 is reflected as Stock compensation charge, while the
$773,000 recorded in fiscal 1999 is reflected as Marketing, general and
administrative costs in the accompanying consolidated statement of operations.
The liability for the fixed tax bonus to be paid to the optionees has been
reduced to reflect $200,000 in tax bonus payments made in fiscal 1999 in
connection with options exercised. The remaining $5.5 million tax bonus
liability is reflected in accounts payable and other current liabilities in the
accompanying consolidated balance sheet at July 25, 1999. All other stock
options granted in fiscal 1998 and fiscal 1999 had an exercise price equal to
the fair market value of the common stock on the date of the grant in accordance
with the Plan.
The following table summarizes information about the stock options
outstanding under the Stock Plan at July 25, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Outstanding Life (in Exercise Exercisable Exercise
Prices @ 7/25/99 years) Price @ 7/25/99 Price
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2 - $5 653,289 8.0 $2.01 557,001 $2.01
6 - 10 1,193,500 9.0 7.18 145,000 7.16
11 - 15 22,500 8.0 14.19 22,500 14.19
16 - 18 2,021,547 8.0 18.00 2,021,547 18.00
----------------------------------------------------------------------------
$2 - $18 3,890,836 8.3 $11.97 2,746,048 $14.15
----------------------------------------------------------------------------
</TABLE>
The Company continues to account for stock-based compensation using the
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", under which no compensation expense for stock
options is recognized for stock option awards granted at or above fair market
value. The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Had stock compensation expense been determined based
on the fair value at the grant dates for awards granted under the Company's
stock option plan, consistent with the provisions of SFAS 123, the Company's net
loss and loss per share would have been increased to the pro forma amounts
indicated below (dollar amounts in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended July 26, 1998 July 25, 1999
---------------------------------------------------------------------------------
<S> <C> <C>
Net Loss
As reported $ (12,294) $ (32,322)
Pro forma (27,562) (32,691)
Basic and fully diluted net
loss per common share
As reported (0.48) (1.07)
Pro forma (1.07) (1.08)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Fiscal Years Ended July 26, 1998 July 25, 1999
---------------------------------------------------------------------------------
<S> <C> <C>
Expected life 10 yrs 10 yrs
Risk-free interest rate 5.6% 6.0%
Volatility 47.1% 68.4%
Dividend yield --- ---
</TABLE>
F-24
<PAGE>
The weighted average grant date fair value for the options granted in
Fiscal 1999 with an exercise price of $4.00 to $8.75 per share was $5.71 per
share. The weighted average grant date fair value for the options granted in
fiscal 1998 with an exercise price of $2.00 per share was $16.92. The weighted
average grant date fair value for the options granted in fiscal 1998 with an
exercise price of $14.19 to $18.00 per share was $11.92.
14. Capital Stock
The Company has two classes of Common Stock outstanding, Class A
Common Stock and Common Stock. The rights and preferences of holders of Class A
Common Sock and Common Stock are substantially identical, except that, while any
Class A Common Stock is outstanding, 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 (i) at the option of the holder at
any time, (ii) automatically upon transfer to any person that is not an
affiliate of the Principal Shareholder and (iii) automatically if, at any time,
the number of shares of Class A Common Stock outstanding represents less than
20% of outstanding shares of Common Stock and Class A Common Stock. The
Principal Shareholder holds 100% of the Class A Common Stock, representing
approximately 51% of the combined voting power of all outstanding shares of
Common Stock and Class A Common Stock. (See Note 17 - Subsequent Events).
15. Business Segment Information
The Company currently operates in two business segments, Resorts and
Real Estate. Data by segment is as follows:
<TABLE>
<CAPTION>
July 27, 1997 July 26, 1998 July 25, 1999
-------------- -------------- ---------------
<S> <C> <C> <C>
Net revenues:
Resorts $ 163,310 $ 277,574 $ 292,558
Real estate 10,721 60,992 24,492
-------------- -------------- ---------------
$ 174,031 $ 338,566 $ 317,050
============== ============== ===============
Income from operations:
Resorts $ 19,666 $ 40,811 $ 15,169
Real estate 1,771 17,438 (1,532)
Corporate (7,052) (26,760) (17,262)
-------------- -------------- ---------------
$ 14,385 $ 31,489 $ (3,625)
============== ============== ===============
Depreciation and amortization:
Resorts $ 16,934 $ 35,579 $ 39,455
Real estate - 385 976
Corporate 1,359 2,001 3,771
-------------- -------------- ---------------
$ 18,293 $ 37,965 $ 44,202
============== ============== ===============
Capital expenditures:
Resorts $ 31,091 $ 92,998 $ 52,465
Real estate 30,926 93,255 153,106
-------------- -------------- ---------------
$ 62,017 $ 186,253 $ 205,571
============== ============== ===============
Identifiable assets:
Resorts $ 613,922 $ 599,173
Real estate 120,957 248,412
Corporate 44,607 55,644
-------------- ---------------
$ 779,486 $ 903,229
============== ===============
</TABLE>
F-25
<PAGE>
16. Quarterly Financial Information (Unaudited)
Following is a summary of unaudited quarterly information (amounts in
thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Year ended July 25, 1999:
Net sales $24,796 $109,505 $164,641 $18,108
Income (loss) from operations (20,852) (4,543) 47,264 (25,494)
Income (loss) before preferred stock dividends (19,209) (9,700) 22,333 (21,374)
Net income (loss) available to common shareholders (20,268) (10,779) 21,237 (22,512)
Basic income (loss) per share:
Net income (loss) available to common shareholders $ (0.67) $ (0.36) $ 0.70 $ (0.74)
Weighted average shares outstanding 30,286 30,287 30,287 30,287
Fully diluted income (loss) per share:
Net income (loss) available to common shareholders $ (0.67) $ (0.36) $ 0.69 $ (0.74)
Weighted average shares outstanding 30,286 30,287 30,630 30,287
Year ended July 26, 1998:
Net sales $14,426 $114,171 $185,158 $24,811
Income (loss) from operations (26,717) 17,218 61,225 (20,237)
Extraordinary loss, net of income tax benefit - 5,081 - -
Income (loss) before preferred stock dividends (20,995) (126) 32,781 (18,608)
Net income (loss) available to common shareholders (23,426) (866) 31,690 (19,692)
Basic income (loss) per share:
Income (loss) before extraordinary items $ (1.59) $ 0.15 $ 1.05 $ (0.65)
Extraordinary loss - (0.18) - -
Net income (loss) available to common shareholders $ (1.59) $ (0.03) $ 1.05 $ (0.65)
Weighted average shares outstanding 14,761 27,913 30,266 30,271
Fully diluted income (loss) per share:
Income (loss) before extraordinary items $ (1.59) $ 0.15 $ 1.03 $ (0.65)
Extraordinary loss - (0.18) - -
Net income (loss) available to common shareholders $ (1.59) $ (0.03) $ 1.03 $ (0.65)
Weighted average shares outstanding 14,761 28,424 30,840 30,271
</TABLE>
17. Subsequent Events
Issuance of Preferred Stock
Pursuant to a Preferred Stock Subscription Agreement (the "Series B
Agreement") dated July 9, 1999, the Company sold 150,000 shares of its 8.5%
Series B Convertible Participating Preferred Stock ("Series B Preferred Stock")
on August 9, 1999 to Oak Hill Capital Partners, L.P. and certain related
entities ("Oak Hill") for $150 million. After using a portion of the proceeds
from the Series B Preferred Stock sale to (1) pay $5.4 million to the Principal
Shareholder for the purchase of certain strategic assets and the repayment of a
demand note issued by a subsidiary of the Company, (2) pay approximately $16
million in fees and expenses in connection with the Series B Preferred Stock
sale and related transactions, the Company used the remaining proceeds to reduce
indebtedness under its Senior Credit Facility, approximately $30 million of
which will be reborrowed and invested in its principal real estate development
subsidiary.
The Series B Preferred Stock is convertible into shares of the Company's
common stock at an initial conversion price of $5.25 per share of common stock.
The initial conversion price is subject to an antidilution adjustment. Assuming
all shares of the Series B Preferred Stock are converted into the Company's
common stock at the initial (and current) conversion price, Oak Hill would own
approximately 48.5% of the Company's outstanding common stock and Class A common
stock as of August 9, 1999. Oak Hill is entitled to vote its shares of Series B
Preferred Stock on matters (other than the election of Directors) as if its
F-26
<PAGE>
shares were converted into the Company's common stock. In addition, Oak Hill as
the holder of Series B Preferred Stock has class voting rights to elect
Directors to the Company's Board of Directors. Furthermore, under the Series B
Agreement, Oak Hill and the Principal Shareholder have agreed to use best
efforts and to vote their shares in order to ensure that each of them is able to
appoint up to four Directors to the Board (depending on their shareholdings).
Therefore, under the Series B Agreement and the Company's certificate of
incorporation, Oak Hill and the Principal Shareholder may elect up to eight of
the 11 members of the Company's Board.
Dividends on the Series B Preferred Stock are payable at the rate of 8.5%
per year. For the first five years, the Company may accrete and compound
dividends payable to the liquidation price instead of paying cash dividends, in
which case the dividend rate will increase to 9.5% after January 31, 2001, and
to 10.5% after January 31, 2002. The Series B Agreement requires dividends to be
paid in cash after July 31, 2004, at which time the dividend rate will revert
back to 8.5%. If the Company elects to accrue dividends on the Series B
Preferred Stock to the liquidation price for the first five years, and
thereafter pay all dividends in cash when due, the Series B Preferred Stock
would be convertible into 60.4% of the Company's common stock after the fifth
anniversary of its issuance.
The following pro forma financial information of the Company gives
effect to the Series B Preferred Stock sale as if the transaction had occurred
on July 27, 1998, with dividends on the Series B Preferred Stock accrued at an
effective rate of 9.7%, assuming that the Company will elect to accrue dividends
for the first five years:
<TABLE>
<CAPTION>
Year Ended
July 25, 1999 Transaction Pro Forma
The Company Adjustments As Adjusted
---------------- -------------- --------------
(in thousands of dollars except per share amounts)
<S> <C> <C> <C>
Depreciation and amortization $ 44,202 $529 $ 44,731
---------------- -------------- --------------
Loss from operations (3,625) (529) (4,154)
Interest expense 39,382 (10,915) 28,467
Provision for (benefit from) income
taxes (15,057) 4,050 (11,007)
---------------- -------------- --------------
Income (loss) before accretion of
discount and dividends accrued on preferred
stock (27,950) 6,335 (21,615)
Accretion of discount and dividends
accrued on mandatorily redeemable preferred
stock 4,372 16,386 20,758
---------------- -------------- --------------
Net loss available to common
shareholders $ (32,322) $ (10,051) $ (42,373)
================ ============== ==============
Basic and diluted earnings per share:
Net loss available to common
shareholders $ (1.07) $ (1.40)
================ ==============
</TABLE>
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the transaction occurred on the date indicated.
As part of the Series B Agreement, the Company also agreed to move its
state of incorporation from Maine to Delaware by merging the Company into a
wholly owned Delaware subsidiary and amending its articles of incorporation (the
"Delaware Reincorporation"). Under the Delaware Reincorporation, which took
place on October 12, 1999, the Company was merged into a newly formed Delaware
subsidiary (ASC Delaware) that survived the merger and that has a capital
structure identical to the Company's prior to the merger. In connection with the
merger, the certificate of incorporation of the new company provides that all
members of the new company's board of directors be elected annually in contrast
to the Company's previous election process in which approximately one-third of
the Board of Directors was elected for three year terms every three years.
On October 7, 1999, a special meeting of stockholders was held to vote on
(1) the approval of the issuance of 46,124,575 shares of the Company's common
stock, which would be issued upon conversion of the Series B Preferred Stock if
the Company elects to accrete dividends rather than pay them in cash for the
first five years, and (2) the approval of the Delaware Reincorporation. Both of
these proposals were approved by a majority of the shareholders at the special
meeting.
F-27
<PAGE>
Internal Revenue Code Section 382 Change of Control; Loss of Tax Benefits
The Company anticipates that the issuance of the Series B Preferred Stock
to Oak Hill will result in an "ownership change" for federal and state tax
purposes. An ownership change will cause certain limitations to apply to the
Company's and its subsidiaries' use of their net operating loss carryforward and
other tax carryforward attributes (collectively, "tax attributes"). Determining
the amount of such limitation requires a number of factual determinations and
the application of recently issued, complex Internal Revenue Service
Regulations. The Company is currently evaluating the change in control and
effect this will have on the tax attributes. If all tax attributes are lost due
to the change in control the Company will be required to write off approximately
$50 million in the first quarter of fiscal 2000.
Related Transactions
In connection with Series B Preferred Stock sale, the Company obtained
consents (1) from lenders and creditors of the Company stating that the Series B
Preferred Stock sale would not constitute a "change of control" under the
relevant loan agreements, (2) from the holders of the 10.5% Senior Preferred
Stock of the Company approving the issuance of the Series B Preferred Stock and
the terms of such stock and (3) from noteholders under the Indenture relating to
the 12% Senior Subordinated Notes due 2006 of the Company's subsidiary, ASC East
(the "Indenture"), approving the "rollup and restructuring" transaction
(described below) and certain other amendments to the Indenture.
Rollup and Restructuring Transaction
In order to comply with the conditions to closing the Series B Preferred
Stock sale, certain amendments were made to the Indenture. One of the amendments
permitted the consummation of a merger of two of the Company's wholly owned
subsidiaries, ASC East and ASC West, with and into ASC. On July 20, 1999 ASC
East issued a consent solicitation to the holders of the Notes, the purpose of
which was to approve a merger of ASC with ASC East and ASC West. This merger was
approved on August 1, 1999 and a payment of approximately $1.5 million was paid
to the holders of the Notes. The Company, ASC East and ASC West were merged on
October 6, 1999. In connection with the merger, ASC assumed all liabilities of
ASC East and ASC West and became the primary obligor under certain credit
facilities and under the Indenture. In addition, the then current subsidiaries
of ASC and ASC West, as well as ASC Utah, also became additional guarantors
under the Indenture. As a result of the merger: (a) ASC East is no longer
required to file annual reports and make other filings under the regulations of
the Securities Exchange Act of 1934 ("Securities Act"); (b) the Company's
capital structure has been simplified, which is expected to make it easier to
raise capital in the future; and (c) the capital and assets of ASC East and its
subsidiaries are available to satisfy the obligations of ASC West and its
subsidiaries.
As a result of the additional guarantee given by certain subsidiaries of
the Company, the noteholders under the Indenture will have priority over the
equity holders of the Company with respect to any claims made on the assets of
those subsidiaries until the obligations under the Indenture have been
satisfied.
The Notes are fully and unconditionally guaranteed by the Company and all
its subsidiaries with the exception of Ski Insurance, Killington West, Ltd.,
Mountain Water Company, Uplands Water Company, Club Sugarbush, Inc., Walton Pond
Apartments, Inc. and Deerfield Operating Company. The guarantor subsidiaries are
wholly-owned subsidiaries of the Company and the guarantees are full,
unconditional, and joint and several. Previous ASC East Securities Act filings
included condensed consolidating financial information that listed separately
the issuer (ASC East), the guarantor subsidiaries under the Notes, and the
non-guarantor subsidiaries. Because the Notes are now guaranteed by subsidiaries
formerly owned by ASC West in addition to the original ASC East guarantor
subsidiaries, the non-guarantor subsidiaries subsequent to the merger are de
F-28
<PAGE>
minimis as compared to the Company, and as such, the condensed consolidating
financial information relating to the guarantor subsidiaries of the Notes are
not included in the footnotes to the financial statements of the Company. The
total assets of the non-guarantor subsidiaries represented 0.5% of the total
assets of the Company as of July 25, 1999. Pre-tax income of the non-guarantor
subsidiaries represented 1.75% of total pre-tax income of the Company for the
year ended July 25, 1999, and net income available to common shareholders of the
non-guarantor subsidiaries represented 1.33% of total net income available to
common shareholders of the Company for the year ended July 25, 1999.
Restructuring of Senior Credit Facility
In connection with the Series B Preferred Stock sale, the Company entered
into a Fourth Amendment to the Senior Credit Facility, dated August 6, 1999
("the Amended Senior Credit Facility") to (1) change the definition of "change
in control" so that it would not be triggered by the issuance of the Series B
Preferred Stock; (2) allow the issuance of the Series B Preferred Stock; (3)
allow the consummation of the rollup transaction described above; (4) allow the
investment of approximately $30 million into the Company's principal real estate
development subsidiary; (5) allow the purchase of certain assets from entities
controlled by the Principal Shareholder; (6) allow the amendment of the
Indenture described above; and (7) allow for $23.1 million in resort capital
expenditures during fiscal year 2000 plus up to an additional $30 million for
construction of a gondola at the Heavenly resort, which the Company currently
plans to construct during fiscal years 2000 and 2001.
Pursuant to the Fourth Amendment, the Senior Credit Facility was restated
and consolidated from two sub-facilities totaling $215 million to a single
facility totaling $165 million. The Amended Senior Credit Facility consists of a
revolving credit facility in the amount of $100 million and a term facility in
the amount of $65 million. The revolving portion of the Amended Senior Credit
Facility matures on May 31 2004, and the term portion matures on May 31, 2006
F-29
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ASC DELAWARE, INC.
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST: The name of the corporation is ASC Delaware, Inc.
SECOND: The address of the corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: (1) The total number of shares of stock which the corporation
shall have authority to issue is 115,500,000, divided into 100,000,000 shares of
Common Stock, par value of $.01 per share, 15,000,000 shares of Class A Common
Stock, par value of $.01 per share, and 500,000 shares of Serial Preferred
Stock, par value of $.01 per share.
(2) Class A Common Stock.
(a) The Class A Common Stock shall consist of 15,000,000 shares, each
having a par value of $.01.
(b) (i) The holder of any shares of Class A Common Stock shall
have the right to convert such shares, in whole or in part,
at any time and from time to time, into fully paid and
non-assessable shares of Common Stock on a share for share
basis; provided, however, that such conversion rate shall be
subject to adjustment as set forth in paragraph 2(b)(iv)
below.
(ii) Any share of Class A Common Stock shall, automatically
and without further action by the corporation or the holder
thereof, upon the transfer of such share to any person or
entity who is not Leslie B. Otten or an Affiliate of Leslie
B. Otten, be converted on a share for share basis into a
fully paid and non-assessable share of Common Stock;
provided, however, that such conversion rate shall be
subject to adjustment as set forth in paragraph 2(b)(iv)
below. "Affiliate" shall mean, for purposes of this
paragraph 2, (A) the spouse or children or grandchildren (in
each case, natural or adopted) of Leslie B. Otten or any
Affiliate, (B) any trust for the sole benefit of Leslie B.
Otten or any Affiliate, (C) any charitable trust the grantor
of which is Leslie B. Otten or any Affiliate, (D) any
corporation or other entity in which Leslie B. Otten or
Affiliates collectively own at least 80% of the equity
interest, or (E) the heirs, executors, administrators or
personal representatives of Leslie B. Otten or any Affiliate
upon the death of Leslie B. Otten or such Affiliate or upon
the incompetency or disability of Leslie B. Otten or such
Affiliate for purposes of the protection and management of
his or her assets.
(iii) In the event that at any time the number of shares of
Class A Common Stock outstanding is less than 20% of the
aggregate number of all shares of Class A Common Stock and
Common Stock then issued and outstanding, then all shares of
Class A Common Stock shall automatically and without further
action by the corporation or any holder thereof, be
converted on a share for share basis into fully paid and
non-assessable shares of Common Stock; provided, however,
that such conversion rate shall be subject to adjustment as
set forth in paragraph 2(b)(iv) below.
(iv) (A) If the corporation shall (1) subdivide the
outstanding shares of Common Stock into a larger number of
shares, (2) combine the outstanding shares of Common Stock
into a smaller number of shares, or (3) issue by
reclassification of the Common Stock any shares of capital
stock of the corporation, then the conversion rate in effect
immediately prior thereto shall be adjusted so that the
holder of any share of Class A Common Stock surrendered for
conversion or subject to automatic conversion shall be
entitled to receive the number of shares of the corporation
which he would have owned or have been entitled to receive
after the happening of any of the events described above had
such shares of Class A Common Stock been converted
immediately prior to the happening of such event.
(B) In case of any capital reorganization of the
corporation, or in case of the consolidation or merger of
the corporation with or into another corporation, or in case
of the sale, transfer or other disposition of all or
substantially all of the property, assets or business of the
corporation as a result of which sale, transfer or other
disposition property other than cash shall be payable or
distributable to the holders of the Common Stock, each share
of Class A Common Stock shall be convertible into the number
and class of shares or other securities or property of the
corporation, or of the corporation resulting from such
consolidation or merger or to which such sale, transfer or
other disposition shall have been made, to which the Common
Stock otherwise issuable upon conversion of such share of
Class A Common Stock would have been entitled upon such
reorganization, consolidation, merger, or sale, transfer or
other disposition if outstanding at the time thereof; and in
any such case appropriate adjustment, as determined by the
Board of Directors of the corporation, shall be made in the
application of the provisions set forth in this paragraph
2(b) with respect to the conversion rights thereafter of the
holders of the Class A Common Stock, to the end that such
provisions shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares or securities
or other property thereafter issuable or deliverable upon
the conversion of Class A Common Stock. Proper provision
shall be made as a part of the terms of any such
consolidation, merger or sale, transfer or other disposition
whereby the conversion rights of the holders of Class A
Common Stock shall be protected and preserved in accordance
with the provisions of this paragraph 2(b)(iv)(B). The
provisions of this paragraph 2(b)(iv)(B) shall similarly
apply to successive capital reorganizations, consolidations,
mergers, sales, transfers or other dispositions of property
as aforesaid.
(C) Whenever the conversion rate shall be adjusted as
provided in paragraph 2(b)(iv)(A), the corporation, as soon
as practicable and in no event later than ten full business
days thereafter, shall file with the transfer agent for the
Class A Common Stock a statement, signed by the President,
any Vice President or the Treasurer of the corporation,
stating the adjusted conversion rate determined as provided
in said paragraph 2(b)(iv)(A) and setting forth in
reasonable detail the facts requiring such adjustment, and
shall promptly mail a copy of such statement to each holder
of Class A Common Stock at his address then appearing on the
record books of the corporation. The transfer agent shall be
fully protected in relying on such statement and shall be
under no duty to inquire into the truth or accuracy thereof.
If any question shall at any time arise with respect to the
adjusted conversion rate, such question shall be determined
by a firm of independent public accountants selected by the
corporation, who may be the corporation's auditors, and such
determination shall be binding upon the corporation and the
holders of the Common Stock and the Class A Common Stock.
(D) If the corporation shall propose to effect any
reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or
combination of outstanding Common Stock), or to effect any
capital reorganization, or shall propose to consolidate with
or merge into another corporation, or to sell, transfer or
otherwise dispose of all or substantially all of its
property, assets or business, or the corporation shall
propose to liquidate, dissolve or wind up, then, in each
such case, the corporation shall file with the transfer
agent for the Class A Common Stock and shall mail to the
holders of record of the Class A Common Stock at their
respective addresses then appearing on the record books of
the corporation notice of such proposed action, such notice
to be filed and mailed at least 30 days prior to the record
date for the purpose of determining holders of the Common
Stock entitled to vote with respect to such action or, if no
record date is taken for any such purpose, the date of the
taking of such proposed action. Such notice shall specify
the date on which such reclassification, reorganization,
consolidation, merger, liquidation, dissolution or
winding-up shall take place, as the case may be, and the
date of participation therein by the holders of Common Stock
if any such date is to be fixed. Such notice shall set forth
such facts with respect thereto as shall be reasonably
necessary to inform the holders of such shares as to the
effect of such action upon their conversion rights. Failure
to file any certificate or notice or to mail any notice, or
any defect in any certificate or notice, pursuant to this
paragraph 2(b)(iv)(D), shall not affect the legality or
validity of any adjustment, dividend, distribution or right
referred to herein. This paragraph 2(b)(iv)(D) shall not
impair any voting rights the holders of Class A Common Stock
may have with respect to any transaction referred to herein.
(E) (1) Any holder of shares of Class A Common Stock
desiring to convert the same into Common Stock or whose
shares of Class A Common Stock are automatically converted
into shares of Common Stock as provided in this paragraph
2(b) shall surrender the certificate or certificates for
such shares of Class A Common Stock at the office of the
transfer agent therefor or at such other offices or agencies
of the corporation, if any, as the Board of Directors may
determine, which certificate or certificates, if the
corporation shall so request, shall be duly endorsed or
assigned to the corporation or in blank, together (in the
case of a conversion at the option of the holder thereof)
with a written request for conversion, and accompanied by
funds in the amount of any tax or taxes payable in respect
of any transfer involved in the issue and delivery of
certificates for shares of Common Stock in a name other than
that of the record holder of the shares of Class A Common
Stock so surrendered for conversion.
(2) The corporation will as soon as
practicable after such surrender for
conversion of certificates for shares of
Class A Common Stock, accompanied by the
written request therefor if prescribed
above, issue and deliver at the office at
which such certificates for shares of
Class A Common Stock shall have been
surrendered to the person for whose
account such shares of Class A Common
Stock were so surrendered, or to his
nominee or nominees, certificates for the
number of whole shares of Common Stock to
which he shall be entitled as aforesaid,
together with an adjustment in cash for
any fraction of a share as hereinafter
provided, if not evenly convertible. Such
conversion shall be deemed to have been
made as of the date of such surrender of
the certificates for shares of Class A
Common Stock to be converted; and the
person or persons entitled to receive the
shares of Common Stock issuable upon the
conversion of such shares of Class A
Common Stock shall be treated for all
purposes as the record holders of such
Common Stock on such date. However, the
corporation shall not be required to
convert, and no surrender of shares of
Class A Common Stock shall be effective
for that purpose, while the stock transfer
books of the corporation are closed for
any purpose; but the surrender of shares
of Class A Common Stock for conversion
during any period while such books are so
closed shall become effective for
conversion immediately upon the reopening
of such books, at the rate in effect at
the date of such surrender.
(F) The corporation shall not be required to issue
fractional shares of Common Stock or scrip upon conversion
of shares of Class A Common Stock. As to any final fraction
of a share of Common Stock which the same record holder of
one or more shares of Class A Common Stock would otherwise
be entitled to upon conversion of shares of Class A Common
Stock in the same transaction, the corporation shall pay a
cash adjustment in respect of such final fraction in an
amount equal to the same fraction, if the Common Stock is
listed or admitted to trading on a securities exchange or
national quotation system, of the last sales price (or bid
price if there were no sales) per share on such securities
exchange or national quotation system on the business date
which next precedes the date of conversion or, if such
Common Stock is not so listed, of the market price per share
(as determined in a manner prescribed by the Board of
Directors of the corporation) at the close of business on
the business day which next precedes the date of conversion.
(G) The corporation will pay any documentary stamp
taxes attributable to the initial issuance of shares of
Common Stock upon conversion of any shares of Class A Common
Stock pursuant hereto, provided, however, that the
corporation shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in
the issue or delivery of any certificates for shares of
Common Stock in a name other than that of the registered
holder of shares of Class A Common Stock in respect of which
such shares of Common Stock are issued.
(H) The corporation shall at all times reserve and keep
available, out of its treasury stock or authorized and
unissued stock, or both, solely for the purpose of effecting
the conversion of the shares of Class A Common Stock, such
number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all shares of
Class A Common Stock from time to time outstanding. The
corporation shall at all times take any corporate action
which may, in the opinion of its counsel, be necessary in
order that the corporation may validly and legally issue
fully paid and nonassessable shares of Common Stock upon
conversion of shares of Class A Common Stock.
(3) Voting Rights.
(a) Subject to paragraph 3(c) below and to the provisions of the
Delaware General Corporation Law (or its successor) requiring a
separate class vote, at each meeting of the stockholders of the
corporation, each holder of Class A Common Stock and each holder
of Common Stock shall be entitled to one vote for each share
held, and such shares shall vote together as a single class.
(b) The holders of Serial Preferred Stock shall have such voting
rights as are set forth elsewhere in this Certificate of
Incorporation (with respect to the 10.5% Repriced Convertible
Exchangeable Preferred Stock and the 8.50% Series B Convertible
Participating Preferred Stock) and, with respect to any
additional series of Serial Preferred Stock, such voting rights
may be fixed and determined by the Board of Directors for the
particular series.
(c) (i) Subject to any rights of holders of Serial Preferred Stock to
elect additional directors, the holders of the Class A Common
Stock shall have the right, voting as a separate class, to elect
the smallest number of directors sufficient to constitute
two-thirds (2/3) in number of such full Board of Directors, and
the directors so elected shall be known as Class A directors.
Notwithstanding the foregoing, if at any time there are fewer
than nine (9) directors, the holders of the Class A Common Stock
shall have the right, voting as a separate class, to elect the
largest number of directors sufficient to constitute not more
than two-thirds (2/3) in number of such full Board of Directors,
and the directors so elected shall be known as the Class A
directors. Subject to any rights of holders of Serial Preferred
Stock to elect additional directors, the holders of the Common
Stock shall have the right, voting as a separate class, to elect
the remaining directors of the corporation. By way of
illustration, if the corporation has ten (10) directors, the
holders of the Class A Common Stock shall have the right to elect
seven (7) directors, and the holders of the Common Stock shall
have the right to elect three (3) directors. If the holders of
Serial Preferred Stock become entitled to elect two (2)
additional directors, the holders of Common Stock and the holders
of Class A Common Stock shall have no voting rights with respect
to the election of such additional directors. Therefore, if the
corporation has ten (10) directors and the size of the board is
increased to twelve (12) to add directors elected by the holders
of Serial Preferred Stock, then the holders of the Class A Common
Stock shall have the right to elect seven (7) directors, the
holders of the Common Stock shall have the right to elect three
(3) directors, and such holders of Serial Preferred Stock shall
have the right to elect two (2) directors. By way of further
illustration, if the corporation has seven (7) directors, the
holders of the Class A Common Stock shall have the right to elect
four (4) directors, and the holders of the Common Stock shall
have the right to elect three (3) directors. Subject to any
rights of holders of Serial Preferred Stock to elect additional
directors, in the event that no shares of Class A Common Stock
remain outstanding, the holders of the Common Stock shall have
the right to elect all of the directors of the corporation.
(ii) Subject to any rights of holders of Serial Preferred Stock
to elect additional directors, at any time following the
merger of American Skiing Company, a Maine corporation, with
and into this corporation, the Board of Directors of the
corporation shall consist of not less than seven (7) or more
than fifteen (15) persons. The exact number of directors
within the minimum and maximum limitations specified in the
preceding sentence shall be fixed from time to time by the
Board of Directors pursuant to a resolution adopted by a
majority of the entire Board of Directors, subject to the
other applicable provisions of this Certificate of
Incorporation, but no decrease in the number of directors
constituting the Board of Directors shall shorten the term
of any incumbent director. Except as otherwise provided in
this Certificate of Incorporation with respect to directors
elected by the holders of Serial Preferred Stock, any
vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting
by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office
until the next annual meeting of shareholders. At such
annual meeting, such directors shall be voted upon by the
holders of Class A Common Stock and the holders of Common
Stock as provided in this paragraph 3(c), or by the holders
of Serial Preferred Stock to the extent provided elsewhere
in this Certificate of Incorporation.
(d) There shall be no cumulative voting rights, and no holders of
stock of the corporation shall have pre-emptive rights to
subscribe for any shares of any class of stock of the corporation
whether now or hereafter authorized.
(4) Advance Notice of Business to be Conducted at Annual Shareholder
Meetings.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual meeting by a shareholder, the item of business must, under applicable
laws and regulations, be proper for consideration by the shareholders, and the
shareholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation, not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the Bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this paragraph 4. The Chairman of
the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this paragraph 4, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
(5) Dividends.
The holders of Class A Common Stock and Common Stock, without regard to
which class of shares they hold, shall be entitled to such dividends on a pro
rata basis as may be declared from time to time by the Board of Directors,
subject to the other provisions of this Certificate of Incorporation.
(6) Liquidation.
In the event of the liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, the holders of Class A Common
Stock and Common Stock, without regard to which class of shares they hold, shall
be entitled to participate on a pro rata basis in the net assets of the
corporation remaining after distributions to the holders of Serial Preferred
Stock.
(7) Serial Preferred Stock.
The Board of Directors is authorized, subject to limitations prescribed
by law and the other provisions of this Article FOURTH, to provide for the
issuance of the shares of Serial Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii)Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board
of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(vii)The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up
of the corporation, and the relative rights of priority, if any,
of payment of shares of that series;
(viii) Any other relative rights, preferences and limitations of that
series.
Two series of Serial Preferred Stock are hereby designated as (x) the
10.5% Repriced Convertible Exchangeable Preferred Stock (herein the
"Exchangeable Preferred Stock"), having the powers, preferences and rights set
forth in Exhibit A attached hereto and made a part hereof, and (y) the 8.50%
Series B Convertible Participating Preferred Stock (herein the "Convertible
Preferred Stock"), having the powers, preferences and rights set forth in
Exhibit B attached hereto and made a part hereof.
FIFTH: The incorporator of the corporation is Foster A. Stewart, Jr.,
whose mailing address is c/o American Skiing Company, Sunday River Road, Bethel,
Maine 04217.
SIXTH: Unless and except to the extent that the by-laws of the
corporation shall so require, the election of directors of the corporation need
not be by written ballot.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors of the corporation
is expressly authorized to make, alter and repeal the by-laws of the
corporation, subject to the power of the stockholders of the corporation to
alter or repeal any by-law whether adopted by them or otherwise.
EIGHTH: The corporation reserves the right at any time, and from time
to time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
article.
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is his act and deed on this 4th day of October,
1999.
/s/ Foster A. Stewart, Jr.
--------------------------------
Foster A. Stewart, Jr.
Incorporator
<PAGE>
EXHIBIT A
Section 1. Designation and Amount. There is hereby created and
authorized a series of Serial Preferred Stock, the designation of which shall be
the 10.5% Repriced Convertible Exchangeable Preferred Stock (herein the
"Exchangeable Preferred Stock"). The number of issuable shares of Exchangeable
Preferred Stock shall be 40,000.
Section 2. Rank. All shares of Exchangeable Preferred Stock,
both as to payment of dividends and to distribution of assets upon liquidation,
dissolution or winding up of the corporation, whether voluntary or involuntary,
shall rank prior to all of the corporation's now or hereafter issued preferred
stock, and senior to all of the corporation's now or hereafter issued Common
Stock or any other common stock of any class of the corporation. The term
"Common Stock" shall mean the Common Stock, par value $.01 per share, and the
Class A Common Stock, par value $.01 per share, of the corporation as the same
exists at the date hereof or as such stock may be constituted from time to time.
Section 3. Dividends and Certain Restrictions. The holders of
the Exchangeable Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors of the corporation out of funds of the
corporation legally available therefor, dividends at a rate per share of 10.5%
per annum, and no more, which shall be fully cumulative, shall accrue (whether
or not declared or paid), shall compound quarterly, and shall be payable in cash
on November 12, 2002, or, at the option of the Company, in whole or in part on
any January 1, April 1, July 1 or October 1 (except that if such date is a
Saturday, Sunday or legal holiday, then such dividend will be payable on the
next day that is not a Saturday, Sunday or legal holiday) to holders of record
as they appear on the stock transfer books of the corporation on such record
date, not more than 60 nor less than 10 days preceding the payment date for such
dividend, as is fixed by the Board of Directors. For purposes hereof, the term
"legal holiday" shall mean any day on which banking institutions are obligated
or authorized to close in New York, New York or in Boston, Massachusetts.
On such dividend payment date all dividends which shall have
accrued on each share of Exchangeable Preferred Stock outstanding on such
dividend payment date shall accumulate and be deemed to become "due". If such
dividends are not fully paid on such dividend payment date, such accrued
dividends shall be added (solely for the purpose of calculating dividends
payable on the Exchangeable Preferred Stock) to the Liquidation Preference of
the Exchangeable Preferred Stock effective at the beginning of the quarterly
dividend compounding period next succeeding the dividend payment date as to
which such dividends were not paid and shall thereafter accrue additional
dividends in respect thereof until such unpaid dividends have been paid in full.
Dividends paid on shares of Exchangeable Preferred Stock in an amount less than
the total amount of such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
Unless all accrued and unpaid dividends on the Exchangeable
Preferred Stock have been paid in cash, or declared and sums set aside for the
payment thereof, dividends (other than in Common Stock or any other stock of the
corporation ranking junior to the Exchangeable Preferred Stock as to dividends
and as to liquidation rights) may not be paid, or declared and set aside for
payment, and other distributions may not be made upon the Common Stock or on any
other stock of the corporation ranking junior to the Exchangeable Preferred
Stock as to dividends. So long as any shares of Exchangeable Preferred Stock are
outstanding, the Common Stock (or any rights, options or warrants to purchase
Common Stock), any other stock or other equity interests (or rights, options or
warrants to purchase such other stock or other equity interests) of the
corporation ranking junior to the Exchangeable Preferred Stock as to dividends
or upon liquidation may not be redeemed, purchased or otherwise acquired for any
consideration by the corporation.
The corporation shall not permit any subsidiary of the
corporation to purchase or otherwise acquire for consideration any shares of
stock (or rights, options or warrants to purchase shares of stock or other
equity interests) of the corporation unless the corporation could, under this
Section 3, purchase or otherwise acquire such shares (or rights, options or
warrants to purchase shares of stock) or units at such time and in such manner.
Any reference to "distribution" contained in this Section 3
shall not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the corporation, whether voluntary or
involuntary.
Section 4. Liquidation Preference. In the event of a
liquidation, dissolution or winding up of the corporation, whether voluntary or
involuntary, the holders of Exchangeable Preferred Stock shall be entitled to
receive out of the assets of the corporation, whether such assets are stated
capital or surplus of any nature, an amount equal to the dividends accrued and
unpaid thereon to the date of final distribution to such holders, whether or not
declared, without interest, and a sum equal to $1,000 per share, and no more
(such sum, the "Liquidation Preference"), before any payment shall be made or
any assets distributed to the holders of Common Stock or any other class or
series of the corporation's capital stock ranking junior as to liquidation
rights to the Exchangeable Preferred Stock; provided, however, that such rights
shall accrue to the holders of Exchangeable Preferred Stock only in the event
that the corporation's payments with respect to the liquidation preferences of
the holders of capital stock of the corporation ranking senior as to liquidation
rights to the Exchangeable Preferred Stock (the "Senior Liquidation Stock") are
fully met. If the assets of the corporation available for distribution after the
liquidation preferences of the Senior Liquidation Stock are fully met are not
sufficient to pay an amount equal to the Liquidation Preference to the holders
of outstanding shares of Exchangeable Preferred Stock and the liquidation
preference to the holders of any other series of the corporation's capital stock
which may hereafter be created in accordance with Section 6(c) hereof having
liquidation rights on a parity with the shares of Exchangeable Preferred Stock
(the "Parity Liquidation Stock"), then the assets of the corporation shall be
distributed ratably among the holders of the Exchangeable Preferred Stock and
the Parity Liquidation Stock in proportion to the respective preferential
amounts to which each is entitled (but only to the extent of such preferential
amounts). Neither a consolidation, merger or other business combination of the
corporation with or into another corporation or other entity nor a sale or
transfer of all or part of the corporation's assets for cash, securities or
other property shall be considered a liquidation, dissolution or winding up of
the corporation for purposes of this Section 4 (unless in connection therewith
the liquidation of the corporation is specifically approved).
The holder of any shares of Exchangeable Preferred Stock shall
not be entitled to receive any payment owed for such shares under this Section 4
until such holder shall cause to be delivered to the corporation (i) the
certificate(s) representing such shares of Exchangeable Preferred Stock and (ii)
transfer instrument(s) satisfactory to the corporation and sufficient to
transfer such shares of Exchangeable Preferred Stock to the corporation free of
any adverse interest. As in the case of the Redemption Price, no interest shall
accrue on any payment upon liquidation after the due date thereof.
Section 5. Redemption. On November 12, 2002 (the "Mandatory
Redemption Date"), the corporation shall redeem, out of funds legally available
therefor, all shares of the Exchangeable Preferred Stock then outstanding at a
redemption price (the "Redemption Price") equal to the Liquidation Preference
per share, together with accrued and unpaid dividends to the redemption date.
If, on the Mandatory Redemption Date, funds are not legally available to the
corporation for redemption of the shares of Exchangeable Preferred Stock, the
corporation shall redeem on such date, at the Redemption Price, that number of
shares of Exchangeable Preferred Stock which it can lawfully redeem, and from
time to time thereafter, as soon as funds are legally available, the corporation
shall redeem at the Redemption Price shares of Exchangeable Preferred Stock
until the corporation has redeemed the shares of Exchangeable Preferred Stock in
full.
The corporation, at its option, may at any time, redeem, out
of funds legally available therefor, in whole or from time to time in part, the
Exchangeable Preferred Stock on any date set by the Board of Directors, for cash
at the Redemption Price, together with accrued and unpaid dividends to the
redemption date (subject to the right of the holder of record of shares of
Exchangeable Preferred Stock on a record date for the payment of a dividend on
the Exchangeable Preferred Stock to receive the dividend due on such shares of
Exchangeable Preferred Stock on the corresponding dividend payment date, if such
dividend payment date is prior to the date set for redemption); provided that
the Exchangeable Preferred Stock may not be so redeemed prior to the Mandatory
Redemption Date unless the closing price of the Common Stock for 45 consecutive
trading days ending no more than 30 calendar days prior to the date notice of
redemption is first mailed is at least 140% of the Adjusted IPO Price then in
effect. The Adjusted IPO Price means $17.10 (as adjusted for the events
specified in Section 11(3)(a) hereof).
In case of the redemption of less than all of the then
outstanding Exchangeable Preferred Stock, the corporation shall select the
shares of Exchangeable Preferred Stock to be redeemed in accordance with any
method permitted by the national securities exchange on which the Exchangeable
Preferred Stock is then listed, or if not so listed, the corporation shall
designate by lot, or in such other manner as the Board of Directors may
determine, the shares to be redeemed, or shall effect such redemption pro rata.
Notwithstanding the foregoing, the corporation shall not redeem less than all of
the Exchangeable Preferred Stock at any time outstanding until all dividends
accrued to such payment date upon all Exchangeable Preferred Stock then
outstanding shall have been paid.
Not more than 120 nor less than 90 days prior to the
redemption date, notice by first class mail, postage prepaid, shall be given to
each holder of record of the Exchangeable Preferred Stock to be redeemed, at
such holder's address as it shall appear upon the stock transfer books of the
corporation. Each such notice of redemption shall specify the date fixed for
redemption, the Redemption Price, the then current Conversion Price, the place
or places of payment and conversion and that payment or conversion will be made
upon presentation and surrender of the certificates) evidencing the shares of
Exchangeable Preferred Stock to be redeemed or converted, and that the
Exchangeable Preferred Stock may be converted at any time before the close of
business on the redemption date.
Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Exchangeable Preferred Stock receives such notice; and failure to give such
notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Exchangeable Preferred Stock. On or after
the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less than
all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued without cost to the holder thereof representing
the unredeemed shares. If such notice of redemption shall have been so mailed
and if, on or prior to the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the corporation,
separate and apart from its other funds, in trust for the account of the holders
of the shares so to be redeemed (as to be and continue to be available
therefor), then on and after the redemption date, notwithstanding that any
certificate for shares of the Exchangeable Preferred Stock so called for
redemption shall not have been surrendered for cancellation, all shares of the
Exchangeable Preferred Stock with respect to which such notice shall have been
mailed and such funds shall have been set aside shall be deemed to be no longer
outstanding and all rights with respect to such shares of the Exchangeable
Preferred Stock so called for redemption shall forthwith cease and terminate,
except the right of the holders thereof to receive out of the funds so set aside
in trust the amount payable on redemption thereof (including an amount equal to
accrued and unpaid dividends to the redemption date) without interest thereon.
The holder of any shares of Exchangeable Preferred Stock
redeemed upon any exercise of the corporation's redemption right shall not be
entitled to receive payment of the Redemption Price for such shares until such
holder shall cause to be delivered to the place specified in the notice given
with respect to such redemption (i) the certificate(s) representing such shares
of Exchangeable Preferred Stock redeemed and (ii) transfer instrument(s)
satisfactory to the corporation and sufficient to transfer such shares of
Exchangeable Preferred Stock to the corporation free of any adverse interest, No
interest shall accrue on the Redemption Price of any share of Exchangeable
Preferred Interests after its redemption date.
Section 6. Voting Rights.
(a) General. The holders of the shares of Exchangeable
Preferred Stock shall vote together with the holders of the Common Stock (and
any other class of equity securities which may similarly vote with the holders
of the Common Stock as a single class) upon all matters upon which stockholders
are entitled to vote and shall be entitled to a number of votes per share of
Exchangeable Preferred Stock equal to the number of shares of Common Stock into
which the shares of the Exchangeable Preferred Stock are convertible on the
record date of the determination of stockholders entitled to notice of and to
vote at such meeting; provided, however, that, other than as provided in Section
6(b) below, the holders of Exchangeable Preferred Stock shall have no voting
rights with respect to the election of directors, as to which the holders of the
Common Stock shall (subject to Section 6(b) below) have exclusive voting rights
as provided elsewhere in this Certificate of Incorporation. In addition, the
holders of Exchangeable Preferred Stock will have all voting rights required by
law, and shall also have all special voting rights provided below. Any shares of
Exchangeable Preferred Stock held by the corporation or any entity controlled by
the corporation shall not have voting rights hereunder and shall not be counted
in determining the presence of a quorum.
(b) Default Voting Rights.
(i) Right To Elect Directors. Whenever dividends on
the Exchangeable Preferred Stock shall be in arrears, or the Redemption
Price (whether mandatory or optional) has not been paid in full when
due, or an Event of Default (as hereinafter defined), has occurred (A)
the number of members of the Board of Directors of the corporation
shall be increased by two, effective as of the time of election of such
directors as hereinafter provided, and (B) the holders of the
Exchangeable Preferred Stock (voting separately as a class) will have
the exclusive right to vote for and elect such two additional directors
of the corporation at any meeting of stockholders of the corporation at
which directors are to be elected held during the period such dividends
remain in arrears or such redemption price has not been paid in full.
The right of the holders of the Exchangeable Preferred Stock to vote
for such two additional directors shall remain vested until (x) payment
in full of all accrued and unpaid dividends on the Exchangeable
Preferred Stock has been made, or (y) payment in full of any Redemption
Price (whether mandatory or optional) which has become due, or (z) the
date on which such conversion is honored or such Event of Default has
ceased to be continuing, at which time such rights shall terminate
(subject in each case to revesting). An "Event of Default" shall occur
if: (i) a default shall occur under any bond, debenture, note or other
evidence of Indebtedness (as defined in the Securities Purchase
Agreement (the "Agreement"), dated July 2, 1997, between American
Skiing Company, a Maine corporation, and Madeleine L.L.C.), for money
borrowed by the corporation or any Restricted Subsidiary (as defined in
the Agreement), which default shall have resulted in such Indebtedness
becoming or being declared payable prior to the date on which it would
otherwise have been due and payable (provided that the aggregate amount
of such Indebtedness subject to acceleration exceeds $5 million),
without such Indebtedness having been discharged, such acceleration
having been rescinded or annulled or there having been deposited in
trust a sum of money sufficient to discharge in full such Indebtedness;
or (ii) the corporation or any of its Subsidiaries (as defined in the
Agreement) fails to pay any principal or interest when due under any
bond, debenture, note or other evidence of Indebtedness for money
borrowed (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument evidencing or governing such Indebtedness, has expired
(provided that the amount of such Indebtedness, and any interest or
premium thereon, exceeds $5 million).
(ii) Special Meeting. Whenever such right shall vest,
it may be exercised initially by the vote of the holders of a majority
of the shares of the Exchangeable Preferred Stock present and voting,
in person or by proxy, at a special meeting of holders of the
Exchangeable Preferred Stock or at the next annual meeting of
stockholders, or by written consent of the holders of record of a
majority of the outstanding shares of the Exchangeable Preferred Stock
without a meeting. Unless such action shall have been taken by written
consent as aforesaid, a special meeting of the holders of the
Exchangeable Preferred Stock for the exercise of such right shall be
called by the Secretary of the corporation as promptly as possible in
compliance with applicable law and regulations, and in any event within
10 days after receipt of a written request signed by the holders of
record of at least 25% of the outstanding shares of the Exchangeable
Preferred Stock, subject to any applicable notice requirements imposed
by law or by any national securities exchange on which any Exchangeable
Preferred Stock is listed. Such meeting shall be held at the earliest
practicable date thereafter.
(iii) Term of Office of Directors. Any director who
shall have been elected by holders of the Exchangeable Preferred Stock
shall hold office for a term expiring (subject to the earlier payment
of all dividends and redemption payments (whether mandatory or
optional) in arrears on the Exchangeable Preferred Stock) at the next
annual meeting of stockholders and during such term may be removed at
any time, either for or without cause, by and only by, the affirmative
vote of the holders of record of a majority of the shares of the
Exchangeable Preferred Stock, voting as a single class, present and
voting, in person or by proxy, at a special meeting of such
stockholders called for such purpose, or by written consent without a
meeting of the holders of record of a majority of the outstanding
shares of the Exchangeable Preferred Stock, voting as a single class,
and any vacancy created by such removal may also be filled at such
meeting or by such written consent. A special meeting of the holders of
the shares of the Exchangeable Preferred Stock for the removal of a
director elected by the holders of the Exchangeable Preferred Stock and
the filling of the vacancy created thereby shall be called by the
Secretary of the corporation as promptly as possible and in any event
within 10 days after receipt of request therefor signed by the holders
of not less than 25% of the outstanding shares of the Exchangeable
Preferred Stock taken as a single class, subject to any applicable
notice requirements imposed by law or any national securities exchange
on which any Exchangeable Preferred Stock is listed. Such meeting shall
be held at the earliest practicable date thereafter.
(iv) Vacancies. Any vacancy caused by the death or
resignation of a director who shall have been elected in accordance
with this subparagraph (b) may be filled by the remaining director so
elected or, if not so filled, by a vote of holders of one-third of the
shares of the Exchangeable Preferred Stock present and voting as a
single class, in person or by proxy, at a meeting of such holders of
Exchangeable Preferred Stock called for such purpose, or by written
consent without a meeting of the holders of record of a majority of the
outstanding shares of the Exchangeable Preferred Stock as a single
class. Unless such vacancy shall have been filled by the remaining
director or by written consent as aforesaid, such meeting shall be
called by the Secretary of the corporation at the earliest practicable
date after such death or resignation, and in any event within 10 days
after receipt of a written request signed by the holders of record of
at least 25% of the outstanding shares of the Exchangeable Preferred
Stock taken as a single class.
(v) Stockholders' Right to Call Meeting. If any
meeting of the holders of the Exchangeable Preferred Stock required by
this subparagraph (b) to be called shall not have been called within 10
days after personal service of a written request therefor upon the
Secretary of the corporation or within 15 days after mailing the same
within the United States of America by registered mail addressed to the
Secretary of the corporation at its principal office, subject to any
applicable notice requirements imposed by law or any national
securities exchange on which any Exchangeable Preferred Stock is
listed, then the holders of record of at least 25% of the outstanding
shares of the Exchangeable Preferred Stock may designate in writing a
holder of a share of the Exchangeable Preferred Stock to call such
meeting at the expense of the corporation, and such meeting may be
called by such Person so designated upon the notice required for annual
meetings of stockholders or such shorter notice (but in no event
shorter than permitted by law or any national securities exchange on
which the Exchangeable Preferred Stock is listed) as may be acceptable
to the holders of a majority of the total number of shares of the
Exchangeable Preferred Stock. Any holder of a share of the Exchangeable
Preferred Stock so designated shall have access to the stock books of
the corporation relating solely to the Exchangeable Preferred Stock for
the purpose of causing such meeting to be called pursuant to these
provisions.
(vi) Quorum. At any meeting of the holders of the
Exchangeable Preferred Stock called in accordance with the provisions
of this subparagraph (b) for the election or removal of directors, the
presence in person or by proxy of the holders of one-third of the total
number of shares of the Exchangeable Preferred Stock as a single class
shall be required to constitute a quorum; in the absence of a quorum, a
majority of the holders present in person or by proxy shall have power
to adjourn the meeting from time to time without notice, other than
announcement at the meeting, until a quorum shall be present.
(c) Class Voting Rights. So long as shares of the Exchangeable
Preferred Stock are outstanding, the corporation shall not, directly or
indirectly or through merger or consolidation with any other person, without the
affirmative vote or consent of the holders of at least a majority of all
outstanding Exchangeable Preferred Stock, voting separately as a class, (i)
amend, alter or repeal (by merger, consolidation or otherwise) any provision of
the Certificate of Incorporation or the By-laws of the corporation, as amended,
or prior to an exchange date, the Indenture (as hereinafter defined) (except for
such amendments which can be made without the consent of the holders of the
debentures pursuant to the terms of the Indenture) so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of the
Exchangeable Preferred Stock or the rights of holders of the debentures (if
issued), (ii) increase the authorized number of shares of the Exchangeable
Preferred Stock, (iii) authorize or issue or increase the authorized amount of
any additional class or series of stock (including any series of Preferred
Stock), or any security convertible into stock of such class or series, ranking
on a parity with or senior to the Exchangeable Preferred Stock as to dividends
or as to rights upon liquidation, dissolution or winding up, or (iv) effect any
reclassification of the Exchangeable Preferred Stock. In connection with any
right to vote pursuant to this Section 6(c), each holder of Exchangeable
Preferred Stock will have one vote for each share held. A class vote on the part
of the Exchangeable Preferred Stock shall, without limitation, specifically not
be deemed to be required (except as otherwise required by law or resolution of
the corporation's Board of Directors) in connection with the authorization,
issuance or increase in the authorized amount of any shares of any other class
or series of stock that ranks junior to the Exchangeable Preferred Stock upon
liquidation, dissolution or winding up of the corporation; provided that so long
as any of the shares of Exchangeable Preferred Stock are outstanding, the
corporation may not create any shares of any other class or series of stock that
ranks junior to the Exchangeable Preferred Stock, unless the terms thereof
provide that (A) dividends on such junior class or series of stock are payable
solely in additional shares of such junior class or series of stock if cash
dividends have not been paid on the Exchangeable Preferred Stock on the
immediately preceding dividend payment date, and (B) such junior class or series
of stock shall not be subject to any mandatory redemption or mandatory offer to
purchase requirements prior to the Mandatory Redemption Date.
Section 7. Exchange. The shares of Exchangeable Preferred
Stock are exchangeable at the option only of the corporation, in whole but not
in part, on any January 1, April 1, July 1 or October 1, commencing January 1,
1998, for the 10.5% Repriced Subordinated Debentures due on the Mandatory
Redemption Date (the "Debentures") of the corporation, to be issued under an
indenture (the "Indenture") substantially in the form agreed to by American
Skiing Company, a Maine corporation, and Madeleine L.L.C., between the
corporation and a corporation organized and doing business under the laws of the
United States or any State thereof or of the District of Columbia (or a
corporation or other person permitted to act as a trustee by the Securities and
Exchange Commission) authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000 and
subject to supervision or examination by Federal, State or District of Columbia
authority, as trustee under the Indenture (the "Trustee"), as set forth therein
and with such changes as may be required by law or usage. Holders of the
outstanding shares of Exchangeable Preferred Stock will be entitled to receive
$1,000 principal amount of the Debentures in exchange for each share of
Exchangeable Preferred Stock held by them. On the date of the exchange, the
corporation shall pay an amount equal to accrued and unpaid dividends, at the
corporation's option, in cash or in Debentures (at the rate of $1,000 principal
amount for each $1,000 in accrued and unpaid dividends) or in any combination
thereof.
No such exchange of Debentures for shares of Exchangeable
Preferred Stock shall be made unless on or prior to the date on which such
exchange is to be made (i) the Indenture shall have been executed and delivered
by the corporation and the Trustee and (ii) the Trustee shall have received an
opinion of counsel, dated such exchange date, substantially to the following
effect (together with appropriate assumptions or qualifications), with such
changes therein as such Trustee shall approve:
(1) the corporation has duly authorized the exercise of its
right to redeem the Exchangeable Preferred Stock in exchange for the
Debentures and has exercised such option; (2) the corporation has full
corporate power and authority to enter into the Indenture and to
perform its obligations under the Indenture and to issue and deliver
the Debentures and the shares of Common Stock issuable upon conversion
thereof; (3) the Indenture has been duly authorized, executed and
delivered by the corporation and is a legal, valid and binding
agreement of the corporation enforceable against the corporation in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time in effect
and to general equitable principles); (4) the Debentures will, when
issued in accordance with the terms of the Indenture, constitute legal,
valid and binding obligations of the corporation enforceable against
the corporation in accordance with their terms (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general equitable
principles) and are entitled to the benefits of the Indenture; (5) the
shares of Common Stock issuable upon conversion of the Debentures have
been reserved for issuance and upon such issuance will be duly issued,
fully paid and non-assessable and free of pre-emptive rights; (6) no
consent, approval, authorization or order of any court or governmental
agency or body is required in connection with the issuance of the
Debentures or the shares issuable upon conversion thereof except such
as may be required under the blue sky laws of any jurisdiction and such
other approvals (specified in such opinion) as have been obtained; and
(7) the issuance of Debentures and the performance by the corporation
of its obligations under the Indenture (including the issuance of
shares of Common Stock upon conversion of Debentures) will not be in
conflict with or constitute a breach of or a default (with the passage
of time or otherwise) under (w) the Certificate of Incorporation or
By-laws of the corporation in effect at the date of such opinion, (x)
the charter or by-laws of any subsidiary of the corporation, which
conflict, breach or default is material to the corporation and its
subsidiaries taken as a whole, in effect at the date of such opinion,
(y) any agreement or instrument, known to such counsel and which is,
individually or in the aggregate, material to the corporation and its
subsidiaries taken as a whole, to which the corporation or any of its
subsidiaries is a party or by which it or any of its subsidiaries is
bound or (z) any statute, law or regulation known to such counsel and
in effect at the date of such opinion to which the corporation or any
of its subsidiaries or any of their respective properties may be
subject or any judgment, decree or order, known to such counsel, of any
court or governmental agency or authority then in effect and applicable
to the corporation or any of its subsidiaries (which conflict, breach
or default is, in the case of this clause (z), individually or in the
aggregate, material to the corporation and its subsidiaries taken as a
whole).
Upon such exchange (unless default shall be made by the
corporation in issuing Debentures in exchange for the outstanding shares of
Exchangeable Preferred Stock on the exchange date), the rights of the holders of
the Exchangeable Preferred Stock as stockholders of the corporation shall cease
(except the right to receive on the date of exchange an amount equal to the
amount of accrued and unpaid dividends on the Exchangeable Preferred Stock to
the date of exchange and the Debentures), and the person or persons entitled to
receive the Debentures issuable upon such redemption and exchange shall be
treated for all purposes as the registered holder or holders of such Debentures.
The corporation will mail to each holder of record of Exchangeable Preferred
Stock, at such holder's last address as it shall appear upon the stock transfer
books of the corporation, written notice of its intention to exchange the
Exchangeable Preferred Stock not less than 20 nor more than 60 days prior to the
exchange date. Such notice shall state: (i) the exchange date; (ii) the place or
places where certificates for such shares are to be surrendered for exchange for
Debentures; and (iii) that dividends on the shares to be exchanged will cease to
accrue on such exchange date. Upon surrender in accordance with said notice of
the certificates for any shares to be exchanged (properly endorsed or assigned
for transfer, if the corporation shall so require and the notice shall so
state), the corporation will cause the Debentures to be authenticated and issued
in exchange for such shares of Exchangeable Preferred Stock and to be mailed to
the holder of the shares of Exchangeable Preferred Stock at such holder's
address of record or such other address as the holder shall specify upon such
surrender of such certificates.
If on the exchange date the corporation shall be in default in
the payment of any dividends (including cumulative dividends, if applicable) on
Exchangeable Preferred Stock, or if there shall not be legally available funds
sufficient therefor, or if such exchange shall on such date be prohibited by
applicable law, then no shares of the Exchangeable Preferred Stock shall be
exchanged.
Section 8. Outstanding Shares. For purposes of this Exhibit A,
all shares of Exchangeable Preferred Stock shall be deemed outstanding except
(i) from the date fixed for redemption pursuant to Section 5, all shares of
Exchangeable Preferred Stock that have been so called for redemption under
Section 5 if funds necessary for payment of the redemption price have been
irrevocably deposited in trust, for the account of the holders of the shares so
to be redeemed (so as to be and continue to be available therefor), with a
corporation organized and doing business under the laws of the United States or
any State or territory thereof or of the District of Columbia (or a corporation
or other person permitted to act as a trustee by the Securities and Exchange
Commission) authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000 and subject to
supervision or examination by Federal, State or District of Columbia or
territorial authority; and (ii) from the date of registration of transfer, all
shares of Exchangeable Preferred Stock held of record by the corporation or any
subsidiary of the corporation.
Section 9. Status of Acquired Shares. Shares of Exchangeable
Preferred Stock redeemed by the corporation, received upon exchange pursuant to
Section 7 or converted pursuant to Section 11, or otherwise acquired by the
corporation, will be restored to the status of authorized and unissued shares of
Serial Preferred Stock, without designation as to series, and may thereafter be
issued, but not as shares of Exchangeable Preferred Stock.
Section 10. Preemptive Rights. The holders of Exchangeable
Preferred Stock are not entitled to any preemptive or subscription rights in
respect of any securities of the corporation.
Section 11. Conversion.
(1) Except as provided in the next succeeding sentence, each
share of the Exchangeable Preferred Stock shall be convertible at any time at
the option of the holder thereof into fully paid and non-assessable shares of
Common Stock, par value $.01 per share, of the corporation ("Conversion Stock")
at the conversion price, determined as hereinafter provided, in effect at the
time of conversion. Unless default be made in the payment in full of the
Redemption Price and any accrued and unpaid dividends, shares of Exchangeable
Preferred Stock called for redemption shall cease to be convertible into shares
of Conversion Stock at the close of business on the Redemption Date. The price
at which shares of the Conversion Stock shall be delivered upon conversion of
shares of the Exchangeable Preferred Stock (hereinafter the "Conversion Price")
shall be initially $17.10 per share. The number of shares of Conversion Stock
issuable upon conversion of a share of Exchangeable Preferred Stock is
determined by dividing the Liquidation Preference of a share of Exchangeable
Preferred Stock by the Conversion Price in effect on the Conversion Date (as
hereinafter defined) and round the result to the nearest 1/100th of a share. The
Conversion Price shall be subject to adjustment as provided below. Upon
conversion any accrued and unpaid dividends on the Exchangeable Preferred Stock
shall be paid to the holder thereof, at the option of the corporation, either
(i) in freely tradeable shares of Conversion Stock at the Conversion Price, or
(ii) in cash. If a holder converts more than one share at the same time, the
number of full shares issuable upon the conversion shall be based upon the total
number of shares converted.
(2) In order to convert shares of the Exchangeable Preferred
Stock into shares of Conversion Stock, the holder thereof shall surrender at the
office of any transfer agent for the Exchangeable Preferred Stock (or in the
absence of any transfer agent, the corporation) the certificate or certificates
therefor, duly endorsed to the corporation or in blank, and give written notice
to the corporation at said office that he or she elects to convert such shares.
Shares of the Exchangeable Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the date of surrender of
such shares for conversion in accordance with the foregoing provisions
(hereinafter the "Conversion Date"), and the person or persons entitled to
receive shares of the Conversion Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of the
Conversion Stock at such time. As promptly as practicable after the Conversion
Date, the corporation shall issue and deliver at said office the certificate or
certificates for the number of full shares of the Conversion Stock issuable upon
such conversion, together with a cash payment in lieu of any fraction of a share
of Conversion Stock, as hereinafter provided, to the person or persons entitled
to receive the same or to the nominee or nominees of such person or persons.
(3) The Conversion Price shall be subject to adjustment as
follows:
(a) In case the corporation shall (i) pay a dividend in shares
of either class of Common Stock to all holders of such class, (ii) make a
distribution in shares of either class of Common Stock to all holders of such
class, (iii) subdivide its outstanding Common Stock into a greater number of
shares, or (iv) combine its outstanding Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior thereto shall be
adjusted so that the holder of any shares of Exchangeable Preferred Stock
thereafter surrendered for conversion shall be entitled to receive that number
of shares of Conversion Stock representing the percentage of all outstanding
Common Stock which he or she would have owned had such Exchangeable Preferred
Stock been converted immediately prior to the happening of such event. An
adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date in the case of a dividend in shares or
distribution and shall become effective immediately after the effective date in
the case of subdivision or combination.
(b) In case the corporation shall issue rights or warrants to
all or substantially all holders of its either class of Common Stock entitling
them (for a period commencing no earlier than the record date described below
and expiring not more than 60 days after such record date) to subscribe for or
purchase shares of Common Stock (or securities convertible into Common Stock) at
a price per share less than the current market price per share of Common Stock
(as determined in accordance with subsection (e) below) at the record date for
the determination of shareholders entitled to receive such rights or warrants,
the Conversion Price in effect immediately prior thereto shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on such
record date, plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate Conversion
Price of the convertible securities so offered) would purchase at such current
market price, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively whenever
any such rights or warrants are issued, and shall become effective immediately
after such record date. If at the end of the period during which such rights or
warrants are exercisable not all rights or warrants shall have been exercised,
the adjusted Conversion Price shall be immediately readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(c) In case the corporation shall distribute to all or
substantially all holders of any class of Common Stock any shares of capital
stock of the corporation (other than Common Stock), evidences of indebtedness or
other non-cash assets (including securities of any company other than the
corporation), or shall distribute to all or substantially all holders of any
class of Common Stock rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in subsection (b) above), then in each
such case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the date of such distribution by a fraction of which the numerator
shall be the current market price per share (as defined in subsection (e) below)
of the Conversion Stock on the record date mentioned below less the fair market
value on such record date (as determined by the Board of Directors of the
corporation, whose determination shall be conclusive evidence of such fair
market value) of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to one
share of Common Stock (determined on the basis of the number of shares of Common
Stock outstanding on the record date), and of which the denominator shall be the
current market price per share (as defined in subsection (e) below) of the
Conversion Stock on such record date. Such adjustment shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such distribution. Notwithstanding the foregoing, in the event that
the corporation shall distribute rights or warrants (other than those referred
to in subsection (b) above) ("Rights") pro rata to holders of any class of
Common Stock, the corporation may, in lieu of making any adjustment pursuant to
this Section 11, make proper provision so that each holder of Exchangeable
Preferred Stock who converts such Stock (or any portion thereof) after the
record date for such distribution and prior to the expiration or redemption of
the Rights shall be entitled to receive upon such conversion, in addition to the
shares of Conversion Stock issuable upon such conversion (the "Conversion
Shares"), a number of Rights to be determined as follows: (i) if such conversion
occurs on or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of Common Stock equal
to the number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the Security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the corporation shall, by dividend or otherwise,
at any time distribute (a "Triggering Distribution") to all or substantially all
holders of any class of Common Stock cash in an aggregate amount that, together
with the aggregate amount of any other cash distributions to all or
substantially all holders of any class of Common Stock made within the 12 months
preceding the date of payment of the Triggering Distribution and in respect of
which no Conversion Price adjustment pursuant to this Section 11 has been made,
exceeds 10% of the product of the current market price per share of Conversion
Stock (as determined in accordance with subsection (e) below) on the Business
Day (the "Determination Date") immediately preceding the day on which such
Triggering Distribution is declared by the corporation multiplied by the number
of shares of Common Stock outstanding on such date (excluding shares held in the
treasury of the corporation), the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying such Conversion Price in
effect immediately prior to the Determination Date by a fraction of which the
numerator shall be the current market price per share of the Conversion Stock
(as determined in accordance with subsection (e) below) on the Determination
Date less the amount of cash so distributed within such 12 months (including,
without limitation, the Triggering Distribution) applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date) and the denominator shall be such current
market price per share of the Conversion Stock (as determined in accordance with
subsection (e) below) on the Determination Date, such reduction to become
effective immediately prior to the opening of business on the day following the
date on which the Triggering Distribution is paid.
(e) For the purpose of any computation under subsections (b),
(c) and (d) of this Section 11(3), the current market price per share of
Conversion Stock on any date shall be deemed to be the average of the daily
closing prices for the 30 consecutive trading days commencing 45 trading days
before (i) the Determination Date with respect to distributions under subsection
(d) above or (ii) the record date with respect to distributions, issuances or
other events requiring such computation under subsection (b) or (c) above. The
closing price for each day shall be the last reported sales price or, in case no
such reported sale takes place on such date, if the Conversion Stock is not
listed or admitted to trading on the New York Stock Exchange ("NYSE"), on the
principal national securities exchange on which the Conversion Stock is listed
or admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the closing sales price of the Conversion Stock as quoted
by NASDAQ or, in case no reported sale takes place, the average of the closing
bid and asked prices as quoted by NASDAQ or any comparable system or, if the
Conversion Stock is not quoted on NASDAQ or any comparable system, the closing
sales price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
corporation for that purpose. If no such prices are available, the current
market price per share shall be the fair value of a share of Conversion Stock as
determined by the Board of Directors of the corporation.
(f) In any case in which this Section 11 shall require that an
adjustment be made following a record date or a Determination Date, as the case
may be, established for purposes of this Section 11, the corporation may elect
to defer (but only until five Business Days following the mailing by the
corporation to the holders of the Notice of Adjustment described in subsection
(i) below) issuing to the holder of any Exchangeable Preferred Stock converted
after such record date or Determination Date the shares of Conversion Stock and
other capital stock of the corporation issuable upon such conversion over and
above the shares of Conversion Stock and other capital stock of the corporation
issuable upon such conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred, the
corporation shall issue or cause its transfer agents to issue due bills or other
appropriate evidence prepared by the corporation of the right to receive such
shares. If any distribution in respect of which an adjustment to the Conversion
Price is required to be made as of the record date, effective date or
Determination Date therefor is not thereafter made or paid by the corporation
for any reason, the Conversion Price shall be readjusted to the Conversion Price
which would then be in effect if such record date had not been fixed or such
effective date or Determination Date had not occurred.
(g) No Adjustment. No adjustment in the Conversion Price shall
be required unless the adjustment would require an increase or decrease of at
least 1% in the Conversion Price as last adjusted; provided, however, that any
adjustments which by reason of this subsection (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in
(a), (b), (c) or (d) above if all holders of Exchangeable Preferred Stock are
entitled to participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of the basis
and notice on which holders of Common Stock participate in the transaction. The
corporation shall give 30 days prior notice to the transfer agent and to the
holders of the Exchangeable Preferred Stock of any such determination.
No adjustment need be made for rights to purchase Common Stock
or issuances of Common Stock pursuant to a corporation plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or a
change to no par value of the Common Stock.
To the extent that the Exchangeable Preferred Stock becomes
convertible into the right to receive cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(h) Adjustment for Tax Purposes. The corporation shall be
entitled to make such reductions in the Conversion Price, in addition to those
required under other provisions of this Section 11, as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivisions
of shares, distributions of rights to purchase stock or securities or
distributions of securities convertible into or exchangeable for stock hereafter
made by the corporation to its shareholders shall not be taxable; provided that
no such reduction shall give rise to a right of the corporation to optionally
redeem the Exchangeable Preferred Stock pursuant to Section 5.
(i) Notice of Adjustment. Whenever the Conversion Price is
adjusted, the corporation shall promptly mail to holders of the Exchangeable
Preferred Stock and to the transfer agent a notice of the adjustment briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence of the correctness of such adjustment.
(j) Notice of Certain Transactions.
In the event that:
(1) the corporation takes any action which would require an
adjustment in the Conversion Price;
(2) the corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another
corporation and shareholders of the corporation must approve
the transaction; or
(3) there is a dissolution or liquidation of the corporation,
the corporation shall mail to holders of the Exchangeable Preferred Stock and to
the transfer agent a notice stating the proposed record or effective date, as
the case may be. The corporation shall mail the notice at least ten days before
such date. Failure to mail such notice or any defect therein shall not affect
the validity of any transaction referred to in clause (1), (2) or (3) of this
Section 11(3)(j).
(k) Effect of Reclassification, Consolidation, Merger or Sale on
Conversion Privilege.
If any of the following shall occur, namely: (a) any
reclassification or change of shares of Conversion Stock issuable upon
conversion of the Exchangeable Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination, or any other change for which an
adjustment is provided in (a), (b) or (c) above); (b) any consolidation or
merger to which the corporation is a party other than a merger in which the
corporation is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in name, or in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of Common Stock;
or (c) any sale or conveyance of all or substantially all of the assets of the
corporation as an entirety, then the corporation, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance, ensure
that effective provision be made in the certificate of incorporation of the
resulting or surviving corporation or otherwise that each holder of Exchangeable
Preferred Stock then outstanding shall have the right to convert such
Exchangeable Preferred Stock into the kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Conversion Stock deliverable upon conversion of such
Exchangeable Preferred Stock immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance, and that the Conversion Price shall
continue to be subject to adjustments which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Section 11. If in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of Conversion Stock include shares of stock or
other securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger, sale
or conveyance, then effective provision shall also be made in the certificate of
incorporation of such other corporation or otherwise of such additional
antidilution provisions as are necessary to protect the interests of the holders
of the Exchangeable Preferred Stock by reason of the foregoing. The provisions
of this Section 11(3)(k) shall similarly apply to successive consolidations,
mergers, sales or conveyances.
Section 12. Reports. So long as the Exchangeable Preferred
Stock remains outstanding, the corporation shall cause its annual reports to
stockholders and any quarterly or other financial reports and information
furnished by it to stockholders pursuant to the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to be mailed to the
holders of the Exchangeable Preferred Stock (contemporaneously with the mailing
of such materials to the corporation's stockholders) at their addresses
appearing on the books of the corporation. If the corporation is not required to
furnish annual or quarterly reports to its stockholders pursuant to the Exchange
Act, it shall cause its financial statements, including any notes thereto (and
with respect to annual reports, an auditors' report by a nationally recognized
firm of independent certified public accountants), a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and such other
information which the corporation would otherwise be required to include in
annual and quarterly reports filed under the Exchange Act, to be mailed to the
holders of the Exchangeable Preferred Stock, within 120 days after the end of
each of the corporation's fiscal years and within 60 days after the end of each
of its first three fiscal quarters.
Section 13. Additional and Supplementary Rights,
Qualifications, Limitations and Restrictions. In addition to the matters
contained herein, the Exchangeable Preferred Stock shall have such additional or
supplementary rights, and be subject to such additional or supplementary
qualifications, limitations and restrictions as are set forth in the Agreement
and made expressly applicable to the Exchangeable Preferred Stock.
Section 14. Severability of Provisions. Whenever possible,
each provision hereof shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision hereof is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
<PAGE>
EXHIBIT B
There is hereby created and authorized a series of Serial
Preferred Stock, the designation of which shall be the 8.50% Series B
Convertible Participating Preferred Stock (herein, the "Convertible Preferred
Stock") having the following rights and preferences, designations, voting powers
and terms.
As used herein, the following terms have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural and vice versa), unless the context otherwise requires:
"Accretion Amounts" shall have the meaning specified in
Section 3.
"Accretion Rate" shall have the meaning specified in Section
3.
"Additional Preferred Directors" shall have the meaning
specified in Section 6(b)(ii).
"Acquisition Transaction" shall mean any transaction or series
of transactions in which at least a majority of the outstanding Common Stock is
acquired by any Person, whether pursuant to a tender offer, merger, acquisition
or otherwise.
"Applicable Base Price" shall mean (a) with respect to an
Acquisition Transaction, the Average Market Price of Company Common Stock and
(b) with respect to a Stock Transaction, (i) the greater of the conversion price
per share and the Average Market Price if convertible preferred stock is issued
in the Stock Transaction, (ii) the Average Market Price if newly issued shares
of Company Common Stock are sold in the Stock Transaction and (iii) the price
per share paid if the outstanding Company Common Stock is sold in the Stock
Transaction.
"Average Market Price" shall mean, with respect to an
Acquisition Transaction or Stock Transaction, the average of the daily closing
prices of the Company Common Stock on the NYSE or, if not then listed or traded
on the NYSE, such other exchange, market or system that the Company Common Stock
is then listed or traded on, for 10 consecutive trading days, commencing on the
fifth business day after the consummation of such Acquisition Transaction or
Stock Transaction.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day that is not a Saturday,
Sunday or a Legal Holiday.
"Change of Control" shall mean any event that gives any Person
or Group other than the Holders, the Stockholders, Leslie B. Otten or their
Permitted Transferees the ability to "control" the Corporation (a) through the
acquisition of either (i) substantially all of the assets of the Corporation and
its subsidiaries, taken as a whole, or (ii) at least a majority of the aggregate
voting power of the Corporation=s capital stock or (b) by otherwise being able
to elect or designate a majority of the Board of Directors through a management
contract or otherwise.
"Class A Common Stock" shall mean the Class A common stock,
par value $.01 per share, of the Corporation.
"Common Stock" shall mean the Company Common Stock and the
Class A Common Stock as the same exist as of the date hereof or as such stock
may be constituted from time to time.
"Company Common Stock" shall mean the common stock, par value
$.01 per share, of the Corporation.
"Conversion Date" shall have the meaning specified in Section
9(b).
"Conversion Price" shall mean the applicable price at which
Conversion Shares shall be delivered upon conversion of shares of the
Convertible Preferred Stock as specified in Section 9(a).
"Conversion Shares" shall have the meaning specified in
Section 9(a).
"Convertible Preferred Stock" shall mean the Corporation=s
8.50% Series B Convertible Participating Preferred Stock, par value $.01 per
share.
"Corporation" shall mean ASC Delaware, Inc., a Delaware
corporation whose name is to be changed to American Skiing Company in connection
with the Delaware Reincorporation.
"Current Market Price" shall mean the Current Market Price of
the Company Common Stock calculated in accordance with Section 9(c)(iv).
"Default Voting Event" shall have the meaning specified in
Section 6(b)(ii).
"Definitive Agreements" shall mean the Preferred Stock
Subscription Agreement, together with the schedules attached thereto, the
Stockholders= Agreement, and the Voting Agreement.
"Delaware Reincorporation" shall mean the merger of American
Skiing Company ("ASC Maine"), a Maine corporation, with and into the Corporation
and that, after giving effect to such merger, will have the identical
authorized, issued and outstanding capital stock with the same rights and
preferences as ASC Maine and a board to which the directors are elected annually
instead of a staggered board of directors.
"Delaware Reincorporation Vote" shall mean a vote in favor of
the Delaware Reincorporation by a majority of the outstanding voting securities
of ASC Maine.
"Distribution Date" shall have the meaning specified in
Section 9(c)(iii).
"Dividend Rate" shall have the meaning specified in Section 3.
"Equity Equivalents" shall mean Common Stock or rights,
warrants, options or other convertible securities (including the Repriced
Preferred Stock and any other convertible debt or equity) representing the right
to acquire Common Stock, but excluding the exercise of options which were
granted prior to the initial public offering of the Corporation or options that
were or are set at the market price at the time such options were or are granted
by the Corporation or as determined by the Board of Directors or a duly
authorized committee or delegee thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fully Diluted Basis" shall have the meaning given to such
term in the Stockholders' Agreement.
"Group" shall have the meaning set forth in Rule 13d-5, as in
effect on the date hereof, under the Exchange Act.
"Holders" shall mean the holders of the Convertible Preferred
Stock.
"Issue Date" shall mean August 6, 1999, the original date of
issuance of the 8.50% Series B Convertible Participating Preferred Stock, par
value $.01 per share, of ASC Maine.
"Junior Preferred" shall have the meaning specified in Section
2.
"Junior Stock" shall have the meaning specified in Section 2.
"Legal Holiday" shall mean any day on which banking
institutions are obligated or authorized to close in The City of New York or in
the State of Maine.
"Liquidation Price" shall mean, as of any date, an amount
equal to $1,000 per share, plus (x) where cash dividends are not paid pursuant
to Section 3, the aggregate Accretion Amounts through such date and (y) all
accrued and unpaid dividends to such date, whether or not declared, to the
extent such accrued and unpaid dividends are not taken into account in
determining the Accretion Amounts under clause (x).
"Liquidation Right" shall mean for each share of Convertible
Preferred Stock the greater of (i) the Liquidation Price and (ii) the amount
that would be received in liquidation following conversion of a share of
Convertible Preferred Stock into Common Stock.
"Majority Holders" shall mean the Holders of a majority of the
then outstanding shares of Convertible Preferred Stock.
"Mandatory Redemption" shall mean any mandatory redemption of
the Convertible Preferred Stock as specified in Section 5(a).
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Notice" shall have the meaning specified in Section 5(b).
"NYSE" shall mean the New York Stock Exchange.
"Permitted Transferees" shall have the meaning given to such
term in the Stockholders' Agreement.
"Person" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3), as in effect on the
date hereof, of the Exchange Act.
"Preferred Directors" shall have the meaning specified in
Section 6(b)(i).
"Preferred Stock" shall mean the Serial Preferred Stock, par
value $.01 per share, of the Corporation.
"Preferred Stock Subscription Agreement" shall mean the
Preferred Stock Subscription Agreement dated July 9, 1999 among ASC Maine, Oak
Hill Capital Partners, L.P., and the other entities identified on Annex A
attached thereto.
"Redemption Price" shall have the meaning specified in Section
5(b).
"Repriced Preferred Stock" shall mean the 10.5% Repriced
Convertible Exchangeable Preferred Stock, $.01 par value per share, of the
Corporation.
"Requisite NYSE Shareholder Approval" shall mean the approval
by ASC Maine=s shareholders to the extent required by the NYSE in connection
with the issuance of Conversion Shares.
"Rights" shall have the meaning specified in Section
9(c)(iii).
"Senior Liquidation Stock" shall have the meaning specified in
Section 4.
"Stock Transaction" shall mean any transaction or series of
transactions pursuant to which the Corporation issues or sells shares of common
stock representing, or convertible preferred stock convertible into, 40% or more
of the outstanding shares of Common Stock on a Fully Diluted Basis.
"Stockholder Director" shall mean a director designated by the
Stockholders pursuant to the Stockholders= Agreement.
"Stockholders" shall mean Oak Hill Capital Partners, L.P. and
the other entities identified in Annex A to the Preferred Stock Subscription
Agreement.
"Stockholders= Agreement" shall mean the Stockholders= Agreement
dated August 6, 1999 among ASC Maine, the Holders, Leslie B. Otten and
ING (U.S.) Capital Corporation.
"Third Party Redemption Date" shall have the meaning specified
in Section 5(a).
"Third Party Transaction" shall mean any Acquisition
Transaction or Stock Transaction in which the financial terms, in the judgment
of the Board of Directors, are superior to those set forth in the Definitive
Agreements.
Section 1. DESIGNATION AND AMOUNT. The designation of such series of
Serial Preferred Stock shall be the Convertible Preferred Stock. The number of
issuable shares of Convertible Preferred Stock shall be 150,000.
Section 2. RANK. All shares of Convertible Preferred Stock, both as to
payment of dividends and to distribution of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, shall rank
(i) senior to all of the Corporation=s now or hereafter issued preferred stock
(the "Junior Preferred") except for the Repriced Preferred Stock, as to which it
shall rank junior, and (ii) senior to all of the Corporation=s now or hereafter
issued Common Stock or any other common stock of any class of the Corporation
(collectively with the Junior Preferred, the "Junior Stock").
Section 3. DIVIDENDS AND CERTAIN RESTRICTIONS. The Holders shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds of the Corporation legally available therefor, dividends at a rate per
share of 8.50% per annum (as may be adjusted from time to time as provided in
this Section 3) of the Liquidation Price (the "Dividend Rate"), which shall be
fully cumulative, shall accrue, and shall be compounded and payable quarterly on
October 31, January 31, April 30 and July 31 of each year, commencing on October
31, 1999 (except that if such date is a Saturday, Sunday or Legal Holiday, then
such dividend will be payable on the next Business Day) to Holders of record as
they appear on the stock transfer books of the Corporation on the record date
for the payment of such dividend, which shall be not more than 60 nor less than
30 days preceding the payment date for such dividend, as is fixed by the Board
of Directors. Dividends may, at the option of the Corporation, be paid (i) in
cash at the Dividend Rate or (ii) until the five-year anniversary of the Issue
Date, by way of an increase in the Liquidation Price in effect immediately prior
to the relevant quarterly dividend payment date in an amount calculated based on
the following rates per annum, compounded quarterly (such rate being the
"Accretion Rate" and each such amount being an "Accretion Amount") (a) 8.50% of
the Liquidation Price until January 31, 2001, (b) 9.50% of the Liquidation Price
until January 31, 2002 and (c) 10.5% of the Liquidation Price thereafter until
July 31, 2004, in the case of clauses (i) and (ii), payable quarterly in arrears
on October 31, January 31, April 30 and July 31 of each year. Notwithstanding
the foregoing, dividends shall be payable solely in accordance with clause (ii)
if cash dividends have not been paid on the Repriced Preferred Stock on the
immediately preceding dividend payment date with respect to such Repriced
Preferred Stock. The Dividend Rate and the Accretion Rate on the Convertible
Preferred Stock shall also be subject to adjustment as provided below.
In addition to the dividends described in the preceding paragraph, the
Holders shall be entitled to receive an amount equal to the amount that the
Holders would be entitled to receive if the Convertible Preferred Stock were
fully converted into Company Common Stock on the record date for the payment of
any such dividends.
The Dividend Rate and the Accretion Rate shall increase to 12.5% per
annum, compounded quarterly, of the Liquidation Price in the event that either
(a) the Delaware Reincorporation Vote or (b) the Requisite NYSE Shareholder
Approval is not obtained on or before December 31, 1999. Once the Delaware
Reincorporation Vote and the Requisite NYSE Shareholder Approval are obtained,
such increased rate will revert back to the applicable rate set forth in the
first paragraph of Section 3. In addition, the Dividend Rate and the Accretion
Rate on the Convertible Preferred Stock shall be increased by 2% per annum upon
a declaration of Default Voting Event as set forth in Section 6(b)(ii) for so
long as such Dividend Default remains uncured.
On any such dividend payment date all dividends which shall have
accrued on each share of Convertible Preferred Stock outstanding on such
dividend payment date shall accumulate and be deemed to become "due" but shall
nonetheless be payable as set forth in the first paragraph of this Section 3. If
such dividends are not fully paid on such dividend payment date, such accrued
dividends shall also be added to the Liquidation Price of the Convertible
Preferred Stock effective as of such dividend payment date and shall thereafter
accrue additional dividends in respect thereof until such unpaid dividends have
been paid in full. Dividends paid on shares of Convertible Preferred Stock in an
amount less than the total amount of such dividends at the time accumulated and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Any reference to "distribution" contained in this Section 3 shall not
be deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
that is effected in accordance with the preferences and priorities set forth in
this Certificate of Incorporation and all certificates of designation setting
forth the rights of the holders of the Corporation=s Preferred Stock.
Section 4. LIQUIDATION RIGHT. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Holders shall be entitled to receive out of the assets of the Corporation,
whether such assets are stated capital or surplus of any nature, the Liquidation
Right, before any payment shall be made or any assets distributed to the holders
of Common Stock or any other class or series of the Corporation=s capital stock
ranking junior as to liquidation rights to the Convertible Preferred Stock;
provided, however, that such rights shall accrue to the Holders only in the
event that the Corporation=s payments with respect to the liquidation
preferences of the holders of capital stock of the Corporation ranking senior as
to liquidation rights to the Convertible Preferred Stock (the "Senior
Liquidation Stock") are fully met. If the assets of the Corporation available
for distribution after the liquidation preferences of the Senior Liquidation
Stock are fully met are not sufficient to pay an amount equal to the Liquidation
Right to the holders of outstanding shares of Convertible Preferred Stock, then
the assets of the Corporation shall be distributed ratably among the Holders.
Neither a consolidation, merger or other business combination of the Corporation
with or into another corporation or other entity nor a sale or offer of all or
part of the Corporation=s assets for cash, securities or other property shall be
considered a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4 (unless in connection therewith the liquidation of
the Corporation is specifically approved).
Section 5. REDEMPTION.
(a) MANDATORY REDEMPTION. The Corporation shall mandatorily redeem all
of the outstanding shares of Convertible Preferred Stock (each of the following
being a "Mandatory Redemption") (i) on August 6, 2009, at a redemption price
equal to the Liquidation Price per share (plus an amount equal to all accrued
and unpaid dividends to such date of redemption) or (ii) if (A) either the
Delaware Reincorporation Vote or the Requisite NYSE Shareholder Approval is not
obtained by December 31, 1999 and (B) if within twelve months following the date
of the Preferred Stock Subscription Agreement, the Corporation announces or
consummates a Third Party Transaction, at the Liquidation Price plus the excess,
if any, of (x) the Applicable Base Price over (y) $5.25, as such number may be
adjusted from time to time as provided in Section 9, multiplied by the number of
Conversion Shares into which the Convertible Preferred Stock being redeemed is
convertible on the date immediately preceding such announcement or consummation
of the Third Party Transaction (a "Third Party Redemption Date"). In addition,
if the Company Common Stock continues to be publicly traded following the
consummation of any Third Party Transaction, the Holders whose Convertible
Preferred Stock has been redeemed pursuant to clause (ii) of this Section 5(a)
shall be entitled to receive within ten days after the first anniversary of the
Third Party Redemption Date an amount equal to the excess, if any, of (i) the
highest average consecutive 30-day trading price of the Company Common Stock
during the 12 months following the Third Party Redemption Date over (ii) the
Applicable Base Price, multiplied by the number of Conversion Shares into which
the Convertible Preferred Stock could have been converted on the Third Party
Redemption Date.
No Mandatory Redemption pursuant to this Section 5(a) shall be made
unless and until all outstanding Repriced Preferred Stock has been converted,
repurchased, redeemed or otherwise retired. If, upon any Mandatory Redemption,
funds are not legally available to the Corporation for redemption of all the
shares of Convertible Preferred Stock, the Corporation shall redeem on such
date, at the applicable redemption price, that number of shares of Convertible
Preferred Stock which it can lawfully redeem, and from time to time thereafter,
as soon as funds are legally available, the Corporation shall redeem at the
applicable redemption price shares of Convertible Preferred Stock until the
Corporation has redeemed the shares of Convertible Preferred Stock in full.
In the event that the Corporation is in arrears in the redemption of
its Convertible Preferred Stock pursuant to a Mandatory Redemption, the
Corporation may not (i) purchase, redeem or pay dividends on any Junior Stock or
(ii) make any mandatory purchase or redemption of any Convertible Preferred
Stock or stock on a parity therewith except pro rata according to all such
obligations then due or in arrears among all such outstanding stock.
(b) OPTIONAL REDEMPTION. Other than pursuant to a Mandatory Redemption
in accordance with Section 5(a) or a redemption upon a Change of Control in
accordance with Section 5(c), the shares of Convertible Preferred Stock shall
not be redeemable at the option of the Company by the Corporation until
following the four-year anniversary of the Issue Date. Following such date, the
Corporation shall have the right, at its option, upon not less than 60 days=
prior written notice ("Notice"), but subject to the right of the Holders to
convert their shares of Convertible Preferred Stock into shares of Common Stock
pursuant to Section 9, to redeem, out of funds legally available therefor, all
or a portion of the shares of Convertible Preferred Stock during the 12-month
period beginning on July 31 of the years indicated below (subject to the right
of the Holder of record on a record date for the payment of a dividend on the
Convertible Preferred Stock to receive the dividend due on such shares of
Convertible Preferred Stock on the corresponding dividend payment date, if such
dividend payment date is prior to the date set for redemption) at the redemption
prices (expressed as a percentage of the Liquidation Price) set forth below
(each a "Redemption Price"):
Year Redemption Price
---- ----------------
2003 105%
2004 104%
2005 103%
2006 102%
2007 101%
2008 and thereafter 100%
provided that the Corporation shall not be entitled to redeem Convertible
Preferred Stock in accordance with this subparagraph (b) unless the closing
sales price for shares of Common Stock on the NYSE for the 30 consecutive
trading days immediately preceding the date of the Notice shall be at least 350%
of the current Conversion Price on or prior to June 30, 2004 and at least 150%
of the current Conversion Price thereafter.
In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the Corporation shall select the shares of
Convertible Preferred Stock to be redeemed in accordance with any method
permitted by the national securities exchange on which the Convertible Preferred
Stock is then listed, or if not so listed, the Corporation shall designate by
lot, or in such other manner as the Board of Directors may determine, the shares
to be redeemed, or shall effect such redemption pro rata. Notwithstanding the
foregoing, the Corporation shall not redeem less than all of the Convertible
Preferred Stock at any time outstanding until all dividends accrued to such
payment date upon all Convertible Preferred Stock then outstanding shall have
been paid.
The Notice shall be given by first class mail, postage prepaid, to each
Holder of record of the Convertible Preferred Stock to be redeemed, at such
Holder=s address as it shall appear upon the stock transfer books of the
Corporation. Each such notice of redemption shall specify the date fixed for
redemption, the Redemption Price, the then current Conversion Price, the place
or places of payment and conversion and that payment or conversion will be made
upon presentation of and surrender of the certificates evidencing the shares of
Convertible Preferred Stock to be redeemed or converted, and that the
Convertible Preferred Stock may be converted at any time before the close of
business on such date fixed for redemption.
Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder of the Convertible
Preferred Stock receives such notice; and failure to give such notice by mail,
or any defect in such notice, to a Holder of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any shares of Convertible Preferred Stock owned by other Holders to whom such
notice was duly given. On or after the date fixed for redemption as stated in
such Notice, each Holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation at the place designated in
such notice and shall thereupon be entitled to receive payment of the Redemption
Price. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued without cost to the
Holder thereof representing the unredeemed shares. If such Notice shall have
been so mailed and if, on or prior to the redemption date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in trust for the account
of the holders of the shares so to be redeemed (as to be and continue to be
available therefor), then on and after the redemption date, notwithstanding that
any certificate for shares of the Convertible Preferred Stock so called for
redemption shall not have been surrendered for cancellation, all shares of the
Convertible Preferred Stock with respect to which such notice shall have been
mailed and such funds shall have been set aside shall be deemed to be no longer
outstanding and all rights with respect to such shares of the Convertible
Preferred Stock so called for redemption shall forthwith cease and terminate,
except the right of the Holders to receive out of the funds so set aside in
trust the amount payable on the redemption thereof (including an amount equal to
accrued and unpaid dividends to the redemption date) without interest thereon.
The Holder of any shares of Convertible Preferred Stock redeemed upon
any exercise of the Corporation=s redemption right under this Section 5(b) shall
not be entitled to receive payment of the Redemption Price for such shares until
such Holder shall cause to be delivered to the place specified in the Notice (i)
the certificate(s) representing such shares of Convertible Preferred Stock
redeemed and (ii) transfer instrument(s) satisfactory to the Corporation and
sufficient to transfer such shares of Convertible Preferred Stock to the
Corporation free of any adverse interests; provided that the foregoing is
subject to the other provisions of the Certificate of Incorporation or Bylaws
governing lost certificates generally.
(c) CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each
Holder may require the Corporation to redeem such requesting Holder=s
Convertible Preferred Stock at a purchase price in cash in an amount equal to
101.0% of the applicable Liquidation Price per share (plus an amount equal to
all accrued and unpaid dividends to such date of redemption) (the "Change of
Control Price").
Within 45 days following any Change of Control, the Corporation shall
give to each Holder a written notice (a "Change of Control Notice") stating:
(i) that a Change of Control has occurred and that such Holder has the
right to require the Corporation to redeem such Holder=s Convertible Preferred
Stock at the Change of Control Price as set forth above;
(ii) the circumstances and relevant facts regarding such Change of Control;
(iii) the redemption date, which date shall be no earlier than 45 days nor
later than 60 days from the date such notice is mailed; and
(iv) the instructions a Holder must follow in order to have its
Convertible Preferred Stock redeemed pursuant to this Section 5(c).
Change of Control Notices shall otherwise be governed by the provisions
set forth above in paragraph (b) relating to Notices.
Holders electing to have Convertible Preferred Stock redeemed under
this Section 5(c) will be required to surrender such Convertible Preferred Stock
to the Corporation at the address specified in the Change of Control Notice at
least five Business Days prior to the specified redemption date. Any Holder will
be entitled to withdraw its election if the Corporation receives, not later than
three Business Days prior to the redemption date, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the amount of the
Convertible Preferred Stock delivered for redemption by such Holder as to which
its election is to be withdrawn and a statement that such Holder is withdrawing
its election to have such Convertible Preferred Stock redeemed.
No Change of Control Notice shall be issued pursuant to this Section
5(c) unless and until all outstanding Repriced Preferred Stock has been, or
shall have been as part of the Change of Control, converted, repurchased,
redeemed or otherwise retired. If, upon any Change of Control, funds are not
legally available to the Corporation for redemption of the shares of Convertible
Preferred Stock that the Holders have requested to be redeemed, the Corporation
shall redeem on such date, at the Change of Control Price, that number of shares
of Convertible Preferred Stock which it can lawfully redeem, and from time to
time thereafter, as soon as funds are legally available, the Corporation shall
redeem at the Change of Control Price shares of Convertible Preferred Stock
until the Corporation has redeemed all the shares of Convertible Preferred Stock
that the Holders have requested be redeemed.
Section 6. VOTING RIGHTS.
(a) GENERAL. The Holders shall vote together with the holders of the
Common Stock (and any other class of equity securities which may similarly vote
with the holders of the Common Stock as a single class with respect to any
matter) upon all matters upon which stockholders are entitled to vote, except
for the election of directors (on which the Holders shall be entitled to vote as
a separate class pursuant to paragraph (b) below) and except for the Requisite
NYSE Shareholder Approval or the Delaware Reincorporation, and shall be entitled
to a number of votes per share of Convertible Preferred Stock equal to the
number of shares of Common Stock into which the shares of the Convertible
Preferred Stock are convertible on the record date of the determination of
stockholders entitled to notice of and to vote on such matter; provided, that,
nothing in this Section 6(a) shall prevent Oak Hill from exercising or enforcing
its rights under the Voting Agreement, dated as of August 6, 1999, among the ASC
Maine, Oak Hill, and certain of ASC Maine=s stockholders. In addition, the
Holders will have all voting rights required by law, and shall also have all
special voting rights provided below. Any shares of Convertible Preferred Stock
held by the Corporation or any entity controlled by the Corporation shall not
have voting rights hereunder and shall not be counted in determining the
presence of a quorum.
(b) CLASS VOTING RIGHTS.
(i) RIGHT TO ELECT DIRECTORS. So long as any shares of
Convertible Preferred Stock are outstanding, the minimum number of directors on
the Board of Directors shall be eleven. The Holders shall be entitled to vote
together as a class to elect four directors of the Corporation (the "Preferred
Directors"); provided at least 112,000 shares of the Convertible Preferred Stock
remain outstanding. In the event that (i) fewer than 112,000 shares and 75,000
or more shares of Convertible Preferred Stock are outstanding, the Holders shall
be entitled to elect three Preferred Directors, (ii) fewer than 75,000 shares
and 37,500 or more shares of Convertible Preferred Stock are outstanding, the
Holders shall be entitled to elect two Preferred Directors, (iii) fewer than
37,500 shares and 7,500 or more shares of Convertible Preferred Stock are
outstanding, the Holders shall be entitled to elect one Preferred Director and
(iv) fewer than 7,500 shares of Convertible Preferred Stock are outstanding, the
Holders shall not be entitled to elect any Preferred Directors.
(ii) DEFAULT VOTING RIGHTS. If, without either the consent of
Majority Holders or the consent of at least one Preferred Director or
Stockholder Director, the Corporation (a) fails to make any quarterly dividend
payment (in accordance with Section 3) on the Convertible Preferred Stock or (b)
breaches a material covenant contained in the Definitive Agreements or the
provisions of Section 6(b)(iii) hereof (any event described in clause (a) or (b)
being a "Default Voting Event"), the Holders, following in the case of clause
(b), a declaration of default by the Majority Holders, will have the right to
elect two additional Preferred Directors ("Additional Preferred Directors"). In
addition, the Dividend Rate and the Accretion Rate on the Convertible Preferred
Stock shall be increased by 2% per annum for so long as any Default Voting Event
remains uncured by the Corporation. At such time as a Default Voting Event no
longer exists, any Additional Preferred Directors elected pursuant to this
Section 6(b)(ii) shall be deemed to have automatically resigned from the Board
of Directors and they shall cease to be directors of the Corporation. The
Holders (voting separately as a class) will have the exclusive right to vote for
and elect such Additional Preferred Directors pursuant to a written consent or
at a meeting of stockholders without any further action on the part of the
Corporation or the Holders as provided below.
(iii) ACTIONS REQUIRING AFFIRMATIVE VOTE. So long as shares of
Convertible Preferred Stock are outstanding, the Corporation shall not, directly
or indirectly, or through merger or consolidation with any other person, without
the affirmative vote or consent of the Majority Holders, with the Holders voting
separately as a class, (a) amend, alter or repeal (by merger, consolidation or
otherwise) any provision of this Certificate of Incorporation or the By-laws of
the Corporation, as amended, so as to affect adversely the relative rights,
preferences, powers (including, without limitation, voting powers) and
privileges of the Convertible Preferred Stock, (b) authorize or issue any new
class of shares or Equity Equivalents having a preference with respect to
dividends, redemption and/or liquidation over, or on parity with, the
Convertible Preferred Stock, (c) reclassify any of its capital stock into shares
having a preference with respect to dividends, redemption and/or liquidation
over, or on parity with, the Convertible Preferred Stock or (d) issue any
additional shares of Convertible Preferred Stock. In connection with any right
to vote pursuant to this Section 6(b)(iii), each Holder will have one vote for
each share of Convertible Preferred Stock held.
(iv) SPECIAL MEETING. Whenever the rights described above
shall vest, they may be exercised initially by the vote of the Majority Holders
present and voting, in person or by proxy, at a special meeting of Holders or at
the next annual meeting of stockholders, or by written consent of the Majority
Holders without a meeting. Unless such action shall have been taken by written
consent as aforesaid, a special meeting of the Holders for the exercise of any
such right shall be called by the Secretary of the Corporation as promptly as
possible in compliance with applicable law and regulations, and in any event
within 10 days after receipt of a written request signed by the Holders of
record of at least 25% of the then outstanding shares of the Convertible
Preferred Stock, subject to any applicable notice requirements imposed by law or
by any national securities exchange on which any Convertible Preferred Stock is
listed. Such meeting shall be held at the earliest practicable date thereafter.
(v) TERM OF OFFICE OF DIRECTORS. Any Preferred Director shall
hold office for a term expiring at the next annual meeting of stockholders and
during such term may be removed at any time, either for or without cause, by and
only by, the affirmative vote of the Majority Holders of record, with the
Convertible Preferred Stock voting as a single class, present and voting, in
person or by proxy, at a special meeting of such stockholders called for such
purpose, or by written consent without a meeting of the Majority Holders of
record, with the Convertible Preferred Stock voting as a single class. A special
meeting of the Holders for the removal of a director elected by the Holders in
accordance with this subparagraph (b) and the filling of the vacancy created
thereby shall be called by the Secretary of the Corporation as promptly as
possible and in any event within 10 days after receipt of request therefor
signed by the holders of not less than 25% of the outstanding shares of the
Convertible Preferred Stock taken as a single class, subject to any applicable
notice requirements imposed by law or any national securities exchange on which
any Convertible Preferred Stock is listed. Such meeting shall be held at the
earliest practicable date thereafter.
(vi) VACANCIES. Any vacancy caused by the death, resignation
or removal of any Preferred Director may be filled by the remaining Preferred
Directors or, if not so filled, or if there are no Preferred Directors on the
Board of Directors, by and only by a vote of the Majority Holders present and
voting as a single class, in person or by proxy, at a meeting of such Holders
called for such purpose, or by written consent without a meeting of the Majority
Holders. Unless such vacancy shall have been filled by the remaining Preferred
Directors or by written consent as aforesaid, such meeting shall be called by
the Secretary of the Corporation at the earliest practicable date after such
death, resignation or removal, and in any event within 10 days after the receipt
of a written request signed by the Holders of record of at least 25% of the
outstanding shares of the Convertible Preferred Stock taken as a single class.
(vii) STOCKHOLDERS= RIGHT TO CALL MEETING. If any meeting of
the Holders required by this subparagraph (b) to be called shall not have been
called within 10 days after personal service of a written request therefor upon
the Secretary of the Corporation or within 15 days after mailing the same within
the United States of America by registered mail addressed to the Secretary of
the Corporation at its principal office, subject to any applicable notice
requirements imposed by law or any national securities exchange on which any
Convertible Preferred Stock is then listed, then the Holders of record of at
least 25% of the then outstanding shares of the Convertible Preferred Stock may
designate in writing a Holder of the Convertible Preferred Stock to call such
meeting at the reasonable expense of the Corporation, and such meeting may be
called by such Person so designated upon the notice required for annual meetings
of stockholders or such shorter notice (but in no event shorter than permitted
by law or any national securities exchange on which the Convertible Preferred
Stock is then listed) as may be acceptable to the Majority Holders. Any Holder
of Convertible Preferred Stock so designated shall have reasonable access to the
stock books of the Corporation relating solely to the Convertible Preferred
Stock for the purpose of causing such meeting to be called pursuant to these
provisions.
(viii) QUORUM. At any meeting of the Holders called in
accordance with the provisions of this subparagraph (b) for the election or
removal of directors, the presence in person or by proxy of the Majority Holders
with the Holders of Convertible Preferred Stock voting as a single class shall
be required to constitute a quorum; in the absence of a quorum, a majority of
the Holders present in person or by proxy shall have power to adjourn the
meeting from time to time without notice, other than announcement at the
meeting, until a quorum shall be present.
Section 7. OUTSTANDING SHARES. For purposes of this Resolution, all
shares of Convertible Preferred Stock shall be deemed outstanding except (i)
from the date fixed for redemption pursuant to Section 5, all shares of
Convertible Preferred Stock that have been so called for redemption under
Section 5 if funds necessary for payment of the Redemption Price have been
irrevocably deposited in trust, for the account of the Holders of the shares so
to be redeemed (so as to be and continue to be available therefor), with a
corporation organized and doing business under the laws of the United States or
any State or territory thereof or of the District of Columbia (or a corporation
or other person permitted to act as a trustee by the Securities and Exchange
Commission), authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000 and subject to
supervision or examination by Federal, State or District of Columbia or
territorial authority; and (ii) from the date of registration of transfer, all
shares of Convertible Preferred Stock held of record by the Corporation or any
subsidiary of the Corporation.
Section 8. STATUS OF ACQUIRED SHARES. The Corporation shall take all
such actions as are necessary to cause any shares of Convertible Preferred Stock
redeemed by the Corporation, received upon conversion pursuant to Section 9, or
otherwise acquired by the Corporation, to be restored to the status of
authorized and unissued shares of Preferred Stock, without designation as to
series, and such shares may thereafter be issued, but not as shares of
Convertible Preferred Stock unless the other provisions of this Resolution have
been complied with.
Section 9. CONVERSION.
(a) Except as provided in the next succeeding sentence, each share of
the Convertible Preferred Stock shall be convertible at any time, after the
Requisite NYSE Shareholder Approval is obtained, at the option of the Holder
thereof, into validly issued, fully paid and non-assessable shares of the
Company Common Stock ("Conversion Shares") at the Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. Unless default be
made in the payment in full of the Redemption Price and any accrued and unpaid
dividends, shares of Convertible Preferred Stock called for redemption in
accordance with the terms herein shall cease to be convertible into Conversion
Shares at the close of business on the redemption date. The Conversion Price
shall be initially $5.25 per share. The number of Conversion Shares issuable
upon conversion of a share of Convertible Preferred Stock is determined by
dividing the Liquidation Price (inclusive of any accrued and unpaid dividends)
of a share of Convertible Preferred Stock by the Conversion Price in effect on
the Conversion Date (as hereinafter defined) and rounding the result to the
nearest 1/100th of a share. The Conversion Price shall be subject to adjustment
as provided below. Upon conversion, any accrued and unpaid dividends on the
Convertible Preferred Stock shall be paid to the Holder thereof in accordance
with the provisions of Section 3. If a holder converts more than one share at
the same time, the number of full shares issuable upon the conversion shall be
based upon the total number of shares converted.
(b) In order to convert shares of the Convertible Preferred Stock into
Conversion Shares, the Holder thereof shall surrender at the office of any
transfer agent for the Convertible Preferred Stock (or in the absence of any
transfer agent, the Corporation) the certificate or certificates therefor, duly
endorsed to the Corporation or in blank, and give written notice to the
Corporation at said office that he or she elects to convert such shares. Shares
of the Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date of surrender of such
shares for conversion in accordance with the foregoing provisions (hereinafter
the "Conversion Date"), and the person or persons entitled to receive Conversion
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Conversion Shares at such time. As promptly as
practicable after the Conversion Date, the Corporation shall issue and deliver
at said office the certificate or certificates for the number of full Conversion
Shares issuable upon such conversion, together with a cash payment in lieu of
any fraction of a Conversion Share, as hereinafter provided, to the person or
persons entitled to receive the same or to the nominee or nominees of such
person or persons.
(c) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Corporation shall (i) pay a dividend in shares
of any class of its Common Stock to all holders of such class, (ii) make a
distribution in shares of any class of its Common Stock to all holders of such
class, (iii) subdivide any of its outstanding Common Stock into a greater number
of shares, or (iv) combine any of its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior thereto shall
be adjusted so that the holder of any shares of Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive that number
of Conversion Shares representing the percentage of all outstanding shares of
Common Stock which the Holder would have owned had such Convertible Preferred
Stock been converted immediately prior to the happening of such event and the
Conversion Price shall be adjusted accordingly. An adjustment made pursuant to
this subsection (i) shall become effective immediately after the record date in
the case of a dividend in shares or distribution and shall become effective
immediately after the effective date in the case of subdivision or combination.
(ii) In case the Corporation shall issue Equity Equivalents to
all or substantially all holders of any class of its Common Stock or to any
other person (other than the Holders) entitling such person or persons to
subscribe for, purchase or otherwise acquire shares of Common Stock (or
securities in any manner representing the right to acquire Common Stock) at a
price per share that is less than the then Current Market Price per share of
Common Stock (as determined in accordance with subsection (v) below) at the
record date for the determination of shareholders entitled to receive such
Equity Equivalents on the date of issuance thereof or, with respect to issuances
to persons other than Holders, on the issue date, as applicable, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date or issue date, as applicable, by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on such record date or issue date, as applicable, plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered, (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Current Market Price (as defined
in subsection (iv) below), and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date or issue date, as
applicable, plus the number of additional shares of Common Stock offered (or
into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever any Equity Equivalents are
issued, and shall become effective immediately after such record date or such
sale date, as applicable. If at the end of the period during which such Equity
Equivalents are exercisable not all such Equity Equivalents shall have been
exercised, the adjusted Conversion Price shall be readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(iii) In case the Corporation shall distribute to all or
substantially all holders of any class of Common Stock any shares of capital
stock of the Corporation (other than Common Stock), evidences of indebtedness or
other non-cash assets (including securities of any company other than the
Corporation), or shall distribute to all or substantially all holders of any
class of Common Stock rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in subsection (ii) above), then in each
such case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the date of such distribution by a fraction of which the numerator
shall be the Current Market Price per share (as defined in subsection (iv)
below) of the Conversion Shares on the record date mentioned below less the fair
market value on such record date (as reasonably determined by the Board of
Directors, whose determination shall be conclusive evidence of such fair market
value) of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to one
share of Common Stock (determined on the basis of the number of shares of Common
Stock outstanding on the record date), and of which the denominator shall be the
Current Market Price per share (as defined in subsection (iv) below) of the
Conversion Shares on such record date. Such adjustment shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such distribution.
Notwithstanding the foregoing, in the event that the
Corporation shall distribute rights or warrants (other than those referred to in
subsection (ii) above) ("Rights") pro rata to holders of any class of Common
Stock, the Corporation may, at its option, in lieu of making any adjustment
pursuant to this Section 9, make proper provision so that each holder of
Convertible Preferred Stock who converts such stock (or any portion thereof)
after the record date for such distribution and prior to the expiration or
redemption of the Rights shall be entitled to receive upon such conversion, in
addition to the shares of Conversion Stock issuable upon such conversion, a
number of Rights to be determined as follows: (i) if such conversion occurs on
or prior to the date for the distribution to the holders of Rights of separate
certificates evidencing such Rights (the "Distribution Date"), the same number
of Rights to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(iv) For the purpose of any computation under subsections (ii)
and (iii) of this Section 9(c), the current market price (the "Current Market
Price") per Conversion Share on any date shall be deemed to be equal to the
average of the daily closing prices of the Common Stock on the NYSE or, if not
then listed or traded on the NYSE, such other exchange, market or system that
the Common Stock is then listed or traded on for the 10 trading days immediately
prior to the record date or date of issuance with respect to distributions,
issuances or other events requiring such computation under subsection (ii) or
(iii) above; provided that in the case of an underwritten public offering of
Equity Equivalents which are currently traded, the Current Market Price shall be
the closing price of the Common Stock on the issuance date, less an allowance
for a customary discount to the current market trading price which is reasonably
required to effect such offering. The closing price for each day shall be the
closing price on the NYSE or the last reported sales price or, if the Conversion
Shares are not listed or admitted to trading on the NYSE, on the principal
national securities exchange on which the Conversion Shares are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the closing sales price of the Conversion Shares as quoted
by NASDAQ or, in case no reported sale takes place, the average of the closing
bid and asked prices as quoted by NASDAQ or any comparable system or, if the
Conversion Shares are not quoted on NASDAQ or any comparable system, the closing
sales price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose. If no such prices are available, the Current
Market Price per share shall be the fair value of a Conversion Share as
reasonably determined by the Board of Directors.
(v) In any case in which this Section 9 shall require that an
adjustment be made following a record date the Corporation may elect to defer
(but only until five Business Days following the mailing by the Corporation to
the holders of the notice of adjustment described in subsection (ix) below)
issuing to the Holder of any Convertible Preferred Stock converted after such
record date the Conversion Shares and other capital stock of the Corporation
issuable upon such conversion over and above the Conversion Shares and other
capital stock of the Corporation issuable upon such conversion only on the basis
of the Conversion Price prior to adjustment; and, in lieu of the shares the
issuance of which is so deferred, the Corporation shall issue or cause its
transfer agents to issue due bills or other appropriate evidence prepared by the
Corporation of the right to receive such shares. If any distribution in respect
of which an adjustment to the Conversion Price is required to be made as of the
record date therefor is not thereafter made or paid by the Corporation for any
reason, the Conversion Price shall be readjusted to the Conversion Price which
would then be in effect if such record date had not been fixed or such effective
date had not occurred.
(vi) NO ADJUSTMENT. No adjustment in the Conversion Price
shall be required unless the adjustment would require an increase or decrease of
at least 1% in the Conversion Price as last adjusted; provided, however, that
any adjustments which by reason of this subsection (vi) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in
paragraph (c)(i), (ii) or (iii) above if all Holders of Convertible Preferred
Stock are entitled to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction. The Corporation shall give 30 days prior notice to any transfer
agent and to the Holders of the Convertible Preferred Stock of any such
determination.
No adjustment need be made for (a) issuances of Common Stock
pursuant to a Corporation plan for reinvestment of dividends or interest, (b) a
change in the par value or a change to no par value of the Common Stock and (c)
the issuance of Common Stock to directors, officers and employees of the
Corporation and its subsidiaries pursuant to any stock-based incentive plan duly
approved by the Board of Directors or any duly authorized committee or delegee
thereof.
To the extent that the Convertible Preferred Stock becomes
convertible into the right to receive cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(vii) ADJUSTMENT FOR TAX PURPOSES. The Corporation shall be
entitled to make such reductions in the Conversion Price, in addition to those
required by other provisions of this Section 9, as it in its discretion shall
determine to be advisable in order that any stock dividends, subdivisions of
shares, distributions of rights to purchase stock or securities or distributions
of securities convertible into or exchangeable for stock hereafter made by the
Corporation to its shareholders shall not be taxable.
(viii) NOTICE OF ADJUSTMENT. Whenever the Conversion Price is
adjusted, the Corporation shall promptly mail to holders of the Convertible
Preferred Stock and to the transfer agent a notice of the adjustment briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence of the correctness of such adjustment.
(ix) NOTICE OF CERTAIN TRANSACTIONS.
In the event that:
(A) the Corporation takes any action which would require an adjustment in
the Conversion Price;
(B) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and shareholders of the
Corporation must approve the transaction (excluding the Delaware
Reincorporation); or
(C) there is a dissolution or liquidation of the Corporation,
the Corporation shall mail to holders of the Convertible Preferred Stock and to
any transfer agent a notice stating the proposed record or effective date, as
the case may be. The Corporation shall mail the notice at least 10 days before
such date. Failure to mail such notice or any defect therein shall not affect
the validity of any transaction referred to in clause (A), (B) or (C) of this
Section 9(c)(ix).
(x) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE
ON CONVERSION PRIVILEGE. If any of the following (which shall not include the
Delaware Reincorporation) shall occur, namely: (a) any reclassification or
change of Conversion Shares issuable upon conversion of the Convertible
Preferred Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination, or any other change for which an adjustment is provided in (c)(i),
(ii) or (iii) above); (b) any consolidation or merger to which the Corporation
is a party other than a merger in which the Corporation is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock; or (c) any sale or
conveyance of all or substantially all of the assets of the Corporation as an
entirety, then the Corporation, or such successor or purchasing corporation, as
the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale or conveyance, ensure that effective
provision be made in the certificate of incorporation of the resulting or
surviving corporation or otherwise that each holder of Convertible Preferred
Stock then outstanding shall have the right to convert such Convertible
Preferred Stock into the kind and amount of shares of stock and other securities
and property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Conversion Stock deliverable upon conversion of such Convertible Preferred Stock
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance, and that the Conversion Price shall continue to be subject to
adjustment which shall be as nearly equivalent as may be practicable to the
adjustments of the Conversion Price provided for in this Section 9. If in the
case of any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Conversion Stock include shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then effective provision
shall also be made in the certificate of incorporation of such other corporation
or otherwise of such additional antidilution provisions as are necessary to
protect the interests of the holders of the Convertible Preferred Stock by
reason of the foregoing. The provisions of this Section 9(c)(x) shall similarly
apply to successive consolidations, mergers, sales or conveyances.
Section 10. REPORTS. So long as the Convertible Preferred Stock remains
outstanding, the Corporation shall cause its annual reports to stockholders and
any quarterly or other financial reports and information furnished by it to
stockholders pursuant to the requirements of the Exchange Act, to be mailed to
the holders of the Convertible Preferred Stock (contemporaneously with the
mailing of such materials to the Corporation=s stockholders) at their addresses
appearing on the books of the Corporation. If the Corporation is not required to
furnish annual or quarterly reports to its stockholders pursuant to the Exchange
Act, it shall cause its financial statements, including any notes thereto (and
with respect to annual reports, an auditors= report by a nationally recognized
firm of independent certified public accounts), a "Management=s Discussion and
Analysis of Financial Condition and Results of Operations" and such other
information which the Corporation would otherwise by required to include in
annual and quarterly reports filed under the Exchange Act, to be mailed to the
holders of the Convertible Preferred Stock, within 120 days after the end of
each of the Corporation=s fiscal years and within 60 days after the end of each
of its first three fiscal quarters.
Section 11. SEVERABILITY OF PROVISIONS. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
BYLAWS
OF
AMERICAN SKIING COMPANY
(f/k/a ASC DELAWARE, INC.)
Adopted: October 7, 1999
ARTICLE I
Name
Section 1. Name. The name of this corporation is stated in the
Certificate of Incorporation, as amended by the Certificate of Ownership and
Merger Merging American Skiing Company into ASC Delaware, Inc. filed with the
Secretary of State of Delaware on or about October 8, 1999.
ARTICLE II
References, Locations and Seal
Section 1. References. References in these Bylaws to the Certificate of
Incorporation shall mean this corporation's Certificate of Incorporation as
amended from time to time as on file with the Secretary of State of Delaware.
References in these Bylaws to the Delaware General Corporation Law and to
particular sections of said Law are to said Law and said sections as amended
from time to time. The headings of Articles and Sections in these Bylaws are for
convenience only, and shall not be taken into account in construing these
Bylaws.
Section 2. Office and Location. The registered office of this
corporation in Delaware and the municipality or other place in Delaware where it
is located are set forth in the Certificate of Incorporation. The principal
office and place of business of this corporation, within or without Delaware or
Maine, shall be at such place as the Board of Directors shall from time to time
fix.
Section 3. Seal. The seal of this corporation shall be circular in form
with the name of the corporation, the word "Delaware" and the year of its
incorporation so engraved on its face that it may be embossed on paper by
pressure, provided that the Board of Directors may adopt a wafer seal in any
form in respect of any particular document, in which case such wafer seal
affixed to such document shall be the corporate seal of this corporation thereon
for all purposes provided by law. The Secretary shall have custody of the
corporate seal and he or the Assistant Secretary may affix the same to documents
requiring it and attest the same. The Secretary may permit the President or
Assistant Secretary to keep a duplicate of the corporate seal.
ARTICLE III
Meetings of Shareholders
Section 1. Place. All meetings of shareholders shall be held at the
registered office of the corporation or at such other place within or without
Delaware as shall be fixed (i) by the Board of Directors, (ii) by the person or
persons calling the meeting, or (iii) in waivers of notice of the meeting signed
by all persons entitled to notice thereof.
Section 2. Date of Annual Meeting. The annual meeting of shareholders
shall be held on the third Monday of November in each year, if not a legal
holiday, and if a legal holiday, then on the next business day following, at
10:00 A.M., Local Time, or at such other hour as may be fixed by the President
or Board of Directors, for the election of a Board of Directors, and for the
transaction of such other business as may properly come before the meeting. The
annual meeting of shareholders may likewise be held at any date and time fixed
by the President or Board of Directors during a period of 30 days after the date
hereinabove specified. If there shall be a failure for whatever reason to hold
the annual meeting for a period of 30 days after the date hereinbefore
specified, a substitute annual meeting of shareholders may be called by any
person or persons entitled to call a special meeting of shareholders.
Section 3. Call of Special Meetings. Special meetings of shareholders
for any purpose or purposes may be called to be held at the date and time fixed
in the call by the President, the Chairman of the Board of Directors (if any), a
majority of the Board of Directors, or the holders of not less than 50% of the
shares entitled to vote at the meeting.
Section 4. Notice. Unless waived in the manner prescribed by law,
written notice stating the place, day and time of the meeting and, in case of a
special meeting or when otherwise required by the Delaware General Corporation
Law, the purpose or purposes for which the meeting is called, shall be delivered
within the time period prescribed in ss. 222 of the Delaware General Corporation
Law, either personally or by mail, by or at the direction of the President,
Secretary, , or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting, and to shareholders of record not
entitled to vote when required by the Delaware General Corporation Law.
ARTICLE IV
Quorum and Voting of Shares
Section 1. Quorum. The holders of a majority of the shares entitled to
vote thereat shall constitute a quorum at a meeting of shareholders.
Section 2. Votes. Except as otherwise provided by the Delaware General
Corporation Law, any corporate action shall be authorized by a majority of the
votes cast at the meeting by the holders of shares entitled to vote on the
subject matter. In elections of Directors, those candidates who receive the
greatest number of votes cast at the meeting by the holders of shares entitled
to vote to elect Directors, even though not receiving a majority of the votes
cast, shall be deemed elected.
ARTICLE V
Directors
Section 1. Number and Term. The number of Directors shall be fixed by
resolution of the shareholders or the Board of Directors within the limits
specified in the Certificate of Incorporation. The Directors shall be elected at
the annual meeting of the shareholders, and each Director so elected shall hold
office for one year and until the next succeeding annual meeting and until his
successor shall have been elected and qualified, or until his earlier
resignation, removal from office, death or incapacity.
Section 2. Vacancies, Resignation and Removal. Except as otherwise
provided in the Certificate of Incorporation, any vacancy in the Board of
Directors, including newly created directorships created by an increase in the
number of Directors, may be filled by a majority of the remaining Directors or
by the sole remaining Director. Any Director may resign his office by delivering
a written resignation to the President or Secretary.
Section 3. Powers. In the management and control of the business,
property and affairs of the corporation, the Board of Directors is hereby vested
with the power to authorize any and all corporate action, except when
shareholder action is specifically required by the Delaware General Corporation
Law, the Certificate of Incorporation or these Bylaws.
Section 4. Special Voting Requirements. For so long as the initial
purchasers of the corporation's 8.50% Series B Convertible Participating
Preferred Stock, par value $.01 per share (the "Series B Preferred")
beneficially own at least 20% of the aggregate outstanding shares of Class A
Common Stock and Common Stock of the corporation (on a Fully Diluted Basis) (as
defined in the Stockholders' Agreement, dated as of August 6, 1999 (the
"Stockholders' Agreement") by and among American Skiing Company, a Maine
corporation (to which this corporation is successor by merger), Leslie B. Otten
and the other parties named therein), the corporation shall not take the actions
listed in clauses (i) through (ix) below without the affirmative vote of at
least one Stockholder Director (as defined in the Stockholders' Agreement),
either as part of the vote of the full Board of Directors or of the Executive
Committee.
(i) Approval of an annual operating and capital budget, which
shall include operating plans, detailed capital expenditure plans and a
business plan (the "Budget"), which Budget will include, without
limitation:
(A) detailed operating assumptions relating to,
without limitation, (1) pricing, (2) expected skier visits,
(3) an explanation of changes in operating cost from the prior
year, (4) head-count and expected seasonal head-count, (5)
departmental "sales, general and administrative" expenses,
including marketing plans and related budgets, and (6) a
detailed analysis of all required capital expenditures,
including return on investment analysis and a prioritization
of both growth and maintenance capital expenditures;
(B) planned material acquisitions, divestitures and
other development decisions (1) involving more than $2,000,000
in the aggregate or (2) reasonably expected to have an impact
of 5% or more on the corporation's consolidated revenues or
earnings;
(C) overall corporate strategy, including actions
that involve repositioning the corporation, commencing new
lines of business or significantly expanding lines of existing
business (other than the skiing business) or making material
investments in joint ventures or non-controlled operating
companies;
(D) requirements for capital in accordance with the
Budget, including, without limitation, planned material
financings (whether in the form of debt or equity), including
(1) issuance of debt or equity securities, (2) entering into
material new credit or financing agreements, (3) materially
increasing lines of credit or making material changes in
existing credit arrangements, (4) pledging material assets,
(5) the payment of dividends on outstanding capital stock of
the corporation and (6) any redemption or repurchase of
capital stock of the corporation, other than (x) the
redemption or repurchase of the Series B Preferred and (y)
redemptions in accordance with the terms of an Employee Plan
(as defined in the Stockholders' Agreement); and
(E) a "materiality" standard for variations in the
Budget requiring Board of Directors' approval.
(ii) Significant executive personnel decisions (other than
terminations), including, without limitation, hiring decisions or
decisions materially changing the compensation or responsibilities of
any Executive (as defined in the Stockholders' Agreement) and the chief
executive officer of the corporation.
(iii) Material actions that are likely to affect the
corporation's operating and strategic direction that are reasonably
expected or likely to have an impact of 5% or more on the corporation's
consolidated revenues or earnings.
(iv) Any amendment to the corporation's Certificate of
Incorporation or Bylaws.
(v) Any voluntary liquidation, dissolution, winding up,
recapitalization or reorganization of the corporation.
(vi) Initiation of material litigation other than with respect
to any counterclaim made by the corporation in response to any claim
made by a third party.
(vii) Any merger, consolidation or other business combination
of the corporation with or into another person or entity or any sale of
all or substantially all the assets of the corporation or any of its
Material Subsidiaries (as defined in the Stockholders' Agreement).
(viii) Material changes to or reduction in insurance coverage.
(ix) Material financing or capital markets activity not
expressly provided in the Budget.
ARTICLE VI
Meetings of the Board of Directors
Section 1. Annual Meeting. The first meeting of each newly elected
Board of Directors, which shall be the Annual Meeting of the Board of Directors,
shall be held at such time and place as shall be fixed by the shareholders at
their meeting electing them, or if no such time and place are so fixed, said
first meeting shall be held at the place of and immediately following such
meeting of shareholders. In either event, no notice of such meeting shall be
necessary. Such meeting of the Board of Directors may also convene at such place
and time as shall be fixed by the consent in writing of all the Directors.
Section 2. Regular Meetings. Regular meetings of the Board of Directors
may be held at such time and place as shall from time to time be fixed by the
Board of Directors, and shall be held at least four (4) times in each fiscal
year commencing August, 2000 and at least six (6) times in the fiscal year
ending in July, 2000. Unless action is to be taken with respect to the
Certificate of Incorporation or Bylaws, no notice of such regular meetings shall
be necessary.
Section 3. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors (if any), President,
Secretary or any other person or persons authorized by the Delaware General
Corporation Law. The person or persons calling the special meeting shall fix the
time and place thereof.
Section 4. Notice; Generally. Notice of each special meeting of the
Board of Directors shall be given to each Director who has not signed a waiver
of notice before or after the meeting. Notices of meetings of the Board of
Directors shall be given by the Secretary or the person or persons calling the
meeting. Neither the business to be transacted at nor the purpose of the meeting
need be specified in the notice unless the Delaware General Corporation Law
shall otherwise require. The giving of notice of a special meeting of the Board
of Directors by or at the direction of the person or persons authorized to call
the same shall constitute the call thereof.
Section 5. Notice; When and How Given. Notice of meetings of the Board
of Directors may be given by any of the following methods within the time period
specified for that method:
(a) by depositing a copy of the notice in the United States mail, first
class postage prepaid, addressed to the Director at his usual or last
known business or residence address, at least 3 business days before
the meeting;
(b) by delivering a copy of the notice to a recognized overnight
delivery or express service addressed to the Director at his usual or
last known business or residence address, including street or the like
in the address, at least 2 business days before the meeting;
(c) by delivering a copy of the notice in hand to the Director at
least 24 hours before the meeting;
(d) by reading or causing to be read the notice over the telephone to
the Director at least 24 hours before the meeting;
(e) by sending a telegram containing the contents of the notice
addressed to the Director at his usual or last known business or
residence address at least 2 business days before the meeting;
(f) by transmitting the contents of the notice by telecopy, fax or any
other electronic means for the simultaneous or substantially
simultaneous transmission of data to a telephone or other number held
out by the Director as a number maintained by him for the receipt of
the means of transmission selected at least 24 hours before the
meeting; or
(g) by sending a copy of the notice by any usual means of communication
addressed to the Director at his usual or last known business or
residence address, including street or the like in the address, at
least 3 business days before the meeting.
Notice to any Director actually received by him at least 24 hours before the
meeting shall be deemed sufficient, notwithstanding the method or means of
communication selected or the time when sent. For the purposes of this Section,
a "business day" is any day other than a Saturday, Sunday or legal holiday in
Maine.
ARTICLE VII
Executive and Other Committees
Section 1. Establishment; Authority. The Board of Directors, by a
resolution adopted by a majority of the Directors then in office, may designate
from among its members an executive committee and other committees, each
consisting of 2 or more Directors, and may delegate to such committee or
committees any part or all of the authority of the Board of Directors, except as
otherwise provided by ss. 141(c)(2) of the Delaware General Corporation Law.
Without limitation of the foregoing, no Employee Plan (as defined in the
Stockholders' Agreement) may be adopted or amended in any material respect
without the approval of the compensation and stock bonus (or equivalent)
committee, which approval must include the affirmative vote of at least one (1)
Stockholder Director (as defined in the Stockholders' Agreement).
Section 2. Procedures. Vacancies in the membership of a committee shall
be filled by resolution adopted by a majority of the Directors then in office.
Committees shall keep minutes of their proceedings and report the same to the
Board of Directors. Members of a committee may be removed from office, with or
without cause, by resolution adopted by a majority of the Directors then in
office. Any person or persons authorized to call a meeting of the Board of
Directors, as well as the chairman of a committee or the committee itself, may
call a meeting of a committee. Except as hereinbefore otherwise provided, so far
as applicable, the provisions of these Bylaws relating to the calling, noticing
and conduct of meetings of the Board of Directors shall govern the calling,
noticing and conduct of meetings of committees.
ARTICLE VIII
Officers
Section 1. Number. The officers of the corporation shall be elected by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors may also elect one or more Vice Presidents (one of whom
may be designated by the Board of Directors as the Executive Vice President),
and one or more Assistant Secretaries and Assistant Treasurers.
Section 2. When Chosen; Qualifications; Term; Removal. The Board of
Directors at its initial meeting after the incorporation of the corporation and
at each Annual Meeting thereafter shall elect said officers, who shall hold
office until the next Annual Meeting of the Board of Directors and thereafter
until their successors are chosen and have qualified, or until their earlier
death, resignation or removal from office.
The President (and any other officer which may at any time be deemed to
be the chief executive officer, if the President is not so identified) may be
removed only by the affirmative vote of at least (a) seven (7) directors, in the
event that there are eleven (11) directors, (b) six (6) directors (including at
least one Independent Director (as defined in the Stockholders' Agreement)) in
the event that there are ten (10) directors, (c) two-thirds of the directors
(including at least one Independent Director), in the event that there are fewer
than ten (10) directors, or (d) a majority of the directors (including at least
one Independent Director) in the event that there are more than eleven (11)
directors.
The President shall have sole authority to remove the chief operating
officer, the chief financial officer or the general counsel of the corporation,
or the chief operating officer (or equivalent position) of American Skiing
Company Resort Properties, Inc., but only after having sought (but not
necessarily obtained) the approval of the Executive Committee and the Board of
Directors at duly called meetings thereof.
Section 3. Authority and Duties. Each officer shall have such authority
and perform such duties as are set forth in the Delaware General Corporation Law
or in these Bylaws, and as shall be determined from time to time by the Board of
Directors. Each officer shall also have such authority and perform such duties
as are usually incumbent upon his office except as the same may be limited from
time to time by the Board of Directors.
Section 4. Compensation of Officers. The compensation of all officers
of the corporation shall be fixed by the Board of Directors.
Section 5. President. The President shall be the chief executive
officer of the corporation, shall preside at all meetings of the shareholders
and of the Board of Directors at which he is present, and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 6. Vice President. The Vice President, if any, or if there
shall be more than one, the Vice Presidents in the order determined by the Board
of Directors, shall, in case of the absence or disability of the President, have
the authority and perform the duties of the President. If the Board of Directors
shall elect an Executive Vice President, it shall be presumed that he is the
Vice President determined by the Board of Directors first to act in case of the
absence or disability of the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and the shareholders and record all the proceedings of the
Board of Directors and the shareholders in a book or books kept for that
purpose. The Secretary shall perform like duties for the executive committee.
The Secretary or an Assistant Secretary may certify all votes, resolutions and
actions of the shareholders and the Board of Directors and its committees.
Section 8. Assistant Secretaries. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries, in the order determined by the
Board of Directors, shall, in case of the absence or disability of the
Secretary, have the authority and perform the duties of the Secretary.
Section 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, and shall deposit all such funds in the name and
to the credit of the corporation in such depositories as may be designated by
the Board of Directors. The Treasurer shall keep or cause to be kept all books
and records of account and shall prepare or cause to be prepared all financial
statements required by the Delaware General Corporation Law, the Board of
Directors or good accounting practices. The Treasurer shall render to the Board
of Directors, whenever required, accounts of all corporate financial
transactions and of the financial condition of the corporation.
Section 10. Assistant Treasurers. Except as hereinbefore provided, the
Assistant Treasurer, or, if there shall be more than one, the Assistant
Treasurers, in the order determined by the Board of Directors, shall, in case of
the absence or disability of the Treasurer, have the authority and perform the
duties of the Treasurer.
ARTICLE IX
Voting Shares of Other Corporations
Section 1. Voting Shares of Other Corporations. The Chairman of the
Board of Directors, if any, the President, any Vice President, the Secretary,
and the Treasurer of this corporation, in that order, shall have authority to
vote shares of other corporations standing in the name of this corporation, and
the President or the Secretary is authorized to execute and deliver in the name
and on behalf of this corporation proxies appointing any one or more of the
foregoing officers as the proxy agents of this corporation.
ARTICLE X
Lost Stock Certificates
Section 1. Lost Stock Certificates. The Board of Directors may
authorize, generally or in a specific case, the appropriate officers to execute
and deliver a replacement certificate for shares of this corporation in
substitution for any certificate for shares theretofore issued alleged to have
been lost, destroyed or stolen. Unless waived by the Board of Directors, the
officers executing the replacement certificate shall require the registered
holder thereof to sign and swear to an affidavit of loss and indemnity agreement
in such form as shall be prescribed by the Secretary. In addition, the Board of
Directors may prescribe such other terms and conditions precedent to the
issuance of replacement certificates, including without limitation the
requirement of further indemnities and surety bonds or insurance policies, as it
deems appropriate to protect the corporation and its officers and agents from
any claim that may be made against it or them with respect to any such
certificate alleged to have been lost, destroyed or stolen. The powers and
duties of the Board of Directors prescribed in this ARTICLE X may be delegated
in whole or in part to any registrar or transfer agent for this corporation.
ARTICLE XI
Transfers and Registration of Shares
Section 1. Stock Transfer Books. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction recorded in the
original stock transfer books of the corporation, provided that the provisions
of Article XV of these Bylaws respecting restrictions on transfers of shares
have been complied with. The original issue of shares of this corporation shall
likewise be recorded in the original stock transfer books of the corporation.
Section 2. Registered Shareholders. The corporation shall be entitled
to recognize the person or persons shown on its original stock transfer books as
the owner of shares as the exclusive and only owner thereof for all purposes,
including without limitation the right to (i) receive dividends and other
distributions; (ii) vote (except as otherwise provided in the Delaware General
Corporation Law); and (iii) examine lists, books, minutes or other materials
relating to the corporation. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person not noted in its original stock transfer books, whether or not it shall
have express or other notice thereof.
ARTICLE XII
Indemnification
Section 1. Definitions. For all purposes of this Article, (i) the term
"Officer" (when capitalized, but not otherwise) shall mean any person who is or
was a Director, the President, the Treasurer, or the Secretary of this
corporation; (ii) the term "Employee" (when capitalized, but not otherwise)
shall mean any other person (whether or not a common law employee) who is or was
an officer, employee or agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan, or other enterprise; and (iii) the term
"Claimant" (when capitalized, but not otherwise) shall mean any Officer or
Employee seeking indemnification under this Article.
Section 2. Indemnification. This corporation shall in all cases
indemnify any Officer, and shall have power exercisable by its Board of
Directors as provided in Section 5 hereof to indemnify any Employee, who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, (other than an action by or in the right of the corporation) by
reason of the fact that the Claimant is or was an Officer or Employee, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement to the extent actually and reasonably incurred by the Claimant in
connection with such action, suit or proceeding if the Claimant:
A. Acted in good faith and in a manner that, in the Claimant's
reasonable belief, was in or not opposed to the best interests of this
corporation; or
B. With respect to any criminal action or proceeding, had no reasonable
cause to believe that the Claimant's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order or
conviction adverse to the Claimant, or by settlement or plea of nolo contendere
or its equivalent, shall not of itself create a presumption that the Claimant
did not act in good faith and in a manner that, in the Claimant's reasonable
belief ,was in or not opposed to the best interests of this corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the Claimant's conduct was unlawful.
Section 3. Derivative Actions. The corporation shall indemnify any
Officer, and shall have power exercisable by its Board of Directors as provided
in Section 5 hereto to indemnify any Employee, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of this corporation to procure a judgment in its favor
by reason of the fact that the person is or was an Officer or Employee against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the Claimant acted in good faith and in a manner the Claimant reasonably
believed to be in or not opposed to the best interests of this corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such Claimant shall have been adjudged to be liable to this
corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such Claimant is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Section 4. When Defense Successful. Any provisions of Sections 2, 3 or
5 hereof to the contrary notwithstanding, to the extent that a Claimant has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 2 or 3, or in defense of any claim, issue or
matter therein, the Claimant shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred in connection therewith.
Section 5. Determination in Specific Cases. Any indemnification under
Section 2 or 3 hereof, unless ordered by a court or required by Section 4
hereof, shall be made by this corporation only as authorized in the specific
case upon a determination that indemnification of the Claimant is proper in the
circumstances because the person has met the applicable standard of conduct set
forth in Section 2 or 3 hereof, as applicable, and in the best interests of this
corporation. Where such a case specific determination is required, that
determination shall be made, with respect to a Claimant who is a director or
officer of this corporation at the time of such determination, by the Board of
Directors by a majority vote of the Directors who were not parties to the
action, suit or proceeding, even though less than a quorum, or by a committee of
such directors designated by a majority vote of such directors, even though less
than a quorum, or if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or by the
shareholders. Such a determination once made may not be revoked and, upon the
making of that determination, the Claimant may enforce the indemnification
against this corporation by a separate action notwithstanding any attempted or
actual subsequent action by the Board of Directors.
Section 6. Advances of Expenses. Expenses incurred by or in behalf of a
Claimant in defending a civil, criminal, administrative or investigative action,
suit or proceeding (i) in the case of a Claimant who is an Employee may be
authorized and paid by this corporation in advance of the final disposition of
that action, suit or proceeding upon a determination made in accordance with the
procedure established in Section 5 hereof that, based solely on the facts then
known to those making the determination and without further investigation, such
Claimant satisfies the standard of conduct prescribed by Section 2 or Section 3
hereof, as applicable, and (ii) in the case of a Claimant who is an Officer
shall in all cases be paid, as reasonably requested from time to time by the
Officer, and in the case of an Employee, may (subject to clause (i) of this
Section 6) be paid, by this corporation in advance of the final disposition of
the action, suit or proceeding upon receipt by this corporation, at the time of
the initial advance, of a written undertaking by or on behalf of it to repay all
amounts advanced if it is ultimately determined that the Claimant is not
entitled to be indemnified by this corporation as authorized in this Article
XII.
The undertaking described in clause (ii) shall be an unlimited general
obligation of the Claimant seeking the advance, but need not be secured and may
be accepted without reference to financial ability to make the repayment.
Section 7. Indemnification Not Exclusive. The indemnification and
entitlement to advances of expenses provided by this Article shall not be deemed
exclusive of any other rights to which a Claimant may be entitled under any
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in the Claimant's official capacity and as to action in another
capacity while holding an office with this corporation, and shall continue as to
a person who has ceased to be a director, officer, employee, agent, trustee,
partner or fiduciary and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of such a person.
Section 8. Enforceable By Separate Action. A right to indemnification
required by this Article or established pursuant to the provisions of this
Article may be enforced by a separate action against this corporation, if an
order for indemnification has not been entered by a court in any action, suit or
proceeding in respect to which indemnification is sought.
Section 9. Miscellaneous. For purposes of this Article, (i) references
to this "corporation" shall include, in addition to the surviving corporation or
new corporation, any participating corporation in a consolidation or merger;
(ii) this corporation shall be deemed to have requested a person to serve an
employee benefit plan whenever the performance by him of his duties to this
corporation also imposes duties on, or otherwise involves services by, him to
the plan or participants or beneficiaries of the plan; and (iii) excise taxes
assessed on a person seeking indemnification with respect to an employee benefit
plan pursuant to applicable law shall be deemed "fines".
Section 10. Amendment. Any amendment, modification or repeal of this
Article shall not deny, diminish or otherwise limit the rights of any Claimant
to indemnification or advances hereunder with respect to any action, suit or
proceeding arising out of any conduct, act or omission occurring or allegedly
occurring at any time prior to the date of such amendment, modification or
repeal.
ARTICLE XIII
Fiscal Year
Section 1. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XIV
Execution of Documents
Section 1. Execution of Documents. Unless the Board of Directors,
Executive Committee or shareholders shall otherwise generally or in any specific
instance provide:
A. Any bill, note or negotiable instrument may be signed or endorsed in
the name and on behalf of this corporation in the ordinary course of
business by the President or Treasurer, acting singly;
B. The President or Treasurer, acting singly, shall in the ordinary
course of business have authority to sign or endorse in the name and on
behalf of this corporation all checks and other orders for the payment
of money drawn on any bank or trust company;
C. The President or Treasurer, acting singly, shall have authority to
make, in the name and on behalf of this corporation, all contracts in
the ordinary course of business; and
D. Any other instrument, document, deed, bill of sale or other writing
of whatever nature to be executed in the ordinary course of business
may be executed in the name and on behalf of this corporation by the
President or Treasurer, acting singly, and either officer may seal,
acknowledge and deliver the same.
Section 2. Assistants. Vice Presidents and Assistant Treasurers shall
not have the authority provided in Section 1 unless granted by the Board of
Directors generally or in any specific instance.
ARTICLE XV
Amendments to Bylaws
Section 1. Amendments. Subject to the provisions of Article V, Section
4, the Board of Directors shall have the power to alter, amend or repeal these
Bylaws, and to adopt new Bylaws, provided that the notice, unless notice shall
be duly waived, of any regular or special meeting at which such action is to be
taken shall either set out the text of the proposed new Bylaw or amendment or
Bylaw to be repealed, or shall summarize the changes to be effected by such
adoption, amendment or repeal, and provided further that the shareholders may
amend or repeal a Bylaw provision adopted by the Board of Directors and in such
case the Board of Directors may not, for two years thereafter, amend or readopt
the Bylaw provision thus amended or repealed by the shareholders.
STOCK CERTIFICATE
AMERICAN SKIING COMPANY
[LOGO]
COMMON STOCK COMMON STOCK
NUMBER SHARES
AMERICAN SKIING COMPANY
INCORPORATED UNDER THE LAWS
OF THE STATE OF MAINE
CUSIP 029654 30 8
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS IS TO CERTIFY THAT
is the owner of
STATE OF INCORPORATION CHANGED TO DELAWARE
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK $.01 PAR VALUE OF
AMERICAN SKIING COMPANY transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Articles of Incorporation of the Corporation and all amendments thereof to all
of which the holder by the acceptance hereof assents. This certificate is not
valid unless countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated
/s/ Christopher E. Howard /s/ Leslie B. Otten
------------------------- -----------------------------
CHIEF ADMINISTRATIVE OFFICER CHIEF EXECUTIVE OFFICER
AND CLERK AND PRESIDENT
[SEAL OF AMERICAN SKIING COMPANY 1997 APPEARS HERE]
COUNTERSIGNED AND REGISTERED:
BankBoston, N.A.
(Boston, MA)
Transfer Agent
And Registrar
By: ___________________________
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS OF EACH SUCH CLASS OF STOCK OR
SERIES THEREOF. ANY SUCH REQUEST SHOULD BE MADE TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR TO THE TRANSFER AGENT AND
REGISTRAR.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the entireties --------------
JT TEN -- as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common
Act__________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of the capital stock represented by within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------------
--------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAMES AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- -----------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
EXECUTION COPY
STOCKHOLDERS' AGREEMENT
Among
AMERICAN SKIING COMPANY,
OAK HILL CAPITAL PARTNERS, L.P.,
THE OTHER ENTITIES NAMED IN ANNEX A HERETO
and
LESLIE B. OTTEN
Dated as of August 6, 1999
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated August 6, 1999 (this
"Agreement") among OAK HILL CAPITAL PARTNERS, L.P., a Delaware limited
partnership ("Oak Hill") and the other entities identified in Annex A attached
hereto (together with Oak Hill, the "Stockholders"), LESLIE B. OTTEN ("Mr.
Otten") and AMERICAN SKIING COMPANY, a Maine corporation (the "Company").
WHEREAS, the execution and delivery of this Agreement is a
condition to the obligations of the Company and the Stockholders under the
Preferred Stock Subscription Agreement dated July 9, 1999 by and between the
Company and the Stockholders (the "Subscription Agreement"), pursuant to which
the Company shall sell to the Stockholders, and the Stockholders shall purchase
from the Company, the Company's 8.5% Series B Convertible Participating
Preferred Stock, par value $.01 per share (the "Series B Preferred"), upon the
terms and subject to the conditions set forth in the Subscription Agreement;
WHEREAS, upon consummation of the transaction contemplated by
the Subscription Agreement, the Stockholders will beneficially own an aggregate
of 150,000 shares of Series B Preferred, each of which may be convertible into
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"); and
WHEREAS, the Company, Mr. Otten and the Stockholders now wish
to enter into this Agreement to set forth their agreement as to the matters set
forth herein with respect to, among other things, representation on the
Company's Board of Directors (the "Board") and the Transfer (as defined below)
of the Restricted Securities (as defined below);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company, Mr. Otten and the Stockholders hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ( Unless otherwise defined in this
Agreement, capitalized terms are used herein as defined in the Subscription
Agreement.
(b) As used in this Agreement, the following terms shall have
the following meanings:
<PAGE>
2
"Affiliate" has the meaning set forth in Rule 12b-2, as in
effect on the date hereof, under the Exchange Act.
"Associate" has the meaning set forth in Rule 12b-2, as in
effect on the date hereof, under the Exchange Act.
"Beneficially Own" has the meaning set forth below:
A Person shall be deemed to "Beneficially Own" any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3 of
the Exchange Act, as in effect on the date of this Agreement;
(ii) which are Beneficially Owned, directly or indirectly, by
any other Person (or any Affiliate or Associate of such other Person)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding, voting or
disposing of such securities; or
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of time
or upon the satisfaction of conditions) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by law to be closed in The
City of New York or the State of Maine.
"By-laws" means the by-laws of the Company, as amended and
restated as of the date hereof and as may be amended from time to time.
"Change of Control" means any event that gives any Person or
Group other than holders of the Series B Preferred, the Stockholders, Mr. Otten
or their Permitted Transferees the ability to control the Company (a) through
the acquisition of either (i) substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, or (ii) a majority of the aggregate voting
power of the Company's capital stock or (b) by otherwise being able to elect or
designate a majority of the Board through a management contract or otherwise.
<PAGE>
"Class A Common Stock" means the Company's Class A common
stock, par value $.01 per share.
"Class A Director" means a Director elected by holders of the
Class A Common Stock pursuant to the Articles of Incorporation.
"Common Stock Director" means a Director elected by the
holders of Common Stock pursuant to the Articles of Incorporation.
"Conversion Stock" means the Common Stock issued by the
Company upon conversion of the Series B Preferred.
"Director" means a member of the Board.
"Employee Plan" means any equity incentive plan, agreement,
bonus, award, stock purchase plan, stock option plan or other stock arrangement
with respect to any directors, officers or other employees of the Company.
"Executive Committee" means the executive committee of the
Board established in accordance with the By-laws.
"Fair Market Value" shall mean for any applicable measurement
date the closing price of the Common Stock on the NYSE or, in the event that
trading hours on the NYSE are extended past 4:00 p.m. (EST), the last sale price
at 4:00 p.m. (EST).
"Fully Diluted Basis" means, in respect of the Common Stock,
the method of calculating the number of shares of Common Stock outstanding on an
applicable measurement date, pursuant to which the following shares shall be
deemed to be outstanding: (i) all shares of Common Stock outstanding on the date
hereof, (ii) all shares of Common Stock issuable upon conversion of outstanding
shares of the Class A Common Stock or the Series B Preferred, (iii) all shares
of Common Stock issued after the date hereof pursuant to the exercise of stock
options under Employee Plans or upon conversion of the Class A Common Stock, the
Series B Preferred or the Senior Preferred Stock, (iv) all shares of Common
Stock issuable pursuant to any securities or stock options of the Company
outstanding at any time which are convertible into or exercisable for shares of
Common Stock at a conversion or exercise price at or below the then current Fair
Market Value of the Common Stock, (v) any shares of Common Stock issued after
the date hereof, other than pursuant to clause (ii), (iii) or (iv) above, at a
price per share at or above $10.50 per share; provided that such issuance has
been approved by at least eight members of the Board and (vi) any shares of
Common Stock issued for any consideration other than cash as may be approved by
the Board.
<PAGE>
"Group" has the meaning set forth in Rule 13d-5, as in effect
on the date hereof, under the Exchange Act.
"Holders" means the Stockholders, Mr. Otten or any Permitted
Transferee to whom the rights under this Agreement are assigned in accordance
with the provisions of Section 5.12 hereof.
"Independent" means, in respect of a Director, an individual
who meets the following criteria: (i) is not, and has not previously been,
within the past three years, an employee of the Company, Mr. Otten, the
Stockholders or any of their Affiliates; (ii) is not related by birth or
marriage to Mr. Otten or any employee of the Company, the Stockholders, or their
respective Affiliates; and (iii) is otherwise independent of Mr. Otten, the
Stockholders and their respective Affiliates.
"ING Registration Rights Agreement" means the Registration
Rights Agreement dated as of November 10, 1997 between the Company and ING.
"Maturity Date" means August 6, 2009.
"Nominating Committee" means the nominating committee of the
Board established in accordance with the By-laws that shall be responsible for,
among other things, identifying and nominating certain Independent individuals
to be elected as Directors of the Company.
"Otten Director" means a Director elected by the holders of
Class A Common Stock or a Director designated by Mr. Otten pursuant to the terms
of this Agreement.
"Person" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3), as in effect on the
date hereof, of the Exchange Act.
"Pledge Agreement" means that certain Pledge Agreement between
Mr. Otten and ING dated as of November 10, 1997 pursuant to which all of the
shares of Class A Common Stock and Common Stock Beneficially Owned by Mr. Otten
are pledged to ING.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document with the SEC in compliance with the Securities Act and the
declaration or ordering of effectiveness by the SEC of such registration
statement or document.
<PAGE>
"Registrable Stock" shall mean (i) the Conversion Stock, (ii)
the Series B Preferred, (iii) any shares of Common Stock Beneficially Owned by
Mr. Otten, the Stockholders or their Permitted Transferees or (iv) any Common
Stock issued as (or upon the conversion or exercise of any warrant, right,
option or other convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
Series B Preferred or the Conversion Stock. For purposes of this Agreement, any
Registrable Stock shall cease to be Registrable Stock when with respect to such
Registrable Stock (w) a registration statement covering such Registrable Stock
has been declared effective and such Registrable Stock has been disposed of
pursuant to such effective registration statement, (x) such Registrable Stock is
sold in a transaction in which the rights under the provisions of Article V are
not assigned in accordance with Section 5.12, (y) such Registrable Stock may be
sold pursuant to Rule 144(k) (or any similar provision then in force, but not
Rule 144(A)) without registration under the Securities Act or (z) Mr. Otten, on
the one hand, or the Stockholders, on the other hand, no longer Beneficially Own
at least 2% of the outstanding shares of Common Stock (on a Fully Diluted
Basis).
"Restricted Securities" means the Senior Preferred Stock,
Series B Preferred, the Conversion Stock, the Class A Common Stock and Common
Stock, including any of such stock issued as payment of a dividend.
"Standstill Period" shall mean any time during the period
beginning on the date hereof and ending on August 6, 2004 during which either
(i) the Stockholders Beneficially Own 15% or more of the outstanding shares of
Common Stock (on a Fully Diluted Basis) or (ii) the Stockholders and their
Affiliates or Associates Beneficially Own 33 1/3% or more of the outstanding
shares of Senior Preferred Stock.
"Stockholder Director" means a Director designated by the
Stockholders pursuant to this Agreement or elected by the holders of the Series
B Preferred pursuant to the Articles of Incorporation.
(c) The following terms have the meanings set forth in the
Sections set forth below:
Term Location
Agreement................................................Preamble
Anti-Dilutive Rights.....................................ss.4.05(a)
Board....................................................Recitals
Budget...................................................ss.3.02(a)(i)
Common Stock.............................................Recitals
Company..................................................Preamble
Departing Otten Director.................................ss.2.02(b)
<PAGE>
Departing Stockholder Director...........................ss.2.02(a)
Executive................................................ss.2.06
Initiating Holders.......................................ss.5.03(a)
Maintenance Securities...................................ss.4.05(a)
Material Subsidiaries....................................ss.2.04(a)
Maximum Stockholder Stock Ownership Percentage...........ss.4.03(a)
Mr. Otten................................................Preamble
Oak Hill.................................................Preamble
Otten Permitted Transferee...............................ss.4.02(a)
Permitted Transferees....................................ss.4.02(a)
Series B Preferred.......................................Recitals
Shelf Registration.......................................ss.5.05(a)
Stockholder Permitted Transferee.........................ss.4.02(a)
Stockholders.............................................Preamble
Subscription Agreement...................................Recitals
Transfer.................................................ss.4.02(a)
(d) References in this Agreement to annexes, articles,
sections, paragraphs, clauses, schedules and exhibits are to annexes, articles,
sections, paragraphs, clauses, schedules and exhibits in or to this Agreement
unless otherwise indicated. Whenever the context may require, any pronoun
includes the corresponding masculine, feminine and neuter forms. Any term
defined by reference to any agreement, instrument or document has the meaning
assigned to it whether or not such agreement, instrument or document is in
effect. The words "include", "includes" and "including" are deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, any agreement, instrument or other document defined or referred to
herein refers to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified from time to time. Unless the
context otherwise requires, references herein to any Person or entity include
its successors and assigns. The words "shall" and "will" have the same meaning
and effect.
ARTICLE II
GOVERNANCE
SECTION 2.01. Board Representation. (a) In accordance with
the Certificate of Designation and subject to the rights of holders of the
Company's serial preferred stock, as of the date hereof and for so long as the
Stockholders shall be entitled to nominate at least one Director pursuant to
Section 2.01(b), the Board shall consist of 11 members, initially consisting of
(i) four Stockholder Directors, (ii) four Otten Directors and (iii) three
Independent Common Stock Directors recommended by the Nominating Committee and
approved by the Board.
<PAGE>
(b) Each of Mr. Otten and the Stockholders shall vote all
Restricted Securities Beneficially Owned by him or it, as the case may be, to
cause, and the parties hereto each shall otherwise use its best efforts to
cause, there to be (i) four Stockholder Directors for so long as the
Stockholders Beneficially Own at least 25% of the outstanding shares of Common
Stock (on a Fully Diluted Basis), (ii) three Stockholder Directors for so long
as the Stockholders Beneficially Own at least 20% but less than 25% of the
outstanding shares of Common Stock (on a Fully Diluted Basis), (iii) two
Stockholder Directors for so long as the Stockholders Beneficially Own at least
15% but less than 20% of the outstanding shares of Common Stock (on a Fully
Diluted Basis), or (iv) one Stockholder Director for so long as the Stockholders
Beneficially Own at least 5% but less than 15% of the outstanding shares of
Common Stock (on a Fully Diluted Basis).
(c) Each of Mr. Otten and the Stockholders shall vote all
Restricted Securities Beneficially Owned by him or it, as the case may be, to
cause, and the parties hereto each shall otherwise use its best efforts to
cause, there to be (i) four Otten Directors for so long as Mr. Otten
Beneficially Owns at least 25% of the outstanding shares of Common Stock (on a
Fully Diluted Basis), (ii) three Otten Directors for so long as Mr. Otten
Beneficially Owns at least 20% but less than 25% of the outstanding shares of
Common Stock (on a Fully Diluted Basis), (iii) two Otten Directors for so long
as Mr. Otten Beneficially Owns at least 15% but less than 20% of the outstanding
shares of Common Stock (on a Fully Diluted Basis), or (iv) one Otten Director
for so long as Mr. Otten Beneficially Owns at least 5% but less than 15% of the
outstanding shares of Common Stock (on a Fully Diluted Basis).
(d) Mr. Otten shall cause holders of Class A Common Stock to
exercise their rights to elect Class A Directors in order to effectuate, to the
extent necessary, the provisions contained in this Section 2.01; provided,
however, notwithstanding anything contained in this Section 2.01 to the
contrary, for so long as any shares of Class A Common Stock are outstanding and
entitled to elect Class A Directors, holders of shares of Class A Common Stock
shall have the sole right to elect Class A Directors.
SECTION 2.02. Resignations and Replacements. (a) If any
Stockholder Director is removed or otherwise ceases to serve as a Director for
any reason other than in accordance with the Certificate of Designation (a
"Departing Stockholder Director") or Section 2.01(b) or 2.02(c), the parties
hereto each shall use its best efforts to cause the vacancy created by such
Director ceasing to serve to be filled by a Stockholder Director who shall serve
out the remaining term of the Departing Stockholder Director, after which time,
such Stockholder Director position shall be filled according to Section 2.01(b).
<PAGE>
(b) If any Otten Director is removed or otherwise ceases to
serve as a Director for any reason (a "Departing Otten Director") other than in
accordance with Section 2.01(c) or 2.02(d), the parties hereto each shall use
its best efforts to cause the vacancy created by such Director ceasing to serve
to be filled by an Otten Director who shall serve out the remaining term of the
Departing Otten Director, after which time, such Otten Director position shall
be filled according to Section 2.01(c).
(c) In the event that at any time any Stockholder Director is
elected or appointed to the Board pursuant to Section 2.01(b) and the number of
Stockholder Directors is greater than the number of Directors that the
Stockholders have the right to designate by virtue of Section 2.01(b) of this
Agreement, then that excess number of Stockholder Directors (starting with any
Class A Director that is a Stockholder Director or, in the event that no
Stockholder Director is a Class A Director, starting with the Stockholder
Director with the longest remaining term of office) shall be deemed to have
resigned immediately upon the occurrence of such event such that the remaining
number of Stockholder Directors, if any, conform to the provisions of this
Agreement, and the Stockholders or Mr. Otten, as the case may be, shall take all
action promptly to effect the resignation or removal of such Director. The
parties hereto each shall use its best efforts to cause the vacancy created by
such Stockholder Director ceasing to serve to be filled by an Independent
individual recommended by the Nominating Committee and approved by the Board or,
in the case of a Class A Director, to be filled by a designee of Mr. Otten.
(d) In the event that at any time any Otten Director is
elected or appointed to the Board pursuant to Section 2.01(c) and the number of
Otten Directors is greater than the number of Directors that Mr. Otten has the
right to designate by virtue of Section 2.01(c) of this Agreement, then that
excess number of Otten Directors (starting with the Otten Director with the
longest remaining term of office) shall be deemed to have resigned immediately
upon the occurrence of such event such that the remaining number of Otten
Directors, if any, conform to the provisions of this Agreement, and the
Stockholders or Mr. Otten, as the case may be, shall take all action promptly to
effect the resignation or removal of such Director. The parties hereto each
shall use its best efforts to cause the vacancy created by such Otten Director
ceasing to serve to be filled by an Independent individual recommended by the
Nominating Committee and approved by the Board.
SECTION 2.03. Rights of Estate of Mr. Otten. Mr. Otten hereby agrees
and hereby directs his estate that in the event of his death, all of his shares
of Class A Common Stock shall be converted into Common Stock effective as the
date of such death.
<PAGE>
SECTION 2.04. Committees Generally; Nominating Committee. (a)
For so long as the Stockholders Beneficially Own at least 20% of the outstanding
shares of Common Stock (on a Fully Diluted Basis), each of the parties hereto
shall use its best efforts to cause the Nominating Committee to have two members
and to cause one Stockholder Director (i) to serve as a member of each committee
of the Board, (ii) to serve as a member of the board of directors of each of ASC
East, Inc., ASC West, Inc., ASC Utah and American Skiing Company Resort
Properties, Inc. or any other board or comparable body necessary to manage any
subsidiary of the Company, whether existing now or created after the date
hereof, that is material to the Company and its subsidiaries, taken as a whole
(together, the "Material Subsidiaries") and (iii) to serve as a member of each
committee of the board of directors of the Material Subsidiaries; provided,
however, that if any applicable law or regulation of the NYSE (or other exchange
on which the Common Stock is listed) shall prohibit the Board from appointing
any of the Stockholder Directors to serve on any committee, this Agreement shall
not require any Stockholder Director to serve on such committee; provided,
further, however, that in such event, the Company and Mr. Otten shall consult
with the Stockholders and each shall use its best efforts to ensure that the
Stockholders are able to achieve a level of participation in the operation of
the Board and the boards of each of the Material Subsidiaries that is
substantially similar to such committee representation and to otherwise preserve
the rights described in this Section 2.04.
(b) Each of the parties hereto shall use its best efforts to
cause the Board (i) to approve any Independent individual recommended by the
Nominating Committee for election to the Board and (ii) to recommend to the
stockholders of the Company that such nominee be elected to the Board.
(c) For so long as there shall be at least one Otten Director and Mr.
Otten is the Company's chief executive officer, each of the parties hereto shall
use its best efforts to cause at least one Otten Director to be a member of the
Nominating Committee.
SECTION 2.05. Meetings; Budget; Board Fees and Expenses. (a)
The Board shall meet at least four times during each fiscal year, except that
there shall be at least six meetings of the Board during the first fiscal year
following the issuance of the Series B Preferred.
(b) Beginning January 1, 2000, proposals for the Budget (as
hereinafter defined) shall be presented to the Board by management of the
Company at least 60 days prior to the beginning of the Company's fiscal year.
The parties hereto each shall use its best efforts to cause the Board to approve
a Budget conforming to Section 3.02(a)(i) prior the beginning of each fiscal
year. At each meeting of the Board, the Budget approved for the current fiscal
year shall be reported on and updated and any additional "material" (as
"materiality" is described in Section 3.02(a)(i)(E)) changes to the Budget since
the previous Board meeting will be subject to Board approval.
(c) The Stockholder Directors shall be entitled to receive
compensation in the same amount as the Company's other non-employee Directors
and to be reimbursed for all reasonable expenses related to attending meetings
and performing other customary duties incident to their directorship. The Otten
Directors shall be entitled to receive compensation in their capacity as
Directors in the same amount as the Company's other non-Stockholder Directors
receive in their capacity as Directors as set forth in the By-Laws and to be
reimbursed all reasonable expenses related to attending meetings and performing
other customary duties incident to their directorship.
<PAGE>
SECTION 2.06. Termination of Executives. Any decision to
terminate the chief operating officer, president (other than Mr. Otten), chief
financial officer or the general counsel of the Company or the chief operating
officer (or equivalent position) of American Skiing Company Resort Properties,
Inc. (each, an "Executive") will be made by Mr. Otten for so long as he
continues to serve as the Company's chief executive officer; provided, however,
that before terminating any Executive, Mr. Otten must (i) seek the approval of
the Executive Committee of such termination at a duly called meeting and (ii) in
the event that the Executive Committee does not approve such termination, seek
the approval of the Board of such termination at a duly called meeting, after
which time Mr. Otten may terminate such Executive without any such approval.
SECTION 2.07. Employee Plans. No Employee Plan will be
adopted or amended in any material respect unless it has been approved by the
compensation and stock option committee of the Board, such approval to include
the affirmative vote of at least one Stockholder Director.
SECTION 2.08. Removal of Chief Executive Officer. Each of the
parties hereto shall use its best efforts to cause the Board to amend the
By-laws of the Company to require that the termination of the chief executive
officer of the Company will require either (i) the affirmative vote of at least
seven Directors, in the event that there are 11 Directors, (ii) the affirmative
vote of at least six Directors (including at least one Independent Director), in
the event that there are 10 Directors, (iii) the affirmative vote of at least
two-thirds of the Directors (including at least one Independent Director), in
the event that there are fewer than 10 Directors or (iv) the affirmative vote of
at least a majority of the Directors (including at least one Independent
Director), in the event that there are more than 11 Directors.
ARTICLE III
VOTING RIGHTS
SECTION 3.01. Voting Restrictions. (a) Mr. Otten agrees to
vote the shares of Common Stock or Class A Common Stock Beneficially Owned by
him to effect the terms of Article II of this Agreement and on other matters to
vote in a manner consistent with the terms of this Agreement.
(b) The Stockholders agree to vote any shares of Common Stock
or Series B Preferred Beneficially Owned by the Stockholders to effect the terms
of Article II of this Agreement and on other matters to vote in a manner
consistent with the terms of this Agreement.
<PAGE>
SECTION 3.02. Special Board Rights. (a) For so long as the
Stockholders Beneficially Own at least 20% of the outstanding shares of Common
Stock (on a Fully Diluted Basis), the Company shall not take the actions listed
in clauses (i) through (ix) below without the affirmative vote of at least one
Stockholder Director, either as part of the vote of the full Board or the
Executive Committee.
(i) Approval of an annual operating and capital budget, which
shall include operating plans, detailed capital expenditure plans and a
business plan (the "Budget"), which Budget will include, without
limitation:
(A) detailed operating assumptions relating to,
without limitation, (1) pricing, (2) expected skier visits,
(3) an explanation of changes in operating cost from the prior
year, (4) head-count and expected seasonal head-count, (5)
departmental "sales, general and administrative" expenses,
including marketing plans and related budgets, and (6) a
detailed analyses of all required capital expenditures,
including return on investment analysis and a prioritization
of both growth and maintenance capital expenditures;
(B) planned material acquisitions, divestitures and
other development decisions (1) involving more than $2,000,000
in the aggregate or (2) reasonably expected to have an impact
of 5% or more on the Company's consolidated revenues or
earnings;
(C) overall corporate strategy, including actions
that involve repositioning the Company, commencing new lines
of business or significantly expanding lines of existing
business (other than the skiing business) or making material
investments in joint ventures or non-controlled operating
companies;
(D) requirements for capital in accordance with the
Budget, including, without limitation, planned material
financings (whether in the form of debt or equity), including
(1) issuance of debt or equity securities, (2) entering into
material new credit or financing agreements, (3) materially
increasing lines of credit or making material changes in
existing credit arrangements, (4) pledging material assets,
(5) the payment of dividends on outstanding capital stock of
the Company and (6) any redemption or repurchase of capital
stock of the Company, other than (x) the redemption or
repurchase of the Series B Preferred and (y) redemptions in
accordance with the terms of an Employee Plan; and
(E) a "materiality" standard for variations in the
Budget requiring Board approval.
(ii) Significant executive personnel decisions (other than
terminations), including, without limitation, hiring decisions or
decisions materially changing the compensation or responsibilities of
any Executive and the chief executive officer of the Company.
<PAGE>
(iii) Material actions that are likely to affect the Company's
operating and strategic direction that are reasonably expected or
likely to have an impact of 5% or more on the Company's consolidated
revenues or earnings.
(iv) Any amendment to the Articles of Incorporation or
By-laws.
(v) Any voluntary liquidation, dissolution, winding up,
recapitalization or reorganization of the Company.
(vi) Initiation of material litigation other than with respect
to any counterclaim made by the Company in response to any claim made
by a third party.
(vii) Any merger, consolidation or other business combination
of the Company with or into another Person or any sale of all or
substantially all the assets of the Company or any of its Material
Subsidiaries.
(viii) Material changes to or reduction in insurance coverage.
(ix) Material financing or capital markets activity not
expressly provided in the Budget.
(b) The Stockholders shall use their best efforts to cause the
Stockholder Directors to abstain from voting on all matters in which the
Stockholders have an interest that differs from those of the Company's other
stockholders in accordance with applicable law and customary corporate practice,
including, without limitation, matters relating to any (i) dividend on the
Series B Preferred (other than as part of the Budget approval process provided
in Section 3.02(a)(i)), (ii) redemption of the Series B Preferred, (iii)
amendment of or waiver under any agreement to which any Stockholder or Affiliate
or Associate thereof is a party or (iv) any other transaction between the
Company and/or any of its Subsidiaries or other Affiliates and any Stockholder
and/or any Affiliate or Associate thereof.
(c) Mr. Otten shall use his best efforts to cause the Otten
Directors to abstain from voting on all matters in which such Directors have an
interest that differs from those of the Company's other stockholders in
accordance with applicable law and customary corporate practice, including,
without limitation, matters relating to (i) any amendment of or waiver under any
agreement to which any such Otten Director or any Affiliate or Associate of such
Otten Director is a party or (ii) any other transaction between the Company
and/or any of its Subsidiaries or other Affiliates and any such Otten Director
and/or any Affiliate or Associate of such Director.
<PAGE>
ARTICLE IV
STANDSTILL PROVISIONS
SECTION 4.01. Ownership of the Series B Preferred. The
Stockholders severally and not jointly, represent and warrant to all other
parties hereto that the Stockholders, together with their Affiliates and
Associates, Beneficially Own in the aggregate, as of the date hereof, 150,000
shares of Series B Preferred and no other securities of the Company.
SECTION 4.02. Transfer Restrictions. (a) Until the earlier of
(i) August 6, 2000 or (ii) the occurrence of a Change of Control, the
Stockholders and Mr. Otten shall not, and shall cause their Permitted
Transferees not to, directly or indirectly, sell, transfer, assign, pledge,
hypothecate or otherwise dispose of ("Transfer") any Restricted Securities,
except (A) to an Affiliate that expressly assumes all of such Stockholder's or
Mr. Otten's, as the case may be, obligations under this Agreement (with respect
to any Stockholder, a "Stockholder Permitted Transferee", with respect to Mr.
Otten, an "Otten Permitted Transferee", and together with the Stockholder
Permitted Transferees, "Permitted Transferees") following the delivery of
written notice of such Transfer to the Company, (B) any Transfer from Mr. Otten
or any Otten Permitted Transferee to ING (or its successor) pursuant to the
terms of the Pledge Agreement or any sale by Mr. Otten or any Otten Permitted
Transferee to any third party if all of the net after tax proceeds from such
sale are used to repay indebtedness under the Credit Agreement dated as of
November 10, 1997 between Mr. Otten and ING, including any amendment,
replacement or refinancing thereof, (C) any Transfer by the estate of Mr. Otten
or any Otten Permitted Transferee following Mr. Otten's death, (D) any Transfer
by Mr. Otten or any Otten Permitted Transferee, which together with all other
Transfers by Mr. Otten or any Otten Permitted Transferee during the immediately
preceding 12 months (other than pursuant to clause (B) above), does not exceed
10% of the number of shares of Common Stock Beneficially Owned by Mr. Otten and
the Otten Permitted Transferees on the date hereof, (E) any Transfer by Mr.
Otten or any Otten Permitted Transferee at any time following the termination of
Mr. Otten's employment with the Company as chief executive officer, (F) in
transactions (including tender offers and exchange offers) either (1) approved
by the Board or (2) with respect to the Stockholders or any Stockholder
Permitted Transferees only, in which Mr. Otten Transfers any Restricted
Securities (other than pursuant to clauses (B)-(E) above) and (G) any pledge of
Restricted Securities; provided, however, that in the event of a material breach
or default under this Agreement, the Voting Agreement or the Subscription
Agreement (x) by Mr. Otten or the Company, then any Stockholder or any
Stockholder Permitted Transferee may Transfer Restricted Securities or (y) by
any of the Stockholders, then Mr. Otten or any Otten Permitted Transferee may
Transfer Restricted Securities, in each case, subject only to the restrictions
contained in Section 4.02(b).
<PAGE>
(b) Notwithstanding paragraph (a) above, the Stockholders, Mr.
Otten and the Permitted Transferees shall not Transfer any Restricted Securities
(i) except through private or public sales that comply with applicable
securities laws, (ii) to Persons (or any other reasonably foreseeable subsequent
transferee) who, to the knowledge of any of the Stockholders, Mr. Otten or their
Permitted Transferees, as the case may be, following such Transfer would
Beneficially Own 10% or more of the outstanding shares of Common Stock (on a
Fully Diluted Basis) or (iii) to a Person (A) that is a direct competitor in any
major line of business of the Company or its Subsidiaries or (B) whose ownership
of the Restricted Securities could reasonably be expected, in the opinion of the
Board, to materially disadvantage the businesses of the Company and its
Subsidiaries or could reasonably be expected to have an adverse effect on the
future profitability of the Company and its Subsidiaries, taken as a whole.
(c) Each Stockholder agrees not to, directly or indirectly,
Transfer its interests in any Stockholder Permitted Transferee so that it ceases
to be a Stockholder Permitted Transferee unless prior thereto the Restricted
Securities held by such entity are transferred to any Stockholder or one or more
Stockholder Permitted Transferees.
(d) Mr. Otten agrees not to, directly or indirectly, Transfer
his interests in any Otten Permitted Transferee so that it ceases to be an Otten
Permitted Transferee unless prior thereto the Restricted Securities held by such
entity are transferred to Mr. Otten or one or more Otten Permitted Transferees.
(e) No transferee (other than a Stockholder, Mr. Otten or
their Permitted Transferees) of Restricted Securities shall be entitled to any
of the rights set forth under this Agreement by virtue of its ownership of such
Restricted Securities.
(f) Any attempted Transfer in violation of this Section 4.02
shall be null, void and of no force and effect, and the Company shall not give
effect to any such attempted Transfer.
SECTION 4.03. Acquisition of Additional Shares; Other
Restrictions. During the Standstill Period, except with the prior approval of a
majority of the Directors who are not Stockholder Directors and except as
expressly permitted by this Agreement or any amendment hereto, the Stockholders
shall not, directly or indirectly, and shall cause the Stockholder Permitted
Transferees not to, directly or indirectly:
<PAGE>
(a) acquire, announce an intention to acquire, offer
to acquire, or enter into any agreement, arrangement or undertaking of
any kind the purpose of which is to acquire, by purchase, exchange or
otherwise (i) Beneficial Ownership of any shares of Common Stock or any
other security convertible into, or any option, warrant or right to
acquire, Common Stock, if such acquisition would cause the Beneficial
Ownership of the Stockholders and the Stockholder Permitted Transferees
to be (A) more than 49.9% of the outstanding shares of Common Stock (on
a Fully Diluted Basis) if prior to such transaction the Stockholders
and the Stockholder Permitted Transferees Beneficially Own 40% or more
of the outstanding shares of Common Stock (on a Fully Diluted Basis) or
(B) more than 40% of the outstanding shares of Common Stock (on a Fully
Diluted Basis) if prior to such transaction the Stockholders and the
Stockholder Permitted Transferees Beneficially Own less than 40% of the
outstanding shares of Common Stock (on a Fully Diluted Basis) (each of
the percentages described in clauses (A) and (B) above being
hereinafter referred to, as applicable, as the "Maximum Stockholder
Stock Ownership Percentage"), (ii) one-third or more of the outstanding
shares of Senior Preferred Stock or (iii) a significant portion of the
assets of the Company or any of its Affiliates. With respect to clause
(i) above, any increase in Beneficial Ownership by the Stockholders and
any Stockholder Permitted Transferees resulting from any Accretion
Amounts (as such term is defined in the Certificate of Designation),
from any dividend in the form of Common Stock made with respect to the
Conversion Stock, or from any repurchase of Common Stock by the Company
shall not be included in the Maximum Stock Ownership Percentage;
provided, however, that in all cases, the Stockholders may acquire
securities of the Company pursuant to Section 4.05 or pursuant to the
issuance of any dividends on Common Stock.
(b) solicit, or participate in any solicitation of,
proxies with respect to any Common Stock or other voting securities of
the Company, or become a "participant" in a "solicitation" (as such
terms are defined in Rule 14A of the Exchange Act) in opposition to any
matter that has been recommended by a majority of the Directors or in
favor of any matter that has not been approved by a majority of the
Directors unless the Company or Mr. Otten has breached any material
provision of Article II or Article III (which breach shall not have
been cured within 10 Business Days following receipt by the breaching
party of written notice of such breach);
(c) propose or otherwise solicit stockholders of the
Company for the approval of one or more stockholder proposals, seek or
solicit support for (whether publicly or privately) any written consent
of stockholders of the Company, attempt to call a special meeting of
stockholders, nominate or attempt to nominate any Person for election
as a Director (except in accordance with Article II), or seek the
removal or resignation of any Director (except in accordance with
Article II), in each case in opposition to any matter that has been
recommended by a majority of the Directors or in favor of any matter
that has not been approved by a majority of the Directors unless the
Company or Mr. Otten has breached any material provision of Article II
or Article III (which breach shall not have been cured within 10
Business Days following receipt by the breaching party of written
notice of such breach);
(d) deposit any securities of the Company into a
voting trust or similar agreement or subject any securities of the
Company to any arrangement or agreement with respect to the voting of
such Common Stock other than an agreement or arrangement solely among
the Stockholders and the Stockholder Permitted Transferees;
<PAGE>
(e) take any action to form, join or in any way
participate in any partnership, limited partnership, syndicate or other
Group with respect to Common Stock or otherwise act in concert with any
Person for the purpose of circumventing the provisions or purposes of
this Agreement;
(f) unless the Company is the subject of a bona fide
unsolicited tender offer, exchange offer or other takeover attempt,
propose (or publicly announce or otherwise disclose an intention to
propose), any tender or exchange offer, merger, consolidation, share
exchange, business combination, restructuring, recapitalization or
similar transaction involving the Company;
(g) solicit, offer, seek to effect, negotiate with or
provide any confidential information relating to the Company or its
business to any other Person with respect to any tender or exchange
offer, merger, consolidation, share exchange, business combination,
restructuring, recapitalization or similar transaction involving the
Company;
(h) make or in any way advance any request or
proposal to amend, modify or waive any provision of this Agreement in a
manner that requires public disclosure by any of the parties hereto; or
(i) announce an intention to do, or solicit, assist,
prompt, induce or attempt to induce any Person to do, any of the
actions restricted or prohibited under subparagraphs (a) through (h)
above.
SECTION 4.04. Additional Shares. All shares of Restricted
Securities acquired by any of the parties hereto or the Permitted Transferees
pursuant to or in compliance with this Article IV or as a result of a
recapitalization of the Company, or any Accretion Amount (as such term is
defined in the Certificate of Designation) or stock dividends or any other
action taken by the Company, shall be subject to all of the terms, covenants and
conditions of this Agreement.
<PAGE>
SECTION 4.05. Anti-Dilutive Rights. (a) Except as provided in
Section 4.05(c) below, the Company shall not issue, sell or transfer to any
Person any Common Stock or securities convertible into, or exercisable for,
Common Stock unless the Stockholders, Mr. Otten and any Permitted Transferees
are offered in writing the right to purchase, at the same price and on the same
terms proposed to be issued and sold, an amount of such Common Stock or other
securities (the "Maintenance Securities") as is necessary for each of the
Stockholders, Mr. Otten and any Permitted Transferees to maintain, individually,
the same level of its respective percentage Beneficial Ownership of Common Stock
(on a Fully Diluted Basis) as it owned immediately prior to such issuance
("Anti-Dilutive Rights"). In the case of a public offering, the Company shall,
as part of its offer, provide a copy of any preliminary prospectus containing
either the indicative price range of the offered securities or trading
information relating to the offered securities, as the case may be, and other
information concerning the offering reasonably requested by the Stockholders,
Mr. Otten or any Permitted Transferee. The Stockholders, Mr. Otten and any
Permitted Transferee shall have the right, during the period specified in
Section 4.05(b), to accept the offer for any or all of the Maintenance
Securities offered to each of them on their own behalf or on behalf of any
Affiliate (and, in the case of Oak Hill, on behalf of Oak Hill Securities Fund,
L.P.) not otherwise accepting such offer to acquire Maintenance Securities under
this Section 4.05.
(b) If any Stockholder, Mr. Otten or any Permitted Transferee
does not deliver to the Company written notice of acceptance of any offer made
pursuant to Section 4.05(a) with respect to a public offering within five
Business Days after receipt by such Stockholder, Mr. Otten, or any Permitted
Transferee, as the case may be, of a preliminary prospectus (filed with the SEC
as part of a registration statement) containing the pricing information
indicated in Section 4.05(a) above, or, with respect to any transaction other
than a public offering, within 15 Business Days after receipt of such offer by
such Stockholder, Mr. Otten, or any Permitted Transferee, as the case may be,
such Stockholder, Mr. Otten or Permitted Transferee shall be deemed to have
waived its or his, as the case may be, right to purchase all or any part of its
Maintenance Securities as set forth in such offer but such Stockholder, Mr.
Otten or any such Permitted Transferee shall retain its or his, as the case may
be, rights under this Section 4.05 with respect to future offers.
(c) The Anti-Dilutive Rights set forth above shall not apply
to (i) the grant or exercise of options to purchase Common Stock or the issuance
of shares of Common Stock to employees or Directors of the Company or any of its
Subsidiaries or otherwise pursuant to an Employee Plan or similar plan whether
in existence on the date hereof or otherwise duly adopted by the Board hereafter
(whether or not such options were issued prior to the date hereof, or are
hereafter issued), (ii) the issuance of warrant shares, or of shares of Common
Stock issuable upon exercise of any option, warrant, convertible security or
other rights to purchase or subscribe for Common Stock which, in each case, had
been issued prior to the date hereof or in compliance with Section 4.05(a) or
Section 4.05(c)(i), (iii) securities issued pursuant to any stock split, stock
dividend or other similar stock recapitalization or (iv) securities issued by
the Company for any consideration other than cash as may be approved by the
Board.
<PAGE>
(d) A closing for the purchase of such Maintenance Securities
pursuant to this Section 4.05(d) shall occur on the later of (i) the date on
which such public or private issuance occurs and (ii) such date as may be
mutually agreed to by the Company, Mr. Otten, any Otten Permitted Transferee and
Oak Hill on behalf of any Stockholder and any Stockholder Permitted Transferee,
as the case may be, and shall take place at the offices of the Company or at
such other reasonable location as the Company may otherwise notify any
Stockholder, Mr. Otten and/or any Permitted Transferee, as the case may be, at
the time specified by the Company in such notice provided to any Stockholder,
Mr. Otten or any Permitted Transferee, as the case may be, at least five days
prior to such closing date. In connection with such closing, the Company, Mr.
Otten, any Stockholder or any Permitted Transferee, as the case may be, shall
provide such closing certificates and other closing deliveries provided in the
transaction giving rise to the rights specified in Section 4.05.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Restrictive Legend. Each certificate
representing the Series B Preferred or Conversion Stock shall, except as
otherwise provided in this Article V, be stamped or otherwise imprinted with
legends substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THE SECURITY REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND CERTAIN RESTRICTIONS ON VOTING CONTAINED
IN THE STOCKHOLDERS' AGREEMENT, DATED AUGUST 6, 1999, AS THE SAME MAY
BE AMENDED, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS LISTED ON THE
SIGNATURE PAGES THEREOF.
A certificate shall not bear the Securities Act legend or the legend regarding
this Agreement, as the case may be, if in the opinion of counsel satisfactory to
the Company (it being agreed that Shearman & Sterling shall be satisfactory) the
securities being sold thereby may be publicly sold without registration under
the Securities Act or may be sold without being subject to the restrictions on
sale specified in Article IV.
<PAGE>
SECTION 5.02. Notice of Proposed Transfer. Prior to any
proposed Transfer of any shares of Registrable Stock (other than under the
circumstances described in Section 5.03, 5.04 or 5.05), permitted under Article
IV, the holder thereof shall give written notice to the Company of its intention
to effect such Transfer. Each such notice shall describe the manner of the
proposed Transfer and, if known, the identity of the proposed transferee and, if
requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company to the effect that the proposed Transfer may be
effected without registration under the Securities Act, whereupon the holder of
such stock shall be entitled to Transfer such stock in accordance with the terms
of its notice, subject in any event to the restrictions in Article IV; provided,
however, that no such opinion of counsel shall be required for a Transfer to one
or more Permitted Transferees subject in any event to the restrictions in
Article IV. Each certificate representing Registrable Stock transferred as above
provided shall bear the legends set forth in Section 5.01, except that such
certificate shall not bear such legends if (i) such Transfer is in accordance
with the provisions of Rule 144 of the Securities Act (or any other rule
permitting public sale without registration under the Securities Act, but not
Rule 144A) or (ii) the opinion of counsel referred to above is to the further
effect that the transferee and any subsequent transferee (other than an
Affiliate of the Company) would be entitled to Transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 5.02 shall not apply to securities that are not
required to bear the legends prescribed by Section 5.01 in accordance with the
provisions of Section 5.01.
SECTION 5.03. Request for Registration. (a) Subject to the
provisions of Article IV, at any time after August 6, 2000, one or more Holders
of Registrable Stock (the "Initiating Holders") may request in a written notice
(which notice shall state the number of shares of Registrable Stock to be so
registered and the intended method of distribution) that the Company file a
registration statement under the Securities Act (or a similar document pursuant
to any other statute then in effect corresponding to the Securities Act)
covering the registration of any or all Registrable Stock held by such
Initiating Holders in the manner specified in such notice; provided, however,
that there must be included in such registration at least 10% of the Registrable
Stock issued (or any lesser percentage if the anticipated aggregate offering
price would exceed $25 million). Following receipt of any notice under this
Section 5.03, the Company shall (x) within 30 days notify all other Holders of
such request in writing and (y) use its best efforts to cause to be registered
under the Securities Act all Registrable Stock that the Initiating Holders and
such other Holders have, within ten days after the Company has given such
notice, requested be registered in accordance with the manner of disposition
specified in such notice by the Initiating Holders.
(b) If the Initiating Holders intend to have the Registrable
Stock distributed by means of an underwritten offering, the Company shall
include such information in the written notice referred to in clause (x) of
paragraph (a) above. In such event, the right of any Holder to include its
Registrable Stock in such registration shall be conditioned upon such Holder's
participation in such underwritten offering and the inclusion of such Holder's
Registrable Stock in the underwritten offering (unless otherwise mutually agreed
by a majority in interest of the Initiating Holders and such Holder) to the
extent provided below. All Holders proposing to distribute Registrable Stock
through such underwritten offering shall enter into an underwriting agreement in
customary form with the underwriter or underwriters. Such underwriter or
underwriters shall be selected by a majority in interest of the Initiating
Holders and shall be approved by the Company, which approval shall not be
unreasonably withheld.
(c) Notwithstanding any provision of this Agreement to the contrary,
<PAGE>
(i) the Company shall not be required to effect a registration
pursuant to this Section 5.03 during the period starting with the date
which is 30 days prior to the date of the initial public filing by the
Company of, and ending on a date that is 120 days following the
effective date of, a registration statement pertaining to a public
offering of securities for the account of the Company or on behalf of
the selling stockholders under any other registration rights agreement
that the Holders have been entitled to join pursuant to Section 5.04;
provided, however, that the Company shall actively employ in good faith
all reasonable efforts to cause such registration statement to become
effective as promptly as practicable;
(ii) if (A)(i) the Company is in possession of material
nonpublic information relating to the Company or any of its
Subsidiaries and (ii) the Company determines in good faith that public
disclosure of such material nonpublic information would not be in the
best interests of the Company and its stockholders, (B)(i) the Company
has made a public announcement relating to an acquisition or business
combination transaction that includes the Company and/or one or more of
its Subsidiaries that is material to the Company and its Subsidiaries
taken as a whole and (ii) the Company determines in good faith that (x)
offers and sales of Registrable Stock pursuant to any registration
statement prior to the consummation of such transaction (or such
earlier date as the Company shall determine) is not in the best
interests of the Company and its stockholders or (y) it would be
impracticable at the time to obtain any financial statements relating
to such acquisition or business combination transaction that would be
required to be set forth in a registration statement or (C) the Company
shall furnish to such Holders a certificate signed by the president of
the Company stating that in the good faith opinion of the Board such
registration would interfere with any material transaction or
financing, confidential negotiations, including, without limitation,
negotiations relating to an acquisition or business combination
transaction, or business activities then being pursued by the Company
or any of its Subsidiaries, then, in any such case, the Company's
obligation to use all reasonable efforts to file a registration
statement shall be deferred, or the effectiveness of any registration
statement may be suspended, in each case for a period not to exceed 120
days; provided, however, that the Company may not delay the filing or
suspend the effectiveness of any registration statement under this
Section 5.03(ii) on more than one occasion in any consecutive
twelve-month period;
(iii) the Company shall not be required to effect a
registration pursuant to this Section 5.03 if the Registrable Stock
requested by all Holders to be registered pursuant to such registration
are included in, and eligible for sale under, a Shelf Registration (as
defined below); and
(iv) the Company shall not be required to effect a
registration pursuant to this Section 5.03 more than one time in any
consecutive twelve-month period.
<PAGE>
(d) With respect to any registration pursuant to this Section
5.03, the Company may include in such registration any of its primary securities
sold on its own behalf or securities being offered by ING pursuant to the ING
Registration Rights Agreement. If, in the opinion of the managing underwriter
(or, in the case of a non-underwritten offering, in the opinion of the Company),
the total amount of all securities to be registered, including Registrable
Stock, will exceed the maximum amount of the Company's securities which can be
marketed (i) at a price reasonably related to the then current market value of
such securities, and (ii) without otherwise materially and adversely affecting
the entire offering, then subject to the registration rights of the holders of
the Senior Preferred Stock and ING, the Company securities and Registrable Stock
to be included in such registration shall be included in the order as set forth
in clauses (1) and (2) below:
(1) In any registration pursuant to this Section 5.03 where
the Stockholders are the Initiating Holders:
(A) first, any securities of the Initiating Holders;
(B) second, any securities offered by the Company; and
(C) third, other Holders requesting registration of
Registrable Stock in proportion (as nearly as
practicable) to the amount of Registrable Stock
requested to be included by such Holder at the
time of filing the registration statement.
(2) In any registration pursuant to this Section 5.03 where Mr. Otten
is the Initiating Holder:
(A) first, any securities of the Company; and
(B) second, any securities of Holders requesting
registration of Registrable Stock, in proportion (as
nearly as practicable) to the amount of Registrable
Stock requested to be included by such Holder at the
time of filing the registration;
Notwithstanding clause (2) above, but subject to the registration rights of the
holders of the Senior Preferred Stock and ING, Mr. Otten, his estate or the
Otten Permitted Transferees, as the case may be, shall have priority over the
Company and each other Holder in selling any and all of their shares of
Registrable Stock on one occasion within two years following Mr. Otten's (1)
termination or resignation from the office of chief executive officer of the
Company or (2) death.
<PAGE>
(e) The Company shall not be obligated to effect and pay for
more than four registrations of the Stockholders (two of which may be Shelf
Registrations requested pursuant to Section 5.05) and three registrations of Mr.
Otten (one of which may be a Shelf Registration requested pursuant to Section
5.05) pursuant to this Section 5.03; provided, however, that a registration
requested by any Holder pursuant to this Section 5.03 shall not be deemed to
have been effected for purposes of this Section 5.03(e) unless (i) it has been
declared effective by the SEC, (ii) it has remained effective for the period set
forth in Section 5.06(a), (iii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or other order or
requirement of the SEC (other than any such stop order, injunction, or other
requirement of the SEC prompted by any act or omission of Holders of Registrable
Stock) and (iv) such Holder was permitted to include in such registration at
least one-half of the Registrable Stock requested by it or him, as the case may
be, to be included in such registration.
SECTION 5.04. Incidental Registration. (a) Subject to Section
5.09 and to the registration rights of the holders of the Senior Preferred Stock
and ING, if at any time the Company determines that it shall file a registration
statement under the Securities Act for the registration of Common Stock (other
than a registration statement on a Form S-4 or S-8 or an offering of securities
solely to the Company's existing stockholders) on any form that would also
permit the registration of the Registrable Stock and such filing is to be on its
behalf or on behalf of selling holders of its securities for the general
registration of Common Stock to be sold for cash, the Company shall each such
time promptly give the Holders written notice of such determination setting
forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than 15 days from the date of such
notice, and advising the Holders of their right to have Registrable Stock
included in such registration. In the case of a registration statement to be
filed on behalf of selling holders of its securities, the Company shall also
indicate in such notice whether it will be registering securities on its own
behalf as part of such registration statement. Upon the written request of any
Holder received by the Company not later than 15 days after the date of the
Company's notice (which request shall state the number of Registrable Shares to
be so registered and the intended method of distribution), the Company shall,
subject to Section 5.04(b) below, use all reasonable efforts to cause to be
registered under the Securities Act all of the Registrable Stock that each such
Holder has so requested to be registered; provided, however, that the Company
shall have the right to postpone or withdraw any registration effected pursuant
to this Section 5.04 without obligation or liability to such Holder.
(b) If, in the opinion of the managing underwriter (or, in the
case of a non-underwritten offering, in the opinion of the Company), the total
amount of such securities to be so registered, including such Registrable Stock,
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to the then current market value of such
securities and (ii) without otherwise materially and adversely affecting the
entire offering, then subject to the registration rights of the holders of the
Senior Preferred Stock and ING, the Company securities and Registrable Stock to
be included in such registration shall be included in the following order:
(A) first, any securities of the Company;
<PAGE>
(B) second, any Registrable Stock of the Stockholders or the Stockholder
Permitted Transferees; and
(C) third, any Registrable Stock of Mr. Otten or the Otten Permitted
Transferees or any other stockholder hereafter granted incidental
registration rights in proportion (as nearly as practicable) to the
amount of Registrable Stock requested to be included by Mr. Otten, the
Otten Permitted Transferees or such stockholders at the time of the
filing of the registration statement.
SECTION 5.05. Shelf Registration. (a) An Initiating Holder
may use registration rights granted pursuant to Section 5.03, subject to the
limitations of paragraphs (d) and (e) of Section 5.03, to request that the
Company file a "shelf" registration statement pursuant to Rule 415 under the
Securities Act or any successor rule (the "Shelf Registration") with respect to
the Registrable Stock. The Company shall (i) use all reasonable efforts to have
the Shelf Registration filed within 30 days of such request and declared
effective as soon as reasonably practicable following such request and (ii)
subject to Section 5.03(c)(iii), use all reasonable efforts to keep the Shelf
Registration continuously effective from the date that such Shelf Registration
is declared effective until at least the earlier of such time as (A) all such
Registrable Stock has been sold thereunder or (B) the second anniversary of such
effective date in order to permit the prospectus forming a part thereof to be
usable by Holders during such period.
(b) Subject to Section 5.03(c)(iii), the Company shall
supplement or amend the Shelf Registration, (i) as required by the registration
form utilized by the Company or by the instructions applicable to such
registration form or by the Securities Act, (ii) to include in such Shelf
Registration any additional securities that become Registrable Stock by
operation of the definition thereof and (iii) following the written request of
an Initiating Holder pursuant to Section 5.05(c), to cover offers and sales of
all or a part of the Registrable Stock by means of an underwriting. The Company
shall furnish to the Holders of the Registrable Stock to which the Shelf
Registration relates copies of any such supplement or amendment sufficiently in
advance (but in no event less than five Business Days in advance) of its use or
filing with the SEC to allow the Holders a meaningful opportunity to comment
thereon.
(c) The Holders may, at their election and upon written notice
by an Initiating Holder to the Company, subject to the limitations set forth in
Section 5.03(c)(iii), effect offers and sales under the Shelf Registration by
means of one or more underwritten offerings, in which case the provisions of
Section 5.03(b) shall apply to any such underwritten distribution of securities
under the Shelf Registration and such underwriting shall, if sales of
Registrable Stock pursuant thereto shall have closed, be regarded as the
exercise of one of the registration rights contemplated by Section 5.03.
<PAGE>
SECTION 5.06. Obligations of the Company. Whenever required
under Sections 5.03 and 5.05 to use all reasonable efforts to effect the
registration and sale of any Registrable Stock under the Securities Act, the
Company shall:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Stock (which shall be filed in no
event later than 90 days after written notice requesting a registration
statement under Section 5.03 or 5.05 has been received) and use all
reasonable efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated
thereby determined as provided hereafter; provided, however, that the
Company shall not be required to keep any Registration Statement (other
than the Shelf Registration) effective more than 120 days;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Stock covered by such registration statement;
(c) furnish to the Holders such reasonable numbers of copies
of the registration statement and the prospectus included therein
(including each preliminary prospectus and any amendments or
supplements thereto) in conformity with the requirements of the
Securities Act, any exhibits filed therewith and such other documents
and information as they may reasonably request;
(d) use all reasonable efforts to register or qualify the
Registrable Stock covered by such registration statement under such
other securities or "blue sky" laws of such jurisdiction within the
United States and Puerto Rico as shall be reasonably appropriate for
the distribution of the Registrable Stock covered by the registration
statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not, but for the requirements of this
paragraph (except that the Company will use all reasonable efforts to
register or qualify Registrable Stock in such additional jurisdictions
as the Holder may request subject to the foregoing proviso and at the
Holder's own expense), be obligated to do so; and provided further that
the Company shall not be required to qualify such Registrable Stock in
any jurisdiction in which the securities regulatory authority requires
that any Holder submit any shares of its Registrable Stock to the
terms, provisions and restrictions of any escrow, lockup or similar
agreement(s) for consent to sell Registrable Stock in such jurisdiction
unless such Holder agrees to do so;
<PAGE>
(e) promptly notify each Holder for whom such Registrable
Stock is covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made, and at the request of any such Holder promptly
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. In the event the Company
shall give such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective as
provided in Section 5.06(a) (or, in the case of the Shelf Registration,
Section 5.05(a)) by the number of days during the period from and
including the date of the giving of such notice to the date when the
Company shall make available to the Holders such supplemented or
amended prospectus;
(f) furnish, at the request of any Holder requesting
registration of Registrable Stock pursuant to Section 5.03 or 5.05, if
the method of distribution is by means of an underwriting, on the date
that the Shares of Registrable Stock are delivered to the underwriters
for sale pursuant to such registration or, if such Registrable Stock is
not being sold through underwriters, on the date that the registration
statement with respect to such shares of Registrable Stock becomes
effective, (1) a signed opinion, dated on or about such date, of the
independent legal counsel representing the Company for the purpose of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Holders making such request, as to such matters as such underwriters or
the Holders holding a majority of the Registrable Stock included in
such registration, as the case may be, may reasonably request and as
would be customary in such a transaction, and (2) letters dated on or
about such date and the date the offering is priced from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and if such Registrable Stock is not being
sold through underwriters, then to the Holders making such request and,
if such accountants refuse to deliver such letters to such Holders,
then to the Company (i) stating that they are independent certified
public accountants within the meaning of the Securities Act and that,
in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and (ii) covering such other
financial matters (including information as to the period ending not
more than five Business Days prior to the date of such letters) with
respect to the registration in respect of which such letter is being
given as such underwriters or the Holders holding a majority of the
Registrable Stock included in such registration, as the case may be,
may reasonably request and as would be customary in such a transaction;
<PAGE>
(g) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(h) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, but not later than
18 months after the effective date of the registration statement, an
earnings statement covering the period of at least 12 months beginning
with the first full month after the effective date of such registration
statement, which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(i) use all reasonable efforts to list the Registrable Stock
covered by such registration statement with any U.S. nationally
recognized securities exchange on which the Common Stock is then
listed.
For purposes of Sections 5.06(a) and 5.06(b), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and six months after the effective
date thereof.
SECTION 5.07. Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Article V of this Agreement that the Holders shall furnish to the Company such
information regarding themselves, the Registrable Stock held by them, and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
<PAGE>
SECTION 5.08. Expenses of Registration. All expenses incurred
in connection with each registration pursuant to Sections 5.03, 5.04 and 5.05 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incidental to such performance and compliance), fees of the National Association
of Securities Dealers, Inc. or listing fees, messenger and delivery expenses,
all fees and expenses of complying with state securities or "blue sky" laws, and
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (which counsel, subject to
the registration rights of holders of the Senior Preferred Stock and ING, shall
be selected by the Holders holding a majority in interest of the Registrable
Stock being registered), shall be paid by the Company; provided, however, that
if a registration request pursuant to Section 5.03 or 5.05 is subsequently
withdrawn by the Holders the Company shall not be required to pay any expenses
of such registration proceeding, and such withdrawing Holders shall bear such
expenses. The Holders shall bear and pay the underwriting commissions and
discounts applicable to securities offered for their account and the fees and
disbursements of any additional counsel in connection with any registrations,
filings and qualifications made pursuant to this Agreement.
SECTION 5.09. Underwriting Requirements. In connection with
any underwritten offering, the Company shall not be required under Section 5.04
to include shares of Registrable Stock in such underwritten offering unless the
Holders of such shares of Registrable Stock accept the terms of the underwriting
of such offering that have been reasonably agreed upon between the Company and
the underwriters selected by the Stockholders.
SECTION 5.10. Indemnification. In the event any Registrable
Stock is included in a registration statement under this Agreement:
<PAGE>
(a) The Company shall indemnify and hold harmless each Holder,
such Holder's directors and officers, agents of such Holder, each
person who participates in the offering of such Registrable Stock,
including underwriters (as defined in the Securities Act), and each
Person, if any, who controls such Holder or participating person within
the meaning of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which they may become subject
under the Securities Act, the Exchange Act, state securities or "blue
sky" laws or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act
or any amendments or supplements thereto) or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each such Holder, such
Holder's directors and officers, agents, such participating person or
controlling person for any legal or other expenses reasonably incurred
by them (but not in excess of expenses incurred in respect of one
counsel for Mr. Otten and any Otten Permitted Transferee and one
counsel for the Stockholders and any Stockholder Permitted Transferee,
as the case may be, all of them unless there is an actual conflict of
interest between any indemnified parties, which indemnified parties may
be represented by separate counsel) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 5.10(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company; provided further that the Company shall not be
liable to any Holder, such Holder's directors and officers, agents,
participating person or controlling person in any such case for any
such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by any such Holder, such Holder's directors and
officers, agents, participating person or controlling person. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such Holder, such Holder's
directors and officers, agents, participating person or controlling
person, and shall survive the Transfer of such securities by such
Holder.
<PAGE>
(b) Each Holder requesting or joining in a registration
severally and not jointly shall indemnify and hold harmless the
Company, each of its directors and officers, each Person, if any, who
controls the Company within the meaning of the Securities Act, and each
agent and any underwriter for the Company (within the meaning of the
Securities Act) against any losses, claims, damages or liabilities,
joint or several, to which the Company or any such director, officer,
controlling person, agent or underwriter may become subject, under the
Securities Act, Exchange Act, state securities or "blue sky" laws or
otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act
or any amendments or supplements thereto) or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished
by or on behalf of such Holder expressly for use in connection with
such registration; and each such Holder shall reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent or underwriter (but not in excess of
expenses incurred in respect of one counsel for all of them unless
there is an actual conflict of interest between any indemnified parties
which indemnified parties may be represented by separate counsel) in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 5.10(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder; and
provided further that the liability of each Holder hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the net proceeds from the
sale of the Shares sold by such Holder under such registration
statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net
proceeds received by such Holder from the sale of Registrable Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party under this
Section 5.10 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 5.10, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and assume
the defense thereof with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with all fees and expenses thereof to be paid by such
indemnified party, and to be apprised of all progress in any proceeding
the defense of which has been assumed by the indemnifying party. The
failure to notify an indemnifying party promptly of the commencement of
any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such
indemnified party on account of the indemnity contained in this Section
5.10, unless (and only to the extent) the indemnifying party was
prejudiced by such failure, and in no event shall such failure relieve
the indemnifying party from any other liability which it may have to
such indemnified party. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability arising out of such claim or proceeding.
<PAGE>
(d) To the extent any indemnification by an indemnifying party
is prohibited or limited by applicable law, the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
the indemnified party in connection with the actions which resulted in
such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by
reference to, among other things, whether or not any action in
question, including any untrue or alleged untrue statement of material
fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party
or indemnified party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages or liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.10(d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
SECTION 5.11. Lockup. Each Holder shall, in connection with
any registration of the Company's securities, upon the request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
agree in writing not to effect any sale, disposition or distribution of any
Registrable Stock (other than (i) the Registrable Stock included in such
registration or (ii) as permitted by clause (B) of Section 4.02(a)), without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time from 60 days prior to the effective date of such
registration to such time as the Company or the underwriters may specify;
provided, however, that (x) all Executives and Directors shall also have agreed
not to effect any sale, disposition or distribution of any Registrable Stock
under the circumstances and pursuant to the terms set forth in this Section 5.11
and (y) in no event shall the Holders be required to not effect any sale,
disposition or distribution for longer than 180 days after the Registration
Statement becomes effective pursuant to this Section 5.11.
SECTION 5.12. Transfer of Registration Rights. Subject to
Article IV, the registration rights of the Stockholders or Mr. Otten under this
Agreement with respect to any Registrable Stock may be transferred to any
Permitted Transferee of such Registrable Stock; provided, however, that (i) the
Stockholders and Mr. Otten shall give the Company written notice at or prior to
the time of such Transfer stating the name and address of the Permitted
Transferee and identifying the securities with respect to which the rights under
this Agreement are being transferred; (ii) such Permitted Transferee shall agree
in writing, in form and substance reasonable satisfactory to the Company, to be
bound as a Holder by the provisions of this Agreement; and (iii) immediately
following such Transfer, the further disposition of such securities by such
Permitted Transferee is restricted under the Securities Act. Except as set forth
in this Section 5.12, no Transfer of Registrable Stock shall cause such
Registrable Stock to lose such status.
SECTION 5.13. Rule 144 Information. Subject to Article IV,
and with a view to making available the benefits of certain rules and
regulations of the SEC which may at any time permit the sale of the Registrable
Stock to the public without registration, at all times after 90 days after any
Shelf Registration Statement covering a public offering of securities of the
Company under the Securities Act shall have become effective, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
<PAGE>
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(c) furnish to each Holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with
the reporting requirements of such Rule 144 and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by
the Company as such Holder may reasonably request in availing itself of
any rule or regulation of the SEC allowing such Holder to sell any
Registrable Stock without registration.
ARTICLE VI
FURNISHING OF INFORMATION
SECTION 6.01. Furnishing of Information. For so long as the
Stockholders, on the one hand, and Mr. Otten, on the other hand, Beneficially
Own at least 5% of the outstanding shares of Common Stock (on a Fully Diluted
Basis):
(a) The Company will furnish or make available to the
Stockholders and/or Mr. Otten, as the case may be, its annual reports
to stockholders and any quarterly or other financial reports and
information furnished by it to stockholders pursuant to the
requirements of the Exchange Act.
(b) If the Company is not required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange Act, it
shall furnish to the Stockholders and/or Mr. Otten, as the case may be,
its financial statements, including any notes thereto (and with respect
to annual reports, an auditors' report by a nationally recognized firm
of independent certified public accountants), a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and such other information which the Company would
otherwise be required to include in annual and quarterly reports filed
under the Exchange Act.
<PAGE>
(c) The Company shall, at any reasonable time and from time to
time, permit the Stockholders and/or Mr. Otten, as the case may be, or
any agent or representative thereof, to examine and make copies of and
abstracts from the records and books of account of the Company, and to
discuss the records, finances and accounts of the Company with any of
its officers, Directors and with their independent certified public
accountants.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Waiver. The parties hereto may agree to (a)
extend the time for the performance of any of the obligations or other acts of
other parties, (b) waive any inaccuracies in the representations and warranties
of other parties contained herein or in any document delivered by other parties
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of other parties contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the parties to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights. Oak Hill shall have all authority to act on behalf of the
other Stockholders under this Section 7.01.
SECTION 7.02. Expenses; Attorneys' Fees. (a) Except as
otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
(b) A party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other parties for and against all reasonable
out-of-pocket expenses, including legal fees, incurred by such other party by
reason of the enforcement and protection of its rights under this Agreement. The
payment of such expenses is in addition to any other relief to which such other
party may be entitled.
SECTION 7.03. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by telecopy, by e-mail or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 7.03):
<PAGE>
(a) if to the Company or Mr. Otten,
American Skiing Company
Sunday River Road
Bethel, ME 04217
Telecopy: (207) 824-5110
Attention: Leslie B. Otten
Christopher E. Howard
with copies (which shall not constitute notice to the Company or Mr. Otten) to:
Pierce Atwood
One Monument Square
Portland, ME 04101
Telecopy: (207) 791-1350
Attention: David J. Champoux, Esq.
(e-mail: [email protected])
and
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022-6069
Telecopy: (212) 848-7179
Attention: Robert Evans III, Esq.
(e-mail: [email protected])
Peter D. Lyons, Esq.
(e-mail: [email protected])
<PAGE>
(b) if to the Stockholders,
Oak Hill Capital Partners, L.P.
201 Main Street
Fort Worth, Texas 76102
Attention: Ray Pinson
and
Oak Hill Capital Management, Inc.
Park Avenue Tower
65 East 55th Street
New York, NY 10022
Telecopy: 212-754-5685
Attention: Steven B. Gruber
Bradford E. Bernstein
with a copy (which shall not constitute notice to the Stockholders) to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 373-2377
Attention: Matthew Nimetz, Esq.
SECTION 7.04. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. No party to this Agreement
shall be deemed to be the draftsman of this Agreement.
SECTION 7.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
<PAGE>
SECTION 7.06. Entire Agreement. This Agreement, together with
the Voting Agreement, constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, between the parties with respect to the
subject matter hereof.
SECTION 7.07. Assignment. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, with respect to the Company, any successor corporation;
provided, however, other than as contemplated by the Delaware Reincorporation or
any other merger involving the Company, no party hereto shall assign or delegate
any of the rights or obligations created under this Agreement without the prior
written consent of the other parties, except to Affiliates of Oak Hill or to Oak
Hill Securities Fund, L.P.; provided, however, that no such assignment shall
release Oak Hill or any of the other Stockholders from any of their obligations
hereunder. Oak Hill shall have all authority to act on behalf of the other
Stockholders under this Section 7.07.
SECTION 7.08. No Third Party Beneficiaries. Except for the
provisions of Article V relating to indemnified parties, this Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 7.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 7.01. Oak Hill
shall have all authority to act on behalf of the other Stockholders under this
Section 7.09.
SECTION 7.10. Governing Law; Forum. (a) Prior to the Delaware
Reincorporation, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maine and (b) on or after the
occurrence of the Delaware Reincorporation, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, in each
case, as applicable to contracts executed in and to be performed entirely in
that state and without regard to any applicable conflicts of law principles. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any State or federal court in Maine (if such action or
proceeding is commenced prior to the Delaware Reincorporation) or in Delaware
(if such action or proceeding is commenced after the Delaware Reincorporation).
Each of the parties to this Agreement (a) consents to submit itself to the
personal jurisdiction of any Maine or Delaware State or federal court, as the
case may be, in the event that any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
in relation to this Agreement or any of the other transactions contemplated by
this Agreement in any court other than any Maine or Delaware State or federal
court, as the case may be.
<PAGE>
SECTION 7.11. Effect of Delaware Reincorporation. This
agreement shall continue in full force and effect notwithstanding any actions
taken in connection with the Delaware Reincorporation.
SECTION 7.12. Counterparts. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 7.13. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
AMERICAN SKIING COMPANY
By: /s/ Leslie B. Otten
Name: Leslie B. Otten
Title: As President
LESLIE B. OTTEN
/s/ Leslie B. Otten
CONSENTED TO AND ACKNOWLEDGED BY:
ING US CAPITAL LLC,
AS PLEDGEE OF SHARES
OF CLASS A COMMON
STOCK AND COMMON STOCK
BENEFICIALLY OWNED BY
LESLIE B. OTTEN
By: /s/ Robert L. Fellows
Name: Robert L. Fellows
Title: Director
<PAGE>
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ Steven B. Gruber
Name: Steven B. Gruber
Title: Managing Member
OAK HILL CAPITAL MANAGEMENT
PARTNERS, L.P.
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ Steven B. Gruber
Name: Steven B. Gruber
Title: Vice President
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.,
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By: /s/ Glenn R. August
Name: Glenn R. August
Title: President
<PAGE>
OHCP SKI, L.P.
By: Oak Hill Capital Partners, L.P.
its general partner
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ Steven B. Gruber
Name: Steven B. Gruber
Title: Vice President
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
STOCKHOLDERS
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
Jurisdiction and
Name Type of Organization
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Oak Hill Capital Partners, L.P. Delaware L.P.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Oak Hill Capital Management Partners, L.P. Delaware L.P.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Oak Hill Securities Fund, L.P. Delaware L.P.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OHCP SKI, L.P. Delaware L.P.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
AMENDED, RESTATED AND CONSOLIDATED CREDIT AGREEMENT
Dated as of October 12, 1999
Among
AMERICAN SKIING COMPANY
AND THE OTHER BORROWERS PARTY HERETO,
as Borrowers,
THE LENDERS PARTY HERETO,
and
BANKBOSTON, N.A.,
as Agent for the Lenders
<PAGE>
TABLE OF CONTENTS
Page
Section 1.1 Definitions........................................................1
Section 1.2 Accounting Terms..................................................25
ARTICLE 2. THE CREDITS.......................................................25
Section 2.1 The Revolving Credit..............................................25
Section 2.2 Making of Revolving Credit Advances...............................27
Section 2.3 Interest on Revolving Credit Advances.............................28
Section 2.4 The Term Loans....................................................28
Section 2.5 Interest on the Term Loans........................................29
Section 2.6 Election of LIBOR Pricing Options.................................29
Section 2.7 Additional Payments...............................................29
Section 2.8 Computation of Interest, Etc......................................30
Section 2.9 Fees..............................................................30
Section 2.10 Set-Off..........................................................30
Section 2.11 Sharing of Payments..............................................31
Section 2.12 Reduction of Commitment by the Borrowers.........................31
Section 2.13 Increased Costs, Etc.............................................32
Section 2.14 Changed Circumstances............................................33
Section 2.15 Use of Proceeds..................................................34
Section 2.16 Letters of Credit................................................35
Section 2.17 Collection of Accounts...........................................39
Section 2.18 Swing Line Commitment............................................39
Section 2.19 Procedure for Swing Line Borrowing; Interest on Swing Line Loans.40
Section 2.20 Refunded Swing Line Loans; Swing Line Loan Participations........41
Section 2.21 Release of Certain Liens.........................................42
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES..................................44
Section 3.1 Conditions to the Term Loans and the Initial Revolving Credit
Advance...........................................................44
Section 3.2 Conditions to All Loans...........................................47
ARTICLE 4. PAYMENT AND REPAYMENT.............................................48
Section 4.1 Mandatory Repayments and Prepayment...............................48
Section 4.2 Voluntary Prepayments.............................................51
Section 4.3 Payment and Interest Cutoff.......................................51
Section 4.4 Payment or Other Actions on Non-Business Days.....................52
Section 4.5 Method and Timing of Payments.....................................52
Section 4.6 Payments Not at End of Interest Period............................52
Section 4.7 Currency..........................................................53
Section 4.8 Foreign Lenders...................................................53
<PAGE>
ARTICLE 5. REPRESENTATIONS AND WARRANTIES....................................53
Section 5.1 Existence, Charter and Formation Documents, Etc...................53
Section 5.2 Principal Place of Business; Location of Records..................53
Section 5.3 Qualification.....................................................53
Section 5.4 Subsidiaries......................................................53
Section 5.5 Power.............................................................54
Section 5.6 Valid and Binding Obligations.....................................55
Section 5.7 Other Agreements..................................................55
Section 5.8 Payment of Taxes..................................................55
Section 5.9 Financial Statements..............................................55
Section 5.10 Other Materials Furnished........................................56
Section 5.11 Stock............................................................56
Section 5.12 Changes in Condition.............................................56
Section 5.13 Assets, Licenses, Patents, Trademarks, Etc.......................57
Section 5.14 Litigation.......................................................57
Section 5.15 Pension Plans....................................................57
Section 5.16 Outstanding Indebtedness.........................................58
Section 5.17 Environmental Matters............................................58
Section 5.18 Foreign Trade Regulations........................................59
Section 5.19 Governmental Regulations.........................................60
Section 5.20 Margin Stock.....................................................60
Section 5.21 Solvency.........................................................60
Section 5.22 Compliance with Other Instruments, Laws, Etc.....................60
Section 5.23 Absence of Financing Statements, Etc.............................60
Section 5.24 Perfection of Security Interests.................................61
Section 5.25 Bank Accounts....................................................61
Section 5.26 Fiscal Year......................................................61
Section 5.27 Tax Status.......................................................61
Section 5.28 Consummation of Issuance of Series B Preferred Stock.............61
Section 5.29 Series B Preferred Stock Agreements..............................61
Section 5.30 Cerberus Purchase Agreement; Cerberus Amendment and Waiver Letter
Agreement; Certificate of Designation ...........................62
Section 5.31 Wolf Acquisition Agreement.......................................62
ARTICLE 6. REPORTS AND INFORMATION...........................................62
Section 6.1 Interim Financial Statements and Reports..........................62
Section 6.2 Annual Financial Statements.......................................63
Section 6.3 Annual Budget.....................................................63
Section 6.4 Reports of Skier Visits...........................................63
Section 6.5 Notice of Defaults................................................64
Section 6.6 Notice of Litigation..............................................64
Section 6.7 Communications with Others........................................64
<PAGE>
Section 6.8 Reportable Events.................................................66
Section 6.9 Reports to other Creditors........................................66
Section 6.10 Communications with Independent Public Accountants...............66
Section 6.11 Environmental Reports............................................67
Section 6.12 Notices Under Certain Agreements.................................67
Section 6.13 Miscellaneous....................................................68
ARTICLE 7. FINANCIAL COVENANTS...............................................68
Section 7.1 Ratio of Consolidated Total Debt to Consolidated EBITDA...........68
Section 7.2 Ratio of Consolidated Adjusted Cash Flow to Consolidated Debt
Service...........................................................68
Section 7.3 Ratio of Consolidated EBITDA to Consolidated Interest Expense.....69
Section 7.4 Minimum Consolidated Net Worth....................................69
Section 7.5 Minimum Consolidated EBITDA.......................................69
ARTICLE 8. AFFIRMATIVE COVENANTS.............................................70
Section 8.1 Existence and Business............................................70
Section 8.2 Taxes and Other Obligations.......................................70
Section 8.3 Maintenance of Properties and Leases..............................71
Section 8.4 Insurance.........................................................71
Section 8.5 Records, Accounts and Places of Business..........................71
Section 8.6 Inspection........................................................72
Section 8.7 Maintenance of Accounts...........................................72
Section 8.8 [Intentionally Omitted]...........................................72
Section 8.9 Ownership of Restricted Subsidiaries..............................72
Section 8.10 Survey and Surveyor's Certificate................................72
Section 8.11 Appraisals.......................................................73
Section 8.12 Lease Renewal....................................................73
Section 8.13 Use of Series B Preferred Stock Proceeds.........................73
Section 8.14 Environmental and Land Use Compliance............................73
Section 8.15 Interest Rate Protection.........................................73
Section 8.16 Independence of Unrestricted Subsidiaries........................73
Section 8.17 Forest Service Permits...........................................74
Section 8.18 Further Assurances...............................................74
ARTICLE 9. NEGATIVE COVENANTS................................................74
Section 9.1 Restrictions on Indebtedness......................................74
Section 9.2 Restriction on Liens..............................................76
Section 9.3 Investments.......................................................78
Section 9.4 Mergers, Acquisitions, Etc........................................79
Section 9.5 Transactions with Affiliates......................................79
Section 9.6 Distributions.....................................................80
Section 9.7 Capital Expenditures..............................................80
<PAGE>
Section 9.8 Dispositions of Assets............................................81
Section 9.9 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons....81
Section 9.10 ERISA............................................................81
Section 9.11 Sale and Leaseback...............................................81
Section 9.12 Restrictive or Inconsistent Agreements...........................81
Section 9.13 Limitations on Real Estate Operations............................81
Section 9.14 Fiscal Year......................................................82
Section 9.15 Limitation on Excess Proceeds....................................82
Section 9.16 No Amendment of Subordinated Notes, Cerberus Purchase Agreement, or
Series B Preferred Stock Agreements............................. 82
Section 9.17 Exchange of Cerberus 10 1/2% Repriced Convertible Exchangeable
Preferred Stock and Amended and Restated Registration Rights
Agreement Penalties..............................................82
Section 9.18 Limitation on Issuance of Capital Stock..........................82
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES...................................82
Section 10.1 Events of Default................................................82
Section 10.2 Remedies.........................................................86
Section 10.3 Distribution of Proceeds.........................................86
ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES..........................87
Section 11.1 Actions by Lenders...............................................87
Section 11.2 Actions by Borrowers.............................................88
ARTICLE 12. SUCCESSORS AND ASSIGNS...........................................89
Section 12.1 General..........................................................89
Section 12.2 Assignments......................................................89
Section 12.3 Participations...................................................90
ARTICLE 13. THE AGENT........................................................92
Section 13.1 Authorization and Action.........................................92
Section 13.2 Agent's Reliance, Etc............................................93
Section 13.3 Agent as a Lender................................................93
Section 13.4 Lender Credit Decision...........................................93
Section 13.5 Indemnification of Agent.........................................94
Section 13.6 Successor Agent..................................................94
Section 13.7 Amendment of Article 13..........................................94
ARTICLE 14. MISCELLANEOUS....................................................94
Section 14.1 Notices..........................................................94
Section 14.2 Merger...........................................................95
Section 14.3 Governing Law; Consent to Jurisdiction...........................95
Section 14.4 Counterparts.....................................................96
<PAGE>
Section 14.5 Expenses and Indemnification.....................................96
Section 14.6 Confidentiality..................................................97
Section 14.7 Reliance on Representations and Actions of American Ski..........98
Section 14.8 Joint and Several Obligations....................................98
Section 14.9 Continuity of 1997 Credit Agreements.............................98
Section 14.10 WAIVER OF JURY TRIAL............................................99
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Amended, Restated and Consolidated Term Loan Note
Exhibit A-3 Form of Amended, Restated and Consolidated Swing Line Note
Exhibit B Form of Notice of Revolving Credit or Swing Line Borrowing
Exhibit C Form of Compliance Certificate
Exhibit D Form of Pricing Notice
Exhibit E-1 Form of Amended, Restated and Consolidated Security
Agreement
Exhibit E-2 Form of Amended and Restated Guarantor Security Agreement
Exhibit F Form of Amended and Restated Unlimited Guaranty Agreement
Exhibit G Form of Amended and Restated Fee and Leasehold Mortgage,
Assignment of Leases and Rents, Financing Statement and
Security Agreement
Exhibit H Form of Amended and Restated Collateral Assignment of
Leases and Rents
Exhibit I [Intentionally Omitted.]
Exhibit J Form of Amended and Restated Assignment in Trust
Exhibit K Form of Amended and Restated Assignment of Trademarks
Exhibit L Form of Amended and Restated Assignment of Licenses,
Contracts and Permits
Exhibit M Form of Amended and Restated Stock Pledge Agreement
Exhibit N Form of Amended and Restated Hazardous Materials
Indemnification Agreement
Exhibit O Form of Opinions of Borrowers' Counsel
Exhibit P Form of Assignment and Acceptance Agreement
Exhibit Q Form of Amended and Restated Otten Subordination Agreement
Exhibit R Acknowledgment of Unrestricted Subsidiary
Exhibit S Form of Joinder
Schedule 1 Schedule of Commitment Percentages
Schedule 2 Pricing Schedule
Schedule 2.1 Schedule of Funding of First Revolving Credit Advance and
Term Loans by Certain Lenders.
Schedule 2.16 Schedule of Letters of Credit
Schedule 2.17 Schedule of Bank Accounts
Schedule 3.1(q) Schedule of Certain Leases
Schedule 5.2 Schedule of Principal Places of Business
Schedule 5.4(a) Schedule of Subsidiaries and Issued and Outstanding Stock
Schedule 5.4(b) Transactions with Unrestricted Subsidiaries
Schedule 5.8 Schedule of Certain Tax Matters
Schedule 5.9 Schedule of Financial Statements
Schedule 5.14 Schedule of Litigation
Schedule 5.13 Schedule of Licenses, Patents, Copyrights and Trademarks
Schedule 5.13(c) Schedule of Certain Leasehold Personal Property Interests
and Personal Property Lease Agreements
Schedule 5.15 Schedule of Pension Plans
Schedule 5.16 Schedule of Indebtedness, Liens, Charges and Encumbrances
<PAGE>
Schedule 5.17 Environmental Matters
Schedule 8.4 Schedule of Insurance
Schedule 8.9 Schedule of Ownership of Restricted Subsidiaries
Schedule 8.12 Schedule of Leases
Schedule 8.13 Schedule of Use of Proceeds of Series B Preferred Stock
Schedule 8.14 Schedule of Environmental and Land Use Compliance
Schedule 8.17 Schedule of Forest Service Permits
Schedule 9.3 Investment Policy and Investments
<PAGE>
AMENDED, RESTATED AND CONSOLIDATED CREDIT AGREEMENT
This AMENDED, RESTATED AND CONSOLIDATED CREDIT AGREEMENT is entered
into as of October 12, 1999 by and among AMERICAN SKIING COMPANY, a Delaware
corporation ("American Ski") and the other Borrowers from time to time party
hereto (each with American Ski a "Borrower" and collectively, the "Borrowers"),
the Lenders from time to time party hereto, and BANKBOSTON, N.A., a national
banking association, as Agent for the lenders from time to time party hereto
(the "Agent").
Recitals
American Ski (as successor to American Skiing Company, a Maine
corporation), certain of the other Borrowers, the Lenders party hereto and the
Agent are parties to (a) an Amended and Restated Credit Agreement dated as of
November 12, 1997, as amended (the "ASC East Credit Agreement") and (b) a Credit
Agreement dated as of November 12, 1997, as amended (the "ASC West Credit
Agreement" and together with the ASC East Credit Agreement, the "1997 Credit
Agreements"). American Ski and the other Borrowers, jointly and severally,
desire to amend, restate and consolidate their existing credit facilities on the
terms and conditions set forth herein. The credit facilities established
hereunder evidence the Borrowers' obligations under the 1997 Credit Agreements,
as amended, restated and consolidated hereunder, and future advances hereunder
will be used (a) to fund certain capital expenditures and (b) to provide for
on-going working capital and other specified needs. The Lenders are willing to
provide such financing on the terms and conditions set forth herein, including,
among others, that American Ski and the other Borrowers amend, restate and
consolidate the 1997 Credit Agreements as provided herein. The Borrowers conduct
their operations on a combined basis with shared management, purchasing,
planning, financial controls and other functions, and the access of all
Borrowers to the credit facilities provided hereunder benefits all Borrowers in
connection with their various businesses.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, (a) American Ski, the other
Borrowers, the Agent and the Lenders party to the 1997 Credit Agreements hereby
amend, restate and consolidate the 1997 Credit Agreements in their entirety and
(b) all the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:
1
<PAGE>
"Affiliate" shall mean (a) any director or executive officer
of American Ski or any of its Subsidiaries or any Person owning more
than 5% of the outstanding common stock of American Ski or any of its
Subsidiaries and (b) any Person that controls, is controlled by or is
under common control with such a Person or any Affiliate of such
Person. For purposes of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" shall mean BankBoston, N.A., in its capacity as agent
for the Lenders, and its successors in that capacity.
"Aggregate Outstanding Revolving Credit Extensions" shall
mean, as to any Revolving Credit Lender at any time, an amount equal to
the sum of (a) the aggregate principal amount of all Revolving Credit
Advances made by such Lender then outstanding plus (b) such Revolving
Credit Lender's Revolving Credit Commitment Percentage of the Letter of
Credit Exposure then outstanding.
"Agreement" shall mean this Amended, Restated and Consolidated
Credit Agreement, as amended or supplemented from time to time.
References to Articles, Sections, Exhibits, Schedules and the like
refer to the Articles, Sections, Exhibits, Schedules and the like of
this Agreement, unless otherwise indicated, as amended and supplemented
from time to time.
"Alpine Pipeline" shall mean Alpine Pipeline Company, a
Vermont corporation.
"Applicable Base Rate" shall mean the sum of (a) the Base Rate
plus (b) the Base Rate Margin, as each is in effect from time to time.
"Applicable LIBOR Rate" shall mean the sum of (a) the LIBOR
Rate plus (b) the LIBOR Rate Margin, as each is in effect from time to
time.
"Applicable Money Market Rate" shall mean the sum of (a) the
Money Market Rate plus (b) the LIBOR Rate Margin, as each is in effect
from time to time.
"Appraisal" shall mean an appraisal of the fair market value
of property and business, accepted and approved by the Agent, performed
by an independent appraiser selected by the Agent who is not employed
by American Ski, any of its Subsidiaries or the Agent, the form of such
appraisal and the identity of the appraiser to be acceptable to the
Agent.
"Appraised Value" shall mean the fair market value of the
subject property determined by the most recent Appraisal.
2
<PAGE>
"Approved Fund" means, with respect to any Lender that is a
fund that invests in commercial loans, any other fund that invests in
commercial loans and is managed by the same investment advisor as such
Lender or by an affiliate of such investment advisor.
"Assignment and Acceptance Agreement" -- See Section 12.2(a)
hereof.
"Attitash Debentures" shall mean the Subordinated Debentures
due 2002 issued by L.B.O. Holding, Inc. in the aggregate outstanding
principal amount as of the date hereof as set forth on Schedule 5.16
hereto.
"Available Revolving Credit Amount" shall mean at any time the
Maximum Revolving Credit Amount in effect at such time (including after
giving effect to any mandatory reductions of the Maximum Revolving
Credit Amount under Section 4.1(c)), less the Letter of Credit Exposure
and less the aggregate principal amount of Swing Line Loans then
outstanding.
"Available Revolving Credit Commitment" shall mean, as to any
Revolving Credit Lender at any time, an amount equal to the excess, if
any, of (a) the product of (i) such Revolving Credit Lender's Revolving
Credit Commitment Percentage multiplied by (ii) the Maximum Revolving
Credit Amount over (b) such Revolving Credit Lender's Aggregate
Outstanding Revolving Credit Extensions.
"Base Capital Expenditure Amount" shall mean $30,000,000.
"Base Rate" shall mean the greater of (a) the rate of interest
announced from time to time by the Agent at its head office in Boston,
Massachusetts as its Base Rate and (b) the Federal Funds Effective Rate
plus 1/2 of 1% per annum (rounded upwards, if necessary, to the next _
of 1%).
"Base Rate Loan" shall mean (a) any Revolving Credit Advance
bearing interest at a fluctuating rate determined by reference to the
Applicable Base Rate, (b) any portion of the Term Loans bearing
interest at a fluctuating rate determined by reference to the
Applicable Base Rate and (c) any portion of a Swing Line Loan bearing
interest at a fluctuating rate determined by reference to the
Applicable Base Rate.
"Base Rate Margin" shall mean a rate per annum determined in
accordance with the Pricing Schedule.
"Business Day" shall mean (a) for all purposes other than as
covered by clause (b) below, any day other than a Saturday, Sunday or
legal holiday on which banks in Boston, Massachusetts are open for the
conduct of a substantial part of their commercial banking business and
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(b) with respect to all notices and determinations in connection with,
and payments of principal and interest on, LIBOR Rate Loans, any day
that is a Business Day described in clause (a) and that is also a day
for trading by and between banks in U.S. Dollar deposits in the London
interbank eurodollar market.
"Capital Assets" shall mean fixed assets, both tangible (such
as land, buildings, fixtures, machinery and equipment) and intangible
(such as patents, copyrights, trademarks, franchises and goodwill);
provided, however, that Capital Assets shall not include any item
customarily charged directly as an expense or depreciated over a useful
life of twelve (12) months or less in accordance with generally
accepted accounting principles.
"Capital Expenditure Reinvestment Amount" shall mean the
amount of proceeds of Permitted Dispositions that is reinvested in
Capital Expenditures within 365 days of such Permitted Dispositions.
"Capital Expenditures" shall mean amounts paid or incurred,
including indebtedness incurred, by American Ski or any of its
Restricted Subsidiaries in connection with the purchase or lease by
American Ski or any of its Restricted Subsidiaries of Capital Assets
that would be required to be capitalized and shown on the balance sheet
of American Ski and its Restricted Subsidiaries in accordance with
generally accepted accounting principles.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with
generally accepted accounting principles and Statement of Financial
Accounting Standards No. 13.
"Capitalized Lease Obligations" shall mean the amount of the
liability reflecting the aggregate discounted amount of future payments
under all Capitalized Leases calculated in accordance with generally
accepted accounting principles and Statement of Financial Accounting
Standards No. 13.
"Cash Insurance Proceeds" shall mean the proceeds received by
American Ski or any of its Restricted Subsidiaries under any property
and casualty insurance policy carried by American Ski or such
Restricted Subsidiary.
"Cash Proceeds" shall mean, with respect to any Permitted
Disposition, the aggregate cash payments (including any cash received
by way of deferred payment pursuant to a note receivable issued in
connection with such Permitted Disposition, but only as and when
received) received by American Ski or any of its Restricted
Subsidiaries from such Permitted Disposition.
"Cerberus Amendment and Waiver Letter Agreement" shall mean
the Cerberus Amendment and Waiver Letter Agreement dated November 3,
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1997 by and between Madeleine LLC and American Ski relating to the
exchange of the Series A Exchangeable Preferred Stock and the Senior
Exchangeable Notes into the 10 1/2% Repriced Convertible Exchangeable
Preferred Stock, the Series A Certificate of Designation, the Amended
and Restated Registration Rights Agreement dated as of November 3, 1997
(the "Amended and Restated Registration Rights Agreement") and the
amendment of certain provisions of the Cerberus Purchase Agreement.
"Cerberus Investment" shall mean the initial purchase by
Madeleine LLC of the Series A Exchangeable Preferred Stock and the
Senior Exchangeable Notes pursuant to the Cerberus Purchase Agreement.
"Cerberus Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of July 2, 1997 between American Ski (f/k/a
ASC Holdings, Inc.) and Madeleine LLC as the purchaser thereunder, as
amended by the First Amendment to Securities Purchase Agreement dated
as of July 25, 1997, the Cerberus Amendment and Waiver Letter Agreement
and the letter agreement dated July 20, 1999 by and between Madeleine
LLC and American Skiing Company.
"Closing Date" shall mean the date on which all of the
conditions set forth in Section 3.1 have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time.
"Collateral" shall mean all of the property, rights and
interests of American Ski and its Subsidiaries that are subject to the
security interests, pledges, and mortgages created by the Security
Agreements.
"Commission"shall mean the Securities and Exchange Commission.
"Commitment Percentage" shall mean as to each Lender, the sum
of its Revolving Credit Commitment Percentage and its Term Loan
Commitment Percentage as set forth on Schedule 1 hereto.
"Compliance Certificate" shall mean a certificate in the form
of Exhibit C hereto and executed by the chief executive officer or
chief financial officer of American Ski.
"Consolidated" and "Consolidating," when used with reference
to any term, mean that term (or the terms "combined" and "combining,"
as the case may be, in the case of partnerships, joint ventures and
Affiliates that are not Subsidiaries) as applied to the accounts of
American Ski (or other specified Person) and all of its Restricted
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Subsidiaries (or other specified Persons), or such of its Restricted
Subsidiaries as may be specified, consolidated (or combined) in
accordance with generally accepted accounting principles and with
appropriate deductions for minority interests in Subsidiaries, as
required by generally accepted accounting principles.
"Consolidated Adjusted Cash Flow" shall mean (a) Consolidated
EBITDA (before any adjustments to reflect acquisitions, sales and
exchanges of property during such period) for each fiscal year of
American Ski and its Restricted Subsidiaries less (b) the sum of (i)
the lesser of actual total Capital Expenditures or $10,000,000, and
(ii) cash taxes paid.
"Consolidated Debt Service" shall mean the sum of (a)
Consolidated Interest Expense, (b) scheduled principal payments on
Indebtedness for borrowed money and (c) without duplication with clause
(b), scheduled reductions in the amount of the Maximum Revolving Credit
Amount under clause (b) of the definition thereof, in each case for the
period under review.
"Consolidated EBITDA" shall mean for the most recently
completed four fiscal quarters, (a) net income or (loss) of American
Ski and its Restricted Subsidiaries on a consolidated basis determined
in accordance with generally accepted accounting principles without
giving effect to extraordinary gains and losses from sales, exchanges
and other dispositions of property not in the ordinary course of
business, and nonrecurring items and excluding from the calculation of
net income all revenues from Unrestricted Subsidiaries except to the
extent received by American Ski or its Restricted Subsidiaries in cash
as a loan repayment, dividend or other distribution, plus, to the
extent deducted in calculating net income, (b) the sum of, without
duplication, (i) depreciation expense of American Ski and its
Restricted Subsidiaries, (ii) amortization expense of American Ski and
its Restricted Subsidiaries, (iii) Consolidated Interest Expense plus
the non-cash portion of consolidated interest expense on Consolidated
Funded Debt, (iv) income tax expense of American Ski and its Restricted
Subsidiaries, (v) other non-cash items of American Ski and its
Restricted Subsidiaries, (vi) non-recurring expenses incurred in
connection with the issuance of the Series B Preferred Stock and/or the
amendment, restatement and consolidation of the 1997 Credit Agreements
on the date hereof and (vii) up to $2,000,000 of losses incurred from
the disposition of retail inventory through October 31, 1999.
"Consolidated Excess Cash Flow" shall mean, for any period,
Consolidated EBITDA less the sum of (a) Consolidated Interest Expense,
(b) cash taxes paid, (c) required principal payments of Indebtedness
and (d) the Base Capital Expenditure Amount, each determined for such
period.
"Consolidated Funded Debt" means, as of each date of
determination, without duplication (a) all Indebtedness for borrowed
money of American Ski and its Restricted Subsidiaries on that date
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(including without limitation all obligations with respect to
Capitalized Leases), (b) the aggregate amount available for drawing
under all letters of credit outstanding on that date (including the
Letters of Credit) for which American Ski or any Restricted Subsidiary
is the account party (excluding however, the aggregate amount available
for drawing under letters of credit issued to lenders and lessors of
Indebtedness of the type described in clause (a) in support of such
Indebtedness), and (c) the aggregate amount drawn under all letters of
credit (including the Letters of Credit) for which American Ski or any
Restricted Subsidiary is the account party and for which the issuer of
such letters of credit has not been reimbursed on that date.
"Consolidated Intangible Assets" shall mean (a) all
intercompany loans (without duplication for exclusions made in
accordance with generally accepted accounting principles) and loans to
any employee or officer of American Ski or any of its Subsidiaries, and
all amounts payable to American Ski or any of its Subsidiaries from any
of the aforesaid persons, (b) all assets which would be classified as
intangible assets under generally accepted accounting principles
consistently applied, including, without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises,
and deferred charges (including, without limitation, unamortized debt
discount and expense, organization costs, and research and development
costs), (c) treasury stock and minority interests in other corporations
or business organizations, (d) cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of capital stock and (e) to the extent not already deducted
from total assets, reserves for depreciation, depletion, obsolescence
and/or amortization of properties and all other reserves or
appropriations of retained earnings which, in accordance with generally
accepted accounting principles consistently applied, should be
established in connection with the business conducted by American Ski
and its Subsidiaries.
"Consolidated Interest Expense" shall mean the cash portion of
consolidated interest expense (including commitment and letter of
credit fees) on Consolidated Funded Debt, as determined in accordance
with generally accepted accounting principles consistently applied.
"Consolidated Net Income" shall mean the net income (or
deficit) from operations of American Ski and its Restricted
Subsidiaries, after taxes, determined in accordance with generally
accepted accounting principles consistently applied.
"Consolidated Net Worth" shall mean, at any date as of which
the amount thereof shall be determined, (a) the consolidated assets of
American Ski and its Restricted Subsidiaries (excluding from assets
investments in Unrestricted Subsidiaries) less (b) the consolidated
total liabilities of American Ski and its Restricted Subsidiaries,
determined in accordance with generally accepted accounting principles
consistently applied.
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"Consolidated Senior Secured Debt" shall mean the outstanding
principal amount of the Term Loans, the Revolving Credit Advances, the
Swing Line Loans and all other Consolidated Funded Debt (other than
Subordinated Indebtedness).
"Consolidated Total Debt" shall mean the sum of (a) the
outstanding principal amount of the Revolving Credit Advances, the Term
Loans and the Swing Line Loans, (b) without duplication, any claim
required to be paid pursuant to Guaranties of American Ski and its
Restricted Subsidiaries, (c) the Senior Subordinated Notes, (d) all
other Consolidated Funded Debt of American Ski and its Restricted
Subsidiaries on a consolidated basis and (e) without duplication, the
stated amount of all letters of credit issued for the account of
American Ski or any Restricted Subsidiary.
"Continuing Directors" means, as of any date of determination,
any member of the board of directors of American Ski who (a) was a
member of the board of directors on October 8, 1999 or (b) was
nominated for election to the board of directors with the approval of
at least two-thirds of the Continuing Directors who were members of the
board of directors at the time of such nomination or election.
"Credit Participants" -- See Section 12.3 hereof.
"Default" shall mean an Event of Default or an event or
condition which with the passage of time or giving of notice, or both,
would become such an Event of Default.
"Direct Unrestricted Subsidiary Investments" shall mean the
sum of (a) Investments made by American Ski and its Restricted
Subsidiaries in Unrestricted Subsidiaries in cash or cash equivalents,
plus (b) the book value of assets other than cash and cash equivalents
and other than Indirect Unrestricted Subsidiary Investments contributed
to or invested by American Ski and its Restricted Subsidiaries in
Unrestricted Subsidiaries less (c) cash dividends or distributions and
repayments of the principal amount of any loans received by American
Ski and its Restricted Subsidiaries from such Unrestricted Subsidiaries
after the date such Investments described in clauses (a) and (b) were
made.
"Distribution" shall mean: (a) the declaration or payment of
any dividend on or in respect of any shares of any class of capital
stock of American Ski or any of its Restricted Subsidiaries, other than
dividends payable solely in shares of common stock of the corporation
involved, (b) the purchase, redemption, or other acquisition or
retirement of any shares of any class of capital stock of American Ski
or any of its Restricted Subsidiaries directly or indirectly, (c) any
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other distribution on or in respect of any shares of any class of
capital stock of American Ski or any Restricted Subsidiary, (d) any
setting apart or allocating any sum for the payment of any dividend or
distribution or for the purchase, redemption or retirement of any
shares of capital stock of American Ski or any Restricted Subsidiary
and (e) any payment of principal on or any retirement or defeasance of
Subordinated Indebtedness.
"EBITDA" shall mean for the most recently completed four
fiscal quarters, (a) net income or (loss) determined in accordance with
generally accepted accounting principles without giving effect to
extraordinary gains and losses from sales, exchanges and other
dispositions of property not in the ordinary course of business, and
nonrecurring items and excluding from the calculation of net income all
revenues from Unrestricted Subsidiaries except to the extent received
by American Ski or its Restricted Subsidiaries in cash as a loan
repayment, dividend, redemption, stock repurchase or other
distribution, plus, to the extent deducted in calculating net income,
(b) the sum of, without duplication, (i) depreciation expense, (ii)
amortization expense, (iii) interest expense plus the non-cash portion
of interest expense on funded debt, (iv) income tax expense and (v)
other non-cash items.
"Environment" means soil, surface waters, groundwaters, land,
stream sediments, surface or subsurface strata, ambient air, and any
environmental medium.
"Environmental Law" means any judgment, decree, order, common
law rule, statute, act, law, code, ordinance, permit, license, rule or
regulation pertaining to environmental matters, or any federal, state,
county or local statute, regulation, code, ordinance, order or decree
relating to public health, welfare, the Environment, or to the storage,
handling, treatment, transportation, use or generation of Hazardous
Materials in or at the workplace, or to worker health or safety,
whether now existing or hereafter enacted.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Event of Default" -- See Section 10.1 hereof.
"Excess Cash Flow Leverage Ratio" shall mean the ratio of (a)
Consolidated Senior Secured Debt plus the Unused Revolving Credit
Commitments to (b) Consolidated EBITDA as of the end of the relevant
Excess Cash Payment Period.
"Excess Cash Payment Date" shall mean the earlier of (a) the
date of delivery of the financial statements pursuant to Section 6.2 in
respect of American Ski's fiscal year then ended and (b) the date
occurring 90 days after the last day of each fiscal year of American
Ski (in either case, commencing with its fiscal year ended July 25,
1999).
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately
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preceding fiscal year of American Ski and its Subsidiaries, provided
that the first Excess Cash Payment Period hereunder shall be the period
from and including July 27, 1998 to and including July 25, 1999.
"Excess Real Property" shall mean unimproved parcels which
constitute part of any Mortgaged Property and are not then currently
used or contemplated (except with respect to lodging and related
infrastructure) to be used in connection with the operation of such
Mortgaged Property as a ski resort as then configured, including
lodging, other recreational uses and related amenities.
"Existing Letters of Credit" shall mean the Letters of Credit
described as such on Schedule 2.16 hereto and issued by the Issuing
Bank.
"Fee Letter" -- See Section 2.9 hereof.
"Federal Funds Effective Rate" shall mean for any day, a
fluctuating interest rate per annum equal to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Bank of New York or, if such
rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by
the Bank from three Federal funds brokers of recognized standing
selected by the Agent.
"Generally accepted accounting principles" shall mean
generally accepted accounting principles as defined by controlling
pronouncements of the Financial Accounting Standards Board, as from
time to time supplemented and amended.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantors" shall mean each of AJT, Inc. and WVSAL, Inc.
"Guaranty Agreements" shall mean the Amended and Restated
Guaranty Agreements of even date herewith in the form of Exhibit F
hereto from each of the Guarantors in favor of the Agent and the
Lenders.
"Guaranty" or "Guarantee" or "Guaranties" shall include any
arrangement whereby a Person is or becomes liable in respect of any
Indebtedness or other obligation of another and any other arrangement
whereby credit is extended to another obligor on the basis of any
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promise of a guarantor, whether that promise is expressed in terms of
an obligation to pay the Indebtedness of such obligor, or to purchase
or lease assets under circumstances that would enable such obligor to
discharge one or more of its obligations, or to maintain the capital,
the working capital, solvency or general financial condition of such
obligor, whether or not such arrangement is listed in the balance sheet
of the guarantor or referred to in a footnote thereto.
"Hazardous Material" means any pollutant, contaminant, toxic
substance, chemical substance or mixture, hazardous waste, hazardous
material, or hazardous substance, or any oil, petroleum, or petroleum
product, as defined in or pursuant to the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, the Superfund Amendment
and Reauthorization Act, as amended, the Federal Clean Water Act, as
amended, the Hazardous Materials Transportation Act, as amended, the
Toxic Substances Control Act, as amended, any regulations promulgated
under these Acts, or any other Environmental Law.
"Heavenly Subsidiaries" shall mean Heavenly Valley Ski &
Resort Corporation, Heavenly Corporation and Heavenly Valley, Limited
Partnership.
"Indebtedness" shall mean, as to any Person, without
duplication: (a) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or similar instruments; (b) all
obligations of such Person for the deferred purchase price of property
or services (including without limitation deferred payment obligations
which are part of the consideration provided for in agreements not to
compete), except trade accounts payable and accrued liabilities arising
in the ordinary course of business which are not overdue by more than
60 days or which are being contested in good faith by appropriate
proceedings; (c) all capital lease obligations of such Person; (d) all
Indebtedness of others secured by a lien on any properties, assets or
revenues of such Person; (e) all Indebtedness of others guaranteed by
such Person; (f) all net obligations of such Person under interest
rate, commodity, foreign currency and financial markets swaps, options,
futures and other hedging obligations; and (g) all obligations of such
Person, contingent or otherwise, in respect of letters of credit or
bankers' acceptances or similar instruments.
"Indemnity Agreements" the Amended and Restated Hazardous
Materials Indemnification Agreements of even date herewith from each
Borrower to the Agent, each in substantially the form of Exhibit N
hereto.
"Indirect Unrestricted Subsidiary Investments" shall mean (a)
the book value of Excess Real Property contributed by American Ski or
any Restricted Subsidiary to Unrestricted Subsidiaries less (b) cash
dividends or distributions and repayments of the principal amount of
any loans received by American Ski or its Restricted Subsidiaries from
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such Unrestricted Subsidiaries after the date such Investments were
made in excess of those referred to in clause (c) of the definition of
Direct Unrestricted Subsidiary Investments in an amount equal to the
sum of Investments described in clauses (a) and (b) of the definition
of Direct Unrestricted Subsidiary Investments.
"Interest Period" shall mean with respect to each LIBOR Rate
Loan, the period commencing on the date of such LIBOR Rate Loan and
ending one, two, three or six months thereafter, as the Borrowers may
request as provided in Sections 2.2(a) or 2.6 hereof, provided that:
(a) any Interest Period (other than an Interest
Period determined pursuant to clauses (c) or (d) below) that would
otherwise end on a day that is not a Business Day shall be extended to
the next succeeding Business Day unless such Business Day falls in the
next calendar month, in which case such Interest Period shall end on
the immediately preceding Business Day;
(b) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clauses (c) and (d) below, end on
the last Business Day of a calendar month;
(c) any Interest Period with respect to a Revolving
Credit Advance that would otherwise end after the Revolving Credit
Termination Date shall end on the Revolving Credit Termination Date;
(d) any Interest Period with respect to any portion
of the Term Loans that would otherwise end after the Term Loan Maturity
Date shall end on the Term Loan Maturity Date; and
(e) notwithstanding clauses (c) and (d) above, no
Interest Period shall have a duration of less than one month, and if
any Interest Period applicable to any LIBOR Rate Loan would be for a
shorter period, such Interest Period shall not be available hereunder.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement, interest rate floor
agreement or other similar agreement or arrangement.
"Investment" shall mean (a) any stock, evidence of
Indebtedness or other security of another Person, (b) any loan,
advance, contribution to capital, extension of credit (except for
current trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in
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accordance with customary trade terms) to another Person, (c) any
purchase of (i) stock or other securities of another Person or (ii) any
business or undertaking of another Person (whether by purchase of
assets or securities), any commitment or option to make any such
purchase if, in the case of an option, the aggregate consideration paid
for such option was in excess of $100 or (d) any other investment, in
all cases whether existing on the date of this Agreement or thereafter
made.
"Issuing Bank" shall mean the Agent.
"Kamori" shall mean Kamori International Corporation, a
Delaware corporation.
"Kamori Acquisition" shall mean the acquisition by ASC West,
Inc. (which has been merged into American Ski) of all of the
outstanding stock and partnership interests in the Steamboat
Subsidiaries and the Heavenly Subsidiaries pursuant to the Kamori
Acquisition Documents.
"Kamori Acquisition Documents" shall mean (a) the Stock
Purchase Agreement dated August 1, 1997 among Kamori, ASC West, Inc.
and American Ski, including all schedules, exhibits and amendments
thereto (the "Kamori Stock Purchase Agreement") and (b) all other
agreements, instruments and documents delivered in connection with the
Kamori Acquisition.
"Kamori Combined Entities" shall mean Kamori, the Heavenly
Subsidiaries and the Steamboat Subsidiaries, collectively.
"Leases" shall mean all leases and other agreements under
which the Borrowers have rights to use or occupy any real property.
"Lender Agreements" shall mean this Agreement, the Term Notes,
the Revolving Credit Notes, the Swing Line Note, the Guaranty
Agreements, the Indemnity Agreements, the Security Agreements, the
Otten Subordination Agreement, the applications and reimbursement
agreements relating to the Existing Letters of Credit and any other
present or future agreement from time to time entered into between
American Ski or any of its Restricted Subsidiaries and the Agent or any
Lender (except for any such agreement which specifically provides in
writing that it is not a Lender Agreement), each as from time to time
amended or supplemented, and all statements, reports and certificates
delivered by American Ski or any of its Restricted Subsidiaries to the
Agent or any Lender in connection therewith.
"Lender Obligations" shall mean all present and future
obligations and Indebtedness of American Ski or any of its Restricted
Subsidiaries owing to the Agent or the Lenders under this Agreement or
any other Lender Agreement, including, without limitation, the
obligations to pay the Indebtedness from time to time evidenced by the
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Term Notes, the Revolving Credit Notes, the Swing Line Note, the
Reimbursement Obligations and obligations to pay interest, commitment
fees, balance deficiency fees, charges, expenses and indemnification
from time to time owed under any Lender Agreement.
"Lenders" shall mean (a) initially, each lender listed on the
signature pages hereof, (b) any other Person who becomes a Successor
Lender hereunder in accordance with the terms of Section 12.2 hereof
and (c) the successors and assigns of the Persons described in clauses
(a) and (b).
"Letter of Credit" shall mean a letter of credit issued by the
Issuing Bank for the account of the Borrowers in accordance with
Section 2.16 hereof.
"Letter of Credit Exposure" shall mean, at any time, the sum
of (a) the Maximum Drawing Amount with respect to all Letters of Credit
and (b) all unpaid Reimbursement Obligations.
"Letter of Credit Fee" -- See Section 2.16 hereof.
"Letter of Credit Participation" -- See Section 2.16(i)hereof.
"Leverage Ratio" shall mean as of the end of any fiscal
quarter the ratio of Consolidated Total Debt as of such date to
Consolidated EBITDA for the four-quarter period ending on such date.
"LIBOR Pricing Option" shall mean the option granted to the
Borrowers pursuant to Section 2.6 hereof to have interest on all or a
portion of the Loans computed on the basis of the Applicable LIBOR Rate
for an applicable Interest Period.
"LIBOR Rate" shall mean for any Interest Period for any LIBOR
Rate Loan, the quotient of (a) the rate of interest determined by the
Agent, at about 10:00 a.m. (Boston time) on the LIBOR Rate Fixing Day
as being the rate at which deposits in U.S. dollars are offered to it
by first-class banks in the London interbank market for deposit for
such Interest Period in amounts comparable to the aggregate principal
amount of LIBOR Rate Loans to which such Interest Period relates,
divided by (b) the difference between one (1) minus the Reserve
Requirement (expressed as a decimal) applicable to that Interest
Period. The LIBOR Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Requirement.
"LIBOR Rate Fixing Day" shall mean, in the case of any LIBOR
Rate Loan, the second Business Day preceding the Business Day on which
an Interest Period begins.
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"LIBOR Rate Loan" shall mean any Loan hereunder upon which
interest will accrue on the basis of a formula including as a component
thereof the LIBOR Rate. The expiration date of any LIBOR Rate Loan
shall be the last day of the Interest Period applicable to such LIBOR
Rate Loan.
"LIBOR Rate Margin" shall mean a rate per annum determined on
the first day of the applicable Interest Period in accordance with the
Pricing Schedule.
"Lien" -- See Section 9.2 hereof.
"Loan" shall mean all or a portion of the Term Loans, any
Revolving Credit Advance or any Swing Line Loan outstanding hereunder
or made to the Borrowers by the Lenders pursuant to Article 2 of this
Agreement, and "Loans" means all of such loans, collectively.
"Majority Lenders" shall mean, at any time, any two or more
Lenders holding at least 51% of the sum of the outstanding principal
amount of the Loans hereunder and the Unused Revolving Credit
Commitments.
"Management Projections" shall mean the projections for fiscal
years 1999-2004, prepared by American Ski and delivered to the Agent by
American Ski on behalf of itself and its Restricted Subsidiaries.
"Material Adverse Effect" shall mean any adverse change (or
occurrence or condition reasonably likely to produce an adverse change)
in the financial condition, properties, business, operations or
prospects which is material to American Ski and its Restricted
Subsidiaries as a whole.
"Maximum Drawing Amount" shall mean the maximum aggregate
amount that the beneficiaries may at any time draw under outstanding
Letters of Credit, as such aggregate amount may be reduced from time to
time pursuant to the terms of the Letters of Credit.
"Maximum Revolving Credit Amount" shall mean as of any date of
determination, the lesser of (a) the applicable amount set forth below
(as each such amount may be reduced from time to time pursuant to the
mandatory reduction requirements of Section 4.1(c)):
Closing Date through May 30, 2002 $100,000,000
May 31, 2002 through May 30, 2003 82,850,000
May 31, 2003 through May 30, 2004 74,800,000
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or (b) the amount to which the Maximum Revolving Credit Amount may have
been reduced pursuant to Section 2.12; provided that if the obligation
of the Lenders to make further Loans is terminated upon the occurrence
of an Event of Default, the Maximum Revolving Credit Amount as of any
date of determination thereafter shall be deemed to be $0.
"Money Market Rate" shall mean with respect to Money Market
Loans the interest rate per annum determined by the Agent in its
reasonable discretion with reference to the Federal Funds Effective
Rate.
"Money Market Loans" shall mean any Loan hereunder bearing
interest at a fluctuating rate determined by reference to the Money
Market Rate.
"Mortgaged Properties" shall mean all real properties and
interests therein owned by American Ski or any of its Restricted
Subsidiaries which are subject to mortgage liens in favor of the Agent
under the Security Agreements.
"Mortgages" -- See definition of Security Agreements.
"Net Cash Proceeds" shall mean the Cash Proceeds (with respect
to any Permitted Disposition) or Cash Insurance Proceeds (with respect
to any casualty) net of the sum of (a) the amount of such proceeds
required to be applied to repay Indebtedness (other than the Loans)
incurred or secured by a lien on any asset disposed of in connection
with such Permitted Disposition; (b) brokerage commissions, legal fees,
accounting fees, investment banking fees, trustee's fees, finder's fees
and other similar fees and commissions, all of which amounts under this
clause (b) shall be reasonable and customary; (c) taxes payable within
one year in connection with or as a result of such transaction; (d)
amounts held in escrow in connection with any such Permitted
Disposition (prior to the release thereof); and (e) other reasonable
and customary out-of-pocket costs incurred in connection therewith.
"1998 Financial Statements" shall mean the Consolidated
Balance Sheet of American Ski and its Subsidiaries as of July 26, 1998
and the related Consolidated Statements of Operations, Cash Flows and
Changes in Stockholders' Equity for the year then ended, and the notes
to such financial statements, audited by Price Waterhouse Coopers LLP.
"Notes" shall mean the Term Loan Notes, the Revolving Credit
Notes and the Swing Line Note.
"Notice of Revolving Credit or Swing Line Borrowing" -- See
Section 2.2(a) hereof.
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"Oak Hill" shall mean Oak Hill Capital Partners, L.P., a
Delaware limited partnership, Oak Hill Securities Fund, L.P., a
Delaware limited partnership, and their respective affiliates.
"Otten Shareholders" shall mean Leslie B. Otten, his spouse
and children, and trusts established for his or any or all of their
benefit, collectively.
"Otten Subordination Agreement" shall mean the Subordination
Agreement of even date herewith in substantially the form of Exhibit Q
hereto by and among American Ski, Leslie B. Otten and the Agent.
"Pension Plan" shall mean an employee benefit plan or other
plan maintained for the employees of American Ski or any Subsidiary as
described in Section 4021(a) of ERISA.
"Permitted Acquisitions" shall mean acquisitions by American
Ski or any Restricted Subsidiary of all of the stock or all or
substantially all of the assets of another domestic (or Canadian)
Person (or all the assets of a division or line of business of such
Person) engaged in any line of business substantially similar to any
existing line of business of American Ski and its Restricted
Subsidiaries, provided that the following terms and conditions are met:
(a) American Ski shall provide the Agent notice of
each proposed acquisition at least 30 days in advance of the
proposed closing date, such notice to include a reasonably
detailed information package outlining the transaction and its
pro forma impact on American Ski and its Restricted
Subsidiaries and certification, with supporting financial
statements, that:
(i) no Default or Event of Default shall
exist at the time of or after giving effect to each
such acquisition on a pro forma basis;
(ii) American Ski and its Restricted
Subsidiaries will comply with the financial covenants
contained herein on a pro forma basis, based on
combined adjusted trailing four-quarter operating
performance, pro forma debt and pro forma debt
service based on scheduled principal payments
(including any acquisition loan) and pro forma
interest on total debt at then prevailing borrowing
rates. Any pro forma adjustments to historical EBITDA
of the Person to be acquired shall be acceptable to
the Lenders in their reasonable discretion, provided
that contractual and adequately documented reductions
in the former owner's compensation and/or rental
expense that will be effective as of the acquisition
date and/or other adjustments not disallowed by the
Commission and certified by the Borrowers'
independent auditors as reasonably likely to occur
shall be deemed acceptable; and
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(iii) the Board of Directors of the Person
to be acquired has approved such acquisition.
(b) Management of the acquiring Borrower shall
reasonably believe that, as a result of its ownership and
management, the Person to be acquired will achieve positive
four-quarter EBITDA not later than two years after the
acquisition.
(c) The maximum purchase price (exclusive of that
portion of the purchase price that may be payable solely in
common stock of American Ski) for any single proposed
acquisition shall not exceed the greater of (i) $50,000,000 or
(ii) 50% of Consolidated EBITDA for the most recent fiscal
year before giving effect to the proposed acquisition.
(d) The terms and structure of such acquisitions
shall be reasonably acceptable to the Lenders and shall not
subject the Agent or the Lenders to any regulatory approvals
in connection with the exercise of any remedies under the
Lender Agreements.
(e) The acquired Person shall be merged into a
Restricted Subsidiary or the acquired assets shall be acquired
by a Restricted Subsidiary, or if it is to be a Subsidiary of
a Borrower, it shall become an obligor under the Lender
Agreements on terms acceptable to the Agent and by executing
and delivering to the Agent the joinder in the form attached
hereto as Exhibit S.
(f) The assets or the stock so acquired shall be
pledged to the Agent on a first perfected basis, subject only
to prior liens and encumbrances associated with assumed debt
otherwise permitted hereunder, on terms and conditions
required by the Agent and consistent with the pledges of
collateral provided to the Agent on the Closing Date, together
with all related appraisals, environmental reviews, surveys,
title insurance, certificates, instruments and opinions
requested by the Agent and consistent with such reviews,
surveys, certificates and opinions provided to the Agent on
the Closing Date.
"Permitted Capital Expenditures" shall mean Capital
Expenditures of American Ski and its Restricted Subsidiaries permitted
under Section 9.7 hereto.
"Permitted Dispositions" shall mean (a) sales or dispositions
of assets of American Ski and its Restricted Subsidiaries for fair
market value in an amount not in excess of $20,000,000 in the aggregate
in any fiscal year, provided that (i) 75% of the proceeds of such sales
or dispositions must be in cash, (ii) all non-cash proceeds of such
sales or dispositions must be pledged, mortgaged or assigned to the
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Agent on terms acceptable to the Agent and (iii) all cash proceeds
thereof must be, within one year following the date of such sales or
dispositions, applied to permanently reduce the Maximum Revolving
Credit Amount or to prepay the Term Loans, in accordance with their
terms, or reinvested in Permitted Capital Expenditures or Permitted
Acquisitions, (b) dispositions of Excess Real Property in accordance
with the requirements of Section 2.21, and (c) sales of developed real
estate units in the ordinary course of business.
"Permitted Liens" -- See Section 9.2 hereof.
"Permitted Non-Strategic Asset Sales" shall mean sales or
other dispositions of assets of American Ski and its Restricted
Subsidiaries, between January 25, 1999 and January 30, 2000, for gross
proceeds not to exceed $30,000,000, which American Ski determines are
not strategic to the skiing and other resort activities of American Ski
and its Restricted Subsidiaries, with the specific assets so sold or
disposed of to be approved by the Agent, such approval not to be
unreasonably withheld.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust,
organization, business, or a government or agency or political
subdivision thereof.
"Pricing Notice" shall mean (a) with respect to a Revolving
Credit Advance which is requested to be a LIBOR Rate Loan, the
applicable Notice of Revolving Credit or Swing Line Borrowing and (b)
with respect to any portion of the Term Loans requested to be a LIBOR
Rate Loan, a notice from American Ski to the Agent in substantially the
form of Exhibit D hereto and meeting the requirements of Section 2.6(b)
hereof.
"Pricing Schedule" shall mean the Pricing Schedule attached
hereto as Schedule 2.
"Real Estate Capital Expenditures" shall mean Capital
Expenditures paid or incurred by American Ski or any of its Restricted
Subsidiaries for the purchase, development, marketing or sale of
residential real estate or lodging operations.
"Real Estate Guaranties" shall mean Guaranties of American Ski
and its Restricted Subsidiaries of Indebtedness of Unrestricted
Subsidiaries. The amount of any Real Estate Guaranty shall be deemed to
be the lesser of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty is
made and (b) the maximum amount for which the obligor under such
Guaranty may be liable pursuant to the terms of the instrument
embodying such Guaranty, unless such primary obligation and the maximum
amount for which such obligor may be liable is not stated or
determinable, in which case the amount of such Guaranty shall be such
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obligor's maximum reasonably anticipated liability in respect thereof,
as agreed upon between American Ski and the Agent.
"Refunded Swing Line Loans" -- See Section 2.20 hereof.
"Refunding Date" -- See Section 2.20 hereof.
"Reimbursement Obligations" shall mean (a) the Borrowers'
obligations to reimburse the Issuing Bank on account of any drawing
under any Letter of Credit and interest thereon as provided in Section
2.16(c) hereof and (b) any Borrower's obligation to reimburse any
Revolving Credit Lender on account of any drawing under any Existing
Letter of Credit.
"Reportable Event" shall mean an event reportable to the
Pension Benefit Guaranty Corporation under Section 4043 of Title IV of
ERISA.
"Reserve Requirement" shall mean the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed under Regulation D on the Banks against
"Euro-currency Liabilities" as defined in said Regulation D.
"Restricted Subsidiaries" shall mean all Subsidiaries of
American Ski, or other specified parent, other than Unrestricted
Subsidiaries of American Ski or such other specified parent.
"Revolving Commitment Fee" -- see Section 2.9 hereof.
"Revolving Credit Advance" shall mean any loan or advance from
any Lender to the Borrower pursuant to Section 2.1 hereof.
Revolving Credit Commitment Percentage" shall mean as to each
Revolving Credit Lender, its percentage interest in the Maximum
Revolving Credit Amount as set forth on Schedule 1 hereto.
"Revolving Credit Lenders" shall mean the Revolving Credit
Lenders so identified on Schedule 1 hereto.
"Revolving Credit Notes" shall mean the Amended, Restated and
Consolidated Revolving Credit Notes substantially in the form of
Exhibit A-1 hereto executed by the Borrowers, jointly and severally, in
favor of each Revolving Credit Lender to evidence the Revolving Credit
Advances to be made by the Revolving Credit Lenders from time to time
hereunder.
"Revolving Credit Termination Date" shall mean May 31, 2004.
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"Security Agreements" shall mean:
(a) The Amended, Restated and Consolidated Security
Agreements of even date herewith from American Ski and each of
its Restricted Subsidiaries to the Agent by which American Ski
and each of its Restricted Subsidiaries has granted to the
Agent, in order to secure the Lender Obligations, a security
interest in substantially all of its assets, each in
substantially the form of Exhibit E-1 hereto.
(b) The Amended, Restated and Consolidated Security
Agreements of even date herewith from the Guarantors to the
Agent by which each of the Guarantors has granted to the
Agent, in order to secure the Lender Obligations, a security
interest in substantially all of its assets, each in
substantially the form of Exhibit E-2 hereto.
(c) The Amended, Restated and Consolidated Fee and
Leasehold Mortgage, Assignment of Leases and Rents, Financing
Statement and Security Agreements of even date herewith (the
"Mortgages") from each Borrower that owns any real property to
the Agent to secure the Lender Obligations, each in
substantially the form of Exhibit G hereto.
(d) The Amended, Restated and Consolidated Collateral
Assignments of Leases and Rents (the "Collateral Assignments
of Leases") from each Borrower that leases any real property,
with respect to all Leases, to the Agent to secure the Lender
Obligations, each in substantially the form of Exhibit H
hereto.
(e) The Amended, Restated and Consolidated
Assignments in Trust (the "Assignments in Trust"), from
certain Borrowers to the Agent to secure the Lender
Obligations, each in the form of Exhibit J hereto.
(f) The Amended, Restated and Consolidated Assignment
of Trademarks of even date herewith (the "Trademark Security
Agreements") from each Borrower to the Agent to secure the
Lender Obligations, each in the form of Exhibit K hereto.
(g) The Amended, Restated and Consolidated
Assignments of Licenses, Contracts and Permits of even date
herewith (the "Assignments of Licenses") from each Borrower to
the Agent to secure the Lender Obligations, each in the form
of Exhibit L hereto.
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(h) The Amended, Restated and Consolidated Stock
Pledge Agreements (the "Stock Pledges") pledging to the Agent
the collateral described therein (excluding stock of
Unrestricted Subsidiaries) to secure the obligations described
therein, each in the form of Exhibit M hereto.
(i) All other security agreements, pledge agreements,
mortgages, assignments and other instruments by which American
Ski or any Restricted Subsidiary grants or pledges to the
Agent a lien on, security interest in, or pledge or mortgage
or assignment of any of its assets.
"Senior Subordinated Notes" shall mean the $120,000,000 Senior
Subordinated Notes of American Ski, as successor to ASC East, Inc., due
July 16, 2006, issued pursuant to the Senior Subordinated Notes
Indenture.
"Senior Subordinated Notes Indenture" shall mean the Indenture
of Trust dated as of June 28, 1996 by and between ASC East and U.S.
Trust Company of New York, as Trustee, as amended by a First
Supplemental Indenture dated as of November 12, 1997, a Second
Supplemental Indenture dated September 4, 1998, a Third Supplemental
Indenture dated August 6, 1999, and a Fourth Supplemental Indenture
dated October 6, 1999.
"Series A Certificate of Designation" shall mean the
Certificate of Designation governing the Series A Exchangeable
Preferred Stock.
"Series A Exchangeable Preferred Stock" shall mean the 36,626
shares of 10.5% Repriced Convertible Exchangeable Preferred Stock
issued by American Ski under the Cerberus Purchase Agreement.
"Series B Certificate of Designation" shall mean the
Certificate of Designation of Preferences and Rights of the 8.50%
Series B Convertible Participating Preferred Stock of American Skiing
Company duly adopted by American Ski on August 5, 1999.
"Series B Gross Proceeds" shall mean $150,000,000,
representing the gross proceeds received from the issuance of the
Series B Preferred Stock.
"Series B Preferred Stock" shall mean the 150,000 shares of
8.50% Series B Convertible Participating Preferred Stock issued by
American Ski under the Series B Preferred Stock Subscription Agreement.
"Series B Preferred Stock Agreements" shall mean the Series B
Certificate of Designation, the Series B Preferred Stock Subscription
Agreement, the Series B Preferred Stock Voting Agreement, and the
Series B Preferred Stock Stockholders Agreement.
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"Series B Preferred Stock Subscription Agreement" shall mean
the Preferred Stock Subscription Agreement dated as of July 9, 1999 by
and among American Ski and Oak Hill as purchaser of the Series B
Preferred Stock, as amended by Amendment No. 1 dated as of August 6,
1999.
"Series B Preferred Stock Stockholders Agreement" shall mean
the Stockholders Agreement dated as of August 6, 1999 by and among
American Ski, the holders of the Series B Preferred Stock, Leslie B.
Otten, and Oak Hill.
"Series B Preferred Stock Voting Agreement" shall mean the
Voting Agreement dated as of August 6, 1999 by and among American Ski,
Leslie B. Otten and Oak Hill, as purchaser of the Series B Preferred
Stock.
"Solvent" or "Solvency" shall mean, as to any Person, that
such Person (a) has assets having a fair value in excess of its
liabilities, (b) has assets having a fair value in excess of the amount
required to pay its liabilities on existing debts as such debts become
absolute and matured and (c) has, and expects to continue to have,
access to adequate capital for the conduct of its business and the
ability to pay its debts from time to time incurred in connection with
the operation of its business as such debts mature.
"Steamboat Subsidiaries" shall mean Steamboat Ski & Resort
Corporation, Steamboat Development Corporation and Orlando Resort
Corporation.
"Subordinated Indebtedness" shall mean (a) the Senior
Subordinated Notes, (b) the Indebtedness identified as Subordinated
Indebtedness on Schedule 5.16 and (c) all other Indebtedness of
American Ski or any Restricted Subsidiary which is subordinated to the
Indebtedness of American Ski or such Restricted Subsidiary to the Agent
and the Lenders on terms and conditions approved in writing by the
Agent.
"Subsidiary" shall mean any Person of which American Ski or
any Restricted Subsidiary or other specified parent shall now or
hereafter at the time own, directly or indirectly through one or more
Subsidiaries or otherwise, sufficient voting stock (or other beneficial
interest) to entitle it to elect at least a majority of the board of
directors or trustees or similar managing body.
"Swing Line Commitment" shall mean $9,000,000.
"Swing Line Lender" -- See Section 2.18 hereof.
"Swing Line Loans" -- See Section 2.18 hereof.
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"Swing Line Note" shall mean the Amended, Restated and
Consolidated Swing Line Note substantially in the form of Exhibit A-3
hereto executed by the Borrowers, jointly and severally, in favor of
the Swing Line Lender to evidence the Swing Line Loans to be made by
the Swing Line Lender from time to time hereunder.
"Swing Line Participation Amount" -- See Section 2.20 hereof.
"10 1/2% Repriced Convertible Exchangeable Preferred Stock"
shall mean the "10 1/2% Repriced Convertible Exchangeable Preferred
Stock" under and as defined in the Cerberus Amendment and Waiver Letter
Agreement and the Series A Certificate of Designation.
"Term Loan Commitment Percentage" shall mean as to each Term
Loan Lender, its percentage interest in the Term Loans as set forth on
Schedule 1 hereto.
"Term Loan Lenders" shall mean those Lenders so identified on
Schedule 1 hereto.
"Term Loan Maturity Date" shall mean May 31, 2006.
"Term Loan Notes" shall mean the Amended, Restated and
Consolidated Term Loan Notes substantially in the form of Exhibit A-2
hereto executed by the Borrowers, jointly and severally, in favor of
each Term Loan Lender to evidence the Term Loans.
"Term Loans" shall mean the term loans made by the Term Loan
Lenders to the Borrowers pursuant to Section 2.4 hereof.
"UCC" shall mean the Uniform Commercial Code in effect in the
applicable jurisdiction, as amended from time to time.
"Uniform Customs and Practice" shall mean the Uniform Customs
and Practice for Documentary Credits (1993 Revision) International
Chamber of Commerce publication No. 500.
"Unrestricted Subsidiaries" shall mean Killington West, Ltd.,
a California corporation, Mountain Water Company, a Vermont
corporation, Grand Summit Resort Properties, Inc., a Maine corporation,
American Skiing Company Resort Properties, Inc., a Maine corporation,
The Canyons Resort Properties, Inc., a Maine corporation, Steamboat
Resort Properties, Inc., a Maine corporation, Heavenly Properties,
Inc., a Maine corporation, Sugarloaf Resort Properties, Inc., a Maine
corporation, Killington Resort Properties, Inc., a Maine corporation,
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Mount Snow Resort Properties, Inc., a Maine corporation, Sugarbush
Resort Properties, Inc., a Maine corporation, Sunday River Resort
Properties, Inc., a Maine corporation, Attitash Resort Properties,
Inc., a Maine corporation, S-K-I Insurance Company, a Vermont
corporation, Club Sugarbush, a Vermont corporation, Uplands Water
Company, a Vermont corporation, Orlando Resort Corporation, a Delaware
corporation, Walton Pond Apartments, a Delaware Corporation, ASC
Transportation, Inc., a New Hampshire corporation, ASC Leasing, Inc., a
Maine corporation, Heavenly Resort Properties, LLC, a Nevada limited
liability company, Blunder Bay Development Company, a Maine
corporation, Grand Summit Resort Hotel Sales, Inc., a Maine corporation
and such other Subsidiaries, other than a Borrower or a Guarantor, as
may from time to time be designated by American Ski as an Unrestricted
Subsidiary and as are reasonably acceptable to the Agent.
"Unused Revolving Credit Commitments" shall mean the Maximum
Revolving Credit Amount in effect at such time less the sum of the
Aggregate Outstanding Revolving Credit Extensions for each Revolving
Credit Lender less the Letter of Credit Exposure and less the aggregate
principal amount of Swing Line Loans then outstanding.
"Uplands Water" shall mean Uplands Water Company, Inc., a
Vermont corporation.
"Wholly-Owned Subsidiary" shall mean any Person of which
American Ski; any Restricted Subsidiary or other specified parent shall
now or hereafter at the time own, directly or indirectly through one or
more Subsidiaries or otherwise, one hundred percent (100%) of such
Person's capital stock or other beneficial interest.
"Wolf Acquisition Agreement" shall mean the Purchase and Sale
Agreement by and between Wolf Resorts and ASC Utah dated as of May 30,
1997.
"Wolf Resorts" shall mean Wolf Mountain Resorts, L.C., a Utah
limited liability company.
Section 1.2 Accounting Terms. All accounting terms used and not defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data required to
be delivered hereunder shall be prepared in accordance with such principles.
ARTICLE 2. THE CREDITS
Section 2.1 The Revolving Credit.
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(a Subject to the terms and conditions of this Agreement and
so long as no Default exists, at any time prior to the Revolving Credit
Termination Date, each Revolving Credit Lender, severally and not jointly, shall
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make such Revolving Credit Advances to the Borrowers as the Borrowers may from
time to time request, by notice to the Agent in accordance with Section 2.2, in
an aggregate amount (i) as to each Revolving Credit Lender, not to exceed at any
time such Lender's Revolving Credit Commitment Percentage of the Available
Revolving Credit Amount and (ii) as to all Revolving Credit Lenders, not to
exceed an amount equal to the Available Revolving Credit Amount. The outstanding
principal amount of the Revolving Credit Advances, together with all accrued
interest and other fees and charges related thereto, shall be repaid in full on
the Revolving Credit Termination Date. On the Closing Date, the Borrowers,
jointly and severally, shall execute and deliver to each Revolving Credit Lender
a Revolving Credit Note to evidence the Revolving Credit Advances from time to
time made by such Revolving Credit Lender to the Borrowers hereunder. The
Revolving Credit Lenders having aggregate Revolving Credit Commitment
Percentages in excess of 50% may from time to time in consultation with the
Borrowers establish sublimits as to the amounts of Revolving Credit Advances
that may be advanced for use by one or more Borrowers that do not operate ski
resorts.
(b Subject to the foregoing limitations and the provisions of
Section 4.2, the Borrowers shall have the right to make prepayments reducing the
outstanding balance of Revolving Credit Advances and to request further
Revolving Credit Advances, all in accordance with Section 2.2, without other
restrictions hereunder; provided that each Revolving Credit Lender shall have
the absolute right to refuse to make any Revolving Credit Advances for so long
as there exists any Default or any other condition which would constitute a
Default upon the making of such a Revolving Credit Advance; and provided further
that during each fiscal year of the Borrowers, commencing with the fiscal year
ending July 30, 2000, there shall be a period of 30 (thirty) consecutive days,
including April 30 of each year, during which the sum of (i) the outstanding
principal amount of all Revolving Credit Advances and (ii) the Letter of Credit
Exposure shall not exceed $35,000,000.
(c Lenders hereunder who were "Lenders" under the 1997 Credit
Agreements upon their termination shall be deemed to have made their Revolving
Credit Commitment Percentage of the first Revolving Credit Advance hereunder
upon execution and delivery hereof and shall receive in full payment of the
principal amount of their "Revolving Credit Notes" issued under the 1997 Credit
Agreements the difference, if any, between the outstanding principal amount of
their "Revolving Credit Notes" issued under the 1997 Credit Agreements and their
Commitment Percentages of the first Revolving Credit Advance hereunder as
described on Schedule 2.1 hereto.
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Section 2.2 Making of Revolving Credit Advances
(a Each Revolving Credit Advance shall be made on notice
given by the Borrowers, or by American Ski, as agent for the Borrowers, to the
Agent not later than 12:00 noon (Boston time) on the date of the proposed
borrowing (a "Notice of Revolving Credit or Swing Line Borrowing"); provided,
however, that if the Borrowers elect a LIBOR Pricing Option with respect to any
Revolving Credit Advance in accordance with Section 2.6 hereof, such Notice of
Revolving Credit or Swing Line Borrowing shall be given by American Ski, as
agent for the Borrowers, contemporaneously with a Pricing Notice in the manner
and within the time specified in Section 2.6. The Agent shall give the Revolving
Credit Lenders notice of each Notice of Revolving Credit or Swing Line Borrowing
in accordance with the Agent's customary practice. Each such Notice of Revolving
Credit or Swing Line Borrowing shall be by telephone or telecopy, in each case
confirmed immediately in writing by American Ski, as agent for the Borrowers, in
substantially the form of Exhibit B hereto, specifying therein (i) the requested
date of such Revolving Credit Advance and (ii) the amount of such Revolving
Credit Advance, which must be a minimum of $100,000 and integral multiples
thereof; provided, however, that the Swing Line Lender may request, on behalf of
the Borrowers, Revolving Credit Advances that are Base Rate Loans in other
amounts pursuant to Section 2.20(a). The Borrowers agree, jointly and severally,
to indemnify and hold the Revolving Credit Lenders harmless for any action,
including the making of any Revolving Credit Advances hereunder, or loss or
expense, taken or incurred by the Agent or the Revolving Credit Lenders in good
faith reliance upon such telephone request. At the time of the initial request
for a Revolving Credit Advance made under this Section 2.2, the Borrowers shall
have provided the Agent with a Compliance Certificate. The Borrowers hereby
agree (A) that the Revolving Credit Lenders shall be entitled to rely upon the
Compliance Certificate most recently delivered to the Agent until it is
superseded by a more recent Compliance Certificate and (B) that each request for
a Revolving Credit Advance, whether by telephone or in writing or otherwise,
shall constitute a confirmation of the representations and warranties contained
in the most recent Compliance Certificate then in the Agent's possession.
(b Subject to the terms and conditions of this Agreement,
each Revolving Credit Lender shall make available on or before 2:00 p.m. (Boston
time) on the date of each proposed Revolving Credit Advance, to the Agent at the
Agent's address and in immediately available funds, such Lender's Revolving
Credit Commitment Percentage of such Revolving Credit Advance. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article 3, the Agent will credit such funds to the Borrowers' accounts,
as directed by American Ski, on the date of the proposed Revolving Credit
Advance.
(c Unless the Agent shall have received notice from a
Revolving Credit Lender prior to the date of any Revolving Credit Advance that
such Revolving Credit Lender will not make available to the Agent such Lender's
Revolving Credit Commitment Percentage of such Revolving Credit Advance, the
Agent may assume that such Revolving Credit Lender has made such amount
available to the Agent on the date of such Revolving Credit Advance in
accordance with and as provided in this Section 2.2 and the Agent may, in
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reliance upon such assumption, make available on such date a corresponding
amount to the Borrowers. If and to the extent such Revolving Credit Lender shall
not have so made its Revolving Credit Commitment Percentage of such Revolving
Credit Advance available to the Agent and the Agent shall have made available
such corresponding amount to the Borrowers, such Revolving Credit Lender agrees
to pay to the Agent forthwith on demand, and the Borrowers agree, jointly and
severally, to repay to the Agent within two Business Days after demand (but only
after demand for payment has first been made to such Revolving Credit Lender and
such Revolving Credit Lender has failed to make such payment), an amount equal
to such corresponding amount together with interest thereon for each day from
the date the Agent shall make such amount available to the Borrowers until the
date such amount is paid or repaid to the Agent, at an interest rate equal to
the interest rate applicable at the time to such Revolving Credit Advances. If
such Revolving Credit Lender shall pay to the Agent such corresponding amount,
such amount so paid shall constitute such Revolving Credit Lender's Revolving
Credit Advance for purposes of this Agreement. If the Borrowers make a repayment
required by the foregoing provisions of this Section 2.2(c) and thereafter the
applicable Revolving Credit Lender or Revolving Credit Lenders make the payments
to the Agent required by this Section 2.2(c), the Agent shall promptly refund
the amount of the Borrowers' payment.
(d The failure of any Revolving Credit Lender to make the
Revolving Credit Advance to be made by it on any date shall not relieve any
other Revolving Credit Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on such date, but no Revolving Credit Lender shall be
responsible for the failure of any other Revolving Credit Lender to make the
Revolving Credit Advance to be made by such other Revolving Credit Lender.
Section 2.3 Interest on Revolving Credit Advances. Subject to the terms of
Section 2.6 relating to LIBOR Pricing Options, the Borrowers, jointly and
severally, shall pay interest on the unpaid balance of the Revolving Credit
Advances from time to time outstanding at a per annum rate equal to the
Applicable Base Rate for Revolving Credit Advances. Interest on the Revolving
Credit Advances shall be payable quarterly in arrears on the first day of the
month following the end of each fiscal quarter, commencing November 1, 1999, and
continuing until all of the Indebtedness of the Borrowers to the Revolving
Credit Lenders under the Revolving Credit Notes shall have been paid in full.
Section 2.4 The Term Loans. Subject to the terms and conditions of this
Agreement, on the date hereof, the Term Loan Lenders, severally and not jointly,
shall make term loans (the "Term Loans") to the Borrowers in an amount equal to
each Term Loan Lender's Term Loan Commitment Percentage of $65,000,000 as set
forth on Schedule 1 hereto and the Borrowers shall execute and deliver to each
Term Loan Lender a Term Loan Note to evidence the Term Loan made by such Term
Loan Lender to the Borrowers hereunder. Lenders hereunder who were "Lenders"
under the 1997 Credit Agreements upon their termination shall be deemed to have
made their Term Loans hereunder upon execution and delivery hereof and shall
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receive in full payment of the principal of their "Term Loan Notes" issued under
the 1997 Credit Agreements the difference, if any, between the outstanding
principal amount of the "Term Loans" under the 1997 Credit Agreements and the
principal amount of their Term Loans hereunder as described on Schedule 2.1
hereto.
Section 2.5 Interest on the Term Loans. Subject to the terms of Section 2.6
relating to LIBOR Pricing Options, the Borrowers, jointly and severally, shall
pay interest on the unpaid balance of the Term Loans at a per annum rate equal
to the Applicable Base Rate for the Term Loans. Interest on the Term Loans shall
be payable quarterly in arrears on the first day of the month following the end
of each fiscal quarter, commencing November 1, 1999, and continuing until all of
the Indebtedness of the Borrowers to the Term Loan Lenders under the Term Loans
shall have been paid in full.
Section 2.6 Election of LIBOR Pricing Options.
(a Subject to all the terms and conditions hereof and so long
as no Default exists, American Ski, as agent for the Borrowers, may, by
delivering a Pricing Notice to the Agent received at or before 10:00 a.m.,
Boston time, on the date two Business Days prior to the commencement of the
Interest Period selected in such Pricing Notice, elect to have all or a portion
of the Term Loans or the outstanding Revolving Credit Advances, as American Ski,
as agent for the Borrowers, may specify in such Pricing Notice, accrue and bear
daily interest during the Interest Period so selected at a per annum rate equal
to the Applicable LIBOR Rate for such Interest Period; provided, however, that
any such election made with respect to the Term Loans or the Revolving Credit
Advances shall be in an amount not less than $5,000,000 and in increments of
$1,000,000; and provided further that no such election will be made if it would
result in there being more than ten (10) LIBOR Pricing Options in the aggregate
outstanding at any one time under this Agreement. Interest on Loans bearing
interest at the Applicable LIBOR Rate shall be payable quarterly in arrears on
the first day of the month following the end of each fiscal quarter and when
such Loan is due (whether at maturity, by reason of acceleration or otherwise).
(b Each Pricing Notice shall be substantially in the form of
Exhibit D attached hereto and shall specify: (i) the selection of a LIBOR
Pricing Option; (ii) the effective date and amount of the Term Loan or the
Revolving Credit Advances subject to such LIBOR Pricing Option, subject to the
limitations set forth herein; and (iii) the duration of the applicable Interest
Period. Each Pricing Notice shall be irrevocable.
(c The Agent will promptly inform each Lender of a Pricing
Notice and the Interest Period specified by the Borrowers therein. Upon
determination by the Agent of the Applicable LIBOR Rate for any Interest Period
selected by the Borrowers, the Agent will promptly inform the Borrowers and each
Lender of such Applicable LIBOR Rate so determined or, if applicable, the reason
why the Borrowers' election will not become effective.
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Section 2.7 Additional Payments. Upon the occurrence and during the
continuance of any Event of Default, the Borrowers shall, jointly and severally,
on demand, pay to the Agent, for the account of the Lenders, interest on the
unpaid principal balance of the Term Loans, the Revolving Credit Advances and
the Swing Line Loans and, to the extent permitted by law, on any overdue
installments of interest, at a rate per annum equal to the stated interest rates
applicable thereto plus 2% per annum.
Section 2.8 Computation of Interest, Etc. Interest hereunder and under the
Loans shall be computed on the basis of a 360-day year for the number of days
actually elapsed. Any increase or decrease in the interest rate on the Loans
resulting from a change in the Base Rate shall be effective immediately from the
date of such change. No interest payment or interest rate charged hereunder
shall exceed the maximum rate authorized from time to time by applicable law.
The outstanding balance of the Term Notes, the Revolving Credit Notes and the
Swing Line Note as reflected on the Agent's records from time to time shall be
considered correct and binding on the Borrowers and the Lenders (absent manifest
error) unless within thirty (30) days after receipt of any written notice by the
Agent or any Lender of such outstanding amount, the Borrowers or a Lender
notifies the Agent to the contrary.
Section 2.9 Fees.
(a The Borrowers, jointly and severally, shall pay to the
Agent, for the account of each Revolving Credit Lender, a commitment fee (the
"Revolving Commitment Fee") on such Revolving Credit Lender's Available
Revolving Credit Commitment from time to time in effect from the date hereof to
and including the Revolving Credit Termination Date computed at the applicable
rate set forth on the Pricing Schedule. The Revolving Commitment Fee shall be
payable quarterly in arrears on the first day of the month following the end of
each fiscal quarter, commencing November 1, 1999, for the period from the date
hereof through such date.
(b The Borrowers, jointly and severally, shall pay to the
Agent, for the Agent's own account, such fees as are provided in a letter
agreement dated October 12, 1999 between American Ski and the Agent (as such
letter agreement may from time to time be amended or supplemented, the "Fee
Letter").
Section 2.10 Set-Off. To the extent not prohibited by applicable law, the
Borrowers, jointly and severally, hereby authorize the Agent and each Lender,
without prior notice to the Borrowers, if and to the extent payment is not
promptly made when due pursuant to the Term Loan Notes, the Revolving Credit
Notes or the Swing Line Note or pursuant to any provision hereof or of any other
Lender Agreement, to charge against any account of any Borrower with the Agent
or such Lender, an amount equal to the accrued interest and principal and other
amounts from time to time then due and payable to the Agent and the Lenders
hereunder and under all other Lender Agreements, provided that the Agent shall
notify the Borrowers of any such set-off promptly thereafter.
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Section 2.11 Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it in excess of its ratable share
(according to the then outstanding principal amount of the Loans) of payments on
account of the Loans obtained by all the Lenders, such Lender shall purchase
from the other Lenders such participations in the Loans held by such other
Lenders as shall cause such purchasing Lender to share such payment ratably
according to the then outstanding principal amount of the Loans with each of
such other Lenders; provided, however, that if all or any portion of such
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
without interest. The Borrowers agree that any Lender so purchasing a
participation in the Loans from another Lender pursuant to this Section 2.11
may, to the fullest extent permitted by law, exercise all its rights of payment
with respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
Section 2.12 Reduction of Commitment by the Borrowers. The Borrowers at
their option may, at any time and from time to time, (a) irrevocably reduce in
part (in a minimum amount of $5,000,000 and in integral multiples of $1,000,000)
the unused portion of the Available Revolving Credit Amount or (b) terminate the
entire unused portion of the Available Revolving Credit Amount, in each case on
not less than seven (7) Business Days' prior written notice to the Agent. No
such reduction may be reinstated by the Borrowers.
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Section 2.13 Increased Costs, Etc.
(a Anything herein to the contrary notwithstanding, if any
changes in present or future applicable law (which term "applicable law," as
used in this Agreement, includes statutes and rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to any Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law), including without limitation any change
according to a prescribed schedule of increasing requirements, whether or not
known or in effect as of the date hereof, shall (i) subject such Lender to any
tax, levy, impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Agreement or the payment to such Lender of any amounts due
to it hereunder, or (ii) materially change the basis of taxation of payments to
such Lender of the principal of or the interest on the Loans or any other
amounts payable to such Lender hereunder, or (iii) impose or increase or render
applicable any special or supplemental deposit or reserve or similar
requirements or assessment against assets held by, or deposits in or for the
account of, or any liabilities of, or loans by an office of such Lender in
respect of the transactions contemplated herein, or (iv) impose on such Lender
any other condition or requirement with respect to this Agreement, the Term
Loans, any Revolving Credit Advance or any Swing Line Loan, and the result of
any of the foregoing is (A) to increase the cost to such Lender of making,
funding or maintaining all or any part of the Loans or its commitment hereunder,
or (B) to reduce the amount of principal, interest or other amount payable to
such Lender hereunder, or (C) to require such Lender to make any payment or to
forego any interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by such Lender from the Borrowers
hereunder, then, and in each such case not otherwise provided for hereunder, the
Borrowers, jointly and severally, will upon demand made by such Lender promptly
following such Lender's receipt of notice pertaining to such matters accompanied
by calculations thereof in reasonable detail, pay to such Lender such additional
amounts as will be sufficient to compensate such Lender for such additional
cost, reduction, payment or foregone interest or other sum; provided that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregone interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of any Lender. In determining the additional amounts payable hereunder,
the Lenders may use any reasonable method of averaging, allocating or
attributing such additional costs, reductions, payments, foregone interest or
other sums among their respective customers.
(b Anything herein to the contrary notwithstanding, if, after
the date hereof, any Lender shall have determined that any present or future
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applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any of the foregoing, either imposes a requirement upon such
Lender to allocate additional capital resources or increases such Lender's
requirement to allocate capital resources or such Lender's commitment to make,
or to such Lender's maintenance of, the Term Loans, the Revolving Credit
Advances or Swing Line Loans hereunder, which has or would have the effect of
reducing the return on such Lender's capital to a level below that which such
Lender could have achieved (taking into consideration such Lender's then
existing policies with respect to capital adequacy and assuming full utilization
of such Lender's capital) but for such applicability, change, interpretation,
administration or compliance, by any amount deemed by such Lender to be
material, such Lender shall promptly after its determination of such occurrence
give notice thereof to the Borrower accompanied by an opinion of counsel to such
Lender with respect to such matters, the cost of which opinion shall be paid by
the Borrowers. The Borrowers and such Lender shall thereafter attempt to
negotiate in good faith an adjustment to the compensation payable hereunder
which will adequately compensate such Lender for such reduction. If the
Borrowers and such Lender are unable to agree on such adjustment within thirty
(30) days of the date on which the Borrowers receive such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such applicability, change, interpretation, administration or
compliance), the fees payable hereunder shall increase by an amount which will,
in such Lender's reasonable determination, evidenced by calculations in
reasonable detail furnished to the Borrowers, compensate such Lender for such
reduction, such Lender's determination of such amount to be conclusive and
binding upon the Borrowers, absent manifest error. In determining such amount,
such Lender may use any reasonable methods of averaging, allocating or
attributing such reduction among its customers.
Section 2.14 Changed Circumstances. In the event that:
(a) on any date on which the Applicable LIBOR Rate would
otherwise be set the Agent shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair means do not
exist for ascertaining the LIBOR Rate, as applicable; or
(b) at any time the Agent shall have determined in good faith
(which determination shall be final and conclusive) that
(i) the implementation of the LIBOR Pricing Option
has been made impracticable or unlawful by (A) the occurrence of a
contingency that materially and adversely affects the London interbank
market or (B) compliance by any Lender in good faith with any
applicable law or governmental regulation, guideline or order or
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interpretation or change thereof by any Governmental Authority charged
with the interpretation or administration thereof or with any request
or directive of any such Governmental Authority (whether or not having
the force of law); or
(ii) the LIBOR Rate shall no longer represent the
effective cost to the Lenders for U.S. dollar deposits in the London
interbank market, as applicable for deposits in which they regularly
participate;
then, and in such event, the Agent shall so notify the Borrowers thereof. Until
the Agent notifies the Borrowers that the circumstances giving rise to such
notice no longer apply, the obligation of the Lenders and the Agent to allow
election by the Borrowers of a LIBOR Pricing Option shall be suspended. If at
the time the Agent so notifies the Borrowers, the Borrowers have previously
given the Agent a Pricing Notice with respect to a LIBOR Pricing Option, but the
LIBOR Pricing Option requested therein has not yet gone into effect, such
Pricing Notice shall automatically be deemed to be withdrawn and be of no force
or effect. Upon such date as shall be specified in such notice (which shall not
be earlier than the date such notice is given), the LIBOR Pricing Option with
respect to all LIBOR Rate Loans shall be terminated.
In the event that the LIBOR Pricing Option is suspended in accordance
with the foregoing provisions for more than sixty (60) days, the Borrowers may
request that the Lenders propose an index, and the spread above such index, for
determining interest on the Loans as an alternative to the LIBOR Rate, which
shall be an index in common usage by United States commercial banks and which
shall adequately reflect the cost of funds to the Lenders. The determination of
whether there is an appropriate index meeting the foregoing requirements, and
the determination of the spread above such index, shall be made by agreement of
all of the Lenders in their sole discretion. In the event the Borrowers and the
Lenders agree on such alternative index, appropriate amendments shall be made to
this Agreement to reflect such agreement and any particular requirements
relating to such alternative index.
Section 2.15 Use of Proceeds. The Term Loans and the initial Revolving
Credit Advance hereunder shall reflect the term loans and revolving credit
advances, respectively, under the 1997 Credit Agreements on the date hereof as
reduced in the case of the Term Loans, as provided in Section 2.4 hereof. The
proceeds of all future Revolving Credit Advances and of the Swing Line Loans
shall be used by the Borrowers for (a) Permitted Capital Expenditures, (b)
on-going working capital requirements relating to the Borrowers' operations and
(c) general corporate purposes provided for by this Agreement. The Borrowers
will not, directly or indirectly, use any part of such proceeds for the purpose
of purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock.
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Section 2.16 Letters of Credit.
(a) Subject to the terms and conditions hereof, including
satisfaction of the conditions set forth in Sections 3.1 and 3.2 hereof, and
provided no Default has occurred and that the Issuing Bank is then generally
issuing letters of credit for its banking customers, the Issuing Bank shall at
any time prior to the Revolving Credit Termination Date, upon the request of the
Borrowers pursuant to paragraph (b) below, issue Letters of Credit for the
account of the Borrowers, provided that the aggregate face amount of all
outstanding Letters of Credit shall not at any time exceed $10,000,000. As of
the date hereof, the Issuing Bank has issued the letters of credit for the
account of the Borrowers described on Schedule 2.16, which from and after the
date hereof shall be deemed to be Letters of Credit issued hereunder, and the
face amount thereof from time to time shall count against the limit set forth
above.
(b) The Borrowers may request that the Issuing Bank issue a
Letter of Credit by written notice (the "Letter of Credit Notice") given by the
Borrowers to the Issuing Bank not less than five (5) Business Days prior to the
proposed date of issuance of such Letter of Credit. The Letter of Credit Notice
shall (i) specify the proposed date of issuance, the beneficiary, amount and the
purpose of such Letter of Credit and (ii) be accompanied by a letter of credit
application furnished by the Issuing Bank.
(c) The Borrowers hereby agree, jointly and severally, to pay
to the Issuing Bank on the date on which the Issuing Bank shall be required to
pay any draft presented under any Letter of Credit, a sum equal to: (i) the
amount so paid under such Letter of Credit, plus (ii) interest on any amount
remaining unpaid by the Borrowers to the Issuing Bank under clause (i) from and
including the date on which such amount becomes payable pursuant to clause (i)
until payment in full, payable on demand, at a per annum rate of interest equal
to the rate applicable to the Revolving Credit Advances which are Base Rate
Loans under Section 2.7. If the Borrowers shall fail to pay to the Issuing Bank
the Reimbursement Obligation on the date on which the Issuing Bank shall be
required to pay any draft presented under any Letter of Credit, the Issuing Bank
shall, to the extent the Borrowers have availability to request a Revolving
Credit Advance, consider such failure to be a request for a Revolving Credit
Advance or, with the Agent's consent, a Swing Line Loan, in the amount of the
unpaid Reimbursement Obligation (which request shall be deemed a confirmation
that the conditions set forth in Section 3.2 have been satisfied), and the
Issuing Bank shall apply the proceeds of such Revolving Credit Advance, or the
Agent shall apply the proceeds of such Swing Line Loan, to reimburse the Issuing
Bank for the Reimbursement Obligation.
(d) The Borrowers shall, jointly and severally, quarterly in
arrears on the last day of each calendar quarter for the immediately preceding
calendar quarter or portion thereof, pay (i) a fee (in each case, a "Letter of
Credit Fee") to the Issuing Bank for the account of the Revolving Credit Lenders
in respect of each Letter of Credit issued at the request of the Borrowers equal
to the LIBOR Rate Margin for Revolving Credit Advances in effect at such time,
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multiplied by the face amount of each Letter of Credit and (ii) a fronting fee
to the Issuing Bank for its account equal to 1/4% per annum multiplied by the
face amount of each Letter of Credit. The Issuing Bank shall, in turn, remit to
each Revolving Credit Lender its pro rata portion of such Letter of Credit Fee.
In addition, the Borrowers shall, jointly and severally, pay to the Issuing
Bank, for its own account, on the date of issuance, or any extension or renewal
of any Letter of Credit and at such other time or times as such charges are
customarily made by the Issuing Bank, the Issuing Bank's standard issuance,
processing, negotiation, amendment and administrative fees, determined in
accordance with customary fees and charges for similar facilities.
(e) Each payment by the Borrowers hereunder shall be made to
the Issuing Bank at the Issuing Bank's head office in Boston, Massachusetts in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrowers under this Section 2.16 at any time from the date such amounts
become due and payable (whether as stated in this Section 2.16, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Issuing Bank on demand at the rate specified in Section 2.7 for
the overdue principal on Revolving Credit Advances which are Base Rate Loans.
(f) The obligations of the Borrowers with respect to the
Letters of Credit shall be joint and several, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of
the Letters of Credit;
(ii) any amendment or waiver of or any consent to or
actual departure from this Agreement;
(iii) the existence of any claim, set-off, defense or
other right which the Borrowers may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any Persons or
entities for which any such beneficiary or any such transferee may be
acting), the Issuing Bank or any other Person or entity, whether in
connection with this Agreement, the transactions contemplated herein or
in any other agreements or any unrelated transaction;
(iv) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of
Credit against presentation by the beneficiary thereof of a draft or
certificate which does not comply with the terms of such Letter of
Credit; or
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(vi) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
(g) The Uniform Customs and Practice shall be binding on the
Borrowers, the Revolving Credit Lenders and the Issuing Bank. The Borrowers
assume all risks of the acts or omissions of the beneficiary of each Letter of
Credit with respect to such Letter of Credit. In furtherance of, and not in
limitation of the Issuing Bank's rights and powers under the Uniform Customs and
Practice, but subject to all other provisions of this paragraph (g), it is
understood and agreed that the Issuing Bank shall not have any liability for,
and that the Borrowers assume all responsibility for: (i) the genuineness of any
signature; (ii) the form, correctness, validity, sufficiency, genuineness,
falsification and legal effect of any draft, certification or other document
required by a Letter of Credit or the authority of the Person signing the same;
(iii) the failure of any instrument to bear any reference or adequate reference
to a Letter of Credit or the failure of any Persons to note the amount of any
instrument on the reverse of a Letter of Credit or to surrender a Letter of
Credit or otherwise to comply with the terms and condition of a Letter of
Credit; (iv) the good faith or acts of any Person other than the Issuing Bank
and its agents and employees; (v) the existence, form or sufficiency or breach
or default under any agreement or instrument of any nature whatsoever; (vi) any
delay in giving or failure to give any notice, demand or protest; and (vii) any
error, omission, delay in or nondelivery of any notice or other communication,
however sent. The determination as to whether the required documents are
presented prior to the expiration of a Letter of Credit and whether such other
documents are in proper and sufficient form for compliance with a Letter of
Credit shall be made by the Issuing Bank in its sole discretion, which
determination shall be conclusive and binding upon the Borrowers absent manifest
error. It is agreed that the Issuing Bank may honor, as complying with the terms
of a Letter of Credit and this Agreement, any documents otherwise in order and
signed or issued by the beneficiary thereof. Any action, inaction or omission on
the part of the Issuing Bank under or in connection with the Letters of Credit
or any related instruments or documents, if in good faith and in conformity with
such laws, regulations or commercial or banking customs as the Issuing Bank may
reasonably deem to be applicable, shall be binding upon the Borrowers, shall not
place the Issuing Bank under any liability to the Borrowers, and shall not
affect, impair or prevent the vesting of any of the Issuing Bank's rights or
powers hereunder or the Borrowers' obligation to make full reimbursement of
amounts drawn under the Letters of Credit.
(h) If the Borrowers, either in writing or orally, request or
consent to any modification or extension of a Letter of Credit or waive failure
of any draft, certificate or other documents to comply with the terms of a
Letter of Credit, the Issuing Bank shall be entitled to rely and shall be deemed
to have relied on such request, consent or waiver with respect to any action
taken or omitted by the Issuing Bank pursuant to any such request, consent or
waiver, and such extension, modification or waiver shall be binding upon the
Borrowers.
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(i) Each Revolving Credit Lender severally agrees that it
shall be absolutely liable, without regard to the occurrence of any Default or
Event of Default or any other condition precedent whatsoever, to the extent of
such Lender's Revolving Credit Commitment Percentage, to reimburse the Issuing
Bank on demand for the amount of each draft paid by the Issuing Bank under each
Letter of Credit to the extent that such amount is not reimbursed by the
Borrowers pursuant to paragraph (c) above (such agreement for a Revolving Credit
Lender being called herein the "Letter of Credit Participation" of such
Revolving Credit Lender).
(j) If any draft shall be presented or other demand for
payment shall be made under any Letter of Credit, the Issuing Bank shall notify
the Borrowers of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrowers fail to reimburse the Issuing Bank as
provided in paragraph (c) above on or before the date that such draft is paid or
other payment is made by the Issuing Bank, the Issuing Bank may at any time
thereafter notify the Revolving Credit Lenders of the amount of any such unpaid
Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business
Day next following the receipt of such notice, each Revolving Credit Lender
shall make available to the Issuing Bank, at its head office located in Boston,
Massachusetts, in immediately available funds, such Lender's Revolving Credit
Commitment Percentage of such unpaid Reimbursement Obligation, together with an
amount equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Issuing Bank for federal funds acquired by the Issuing Bank during each day
included in such period, times (ii) the amount equal to such Lender's Revolving
Credit Commitment Percentage of such unpaid Reimbursement Obligation, times
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Issuing Bank paid the draft presented for honor or
otherwise made payment to the date on which such Lender's Revolving Credit
Commitment Percentage of such unpaid Reimbursement Obligation shall become
immediately available to the Issuing Bank, and the denominator of which is 360.
(k) Neither the Issuing Bank nor any Revolving Credit Lender
nor any of their officers, directors or employees shall be liable or responsible
for: (i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (ii) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (iii) payment by the Issuing Bank
against presentation of documents which do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to a Letter of Credit; or (iv) any other circumstances whatsoever in
making or failure to make payment under a Letter of Credit; provided, that,
notwithstanding anything in this Section 2.16 to the contrary, the Borrowers
shall have a claim against the Revolving Credit Lenders, and the Revolving
Credit Lenders shall be liable to the Borrowers, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by the
Borrowers which were caused by the Issuing Bank's failure to conform to the
standards of the Uniform Customs and Practice. In furtherance and not in
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limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
Section 2.17 Collection of Accounts.
(a) American Ski and the other Borrowers shall establish and
maintain, at their expense, deposit account arrangements with the Agent and the
other banks set forth on Schedule 2.17 hereto and after prior written notice to
the Agent, such other banks as any Borrower may hereafter select that are
acceptable to the Agent. The banks set forth on Schedule 2.17 constitute all of
the banks with whom American Ski, any other Borrower and any Restricted
Subsidiary has deposit account arrangements as of the date hereof and identifies
each of the deposit accounts at such banks to an operating location of each
Borrower or otherwise describes the nature of the use of such deposit account by
each Borrower.
(b) Each Borrower shall deposit all proceeds (other than
amounts of cash, not to exceed $100,000 for any location operated by such
Borrower, for opening cash at such location consistent with past practices so
long as no Default exists or has occurred) from sales of goods or services in
every form, including, without limitation, cash, checks, credit or debit card
sales drafts, credit or debit card sales or charge slips or receipts and other
forms of daily receipts, from each location of each Borrower on each Business
Day into the concentration accounts of the Borrowers identified to each Borrower
location as set forth on Schedule 2.17.
(c) For purposes of calculating interest on the Lender
Obligations, the payments or other funds received pursuant to paragraph (b)
above after 2:00 p.m. (Boston time) on any day will be applied (conditional upon
final collection) to the Lender Obligations one (1) Business Day following the
date of receipt of immediately available funds by the Agent from the
concentration accounts identified on Schedule 2.17. For purposes of calculating
the amount of the Revolving Credit Advances or Swing Line Loans available to the
Borrowers, such payments will be applied (conditional upon final collection) to
the Lender Obligations on the Business Day of receipt by the Agent in the
concentration accounts identified on Schedule 2.17, if such payments are
received within sufficient time (in accordance with the Agent's usual and
customary practices as in effect from time to time) to credit Borrowers' loan
account on such day, and if not, then on the next Business Day. All such
payments shall be applied by the Agent first to any outstanding Swing Line Loans
and second, at the Agent's election and in accordance with the provisions of
Section 4.2(a), to any outstanding Revolving Credit Advances which are Base Rate
Loans, and any amounts not so applied shall be retained in the concentration
accounts until they can be so applied.
Section 2.18 Swing Line Commitment. Subject to the terms and conditions
hereof, BankBoston, N.A. (in such capacity, the "Swing Line Lender") agrees to
make a portion of the credit otherwise available to the Borrowers hereunder,
from time to time prior to the Revolving Credit Termination Date, by making
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swing line loans ("Swing Line Loans") to the Borrowers, jointly and severally,
in an aggregate principal amount not to exceed at any one time outstanding the
Swing Line Commitment; provided that (a) the aggregate principal amount of Swing
Line Loans outstanding at any time shall not exceed the Swing Line Commitment
then in effect (notwithstanding that the Swing Line Loans outstanding at any
time, when aggregated with the Swing Line Lender's other outstanding Loans
hereunder, may exceed the Swing Line Commitment then in effect) and (b) the
Borrowers shall not request, and the Swing Line Lender shall not make, any Swing
Line Loan if, after giving effect to the making of such Swing Line Loan, the
aggregate amount of the Available Revolving Credit Amount would be less than $0.
Prior to the Revolving Credit Termination Date, the Borrowers may use the Swing
Line Commitment by borrowing, repaying and reborrowing, all in accordance with
the terms and conditions hereof. Swing Line Loans shall be Base Rate Loans or
Money Market Loans only. The Borrowers may use the proceeds of Revolving Credit
Advances from time to time to repay any outstanding Swing Line Loans. The
Borrowers, jointly and severally, shall repay all outstanding Swing Line Loans
on the Revolving Credit Termination Date. On the Closing Date, the Borrowers
shall deliver to the Swing Line Lender a Swing Line Note to evidence the Swing
Line Loans from time to time made by the Swing Line Lender to the Borrowers
hereunder.
Section 2.19 Procedure for Swing Line Borrowing; Interest on Swing Line
Loans. Whenever the Borrowers desire that the Swing Line Lender make Swing Line
Loans under Section 2.18, American Ski shall give the Swing Line Lender
irrevocable telephonic notice confirmed promptly in writing by delivery of a
Notice of Revolving Credit or Swing Line Borrowing (which telephonic notice must
be received by the Swing Line Lender not later than 1:00 P.M., Boston time, on
the proposed borrowing date), specifying (a) the amount to be borrowed, (b)
whether such Swing Line Loan is requested to be a Money Market Loan or a Base
Rate Loan and (c) the requested borrowing date (which shall be a Business Day
prior to the Revolving Credit Termination Date); and not later than 3:00 P.M.,
Boston time, on the borrowing date specified in the notice in respect of Swing
Line Loans, the Swing Line Lender shall make the proceeds of such Swing Line
Loan available to American Ski, as agent for the Borrowers on such borrowing
date in accordance with the instructions of ASC East; provided, however, that
the provisions of the cash management arrangements between the Borrowers and the
Swing Line Lender, including any provisions relating to automatic Swing Line
Loans to fund daily disbursements under a Borrower's controlled disbursement
account shall supersede the foregoing requirements. The Borrowers, jointly and
severally, shall pay interest on the unpaid balance of the Swing Line Loans from
time to time outstanding at a per annum rate equal to the Applicable Base Rate
or the Money Market Rate as agreed to by the Swing Line Lender and the Borrower
at the time of making the Swing Line Loan. Interest on the Swing Line Loans
shall be payable quarterly in arrears on the first day of the month following
the end of each fiscal quarter, commencing November 1, 1999 and continuing until
all of the Indebtedness of the Borrowers to the Swing Line Lender hereunder
shall have been paid in full.
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Section 2.20 Refunded Swing Line Loans; Swing Line Loan
Participations.
(a) The Swing Line Lender, at any time and from time to time
in its sole and absolute discretion may, and in any event not less than once
each week shall, on behalf of the Borrowers (which hereby irrevocably direct the
Swing Line Lender to act on their behalf) on one Business Day's notice given by
the Swing Line Lender no later than 12:00 noon, Boston time, request each
Revolving Credit Lender to make, and each Revolving Credit Lender hereby agrees
to make, a Revolving Credit Advance in an amount equal to such Lender's
Revolving Credit Commitment Percentage of the aggregate amount of the Swing Line
Loans (the "Refunded Swing Line Loans") outstanding on the date of such notice,
to repay the Swing Line Lender. Unless any of the events described in Section
10(f) shall have occurred and be continuing (in which case the procedures of
Section 2.20(c) shall apply), each Revolving Credit Lender shall make the amount
of such Revolving Credit Advance available to the Agent at its office set forth
in Section 14.1 in immediately available funds, not later than 10:00 A.M.,
Boston time, one Business Day after the date of such notice. The proceeds of
such Revolving Credit Advances shall be immediately applied by the Swing Line
Lender to repay the Refunded Swing Line Loans. Effective on the day such
Revolving Credit Advances are made, the portion of the Swing Line Loans so paid
shall no longer be outstanding as Swing Line Loans and shall be outstanding as
Revolving Credit Advances and owed to the Revolving Credit Lenders in accordance
with their respective Revolving Credit Commitment Percentages. The Borrowers
irrevocably authorize the Swing Line Lender to charge the Borrowers' accounts
with the Agent (up to the amount available in each such account) to immediately
pay the amount of such Refunded Swing Line Loans to the extent amounts received
from the Revolving Credit Lenders are not sufficient to repay in full such
Refunded Swing Line Loans.
(b) The making of any Swing Line Loan hereunder shall be
subject to the satisfaction of the applicable conditions precedent thereto set
forth in Section 3.1, in the case of any Swing Line Loan to be made on the
Closing Date, and Section 3.2, in the case of all other Swing Line Loans (unless
otherwise waived in accordance with Section 11.1). The Swing Line Lender shall
notify American Ski of its election not to make Swing Line Loans hereunder as a
result of the failure to satisfy such conditions precedent, unless an Event of
Default of the type specified in Section 10.1(f) shall have occurred and be
continuing.
(c) If prior to the time a Revolving Credit Advance would have
otherwise been made pursuant to Section 2.20(a) one of the events described in
Section 10(f) shall have occurred and be continuing, each Revolving Credit
Lender shall, on the date such Revolving Credit Advance was to have been made
pursuant to the notice referred to in Section 2.20(a) (the "Refunding Date"),
purchase an undivided participating interest in an amount equal to (i) its
Commitment Percentage times (ii) the aggregate principal amount of Swing Line
Loans then outstanding which were to have been repaid with such Revolving Credit
Advances (the "Swing Line Participation Amount"). On the Refunding Date, each
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Revolving Credit Lender shall transfer to the Swing Line Lender, in immediately
available funds, such Revolving Credit Lender's Swing Line Participation Amount
and upon receipt thereof the Swing Line Lender shall deliver to such Revolving
Credit Lender a certificate evidencing such Swingline Participation Amount dated
the date of the Swing Line Lender's receipt of such funds and in such Swing Line
Participation Amount.
(d) Whenever, at any time after the Swing Line Lender has
received from any Revolving Credit Lender such Revolving Credit Lender's Swing
Line Participation Amount, the Swing Line Lender receives any payment on account
of the Swing Line Loans, the Swing Line Lender will distribute to such Revolving
Credit Lender its Swing Line Participation Amount (appropriately adjusted, in
the case of interest payments, to reflect the period of time during which such
Revolving Credit Lender's participating interest was outstanding and funded and,
in the case of principal and interest payments, to reflect such Revolving Credit
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swing Line Loans then due); provided,
however, that in the event that such payment received by the Swing Line Lender
is required to be returned, such Revolving Credit Lender will return to the
Swing Line Lender any portion thereof previously distributed to it by the Swing
Line Lender.
(e) Each Revolving Credit Lender's obligation to make the
Loans referred to in Section 2.20(a) and to a purchase participating interest
pursuant to Section 2.20(c) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Revolving Credit
Lender or the Borrowers may have against the Swing Line Lender, the Borrowers or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default or an Event of Default or the failure to satisfy any of the other
conditions specified in Section 5; (iii) any adverse change in the condition
(financial or otherwise) of the Borrowers; (iv) any breach of this Agreement or
any other Lender Agreement by the Borrowers or any other Lender; or (v) any
other circumstances, happening or event whatsoever, whether or not similar to
any of the foregoing.
Section 2.21 Release of Certain Liens. (a) Notwithstanding anything herein
to the contrary, the parties hereto acknowledge that the Borrowers shall have
the right to transfer to any Unrestricted Subsidiary parcels of Excess Real
Property, in each case so long as there exists no Default. Upon the transfer of
any such Excess Real Property on request of American Ski, at any time so long as
there exists no Default, the Agent shall release any parcel of Excess Real
Property from the Lien of the Mortgage and Security Agreements to which such
parcel of Excess Real Property is subject, provided that such release shall only
be granted if the following conditions have been met or satisfied:
(i) The Borrowers shall reimburse the Agent for any
costs and expenses it incurs arising from the transfer of the parcel of
Excess Real Property and any release of such parcel of Excess Real
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Property from the Lien of the Mortgage (including, without limitation,
reasonable attorneys' fees and expenses);
(ii) No Default exists hereunder;
(iii) Each applicable municipal authority exercising
jurisdiction over the parcel of Excess Real Property has approved a lot
split ordinance or other applicable action under local law dividing the
parcel of Excess Real Property from the remainder of the Mortgaged
Property and assigning separate tax identification numbers to each;
(iv) No part of the remaining Mortgaged Property
shall be part of a tax lot affecting any portion of the parcel of
Excess Real Property;
(v) All requirements under all laws, statutes, rules
and regulations (including, without limitation, all zoning and
subdivision laws, setback requirements, sideline requirements, parking
ratio requirements, use requirements and building and fire code
requirements) applicable to the Mortgaged Property necessary to
accomplish the lot split shall have been fulfilled;
(vi) As a result of the lot split, the remaining
Mortgaged Property will not be in violation of any applicable law,
statute, rule or regulation (including, without limitation, all zoning
and subdivision laws, setback requirements, sideline requirements,
parking ratio requirements, use requirements and building and fire code
requirements) and all necessary variances, if any, shall have been
obtained;
(vii) Appropriate reciprocal easement agreements for
the benefit and burden of the remaining Mortgaged Property and the
parcel of Excess Real Property regarding the use of common facilities
of such parcels, including, but not limited to, open areas, ski lifts,
ski trails, roadways, parking areas, utilities, snowmaking facilities
and community facilities and related infrastructure by the occupants of
the remaining Mortgaged Property and the parcel of Excess Real
Property, in a form and substance acceptable to Agent. shall be
declared and recorded;
(viii) American Ski shall have delivered to Agent one
or more endorsements to the title insurance policies insuring the Lien
of the applicable Mortgage or such other evidence reasonably acceptable
to the Lender insuring that, after giving effect to such release, the
title insurance policies insuring the Lien of the applicable Mortgage
are in full force and effect and unaffected by such release; and
(ix) Borrower shall execute such documents and
instruments as Agent shall reasonably require in connection with the
foregoing.
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(b) So long as no Default exists, the Agent shall release the
liens on properties or assets sold or disposed of in connection with Permitted
Dispositions and Permitted Non-Strategic Asset Sales.
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES
Section 3.1 Conditions to the Term Loans and the Initial Revolving Credit
Advance. The Lenders' obligations to make the Term Loans and the initial
Revolving Credit Advance shall be subject to compliance by the Borrowers with
their agreements contained in this Agreement, and to the condition precedent
that the Lenders shall have received each of the following, in form and
substance satisfactory to the Agent and its counsel or in the form attached
hereto as an Exhibit, as the case may be:
(a) Notes. The Term Loan Notes and the Revolving Credit Notes
duly executed by the Borrowers.
(b) Guaranty Agreements. The Guaranty Agreements duly executed
by AJT, Inc., and WVSAL, Inc.
(c) Resolutions. Copies of the resolutions of the Board of
Directors of American Ski and its Subsidiaries authorizing the execution,
delivery and performance of this Agreement, the Term Loan Notes, the Revolving
Credit Notes, the Swing Line Note, the Guaranty Agreements, the Security
Agreements and the other Lender Agreements executed in connection herewith to
which the American Ski or any Restricted Subsidiary is a party, certified by the
Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of American
Ski and each of its Subsidiaries (which certificate shall state that such
resolutions are in full force and effect).
(d) Incumbency. A certificate of the Secretary or an Assistant
Secretary (or Clerk or Assistant Clerk) of American Ski and each of its
Subsidiaries certifying the name and signatures of the officers of American Ski
and each of its Subsidiaries authorized to sign this Agreement, the Term Loan
Notes, the Revolving Credit Notes, the Swing Line Note, the Guaranty Agreements,
the Security Agreements, the other Lender Agreements executed in connection
herewith to which American Ski, any Borrower or any Subsidiary is a party and
the other documents to be delivered by American Ski and the Borrowers hereunder.
(e) Certificates of Existence. Copies of certificates of legal
existence, corporate or partnership good standing and foreign qualification for
American Ski, each Borrower and each other Restricted Subsidiary of American Ski
of recent date issued by the appropriate California, Colorado, Delaware, Maine,
Nevada, New Hampshire, Utah and Vermont Governmental Authorities.
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(f) Legal Opinions. The opinions of Pierce Atwood, Wadleigh,
Starr, Peters, Dunn & Chiesa, Reiber, Kenlan, Schwiebert, Hall & Facey and
Scarpello & Alling, counsel to American Ski, the Borrowers and their Restricted
Subsidiaries, dated the date of execution of this Agreement, in substantially
the forms of Exhibit O attached hereto.
(g) Satisfaction of Conditions. A certificate of the chief
executive officer or chief financial officer of American Ski and each Borrower,
dated the Closing Date, to the effect that all conditions precedent on the part
of American Ski and the Borrowers to the execution and delivery hereof and the
making of the Term Loans and the initial Revolving Credit Advance have been
satisfied.
(h) Governmental Approvals. Evidence of the receipt of all
necessary governmental authorizations, consents and approvals for the execution,
delivery and performance by American Ski and its Restricted Subsidiaries and
their Subsidiaries party thereto of this Agreement, the Term Loan Notes, the
Revolving Credit Notes, the Swing Line Note and the other Lender Agreements.
(i) Merger of ASC East and ASC West, Inc. Evidence that the
merger of ASC East and ASC West, Inc. with and into the predecessor of American
Ski has been consummated.
(j) Fourth Supplemental Indenture. American Ski and United
States Trust Company of New York, as Trustee, shall have entered into the Fourth
Supplemental Indenture relating to the Senior Subordinated Notes on terms and
conditions satisfactory to the Agent.
(k) Agent's Fee. Receipt by the Agent for its own account of
the fees due to it pursuant to the Fee Letter.
(l) Solvency Certificates. Receipt of a certificate of the
chief financial officer of American Ski and each Restricted Subsidiary,
demonstrating the solvency of American Ski and each Restricted Subsidiary.
(m) Security Agreements. Each of the Security Agreements,
shall have been duly and properly authorized, executed and delivered by the
parties thereto and shall be in full force and effect, and pursuant to the
Security Agreements the Borrowers shall have granted to the Agent first
perfected, valid and binding security interests, liens and encumbrances on all
of the assets of the Borrowers in favor of the Agent (subject only to Liens
permitted under Section 9.2) including without limitation:
(i) all fee simple and leasehold interests in and to
all real property owned or leased by the Borrowers and their Restricted
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Subsidiaries other than those leases set forth on Schedule 3.1(q), and
all buildings and improvements now located or to be constructed
thereon, whether now owned or hereafter acquired;
(ii) all tangible and intangible assets of the
Borrowers, whether now owned or hereafter acquired, including without
limitation all machinery, equipment, furniture, furnishings, inventory,
appliances, contract rights, deposit accounts, cash collateral, hotel
and motel revenues, instruments, general intangibles, etc., whether now
owned or hereafter acquired, but excluding leasehold personal property
interests which the Borrowers are prohibited by the lessor from
assigning and any interest in any personal property lease agreement
which the Borrowers are prohibited from assigning;
(iii) all leases, tenancies, purchase and sale
agreements for the sale of condominium units or other property,
operating agreements, contract and rental agreements for the lease,
sale (as permitted hereunder), rental, occupancy, hire or use of any of
Borrowers' assets, including without limitation the Mortgaged
Properties, or any portion thereof together with all income, profits,
revenues, cash collateral and other proceeds thereof; and
(iv) all licenses, permits, trade names, patents,
trademarks, approvals and contracts.
(n) Recording of Mortgages, Financing Statements, Etc. All
actions necessary or appropriate to perfect the Agent's liens and security
interests in the assets of the Borrowers and their Restricted Subsidiaries shall
have been fully performed including without limitation:
(i) the due and proper recording and filing of all of
the Mortgages, Collateral Assignments of Leases, Collateral Assignments
of Income, Assignments in Trust and Assignments of Licenses;
(ii) the filing of Uniform Commercial Code financing
statements necessary to perfect the security interests of the Agent in
the assets of the Borrowers; and
(iii) the receipt by the Agent of commitments from
Lawyer's Title Insurance Corporation to issue ALTA standard form
mortgage loan policies or endorsements thereto insuring the first
priority of the Mortgages, subject only to Permitted Liens, covering
all real property of the Borrowers both as owned in fee or held as a
leasehold estate under the Leases or otherwise and covering the real
property described in the Mortgages in an aggregate amount of not less
than $165,000,000, such policies to be in form and substance
satisfactory to the Agent, including without limitation, such
endorsements and affirmative insurance as the Agent shall require with
the standard tenant's and mechanic's liens exceptions deleted and with
such portions of the survey coverage deleted as the Agent may require,
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and the Agent shall also have received proof of full payment of all
fees and premiums for said policies and copies of all documents listed
as exceptions on Schedule B to each such policy.
(o) Insurance. The Agent shall have received (i) certificates
of insurance as to the liability hazard and other insurance maintained by the
Borrowers and their Restricted Subsidiaries on the Collateral in conformity with
the insurance requirements contained in the Security Agreements (including flood
insurance if necessary) from the insurer or an independent insurance broker
dated as of the Closing Date, identifying insurers, types of insurance,
insurance limits, and policy terms all in accordance with the provisions of the
Security Agreements; (ii) certified copies of all policies evidencing such
insurance (or certificates therefor signed by the insurer or an agent authorized
to bind the insurer); and (iii) such further information and certificates from
the Borrowers, their insurers and insurance brokers as the Agent may request.
(p) Unrestricted Subsidiary Acknowledgment. An Acknowledgment
from each Unrestricted Subsidiary in the form attached hereto as Exhibit R.
(q) Series B Preferred Stock Agreements. The Agent shall have
received true and correct copies of the Series B Preferred Stock Agreements duly
executed by all parties thereto and evidence that the transactions contemplated
thereby, including, without limitation, the issuance of the Series B Preferred
Stock, have occurred.
(r) Miscellaneous. The Agent shall have received such other
documents, certificates and opinions as the Agent or the Lenders may reasonably
request.
Section 3.2 Conditions to All Loans. The Lenders' obligations to make any
Loans pursuant to this Agreement shall be subject to compliance by the Borrowers
and the Guarantors with their agreements contained in this Agreement and each
other Lender Agreement, and to the satisfaction, at or before the making of each
Loan, of all of the following conditions precedent:
(a) The representations and warranties herein and those made
by or on behalf of the Borrowers in any other Lender Agreement shall be correct
as of the date on which any Loan is made, with the same effect as if made at and
as of such time (except as to representations and warranties made as of a
certain date, which shall be true and correct in all material respects as of
such date, except as to transactions permitted hereunder, and except that the
references in Article 5 to the 1998 Financial Statements shall be deemed to
refer to the most recent annual audited consolidated financial statements of
American Ski and its Subsidiaries furnished to the Agent.)
(b) On the date of any Loan hereunder, there shall exist no
Default.
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(c) The making of the requested Loan shall not be prohibited
by any law or governmental order or regulation applicable to the Lenders or to
the Borrowers, and all necessary consents, approvals and authorizations of any
Person for any such Loan shall have been obtained.
ARTICLE 4. PAYMENT AND REPAYMENT
Section 4.1 Mandatory Repayments and Prepayment
- --------------------------------------------------------------------------------
(a) If at any time the sum of the aggregate outstanding
principal balance of all Revolving Credit Advances and all Swing Line Loans made
hereunder exceeds the Available Revolving Credit Amount, the Borrowers, jointly
and severally, shall immediately repay to the Agent for the ratable accounts of
the Revolving Credit Lenders an amount equal to such excess to be applied first
to the Swing Line Loans and second to the Revolving Credit Advances.
(b) The Borrowers will repay the Term Loans in six annual
installments, payable on May 31 of each year, commencing May 31, 2000, in the
following amounts
Payment Date Amount
May 31, 2000 $ 650,000
May 31, 2001 650,000
May 31, 2002 650,000
May 31, 2003 650,000
May 31, 2004 650,000
May 31, 2005 30,000,000
May 31, 2006 31,750,000
In any event, the final installment due on the Term Loan Maturity Date shall be
equal to the outstanding principal balance of the Term Loans, together with
accrued interest and all other amounts due hereunder in connection therewith.
The amount of the principal installments of the Term Loans are subject to
adjustment as provided in paragraph (c) below.
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(c) The Borrowers shall also make prepayments of the following
amounts:
(i) Ten days following the delivery of the Mandatory
Prepayment Notice (as defined below) by the Agent following each Excess
Cash Payment Date and in connection with the relevant Excess Cash
Payment Period, if the Excess Cash Flow Leverage Ratio for such period
exceeded 3.50-to-1, an amount equal to 50% of the Consolidated Excess
Cash Flow shall be applied as a mandatory repayment of principal of
outstanding Term Loans and a mandatory reduction of the Maximum
Revolving Credit Amount in accordance with clause (v) below.
(ii) At any time on and after the Closing Date, if
American Ski or any of its Restricted Subsidiaries receives Cash
Proceeds from any Permitted Disposition or receives Cash Insurance
Proceeds, an amount equal to 100% of the Net Cash Proceeds therefrom
shall be applied as a mandatory repayment of principal of outstanding
Term Loans and a mandatory reduction of the Maximum Revolving Credit
Amount in accordance with clause (v) below; provided, however that with
respect to no more than $250,000 in the aggregate of such Net Cash
Proceeds in any fiscal year of American Ski and its Restricted
Subsidiaries, such Net Cash Proceeds shall not be required to be
so-applied if no Default then exists and American Ski delivers a
certificate to the Agent together with the notice referred to in clause
(vii) below stating that such Net Cash Proceeds shall be used for
Permitted Capital Expenditures and Permitted Acquisitions by American
Ski and its Restricted Subsidiaries in compliance with this Agreement
within 365 days following the date of such Permitted Disposition or the
date of receipt of such Cash Insurance Proceeds (which certificate
shall set forth the estimates of the proceeds to be so expended); and
provided further, that if all or any portion of such Net Cash Proceeds
not so-applied to the repayment of Term Loans and a mandatory reduction
of the Maximum Revolving Credit Amount are not so used within such 365
day period, such remaining portion shall be applied on the last day of
such period as a mandatory repayment of principal of outstanding Term
Loans and a mandatory reduction of the Maximum Revolving Credit Amount
as provided in clause (v) below.
(iii) At any time on and after the Closing Date upon
which American Ski or any of its Restricted Subsidiaries receives any
proceeds from any issuance of any equity interests, excluding proceeds
received from the sale or issuance of equity interests which are used
to effect Permitted Acquisitions on the date of sale or issuance of
such equity interests and the Series B Gross Proceeds, an amount equal
to 100% of the cash proceeds therefrom (net of underwriting discounts
or placement discounts and commissions and all reasonable and customary
fees, costs and expenses associated with the marketing, sale and
issuance of such equity interests paid to Persons other than
Affiliates) shall be applied as a mandatory repayment of principal of
outstanding Term Loans and a mandatory reduction of the Maximum
Revolving Credit Amount in accordance with clause (v) below; provided,
however that the requirement of this clause (iii) shall not apply until
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the proceeds received by American Ski or any of its Restricted
Subsidiaries from the sale or issuance of equity interests to which
this clause (iii) would otherwise apply plus any proceeds from the
incurrence of debt referred to in clause (iv) below exceed $10,000,000
in the aggregate.
(iv) At any time after the Closing Date upon which
American Ski or any of its Restricted Subsidiaries receives any
proceeds from any incurrence by American Ski or its Restricted
Subsidiaries of Indebtedness, an amount equal to 100% of the cash
proceeds therefrom (net of underwriting discounts or placement
discounts and commissions paid to Persons other than Affiliates) shall
be applied as a mandatory repayment of principal of outstanding Term
Loans and a mandatory reduction of the Maximum Revolving Credit Amount
in accordance with clause (v) below; provided, however that the
requirement of this clause (iv) shall not apply until the proceeds
received by American Ski or any of its Restricted Subsidiaries from any
incurrence of Indebtedness to which this clause (iv) would otherwise
apply plus any proceeds from the issuance of equity interests referred
to in clause (iii) above exceed $10,000,000 in the aggregate.
(v) All mandatory prepayments pursuant to this
Section 4.1(c) will (A) be applied pro rata to the outstanding
principal amounts of the Term Loans and the Maximum Revolving Credit
Amount, (B) reduce the remaining scheduled principal payments of the
Term Loans and any scheduled reductions of the Maximum Revolving Credit
Amount, as applicable, on a pro rata basis and (C) be made ten days
following notice from the Agent that such payment is required and
specifying the payment date (the "Mandatory Prepayment Notice.").
Nothing in this Section 4.1(c), however, shall require that the Maximum
Revolving Credit Amount be reduced to an amount less than $74,800,000
and to the extent that any reductions hereunder would have otherwise
reduced the Maximum Revolving Credit Amount below $74,800,000, such
excess amount shall be applied as a mandatory prepayment of the Term
Loans, unless waived by the Term Loan Lenders as provided in clause
(vi) below.
(vi) Notwithstanding anything to the contrary
contained in this Section 4.1(c) or elsewhere in this Agreement, the
Term Loan Lenders shall have the option to waive all or any portion of
a mandatory repayment of the Term Loans pursuant to this Section 4.1(c)
(each such repayment, a "Mandatory Repayment") upon the terms and
provisions set forth in this Section 4.1(c)(vi) ratably on the basis of
their outstanding Term Loans. In the event any Term Loan Lender desires
to waive its right to receive all or any portion of any such Mandatory
Repayment in whole or in part, such Term Loan Lender shall so advise
the Agent no later than the close of business two Business Days after
the date of the Mandatory Prepayment Notice, which notice shall also
include the amount such Term Loan Lender desires to receive in respect
of such Mandatory Repayment. If any Term Loan Lender does not reply to
the Agent within the two Business Days, it will be deemed not to have
waived any part of such Mandatory Repayment. If any Term Loan Lender
does not specify an amount it wishes to receive, it will be deemed to
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have accepted 100% of the total payment. In the event that any such
Term Loan Lender waives all or part of such right to receive all or any
portion of any such Mandatory Repayment, the Agent shall apply 100% of
the amount so waived by such Term Loan Lender to a mandatory reduction
of the Maximum Revolving Credit Amount as provided herein.
(vii) American Ski shall, within three (3) Business
Days of the Excess Cash Payment Date and the occurrence of any event
described in clauses (ii), (iii) or (iv) of this Section 4.1(c),
provide the Agent with written notice of the Consolidated Excess Cash
Flow for the relevant Excess Cash Payment Period and/or the proceeds
received or to be received in connection with the occurrence of any
event described in clauses (ii), (iii) or (iv) of this Section 4.1(c).
Section 4.2 Voluntary Prepayments.
(a) The Borrowers may make prepayments to the Agent for the
ratable accounts of the Term Loan Lenders, the Swing Line Lender and the
Revolving Credit Lenders, respectively, of any outstanding principal amount of
the Term Loans, Swing Line Loans or the Revolving Credit Advances equal to
$100,000 or an integral multiple thereof which are Base Rate Loans in accordance
with Section 4.3 at any time prior to 12:00 noon (Boston time) on any Business
Day without premium or penalty; provided, however, that repayment of Revolving
Credit Advances which are Base Rate Loans may be made in other amounts as
provided in Section 2.17(c).
(b) The Borrowers may make prepayments to the Agent for the
ratable accounts of the Term Loan Lenders or the Revolving Credit Lenders,
respectively, of any outstanding principal amount of the Term Loans or any
Revolving Credit Advances equal to $5,000,000 or an integral multiple of
$1,000,000 in excess thereof which are LIBOR Rate Loans in accordance with
Section 4.3 at any time prior to 12:00 noon (Boston time) on any Business Day
subject, however, to the premiums and penalties set forth in Section 4.6.
(c) Any voluntary prepayments of the Term Loans pursuant to
this Section 4.2 will reduce the remaining scheduled principal payments on the
Term Loans pro rata.
Section 4.3 Payment and Interest Cutoff. Notice of each prepayment pursuant
to Section 4.2 shall be given to the Agent (a) in the case of prepayment of Base
Rate Loans, not later than 12:00 noon (Boston time) one (1) Business Day prior
to the proposed date of payment and (b) in the case of prepayment of LIBOR Rate
Loans on any day other than the last day of the Interest Period applicable
thereto, not later than 12:00 noon (Boston time), three (3) Business Days, prior
to the proposed date of payment, and, in each case, shall specify the total
principal amount of the Term Loans or the Revolving Credit Advances to be paid
on such date. Notice of prepayment having been given in compliance with this
Section 4.3, the amount specified to be prepaid shall become due and payable on
the date specified for prepayment and from and after said date (unless the
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Borrowers shall default in the payment thereof) interest thereon shall cease to
accrue. Unpaid interest on the principal amount of the Term Loans or any
Revolving Credit Advances so prepaid accrued to the date of prepayment shall be
due on the date of prepayment.
Section 4.4 Payment or Other Actions on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be. In the case of any other action
the last day for performance of which shall be a day other than a Business Day,
the date for performance shall be extended to the next succeeding Business Day.
Section 4.5 Method and Timing of Payments.
(a) All payments required to be made pursuant to the
provisions of this Agreement and any other Lender Agreement, and all prepayments
pursuant to Section 4.1, may be charged by the Agent against any Borrower's
accounts with the Agent. Each Borrower hereby authorizes the Agent and the
Lenders, without prior notice to the Borrower but with confirming notice to such
Borrower promptly thereafter, to charge against any account of such Borrower
with the Agent or such Lender an amount equal to the accrued interest, principal
and other amounts from time to time due and payable to the Agent and the Lenders
hereunder and under all other Lender Agreements.
(b) The Borrowers shall make each payment to be made by them
hereunder not later than 12:00 noon (Boston time) on the day when due in lawful
money of the United States to the Agent at its address set forth in Section 14.1
in immediately available funds. The Agent will, after its receipt thereof,
distribute like funds relating to the payment of principal, interest or any
other amounts payable hereunder ratably to the Lenders in accordance with their
respective Commitment Percentages. Any payment made by the Borrowers to the
Agent under this Agreement or under the Notes in the manner provided in this
Agreement shall be deemed to be a payment to each of the respective Lenders,
unless the provisions of this Agreement expressly provide that any such payment
shall be solely for the account of the Agent or any specific Lender.
Section 4.6 Payments Not at End of Interest Period. If the Borrowers for
any reason make any payment of principal with respect to any LIBOR Rate Loan on
any day other than the last day of the Interest Period applicable to such LIBOR
Rate Loan, including without limitation by reason of acceleration, or fail to
borrow a LIBOR Rate Loan after electing a LIBOR Pricing Option with respect
thereto pursuant to Section 2.6, the Borrowers shall pay to the Agent, jointly
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and severally, for the ratable account of the Lenders, any amounts required to
compensate the Lenders for any additional losses, costs or expenses which they
may reasonably incur as a result of such payment or failure to borrow, including
without limitation, any loss, including lost profits, costs or expenses incurred
by reason of the liquidation, reutilization or reemployment of deposits or other
funds acquired by the Lenders to fund or maintain such LIBOR Rate Loan. Such
compensation may include, without limitation, an amount equal to (a) the amount
of interest which would have accrued on the amount so paid or not borrowed, for
the period from the date of such payment or failure to borrow, to the last day
of the then current Interest Period for such LIBOR Rate Loan (or, in the case of
a failure to borrow, to the last day of the Interest Period for the LIBOR Rate
Loan which would have commenced on the date of such failure to borrow), at the
applicable rate of interest for such LIBOR Rate Loan provided for herein minus
(b) the amount of interest (as reasonably determined by the Agent), which would
accrue and become payable to the Lenders during such period on the principal
repaid or not borrowed if the Lenders, following such repayment or failure to
borrow, were to reinvest such principal in U.S. Treasury securities selected by
the Agent in an amount equal (as nearly as may be) to the principal so repaid or
not borrowed and having a term equal (as near as may be) to such period. The
Borrowers, jointly and severally, shall pay such amount upon presentation by the
Agent of a statement setting forth the amount and the Agent's calculation
thereof pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
Section 4.7 Currency. All payments and prepayments provided for under this
Agreement shall be made in lawful currency of the United States of America in
immediately available funds.
Section 4.8 Foreign Lenders. Each Lender (including any Successor Lender)
that is not a citizen or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America (or any jurisdiction thereof), or any
estate or trust that is subject to federal income taxation regardless of the
source of its income (a "Non-U.S. Lender") shall deliver to the Borrowers and
the Agent (or, in the case of a Credit Participant, to the Lender from which the
related participation shall have been purchased) two copies of either U.S.
Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio interest," a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, an annual certificate representing that
such Non-U.S. Lender is not a "bank" for purposes of Section 881(c) of the Code,
is not a 10% shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of any of the Borrowers and is not a controlled foreign corporation
related to any of the Borrowers (within the meaning of Section 864(d)(4) of the
Code)), properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrowers under this Agreement and the other Lender
Agreements. Such forms shall be delivered by each Non-U.S. Lender on or before
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the date it becomes a party to this Agreement (or, in the case of any Credit
Participant, on or before the date such Credit Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrowers
at any time it determines that it is no longer in a position to provide any
previously delivered certificate to the Borrowers (or any other form of
certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 4.8, a Non-U.S. Lender shall
not be required to deliver any form pursuant to this Section 4.8 that such
Non-U.S. Lender is not legally able to deliver.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to induce the Lenders to make the Loans as contemplated hereby,
the Borrowers, jointly and severally, hereby make the following representations
and warranties:
Section 5.1 Existence, Charter and Formation Documents, Etc. American Ski
and each Restricted Subsidiary other than Heavenly Valley, Limited Partnership
is a corporation, and Heavenly Valley, Limited Partnership is a limited
partnership, and each of them is validly organized, legally existing and in good
standing under the laws of the jurisdiction in which it is organized and has
corporate or partnership power to own its properties and conduct its business as
now conducted and as proposed to be conducted by it. Certified copies of the
charter documents and By-Laws of American Ski and each Restricted Subsidiary
have been delivered to the Lenders and are true, accurate and complete as of the
date hereof.
Section 5.2 Principal Place of Business; Location of Records. American
Ski's and each Restricted Subsidiary's principal place of business is as
described on Schedule 5.2, and neither American Ski nor any Restricted
Subsidiary has had any other principal place of business during the last six
months. All of the books and records or true and complete copies thereof
relating to the accounts and contracts of American Ski and each Restricted
Subsidiary are and will be kept at such location and at the other locations
designated on Schedule 5.2.
Section 5.3 Qualification. American Ski and each Restricted Subsidiary is
duly qualified, licensed and authorized to do business and is in good standing
as a foreign corporation or partnership in each jurisdiction where its ownership
or leasing of properties or the conduct of its business requires it to be so
qualified except to the extent that any failure to be so qualified would not
have a Material Adverse Effect.
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Section 5.4 Subsidiaries.
(a) As of the date hereof and as of the end of the most recent
fiscal quarter for which a Compliance Certificate has been delivered under
Section 6.1(a) hereof, American Ski has no Subsidiaries except for those listed
on Schedule 5.4(a). All of the issued and outstanding capital stock of each
Subsidiary listed on Schedule 5.4(a) is owned of record and beneficially as
described therein. At the time of delivery of a Compliance Certificate, American
Ski may amend Schedule 5.4(a) to add any additional Subsidiaries which have been
formed or acquired without violation of Section 9.3 hereof.
(b) As of the dated hereof and as of the end of the most
recent fiscal quarter for which a Compliance Certificate has been delivered
under Section 6.1(a) hereof, there are no transactions or relationships between
American Ski or any of its Restricted Subsidiaries, on the one hand, and any
Unrestricted Subsidiary, on the other, except as disclosed on Schedule 5.4(b).
At the time of delivery of a Compliance Certificate, American Ski may amend
Schedule 5.4(b) to add descriptions of any such transactions or relationships
entered into hereafter in compliance with Section 9.5 hereof.
Section 5.5 Power. The execution, delivery and performance of
this Agreement, the Term Notes, the Revolving Credit Notes, the Guaranty
Agreements, the Security Agreements and all other Lender Agreements and other
documents delivered or to be delivered by each Borrower or any Subsidiary to the
Agent or the Lenders, and the incurrence of Indebtedness to the Lenders
hereunder or thereunder, now or hereafter owing:
(a) are within the powers of each Borrower and each Subsidiary
party thereto, as the case may be, having been duly authorized by its Board of
Directors or other similar governing body, and, if required by law, by its
charter documents or by its By-Laws, by its stockholders or partners;
(b) do not require any approval or consent of, or filing with,
any governmental agency or other Person (except for such approvals and consents
that have been obtained and delivered to the Lenders) and are not in
contravention of law or the terms of the charter documents or By-Laws of each
Borrower and each Subsidiary or any amendment thereof;
(c) do not and will not
(i) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which American Ski, any Borrower or any
Subsidiary is a party or by which any Borrower, any Subsidiary or any
of their respective properties are bound or affected, except for those
breaches or defaults which have been waived or consented to in writing
or which will not in the aggregate result in a Material Adverse Effect,
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(ii) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature on any property
now owned or hereafter acquired by any Borrower or any Subsidiary,
except as provided in the Lender Agreements, or
(iii) result in a violation of or default under any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award having applicability to any Borrower or any
Subsidiary, or to any of their respective properties.
Section 5.6 Valid and Binding Obligations. This Agreement, the Term Loan
Notes, the Revolving Credit Notes, the Guaranty Agreements, the Security
Agreements and all the other Lender Agreements executed in connection herewith
and therewith constitute, or will constitute when delivered, the valid and
binding obligations of the Borrowers and their Subsidiaries parties thereto, as
the case may be, enforceable in accordance with their respective terms, except
as the enforceability thereof may be subject to bankruptcy, insolvency,
moratorium and other laws affecting the rights and remedies of creditors and
secured parties and to the exercise of judicial discretion in accordance with
general equitable principles.
Section 5.7 Other Agreements. Neither American Ski nor any Restricted
Subsidiary is a party to any indenture, loan or credit agreement, or any lease
or other agreement or instrument, or subject to any charter or corporate
restriction or any judgment, decree, order, rule or regulation, which is likely
to have a Material Adverse Effect, or which restricts the ability of American
Ski or any Restricted Subsidiary to carry out any of the provisions of this
Agreement, the Term Loan Notes, the Revolving Credit Notes, the Guaranty
Agreements, the Security Agreements or any of the Lender Agreements executed in
connection herewith and therewith.
Section 5.8 Payment of Taxes. American Ski and its Subsidiaries have filed
all tax returns which are required to be filed by them and have paid, or made
adequate provision for the payment of, all taxes which have or may become due
pursuant to said returns or to assessments received, except such as are being
contested in good faith by appropriate proceedings. All federal tax returns of
American Ski and its Subsidiaries through their fiscal year ended in 1991 have
been audited by the Internal Revenue Service or are not subject to such audit by
virtue of the expiration of the applicable statute of limitation, and the
results of such audits are fully reflected in the balance sheet contained in the
1998 Financial Statements. American Ski knows of no material additional
assessments since such date for which adequate reserves appearing in the balance
sheet contained in the 1998 Financial Statements have not been established.
American Ski and its Subsidiaries have made adequate provision for all current
taxes, and except as described on Schedule 5.8, to the best of the American
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Ski's knowledge there will not be any additional assessments for any fiscal
periods prior to and including that which ended on the date of said balance
sheet in excess of the amounts reserved therefor.
Section 5.9 Financial Statements
(a) All balance sheets, statements and other financial
information furnished to the Agent and the Lenders in connection with this
Agreement and the transactions contemplated hereby (certain of which information
is listed on Schedule 5.9), including, without limitation, the 1998 Financial
Statements, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except for
normal year-end adjustments and for the absence of footnotes with interim
statements) and present fairly as of the date thereof the consolidated financial
condition of American Ski and its Subsidiaries reported therein and all such
information so furnished was true, correct and complete as of the date thereof,
in all material respects.
(b) To the best knowledge of each Borrower, no facts exist
that (individually or in the aggregate) would result in any material change in
the most recent projections delivered under Section 6.3 hereof. The Management
Projections and the most recent projections delivered under Section 6.3 hereof
are based upon estimates and assumptions which the senior executive and
financial officers of the Borrowers consider as of the date thereof reasonable,
have been prepared on the basis of the assumptions stated therein and as of the
date thereof reflect the reasonable estimates of the Borrowers of the results of
operations and other information projected therein.
Section 5.10 Other Materials Furnished. The written information, exhibits,
memoranda or reports furnished to the Agent or the Lenders by or on behalf of
American Ski or any of its Subsidiaries in connection with the negotiation of
this Agreement, taken as a whole, does not contain any material misstatement of
fact or omit to state a material fact necessary to make the statements contained
therein not misleading.
Section 5.11 Stock. As of the date hereof, the issued and outstanding
capital stock of American Ski is as set forth on Schedule 5.4(a) hereto. There
are presently issued by American Ski's Restricted Subsidiaries and outstanding
the shares of capital stock indicated on Schedule 5.4(a). American Ski and its
Subsidiaries have received the consideration for which such stock was authorized
to be issued and have otherwise complied with all legal requirements relating to
the authorization and issuance of shares of stock and all such shares are
validly issued, fully paid and non-assessable. The Borrowers and their
Restricted Subsidiaries have no other capital stock of any class outstanding.
Section 5.12 Changes in Condition. Since the date of the balance sheets
contained in the 1998 Financial Statements or the most recent audited annual
financial statements delivered pursuant to Section 6.2 hereof, except as
described in any filing made by American Ski with the Commission and also
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delivered to the Agent and the Lenders pursuant to Section 6.7 hereof, there has
been no material adverse change in the business or assets or in the condition,
financial or otherwise, of American Ski and its Restricted Subsidiaries taken as
a whole, and neither American Ski nor any Restricted Subsidiary has entered into
any transaction outside of the ordinary course of business which is material to
American Ski and its Restricted Subsidiaries taken as a whole except for the
issuance and sale of the Series B Preferred Stock. Neither American Ski nor any
Restricted Subsidiary had, as of the date thereof, any contingent liabilities of
any material amount which are not referred to in the 1998 Financial Statements.
Section 5.13 Assets, Licenses, Patents, Trademarks, Etc.
(a) American Ski and its Restricted Subsidiaries have good and
marketable title to, or valid leasehold interests in, all of their assets, real
and personal, including the assets carried on their books and reflected in the
1998 Financial Statements, subject to no liens, charges or encumbrances, except
for (i) liens, charges and encumbrances in existence as of the date hereof
described in Schedule 5.16 and permitted by Section 9.2 hereof, (ii) liens,
charges and encumbrances arising after the date hereof and permitted by Section
9.2 hereof and (iii) assets sold, abandoned or otherwise disposed of in the
ordinary course of business.
(b) As of the date hereof and as of the end of the most recent
fiscal quarter for which a Compliance Certificate has been delivered under
Section 6.1(a) hereof. American Ski and its Restricted Subsidiaries own all
material licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications, and trade names necessary to continue to
conduct their business as heretofore conducted by them, now conducted by them
and proposed to be conducted by them, each of which is listed, together with
Patent and Trademark Office application or registration numbers, where
applicable, on Schedule 5.13 hereto. At the time of delivery of a Compliance
Certificate, American Ski may amend Schedule 5.13 to add any additional
licences, patents, patent applications, copyrights, service marks, trademarks,
trademark applications and trade names. American Ski and its Restricted
Subsidiaries conduct their respective businesses without infringement or claim
of infringement of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
others. To the best knowledge of American Ski and the Borrowers, there is no
infringement or claim of infringement by others of any material license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of American Ski and its Restricted Subsidiaries.
(c) Except as set forth on Schedule 5.13(c) hereto, no
leasehold personal property interest which any Borrower is prohibited by the
lessor from assigning and no interest in any personal property lease agreement
which any Borrower is prohibited from assigning is material, or taken as a whole
are material, to the operations of any such Borrower.
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Section 5.14 Litigation. Except as described on Schedule 5.14 or the most
recent Compliance Certificate, there is no litigation, at law or in equity, or
any proceeding before any federal, state, provincial or municipal board or other
governmental or administrative agency pending or, to the knowledge of the
Borrowers, threatened, or any basis therefor, which involves a material risk of
any judgment or liability which could have a Material Adverse Effect, and no
judgment, decree, or order of any federal, state, provincial or municipal court,
board or other governmental or administrative agency has been issued against
American Ski or any of its Restricted Subsidiaries which has or may have a
Material Adverse Effect.
Section 5.15 Pension Plans. No employee benefit plan established or
maintained by American Ski or any of its Subsidiaries or any other Person a
member of the same "control group," as American Ski or any of its Subsidiaries
(a "Pension Affiliate"), within the meaning of Section 302(f)(6)(b) of ERISA,
(including any multi-employer plan to which American Ski or any of its
Subsidiaries contributes) which is subject to Part 3 of Subtitle B of Title I of
the ERISA, had a material accumulated funding deficiency (as such term is
defined in Section 302 of ERISA) as of the last day of the most recent fiscal
year of such plan ended prior to the date hereof, or would have had an
accumulated funding deficiency (as so defined) on such day if such year were the
first year of such plan to which Part 3 of Subtitle B of Title I of ERISA
applied, and no material liability under Title IV of ERISA has been, or is
expected by American Ski or any of its Subsidiaries to be, incurred with respect
to any such plan by American Ski or any of its Subsidiaries or any Pension
Affiliate. The execution, delivery and performance by American Ski and the
Borrowers of this Agreement and the other Lender Agreements executed on the date
hereof will not involve any prohibited transaction within the meaning of ERISA
or Section 4975 of the Code. American Ski and its Subsidiaries have no Pension
Plan other than those described on Schedule 5.15.
Section 5.16 Outstanding Indebtedness. After application of the proceeds of
the Term Loans and the initial Revolving Credit Advance, the outstanding amount
of Consolidated Funded Debt and Guaranties of borrowed money of American Ski and
its Restricted Subsidiaries as of the date hereof is correctly set forth on
Schedule 5.16 hereto, and said Schedule correctly describes the credit
agreements, guaranties, leases and other instruments pursuant to which such
Indebtedness has been incurred and all liens, charges and encumbrances securing
such Indebtedness. Said schedule also describes all agreements and other
arrangements pursuant to which American Ski or any of its Restricted Subsidiary
may borrow any money.
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Section 5.17 Environmental Matters. Except as set forth on Schedule 5.17:
(a) None of American Ski, any Restricted Subsidiary nor any
operator of any of their respective properties is in violation, or to any
Borrower's knowledge is in alleged violation, of any Environmental Law, which
violation would have a Material Adverse Effect.
(b) None of American Ski, any Restricted Subsidiary nor any
operator of any of their respective properties has received notice from any
third party, including without limitation any federal, state, county, or local
governmental authority, (i) that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA") or any equivalent state law,
with respect to any site or location; (ii) that any Hazardous Materials which it
has generated, transported or disposed of, has been found at any site at which a
federal, state, county, or local agency or other third party has conducted or
has ordered American Ski, any Restricted Subsidiary or another third party or
parties (e.g. a committee of potentially responsible parties) to conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any claim,
action, cause of action, complaint (contingent or otherwise) or legal or
administrative proceeding arising out of any actual or alleged release or
threatened release of Hazardous Materials. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of any Hazardous Material into the Environment, or the
uncontained presence of any Hazardous Material in the Environment.
(c) (i) American Ski, each Restricted Subsidiary and each
operator of any real property owned or operated by any Borrower is in
compliance, in all material respects, with all provisions of the Environmental
Laws relating to the handling, manufacturing, processing, generation, storage or
disposal of any Hazardous Materials; (ii) to the best of each Borrower's
knowledge, no portion of property owned, operated or controlled by American Ski
or any of its Restricted Subsidiaries has been used for the handling,
manufacturing, processing, generation, storage or disposal of Hazardous
Materials except in accordance with applicable Environmental Laws; (iii) to the
best of each Borrower's knowledge, there have been no releases or threatened
releases of Hazardous Materials on, upon, into or from any property owned,
operated or controlled by American Ski or any Restricted Subsidiary, which
releases could have a Material Adverse Effect; (iv) to the best of each
Borrower's knowledge, there have been no releases of Hazardous Materials on,
upon, from or into any real property in the vicinity of the real properties
owned, operated or controlled by American Ski or any Restricted Subsidiary
which, through soil or groundwater contamination, may have come to be located on
the properties of American Ski or any Restricted Subsidiary; (v) to the best of
each Borrower's knowledge, there have been no releases of Hazardous Materials
on, upon, from or into any real property formerly but no longer owned, operated
or controlled by American Ski or any Restricted Subsidiary.
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(d) None of the properties of American Ski or any Restricted
Subsidiary is or shall be subject to any applicable environmental cleanup
responsibility law or environmental restrictive transfer law or regulation by
virtue of the transactions set forth herein and contemplated hereby.
Section 5.18 Foreign Trade Regulations. Neither American Ski nor any
Restricted Subsidiary is (a) a person included within the definition of
"designated foreign country" or "national" of a "designated foreign country" in
Executive Order No. 8389, as amended, in Executive Order No. 9193, as amended,
in the Foreign Assets Control Regulations (31 C.F.R., Chapter V, Part 500, as
amended), in the Cuban Assets Control Regulations of the United States Treasury
Department (31 C.F.R., Chapter V, Part 515, as amended) or in the Regulations of
the Office of Alien Property, Department of Justice (8 C.F.R., Chapter II, Part
507, as amended) or within the meanings of any of the said Orders or
Regulations, or of any regulations, interpretations, or rulings issued
thereunder, or in violation of said Orders or Regulations or of any regulations,
interpretations or rulings issued thereunder; or (b) an entity listed in Section
520.101 of the Foreign Funds Control Regulations (31 C.F.R., Chapter V, Part
520, as amended).
Section 5.19 Governmental Regulations. Neither American Ski nor any
Restricted Subsidiary or any Affiliate of American Ski is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940, or is a common carrier under the Interstate
Commerce Act, or is engaged in a business or activity subject to any statute or
regulation which regulates the incurring by any Borrower of Indebtedness for
borrowed money, including statutes or regulations relating to common or contract
carriers or to the sale of electricity, gas, steam, water, telephone or
telegraph or other public utility services, except for Uplands Water, Alpine
Pipeline, Community Water Company and Mountain Water Company.
Section 5.20 Margin Stock. Neither American Ski nor any Restricted
Subsidiary owns any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder, nor is American Ski or any Restricted
Subsidiary engaged principally or as one of its important activities in
extending credit which is used for the purpose of purchasing or carrying margin
stock.
Section 5.21 Solvency. American Ski and each Restricted Subsidiary, before
and after giving effect to the transactions contemplated by this Agreement and
the other Lender Agreements is Solvent.
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Section 5.22 Compliance with Other Instruments, Laws, Etc.
(a) Neither American Ski nor any Restricted Subsidiary is in
violation of any provision of its charter documents, bylaws, or any agreement or
instrument to which it may be subject or by which it or any of its properties
may be bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in a
Material Adverse Effect.
(b) American Ski and its Restricted Subsidiaries have complied
in all respects with the requirements of the Hart-Scott-Rodino Anti-Trust
Improvement Act of 1976, as amended (the "HSR Act"), and have made all filings
with all Governmental Authorities required to be made thereunder in connection
with the issuance of the Series B Preferred Stock. All waiting periods required
under the H-S-R Act have expired in connection with the issuance of the Series B
Preferred Stock. Neither American Ski nor any of its Restricted Subsidiaries has
any obligation or duty to take any further action (or to refrain from taking any
action) in order to be in compliance with the H-S-R Act in connection with the
issuance of the Series B Preferred Stock.
Section 5.23 Absence of Financing Statements, Etc. To the best knowledge of
American Ski and except with respect to Permitted Liens, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry or other public
office, that purports to cover, effect or give notice of any present or possible
future lien on, or security interest in, any assets or property of American Ski
or any Restricted Subsidiary or any rights relating thereto.
Section 5.24 Perfection of Security Interests. All filings, assignments,
pledges and deposits of documents or instruments have been made and all other
actions have been taken that are required under applicable law to establish and
perfect the Agent's security interest in the Collateral. The Collateral and the
Agent's rights with respect to the Collateral are not subject to any set-off,
claims, withholdings or other defenses. American Ski or its Restricted
Subsidiaries as specified in the Security Agreements, own the Collateral free
from any lien, security interest, encumbrance and any other claim or demand
except for Permitted Liens.
Section 5.25 Bank Accounts. Schedule 2.17 sets forth the account numbers,
location and description of all bank accounts of American Ski and each
Restricted Subsidiary.
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Section 5.26 Fiscal Year. American Ski and each Restricted Subsidiary has a
fiscal year which is the twelve-months ending on the last Sunday of July of each
year.
Section 5.27 Tax Status. Each Borrower is a "C" corporation for all
purposes under the Code.
Section 5.28 Consummation of Issuance of Series B Preferred Stock. American
Ski has successfully completed the issuance of the Series B Preferred Stock, and
has received the Series B Gross Proceeds.
Section 5.29 Series B Preferred Stock Agreements. True and complete copies
of the Series B Preferred Stock Agreements have been delivered to the Agent. The
Series B Preferred Stock Agreements and the Series B Preferred Stock constitute
the entire agreement between Oak Hill and its affiliates, on the one hand, and
American Ski and its Restricted Subsidiaries and other Affiliates, on the other
hand, and there are no other written agreements, by or between them, except for
a letter of intent, fee letter, and confidentiality agreement relating to the
Series B Preferred Stock. As of the date hereof, the Series B Preferred Stock
Agreements have not been modified, amended or supplemented and no waivers have
been granted thereunder, except for waivers of any closing conditions disclosed
to the Agent. The Series B Preferred Stock Agreements have been duly executed
and delivered by American Ski and Oak Hill and are enforceable against American
Ski and Oak Hill in accordance with their terms. The Series B Certificate of
Designation has been duly authorized and filed by American Ski and is
enforceable against American Ski in accordance with its terms. American Ski
hereby confirms and restates to the Agent and the Lenders as if set forth herein
in full the representations and warranties of American Ski set forth in Sections
3.01, 3.02, 3.03, 3.04 and 3.18 of the Series B Preferred Stock Subscription
Agreement. All conditions to closing of the issuance of the Series B Preferred
Stock set forth in Article VI of the Series B Preferred Stock Subscription
Agreement have been satisfied in full without amendment, modification or waiver,
except as disclosed to the Agent. American Ski will use all net proceeds
received from the issuance of the Series B Preferred Stock as described in
Schedule 8.13 hereto.
Section 5.30 Cerberus Purchase Agreement; Cerberus Amendment and Waiver
Letter Agreement; Certificate of Designation. A true and complete copy of the
Cerberus Purchase Agreement and the Series A Certificate of Designation has been
delivered to the Agent. The Cerberus Purchase Agreement, the Series A
Exchangeable Preferred Shares and the Senior Exchangeable Notes constitute the
entire agreement between Cerberus, Madeleine LLC and their affiliates, on the
one hand, and American Ski and its Restricted Subsidiaries and other Affiliates,
on the other hand, and there are no other agreements, instruments or
understandings by or between them. The Cerberus Purchase Agreement has not been
modified, amended or supplemented and no consents or waivers have been granted
thereunder except for the Cerberus Amendment and Waiver Letter Agreement and the
letter dated July 20, 1999. The Cerberus Amendment and Waiver Letter Agreement
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and the letter dated July 20, 1999 have been duly executed and delivered by
Madeleine LLC and are enforceable against Madeleine LLC in accordance with their
terms. The Series A Certificate of Designation has been duly authorized and
filed by American Ski and is enforceable against American Ski in accordance with
its terms.
Section 5.31 Wolf Acquisition Agreement. A true and complete copy of the
Wolf Acquisition Agreement has been delivered to the Agent. The Wolf Acquisition
Agreement has not been modified, amended or supplemented and no consents or
waivers have been granted thereunder.
ARTICLE 6. REPORTS AND INFORMATIONARTICLE
Section 6.1 Interim Financial Statements and Reports.
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(a) As soon as available, and in any event within forty-five
(45) days after the end of each of the first three quarters and within ninety
(90) days after the end of the fourth quarter of each fiscal year of American
Ski, American Ski shall furnish to the Agent and each Lender: (i) consolidated
and consolidating balance sheets of American Ski and its Restricted
Subsidiaries, as of the end of such quarter and consolidated and consolidating
statements of operations, shareholders' equity and cash flow of American Ski and
its Restricted Subsidiaries for such quarter and for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable detail;
(ii) a Compliance Certificate; and (iii) unconsolidated financial statements of
the Unrestricted Subsidiaries similar to the financial statements described in
clause (i) above.
(b) As soon as available, but in any event not more than
thirty (30) days after the end of each month, American Ski shall furnish to the
Agent and each Lender (i) consolidated and consolidating profit and loss
statements of American Ski and each of its Restricted Subsidiaries for the
period then ended all in reasonable detail and (ii) unconsolidated profit and
loss statements of the Unrestricted Subsidiaries similar to the profit and loss
statements described in clause (i) above.
(c) Not more than seven (7) days after the end of each month,
the Borrowers shall furnish to the Agent and each Lender their then current
year-to-date internally prepared, unaudited profit plan report in the form
currently prepared by the Borrowers.
Section 6.2 Annual Financial Statements. As soon as available, but in any
event within ninety (90) days after the end of each fiscal year of the
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Borrowers, American Ski shall furnish to the Agent and each Lender: (a) audited
consolidated and consolidating balance sheets of (i) American Ski and its
Restricted Subsidiaries, and (ii) American Ski and its Subsidiaries, as of the
end of such fiscal year, and consolidated and consolidating statements of
operations, shareholders' equity and cash flow of (A) American Ski and its
Restricted Subsidiaries and (B) American Ski and its Subsidiaries, for such
fiscal year, in each case (other than the consolidating statements) reported on
by Arthur Andersen LLP, or other independent certified public accountants of
recognized national standing reasonably acceptable to the Agent, which report
shall express, without reliance upon others, a positive opinion regarding the
fairness of the presentation of such financial statements in accordance with
generally accepted accounting principles consistently applied, said report to be
without qualification, except in cases of unresolved litigation and accounting
changes with which such accountants concur, together with the statement of such
accountants that they have caused the provisions of this Agreement and the other
Lender Agreements to be reviewed and that nothing has come to their attention to
lead them to believe that any Default exists hereunder or specifying any Default
and the nature thereof; (b) a Compliance Certificate; and (c) unconsolidated
audited financial statements of the Unrestricted Subsidiaries similar to the
financial statements described in clause (a) above. At the time of delivery of
the annual audited financial statements, American Ski shall furnish to the Agent
and each Lender copies of the written recommendations concerning the management,
finances, financial controls, or operations of any Borrower or any Restricted
Subsidiary received from American Ski's independent public accountants.
Section 6.3 Annual Budget. On or before August 15 of each year, American
Ski shall furnish to the Agent and each Lender (a) consolidated and
consolidating projections of American Ski and its Restricted Subsidiaries and
(b) consolidated and consolidating projections of the proposed Capital
Expenditures (which proposed expenditures shall be consistent with the
limitations set forth in Section 9.7 hereof) of American Ski and its Restricted
Subsidiaries, in each case, for the fiscal year just commenced, prepared on a
quarter-by-quarter basis in accordance with generally accepted accounting
principles consistently applied to the extent applicable to such projections and
in such detail as the Agent may reasonably request.
Section 6.4 Reports of Skier Visits. At the time of each delivery by
American Ski of (a) interim financial statements and reports under Section 6.1
hereof and (b) annual financial statements under Section 6.2 hereof shall
furnish to the Agent and the Lenders information setting forth (i) the number of
paid skier visits and unpaid skier visits to each ski resort or skiing facility
owned or operated by American Ski or any Restricted Subsidiary during each month
of the applicable fiscal period and for the fiscal year-to-date and (ii) in
comparative form the corresponding figures for the corresponding fiscal period
of the previous fiscal and for the corresponding year-to-date of such previous
fiscal year.
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Section 6.5 Notice of Defaults. As soon as possible, and in any event
within five (5) days after the occurrence of each Default, American Ski shall
furnish to the Agent and each Lender the statement of their chief executive
officers or chief financial officers setting forth details of such Default and
the action which American Ski has taken or propose to take with respect thereto.
Section 6.6 Notice of Litigation. Promptly after the commencement thereof,
American Ski shall furnish to the Agent and each Lender written notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting American Ski or any Restricted Subsidiary, which, if adversely
determined, would have a Material Adverse Effect.
Section 6.7 Communications with Others. If and when any debt or equity
security of American Ski or any Restricted Subsidiary is or is proposed to be
traded publicly, promptly after filing the same, American Ski shall furnish to
the Agent and each Lender copies of all regular, periodic and special reports
and all registration statements which American Ski or such Borrower files with
the Commission or any Governmental Authority which may be substituted therefor,
or with any national or regional securities exchange.
Section 6.8 Reportable Events. At any time that American Ski or any Pension
Affiliate has a Pension Plan, American Ski shall furnish to the Agent and each
Lender, as soon as possible, but in any event within thirty (30) days after
American Ski knows or has reason to know that any Reportable Event with respect
to any Pension Plan has occurred, the statement of the chief executive officers
or chief financial officers of American Ski setting forth the details of such
Reportable Event and the action which American Ski or any Pension Affiliate has
taken or proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation.
Section 6.9 Reports to other Creditors. Promptly after filing the same,
American Ski shall furnish to the Agent and each Lender copies of any compliance
certificate and other information furnished to any other holder of the
securities (including the Senior Subordinated Notes, the Series A Exchangeable
Preferred Stock, and any other debt obligations) of American Ski or any
Restricted Subsidiary pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Agent or the
Lenders pursuant to any other provision of this Agreement.
Section 6.10 Communications with Independent Public Accountants. At any
reasonable time and from time to time upon reasonable request, American Ski
shall provide the Agent and the Lenders and any agents or representatives of the
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Agent and the Lenders access to the independent public accountants of American
Ski and its Restricted Subsidiaries to discuss their financial condition,
including, without limitation any recommendations of such independent public
accountants concerning the management, finances, financial controls or
operations of American Ski and its Restricted Subsidiaries.
Section 6.11 Environmental Reports. In the event that and to the extent
that any of the following provides notice of circumstances, occurrences or
events that have or could reasonably be expected to have a material impact on
the operations of any Borrower, American Ski or the Borrowers shall furnish to
the Agent and each Lender: (a) not later than seven (7) days after notice
thereof, notice of any enforcement actions, or, to the knowledge of any
Borrower, threatened enforcement actions affecting American Ski or any
Restricted Subsidiary by any Governmental Authority related to Environmental
Laws; (b) copies, promptly after they are received, of all orders, notices of
responsibility, notices of violation, notices of enforcement actions, and
assessments, and other written communications pertaining to any such orders,
notices, claims and assessments received by American Ski or any Restricted
Subsidiary from any Governmental Authority; (c) not later than seven (7) days
after notice thereof, notice of any civil claims or threatened civil claims
affecting American Ski or any Restricted Subsidiary by any third party alleging
any violation of Environmental Laws or harm to human health, safety or the
environment; (d) copies of all cleanup plans, site assessment reports, response
plans, remedial proposals, or other submissions of American Ski or any
Restricted Subsidiary, other third party (e.g., committee of potentially
responsible parties at a Superfund site), or any combination of same, submitted
to a Governmental Authority in response to any communication referenced in
subsections (a) and (b) herein simultaneously with their submission to such
Governmental Authority; and (e) from time to time, on reasonable request of the
Agent, evidence satisfactory to the Agent of American Ski's and its Restricted
Subsidiaries' insurance coverage, if any, for any environmental liabilities.
Section 6.12 Notices Under Certain Agreements. American Ski and its
Restricted Subsidiaries will provide the Agent with copies of all notices and
other written communications given or received by them under the Cerberus
Purchase Agreement, the Cerberus Amendment and Waiver Letter Agreement, the
Series B Preferred Stock Agreements (excluding the Series B Preferred Stock
Stockholders Agreement), the Kamori Stock Purchase Agreement and the Wolf
Acquisition Agreement to the extent such notices relate to (a) defaults of
American Ski or any Restricted Subsidiary or any other party under such
agreements, (b) events which with the giving of notice or passage of time or
both would constitute a default of American Ski or any Restricted Subsidiary or
any other party under such agreements, (c) indemnification claims of American
Ski or any Restricted Subsidiary under such agreements or (d) other material
transactions under such agreements. Without limiting the generality of the
foregoing, American Ski shall provide the Agent with written notice of any
indemnification claims pursuant to Section 10(b) of the Kamori Stock Purchase
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Agreement, Section 7.02(c) of the Series B Preferred Stock Subscription
Agreement or Section 5.10 of the Series B Preferred Stock Stockholders
Agreement.
Section 6.13 Miscellaneous. American Ski shall provide the Agent and
the Lenders with such other information as the Agent or the Lenders may from
time to time reasonably request respecting the business, properties, prospects,
condition or operations, financial or otherwise, of American Ski and its
Restricted Subsidiaries.
ARTICLE 7. FINANCIAL COVENANTSARTICLE
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment to make any
loans or advances hereunder, American Ski and its Restricted Subsidiaries shall
observe the following covenants:
Section 7.1 Ratio of Consolidated Total Debt to Consolidated EBITDA.
American Ski and its Restricted Subsidiaries shall maintain as of the end of
each fiscal quarter a ratio of (i) Consolidated Total Debt as of such date to
(ii) Consolidated EBITDA for the four-quarter period ending on such date of not
more than the following levels as of the fiscal quarters indicated:
Fiscal Quarter Ratio Fiscal Quarter Ratio
2000 Quarter 1 7.00-to-1.00 2001 Quarter 2 5.00-to-1.00
2000 Quarter 2 5.50-to-1.00 2001 Quarter 3 4.50-to-1.00
2000 Quarter 3 5.00-to-1.00 2001 Quarter 4 4.50-to-1.00
2000 Quarter 4 5.00-to-1.00 2002 Quarter 1 4.50-to-1.00
2001 Quarter 1 5.00-to-1.00 2002 Quarter 3 4.00-to-1.00
and Thereafter
Section 7.2 Ratio of Consolidated Adjusted Cash Flow to Consolidated
Debt Service. American Ski and its Restricted Subsidiaries shall maintain as of
the end of each fiscal quarter, commencing with 2000 fiscal quarter 3, for the
four-quarter period ending on such date a ratio of (a) Consolidated Adjusted
Cash Flow to (b) Consolidated Debt Service of not less than the following levels
as of the end of each fiscal quarter indicated:
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Fiscal Quarter Ratio
2000 Quarter 3 1.10-to-1.00
2000 Quarter 4 1.10-to-1.00
2001 Quarter 1 1.10-to-1.00
2001 Quarter 2 1.10-to-1.00
2001 Quarter 3 1.25-to-1.00
2001 Quarter 4 1.25-to-1.00
2002 Quarter 1 1.25-to-1.00
2002 Quarter 2 1.25-to-1.00
2002 Quarter 3 1.50-to-1.00
and Thereafter
Section 7.3 Ratio of Consolidated EBITDA to Consolidated Interest
Expense. American Ski and its Restricted Subsidiaries shall maintain as of the
end of each fiscal quarter for the four-quarter period ending on such date a
ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense of not
less than the following levels as of the end of each fiscal quarter indicated:
Fiscal Quarter Ratio Fiscal Quarter Ratio
2000 Quarter 1 1.20-to-1.00 2001 Quarter 3 2.00-to-1.00
2000 Quarter 2 1.20-to-1.00 2001 Quarter 4 2.00-to-1.00
2000 Quarter 3 1.50-to-1.00 2002 Quarter 1 2.00-to-1.00
2000 Quarter 4 1.50-to-1.00 2002 Quarter 2 2.00-to-1.00
2001 Quarter 1 1.50-to-1.00 2002 Quarter 3 2.25-to-1.00
2001 Quarter 2 1.50-to-1.00 and Thereafter
Section 7.4 Minimum Consolidated Net Worth. American Ski and its Restricted
Subsidiaries shall maintain minimum Consolidated Net Worth at all times of not
less than the sum of (a) $200,000,000 plus (b) 75% of cumulative Consolidated
Net Income of American Ski and its Restricted Subsidiaries for the period after
April 26, 1999 plus (c) all amounts received by American Ski or the Borrowers
after the Closing Date from the issuance of equity interests.
Section 7.5 Minimum Consolidated EBITDA. American Ski and its Restricted
Subsidiaries shall have Consolidated EBITDA of not less than the amounts set
forth below for the applicable fiscal quarter.
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Fiscal Quarter Minimum EBITDA
1999 Quarter 4 ($21,000,000)
2000 Quarter 1 ($21,000,000)
2000 Quarter 2 $25,000,000
ARTICLE 8. AFFIRMATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment to make any
loans or advances hereunder, American Ski and its Restricted Subsidiaries will
comply with the following covenants and provisions:
Section 8.1 Existence and Business. American Ski and each Restricted
Subsidiary will (a) preserve and maintain its corporate or partnership existence
and qualify and remain qualified as a foreign corporation or partnership in each
jurisdiction in which such qualification is required except to the extent that
any failure to remain qualified as a foreign corporation or partnership would
not have a Material Adverse Effect, (b) preserve and maintain in full force and
effect all material rights, licenses, patents and franchises, (c) comply in all
material respects with all valid and applicable statutes, rules and regulations
necessary for the conduct of business and (d) engage only in the businesses
which they are conducting on the date of this Agreement (operation of all-season
resort properties, including related hotel, restaurant and retail operations,
but excluding the real estate development prohibited by Section 9.13 hereof);
provided, however that a Restricted Subsidiary may merge into another Restricted
Subsidiary or American Ski.
Section 8.2 Taxes and Other Obligations. American Ski and each Restricted
Subsidiary (a) will duly pay and discharge, or cause to be paid and discharged,
before the same shall become in arrears, all material taxes, assessments and
other governmental charges, imposed upon each of them and its properties, sales
and activities, or upon the income or profits therefrom, as well as the claims
for labor, materials, or supplies which if unpaid might by law result in a lien
or charge upon any of its properties; provided, however, that American Ski and
any Restricted Subsidiary may contest any such charges or claims in good faith
so long as (i) an adequate reserve therefor has been established and is
maintained if and as required by generally accepted accounting principles and
(ii) no action to foreclose any such lien has been commenced and (b) will
promptly pay or cause to be paid when due, or in conformance with customary
trade terms (but not later than 60 days from the due date in the case of trade
debt), all material lease obligations, trade debt and all other Indebtedness
incident to its operations. American Ski and each Restricted Subsidiary shall
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cause all applicable tax returns and all amounts due thereunder to be filed and
paid, as the case may be, in order to maintain its good standing with the
Internal Revenue Service and state, local and foreign tax authorities.
Section 8.3 Maintenance of Properties and Leases. American Ski and each
Restricted Subsidiary shall maintain, keep and preserve all of its material
properties (tangible and intangible) in good repair and working order, ordinary
wear and tear excepted. American Ski and each Restricted Subsidiary shall
replace and improve its material properties as necessary for the conduct of its
business. American Ski and each Restricted Subsidiary shall comply in all
material respects with all leases naming it as lessee.
Section 8.4 Insurance. American Ski and each Restricted Subsidiary (a) will
keep its principal assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion or hazards, by extended coverage in an amount sufficient to avoid
co-insurance liability and (b) will maintain with financially sound and
reputable insurers insurance against other hazards and risks and liability to
persons and property to the extent and in a manner satisfactory to the Lenders,
and in any event as customary for companies in similar businesses similarly
situated; provided, however, that on prior notice to the Agent and the Lenders
it may effect workmen's compensation and general liability insurance through an
insurance fund operated by such state or jurisdiction and may also be a
self-insurer with respect to workmen's compensation and with respect to group
medical benefits under any medical benefit plan. The provisions of the Security
Agreements relating to insurance shall not be limited by the provisions of this
Section 8.4. On request of the Agent from time to time, American Ski will render
to the Agent and the Lenders a statement in reasonable detail as to all
insurance coverage required by this Section 8.4. A description of the material
elements of insurance coverage of American Ski and its Restricted Subsidiaries
as of the date hereof is set forth on Schedule 8.4.
Section 8.5 Records, Accounts and Places of Business. American Ski and each
Restricted Subsidiary shall maintain comprehensive and accurate records and
accounts in accordance with generally accepted accounting principles
consistently applied. American Ski and each Restricted Subsidiary shall maintain
adequate and proper reserves. American Ski and each Restricted Subsidiary shall
promptly notify the Agent of (a) any changes in the places of business of
American Ski and any Restricted Subsidiary and (b) any additional places of
business which may arise hereafter.
Section 8.6 Inspection. At any reasonable time and from time to time, the
Borrowers shall permit the Agent and the Lenders and any of the Agent's and the
Lenders' agents or representatives to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, American
Ski and its Subsidiaries and to discuss the affairs, finances and accounts of
American Ski and any Subsidiary with any of their officers or directors and with
American Ski's and its Subsidiaries' independent accountants. In addition, the
Agent shall be entitled, and American Ski shall permit the Agent, to conduct
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field examinations of American Ski and its Restricted Subsidiaries, at the
Borrowers' sole expense and at any time or times in the Agent's reasonable
discretion.
Section 8.7 Maintenance of Accounts. American Ski and its Restricted
Subsidiaries shall maintain their principal concentration and disbursement
accounts with the Agent.
Section 8.8 [Intentionally Omitted]
Section 8.9 Ownership of Restricted Subsidiaries. American Ski will
maintain legal and beneficial ownership, directly or indirectly, of 100% of the
equity interests of each of the Restricted Subsidiaries as described on Schedule
8.9 hereto with only such exceptions as described on Schedule 8.9 hereto.
Section 8.10 Survey and Surveyor's Certificate. Upon request of the Agent
upon a Default not cured within any applicable cure period, or in the event that
the Agent determines in its reasonable judgment that a survey is required to
assure the location of future improvements constructed by American Ski or a
Restricted Subsidiary on the Mortgaged Properties, American Ski shall provide
the Agent with an instrument survey of the affected Mortgaged Property, such
survey to be satisfactory to the Agent in form and substance and with respect to
each survey, a certificate executed by the surveyor who prepares such survey
dated as of a recent date and containing such information relating to the
affected Mortgaged Property as the Agent or the title insurance company may
require, such certificate to be satisfactory to the Agent in form and substance
and sufficient to obtain the deletion of the survey exception in the title
insurance policy furnished to the Agent with respect to the affected Mortgage
Property.
Section 8.11 Appraisals.
(a) The sum of (i) the Term Loans, (ii) the Maximum Revolving
Credit Amount, (iii) the Letter of Credit Exposure and (iv) the outstanding
amount of all other Indebtedness secured by any assets of the Borrowers
(including secured Subordinated Indebtedness) shall not at any time exceed
seventy-five percent (75%) of the Appraised Value of the Collateral (the "Loan
to Value Ratio"). If at any time the Loan to Value Ratio exceeds 75%, then the
Borrowers, jointly and severally, shall promptly (but no later than sixty (60)
days thereafter, either (i) reduce the sum of such outstanding commitments or
Indebtedness to a point where the Loan to Value Ratio is less than 75% or (ii)
provide the Agent with additional Collateral satisfactory to the Agent in its
discretion, and at the expense of American Ski, such that the 75% Loan to Value
Ratio is satisfied.
(b) Upon the occurrence of and during any continuance of an
Event of Default, the Agent shall have the right to obtain, at the cost and
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expense of the Borrowers, updated appraisals of the Collateral, provided that
the Borrowers shall not be obligated to pay for the costs and expenses
associated with more than one such appraisal during any twelve (12) month
period. The costs and expenses incurred by the Agent in obtaining such
appraisals shall be paid by the Borrowers and American Ski, jointly and
severally, forthwith upon billing or request by the Agent for reimbursement
therefor.
Section 8.12 Lease Renewal. The Borrowers will renew all leases set forth
on Schedule 8.12 in accordance with their terms.
Section 8.13 Use of Series B Preferred Stock Proceeds. American Ski will
use all net proceeds received from the issuance of the Series B Preferred Stock
as described on Schedule 8.13 hereto.
Section 8.14 Environmental and Land Use Compliance. American Ski and its
Restricted Subsidiaries, jointly and severally, will undertake and diligently
pursue to completion the environmental and land use cleanup, compliance and
permit requirements described on Schedule 8.14 attached hereto and incorporated
herein by reference and will provide the Agent with documentation confirming the
completion of the specified tasks by the dates specified for each task
referenced on said Schedule 8.14. In addition, with each Compliance Certificate,
American Ski shall provide the Agent with a report as to the status of their
compliance and their efforts to comply with the obligations specified on
Schedule 8.14, and any information relevant to their ability or inability to
obtain compliance with a particular obligation by the requisite scheduled date,
any other environmental or land use cleanup, compliance or permit related matter
which arises subsequent to the date hereof and which remains unresolved to the
satisfaction of the Agent as of the date of the applicable Compliance
Certificate.
Section 8.15 Interest Rate Protection. American Ski will maintain Interest
Rate Protection Agreements on notional amounts for not less than $32,500,000 at
a rate and on terms satisfactory to the Agent.
Section 8.16 Independence of Unrestricted Subsidiaries. American Ski and
its Restricted Subsidiaries will conduct their business and operations
separately from that of the Unrestricted Subsidiaries and will cause the
Unrestricted Subsidiaries to conduct their business and operations separately
from that of American Ski and its Restricted Subsidiaries, by (a) not
commingling funds or other assets, (b) maintaining separate corporate and
financial records and observing all corporate formalities, (c) paying their
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respective liabilities from their respective assets, except pursuant to any
guarantees extended by the Restricted Subsidiaries of obligations of
Unrestricted Subsidiaries and permitted hereunder, (d) maintaining
capitalization adequate to meet their respective business needs and (e)
conducting contractual dealings with third parties in their respective names and
as separate and independent entities.
Section 8.17 Forest Service Permits. The Borrowers hold certain rights
under and by virtue of the Term Special Use Permits issued to the applicable
Borrower by the Forest Service of the United States Department of Agriculture
listed on Schedule 8.18 hereto (individually a "Forest Service Permit" and
collectively the "Forest Service Permits"). The Borrowers will make no changes,
alterations or amendments to any Forest Service Permit without the prior written
consent of the Agent and except as would not have or reasonably be expected to
have a material impact on the operations of any Borrower; provided, however,
that changes or alterations in any master plan provided under or incorporated by
reference in any Forest Service Permit will not constitute changes, alterations
or amendments under this Section 8.18. Each Borrower will well and truly
perform, or cause to be performed, all of its material obligations and
agreements under the Forest Service Permits and under any renewals or extensions
thereof and will not do or suffer anything which will impair any Forest Service
Permit or which would be a Default hereunder.
Section 8.18 Further Assurances. American Ski and each Restricted
Subsidiary will cooperate with the Agent and the Lenders and execute such
further instruments and documents as the Agent or the Lenders shall reasonably
request to carry out to their satisfaction the transactions contemplated by this
Agreement and the other Lender Agreements.
ARTICLE 9. NEGATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment to make any
loans or advances hereunder, the Borrowers, jointly and severally, covenant that
neither American Ski nor any Restricted Subsidiary will:
Section 9.1 Restrictions on Indebtedness. Create, incur, suffer or permit
to exist, or assume or guarantee, either directly or indirectly, or otherwise
become or remain liable with respect to, any Indebtedness, except the following:
(a) Indebtedness to the Lenders and the Agent under this
Agreement, the Term Loan Notes, the Revolving Credit Notes, the other Lender
Agreements.
(b) Indebtedness (i) described on Schedule 5.16 hereto and
(ii) any renewals, extensions and refundings thereof which do not increase the
amount thereof, extend the weighted average maturity of any thereof by more than
25%, provide any collateral in excess of collateral currently securing such
Indebtedness (after giving effect to any existing after-acquired property
clause) or grant, modify or amend any rights, remedies or interests of the
holders thereof in a manner materially adverse to the interests of the Agent or
the Lenders.
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(c) The Senior Subordinated Notes and the subordinated
guaranties of the Restricted Subsidiaries with respect thereto.
(d) The Series A Exchangeable Preferred Stock and the
Series B Preferred Stock.
(e) Subordinated Indebtedness incurred to the sellers of
assets or stock in connection with Permitted Acquisitions, provided that such
Indebtedness is unsecured, has a cash interest rate of not greater than 12% per
annum, has no scheduled amortization until after payment in full of all Lender
Obligations and is subordinated to the prior payment in full in cash of all
Lender Obligations on terms and conditions approved in writing by the Agent.
(f) (i) Real Estate Guaranties; provided that the sum of Real
Estate Guaranties and Direct Unrestricted Subsidiary Investments shall not
exceed $25,000,000 at any time;
(ii) (A) Capitalized Lease Obligations and (B)
Indebtedness of the Borrowers to purchase tangible assets to be used in
the Borrower's operations in an amount not to exceed 100% of the
purchase price of such assets, which Indebtedness may be secured by the
assets so purchased but by no other assets; provided, however, that the
aggregate amount under clauses (A) and (B) of this Section 9.1(f)(ii)
shall not exceed $50,000,000;
(iii) Indebtedness of Persons that become Restricted
Subsidiaries in connection with Permitted Acquisitions and not incurred
in anticipation of such Permitted Acquisitions in an aggregate amount
not to exceed $50,000,000; and
(iv) Other unsecured Indebtedness in an amount not
to exceed $25,000,000; provided, however, that the total amount of all
Indebtedness outstanding at any time under this clause (f) shall not exceed
$100,000,000.
(g) Indebtedness consisting of indemnification and price
adjustment obligations incurred in connection with Permitted Acquisitions.
(h) Indebtedness on account of consolidated current
liabilities (other than for money borrowed) incurred in the normal and ordinary
course of business.
(i) Indebtedness in respect of (i) taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment thereof shall not at the time be required to be made in
accordance with the provisions of Section 8.2 hereof, (ii) judgments or awards
which have been in force for less than the applicable appeal period so long as
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execution is not levied thereunder or in respect of which American Ski or the
Restricted Subsidiary subject to such judgment or award shall at the time in
good faith be prosecuting an appeal or proceedings for review in a manner
satisfactory to the Agent and in respect of which a stay of execution shall have
been obtained pending such appeal or review and for which adequate reserves have
been established in accordance with generally accepted accounting principles and
(iii) endorsements made in connection with the deposit of items for credit or
collection in the ordinary course of business.
(j) Indebtedness consisting of intercompany loans among
American Ski and its Restricted Subsidiaries evidencing intercompany obligations
with respect to the Revolving Credit Advances hereunder, and other intercompany
loans among American Ski and its Restricted Subsidiaries provided that the
aggregate outstanding principal amount of all such other intercompany loans
shall not exceed $5,000,000 and no such loan shall be evidenced by a promissory
note or other instrument unless such note has been pledged and delivered to the
Agent as security for the Lender Obligations on terms and conditions acceptable
to the Agent.
(k) Indebtedness of American Ski and its Restricted
Subsidiaries under Interest Rate Protection Agreements entered into to protect
American Ski and its Restricted Subsidiaries against fluctuations in interest
rates so long as management of American Ski and its Restricted Subsidiaries has
determined that the entering into of such Interest Rate Protection Agreements
are bona fide hedging activities.
(l) Payment and performance bonds entered into in the ordinary
course of business in support of the activities of American Ski and its
Restricted Subsidiaries.
Section 9.2 Restriction on Liens. Create or incur or suffer to be created
or incurred or permit to exist any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over the claims of
its general creditors, or sell, assign, pledge or otherwise transfer for
security any of its accounts, contract rights, general intangibles, or chattel
paper (as those terms are defined in the UCC) with or without recourse (each of
the foregoing, a "Lien"); provided, however, that any Restricted Subsidiary may
create or incur or suffer to be created or incurred or permit to exist the
following (the "Permitted Liens"):
(a) Liens described on Schedule 5.16 securing certain existing
Indebtedness and any renewals, extensions and refundings thereof which do not
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increase the amount thereof, extend such lien to any other property or assets of
the Restricted Subsidiaries or grant, modify or amend any rights, remedies or
interests of the holders thereof in a manner materially adverse to the interests
of the Agent or the Lenders.
(b) Purchase money security interests (which term shall
include mortgages, conditional sale contracts, Capitalized Leases and all other
title retention or deferred purchase devices) to secure the purchase price of
property acquired hereafter by any Restricted Subsidiary, or to secure
Indebtedness incurred solely for the purpose of financing such acquisitions;
provided, however, that no such purchase money security interests shall extend
to or cover any property other than the property the purchase price of which is
secured by it, and that the principal amount of Indebtedness (whether or not
assumed) with respect to each item of property subject to such a security
interest shall not exceed the fair value of such item on the date of its
acquisition; and liens securing Indebtedness permitted under Section 9.1(f)(iii)
on assets acquired in connection with Permitted Acquisitions and subject to such
liens from the incurrence of such Indebtedness.
(c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the extent
such judgments or awards are permitted as Indebtedness by the provisions of
Section 9.1(i); and liens for taxes, assessments or governmental charges or
levies and liens to secure claims for labor, material or supplies and liens
securing obligations to carriers, warehousemen and mechanics to the extent that
payment thereof shall not at the time be required to be made in accordance with
Section 8.2.
(d) Encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property
which do not materially detract from the value of such property or impair its
use in the business of the owner or lessee.
(e) Liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding which has not yet resulted in
an Event of Default, provided that the execution or other enforcement thereof is
effectively stayed and the claims secured thereby are being actively contested
in good faith by appropriate proceedings satisfactory to the Agent.
(f) Liens arising by operation of law to secure landlords,
lessors or renters under leases or rental agreements made in the ordinary course
of business and confined to the premises or property rented.
(g) Liens in favor of the Agent for the benefit of the Lenders
securing the Lender Obligations.
(h) Other Liens not otherwise permitted hereunder securing
Indebtedness in an amount not to exceed $5,000,000.
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Nothing contained in this Section 9.2 shall permit any Restricted Subsidiary to
incur any Indebtedness or take any other action or permit to exist any other
condition which would be in contravention of any other provision of this
Agreement.
Section 9.3 Investments. Have outstanding or hold or acquire or make or
commit itself to acquire or make any Investment except the following:
(a) Existing Investments in Unrestricted Subsidiaries
described on Schedule 5.4, including the Investment in ASCRP described on
Schedule 8.13 and other existing Investments described on Schedule 9.3.
(b) Investments having a maturity of less than one year from
the date thereof by the Borrower or any Restricted Subsidiary in: (i)
obligations of the Agent or any of the Lenders; (ii) obligations of the United
States of America or any agency or instrumentality thereof; (iii) repurchase
agreements involving securities described in clauses (i) and (ii) with the Agent
or any of the Lenders; and (iv) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Moody's Investor Service, Inc. or
Standard & Poor's Corporation, respectively, or their successors.
(c) Investments in Restricted Subsidiaries or other assets as
a result of Permitted Acquisitions.
(d) Investments received as consideration from the sale of
assets otherwise permitted hereunder, which Investments are pledged to the Agent
on terms and conditions acceptable to the Agent.
(e) Investments consisting of advances to employees in the
ordinary course of business in an amount not to exceed $2,000,000 in the
aggregate at any time outstanding.
(f) Investments consisting of Interest Rate Protection
Agreements to the extent permitted under Section 9.1(k).
(g) Guaranties to the extent permitted under Section 9.1(f)(i)
and (iv) and Section 9.5.
(h) Investments of American Ski in Unrestricted Subsidiaries,
as follows:
(i) Direct Unrestricted Subsidiary Investments;
provided that the sum of Direct Unrestricted Subsidiary Investments and
Real Estate Guaranties shall not exceed $25,000,000 at any time;
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(ii) Indirect Unrestricted Subsidiary Investments in
an amount not to exceed $25,000,000; provided that the aggregate amount
of the Investments under clauses (i) above and this clause (ii) shall
not exceed $40,000,000, except that if American Ski has Consolidated
EBITDA in any immediately preceding fiscal year of $75,000,000 or more,
this restriction shall not apply to Investments made in the then
current fiscal year; and
(iii) Investments consisting of contributions to
Unrestricted Subsidiaries of Excess Real Property not included in
appraisals of the Mortgaged Property.
(i) Investments acquired in connection with the bankruptcy or
workout of account debtors.
(j) Investments consisting of (i) Pico's ownership of (A) 2001
shares of the capital stock of Uplands Water, constituting approximately 95% of
the issued and outstanding capital stock thereof and (B) 61 shares of the
capital stock of Alpine Pipeline and all related wastewater disposal units, (ii)
Sugarloaf Mountain Corporation's ownership of a 10% interest in Sugarloaf Land
Partners I and a 10% interest in Sugarloaf Land Partners II and (iii) ASC Utah's
rights to acquire stock in Community Water Company.
(k) Investments in Restricted Subsidiaries.
(l) Other Investments in an aggregate amount not to exceed
$5,000,000.
Section 9.4 Mergers, Acquisitions, Etc. Enter into any merger or
consolidation with or acquire all or substantially all of the assets of any
Person, or sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, except for (a)
the merger of a Restricted Subsidiary into another Restricted Subsidiary or into
American Ski, (b) acquisitions approved in writing by the Majority Lenders and
(c) Permitted Acquisitions.
Section 9.5 Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except that American Ski and its
Restricted Subsidiaries (a) may pay reasonable salaries, fees and bonuses to
their directors, officers and employees as are usual and customary in American
Ski's or its Restricted Subsidiaries' business, (b) may enter into transactions
among each other on terms that are not materially less favorable to American Ski
or any Restricted Subsidiary than those which could be obtained at the time from
Persons who are not Affiliates and which transactions (to the extent in excess
of $250,000 for each transaction or a series of related transactions) are
disclosed to the Agent in Compliance Certificates, (c) may enter into
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Investments permitted under Section 9.3(i) hereof and Real Estate Guaranties
permitted under Section 9.1(h) hereof, (d) may enter into and perform their
obligations under the Lender Agreements and (e) may purchase on or before
October 31, 1999 certain assets from Leslie B. Otten from the proceeds of the
Series B Preferred Stock as described in Schedule 8.13.
Section 9.6 Distributions. Make any Distribution or make any other payment
on account of the purchase, acquisition, redemption, or other retirement of any
shares of stock, whether now or hereafter outstanding, except that (a) American
Ski may make Distributions not to exceed, in the aggregate, 50% of cumulative
Consolidated Net Income after April 25, 1999 provided, that after giving pro
forma effect to such Distribution, the ratio of Consolidated Total Debt to
Consolidated EBITDA does not exceed 4.0-to-1 and American Ski's Restricted
Subsidiaries may make lawful Distributions to American Ski in an aggregate
amount equal to the Distributions which American Ski is entitled to make under
this clause (a) and provided further that no Default shall exist at the time of
or be caused by any such Distribution; and (b) Restricted Subsidiaries of
American Ski may make Distributions to American Ski and to other Restricted
Subsidiaries of American Ski.
Section 9.7 Capital Expenditures. Make any Capital Expenditure except that:
(a) For their fiscal year 2000, American Ski and its
Restricted Subsidiaries may make Capital Expenditures not to exceed the sum of
(i) up to $3,500,000 for the purchase of assets from Leslie B. Otten plus (ii)
$23,100,000.
(b) For each fiscal year after their fiscal year 2000,
American Ski and its Restricted Subsidiaries may make Capital Expenditures in
each fiscal year of not more than the lesser of (a) $35,000,000 or (b) (i)
Consolidated EBITDA for the four fiscal quarters ended in April of the previous
fiscal year less (ii) Consolidated Debt Service for the four fiscal quarters
ended in April of the previous fiscal year.
(c) In addition to the Capital Expenditures permitted under
clauses (a) and (b) above, American Ski and its Restricted Subsidiaries may make
Capital Expenditures not to exceed $30,000,000 to be used for the purchase,
construction and installation of a gondola ski lift at Heavenly Valley Ski
Resort.
Section 9.8 Dispositions of Assets. Sell, lease or otherwise dispose of any
assets except for (a) the sale, lease or other disposition of inventory,
including residential real property held for resale, in the ordinary course of
business, (b) the Permitted Dispositions and (c) Permitted Non-Strategic Asset
Sales.
Section 9.9 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise be or become directly or
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contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except for (a) Real Estate Guaranties, (b) Guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (c) Guaranties which constitute Investments
permitted under Section 9.3 hereof.
Section 9.10 ERISA. At any time while American Ski or any of its
Subsidiaries has a Pension Plan, permit any accumulated funding deficiency to
occur with respect to any Pension Plan or other employee benefit plans
established or maintained by American Ski or any of its Subsidiaries or to which
contributions are made by the American Ski or any of its Subsidiaries (the
"Plans"), and which are subject to the "Pension Reform Act" and the rules and
regulations thereunder or to Section 412 of the Internal Revenue Code, and at
all times comply in all material respects with the provisions of the Act and
Code which are applicable to the Plans. American Ski will not permit the Pension
Benefit Guaranty Corporation to cause the termination of any Pension Plan under
circumstances which would cause the lien provided for in Section 4068 of the
Pension Reform Act to attach to the assets of American Ski or any of its
Subsidiaries.
Section 9.11 Sale and Leaseback. Sell or transfer any of its properties
with the intention of taking back a lease of the same property or leasing other
property for substantially the same use as the property being sold or
transferred.
Section 9.12 Restrictive or Inconsistent Agreements. Enter into any
agreement (a) other than the Lender Agreements, the Senior Subordinated Notes
Indenture and related guaranties of Restricted Subsidiaries, the Cerberus
Purchase Agreement and the Series B Preferred Stock Agreements, which, directly
or indirectly, prohibits or restrains, or has the effect of prohibiting or
restraining or otherwise imposes any materially adverse or burdensome condition
upon, the declaration or payment of dividends or distributions, the incurrence
of Indebtedness, the granting of liens (except for customary restrictions
against liens on assets leased under Capitalized Leases permitted hereunder),
the making of loans or advances to American Ski or any of its Restricted
Subsidiaries or the amendment or modification of any of the Lender Agreements or
(b) containing any provision that would be violated or breached by any Loan or
the performance by American Ski or any of its Restricted Subsidiaries of its
obligations hereunder or under any of the Lender Agreements.
Section 9.13 Limitations on Real Estate Operations. Engage in any real
estate development activities involving acquisition of land intended for resale
(except incident to a Permitted Acquisition) or development of residential
subdivisions, condominium units, hotels or related infrastructure and utilities,
except through the Unrestricted Subsidiaries and except for Real Estate Capital
Expenditures to the extent permitted under Section 9.7 hereof.
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Section 9.14 Fiscal Year. Change their fiscal year from the twelve-month
period ending on the last Sunday of July of each year.
Section 9.15 Limitation on Excess Proceeds. So long as applicable, permit
Excess Proceeds (as defined in the Senior Subordinated Notes Indenture) at any
time to exceed $7,500,000.
Section 9.16 No Amendment of Subordinated Notes, Cerberus Purchase
Agreement, or Series B Preferred Stock Agreements. Enter into any amendment,
modification or waiver of or supplement to any of the terms or provision of
Senior Subordinated Notes, the Senior Subordinated Notes Indenture, the Cerberus
Purchase Agreement, the Series A Certificate of Designation or the Series B
Preferred Stock Agreements (except for amendments, modifications, waivers and
supplements of the Series B Preferred Stock Stockholders Agreement) without the
prior written consent of the Majority Lenders.
Section 9.17 Exchange of Cerberus 10 1/2% Repriced Convertible Exchangeable
Preferred Stock and Amended and Restated Registration Rights Agreement
Penalties. Exercise its rights under Section 7 of the Series A Certificate of
Designation to convert the Cerberus 10 1/2% Repriced Convertible Exchangeable
Preferred Stock into 10 1/2% Repriced Subordinated Debentures (as defined in the
Certificate of Designation) without the prior written consent of the Majority
Lenders or incur any Registration Delay Fees (as defined in the Amended and
Restated Registration Rights Agreement) pursuant to Section 2.1(b) of the
Amended and Restated Registration Rights Agreement without the prior written
consent of the Agent.
Section 9.18 Limitation on Issuance of Capital Stock. American Ski will
not, and will not permit any of its Restricted Subsidiaries to, issue (a) any
class of preferred stock (other than the Series A Exchangeable Preferred Stock
and the Series B Preferred Stock) or (b) any class of redeemable (except at the
sole option of American Ski or such Restricted Subsidiary) common stock.
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default. Each of the following events shall be
deemed to be Events of Default hereunder:
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(a) American Ski or any Restricted Subsidiary shall fail to
make any payment in respect of (i) the principal of any of the Lender
Obligations as the same shall become due, whether at the stated payment dates,
required prepayment or by acceleration, demand or otherwise, or (ii) interest or
commitment fees on or in respect of any of the Lender Obligations as the same
shall become due, and such failure shall continue for a period of five (5) days.
(b) American Ski or any Restricted Subsidiary shall fail to
perform or observe any of the terms, covenants, conditions or provisions of
Articles 6, 7, 8 or 9 hereof; provided, however, that with respect to the terms,
covenants, conditions and provisions of Article 6 only (except for Sections 6.5,
6.6 and 6.11), the Agent shall notify American Ski of American Ski's failure to
provide the required reports when due and the Agent shall allow American Ski
five (5) days to comply with the terms, covenants, conditions and provisions of
Article 6.
(c) American Ski or any Restricted Subsidiary shall fail to
perform or observe any other term, covenant, condition or provision to be
performed or observed by American Ski or any Restricted Subsidiary under this
Agreement or any other Lender Agreement, and such failure shall not be rectified
or cured to the Agent's satisfaction within thirty (30) days after written
notice thereof to American Ski.
(d) Any representation or warranty of American Ski or any
Restricted Subsidiary herein or in any other Lender Agreement or any amendment
to any thereof shall have been materially false or misleading at the time made
or intended to be effective.
(e) American Ski or any Restricted Subsidiary (i) shall fail
to make any payment of principal of or interest on Indebtedness for money
borrowed of American Ski or any Restricted Subsidiary with an outstanding
principal amount of greater than $2,000,000 or any Guaranty of money borrowed
with an outstanding principal amount of greater than $2,000,000 when such
payment is due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) or shall fail to perform or observe any
provision of any agreement or instrument relating to such Indebtedness, and such
failure shall permit the holder thereof to accelerate such Indebtedness or (ii)
shall fail to observe or perform its covenants, agreements and obligations under
any other material lease or other agreement by which it is bound, including any
leasing facility with any of the Lenders or their affiliates.
(f) American Ski or any Restricted Subsidiary shall be
involved in financial difficulties as evidenced:
(i) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or
by its authorizing, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a voluntary
case;
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(ii) by its filing an answer or other pleading
admitting or failing to deny the material allegations of a petition
filed against it commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein provided,
or by its failing to controvert timely the material allegations of any
such petition;
(iii) by the entry of an order for relief in any
involuntary case commenced under said Title 11;
(iv) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors, or by its consenting to or
acquiescing in such relief;
(v) by the entry of an order by a court of competent
jurisdiction (1) finding it to be bankrupt or insolvent, (2) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors or (3) assuming custody of,
or appointing a receiver or other custodian for all or a substantial
part of its property and such order shall not be vacated or stayed on
appeal or otherwise stayed within 30 days;
(vi) by the filing of a petition against American Ski
or any Restricted Subsidiary under said Title 11 which shall not be
vacated within 30 days; or
(vii) by its making an assignment for the benefit of,
or entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all
or a substantial part of its property.
(g) There shall have occurred a judgment against American Ski
or any Restricted Subsidiary in any court (i) for an amount in excess of
$2,000,000 and from which no appeal has been taken or with respect to which all
appeal periods have expired, unless such judgment is, to the Agent's
satisfaction, insured against in full (less the applicable policy deductible) or
(ii) which shall have a Material Adverse Effect.
(h) The adoption of a plan relating to the liquidation or
dissolution of American Ski.
(i) The first day on which more than one-third of the members
of the Board of Directors of American Ski are not Continuing Directors.
(j) Any person or group of persons within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended, other than
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the Otten Shareholders and Oak Hill, shall own of record or beneficially more
than 30% of the issued and outstanding capital stock of American Ski.
(k) [Intentionally Omitted]
(l) American Ski shall cease to own, directly or indirectly,
of record and beneficially all of the issued and outstanding capital stock of
any Material Restricted Subsidiary, except as a result of a Permitted
Disposition or the exercise of the Sugarloaf warrants described on Schedule 8.9
hereto. For purposes of this Section 10.1(l), a "Material Restricted Subsidiary"
shall mean a Restricted Subsidiary (i) whose assets constitute greater than 5%
of the consolidated assets of American Ski and its Restricted Subsidiaries or
(b) whose revenues contributed greater than 5% of the consolidated revenues of
American Ski and its Restricted Subsidiaries for any fiscal year during the
preceding three fiscal years.
(m) Any of the Lender Agreements shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or approval of the
Agent; or any Lender Agreement, or any Lien granted thereunder, shall (except in
accordance with its terms or the terms of this Agreement), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of any Borrower or Guarantor; or any Lien securing any
Lender Obligation shall, in whole or in part, cease to be a perfected first
priority Lien, subject only to those exceptions expressly permitted by a Lender
Agreement or the terms of this Agreement and except to the extent that any such
Lien has ceased to be a perfected first priority Lien solely due to an act or
omission by the Agent or a Lender; or any action at law suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Lender Agreements
shall be commenced by or on behalf of American Ski or any Restricted Subsidiary,
or any court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any one or more of the Lender
Agreements is illegal, invalid or unenforceable in accordance with the terms
thereof.
(n) American Ski or any Restricted Subsidiary shall be
indicted for a federal crime, a punishment for which could include the
forfeiture of any assets of American Ski or such Restricted Subsidiary.
(o) American Ski shall make a claim for indemnification under
the Kamori Stock Purchase Agreement in an amount in excess of $250,000.
(p) The subordination provisions relating to any Subordinated
Indebtedness shall fail to be enforceable by the Lenders (which have not
effectively waived the benefits thereof) in accordance with the terms thereof,
or the principal or interest on any Lender Obligation shall fail to constitute
Senior Indebtedness (or similar term, as defined in any such Subordinated
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Indebtedness) or any Borrower, Guarantor, Restricted Subsidiary or any holder of
Subordinated Indebtedness shall, directly or indirectly, disavow or contest in
any manner (i) the effectiveness, validity or enforceability of any of the
provisions of the Subordinated Indebtedness, (ii) that any of such provisions of
Subordinated Indebtedness exist for the benefit of the Agent and each Lender or
(iii) that all payments of principal or interest with respect to any such
Subordinated Indebtedness made by the Borrower, any Guarantor or any Restricted
Subsidiary, or realized from the liquidation of any property of the Borrower,
any Guarantor or any Restricted Subsidiary, shall be subject to any of such
provisions of Subordinated Indebtedness.
Section 10.2 Remedies. Upon the occurrence of an Event of Default, in each
and every case, the Agent may, and upon the request of the Majority Lenders
shall, proceed to protect and enforce the rights of the Agent and the Lenders by
suit in equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant or condition contained in this Agreement or
any other Lender Agreement or in any instrument delivered to the Agent or the
Lenders pursuant hereto or thereto, or in aid of the exercise of any power
granted in this Agreement, any Lender Agreement or any such instrument, and
(unless there shall have occurred an Event of Default under Section 10.1(f), in
which case the unpaid balance of the Lender Obligations shall automatically
become due and payable without notice or demand) by notice in writing to the
Borrowers (a) declare the obligations of the Lenders to make Revolving Credit
Advances, the obligation of the Swing Line Lender to make Swing Line Loans and
the obligations of the Issuing Bank to issue, extend or renew Letters of Credit
to be terminated, whereupon such obligations shall be terminated, (b) declare
all or any part of the unpaid balance of the Lender Obligations then outstanding
to be forthwith due and payable, whereupon such unpaid balance or part thereof
shall become so due and payable without presentation, protest or further demand
or notice of any kind, all of which are hereby expressly waived, and the Agent
may proceed to enforce payment of such balance or part thereof in such manner as
the Agent may elect, and the Agent and each Lender may offset and apply toward
the payment of such balance or part thereof any Indebtedness of the Agent or any
Lender to any Borrower or to any Subsidiary, or to any obligor of the Lender
Obligations, including any Indebtedness represented by deposits in any general
or special account maintained with the Agent or any Lender or with any other
Person controlling, controlled by or under common control with the Agent or any
Lender and (c) demand that the Borrowers provide cash collateral to the Agent as
security for the Revolving Credit Lenders in an amount equal to 105% of the
Letter of Credit Exposure which the Borrowers shall provide to the Agent
immediately upon such demand.
Section 10.3 Distribution of Proceeds. Notwithstanding anything to the
contrary contained herein, in the event that following the occurrence or during
the continuance of any Event of Default, the Agent or any Lender receives any
monies on account of the Lender Obligations from the Borrowers or otherwise,
such monies shall be distributed for application as follows:
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(a) First, to the payment of or the reimbursement of, the
Agent for or in respect of all costs, expenses, disbursements and losses which
shall have been incurred or sustained by the Agent in connection with the
collection of such monies by the Agent, or in connection with the exercise,
protection or enforcement by the Agent of all or any of the rights, remedies,
powers and privileges of the Agent or the Lenders under this Agreement or any
other Lender Agreement;
(b) Second, to the payment of all interest, including interest
on overdue amounts, and late charges, then due and payable with respect to the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;
(c) Third, to the payment of the outstanding principal balance
of the Loans, allocated among the Lenders in proportion to their respective
Commitment Percentages;
(d) Fourth, to any other outstanding Lender Obligations,
allocated among the Lenders in proportion to their respective Commitment
Percentages; and
(e) Fifth, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
Section 11.1 Actions by Lenders. Except as otherwise expressly set forth in
any particular provision of this Agreement, any consent or approval required or
permitted by this Agreement to be given by the Lenders, including without
limitation under Section 11.2, may be given, and any term of this Agreement or
of any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by American Ski or any Restricted Subsidiary of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of American Ski, the Borrowers and the Majority Lenders;
provided, however, that (a) no amendment of Section 2.18 may be made without the
consent of the Swing Line Lender, (b) no amendment of Article 13 may be made
without the consent of the Agent and (c) without the written consent of all
Lenders:
(i) no reduction in the interest rates on or any
fees or refinancing premium relating to the Loans shall be made;
(ii) no extension or postponement shall be made of
the stated time of payment of the principal amount of, interest on, or
fees payable to the Lenders or the Swing Line Lender relating to the
Term Loans and the Revolving Credit Advances or the Swing Line Loans,
respectively;
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(iii) no change in the Maximum Revolving Credit
Amount or the principal amount of the Term Loans and extension of the
Revolving Credit Termination Date or the Term Loan Maturity Date shall
be made;
(iv) no release of all or substantially all of the
collateral security for, or any material guarantor of, the Lender
Obligations shall be made;
(v) no change in the definition of the term
"Majority Lenders" shall be made; and
(vi) no change in the provisions of Section
12.1(a) or this Section 11.1 shall be made.
Section 11.2 Actions by Borrowers. No delay or omission on the Agent's or
the Lenders' part in exercising their rights and remedies against American Ski,
the Borrowers or any other interested party shall constitute a waiver. A breach
by American Ski or any Borrower of its obligations under this Agreement may be
waived only by a written waiver executed by the Agent and the Lenders in
accordance with Section 11.1. The Agent's and the Lenders' waiver of American
Ski's or a Borrower's breach in one or more instances shall not constitute or
otherwise be an implicit waiver of subsequent breaches. To the extent permitted
by applicable law, American Ski and the Borrowers, jointly and severally, hereby
agree to waive, and do hereby absolutely and irrevocably waive, (a) all
presentments, demands for performance, notices of protest and notices of
dishonor in connection with any of the Indebtedness evidenced by the Term Loan
Notes, the Revolving Credit Notes and the Swing Line Note (b) any requirement of
diligence or promptness on the Agent's or the Lenders' part in the enforcement
of their rights under the provisions of this Agreement or any Lender Agreement
and (c) any and all notices of every kind and description which may be required
to be given by any statute or rule of law with respect to its liability (i)
under this Agreement or in respect of the Indebtedness evidenced by the Term
Loan Notes, the Revolving Credit Notes and the Swing Line Note, or any other
Lender Obligation or (ii) under any other Lender Agreement. No course of dealing
between any American Ski or any Borrower or American Ski and the Borrowers
collectively and the Agent or the Lenders shall operate as a waiver of any of
the Agent's or the Lenders' rights under this Agreement or any Lender Agreement
or with respect to any of the Lender Obligations. This Agreement shall be
amended only by a written instrument executed by the Agent and the Lenders in
accordance with Section 11.1 making explicit reference to this Agreement. The
Agent's and the Lenders' rights and remedies under this Agreement and under all
subsequent agreements between the Agent, the Lenders, American Ski and the
Borrowers shall be cumulative and any rights and remedies expressly set forth
herein shall be in addition to, and not in limitation of, any other rights and
remedies which may be applicable to the Agent and the Lenders in law or at
equity.
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ARTICLE 12. SUCCESSORS AND ASSIGNS
Section 12.1 General. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors (which
shall include in the case of the Agent or any Lender any entity resulting from a
merger or consolidation) and assigns, except that (a) neither American Ski nor
any Borrower may assign its rights or obligations under this Agreement and (b)
each Lender may assign its rights in this Agreement only as set forth below in
this Article 12.
Section 12.2 Assignments
(a) Assignments. In compliance with applicable laws with
respect to such assignment and with the consent of the Agent and, so long as no
Event of Default has occurred and except for assignments between and among the
Lenders, affiliates of the Lenders or an Approved Fund, American Ski on behalf
of the Borrowers (which consents shall not be unreasonably withheld), a Lender
may assign to one or more financial institutions (each a "Successor Lender") a
proportionate part of its rights and obligations in connection with this
Agreement, its Term Loan Note and/or its Revolving Credit Note and the related
Lender Agreements and each such Successor Lender shall assume such rights and
obligations pursuant to an Assignment and Acceptance Agreement ("Assignment and
Acceptance Agreement") duly executed by such Successor Lender and such assigning
Lender and acknowledged and consented to by the Agent and, so long as no Event
of Default has occurred and except for assignments between and among the
Lenders, affiliates of the Lenders or an Approved Fund, American Ski on behalf
of the Borrowers, substantially in the form of Exhibit P attached hereto. Any
assignment under this Section 12.2(a) shall be of the Maximum Revolving Credit
Amount and for the term Loans in an aggregate minimum amount of $5,000,000
except that there shall be no minimum assignment amount in the case of (i)
assignments between and among the Lenders, affiliates of the Lenders or an
Approved Fund and (ii) an assignment of a Lender's total remaining interest that
is in an amount less than $5,000,000. In connection with any assignment under
this Section 12.2(a) there shall be paid to the Agent by the assigning Lender or
the Successor Lender an administrative processing fee in the amount of $2,500.
(b) Assignment Procedures. In the event of an assignment in
accordance with Section 12.2(a), upon execution and delivery of such an
assignment at least five (5) Business Days prior to the proposed assignment
date, and payment by such Successor Lender to the assigning Lender of an amount
equal to the purchase price agreed between such assigning Lender and such
Successor Lender, such Successor Lender shall become party to this Agreement as
a signatory hereto and shall have all the rights and obligations of a Lender
under this Agreement and the other Lender Agreements with an interest therein as
set forth in such assignment, and such assignor making such assignment shall be
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released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any such assignment, the assigning Lender, the Successor Lender and the
Borrowers shall make appropriate arrangements so that, if required, a new Term
Loan Note and Revolving Credit Note are issued to the Successor Lender and a
replacement Term Loan Note and/or Revolving Credit Note is issued to the
assigning Lender in principal amounts reflecting their respective revised
interests.
(c) Register. The Agent shall maintain a register (the
"Register") for the recordation of (i) the names and addresses of all Successor
Lenders that enter into Assignment and Acceptance Agreements, (ii) the interests
of each Lender, (iii) the principal amount of the Term Loans owing to each Term
Loan Lender from time to time, (iv) the amounts of the Revolving Credit Advances
owing to each Revolving Credit Lender from time to time and (v) the amounts of
the Swing Line Loans owing to the Swing Line Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Agent and the Lenders may treat each Person whose name is
registered therein for all purposes as a party to this Agreement. The Register
shall be available for inspection by the Borrowers and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Further Assurances. American Ski and the Borrowers shall
sign such documents and take such other actions from time to time reasonably
requested by the Agent or a Lender to enable any Successor Lender to share in
the benefits and rights created by the Lender Agreements.
(e) Assignments to Federal Reserve Bank. Any Lender at any
time may assign all or any portion of its rights under this Agreement, its Term
Loan Note and/or its Revolving Credit Note to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from its obligations hereunder.
(f) Assignments of Security Agreements/Endorsements to Title
Policies. In connection with the assignment by a Lender of its rights under this
Agreement, its Term Loan Note and/or its Revolving Credit Note, such Lender
shall assign all of its rights under the Security Agreements to the applicable
Successor Lender. In connection with the assignment of the Mortgages and the
Collateral Assignment of Leases from such Lender to such Successor Lender,
American Ski and the Borrowers shall provide the Agent with appropriate and
acceptable endorsements to the title policies insuring the Lien of the
Mortgages, if any are required, reflecting the Assignment of the Mortgages and
the Assignment of Leases to such Successor Lender in form and substance
acceptable to the Agent and the Successor Lender.
Section 12.3 Participations. Any Lender may, without the consent of the
Borrowers or the Agent, at any time grant or offer to grant to one or more
financial institutions ("Credit Participants") participating interests in such
Lender's rights and obligations in this Agreement, its Term Loan Note, its
Revolving Credit Note and the related Lender Agreements, and each such Credit
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Participant shall acquire such participation subject to the terms set forth
below.
(a) Procedure. Each Lender granting such participation shall
comply with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the obligations of American Ski and the Borrowers
hereunder and under the other Lender Agreements, including the right to consent
to any amendment, modification or waiver of any provision of any Lender
Agreement, except for those matters referred to in Section 11.1 which require
the consent of all Lenders and which may also require the consent of each Credit
Participant.
(b) Dealing with Lenders. American Ski and the Borrowers shall
continue to deal solely and directly with the Lenders in connection with their
rights and obligations under this Agreement and the other Lender Agreements.
(c) Rights of Credit Participants. The Borrowers agree that
each Credit Participant shall, to the extent provided in its participation
instrument, be entitled to the benefits of Sections 2.9, 2.10, 2.11, 2.13, 2.14
and 14.5, and the set-off rights in Section 10.2 with respect to its
participating interest; provided, however, that no Credit Participant shall be
entitled to receive any greater payment under such Sections than the Lender
granting such participation would have been entitled to receive with respect to
the interests transferred.
(d) Notice. At the time of granting any participation, the
Lender granting such participation shall notify the Agent and the Borrowers.
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ARTICLE 13. THE AGENT
Section 13.1 Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Term Loan Notes and the Revolving Credit
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to liability or which is contrary to this Agreement or the
other Lender Agreements or applicable law. Subject to the foregoing provisions
and to the other provisions of this Article 13, the Agent shall, on behalf of
the Lenders: (a) execute any documents on behalf of the Lenders providing
collateral for or guarantees of the Lender Obligations; (b) hold and apply any
collateral for the Lender Obligations, and the proceeds thereof, at any time
received by it, in accordance with the provisions of this Agreement and the
other Lender Agreements; (c) exercise any and all rights, powers and remedies of
the Lenders under this Agreement or any of the other Lender Agreements,
including the giving of any consent or waiver or the entering into of any
amendment, subject to the provisions of Section 11.1; (d) at the direction of
the Lenders, execute, deliver and file UCC financing statements, mortgages,
deeds of trust, lease assignments and such other agreements in respect of any
collateral for the Lender Obligations, and possess instruments included in the
collateral on behalf of the Lenders; and (e) in the event of acceleration of
American Ski's or the Borrowers' Indebtedness hereunder, act at the direction of
the Majority Lenders to exercise the rights of the Lenders hereunder and under
the other Lender Agreements.
Section 13.2 Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Term Loan Note or any
Revolving Credit Note as the holder thereof until the Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
required under Article 12 hereof; (b) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representations to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement or the other Lender Agreements; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the other Lender
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Agreements on the part of the Borrowers or any other Person or to inspect the
property (including the books and records) of the Borrowers or any other Person;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Lender Agreements or any other instrument or document furnished
pursuant hereto or thereto; and (f) shall incur no liability under or in respect
of this Agreement or the other Lender Agreements by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopy or
telegram) believed by the Agent to be genuine and signed or sent by the proper
party or parties.
Section 13.3 Agent as a Lender. With respect to its interest in its
Commitment Percentage of the Loans hereunder, BankBoston, N.A. shall have the
same rights and powers under this Agreement and the other Lender Agreements as
any other Lender and may exercise the same as though it were not the Agent; and
the term "Lender" or "Lender(s)" shall, unless otherwise expressly indicated,
include BankBoston, N.A. in its individual capacity. BankBoston, N.A. and its
affiliates may lend money to, and generally engage in any kind of business with,
any Borrower, any Affiliate of any Borrower and any Person who may do business
with or own securities of any Borrower or any such Affiliate of any Borrower,
all as if BankBoston, N.A. were not the Agent and without any duty to account
therefor to the Lenders.
Section 13.4 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 5.9 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
Section 13.5 Indemnification of Agent. Each Lender agrees to indemnify the
Agent and its directors, officers, employees and agents (to the extent that the
Agent is not reimbursed by the Borrowers), ratably according to each Lender's
Commitment Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent or its directors, officers, employees or
agents in any way relating to or arising out of this Agreement or any other
Lender Agreement or any action taken or omitted by the Agent in such capacity
under this Agreement; provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the Agent in
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connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Lender Agreement, to the
extent that the Agent is not reimbursed for such expenses by American Ski the
Borrowers.
Section 13.6 Successor Agent. Except as provided below, the Agent may
resign at any time by giving written notice thereof to the Lenders and American
Ski. Upon any such resignation, the Lenders shall have the right to appoint a
successor Agent which shall be reasonably acceptable to American Ski. If no
successor Agent shall have been so appointed by the Lenders (other than the
resigning Agent), and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a
commercial bank or financial institution organized under the laws of the United
States of America or of any state thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Lender Agreements. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
13 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Lender Agreements.
Section 13.7 Amendment of Article 13. American Ski and the Borrowers hereby
agree that the foregoing provisions of this Article 13 constitute an agreement
among the Agent and the Lenders (and the Agent and the Lenders acknowledge that
except for the provisions of Section 13.6, American Ski and the Borrowers are
not parties to or bound by such foregoing provisions) and that any and all of
the provisions of this Article 13 (excepting Section 13.6) may be amended at any
time by the Lenders and the Agent without the consent or approval of, or notice
to, American Ski and the Borrowers (other than the requirement of notice to
American Ski and the Borrowers of the resignation of the Agent and the
appointment of a successor Agent).
ARTICLE 14. MISCELLANEOUS
Section 14.1 Notices. All notices and other communications made or required
to be given pursuant to this Agreement shall be in writing and shall be mailed
by United States mail, postage prepaid, or sent by hand, by telecopy or by
nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston, MA 02110,
Telecopier No. 617/434-8102, Attention: Mr. Carlton F. Williams, Director, with
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a copy to: Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109,
Telecopier No. 617/523-1231, Attention: Edward Matson Sibble, Jr., P.C., or at
such other address(es) or to the attention of such other Person(s) as the Agent
shall from time to time designate in writing to American Ski and the Lenders.
(b) If to American Ski or the Borrowers, c/o American Skiing
Company, P.O. Box 450, Bethel, ME 04217, or for overnight delivery service,
Sunday River Road, Bethel, ME 04217, Telecopier No. 207/824-0192, Attention:
Mark J. Miller, Chief Financial Officer, with a copy to: Foster A. Stewart,
Esquire, General Counsel, American Skiing Company, One Monument Way, Portland,
ME 04101 or at such other address(es) or to the attention of such other
Person(s) as American Ski shall from time to time designate in writing to the
Agent and the Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution page of
this Agreement (or in the case of a Successor Lender, at the address(es) and to
the attention of the Person(s) specified in the Assignment and Acceptance
Agreement executed by such Successor Lender), or at such other address(es) and
to the attention of such other Person(s) as any Lender shall from time to time
designate in writing to the Agent and American Ski.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given when mailed. Any notice so addressed and sent
by hand, by telecopy or by overnight carrier service shall be deemed to have
been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by American Ski and the Borrowers as having been
given by the Lenders.
Section 14.2 Merger. This Agreement and the other Lender Agreements and
documents contemplated hereby constitute the entire agreement of American Ski,
the Borrowers, the Agent and the Lenders and express their entire understanding
with respect to credits advanced or to be advanced by the Lenders to the
Borrowers.
Section 14.3 Governing Law; Consent to Jurisdiction. This Agreement and all
matters arising hereunder or relating hereto (except to the extent local law
governs the exercise of remedies under the Security Agreements) shall be
governed by and construed and enforced under the laws of The Commonwealth of
Massachusetts. American Ski, each of its Subsidiaries and each Lender hereby
irrevocably submits itself to the non-exclusive jurisdiction of the courts of
The Commonwealth of Massachusetts and to the non-exclusive jurisdiction of any
Federal court of the United States located in the District of Massachusetts for
the purpose of any suit, action or other proceeding arising out of this
Agreement or any other Lender Agreement or any of the transactions contemplated
hereby or thereby.
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Section 14.4 Counterparts. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
Section 14.5 Expenses and Indemnification.
(a) The Borrowers agree, jointly and severally, to pay, on
demand, all of the Agent's reasonable expenses in preparing, executing,
delivering and administering this Agreement, the Lender Agreements, all related
instruments and documents and any requested amendment, waiver or consent
relating hereto or thereto, including, without limitation, the reasonable fees
and out-of-pocket expenses of the Agent's third-party consultants, special
counsel, Goodwin, Procter & Hoar LLP, and local counsel in each jurisdiction in
which American Ski or any Restricted Subsidiary has assets and the Agent's and
Lenders' reasonable expenses in connection with periodic audits of American Ski
and its Restricted Subsidiaries. The Borrowers also agree, jointly and
severally, to pay, on demand, all reasonable out-of-pocket expenses incurred by
the Agent and the Lenders, including, without limitation, reasonable legal,
accounting and third-party consultant fees, in connection with the collection of
amounts due hereunder and under all other Lender Agreements upon the occurrence
of a Default hereunder, the revision, protection or enforcement of any of the
Agent's or the Lenders' rights against the Borrowers under this Agreement, the
Notes, the Guaranty Agreements, the Security Agreements, and all other Lender
Agreements and the administration of special problems that may arise under this
Agreement or any other Lender Agreement. The Borrowers also agree, jointly and
severally, to pay all stamp and other taxes in connection with the execution and
delivery of this Agreement and related instruments and documents.
(b) Without limitation of any other obligation or liability of
the Borrowers or right or remedy of the Agent or the Lenders contained herein,
the Borrowers hereby covenant and agree, jointly and severally, to indemnify and
hold the Agent, the Lenders, and the directors, officers, subsidiaries,
shareholders, agents, affiliates and Persons controlling the Agent and the
Lenders, harmless from and against any and all damages, losses, settlement
payments, obligations, liabilities, claims, including, without limitation,
claims for finder's or broker's fees, actions or causes of action, and
reasonable costs and expenses incurred, suffered, sustained or required to be
paid by any such indemnified party in each case by reason of or resulting from
any claim, investigation, litigation or other proceeding related to the entering
into of this Agreement or any other Lender Agreement, the use of any Letter of
Credit or the proceeds of any Loans, the consummation of the transactions
contemplated herein, the exercise by the Agent and the Lenders of their rights
and remedies, or otherwise relating to the transactions contemplated hereby,
other than any such claims which are determined by a final, non-appealable
judgment or order of a court of competent jurisdiction to be the result of the
gross negligence or willful misconduct of such indemnified party. Promptly upon
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receipt by any indemnified party hereunder of notice of the commencement of any
action against such indemnified party for which a claim is to be made against
the Borrowers hereunder, such indemnified party shall notify American Ski in
writing of the commencement thereof, although the failure to provide such notice
shall not affect the indemnification rights of any such indemnified party
hereunder unless and only to the extent American Ski demonstrates to the
reasonable satisfaction of such party that such failure to provide notice
prejudiced the Borrowers in their defense of such claim. The Borrowers shall
have the right, at their option upon notice to the indemnified parties, to
defend any such matter at their own expense and with their own counsel, except
as provided below, which counsel must be reasonably acceptable to the
indemnified parties. The indemnified party shall cooperate with the Borrowers in
the defense of such matter. The indemnified party shall have the right to employ
separate counsel and to participate in the defense of such matter at its own
expense. In the event that (a) the employment of separate counsel by an
indemnified party has been authorized in writing by American Ski, (b) the
Borrowers have failed to assume the defense of such matter within fifteen (15)
days of notice thereof from the indemnified party, or (c) the named parties to
any such action (including impleaded parties) include any indemnified party who
has been advised by counsel that there may be one or more legal defenses
available to it or prospective bases for liability against it, which are
different from those available to or against the Borrowers, then the Borrowers
shall not have the right to assume the defense of such matter with respect to
such indemnified party. The Borrowers shall not compromise or settle any such
matter against an indemnified party without the written consent of the
indemnified party, which consent may not be unreasonably withheld or delayed.
Section 14.6 Confidentiality. The Agent and the Lenders agree to use
commercially reasonable efforts to keep in confidence all financial data and
other information relative to the affairs of American Ski and its Subsidiaries
heretofore furnished or which may hereafter be furnished to them pursuant to the
provisions of this Agreement; provided, however, that this Section 14.6 shall
not be applicable to information otherwise disseminated to the public by
American Ski or any of its Subsidiaries or any of their Affiliates; and provided
further, that such obligation of the Agent and the Lenders shall be subject to
the Agent's or the Lenders', as the case may be, (a) obligation to disclose such
information pursuant to a request or order under applicable laws and regulations
or pursuant to a subpoena or other legal process, (b) right to disclose any such
information to bank or other regulatory examiners, affiliates, auditors,
accountants and counsel or to any Person who evaluates, approves, structures or
administers the Loans on behalf of a Lender who agree to keep such information
confidential and (c) right to disclose any such information (i) in connection
with the transactions set forth herein including assignments or the sale of
participation interests pursuant to Article 12, so long as such potential
assignees or participants shall agree in writing to be bound by the terms of
this Section 14.6 , (ii) to any direct or indirect contractual counterparty in
swap agreements or such contractual counterparty's professional advisor (so long
as such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section 14.6), or
(iii) in connection with any litigation or dispute involving the Agent or any
transfer or other disposition by the Agent or the Lenders, as the case may be,
97
<PAGE>
of any of the Lender Obligations; provided that information disclosed pursuant
to this provision shall be so disclosed subject to such procedures as are
reasonably calculated to maintain the confidentiality thereof.
Section 14.7 Reliance on Representations and Actions of American Ski. The
Borrowers hereby appoint American Ski as the Borrowers' agent to execute,
deliver and perform, on behalf of the Borrowers, any and all notices,
certificates, documents and actions to be executed, delivered or performed
hereunder or under any of the other Lender Agreements, and the Borrowers hereby
agree that the Agent and the Lenders may rely upon any representation, warranty,
certificate, notice, document or telephone request which purports to be executed
or made or which the Agent or the Lenders in good faith believe to have been
executed or made by American Ski or any of its executive officers, and the
Borrowers hereby further, jointly and severally, agree to indemnify and hold the
Agent and the Lenders harmless for any action, including the making of the Term
Loans, the Revolving Credit Advances or the Swing Line Loans hereunder, and any
loss or expense, taken or incurred by any of them as a result of their good
faith reliance upon any such representation, warranty, certificate, notice,
document or telephone request.
Section 14.8 Joint and Several Obligations. All obligations of the
Borrowers hereunder and under the Notes and all other Lender Agreements shall be
joint and several obligations. The Borrowers waive presentment, demand, protest,
notice of acceptance, notice of indebtedness incurred and all other notices of
any kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshaling of assets of the Borrowers and their Restricted
Subsidiaries, and all suretyship defenses generally.
Section 14.9 Continuity of 1997 Credit Agreements. The Borrowers, the Agent
and the Lenders hereby acknowledge and agree that (a) each of the 1997 Credit
Agreements and the Lender Agreements executed in connection therewith, as
amended, restated and consolidated hereby, shall continue in full force and
effect, as so amended, restated and consolidated and (b) the Agent shall be
entitled to the benefit of all documents, opinions, certificates or other
instruments which have been issued in favor of or which otherwise benefit the
Agent as agent under one or both of the 1997 Credit Agreements, and the Agent
may take any actions to enforce any rights thereunder in accordance with the
terms thereof as the Agent may deem useful, convenient or necessary. The
Borrowers will execute and deliver, or cause to be delivered, such documents,
opinions, certificates or other instruments as the Agent may reasonably request
to assure the Agent the continued benefit of its rights and remedies as agent,
under the 1997 Credit Agreements and all related documents, opinions,
certificates and instruments, as in effect immediately prior to the amendment,
restatement and consolidation of the 1997 Credit Agreements hereunder.
98
<PAGE>
Section 14.10 WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS, AND THE
BORROWERS AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION
INVOLVING THE AGENT OR ANY LENDER AS A PARTY BASED UPON OR ARISING OUT OF, THIS
AGREEMENT, THE TERM LOAN NOTES, THE REVOLVING CREDIT NOTES, THE SWING LINE NOTE,
ANY LENDER AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH
OF THE AGENT, THE LENDERS, AND THE BORROWERS WITH THEIR RESPECTIVE COUNSEL, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE AGENT, THE
LENDERS, OR THE BORROWERS HAVE AGREED WITH OR REPRESENTED TO ANY OTHER PARTY
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
99
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have
caused this Amended, Restated and Consolidated Credit Agreement to be executed
by their duly authorized officers as of the date set forth above.
AMERICAN SKIING COMPANY
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUNDAY RIVER SKIWAY CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUNDAY RIVER LTD.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
PERFECT TURN, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUNDAY RIVER TRANSPORTATION INC
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
100
<PAGE>
L.B.O. HOLDING, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUGARBUSH RESORT HOLDINGS, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Offier
SUGARBUSH LEASING COMPANY
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUGARBUSH RESTAURANTS, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
MOUNTAIN WASTEWATER TREATMENT,
INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
S-K-I, LTD.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
101
<PAGE>
KILLINGTON, LTD.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chier Financial Officer
MOUNT SNOW LTD.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
PICO SKI AREA MANAGEMENT
COMPANY
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
RESORT SOFTWARE SERVICES, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
KILLINGTON RESTAURANTS, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
RESORTS TECHNOLOGIES, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
102
<PAGE>
DOVER RESTAURANTS, INC.
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUGARLOAF MOUNTAIN CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
MOUNTAINSIDE
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
SUGARTECH
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
ASC UTAH
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
STEAMBOAT SKI & RESORT
CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
103
<PAGE>
STEAMBOAT DEVELOPMENT
CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
HEAVENLY VALLEY SKI & RESORT
CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
HEAVENLY CORPORATION
By:\s\Mark J. Miller
Name: Mark J. Miller
Title:Chief Financial Officer
HEAVENLY VALLEY, LIMITED
PARTNERSHIP
By: Heavenly Corporation,
its general partner
By:\s\Mark J. Miller
Name: Mark J. Miller
Title: Chief Financial Officer
104
<PAGE>
BANKBOSTON, N.A., as Agent
By:\s\Carlton F. Williams
Name: Carlton F. Williams
Title: Director
100 Federal Street
Boston, MA 02110
Telecopier: (617) 434-8102
Attention:
Mr. Carlton F. Williams,
Director
BANKBOSTON, N.A.
By:\s\Carlton F. Williams
Name: Carlton F. Williams
Title: Director
100 Federal Street
Boston, MA 02110
Telecopier: (617) 434-8102
Attention:
Mr. Carlton F. Williams,
Director
105
<PAGE>
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:\s\Dan Adams
Name: Dan Adams
Title:Vice President
400 Capital Mall, 7th Floor
Sacramento, CA 95814
Telecopier: (916) 444-2869
Attention: Mr. Dan Adams,
Vice President
U.S. BANK NATIONAL ASSOCIATION
By:\s\Hassan A. Salem
Name: Hassan A. Salem
Title:Assistant Vice President
918 17th Street
Denver, CO 80202
Telecopier: (303) 585-4135
Attention: Mr. Hassen Salem,
Assistant Vice President
106
<PAGE>
FIRST SECURITY BANK, N.A.
By:\s\Dick van Klaveren
Name: Dick van Klaveren
Title:Vice President
15 East 100 South, 2nd Floor
Salt Lake City, Utah 84111
Telecopier: (801) 246-5532
Attention:
Mr. Dick Van Klaveren,
Vice President
THE HOWARD BANK, N.A.
By:\s\Michael W. Quinn
Name: Michael W. Quinn
Title:Senior Vice President
111 Main Street
Burlington, MA 05401
Telecopier: (802) 860-5542
Attention: Mr. Michael Quinn
107
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By:\s\John M. Johnson
Name: John M. Johnson
Title:Authorized Signatory
800 Scudders Mill Road,Area 1B
Plainsboro, NJ 08536
Telecopier: (609) 282-3542
Attention: Ms. Jill Montanye
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By:\s\John M. Johnson
Name: John M. Johnson
Title:Authorized Signatory
800 Scudders Mill Road,Area 1B
Plainsboro, NJ 08536
Telecopier: (609) 282-3542
Attention: Mr. John Johnson
108
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:\s\Darvin D. Pierce
Name: Darvin D. Pierce
Title:Vice President
c/o Van Kampen American
Capital
One Parkview Plaza, 5th Floor
Oakbrook Terrace, IL 60181
Telecopier: (630) 684-6740
Attention: Mr. Scott Fries
CAPTIVA II FINANCE, LTD.
By:\s\John Cullinane
Name: John Cullinane
Title:Director
c/o Stanfield Capital Partners
330 Madison Ave., 27th Floor
New York, NY 10017
Telecopier: (212) 284-4320
Attention:
Mr. Timothy Daileader
109
<PAGE>
KZH-PAMCO LLC
By:\s\James J. Fevola
Name: James J. Fevola
Title:Authorized Agent
c/o The Chase Manhattan Bank
450 West 33rd Street,
15th Floor
New York, NY 10001
Telecopier: (212) 946-7776
Attention: Ms. Virginia Conway
PAM CAPITAL FUNDING, L.P.
By: Highland Capital
Management L.P., as
Collateral Manager
By:\s\Mark Okada
Name: Mark Okada
Title:Executive Vice President
c/o Highland Capital
Management, L.P.
1150 Two Galleria Tower
13455 Noel Rd. LB #45
Dallas, TX 75240
Telecopier: (972) 233-4343
Attention:
Mr. Mark Okada/Mr. Joe Doherty
110
<PAGE>
KZH III LLC
By:\s\James J. Fevola
Name: James J. Fevola
Title:Authorized Agent
c/o The Chase Manhattan Bank
50 West 33rd Street-15th Floor
New York, NY 10001
Telecopier: (212) 946-7776
Attention: Ms. Virginia Conway
PAMCO CAYMAN, LTD.
By: Highland Capital
Management L.P., as
Collateral Manager
By:\s\Mark Okada
Name: Mark Okada
Title:Executive Vice President
c/o Highland Capital
Management, L.P.
1150 Two Galleria Tower
13455 Noel Road, LB 45
Dallas, TXZ 75240
Telecopier: (972) 233-6143
Attention:
Mr. Mark Okada/Mr. Joe Doherty
111
<PAGE>
DEBT STRATEGIES FUND II, INC.
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By:\s\John M. Johnson
Name: John M. Johnson
Title:Authorized Signatory
c/o Merrill Lynch Asset
Management
800 Scudders Mill Road-Area 1B
Plainsboro, NJ 08536
Telecopier: (609) 282-2756
Attention: Mr. John Johnson
MORGAN STANLEY SENIOR
FUNDING, INC.
By:\s\Christopher A. Pucillo
Name: Christopher A. Pucillo
Title:Vice President
c/o Morgan Stanley Senior
Funding, Inc.
1585 Broadway, 10th Floor
New York, NY 10036
Telecopier: (212) 761-0592
Attention: Mr. James Morgan
112
<PAGE>
OASIS COLLATERALIZED HIGH
INCOME PORTFOLIOS-I, LTD.
By:\s\Anthony R. Clemente
Name: Anthony R. Clemente
Title:Authorized Signatory
c/o Stanfield Capital Partners
LLC
330 Madison Ave., 27th Floor
New York, NY 10017
Telecopier: (212) 284-4302
Attention:
Mr. Christopher E. Jansen
BLACK DIAMOND CLO 1998-1 LTD.
By: /s/ [illegible]
Name:
Title:
c/o Black Diamond Capital
Management, L.L.C.
99 River Road
Cos Cob, CT 06807
Telecopier: (203) 552-1014
Attention: Mr. Bob Rosenbloom
LONG LANE MASTER TRUST IV
BankBoston, N.A. as Trust
Administrator
By:\s\Liam G. Stokes
Name: Liam G. Stokes
Title:Director
c/o BankBoston, N.A.
100 Federal Street
Boston, MA 02110
113
<PAGE>
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ACCESSION, LOAN SALE AND SECOND AMENDMENT AGREEMENT
RE:
LOAN AND SECURITY AGREEMENT
AMONG
GRAND SUMMIT RESORT PROPERTIES, INC., AS BORROWER
AND
TEXTRON FINANCIAL CORPORATION, AS ADMINISTRATIVE AGENT
AND
THE LENDERS LISTED HEREIN, AS LENDERS, FINOVA CAPITAL CORPORATION AND
LITCHFIELD FINANCIAL CORPORATION
DATED JUNE 24, 1999
<PAGE>
ACCESSION, LOAN SALE AND SECOND AMENDMENT AGREEMENT
THIS ACCESSION, LOAN SALE AND SECOND AMENDMENT AGREEMENT (as amended
from time to time, this "Agreement"), dated June 24, 1999 (the "Second Amendment
Closing Date") among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation,
(herein referred to as "GSRP"), FINOVA CAPITAL CORPORATION ("FINOVA"), a
Delaware corporation, LITCHFIELD FINANCIAL CORPORATION ("LITCHFIELD"), a
Massacusetts corporation, the lenders listed on the signature pages hereof(each
individually referred to herein as an "Original Lender" and, collectively, the
"Original Lenders;" the Original Lenders and FINOVA and Litchfield are referred
to herein, individually, as a "Lender," and collectively, as the "Lenders"),
TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as agent for the Lenders
(in such capacity herein referred to as the "Administrative Agent").
W I T N E S S E T H:
A. WHEREAS, GSRP entered into that certain Loan and Security Agreement with the
Original Lenders and the Administrative Agent dated as of September 1, 1998 (as
amended to but excluding the date hereof, the "Existing LSA" and, as amended
hereunder, "Amended LSA"), pursuant to which the Original Lenders agreed to make
loans to GSRP in accordance with the terms of the Existing LSA;
B. WHEREAS, capitalized terms used herein shall have the meanings ascribed to
the same in the Existing LSA unless otherwise defined herein;
C. WHEREAS, the parties to the Existing LSA have agreed to certain amendments to
the Existing LSA, as described and set forth below, and to add to the Existing
LSA, as amended hereby, (1) FINOVA as a Canyons Construction Project Advance
Lender and as a Canyons Inventory Advance Lender and (2) Litchfield as a Canyons
Construction Project Advance Lender, a Canyons Inventory Advance Lender, a
Steamboat Construction Project Advance Lender, a Steamboat Inventory Advance
Lender, an Attitash Inventory Advance Lender, a Jordan Bowl Inventory Advance
Lender, a Killington Inventory Advance Lender and a Mt. Snow Inventory Advance
Lender;
NOW, THEREFORE, in consideration of the Administrative Agent's, the
Lenders,' FINOVA's, Litchfield's and GSRP's agreements hereunder, and in
consideration of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Administrative Agent, the
Original Lenders, FINOVA, Litchfield and GSRP hereby agree as follows:
<PAGE>
1. ACCESSION; SALE OF CERTAIN EXISTING LOANS.
(a) FINOVA Accession.Textron Financial Corporation, in its
individual capacity, does hereby exercise its right under Section
2.6(c) of the Existing LSA and adds FINOVA to the Existing LSA, as
amended hereby, as a Canyons Construction Project Advance Lender and a
Canyons Inventory Advance Lender, with all of the respective rights and
obligations in respect thereof that are provided for in the Existing
LSA, as amended hereby. The Canyons Construction Project Advance
Commitment of FINOVA shall be as set forth on Attachment 1 hereto and
such Commitment of FINOVA shall be in addition to any existing Canyons
Construction Project Advance Commitments of the Original Lenders, as
shown on Attachment 2 hereto, but subject to the reallocation of such
existing Commitments as described on said Attachment 2. The Canyons
Inventory Advance Commitment of FINOVA shall be as set forth on
Attachment 1 hereto and such Commitment of FINOVA shall be in addition
to any existing Canyons Inventory Advance Commitments of the Original
Lenders, as shown on Attachment 2 hereto, but subject to the
reallocation of such existing Commitments as described on said
Attachment 2. FINOVA does hereby agree to become, and does hereby
accept its becoming, a party to the Existing LSA, as amended hereby, as
a Canyons Construction Project Advance Lender with the Canyons
Construction Project Advance Commitment set forth on Attachment 1
hereto and a Canyons Inventory Advance Lender with the Canyons
Inventory Advance Commitment set forth on Attachment 1 hereto, and
FINOVA further agrees to be bound by the terms and conditions of the
Existing LSA, as amended hereby. GSRP, by its execution and delivery of
this Agreement, hereby approves of the adding of FINOVA to the Existing
LSA, as amended hereby, as a Canyons Construction Project Advance
Lender and a Canyons Inventory Advance Lender. Each of the
Administrative Agent and the Original Lenders acknowledges receipt of a
copy of this Agreement. GSRP agrees to deliver to FINOVA on the Second
Amendment Closing Date (a) a Canyons Construction Project Advance Note
reflecting the Canyons Construction Project Advance Commitment of
FINOVA set forth on Attachment 1 hereto and (b) a Canyons Inventory
Advance Note reflecting the Canyons Inventory Advance Commitment of
FINOVA set forth on Attachment 1 hereto.
(b) Sale to FINOVA of a Portion of the Existing Canyons Loan.
(i) GSRP hereby represents and warrants to the
Original Lenders, the Administrative Agent, and FINOVA that
the outstanding principal amount of the Canyons Loan (together
with accrued and unpaid interest thereon) as of the Second
Amendment Closing Date is as set forth on Attachment 3 hereto.
Textron Financial Corporation, as an Original Lender, hereby
confirms and warrants to FINOVA that the amount set forth on
Attachment 3 and identified as its share of the Canyons Loan
(together with accrued and unpaid interest thereon) as of the
Second Amendment Closing Date is correct. Green Tree Financial
Servicing Corporation, as an Original Lender, hereby confirms
and warrants to FINOVA that the amount set forth on Attachment
3 and identified as its share of the Canyons Loan (together
with accrued and unpaid interest thereon) as of the Second
Amendment Closing Date is correct.
<PAGE>
(ii) Textron Financial Corporation, as an Original
Lender pursuant to Section 2.6(b) of the Existing LSA, hereby
sells, assigns and transfers to FINOVA, and FINOVA hereby
accepts from Textron Financial Corporation the sale,
assignment and transfer, of a 50.0% undivided interest in
Textron Financial Corporation's share of the Canyons Loan, as
set forth on Attachment 3 hereto, which undivided interest
consists of a principal amount of $3,842,513.63 and an accrued
and unpaid interest amount of $22,557.35, and FINOVA agrees,
on the Second Amendment Closing Date and contemporaneously
with the consummation of such sale, assignment and transfer,
to pay to Textron Financial Corporation, as provided for in
Section 1(i)(x) below, a purchase price in respect of such
50.0% undivided interest of $3,865,070.98. In connection with
the foregoing sale, assignment and transfer, FINOVA assumes
from Textron Financial Corporation (and Textron Financial
Corporation is relieved from) the obligations, if any, of a
Canyons Construction Project Advance Lender under the Amended
LSA and other Security Documents to the extent of such sale,
assignment and transfer. GSRP consents to the aforesaid sale,
assignment, transfer and assumption.
(iii) Green Tree Financial Servicing Corporation, as
an Original Lender pursuant to Section 2.6(b) of the Existing
LSA, hereby sells, assigns and transfers to FINOVA, and FINOVA
hereby accepts from Green Tree Financial Servicing Corporation
the sale, assignment and transfer, of a 50.0% undivided
interest in Green Tree Financial Servicing Corporation's share
of the Canyons Loan, as set forth on Attachment 3 hereto,
which undivided interest consists of a principal amount of
$3,842,513.64 and an accrued and unpaid interest amount of
$22,557.35, and FINOVA agrees, on the Second Amendment Closing
Date and contemporaneously with the consummation of such sale,
assignment and transfer, to pay to Green Tree Financial
Servicing Corporation, as provided for in Section 1(i)(x)
below, a purchase price in respect of such 50.0% undivided
interest of $3,865,070.99. In connection with the foregoing
sale, assignment and transfer, FINOVA assumes from Green Tree
Financial Servicing Corporation (and Green Tree Financial
Servicing Corporation is relieved from) the obligations, if
any, of a Canyons Construction Project Advance Lender under
the Amended LSA and other Security Documents to the extent of
such sale, assignment and transfer. GSRP consents to the
aforesaid sale, assignment, transfer and assumption.
(iv) GSRP agrees that the principal amounts set forth
in subclauses (ii) and (iii) above being sold, assigned and
transferred by Textron Financial Corporation and Green Tree
Financial Servicing Corporation, respectively, to FINOVA shall
be deemed to be immediately outstanding under the Canyons
Construction Project Advance Note to be delivered to FINOVA by
GSRP pursuant to Section 1(a) hereof, and the accrued and
unpaid interest being sold, assigned and transferred therewith
shall also be deemed outstanding under such Construction
Project Advance Note and due and payable on the next scheduled
interest payment date under the Amended LSA, and GSRP further
agrees to note all of the foregoing on such Canyons
Construction Project Advance Note and in its books and
records. GSRP further agrees that the sale, assignment and
transfer of the aforesaid amounts of the Canyons Loan by
Textron Financial Corporation and Green Tree Financial
Servicing Corporation to FINOVA shall be treated for all
purposes under the Amended LSA as if FINOVA had extended
<PAGE>
Canyons Construction Project Advances to GSRP in respect
thereof and FINOVA shall have a 100% interest therein. On and
after the Second Amendment Closing Date, neither Textron
Financial Corporation nor Green Tree Financial Servicing
Corporation shall have any right, title or interest in and to
the aforesaid sold, assigned and transferred principal and
interest and the Administrative Agent agrees to pay the same,
when received by it from GSRP and in accordance with the
Amended LSA, directly to FINOVA.
(c) Litchfield Accession. Textron Financial Corporation, in
its individual capacity, does hereby exercise its right under Section
2.6(c) of the Existing LSA and adds Litchfield to the Existing LSA, as
amended hereby, as a Canyons Construction Project Advance Lender, a
Canyons Inventory Advance Lender, a Steamboat Construction Project
Advance Lender and a Steamboat Inventory Advance Lender with all of the
respective rights and obligations in respect thereof that are provided
for in the Existing LSA, as amended hereby. The Canyons Construction
Project Advance Commitment of Litchfield shall be as set forth on
Attachment 1 hereto and such Commitment shall be in addition to any
existing Canyons Construction Project Advance Commitments of the
Original Lenders, as shown on Attachment 2 hereto, but subject to the
reallocation of such existing Commitments as described on said
Attachment 2. The Canyons Inventory Advance Commitment of Litchfield
shall be as set forth on Attachment 1 hereto and such Commitment shall
be in addition to any existing Canyons Inventory Advance Commitments of
the Original Lenders, as shown on Attachment 2 hereto, but subject to
the reallocation of such existing Commitments as described on said
Attachment 2. The Steamboat Construction Project Advance Commitment of
Litchfield shall be as set forth on Attachment 1 hereto and such
Commitment shall be in addition to any existing Steamboat Construction
Project Advance Commitments of the Original Lenders, as shown on
Attachment 2 hereto, but subject to the reallocation of such existing
Commitments as described on said Attachment 2. The Steamboat Inventory
Advance Commitment of Litchfield shall be as set forth on Attachment 1
hereto and such Commitment shall be in addition to any existing
Steamboat Inventory Advance Commitments of the Original Lenders, as
shown on Attachment 2 hereto, but subject to the reallocation of such
existing Commitments as described on said Attachment 2. Litchfield does
hereby agree to become, and does hereby accept its becoming, a party to
the Existing LSA, as amended hereby, as a Canyons Construction Project
Advance Lender with the Canyons Construction Project Advance Commitment
set forth on Attachment 1 hereto, a Canyons Inventory Advance Lender
with the Canyons Inventory Advance Commitment set forth on Attachment 1
hereto, a Steamboat Construction Project Advance Lender with the
Steamboat Construction Project Advance Commitment set forth on
Attachment 1 hereto and a Steamboat Inventory Advance Lender with the
Steamboat Inventory Advance Commitment set forth on Attachment 1
hereto, and Litchfield further agrees to be bound by the terms and
conditions of the Existing LSA, as amended hereby. GSRP, by its
execution and delivery of this Agreement, hereby approves of the adding
of Litchfield to the Existing LSA, as amended hereby, as a Canyons
Construction Project Advance Lender, a Canyons Inventory Advance
Lender, a Steamboat Construction Project Advance Lender, and a
Steamboat Inventory Advance Lender. Each of the Administrative Agent
and the Original Lenders acknowledges receipt of a copy of this
Agreement. GSRP agrees to deliver to Litchfield on the Second Amendment
Closing Date (a) a Canyons Construction Project Advance Note reflecting
the Canyons Construction Project Advance Commitment of Litchfield set
forth on Attachment 1 hereto, (b) a Canyons Inventory Advance Note
reflecting the Canyons Inventory Advance Commitment of Litchfield set
forth on Attachment 1 hereto, (c) a Steamboat Construction Project
Advance Note reflecting the Steamboat Construction Project Advance
Commitment of Litchfield set forth on Attachment 1 hereto, and (d) a
Steamboat Inventory Advance Note reflecting the Steamboat Inventory
Advance Commitment of Litchfield set forth on Attachment 1 hereto.
(d) Sale to Litchfield of a Portion of the Existing Loans.
(i) GSRP hereby represents and warrants to the
Original Lenders, the Administrative Agent and Litchfield that
the outstanding principal amount of each of the Loans
(together with accrued and unpaid interest thereon) as of the
Second Amendment Closing Date is as set forth on Attachment 3
hereto. Textron Financial Corporation, as an Original Lender,
hereby confirms and warrants to Litchfield that the amount set
forth on Attachment 3 and identified as its share of such
Loans (together with accrued and unpaid interest thereon) as
of the Second Amendment Closing Date is correct. Green Tree
Financial Servicing Corporation, as an Original Lender, hereby
confirms and warrants to Litchfield that the amount set forth
on Attachment 3 and identified as its share of the Loans
(together with accrued and unpaid interest thereon) as of the
Second Amendment Closing Date is correct.
(ii) Textron Financial Corporation, as an Original
Lender and pursuant to Section 2.6(b) of the Existing LSA,
hereby sells, assigns and transfers to Litchfield, and
Litchfield hereby accepts from Textron Financial Corporation
the sale, assignment and transfer, of a 12.50% undivided
interest in Textron Financial Corporation's share of the
Steamboat Loan, as set forth on Attachment 3 hereto, which
undivided interest consists of a principal amount of
$1,285,965.75 and an accrued and unpaid interest amount of
$7,565.85, and Litchfield agrees, on the Second Amendment
Closing Date and contemporaneously with the consummation of
such sale, assignment and transfer, to pay to Textron
Financial Corporation, as provided for in Section 1(i)(x)
below, an aggregate purchase price in respect of such
undivided interests of $1,293,531.60. In connection with the
foregoing sale, assignment and transfer but only to the extent
of such sale, assignment and transfer, Litchfield assumes from
Textron Financial Corporation (and Textron Financial
Corporation is relieved from) the obligations, if any, of a a
Steamboat Construction Project Advance Lender. GSRP consents
to the aforesaid sale, assignment, transfer and assumption.
(iii) Green Tree Financial Servicing Corporation, as
an Original Lender and pursuant to Section 2.6(b) of the
Existing LSA, hereby sells, assigns and transfers to
Litchfield, and Litchfield hereby accepts from Green Tree
Financial Servicing Corporation the sale, assignment and
transfer, of
<PAGE>
(A) a 12.50% undivided interest in Green
Tree Financial Servicing Corporation's share of the
Canyons Loan, as set forth on Attachment 3 hereto,
which undivided interest consists of a principal
amount of $960,628.41 and an accrued and unpaid
interest amount of $5,639.34,
(B) a 25.0% undivided interest in Green Tree
Financial Servicing Corporation's share of the
Attitash Loan, as set forth on Attachment 3 hereto,
which undivided interest consists of a principal
amount of $80,921.37 and an accrued and unpaid
interest amount of $490.33,
(C) a 25.0% undivided interest in Green Tree
Financial Corporation's share of the Jordan Bowl
Loan, as set forth on Attachment 3 hereto, which
undivided interest consists of a principal amount of
$684,723.87 and an accrued and unpaid interest amount
of $4,118.08,
(D) a 25.0% undivided interest in Green Tree
Financial Servicing Corporation's share of the
Killington Loan, as set forth on Attachment 3 hereto,
which undivided interest consists of a principal
amount of $505,282.61 and an accrued and unpaid
interest amount of $3,164.58, and
(E) a 25.0% undivided interest in Green Tree
Financial Servicing Corporation's share of the Mt.
Snow Loan, as set forth on Attachment 3 hereto, which
undivided interest consists of a principal amount of
$1,185,480.62 and an accrued and unpaid interest
amount of $7,070.92,
and Litchfield agrees, on the Second Amendment Closing Date
and contemporaneously with the consummation of such sale,
assignment and transfer, to pay to Green Tree Financial
Servicing Corporation, as provided for in Section 1(i)(x)
below, an aggregate purchase price in respect of such
undivided interests of $3,437,520.13. In connection with the
foregoing sale, assignment and transfer but only to the extent
of such sale, assignment and transfer, Litchfield assumes from
Green Tree Financial Servicing Corporation (and Green Tree
Financial Servicing Corporation is relieved from) the
obligations, if any, of a Canyons Construction Project Advance
Lender, a Steamboat Construction Project Advance Lender, an
Attitash Inventory Advance Lender, a Jordan Bowl Inventory
Advance Lender, a Killington Inventory Advance Lender, and a
Mt. Snow Inventory Advance Lender, as the case may be, under
the Amended LSA and other Security Documents. GSRP consents to
the aforesaid sale, assignment, transfer and assumption.
<PAGE>
(iv) GSRP agrees that the principal amounts set forth
in subclauses (iii)(A) above in respect of the Canyons Loan
being sold, assigned and transferred by Green Tree Financial
Servicing Corporation to Litchfield shall be deemed to be
immediately outstanding under the Canyons Construction Project
Advance Note (as a Canyons Construction Project Advance) to be
delivered to Litchfield by GSRP pursuant to Section 1(c)
hereof, and the accrued and unpaid interest being sold,
assigned and transferred therewith shall also be deemed
outstanding under such Construction Project Advance Note and
due and payable on the next scheduled interest payment date
under the Amended LSA, and GSRP further agrees to note all of
the foregoing on such Canyons Construction Project Advance
Note and in its books and records. GSRP further agrees that
the sale, assignment and transfer of the aforesaid amounts of
the Canyons Loan by Green Tree Financial Servicing Corporation
to Litchfield shall be treated for all purposes under the
Amended LSA as if Litchfield had extended Canyons Construction
Project Advances to GSRP in respect thereof and Litchfield
shall have a 100% interest therein. On and after the Second
Amendment Closing Date, Green Tree Financial Servicing
Corporation shall not have any right, title or interest in and
to the aforesaid sold, assigned and transferred principal and
interest and the Administrative Agent agrees to pay the same,
when received by it from GSRP and in accordance with the terms
of the Amended LSA, to Litchfield,
(v) GSRP agrees that the principal amount set forth
in subclause (ii)(B) above in respect of the Steamboat Loan
being sold, assigned and transferred by Textron Financial
Corporation to Litchfield shall be deemed to be immediately
outstanding under the Steamboat Construction Project Advance
Note to be delivered to Litchfield by GSRP pursuant to Section
1(c) hereof, and the accrued and unpaid interest being sold,
assigned and transferred therewith shall also be deemed
outstanding under such Steamboat Construction Project Advance
Note and due and payable on the next scheduled interest
payment date under the Amended LSA, and GSRP further agrees to
note all of the foregoing on such Steamboat Construction
Project Advance Note and in its books and records. GSRP
further agrees that the sale, assignment and transfer of the
aforesaid amounts of the Steamboat Loan by Textron Financial
Corporation to Litchfield shall be treated for all purposes
under the Amended LSA as if Litchfield had extended Steamboat
Construction Project Advances to GSRP in respect thereof and
Litchfield shall have a 100% interest therein. On and after
the Second Amendment Closing Date, Textron Financial
Corporation shall not have any right, title or interest in and
to the aforesaid sold, assigned and transferred principal and
interest and the Administrative Agent agrees to pay the same,
when received by it from GSRP in accordance with the terms of
the Amended LSA, to Litchfield,
<PAGE>
(vi) GSRP acknowledges that the principal amounts set
forth in subclause (iii)(B) above in respect of the Attitash
Loan are being sold, assigned and transferred by Green Tree
Financial Servicing Corporation to Litchfield. GSRP agrees to
deliver to Litchfield on the Second Amendment Closing Date an
Attitash Inventory Advance Note in the aggregate principal
amount equal to the sum of the principal amounts set forth in
subclause (iii)(B) above and such amounts shall be deemed to
be immediately outstanding under such Attitash Inventory
Advance Note; the aforesaid accrued and unpaid interest shall
also be deemed outstanding under such Attitash Inventory
Advance Note and shall be due and payable on the next
scheduled interest payment date under the Amended LSA; GSRP
agrees to note all of the foregoing on such Attitash Inventory
Advance Note and in its books and records. GSRP further agrees
that the sale, assignment and transfer of the aforesaid
amounts of the Attitash Loan by Green Tree Financial Servicing
Corporation to Litchfield shall be treated for all purposes
under the Amended LSA as an assignment thereof pursuant to
Section 2.6(b) of the Existing LSA, as amended hereby, and
Litchfield, and only Litchfield, shall have a 100% interest
therein. On and after the Second Amendment Closing Date, Green
Tree Financial Servicing Corporation shall not have any right,
title or interest in and to the aforesaid principal and
interest sold, assigned and transferred to Litchfield, and the
Administrative Agent agrees to pay the same, when received by
it from GSRP in accordance with the terms of the Amended LSA,
to Litchfield, GSRP further acknowledges that the Attitash
Inventory Advance Commitment has been fully utilized prior to
the Second Amendment Closing Date and, as a result thereof,
Litchfield shall have no obligations thereunder to make any
further Attitash Inventory Advances.
(vii) GSRP acknowledges that the principal amounts
set forth in subclause (iii)(C) above in respect of the Jordan
Bowl Loan are being sold, assigned and transferred by Green
Tree Financial Servicing Corporation to Litchfield. GSRP
agrees to deliver to Litchfield on the Second Amendment
Closing Date a Jordan Bowl Inventory Advance Note in the
aggregate principal amount equal to the sum of the principal
amounts set forth in subclause (iii)(C) above and such amounts
shall be deemed to be immediately outstanding under such
Jordan Bowl Inventory Advance Note; the aforesaid accrued and
unpaid interest shall also be deemed outstanding under such
Jordan Bowl Inventory Advance Note and shall be due and
payable on the next scheduled interest payment date under the
Amended LSA; GSRP agrees to note all of the foregoing on such
Jordan Bowl Inventory Advance Note and in its books and
records. GSRP further agrees that the sale, assignment and
transfer of the aforesaid amounts of the Jordan Bowl Loan by
Green Tree Financial Servicing Corporation to Litchfield shall
be treated for all purposes under the Amended LSA as an
assignment thereof pursuant to Section 2.6(b) of the Existing
LSA, as amended hereby, and Litchfield, and only Litchfield,
shall have a 100% interest therein. On and after the Second
Amendment Closing Date, Green Tree Financial Servicing
Corporation shall not have any right, title or interest in and
to the aforesaid principal and interest sold, assigned and
transferred to Litchfield, and the Administrative Agent agrees
to pay the same, when received by it from GSRP in accordance
with the terms of the Amended LSA, to Litchfield. GSRP further
acknowledges that the Jordan Bowl Inventory Advance Commitment
has been fully utilized prior to the Second Amendment Closing
Date and, as a result thereof, Litchfield shall have no
obligations thereunder to make any further Jordan Bowl
Inventory Advances.
<PAGE>
(viii) GSRP acknowledges that the principal amounts
set forth in subclause (iii)(D) above in respect of the
Killington Loan are being sold, assigned and transferred by
Green Tree Financial Servicing Corporation to Litchfield. GSRP
agrees to deliver to Litchfield on the Second Amendment
Closing Date a Killington Inventory Advance Note in the
aggregate principal amount equal to the sum of the principal
amounts set forth in subclause (iii)(D) above and such amounts
shall be deemed to be immediately outstanding under such
Killington Inventory Advance Note; the aforesaid accrued and
unpaid interest shall also be deemed outstanding under such
Killington Inventory Advance Note and shall be due and payable
on the next scheduled interest payment date under the Amended
LSA; GSRP agrees to note all of the foregoing on such
Killington Inventory Advance Note and in its books and
records. GSRP further agrees that the sale, assignment and
transfer of the aforesaid amounts of the Killington Loan by
Green Tree Financial Servicing Corporation to Litchfield shall
be treated for all purposes under the Amended LSA as an
assignment thereof pursuant to Section 2.6(b) of the Existing
LSA, as amended hereby, and Litchfield, and only Litchfield,
shall have a 100% interest therein. On and after the Second
Amendment Closing Date, Green Tree Financial Servicing
Corporation shall not have any right, title or interest in and
to the aforesaid principal and interest sold, assigned and
transferred to Litchfield, and the Administrative Agent agrees
to pay the same, when received by it from GSRP in accordance
with the terms of the Amended LSA, to Litchfield. GSRP further
acknowledges that the Killington Inventory Advance Commitment
has been fully utilized prior to the Second Amendment Closing
Date and, as a result thereof, Litchfield shall have no
obligations thereunder to make any further Killington
Inventory Advances.
<PAGE>
(ix) GSRP acknowledges that the principal amounts set
forth in subclause (iii)(E) above in respect of the Mt. Snow
Loan are being sold, assigned and transferred by Green Tree
Financial Servicing Corporation to Litchfield. GSRP agrees to
deliver to Litchfield on the Second Amendment Closing Date a
Mt. Snow Inventory Advance Note in the aggregate principal
amount equal to the sum of the principal amounts set forth in
subclause (iii)(E) above and such amounts shall be deemed to
be immediately outstanding under such Mt. Snow Inventory
Advance Note; the aforesaid accrued and unpaid interest shall
also be deemed outstanding under such Mt. Snow Inventory
Advance Note and shall be due and payable on the next
scheduled interest payment date under the Amended LSA; GSRP
agrees to note all of the foregoing on such Mt. Snow Inventory
Advance Note and in its books and records. GSRP further agrees
that the sale, assignment and transfer of the aforesaid
amounts of the Mt. Snow Loan by Green Tree Financial Servicing
Corporation to Litchfield shall be treated for all purposes
under the Amended LSA as an assignment thereof pursuant to
Section 2.6(b) of the Existing LSA, as amended hereby, and
Litchfield, and only Litchfield, shall have a 100% interest
therein. On and after the Second Amendment Closing Date, Green
Tree Financial Servicing Corporation shall not have any right,
title or interest in and to the aforesaid principal and
interest sold, assigned and transferred to Litchfield, and the
Administrative Agent agrees to pay the same, when received by
it from GSRP in accordance with the terms of the Amended LSA,
to Litchfield, GSRP further acknowledges that the Mt. Snow
Inventory Advance Commitment has been fully utilized prior to
the Second Amendment Closing Date and, as a result thereof,
Litchfield shall have no obligations thereunder to make any
further Mt. Snow Inventory Advances.
(e) Original Lenders' Commitment Adjustments.
(i) Textron Financial Corporation, as an Original
Lender, Green Tree Financial Servicing Corporation, as an
Original Lender, and GSRP agree, in light of Sections 1(a),
1(b), 1(c) and 1(d) above and Section 1(f) below, to the
further modifications of the existing Canyons Construction
Project Advance Commitments, Canyons Inventory Advance
Commitments, Steamboat Construction Project Advance
Commitments and Steamboat Inventory Advance Commitments of
Textron Financial Corporation and Green Tree Financial
Corporation, respectively, as are set forth in Attachment 2
hereto.
(ii) The Canyons Construction Project Advance Note,
the Canyons Inventory Advance Note, the Steamboat Construction
Project Advance Note and the Steamboat Inventory Advance Note
of Green Tree Financial Servicing Corporation are each hereby
amended to reflect the changes in the Canyons Construction
Project Advance Commitment, the Canyons Inventory Advance
Commitment, the Steamboat Construction Project Advance
Commitment and the Steamboat Inventory Advance Commitment of
Green Tree Financial Servicing Corporation, as set forth on
Attachment 2 hereto, and the sales, assignments and transfers
in respect of the Canyons Loan described in Sections 1(b) and
1(d) hereof; and the Canyons Construction Project Advance
Commitment, the Canyons Inventory Advance Commitment, the
Steamboat Construction Project Advance Commitment and the
Steamboat Inventory Advance Commitment of Green Tree Financial
Servicing Corporation as set forth in its signature block to
the Existing LSA is hereby conformed to Attachment 3. GSRP
agrees to execute and deliver allonges, in form and substance
satisfactory to Green Tree Financial Servicing Corporation on
the Second Amendment Closing Date, reflecting the above
changes in respect of its Canyons Construction Project Advance
Note, Canyons Inventory Advance Note, Steamboat Construction
Project Advance Note and Steamboat Inventory Advance Note, and
Green Tree Financial Servicing Corporation agrees to attach
such allonges to its Canyons Construction Project Advance
Note, Canyons Inventory Advance Note, Steamboat Construction
Project Advance Note and Steamboat Inventory Advance Note.
GSRP further agrees to execute and deliver to Green Tree
Financial Servicing Corporation new Attitash Inventory Advance
Notes, Jordan Bowl Inventory Advance Notes, Killington
Inventory Advance Notes and Mt. Snow Inventory Advance Notes,
dated as of the Second Amendment Agreement Date, and
reflecting the sales, transfers and assignments in respect
thereof set forth in Section 1(d) above.
<PAGE>
(iii) The Canyons Construction Project Advance Note,
the Canyons Inventory Advance Note, the Steamboat Construction
Project Advance Note and the Steamboat Inventory Advance Note
of Textron Financial Corporation are each hereby amended to
reflect the changes in the Canyons Construction Project
Advance Commitment, the Canyons Inventory Advance Commitment,
the Steamboat Construction Project Advance Commitment and the
Steamboat Inventory Advance Commitment of Textron Financial
Corporation, as set forth on Attachment 2 hereto; and the
Canyons Construction Project Advance Commitment, the Canyons
Inventory Advance Commitment, the Steamboat Construction
Project Advance Commitment and the Steamboat Inventory Advance
Commitment of Textron Financial Corporation as set forth in
its signature block to the Existing LSA is hereby conformed to
Attachment 3; and GSRP agrees to execute and deliver allonges,
in form and substance satisfactory to Textron Financial
Corporation on the Second Amendment Closing Date, reflecting
the above, and Textron Financial Corporation agrees to attach
such allonges to its Canyons Construction Project Advance
Note, Canyons Inventory Advance Note, Steamboat Construction
Project Advance Note and Steamboat Inventory Advance Note.
GSRP further agrees to execute and deliver to Textron
Financial Corporation new Attitash Inventory Advance Notes,
Jordan Bowl Inventory Advance Notes, Killington Inventory
Advance Notes and Mt. Snow Inventory Advance Notes, dated as
of the Second Amendment Agreement Date, and reflecting the
sales, transfers and assignments in respect thereof set forth
in Section 1(d) above.
(f) Sale to Green Tree Financial Servicing Corporation of a
Portion of the Steamboat Loan.
(i) GSRP hereby represents and warrants to the
Original Lenders and the Administrative Agent that the
outstanding principal amount of the Interim Steamboat
Construction Project Advances comprising the Steamboat Loan
(together with accrued and unpaid interest thereon) as of the
Second Amendment Closing Date is as set forth on Attachment 3
hereto. Textron Financial Corporation, as an Original Lender,
hereby confirms and warrants to Green Tree Financial Servicing
Corporation that the amount set forth on Attachment 3 and
identified as its share of the Steamboat Loan (together with
accrued and unpaid interest thereon) as of the Second
Amendment Closing Date is correct.
(ii) Textron Financial Corporation, as an Original
Lender, hereby sells, assigns and transfers to Green Tree
Financial Servicing Corporation, and Green Tree Financial
Servicing Corporation hereby accepts from Textron Financial
Corporation the sale, assignment and transfer, of a 37.50%
undivided interest in Textron Financial Corporation's share of
the Steamboat Loan, as set forth on Attachment 3 hereto, which
undivided interest consists of a principal amount of
$3,857,897.25 and an accrued and unpaid interest amount of
$22,697.54.
<PAGE>
(iii) GSRP agrees that the principal amounts set
forth in subclause (ii) above being sold, assigned and
transferred by Textron Financial Corporation to Green Tree
Financial Servicing Corporation shall be deemed to be
immediately outstanding under the Steamboat Construction
Project Advance Note of Green Tree Financial Servicing
Corporation, and the accrued and unpaid interest being sold,
assigned and transferred therewith shall also be deemed
outstanding under such Construction Project Advance Note and
due and payable on the next scheduled interest payment date
under the Amended LSA, and GSRP further agrees to note all of
the foregoing on the allonge to the Steamboat Construction
Project Advance Note to be delivered to Green Tree Financial
Servicing Corporation, as contemplated under Section 1(e)
hereof, and in the books and records of GSRP. GSRP further
agrees that the sale, assignment and transfer of the aforesaid
amount of the Steamboat Loan by Textron Financial Corporation
to Green Tree Financial Servicing Corporation shall be treated
for all purposes under the Amended LSA as if Green Tree
Financial Servicing Corporation had extended a Steamboat
Construction Project Advances to GSRP in respect thereof and
Green Tree Financial Corporation shall have a 100% interest
therein. On and after the Second Amendment Closing Date,
Textron Financial Corporation shall not have any right, title
or interest in and to the aforesaid sold, assigned and
transferred principal and interest and the Administrative
Agent agrees to pay the same, when received by it from GSRP in
accordance with the terms of the Amended LSA, directly to
Green Tree Financial Servicing Corporation.
(iv) To the extent that the Steamboat Loan sold,
assigned and transferred to Green Tree Financial Servicing
Corporation or retained by Textron Financial Corporation
consists of Interim Steamboat Construction Project
Construction Advances or Steamboat Interest Advances in
respect thereof, such Interim Construction Project Advances
and Steamboat Interest Advances shall be treated for all
purposes on and after the Second Amendment Closing Date as
"Steamboat Construction Project Advances" and "Steamboat
Interest Advances" and the Interim Steamboat Construction
Project Advance Commitment is hereby terminated. For the
avoidance of doubt, the terminating of the Interim Steamboat
Construction Project Advance Commitment shall have no effect
on the Steamboat Construction Project Advance Commitments and
the Steamboat Inventory Advance Commitments.
(g) Interest; Allocations.
(i) With respect to the Canyons Loan and the
Steamboat Loan, the interest portion thereof (as shown on
Attachment 3 hereto) purchased herein by FINOVA, Litchfield
and Green Tree Financial Servicing Corporation, as the case
may be, shall be treated as a Canyons Interest Advance and a
Steamboat Interest Advance made by FINOVA, Litchfield and
Green Tree Financial Servicing Corporation, as the case may
be, on the scheduled interest payment date therefor. Remaining
interest accrued on the Canyons Loan and Steamboat Loan after
the Second Amendment Closing Date shall be paid by way of
Canyons Interest Advances and Steamboat Interest Advances, as
provided in Section 2.4(c) of the Existing LSA.
<PAGE>
(ii) As payments are received in respect of the
Attitash Loan, the Jordan Bowl Loan, the Killington Loan and
the Mt. Snow Loan, Litchfield, Textron Financial Corporation
and Green Tree Financial Servicing Corporation shall each
individually determine, in consultation with GSRP, how such
principal payments are to allocated to its Steamboat
Construction Project Advance Commitment and its Canyons
Construction Project Advance Commitment, as contemplated in
Attachment 3 hereto.
(h) Amendments. The parties hereto agree that the Existing LSA
is, and shall be deemed to be, amended and modified by the terms and
provisions of this Section 1 and Attachments 1, 2 and 3 hereto.
(i) Representations; Miscellaneous Provisions.
(i) Each of FINOVA, Litchfield, Textron Financial
Corporation and Green Tree Financial Servicing Corporation
represent and warrant to each other that (A) it is a company
duly organized and validly existing and has all necessary
power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated herein and perform
its obligations hereunder and (B) its execution and delivery
of and performance of its obligations under this Agreement and
the consummation of the transactions contemplated herein have
been duly authorized and approved and will not contravene any
law or regulation or any contract or other obligations binding
on it.
(ii) FINOVA represents and warrants to Textron
Financial Corporation and Green Tree Financial Servicing
Corporation that it is an Eligible Assignee and that no
further action or authorization is necessary for it to
consummate the transactions contemplated under this Agreement.
Litchfield represents and warrants to Textron Financial
Corporation and Green Tree Financial Servicing Corporation
that it is an Eligible Assignee and that no further action or
authorization is necessary for it to consummate the
transactions contemplated under this Agreement.
(iii) Textron Financial Corporation, as a seller of
the undivided interests in and to its share of the Steamboat
Loan, as shown on Attachment 3 hereto, represents and warrants
to Litchfield, as the buyer of the same, that
(A) Textron Financial Corporation owns all
right, title and interest in and to the portion of
the Steamboat Loan sold, assigned and transferred to
Litchfield under this Section 1, as shown on
Attachment 3 hereto, which portion of the Steamboat
Loan is free and clear of all security interests,
liens, charges, encumbrances and rights of others
(other than those of GSRP under the Amended LSA) and
is, to the best of Textron Financial Corporation's
knowledge, free of any adverse claims or defenses or
rights of offset of GSRP,
<PAGE>
(B) no further action or authorization is
required for Textron Financial Corporation to effect
such sale, assignment and transfer, and
(C) Textron Financial Corporation has not
received notice of the existence of any Default or
Event of Default (other than any that Textron
Financial Corporation knows is no longer continuing
after giving effect to this Agreement and the
transactions contemplated herein).
(iv) Textron Financial Corporation, as a seller of
the undivided interests in and to its share of the Canyons
Loan to FINOVA, as shown on Attachment 3 hereto, represents
and warrants to FINOVA, as the buyer of the same, that
(A) Textron Financial Corporation owns all
right, title and interest in and to the portion of
the Canyons Loan sold, assigned and transferred to
FINOVA under this Section 1, as shown on Attachment 3
hereto, which portion of the Canyons Loan is free and
clear of all security interests, liens, charges,
encumbrances and rights of others (other than those
of GSRP under the Amended LSA) and is, to the best of
Textron Financial Corporation's knowledge, free of
any adverse claims or defenses or rights of offset of
GSRP,
(B) no further action or authorization is
required for Textron Financial Corporation to effect
such sale, assignment and transfer, and
(C) Textron Financial Corporation has not
received notice of the existence of any Default or
Event of Default (other than any that Textron
Financial Corporation knows is no longer continuing
after giving effect to this Agreement and the
transactions contemplated herein).
(v) Textron Financial Corporation, as a seller of the
undivided interests in and to its share of the Steamboat Loan
to Green Tree Financial Servicing Corporation, as shown on
Attachment 3 hereto, represents and warrants to Green Tree
Financial Servicing Corporation, as the buyer of the same,
that
(A) Textron Financial Corporation owns all
right, title and interest in and to the portion of
the Steamboat Loan sold, assigned and transferred to
Green Tree Financial Servicing Corporation under this
Section 1, as shown on Attachment 3 hereto, which
portion of the Steamboat Loan is free and clear of
all security interests, liens, charges, encumbrances
and rights of others (other than those of GSRP under
the Amended LSA) and is, to the best of Textron
Financial Corporation's knowledge, free of any
adverse claims or defenses or rights of offset of
GSRP,
<PAGE>
(B) no further action or authorization is
required for Textron Financial Corporation to effect
such sale, assignment and transfer, and
(C) Textron Financial Corporation has not
received notice of the existence of any Default or
Event of Default (other than any that Textron
Financial Corporation knows is no longer continuing
after giving effect to this Agreement and the
transactions contemplated herein).
(vi) Green Tree Financial Servicing Corporation, as a
seller of the undivided interests in and to its share of the
Canyons Loan, the Steamboat Loan, the Attitash Loan, the
Jordan Bowl Loan, the Killington Loan and the Mt. Snow Loan to
Litchfield, as shown on Attachment 3 hereto, represents and
warrants to Litchfield, as the buyer of the same, that
(A) Green Tree Financial Servicing
Corporation owns all right, title and interest in and
to the portion of the Canyons Loan, the Attitash
Loan, the Jordan Bowl Loan, the Killington Loan and
the Mt. Snow Loan sold, assigned and transferred to
Litchfield under this Section 1, as shown on
Attachment 3 hereto, which portion of the Canyons
Loan, the Attitash Loan, the Jordan Bowl Loan, the
Killington Loan and the Mt. Snow Loan is free and
clear of all security interests, liens, charges,
encumbrances and rights of others (other than those
of GSRP under the Amended LSA) and is, to the best of
Green Tree Financial Servicing Corporation's
knowledge, free of any adverse claims or defenses or
rights of offset of GSRP,
(B) no further action or authorization is
required for Green Tree Financial Servicing
Corporation to effect such sale, assignment and
transfer, and
(C) Green Tree Financial Servicing
Corporation has not received notice of the existence
of any Default or Event of Default (other than any
that Green Tree Financial Servicing Corporation knows
is no longer continuing after giving effect to this
Agreement and the transactions contemplated herein).
(vi) Green Tree Financial Servicing Corporation, as a
seller of the undivided interests in and to its share of the
Canyons Loan to FINOVA, as shown on Attachment 3 hereto,
represents and warrants to FINOVA, as the buyer of the same,
that
<PAGE>
(A) Green Tree Financial Servicing
Corporation owns all right, title and interest in and
to the portion of the Canyons Loan sold, assigned and
transferred to FINOVA under this Section 1, as shown
on Attachment 3 hereto, which portion of the Canyons
Loan is free and clear of all security interests,
liens, charges, encumbrances and rights of others
(other than those of GSRP under the Amended LSA) and
is, to the best of Green Tree Financial Servicing
Corporation's knowledge, free of any adverse claims
or defenses or rights of offset of GSRP,
(B) no further action or authorization is
required for Green Tree Financial Servicing
Corporation to effect such sale, assignment and
transfer, and
(C) Green Tree Financial Servicing
Corporation has not received notice of the existence
of any Default or Event of Default (other than any
that Green Tree Financial Servicing Corporation knows
is no longer continuing after giving effect to this
Agreement and the transactions contemplated herein).
(vii) Each of FINOVA, Litchfield, Green Tree
Financial Servicing Corporation and Textron Financial
Corporation acknowledges to each other that it is entering
into the transactions contemplated herein on the basis of its
own investigation and evaluation of the creditworthiness of
GSRP and the Collateral and such other issues and information
as each of them has judged appropriate and prudent, without
reliance on any representation or warranty made by the
Administrative Agent or the seller to such Person of the
interests being purchased hereunder except for representations
and warranties set forth herein.
(viii) Neither Textron Financial Corporation nor
Green Tree Financial Servicing Corporation, as sellers of the
interests in the Loans, as described on Attachment 3 hereto,
shall have any responsibility to any buyer thereof hereunder
with respect to (A) the due execution, legality, validity,
enforceability, genuineness, sufficiency, or collectibility of
the Loans, the Collateral and/or the Security Documents, (B)
any representations, warranties or other statements made in or
in connection with any of the Security Documents by GSRP, (C)
the financial condition or creditworthiness of GSRP, the
Parent or any other third party, (D) the performance of or
compliance with any of the terms or provisions of the Security
Documents by GSRP or any other third party , (E) the
performance of or compliance with any of the terms of the
Parent/BKB Credit Facility by the Parent or any other third
party or (F) the inspection of any of the Property, books or
records of GSRP.
<PAGE>
(ix) If Textron Financial Corporation, as a seller of
the interests in the Loans, as described on Attachment 3
hereto, shall receive any payments from the Administrative
Agent or GSRP that otherwise have been sold, assigned and
transferred to FINOVA, Litchfield or Green Tree Financial
Servicing Corporation hereunder, it shall hold the same in
trust for such Person and promptly deliver the same to such
Person. If Green Tree Financial Servicing Corporation, as a
seller of the interests in the Loans, as described on
Attachment 3 hereto, shall receive any payments from the
Administrative Agent or GSRP that otherwise have been sold,
assigned and transferred to FINOVA or Litchfield hereunder, it
shall hold the same in trust for such Person and promptly
deliver the same to such Person.
(x) Payments to Litchfield under the Amended LSA
shall be made as provided for in Attachment 4 hereto. Payments
to FINOVA under the Amended LSA shall be made as provided for
in Attachment 4 hereto. Notices to Litchfield under the
Amended LSA shall be sent to the address as set forth in
Attachment 4 hereto. Notices to FINOVA under the Amended LSA
shall be sent to the address as set forth in Attachment 4
hereto. Payments to Textron Financial Corporation under this
Section 1shall be made as provided for in Attachment 4 hereto.
Payments to Green Tree Financial Servicing Corporation under
this Section 1 shall be made as provided for in Attachment 4
hereto.
2. AMENDMENTS OF EXISTING LSA.
The Existing LSA is hereby amended as follows:
(a) Amended and Restated Defined Terms. The following new
term is hereby added to Section 1.1 of the Existing LSA:
Maximum Outstanding Loan Limit - means, at any time,
$105,000,000.
Second Amendment Agreement -- means that certain
Accession, Loan Sale and Second Amendment Agreement, dated
June 24,1999, which amends and supplements this Agreement.
(b) Full Syndication Date. GSRP, the Administrative Agent,
FINOVA, Litchfield, Green Tree Financial Servicing Corporation, as an
Original Lender, and Textron Financial Corporation, as an Original
Lender, agree and acknowledge that the Full Syndication Date shall be
deemed to have occurred on the Second Amendment Closing Date and that
the Syndication Period shall be deemed terminated as of the Second
Amendment Closing Date. All restrictions in the Existing LSA in respect
of the Steamboat Construction Borrowing Base with respect to the
Syndication Period shall cease and be of no further force and effect
after the Second Amendment Closing Date.
(c) Interim Steamboat Construction Advance. The Interim
Steamboat Construction Advance Commitment is hereby terminated and the
outstanding principal balance of the Interim Steamboat Construction
Advance is hereby made part of the Steamboat Construction Project
Advance Note of Textron Financial Corporation, as a Steamboat
Construction Project Advance Lender and shall be subject to the sales,
assignments and transfers provided for in respect thereof in Section 1
hereof.
<PAGE>
(d) Deliveries; Special Conditions; Special Undertakings.
(i) GSRP agrees to deliver, or cause to be delivered, to each
Steamboat Construction Project Advance Lender and each Canyons
Construction Project Advance Lender (unless such Lender shall
specifically request not to be covered by this subclause (e)) all
documents, certificates, requests and other deliverables in respect of
its particular Advance (including, without limitation, all Construction
Cost Certificates, the Final Construction Cost Certificate, all
Architect's Construction Cost Certificates, the Architect's Final
Construction Cost Certificate and all Nonconstruction Cost Certificates
in respect of the Steamboat Project or the Canyons Project, as the case
may be) that it delivers to the Administrative Agent with respect to
each requested Steamboat Construction Project Advance, each requested
Canyons Construction Project Advance, the Canyons Inventory Advance and
the Steamboat Inventory Advance, and GSRP further agrees to address, or
cause to be addressed, each of such documents, certificates, requests
and other deliverables to each such Lender (in addition to the
Administrative Agent).
(ii) The Administrative Agent agrees to have its architects or
other experts in respect of the Canyons Project or the Steamboat
Project address any certificates delivered to it in respect of such
Project also to each Steamboat Construction Project Advance Lender and
each Canyons Construction Project Advance Lender (unless such Lender
shall specifically request not to be covered by this subclause (e)) so
that each such Lender may rely thereon.
(iii) GSRP acknowledges and agrees that each Steamboat
Construction Project Advance Lender and each Canyons Construction
Project Advance Lender (unless such Lender shall specifically request
not to be covered by this subclause (e)) shall not be obligated to fund
any Steamboat Construction Project Advance, any Canyons Construction
Project Advance, the Steamboat Inventory Advance or the Canyons
Inventory Advance unless and until it is satisfied, in its reasonable
discretion, that all conditions precedent thereto have been satisfied.
(iv) GSRP acknowledges and agrees that each Steamboat
Construction Project Advance Lender and each Canyons Construction
Project Advance Lender (unless such Lender shall specifically request
not to be covered by this subclause (e)) shall not be obligated to fund
any Steamboat Construction Project Advance, any Canyons Construction
Project Advance, the Steamboat Inventory Advance or the Canyons
Inventory Advance if, in its reasonable discretion, it determines that
the Administrative Agent or GSRP is in default of any of its duties or
obligations to such Lender under the Amended LSA and/or any other
Security Document.
<PAGE>
(v) GSRP acknowledges and agrees that all information and
financial statements and other reports to be provided under Section
7.14 of the Amended LSA by GSRP shall be directly delivered by GSRP to
each Steamboat Construction Project Advance Lender and each Canyons
Construction Project Advance Lender as well as the other Lenders and
the Administrative Agent. GSRP agrees to deliver to each Steamboat
Construction Project Advance Lender and each Canyons Construction
Project Advance Lender and each of the other Lenders copies of each of
American Ski Company's Quarterly Reports on Form 10-Q and Annual
Reports on Form 10-K filed by American Ski Company with the Securities
Exchange Commission after the Second Amendment Closing Date reasonably
promptly after the filing thereof.
(vi) The Administrative Agent agrees to deliver to each of the
Canyons Construction Project Advance Lenders, each of Canyons Inventory
Advance Lenders, each of the Steamboat Construction Project Advance
Lenders and each of the Steamboat Inventory Advance Lenders with
respect to each Steamboat Construction Project Advance, each Steamboat
Inventory Advance, each Canyons Construction Project Advance and each
Canyons Inventory Advance in which such Lender is participating, at
least three (3) Business Days prior to the making of any such Advance,
a written notice thereof, which written notice shall contain the
following information: (w) the total amount of such Advance, (x) the
Pro Rata Share of each Lender in respect of such Advance, (y) the
calculation of the Pro Rata Share percentage of such Lender in respect
of such Advance and (z) the advance date for such Advance. The
deliveries set forth in this clause (vi) shall be an additional
condition precedent to the making of any Advance referred to in this
clause (vi).
(e) Canyons Project.
(i) The definitions of "Canyons Construction Project Advance
Commitment" and "Canyons Inventory Advance Commitment" in Section 1.1
are hereby amended and restated in their entirety as follows:
Canyons Construction Project Advance Commitment--
means, with respect to each Canyons Construction Project
Advance Lender, the amount set forth underneath its signature
hereto, as amended by the Second Amendment Agreement, or as
otherwise set forth on Attachment 1 to the Second Amendment
Agreement, as the case may be, with respect to the making of
Canyons Construction Project Advances and Canyons Interest
Advances, provided that
(a) the Canyons Construction Project Advance Commitment of
FINOVA Capital Corporation shall never exceed 50% of the Canyons
Construction Project Borrowing Base,
<PAGE>
(b) the Canyons Construction Project Advance
Commitment of the other Canyons Construction Project
Advance Lenders (other than FINOVA Capital
Corporation) shall be equal to their respective
ratable share (based on their respective commitment
amounts set forth underneath their respective
signatures hereto with respect to the making of
Canyons Construction Project Advances and Canyons
Interest Advances -excluding in any case from such
determination the commitment of FINOVA Capital
Corporation) of the difference between (i) the
Canyons Construction Project Borrowing Base minus
(ii) the amount of the Canyons Construction Project
Advance Commitment of FINOVA Capital Corporation
determined in clause (a) above (but in no case shall
the Canyons Construction Project Advance Commitment
of any such other Canyons Construction Project
Advance Lenders exceed the aforesaid amount set forth
underneath their respective signatures hereto with
respect to the making of Canyons Construction Project
Advances and Canyons Interest Advances, and
(c) the amount of the Canyons Construction
Project Advance Commitment shall be adjusted to give
effect to any assumptions of such Commitments
permitted under Section 2.3(a)(i) hereof and any
assignments of Commitments permitted under Section
2.6(b) hereof.
Canyons Inventory Advance Commitment-- means, with
respect to each Canyons Inventory Advance Lender, the amount
set forth underneath its signature hereto with respect to the
Canyons Inventory Advances, provided that
(a) the Canyons Inventory Advance Commitment
of FINOVA Capital Corporation shall never exceed 50%
of the then outstanding aggregate principal balance
of all of the Canyons Construction Project Advances
and Canyons Interest Advances,
(b) the Canyons Inventory Advance Commitment
of the other Canyons Inventory Advance Lenders (other
than FINOVA Capital Corporation) shall be equal to
their ratable share (based on their respective
commitment amounts set forth underneath their
respective signatures hereto with respect to the
making of Canyons Inventory Advances -- excluding in
any case from such determination the commitment of
FINOVA Capital Corporation) of the difference between
(i) the aggregate then outstanding principal amount
of all of the Canyons Construction Project Advances
and Canyons Interest Advances minus (ii) the amount
of the Canyons Inventory Advance Commitment of FINOVA
Capital Corporation determined in clause (a) above
(but in no case shall the Canyons Inventory Advance
Commitment of any such other Canyons Inventory
Advance Lenders exceed the aforesaid amount set forth
underneath their respective signatures hereto with
respect to the making of Canyons Inventory Advances,
and
(c) the amount of the Canyons Inventory Advance
Commitment shall be adjusted to give effect to any
assumptions of such Commitments permitted under Section
2.3(a)(i) hereof and any assignments of Commitments
permitted under Section 2.6(b) hereof. (ii) GSRP, the
Original Lenders, the Administrative Agent, FINOVA and
Litchfield agree that Section 2.1(b)(i)(D) of the Existing
LSA is hereby amended and restated as follows:
<PAGE>
(D) if the aggregate amount of the purchase
prices payable under Validated Contracts arising from
the sales of Canyons Quartershare Interests is less
than $42,900,000.
(iii) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 2.1(b)(ii) of
the Existing LSA is hereby amended and restated as follows:
(ii) (A) on the date of the making of any
Canyons Construction Project Advance (and after
giving effect thereto) the aggregate outstanding
principal amount of all Construction Project Advances
made hereunder with respect to all of the Projects
shall not exceed the Aggregate Construction Project
Borrowing Base, determined as of such date, (B) on
the date of the making of any Canyons Construction
Project Advance hereunder (and after giving effect
thereto) the aggregate original principal amount of
all Advances made hereunder shall not exceed
$177,000,000, provided that in making such
calculation there shall be no duplication in respect
of any Construction Project Advance or Advances which
shall have been refinanced by an Inventory Advance,
(C) on the date of the making of any Canyons
Construction Project Advance hereunder (and after
giving effect thereto) the sum of the aggregate
original principal amount of all Canyons Construction
Project Advances and the aggregate original principal
amount of all Canyons Interest Advances made by all
Canyons Construction Project Advance Lenders shall
not exceed $75,000,000 and the sum of the aggregate
original principal amount of all Canyons Construction
Project Advances and the aggregate original principal
amount of all Canyons Interest Advances made by
FINOVA Capital Corporation shall not exceed
$37,500,000 and (D) on the date of the making of any
Canyons Construction Project Advance hereunder (and
after giving effect thereto) the aggregate
outstanding principal amount of all Canyons
Construction Project Advances and all Canyons
Interest Advances held by FINOVA Capital Corporation
shall not exceed (1) 50% of the aggregate outstanding
principal amount of all Canyons Construction Project
Advances and all Canyons Interest Advances held by
all Canyons Construction Project Advance Lenders and
(2) $30,000,000.
(iv) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 2.4(c)(iii)(B)
of the Existing LSA is hereby amended and restated as follows:
<PAGE>
(B) GSRP hereby requests the Canyons
Construction Project Advance Lenders (such request to
be deemed a standing request unless rescinded in
writing by GSRP), and hereby authorizes the Canyons
Construction Project Advance Lenders, to make an
advance (each such advance to be made by the Canyons
Construction Project Advance Lenders is referred to
herein as a "Canyons Interest Advance") to it on the
10th day of each calendar month during the Canyons
Commitment Period in an amount equal to the lesser of
(y) the amount of accrued interest due and payable on
such day to the Canyons Construction Project Advance
Lenders in respect of the Canyons Loan and (z) an
amount, which when added to the aggregate outstanding
principal amounts of all prior Canyons Construction
Project Advances and Canyons Interest Advances would
not exceed the Canyons Construction Project Borrowing
Base, and the Canyons Construction Project Advance
Lenders agree, subject only to the lack of existence
of a Default or Event of Default and to the
satisfaction of the conditions set forth below, to
extend their respective Pro Rata Shares of each such
Canyons Interest Advance to GSRP, provided that all
of the proceeds of each such Pro Rata Share shall be
used by the Canyons Construction Project Advance
Lender related to such Pro Rata Share for the sole
purpose of satisfying (in whole or part, as the case
may be) the accrued interest due and payable on such
10th day of such month and GSRP hereby irrevocably
authorizes and instructs such use. To the extent that
the amount of any such Canyons Interest Advance is
insufficient to pay in full the amount of such
interest due and payable on such 10th day of such
month or no such Canyons Interest Advance is made,
GSRP shall pay, on such 10th day, the balance of
interest due and payable on such 10th day. In
connection with any such Canyons Interest Advance,
GSRP shall deliver to the Administrative Agent title
insurance endorsements to the Title Insurance Policy
{Blanket} in respect of the Canyons Project in form
and substance reasonably satisfactory to the
Administrative Agent whereby the effective date of
such Title Insurance Policy {Blanket} shall be made
the date of such Canyons Interest Advance, all
exclusions and/or exceptions not satisfactory to the
Administrative Agent shall have been removed or
appropriate endorsements in respect thereof shall
have been obtained; such Title Insurance Policy
{Blanket} shall be in an amount not less than the sum
of the principal amount of the Canyons Loan
outstanding after giving effect to such Canyons
Interest Advance. All premiums in respect of such
endorsement to such Title Insurance Policy {Blanket}
shall have been paid in full and evidence thereof
shall have been delivered to the Administrative
Agent. No Canyons Inventory Advance Lender shall be
obligated to make any Canyons Interest Advance. The
additional conditions to any Canyons Interest Advance
referred to above are as follows: (1) on the date of
the making of any Canyons Interest Advance hereunder
(and after giving effect thereto) the sum of the
aggregate original principal amount of all Canyons
Construction Project Advances and the aggregate
original principal amount of all Canyons Interest
Advances made by all Canyons Construction Project
Advance Lenders shall not exceed $75,000,000 and the
sum of the aggregate original principal amount of all
Canyons Construction Project Advances and the
aggregate original principal amount of all Canyons
Interest Advances made by FINOVA Capital Corporation
shall not exceed $37,500,000 and (2) on the date of
the making of any Canyons Interest Advance hereunder
(and after giving effect thereto) the aggregate
outstanding principal amount of all Canyons
Construction Project Advances and all Canyons
Interest Advances held by FINOVA Capital Corporation
shall not exceed (y) 50% of the aggregate outstanding
principal amount of all Canyons Construction Project
Advances and all Canyons Interest Advances held by
all Canyons Construction Project Advance Lenders and
(z) $30,000,000.
(v) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 2.5(f) of the
Existing LSA is hereby amended by adding the following
language at the end of such Section:
Notwithstanding anything to the contrary in
this Section 2.5(f), the proceeds of sales of the
types described in the first sentence of this Section
2.5(f) with respect to the Canyons Project shall be
paid to the Administrative Agent, but the
Administrative Agent shall apply such proceeds as set
forth in Section 2.5(b)(ii) hereof instead of
depositing such proceeds in the Cash Collateral
Account. Although prepayment of the Canyons Loan from
such proceeds is not permitted during the first 12
months of the term of this Agreement, if sales of the
types described above do occur, GSRP shall pay a
Prepayment Premium in respect thereof to the
Administrative Agent (and disbursed to the Canyons
Lenders in accordance with their Pro Rata Shares of
the Canyons Loan), which Prepayment Premium shall be
deemed to be 3% of the amount prepaid, and, in
addition, the Canyons Required Lenders shall be
entitled to exercise any other remedies provided to
them under this Agreement.
Notwithstanding anything to the contrary in
this Section 2.5(f), the proceeds of sales of the
types described in the first sentence of this Section
2.5(f) with respect to the Steamboat Project shall be
paid to the Administrative Agent, but the
Administrative Agent shall apply such proceeds as set
forth in Section 2.5(b)(ii) hereof instead of
depositing such proceeds in the Cash Collateral
Account. Although prepayment of the Steamboat Loan
from such proceeds is not permitted during the first
12 months of the term of this Agreement, if sales of
the types described above do occur, GSRP shall pay a
Prepayment Premium in respect thereof to the
Administrative Agent (and disbursed to the Steamboat
Lenders in accordance with their Pro Rata Shares of
the Steamboat Loan), which Prepayment Premium shall
be deemed to be 3% of the amount prepaid, and, in
addition, the Steamboat Required Lenders shall be
entitled to exercise any other remedies provided to
them under this Agreement.
(vi) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 3.5(c)(ii) of
the Existing LSA is hereby amended by adding the following
language at the end of such Section:
<PAGE>
Notwithstanding anything to the contrary in
this Section 3.5(c)(ii), if such losses for the
Canyons Project exceed $1,000,000, the Administrative
Agent is authorized to collect and receive the
insurance proceeds for such losses, and each
insurance company is authorized and directed to make
payment for all such loses directly to the
Administrative Agent instead of to GSRP. In the event
any insurance company fails to disburse directly and
solely to the Administrative Agent, but disburses
instead either solely to GSRP or to GSRP (and/or any
Association) and the Administrative Agent jointly,
GSRP agrees immediately to endorse and transfer, or
cause to be endorsed and transferred, such proceeds
to the Administrative Agent, and upon its failure to
so endorse and transfer, GSRP unconditionally and
irrevocably appoints Administrative Agent as GSRP's
agent and attorney-in-fact, coupled with an interest,
to endorse and transfer such proceeds to the
Administrative Agent on behalf of the Lenders. After
deducting from said insurance proceeds all of its
expenses incurred in the collection and
administration of such sums, including attorneys'
fees, the Administrative Agent will apply the net
proceeds to the repair and/or restoration of the
Canyons Project subject to and in accordance with the
scope and plans for such repair and restoration
approved by the Administrative Agent in accordance
with this Section 3.5(c)(ii).
Notwithstanding anything to the contrary in
this Section 3.5(c)(ii), if such losses for the
Steamboat Project exceed $1,000,000, the
Administrative Agent is authorized to collect and
receive the insurance proceeds for such losses, and
each insurance company is authorized and directed to
make payment for all such loses directly to the
Administrative Agent instead of to GSRP. In the event
any insurance company fails to disburse directly and
solely to the Administrative Agent, but disburses
instead either solely to GSRP or to GSRP (and/or any
Association) and the Administrative Agent jointly,
GSRP agrees immediately to endorse and transfer, or
cause to be endorsed and transferred, such proceeds
to the Administrative Agent, and upon its failure to
so endorse and transfer, GSRP unconditionally and
irrevocably appoints Administrative Agent as GSRP's
agent and attorney-in-fact, coupled with an interest,
to endorse and transfer such proceeds to the
Administrative Agent on behalf of the Lenders. After
deducting from said insurance proceeds all of its
expenses incurred in the collection and
administration of such sums, including attorneys'
fees, the Administrative Agent will apply the net
proceeds to the repair and/or restoration of the
Steamboat Project subject to and in accordance with
the scope and plans for such repair and restoration
approved by the Administrative Agent in accordance
with this Section 3.5(c)(ii).
(vii) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 6.2(d) of the
Existing LSA is hereby amended by adding the following
language at the end of such Section:
<PAGE>
With respect to any Canyons Construction
Project Advance, the aggregate total increase in the
construction costs for all change orders for the
Canyons Project shall not exceed $200,000 without the
prior written consent of FINOVA, and no change orders
involving a material modification of the design of
the building, a material change in the quality of
workmanship or materials or a material delay in
completion of construction in respect of the Canyons
Project shall have been approved without the prior
written consent of FINOVA.
(viii) GSRP, the Original Lenders, the Administrative
Agent, FINOVA and Litchfield agree that Section 10 of the
Existing LSA is hereby amended by adding the following
language at the end of such Section:
(I) As a point of clarification, if the
Administrative Agent resigns or is removed under
Section 10.5 hereof, such Administrative Agent shall
stay in place and perform all of its duties under
this Agreement in accordance with the terms hereof
until its successor is appointed. Upon appointment of
its successor, the existing Administrative Agent
shall take all actions necessary to transfer its
rights, duties and obligations to the successor
Administrative Agent, including, without limitation,
the transfer and continued perfection of all rights
with respect to bank accounts, liens, security
interests, assignments, insurance policies, bonds,
title insurance policies, claims, books, records,
etc.
(II) The instrument or concurrent
instruments delivered by the Required Parties to GSRP
and the Administrative Agent to remove the
Administrative Agent under Section 10.5 shall require
the signatures of all Required Parties other than
Textron Financial Corporation but shall not require
the signature of Textron Financial Corporation so
long as Textron Financial Corporation is the
Administrative Agent.
(III) Notwithstanding anything to the
contrary in Section 10.5, the resignation or removal
of the Administrative Agent shall not affect the
liability of the Administrative Agent due to any
actions taken or omitted to be taken by it in its
role of Administrative Agent that constitutes gross
negligence or wilful misconduct on the part of the
Administrative Agent.
(IV) As a point of clarification, Lenders'
agreement under Section 10.9 hereof to pay to
Administrative Agent the fees described therein shall
not be construed to require the Lenders to pay
out-of-pocket the fees that Borrower owes to the
Administrative Agent, and such fees are to be paid
only by deduction from payments received from
Borrower.
<PAGE>
(V) Notwithstanding anything to the contrary
in Section 10.10 hereof or anything contained
elsewhere in this Agreement or the Security
Documents, the Canyons Construction Project Required
Lenders (or after the date of the Canyons Inventory
Advance, the Canyons Inventory Required Lenders, as
applicable, the "Canyons Required Lenders") shall be
competent, and no other group of Lenders (whether
decisions are to be made by Required Parties, Project
Required Lenders or otherwise pursuant to this
Agreement or the Security Documents) shall be
competent, to approve and/or to direct the
Administrative Agent as to any action (or decision
not to act) under this Agreement or the Security
Documents with respect to the Canyons Project, the
Canyons Loan, the Canyons Obligations or the
Collateral arising from the Canyons Project
(including, without limitation, the exercise of all
rights and remedies with respect thereto, any
acceleration of the Canyons Loan, and any foreclosure
of the Collateral arising from the Canyons Project).
Without limiting the foregoing, the Canyons Required
Lenders shall be competent to direct the
Administrative Agent regarding actions to be taken
with respect to Events of Default, acceleration,
foreclosure and other collection actions, insurance
proceeds, casualty proceeds, title insurance
policies, actions, insurance proceeds, casualty
proceeds, title insurance policies, performance
bonds, litigation and other matters involving the
Canyons Project or the Canyons Project Lenders
regardless of the fact that liens, lawsuits,
insurance policies, title policies, bonds, and other
documents and agreements may be in the name of
Textron Financial Corporation in its role as
Administrative Agent.
<PAGE>
Notwithstanding anything to the contrary in
Section 10.10 hereof or anything contained elsewhere
in this Agreement or the Security Documents, the
Steamboat Construction Project Required Lenders (or
after the date of the Steamboat Inventory Advance,
the Canyons Inventory Required Lenders, as
applicable, the "Steamboat Required Lenders") shall
be competent, and no other group of Lenders (whether
decisions are to be made by Required Parties, Project
Required Lenders or otherwise pursuant to this
Agreement or the Security Documents) shall be
competent, to approve and/or to direct the
Administrative Agent as to any action (or decision
not to act) under this Agreement or the Security
Documents with respect to the Steamboat Project, the
Steamboat Loan, the Steamboat Obligations or the
Collateral arising from the Steamboat Project
(including, without limitation, the exercise of all
rights and remedies with respect thereto, any
acceleration of the Steamboat Loan, and any
foreclosure of the Collateral arising from the
Steamboat Project). Without limiting the foregoing,
the Steamboat Required Lenders shall be competent to
direct the Administrative Agent regarding actions to
be taken with respect to Events of Default,
acceleration, foreclosure and other collection
actions, insurance proceeds, casualty proceeds, title
insurance policies, actions, insurance proceeds,
casualty proceeds, title insurance policies,
performance bonds, litigation and other matters
involving the Steamboat Project or the Steamboat
Project Lenders regardless of the fact that liens,
lawsuits, insurance policies, title policies, bonds,
and other documents and agreements may be in the name
of Textron Financial Corporation in its role as
Administrative Agent.
(f) Indemnification Limitation.
(i) Neither FINOVA nor Litchfield shall be obligated
to indemnify the Administrative Agent under Section 10.4 of
the Amended LSA in respect of any liabilities, obligations,
losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind or nature
whatsoever incurred by the Administrative Agent and referred
to in said Section 10.4 that arose prior to the Second
Amendment Closing Date or were connected with the performance
of duties of the Administrative Agent prior to the Second
Amendment Closing Date under the Amended LSA and/or under the
other Security Documents. Any such indemnification referred to
above in this clause (g) required under Section 10.4 of the
Amended LSA shall be effected as if FINOVA and Litchfield were
not Lenders.
(ii) With respect to the Administrative Agent's right
to indemnity under Section 10.4 hereof, FINOVA's Pro Rata
Share indemnification of the Administrative Agent is hereby
limited to such matters indemnified thereunder that arise from
acts of the Administrative Agent taken at the direction of the
Canyons Required Lenders after the Second Amendment Closing
Date.
(iii) With respect to the Administrative Agent's
right to indemnity under Section 10.4 hereof, Litchfield's Pro
Rata Share indemnification of the Administrative Agent is
hereby limited to such matters indemnified thereunder that
arise from acts of the Administrative Agent taken at the
direction of Required Lenders as to which Litchfield is a
member after the Second Amendment Closing Date.
(iv) With respect to the Administrative Agent's right
to indemnity under Section 10.4 hereof, Green Tree's Pro Rata
Share indemnification of the Administrative Agent is hereby
limited to such matters indemnified thereunder that arise from
acts of the Administrative Agent taken at the direction of
Required Lenders as to which Green Tree is a member after the
Second Amendment Closing Date.
(v) With respect to the Administrative Agent's right
to indemnity under Section 10.4 hereof, Textron's Pro Rata
Share indemnification of the Administrative Agent is hereby
limited to such matters indemnified thereunder that arise from
acts of the Administrative Agent taken at the direction of
Required Lenders as to which Textron is a member after the
Second Amendment Closing Date.
<PAGE>
(g) Indemnification by Administrative Agent. In accordance
with Section 10.2(c) of the Amended LSA and subject to the limitations
and qualifications set forth therein, the Administrative Agent hereby
agrees and confirms that it shall be liable to FINOVA and Litchfield
(together with their respective officers, directors, employees and
agents) for its gross negligence and its willful conduct in respect of
actions taken or omitted to be taken by the Administrative Agent prior
to the Second Amendment Closing Date under or in connection with the
Amended LSA and the other Security Documents.
(h) Special Reports. An additional sentence is hereby to the
end of Section 7.14(h) of the Existing LSA:
In connection with the delivery of each of the
quarterly statements referred to in Section 7.14(b)
above, Borrower shall deliver to each Lender a matrix
which shall show, as of the end of the quarterly
period then being reported upon, the outstanding
principal balance, the remaining Commitment
availability, the Pro Rata Share of such remaining
Commitments and the percentage of the aggregate
outstanding principal amount of Advances of such
Lender in respect of the Steamboat Loan, Canyons
Loan, the Attitash Loan, the Killington Loan, the
Mount Snow Loan and the Jordan Bowl Loan.
5. WARRANTIES AND REPRESENTATIONS
GSRP hereby represents and warrants as of the date hereof as follows,
which representations and warranties are hereby incorporated into and made part
of the Amended LSA:
(a) Warranties and Representations True and Correct. Except as
otherwise disclosed on Attachment 5 hereto, each of the representations
and warranties contained in Section 4 of the Existing LSA (other than
Section 4.4 thereof) is true and correct as of the date hereof. Without
limiting the foregoing and in addition thereto, GSRP hereby:
(i) represents and warrants, except with respect to
the Permitted Exceptions, that all Liens granted to the
Administrative Agent under the Existing LSA and the other
Security Documents are duly granted, valid, perfected and
prior in right to all other Liens that now or hereafter may be
granted to or held by any other Person; and
(ii) acknowledges that no claims, actions, causes of
actions, offsets, counterclaims and/or liabilities exist against,
or are held by it in respect of, any Original Lender or the
Administrative Agent under the Existing LSA or any of the
Security Documents.
(b) Transaction Is Legal and Authorized. The execution and
delivery of this Agreement and the other documents and instruments
contemplated herein, and compliance by GSRP with all of the provisions
of this Agreement, the Existing LSA, as amended hereby, and each of the
other documents set forth above are:
<PAGE>
(i) within the corporate powers of GSRP;
(ii) valid and legal acts and will not conflict with,
or result in any breach in any of the provisions of, or
constitute a default under, or result in the creation of any
Lien (except Liens contemplated under any of the Security
Documents) upon any Property of GSRP under the provisions of,
any agreement, charter instrument, bylaw or other instrument
to which GSRP is a party or by which its Property may be
bound.
(c) Governmental Consent. Neither the nature of GSRP, or of
any of its businesses or Properties, or any relationship between GSRP
and any other Person, or any circumstance in connection with the
execution or delivery of this Agreement and the other documents
contemplated in connection herewith, nor the operation of any Project
and the sale, or offering for sale, of any Quartershare Interest of any
of the Projects by GSRP, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of GSRP, as a condition of the
execution, delivery or performance of this Agreement and the other
documents contemplated in connection herewith.
(d) Restrictions of GSRP. GSRP will not be, on or after the
date hereof, a party to any contract or agreement which restricts its
right or ability to incur indebtedness under, or prohibits the
execution of, or compliance with, this Agreement by GSRP. GSRP has not
agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property
constituting the Collateral, whether now owned or hereafter acquired,
to be subject to a Lien and all Liens in favor of the Administrative
Agent in respect of such Collateral remain in full force and effect.
(e) Brokers' Fees. There are no brokers and finders which are
entitled to receive compensation for their services rendered to GSRP
with respect to the transactions described in this Agreement.
(f) No Defaults or Events of Default. No Default or Event of
Default has occurred or is continuing, nor does any event or condition
exist that would constitute a Default or an Event of Default upon the
execution and delivery of this Agreement. Since the Closing Date, no
material adverse change has occurred in or in respect of the Collateral
or any one or more of the Projects. After giving effect to this
Agreement, no default or event of default exists under the Parent/BKB
Credit Facility.
(g) Canyons Project. Attachment 6 hereto correctly reflects
the nature and composition of the equity contributions in respect of
the Canyons Project.
6. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall become effective on the Second Amendment Closing
Date upon the parties hereto executing this Agreement and upon each of the
following conditions being satisfied:
<PAGE>
(a) Secretary's Certificates.
The Administrative Agent shall have received a certificate of
the Secretary or any Assistant Secretary of GSRP, in form and substance
reasonably satisfactory to the Administrative Agent, dated as of the
Second Amendment Closing Date, certifying
(i) the adoption by the Board of Directors of GSRP of
a resolution authorizing GSRP to enter into this Agreement and
the transactions and instruments contemplated hereby, and
(ii) the incumbency and authority of, and verifying
the specimen signatures of, the officers of GSRP authorized to
execute and deliver this Agreement and the other documents
contemplated hereunder.
(b) Legal Opinion. GSRP shall have delivered to Administrative
Agent and the Lenders a legal opinion from its General Counsel in form
and substance reasonably satisfactory to the Lenders and Administrative
Agent.
(c) Expenses. GSRP shall have paid all fees and expenses
required to be paid by it pursuant to Section 11.2(d) of Existing LSA
pursuant to invoices or other bills submitted to GSRP (including the
fees and disbursements of counsel to Textron Financial Corporation) and
all costs and expenses of FINOVA and Litchfield in connection with
their becoming Lenders under the Existing LSA, as amended hereby
(including the reasonable fees and disbursements of counsel to FINOVA
and counsel to Litchfield).
(d) Other Documents.
(i) GSRP shall have executed and delivered (A) the
allonges referred to in Section 1 hereof to Textron Financial
Corporation and Green Tree Financial Servicing Corporation;
(B) the Canyons Construction Project Advance Note and Canyons
Inventory Advance Note to FINOVA; (C) the Canyons Construction
Project Advance Note, the Canyons Inventory Advance Note, the
Steamboat Construction Project Advance Note, the Steamboat
Inventory Advance Note, the Attitash Inventory Advance Note,
the Jordan Bowl Inventory Advance Note, the Killington
Inventory Advance Note and the Mt. Snow Inventory Advance Note
to Litchfield; (D) the Attitash Inventory Advance Note, the
Jordan Bowl Inventory Advance Note, the Killington Inventory
Advance Note and the Mt. Snow Inventory Advance Note to
Textron Financial Corporation; and (E) the Attitash Inventory
Advance Note, the Jordan Bowl Inventory Advance Note, the
Killington Inventory Advance Note and the Mt. Snow Inventory
Advance Note to Green Tree Financial Servicing Corporation.
(ii) GSRP shall have delivered to the Administrative
Agent date-down endorsements in respect of the Blanket
Mortgages and such endorsements shall show no Liens in and to
the Projects other than Permitted Exceptions.
<PAGE>
(iii) GSRP shall have obtained the written consent of
BankBoston, N.A., as agent under the Parent/BKB Credit
Facility to this Agreement and a written acknowledgment
(addressed to GSRP and each of the Lenders) from the Parent
that no default or event of default under, and as defined in,
the Parent/BKB Credit Facility exists as of the Second
Amendment Closing Date (and after giving effect to the
transactions contemplated herein).
(g) Fees. At the time of closing of FINOVA';s accession under
Section 1(a) hereof and its purchases under Section 1(b) hereof with
respect to the Canyons Loan, GSRP shall have paid to FINOVA a fee of
$300,000 in consideration of its becoming a Lender in respect of the
Canyons Project. GSRP shall have paid to Litchfield a fee of $100,000
in consideration of its becoming a Lender in respect of the Canyons
Project, the Steamboat Project, the Attitash Project, the Jordan Bowl
Project, the Killington Project and the Mt. Snow Project.
7. MISCELLANEOUS
(a) Parties, Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(b) Governing Law. This Agreement shall be governed by the
internal laws of the State of Maine. To the extent any provision of
this Agreement is not enforceable under applicable law, such provision
shall be deemed null and void and shall have no effect on the remaining
portions of this Agreement.
(c) Section Headings and Table of Contents and Construction.
The titles of the Sections appear as a matter of convenience only, do
not constitute a part hereof and shall not affect the construction
hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to
this Agreement as a whole and not to any particular Section or other
subdivision.
(d) Survival. All warranties, representations and covenants
made by GSRP herein or in the Existing LSA or in any certificate or
other instrument delivered by it or on its behalf under this Agreement
or in the Existing LSA shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this
Agreement.
(e) Effect of Amendment. Except as explicitly amended by, or
otherwise provided for in, this Agreement , the Existing LSA, the Notes
and the other Security Documents remain in full force and effect under
their respective terms as in effect immediately prior to the
effectiveness of this Agreement, and GSRP hereby affirms all of its
obligations thereunder.
<PAGE>
(f) Administrative Agent; Trust Agreement. The Original
Lenders hereby instruct the Administrative Agent, as administrative
agent under the Existing LSA and trustee under that certain Trust
Agreement referred to in the Maine Blanket Mortgage, to execute and
deliver this Agreement and all necessary instruments, certificates and
documents required in its reasonable judgment to consummate the
transactions contemplated in this Agreement.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist
of a number of copies hereof, each signed by less than all, but
together signed by all, of the parties hereto.
[Remainder of page intentionally left blank. Next page is signature page.]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
GSRP: Lender:
GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION
PROPERTIES, INC.
By /s/ Mark P. Girard By /s/ Nicholas L. Mecca
------------------------------ ----------------------------
Name: Mark P. Girard Name: Nicholas L. Mecca
Title: Vice President Title: Vice President
Lender:
GREEN TREE FINANCIAL SERVICING CORPORATION
By /s/ C.A. Gouskos
------------------------------
Name: C.A. Gouskos
Title: Senior Vice President
FINOVA CAPITAL CORPORATION
By /s/ Gayle R. McKenzie
------------------------------
Name: Gayle R. McKenzie
Title: Vice President
LITCHFIELD FINANCIAL CORPORATION
By /s/ James R. Yearwood
------------------------------
Name: James R. Yearwood
Title: Senior Vice President
<PAGE>
Administrative Agent:
TEXTRON FINANCIAL CORPORATION
By /s/ Nicholas L. Mecca
------------------------------
Name: Nicholas L. Mecca
Title: Vice President
AGREED AND CONSENTED TO:
L.B.O. HOLDING, INC.
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
MOUNT SNOW, LTD.
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
KILLINGTON, LTD.
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
SUNDAY RIVER SKIWAY CORPORATION
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
<PAGE>
ASC UTAH, INC.
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
STEAMBOAT SKI & RESORT CORPORATION
By /s/ Foster A. Stewart, Jr.
------------------------------
Name: Foster A. Stewart, Jr.
Title: Vice President
AMERICAN SKIING COMPANY RESORT PROPERTIES, INC.
By /s/ Mark P. Girard
------------------------------
Name: Mark P. Girard
Title: Vice President
<PAGE>
CONSTRUCTION LOAN AGREEMENT
This CONSTRUCTION LOAN AGREEMENT is made by and between THE CANYONS
RESORT PROPERTIES, INC., a Maine corporation authorized to do business in Utah
(collectively the "Borrower") having its principal place of business and mailing
address at Sunday River Access Road, P.O. Box 450, Bethel, ME 04217 and KEYBANK
NATIONAL ASSOCIATION, a national bank with a place of business at 70 Federal
Street, Boston, Massachusetts 02110 (the "Lender" or "Bank").
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
SECTION 1.1. Definitions. The following terms shall have the meanings
set forth in this SECTION 1, in the other provisions of this Agreement or the
other Loan Documents referred to below:
Affiliate(s). Any Person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Borrower
or Guarantor, which, in the case of a Person which is a partnership, shall
include each of the constituent partners thereof. The term "control," as used in
the immediately preceding sentence, means, with respect to a Person that is a
corporation, the right to the exercise, directly or indirectly, of more than 50%
of the voting rights or controlling interests attributable to the shares of the
controlled corporation, and, with respect to a Person that is not a corporation,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled Person.
Advance. Any disbursement of the proceeds of the Loan made or to be
made by the Lender pursuant to this Agreement.
Agreement. This Agreement, including the Schedules and Exhibits hereto.
Appraisal. An appraisal of the value of the Project on an as completed
basis, determined on a "fair market value" basis accepted by Lender, performed
by a qualified independent appraiser approved by the Lender.
Assignment of Declarant Rights. The Collateral Assignment of Declarant
Rights pursuant to which the Borrower assigns to Lender Borrower's interest as
declarant in and to the Condominium Declaration under the Project, to be in form
and substance satisfactory to the Lender, and to be recorded at the recording of
the Condominium Declaration.
Assignment of Income and Revenues. The Collateral Assignment of Income,
Revenues and Rentals pursuant to which the Borrower assigns to Lender Borrower's
interest as operator, manage, and lessor of the Mortgaged Property and the
Project, to be in form and substance satisfactory to the Lender.
Assignment of Project Documents. The Collateral Assignment of Project
Documents pursuant to which the Borrower assigns and grants a security interest
to Lender in the Architect's Contract, the Construction Contract, the Plans and
Specifications, and the Project Approvals, to be in form and substance
satisfactory to the Lender.
Assignment of Declarant Rights. The Collateral Assignment of Declarant
Rights pursuant to which the Borrower assigns to Lender Borrower's interest as
declarant in and to the Condominium Declaration under the Project, to be in form
and substance satisfactory to the Lender, and to be recorded at the recording of
the Condominium Declaration.
Borrower's Architect . IBI Group Architects, Engineers and Planners of
18401 Von Karman Avenue - Suite 110, Irvine, CA 92612
Closing Date. The first date on which the conditions set forth in
SECTION 11 have been satisfied and Advances are to be made.
Collateral. All of (a) the property, rights and interests of the
Borrower that are or are intended to be subject to the Security Documents,
including without limitation, the Project and the Mortgaged Property.
Commercial Unit. The commercial condominium unit to be retained by
Borrower containing 38,370 square feet of commercial space consisting of front
desk/administrative areas, restaurant, shopping and commercial areas.
Completion Date. March 30, 2000.
Condominium Declaration. The document creating a condominium regime for
the Mortgaged Property to be established in accordance with the Utah Condominium
Act Title 57, Chapter 8 of the Utah Code Annotated, and establishing the
condominium hotel known as the "Sundial Lodge at The Canyons" consisting of: 149
residential Condominium Units and one Commercial Condominium Units, subject to
the execution of a Limited Joinder by Lender and the Junior Creditor.
Condominium Units. The condominium units with their appurtenant
interest in the common areas and facilities created under the Condominium
Declaration.
Construction Contract. The construction contract entered into with
Contractor providing for the construction of the Improvements.
Construction Schedule. The schedules by trade, job and subcontractor of
the estimated dates of commencement and completion of construction for the
Improvements subject to the approval of the Lender and to be attached hereto as
Exhibit A.
Construction Inspector. Construction Risk Consultants of Salt Lake
City, Utah or, at the Lender's option, either an officer or employee of the
Lender or other consulting architects, engineers or inspectors appointed by the
Lender from time to time.
Contingency Reserve. The amount(s) allocated as contingency reserve(s)
in the Project Budget in the amount of One Million Three Hundred Eighty Three
Thousand Eight Hundred ($1,383,800.00), to be advanced only in accordance with
provisions of SECTION 2.6 hereof.
Contractor. Okland Construction Company, Inc. of 1978 South West
Temple, Salt Lake City, Utah.
Debt Subordination Agreement. The agreement from Guarantor
subordinating its loans and claims with respect to advances and transfers made
to or for the benefit of Borrower including without limitation, the $4,000,000
in land, cash and prepaid expenses provided by Guarantor, such agreement to be
in form and substance acceptable to Lender.
Default. A condition or event which would, with the giving of notice or
lapse of time or both, as defined in the Security Deed, constitute an Event of
Default.
Direct Costs. The costs of the labor, materials, fixtures, machinery
and equipment required to construct, equip and complete the Improvements in
accordance with the Plans and Specifications.
Disbursement Schedule. The schedule of the amounts of Advances
anticipated to be requisitioned by the Borrower each month during the
construction of the Improvements (including an itemization of Direct Costs and
Indirect Costs), as approved by the Lender and to be attached hereto as Exhibit
B.
Drawdown Date. The date on which any Advance is made or is to be made.
Draw Request. With respect to each Advance, the Borrower's Requisition
for such Advance, and documents required by this Agreement as a condition to
such Advance.
Easement Agreements means the (i) Easement Agreement dated August 1,
1998 entered into between Junior Creditor and American Skiing Resort Properties
Inc. as assigned to Borrower duly recorded, (ii) the Development Agreement for
The Canyons Specially Planned Area (SPA) Plan entered into ASC Utah, Inc.,
Guarantor, Junior Creditor, and others dated July 14, 1998 and (iii) The
Development Improvements Agreement for The Canyons Resort by and between Summit
County, a political subdivision of the State of Utah and Guarantor dated
September 14, 1998, and (iv) The Canyons Village Resort Easement and Management
Agreement to be entered into among ASC Utah, Inc., Guarantor and Borrower in
form and substance acceptable to Lender all to be recorded in the Summit County,
Utah Public Records to the extent required to render such agreements enforceable
against all present and future owners, with releases or subordinations from all
other parties with liens or interests therein, all to be in form and substance
acceptable to Lender.
Environmental Laws. As defined in the Security Deed.
Event of Default. See SECTION 13.1.
Generally accepted accounting principles. Principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal year
ended on the Balance Sheet Date and to the extent consistent with such
principles, the prior accounting practices of the Borrower reflected in its
financial statements.
Governmental Authority. The United States of America, the State of
Utah, any political subdivision thereof, the County of Summit, Utah and any
agency, authority, department, commission, board, bureau, or instrumentality of
any of them.
Guarantor shall mean American Skiing Company Resort Properties, a
Maine corporation.
Guaranty shall mean both the Limited Guaranty of Payment and the
Unconditional Guaranty of Project Completion and Payment of Project Costs
pursuant to which Guarantor guarantees to the Lender the payment and performance
of the Obligations as set forth therein, each such Guaranty to be in form and
substance satisfactory to the Lender but which shall be limited as set forth in
the Guaranty. If not paid when due, the Limited Guaranty shall require in
addition the payment of accruing interest and costs as described in the Limited
Guaranty.
Improvements. Collectively, the buildings and improvements, drainage,
utility, infrastructure and all other common improvements to be constructed on
or about the Land in accordance with the Plans and Specifications.
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge, or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others.
Indemnity Agreement. The Indemnity Agreement Regarding Hazardous
Materials pursuant to which the Borrower agrees to indemnify the Lender with
respect to Hazardous Materials and Environmental Laws, such Indemnity Agreement
to be in form and substance satisfactory to the Lender.
Indirect Costs. Mean and include title insurance premiums, survey
charges, engineering fees, architectural fees, real estate taxes, appraisal
costs, commitment fees and interest payable to the Lender under the Loan,
premiums for insurance, marketing, advertising and leasing costs, brokerage
commissions, legal fees, accounting fees, overhead and administrative costs, and
all other expenses which are expenditures relating to the Project and are not
Direct Costs.
Junior Creditor. Wolf Mountain Resort L.C., a Utah limited liability
company with a place of business in Park City, Utah.
Land. The real property located on 1.902 acre site located on or about
The Canyons Drive, Snyderville, Summit County, Utah known as "Sundial Lodge
Buildings 8 and 9" as described in Exhibit A to the Security Deed, together with
the Easement Agreements which shall include easements for access, parking,
construction and construction staging and storage, signage, ski on and ski off
access, utilities, drainage and other purposes in order to permit the
functioning of the Improvements as a condominium ski area hotel.
Lease. Leases, licenses and agreements, whether written or oral,
relating to the use or occupation of space in the Improvements or on the Land by
Persons other than the Borrower.
Lender. KeyBank National Association, its successors and assigns.
Loan. The construction loan in the amount of up to $29,000,000 which is
the subject of this Agreement.
Loan Amount. The sum of $29,000,000 or Seventy-Seven Percent (77.0%) of
the value of the Project as completed as determined by the Appraisal approved by
Lender, whichever is less, to be advanced as construction progresses and in
accordance with the terms and conditions specified.
Loan Documents. This Agreement, the Note, the Indemnity Agreement, the
Guaranty, the Subordination Agreement, the Debt Subordination Agreement, and the
Security Documents, the Subordination Agreement from the Junior Creditor, and
all other agreements, documents and instruments now or hereafter evidencing,
securing or otherwise relating to the Loan.
Maturity Date. The earlier to occur of Eighteen (18) months from the
date of this Agreement or June 30, 2000, whichever date occurs first.
Mortgaged Property. The Land [including the Easement Agreements], the
Improvements and the Personal Property.
Note. The Promissory Note.
Obligations. The indebtedness, obligations and liabilities of the
Borrower to the Lender existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, to the extent that any such
obligation arises or is incurred under this Agreement or any of the other Loan
Documents or in respect of any of the Advances or the Note or other instruments
at any time evidencing any thereof.
Permitted Encumbrances. Those encumbrances on the Mortgaged Property
permitted by the Security Deed.
Person. Any individual, corporation, trust, partnership or other legal
entity, and any government or any governmental agency or political subdivision
thereof.
Personal Property. All materials, furnishings, fixtures, furniture,
machinery, equipment and all items of tangible personal property now or
hereafter owned or acquired by the Borrower, wherever located, and either (i) to
be located on or incorporated into the Mortgaged Property, (ii) used in
connection with the construction of the Mortgaged Property (iii) to be used in
connection with the operation or maintenance of the Mortgaged Property,
including without limitation all apparatus, fixtures and articles of personal
property owned by the Borrower now or hereafter attached to or used or procured
for use in connection with the operation or maintenance of the Mortgaged
Property (except property belonging to lessees or other occupants of the
Mortgaged Property), together with any and all replacements thereof and
additions thereto.
Plans and Specifications. The plans and specifications for the
Improvements to be prepared by Borrower and reviewed and approved by Borrower's
Architect and Contractor and more particularly identified on Exhibit C attached
hereto.
Project. The Mortgaged Property and Personal Property.
Project Approvals. All approvals, consents, waivers, orders,
agreements, acknowledgments, authorizations, permits and licenses required under
applicable Requirements or under the terms of any restriction, covenant or
easement affecting the Project, or otherwise necessary or desirable, for the
ownership and acquisition of the Mortgaged Property, the construction and
equipping of the Improvements, and the use, occupancy and operation of the
Project following completion of construction of the Improvements, whether
obtained from a Governmental Authority or any other Person.
Project Budget. The budget for total estimated Project Costs attached
hereto as Exhibit D, which includes: (a) a line item cost breakdown for Direct
Costs by trades, jobs and subcontractors; (b) a line item cost breakdown for
Indirect Costs; and (c) a schedule of the sources of funds to pay Project Costs,
indicating by item the portion of Project Costs to be funded through the Loan
and Required Equity Funds.
Project Costs. The sum of all Direct Costs and Indirect Costs that will
be incurred in connection with the acquisition of the Land and the construction,
equipping and completion of the Improvements constituting the Project.
Promissory Note. The commercial note in the principal face amount of
the Loan Amount from Borrower to Lender evidencing the Loan, to be in form and
substance satisfactory to the Lender.
Purchase and Sale Agreements. The purchase and sale agreements for
individual Residential Units in the Project, to be in form and substance
acceptable to Lender.
Real Estate. All real property at any time owned, leased (as lessee or
sublessee) or operated by the Borrower.
Required Equity Funds. Such amount as the Lender shall determine from
time to time pursuant to SECTION 9.16 hereof.
Requirements. Any law, ordinance, code, order, rule or regulation of
any Governmental Authority relating in any way to the acquisition and ownership
of the Project, the construction of the Improvements, or the use, occupancy and
operation of the Project following the completion of construction of the
Improvements, including those relating to subdivision control, zoning, building,
use and occupancy, fire prevention, health, safety, sanitation, handicapped
access, historic preservation and protection, tidelands, wetlands, flood
control, access and earth removal, and all Environmental Laws.
Residential Units. The 149 individual Condominium Units created under
the Declaration of the Condominium which are the subject of the Purchase and
Sale Agreements.
Security Agreement. The Commercial Security Agreement pursuant to which
the Borrower grants a security interest in and to the personal property forming
the Project, such Security Agreement to be in form and substance satisfactory to
the Lender.
Security Deed. The Deed of Trust and Security Agreement pursuant to
which the Borrower grants a mortgage lien and security interest in and to the
Project, such Security Deed to be in form and substance satisfactory to the
Lender, including any supplements thereto in order to include all Easement
Agreements.
Security Documents. The Security Deed, the Security Agreement, the
Assignment of Project Documents, the Assignment of Declarant Rights, the
Assignment of Purchase and Sale Agreements, Assignment of Income and Revenues,
the Financing Statements, the Guaranty from the Guarantor and any other
agreement, document or instrument now or hereafter securing the Note.
Subordination Agreement. The Subordination Agreement from Junior
Creditor subordinating Junior Creditor's claims, security interest and mortgage
liens under a certain $2,097,495.60 loan secured by a junior deed of trust, to
be in form and substance satisfactory to the Lender.
Survey. An ALTA/ACSM survey of the Land and the Improvements, such
survey to be satisfactory to the Lender in form and substance, provided that an
update of the 1997 survey shall be acceptable so long as the surveyor
recertifies such survey to Lender and the Title Insurance Company agrees to
provide survey coverage thereunder.
Surveyor Certificate. With respect to any Survey, a certificate
executed by the surveyor who prepares such Survey dated as of a recent date and
containing such information relating to the Project as the Lender or the Title
Insurance Company may require, such certificate to be satisfactory to the Lender
in form and substance.
Taking. Any condemnation for public use of, or damage by reason of,
the action of any Governmental Authority, or any transfer by private sale in
lieu thereof, either temporarily or permanently.
Title Insurance Company. First American Title Insurance Company with a
place of business at Salt Lake City, Utah.
Title Policy. An ALTA standard form title insurance policy issued by
the Title Insurance Company (with such reinsurance or co-insurance as the Lender
may require, any such reinsurance to be with direct access endorsements) in an
amount not less than the Loan Amount insuring the priority of the Security Deed
and each advance under the Loan, and that the Borrower holds marketable fee
simple title to the Project, subject only to such exceptions as the Lender may
approve and which shall not contain exceptions for persons in occupancy or
matters which would be shown by a survey, shall not insure over any matter
except to the extent that any such affirmative insurance is acceptable to the
Lender in its sole discretion, and shall contain a pending disbursements clause
or endorsement and such other endorsements and affirmative insurance as the
Lender in its discretion may require.
SECTION 2. AGREEMENT TO MAKE ADVANCES; LIMITATIONS.
SECTION 2.1. Agreement to Make Advances. Subject to the terms and
conditions of this Agreement and pursuant to the Note, the Lender agrees to lend
to the Borrower and the Borrower may borrow from time to time between the
Closing Date and the Maturity Date upon submission by the Borrower of a Draw
Request in accordance with SECTION 3.1, such amounts as are requested by the
Borrower up to a maximum aggregate principal amount equal to the Loan Amount to
pay for the acquisition of the Land and the Project Costs actually incurred by
the Borrower and reflected in the Project Budget as being funded as a part of
the Loan.
Each Draw Request for an Advance hereunder shall constitute a
representation and warranty by the Borrower that the conditions set forth in
this Agreement have been satisfied on the date of such Draw Request.
On the Maturity Date, the Lender's obligation to make advances on the
Loan shall terminate, provided however that Lender may at its option make
advances on the Loan after the Maturity Date without waiving its right to
terminate such continuing advances.
SECTION 2.2. Project Budget. The Project Budget reflects, by category
and line items, the purposes and the amounts for which funds to be advanced by
the Lender under this Agreement are to be used.
SECTION 2.3. Amount of Advances. In no event shall the Lender be
obligated to advance more than the Loan Amount. In no event shall any Advance
for Direct Costs of constructing the Improvements exceed an amount equal to:
(a) the total value of the labor, materials, fixtures, machinery
and equipment completed, approved and incorporated into the
Land or the Improvements prior to the date of the Draw Request
for such Advance, less
(b) subject to the provisions of SECTION 2.7 hereof, retainage in
an amount equal to ten percent (10.0%) of such total value,
provided that for the Construction Contract the 10% retainage
shall only apply to the first 50% of the total contract price
with any reduction in any other contracts to be based on the
prior written consent of Lender, with no retainage required
thereafter if no Event of Default is outstanding
("Retainage"), less
(c) the total amount of any Advances previously made by the
Lender for such Direct Costs.
Retainage shall be advanced by the Lender upon satisfaction of the
conditions set forth in SECTION 12.6; provided however that upon substantial
completion of the Improvements, compliance with the other provisions of SECTION
12.6 and approval of the Project for occupancy such that purchasers of
Residential Units under the Purchase and Sale Agreements are required to proceed
to closing, the Retainage may be advanced but reserving the greater of 200% of
the Direct Cost of completion of incomplete items until final completion of all
the Improvements to be provided by Borrower.
With respect to any other Direct Costs and all Indirect Costs, in no
event shall any Advance exceed an amount equal to the amount of such Direct
Costs and Indirect Costs approved by the Lender, incurred by the Borrower prior
to the date of the Draw Request for such Advance, and theretofore paid or to be
paid with the proceeds of such Advance, less the total amount of any Advances
previously made by the Lender for such Direct Costs and Indirect Costs.
SECTION 2.4. Quality of Work. No Advance shall be due unless the work
done for such Advance is then done in a good and workmanlike manner and without
defects, as confirmed by the report of the Construction Inspector.
SECTION 2.5. Cost Overruns and Savings. If the Borrower becomes aware
of any increase in Project Costs, the Borrower shall promptly notify the Lender
in writing and promptly submit a revised Project Budget to the Lender for its
approval. If there is an increase in Project Costs, no further Advances need be
made by the Lender until (a) the revised Project Budget is approved by the
Lender, and (b) the Borrower has deposited with the Lender (or made other
provision approved by Lender) any additional Required Equity Funds. If the
revised Project Budget indicates a decrease in a category or line item of
Project Costs, no reductions in Project Costs will be made or savings
reallocated by the Borrower unless and until (c) the revised Project Budget is
approved by the Lender, and (d) in the case of decreases in a category or line
item of Direct Costs, the Borrower has furnished evidence satisfactory to the
Lender that related work has been satisfactorily completed in accordance with
the Plans and Specifications and paid for in full.
SECTION 2.6. Contingency Reserve. The amount allocated as Contingency
Reserve in the Project Budget, namely the sum of One Million Three Hundred and
Eighty Three Thousand Eight Hundred Dollars ($1,383,800.00), is not intended to
be disbursed and will only be disbursed upon the prior approval of the Lender.
The disbursement of a portion of Contingency Reserve shall in no way prejudice
the Lender from withholding disbursement of any further portion of Contingency
Reserve.
SECTION 2.7. Stored Materials. Lender shall not be required to disburse
any funds for any materials, furnishings, fixtures, machinery or equipment not
yet incorporated into the Land or Improvements ("Stored Materials"), except with
the prior written consent of Lender which shall not be unreasonably withheld and
subject to Lender's receipt of a perfected first security interest in such
Stored Materials. Any disbursement for the cost of Stored Materials shall be
subject to retainage in an amount equal to ten percent (10.0%) for the first 50%
of the total price of the Construction Contract unless otherwise agreed by
Lender (thereafter no retainage shall be required) and shall be contingent upon
the Lender receiving satisfactory evidence that:
(a) the Stored Materials are ready for incorporation into the Land or
the Improvements and shall be so incorporated within a period of
30 days;
(b) the Stored Materials are stored at the Land, at a site controlled
by the Borrower, or at such other site as the Lender shall
approve, and are fully insured and protected against theft and
damage;
(c) the Stored Materials have been paid for in full or will be paid
for with the retainage funds to be disbursed and all lien rights
or claims of the supplier have been released or will be released
upon payment with disbursed funds;
(d) the Lender has or will have upon payment with disbursed funds a
perfected, first priority security interest in the Stored
Materials; and
(e) the Stored Materials are insured for an amount equal to their replacement
cost.
SECTION 3. MAKING THE ADVANCES.
SECTION 3.1. Draw Request. At such time as the Borrower shall desire to
obtain an Advance, the Borrower shall complete, execute and deliver to the
Lender the Borrower's Requisition in the form of Exhibit E attached hereto
(hereinafter referred to as "Borrower's Requisition"), accompanied by:
(a) a completed and fully itemized Application and Certificate for
Payment (AIA Document G702 or similar form approved by the Lender)
containing the certification of the Contractor and either the
Borrower's Architect or the Construction Inspector as to the
accuracy of same,
(b) copies of requisitions and invoices from subcontractors and
materialmen supporting all items of cost covered by such
application;
(c) written lien waivers from the Contractor for the current Draw
Request and, upon request from Lender from such subcontractors and
materialmen for work done and materials supplied by them which
were paid for pursuant to the next preceding Draw Request in an
amount in excess of $5,000.00;
(d) a written request of the Borrower for any necessary changes in the
Plans and Specifications, the Project Budget, the Disbursement
Schedule or the Construction Schedule;
(e) copies of all change orders and construction change directives,
accompanied by a change order summary prepared by and executed by
the Borrower, copies of all material subcontracts, and, to the
extent requested by the Lender, of all material inspection or test
reports and other documents relating to the construction of the
Improvements, not previously delivered to the Lender; and
(f) If the Borrower's Requisition includes payment for Stored
Materials it shall be accompanied by evidence as to the
satisfaction of the requirements set forth in SECTION 2.7 hereof;
(g) such other information, documentation and certification as the
Lender shall reasonably request.
SECTION 3.2. Notice and Frequency of Advances. Each Draw Request shall
be submitted to the Lender at least ten (10) business days prior to the date of
the requested Advance, and no more frequently than once each month.
SECTION 3.3. Deposit of Funds Advanced. The Borrower shall open and
maintain a non-interest bearing loan checking account with the Lender (the "Loan
Checking Account"). Absent a Default or Event of Default, the Lender shall
deposit the proceeds of each Advance into the Loan Checking Account.
At the request of Borrower or upon an Event of Default with notice to
Borrower, at its option the Lender may make any or all Advances under the Loan
to any Person to whom the Lender in good faith determines payment is due.
SECTION 3.4. Advances Do Not Constitute a Waiver. No Advance shall
constitute a waiver of any of the conditions to further Advances nor shall any
such Advance have the effect of precluding the Lender from thereafter declaring
a failure to satisfy a condition to be an Event of Default.
SECTION 4. THE NOTE; INTEREST; MATURITY AND PREPAYMENT.
SECTION 4.1 Loan Facility. Loan Facility shall be a construction loan
in the maximum amount of Twenty-Nine Million Dollars ($29,000,000.00) and shall
be used by the Borrower in accordance with the Project Budget to construct the
Improvements on the Mortgaged Property, being land, buildings and improvements
constituting a resort condominium project in Snyderville, Summit County, Utah
known as the "Sundial Lodge at The Canyons" consisting of: 149 Residential
Units, and the one Commercial Unit. Lender shall not be obligated to advance
more than 77% of the Appraised value of the Mortgaged Property.
SECTION 4.2. The Note. The obligation of the Borrower to pay the Loan
Amount or, if less, the aggregate unpaid principal amount of all Advances made
by the Lender hereunder, plus accrued interest thereon, and other fees shall be
evidenced by the Note. In the event the Note is lost, destroyed or mutilated at
any time prior to payment in full of the indebtedness evidenced thereby, the
Borrower shall execute a new note substantially in the form of the relevant
Note. The Note shall not be necessary to establish the indebtedness of the
Borrower to the Lender on account of Advances made under this Agreement. Each
Advance shall bear interest in accordance with the Note.
Borrower shall reduce the principal balance of the Loan by 100% of the net
sale proceeds of each Residential Condominium Unit. The foregoing principal
reductions may be accomplished through the payments required to obtain partial
releases of individual Residential Units, but lack of Residential Unit sales
shall not excuse Borrower's obligation to pay the entire loan balance on the
Maturity Date, when the entire Note shall be due and payable in full.
No amount prepaid by the Borrower on the Note may be reborrowed.
SECTION 4.3 Partial Releases. Lender agrees to release individual
Residential Units in order to permit their sale to third party purchasers upon
receipt of 100% of the net proceeds of the sale of Residential Units based on
the purchase price as set forth in the Assignment of Purchase and Sale
Agreements, provided that in the event of a default in the Obligations and the
commencement of foreclosure proceedings, such release shall be contingent upon
the Borrower's binding agreement that such release and application of funds to
the Obligations does not waive any otherwise uncured event of default or any
pending foreclosure. To facilitate sales, Lender will provide partial releases
in escrow to First American Title Insurance Company.
SECTION 4.4 Maturity. The Maturity Date of the Loan shall be as
provided in the Note, on which date the Borrower promises to pay all unpaid
principal of Loan facility under the Note in full with accrued interest and
other applicable charges to such date.
SECTION 5. COMMITMENT FEE; PAYMENTS AND COMPUTATIONS; CAPITAL ADEQUACY.
SECTION 5.1. Commitment Fees. The Borrower shall pay to the Lender a
commitment fee in the amount of $217,500.00 upon or before the execution of this
Agreement, of which $108,750.00 has been paid on or before Borrower's acceptance
of Lender's commitment letter.
SECTION 5.2. Funds for Payments. All payments of principal, interest,
fees and any other amounts due under the Note shall be made in accordance with
the Note.
SECTION 5.3 Operating Account. The Borrower shall maintain an operating
deposit account with the Lender. All Advances on the Loan will be made into such
account.
SECTION 6. COLLATERAL SECURITY. The Obligations shall be secured by a
perfected first priority mortgage lien and security interest in the Collateral,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents, and by the Guaranty.
SECTION 7. CERTAIN RIGHTS OF LENDER.
SECTION 7.1. Right to Retain the Construction Inspector. The Lender
shall have the right to retain, at the Borrower's cost and expense, the
Construction Inspector to perform the following services on behalf of the
Lender:
(a) to review and advise the Lender whether in the opinion of the
Construction Inspector, the Project Budget accurately reflects all
Project Costs;
(b) to review and advise the Lender whether, in the opinion of the
Construction Inspector, the Plans and Specifications are
satisfactory for the intended purposes thereof;
(c) to make periodic inspections of the Improvements for compliance
with the Plans and Specifications and to approve the then current
Draw Request, and to advise the Lender of the anticipated cost of
and time for completion of construction of the Improvements and
the adequacy of any Contingency Reserve;
(d) to review and advise the Lender on any proposed change orders or
construction change directives; and
(e) to review the Construction Contract and subcontracts
The reasonable fees of the Construction Inspector shall be paid by the Borrower
forthwith upon billing therefor and expenses incurred by the Lender on account
thereof shall be reimbursed to the Lender forthwith upon request therefor, but
neither the Lender nor the Construction Inspector shall have any liability to
the Borrower on account of (i) the services performed by the Construction
Inspector, (ii) any neglect or failure on the part of the Construction Inspector
to properly perform its services, or (iii) any approval by the Construction
Inspector of construction of the Improvements. Neither the Lender nor the
Construction Inspector assumes any obligation to the Borrower or any other
Person concerning the quality of construction of the Improvements or the absence
therefrom of defects. The services provided by the Construction Inspector are
for the sole and exclusive benefit of Lender.
SECTION 7.2. Appraisal. The Lender's obligation to fund the Loan is
subject to an Appraisal completed by an approved appraiser and acceptable in all
respects to the Lender indicating that the amount of the Loan, as a percentage
of the value of the Mortgaged Property securing the Loan does not exceed
seventy-seven percent (77%) (the "Loan To Value Ratio").
Lender may require an Appraisal at the Borrower's cost and expense
subsequent to the closing of the Loan, provided that such an Appraisal shall not
be required more frequently than once within any 12 month period after the
closing of the Loan unless there is an outstanding uncured Event of Default
which has arisen in the preceding 90 days or unless required as a component of a
foreclosure or sale under the Security Deed.
If an Appraisal indicates that the value of the Mortgaged Property for
the Loan has decreased so that the Loan To Value Ratio exceeds seventy-seven
percent (77%) then the Borrower must either (i) make payments to the Lender
reducing the amount of the Loan to a point where the Loan To Value Ratio is
seventy-seven percent (77%) or lower, (ii) grant the Lender with mortgage liens
and security interests covering additional collateral satisfactory to the Lender
in order to reduce the Loan To Value Ratio to seventy-seven percent (77%) or
lower, or (iii) repay the Loan in full.
All reasonable costs of such future Appraisals or the grant of
additional collateral required as a result of said appraisal shall be paid by
the Borrower. The costs and expenses incurred by the Lender in obtaining such
Appraisals shall be paid by the Borrower forthwith upon billing or request by
the Lender for reimbursement therefor, and if not paid when due shall be added
to the Loan balance and bear interest.
SECTION 7.3. Charges Against Loan Checking Account. To the extent that
the same are not paid by the respective due dates thereof including any
applicable grace period, then the Lender shall have the right, and the Borrower
hereby irrevocably authorizes the Lender, to charge any account of the Borrower
with the Lender, including the Loan Checking Account, without the further
approval of the Borrower, for (i) any installment of interest due under the Note
and, (ii) any costs or expenses incurred by the Lender which are to be paid or
reimbursed by the Borrower under the terms of this Agreement or any of the other
Loan Documents (including, without limiting the generality of the foregoing, all
Construction Inspector, Appraisal and reasonable attorney's fees) or (iii) any
other sums due to the Lender under the Note, this Agreement or any of the other
Loan Documents. The Borrower shall at all times maintain and keep collected
balances in the Loan Checking Account sufficient to satisfy the foregoing
obligations on the respective due dates thereof.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lender as follows:
SECTION 8.1. Organization; Authority; Etc.
(a) Organization; Good Standing. Each of Borrower and Guarantor is a
corporation duly organized and is validly existing and in good standing under
the laws of the State of Maine and duly authorized to do business in the State
of Maine, and Borrower is duly authorized to do business in the State of Utah.
The Borrower has all requisite power to own its property and conduct its
business as now conducted and as presently contemplated. Borrower was organized
solely for the purpose of the development, construction, ownership, operation
and sale of the Mortgaged Property and no other purpose.
(b) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents and the transactions contemplated hereby
by Borrower and Guarantor (i) are within the authority of such Person, (ii) have
been duly authorized by all necessary proceedings on the part of such Person,
(iii) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which such Person is subject or
any judgment, order, writ, injunction, license or permit applicable to such
Person or any Indebtedness to such Borrower and Guarantor are a party and (iv)
do not conflict with any provision of the articles of incorporation or bylaws
of, or any agreement or other instrument binding upon, such Person.
(c) Enforceability. The execution and delivery of this Agreement and the
other Loan Documents to which each Borrower and Guarantor is a party will result
in valid and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
SECTION 8.2. Title to Project and other Properties.
(a) Except as disclosed in the Security Deed, the Borrower holds good
clear record and marketable fee simple absolute title to the Mortgaged Property,
and the Personal Property, subject to no other mortgages, leases, conditional
sale agreements, title retention agreements, liens or other encumbrances, other
than the mortgage lien of the Junior Creditor which is subject to the
Subordination Agreement and the Purchase and Sale Agreements subject to the
Collateral Assignment of Purchase and Sale Agreements and which contain
subordination provisions as set forth therein.
(b) Each of the Borrower and Guarantor owns all of the assets reflected
in the balance sheet of the Borrower and Guarantor respectively as delivered to
Lender (except property and assets sold or otherwise disposed of in the ordinary
course of business since that date), subject to no rights of others, including
any mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except as disclosed therein.
SECTION 8.3. Financial Statements. There has been furnished to the
Lender the financial statement of Guarantor for the fiscal period ending October
25, 1998, which has been prepared in accordance with generally accepted
accounting principles and which when considered together with the Schedules of
Guarantor as filed with the U.S. Securities and Exchange Commission, fairly
present the financial condition of Guarantor respectively as at the date
thereof. As of the date of this Agreement, there are no known liabilities or
contingent liabilities of the Borrower and Guarantor which are not disclosed in
said balance sheet and the related notes thereto and said Schedule respectively
other than the Obligations, and the obligations secured by the Permitted Liens.
Since the date of the said Schedules filed with the U.S. Securities and
Exchange Commission , there has occurred no material adverse change in the
financial condition or business of the Borrower or Guarantor, other than changes
in the ordinary course of business that have not had any material adverse
effect.
SECTION 8.5. Franchises, Patents, Copyrights, Etc. The Borrower
possesses all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted without known conflict with any
rights of others.
SECTION 8.6. Litigation. Except as disclosed in Exhibit G, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Borrower or Guarantor before any court, tribunal or administrative
agency or board that, if adversely determined, might, either in any case or in
the aggregate, materially and adversely affect the properties, assets, financial
condition or business of Borrower and Guarantor respectively or materially
impair the right of Borrower and Guarantor respectively to carry on business
substantially as now conducted by it, or result in any material liability which
might affect the Project not adequately covered by insurance or for which
adequate reserves are not maintained on the balance sheet of such Person, or
which question the validity of this Agreement or any of the other Loan
Documents, or which will adversely affect the ability of the Borrower to
construct, use and occupy the Improvements or to pay and perform the
Obligations.
SECTION 8.7. No Materially Adverse Contracts, Etc. Except as disclosed
in Exhibit G, Borrower and Guarantor respectively are not subject to any
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation that has or is expected in the future to have a materially adverse
effect on the business, assets or financial condition of the Borrower or
Guarantor respectively. The Borrower is not a party to any contract or agreement
that has or is expected to have any materially adverse effect on the Borrower.
SECTION 8.8. Compliance With Other Instruments, Laws, Etc. Except as
disclosed in Exhibit G, the Borrower and Guarantor respectively are not in
violation of their articles of incorporation, by-laws, or any agreement or
instrument to which they may be subject or by which they or any of they
properties may be bound, including without limitation any Indebtedness or any
decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of material
penalties or materially and adversely affect the financial condition, properties
or business of the Borrower or Guarantor respectively.
SECTION 8.9. Tax Status. Each of the Borrower and Guarantor (a) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which they are is subject and,
(b) have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings pursued with
diligence. There are no unpaid taxes in any material amount claimed to be due by
any taxing authority, and the Borrower and Guarantor know of no basis for any
such claim.
SECTION 8.10. No Event of Default. No Default or Event of Default has
occurred and is continuing under the Loan Documents or any other loan
obligations or documents to which Borrower is a party.
SECTION 8.11. Absence of Other Liens, Etc. There is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry, or other public
office, that purports to cover, affect or give notice of any present or possible
future lien on, or security interest in any Collateral or any rights relating
thereto.
Borrower shall obtain and record a Subordination Agreement from the
Junior Creditor covering the Mortgaged Property, including without limitation
the Easement Agreements.
SECTION 8.12. Setoff, Etc. The Collateral and the Lender's rights with
respect to the Collateral are not subject to any setoff, claims, withholdings or
other defenses. The Borrower is the owner of the Collateral free from any lien,
security interest, encumbrance and any other claim or demand except as permitted
in the Security Deed and the junior mortgage in favor of the Junior Creditor
subject to the Subordination Agreement.
SECTION 8.13. Environmental Compliance. Except as set forth in Schedule
8.13 attached hereto, the Borrower is in full compliance with the
representations, covenants and warranties regarding the Environmental Laws and
Hazardous Materials as set forth in the Security Deed.
SECTION 8.14. Subsidiaries. The Borrower has no Subsidiaries. Borrower
is a wholly owned subsidiary of Guarantor.
SECTION 8.15. Availability of Utilities. All utility services necessary
and sufficient for the construction, development and operation of the Project
for its intended purposes are presently available to the boundaries of the
Mortgaged Property with respect to which the Security Deed creates a valid and
enforceable first lien, including, but not limited to, water supply, storm and
sanitary sewer, electric and telephone facilities, cable television, and
drainage, with the certificate of an independent professional engineer or other
evidence acceptable to Lender that such utility services are available.
SECTION 8.16. Access/Utilities/Independent Building. (a) The rights of
way for all roads and utility services necessary for the full utilization of the
Improvements for their intended purposes have been established pursuant to valid
and enforceable private easements set forth in Exhibit A to the Security Deed or
shall be established pursuant to Easement Agreements to the satisfaction of
Lender, and all such roads and utility lines shall have been completed, or all
necessary steps have been taken by the Borrower and/or such Governmental
Authority to assure the complete construction and installation thereof prior to
the date upon which access to the Project via such roads will be necessary. All
curb cuts, driveways, water supplies, electrical, fire protection, subsurface
sanitary sewer and storm water lines shown on the Plans and Specifications are
presently existing or have been fully approved by the appropriate Governmental
Authority.
The Land and Improvements are fully independent in all respects
including, without limitation, in respect of parking, structural integrity,
heating, ventilating and air conditioning, plumbing, mechanical and other
operating and mechanical systems, fuel, and electrical, sanitation, drainage,
drinking water systems, or binding arrangements shall be established under the
Easement Agreements to the Lender's satisfaction .
Borrower shall seek to have the Land separately assessed for purposes of
real estate tax assessment and payment. Until such separate assessment, Borrower
shall pay or cause to be paid all real estate taxes on the Land.
The Land and Improvements and building service equipment, sewage
disposal facilities, parking, and all paved or landscaped areas related to or
used in connection with the Improvements are located wholly within the perimeter
lines of the Land including the Easement Agreements.
The Land and all Condominium units shall have an easement for direct
access to snow skiing trails under the Easement Agreements.
SECTION 8.17. Condition of Project. Neither the Project nor any part
thereof is now damaged or injured as result of any fire, explosion, accident,
flood or other casualty or has been the subject of any Taking, and to the
knowledge of the Borrower, no Taking is pending or contemplated.
SECTION 8.18. Compliance with Requirements. The Plans and
Specifications and construction of the Improvements pursuant thereto and the use
and occupancy of the Project contemplated thereby comply with all Requirements.
SECTION 8.19. Project Approvals. Except as set forth on Schedule
8.19(a) hereto, the Borrower has obtained all Project Approvals and fully
complies with all Requirements without any variances or waivers. Except as set
forth on Schedule 8.19(a) hereto, all Project Approvals obtained by the Borrower
as listed and described on Schedule 8.19(b) hereto have been validly issued and
are in full force and effect. The Borrower has no reason to believe that any of
the Project Approvals not heretofore will not be obtained in the ordinary course
following completion of the Improvements in accordance with the Plans and
Specifications.
SECTION 8.20. Construction Contract. The Construction Contract shall be
in full force and effect with a maximum guaranteed price of $33,225,000.00 and
both the Borrower and the Contractor shall thereafter be full compliance with
their respective obligations under the Construction Contract. The work to be
performed by the Contractor under the Construction Contract is the work called
for by the Plans and Specifications, and all work required to complete the
Improvements in accordance with the Plans and Specifications is provided for
under the Construction Contract.
SECTION 8.21. Other Contracts. Except as provided in the Project
Budget, the Borrower has made no contract or arrangement of any kind or type
whatsoever (whether oral or written, formal or informal), the performance of
which by the other party thereto could give rise to a lien or encumbrance on the
Project.
SECTION 8.22. Real Property Taxes; Special Assessments. There are no
overdue, unpaid or outstanding real estate or other taxes or assessments on or
against the Project or any part thereof which are payable by the Borrower or any
prior owner. No abatement proceedings are pending with reference to any real
estate taxes assessed against the Project.
SECTION 8.23. Violations. The Borrower has received no notices of, or
has any knowledge of, any violations of any applicable Requirements or Project
Approvals.
SECTION 8.24 Plans and Specifications. The Borrower has furnished the
Lender with true and complete sets of the Plans and Specifications. The Plans
and Specifications so furnished to the Lender comply with all Requirements, all
Project Approvals, and all restrictions, covenants and easements affecting the
Project, and have been approved by the Contractor, the Borrower's Architect, and
such Governmental Authority as is required for construction of the Improvements.
SECTION 8.25. Project Budget. The Project Budget accurately reflects
all Project Costs.
SECTION 8.26. Feasibility. To the best of Borrower's knowledge, each of
the Construction Schedule and the Disbursement Schedule is realistic and
feasible, and is accurate to date.
SECTION 8.27. Purchase and Sale Agreements; Leases. The Purchase and
Sale Agreements as set forth in the exhibit to the Assignment of Purchase and
Sale Agreements constitute the sole agreements and understandings presently
outstanding which relate to sale of Condominium Units in the Mortgaged Property.
The Purchase and Sale Agreements will general gross sale proceeds totaling
$42,559,700. Borrower has received and invested directly into the Project the
initial deposits under the Purchase and Sale Agreements totaling $3,989,170, and
upon the completion of the roof for the Project, Borrower shall obtain and
utilize and additional deposit in the amount of $3,989,170 for the expenses of
the Project.
Borrower expressly represents to Lender that the use of the purchasers'
deposits under the Purchase and Sale Agreements for the expenses of the Project
is proper and legal under the terms of the Purchase and Sale Agreements, the
Utah Condominium Act and all other applicable laws, regulations and
requirements.
All Purchase and Sale Agreements shall be collaterally assigned to
Lender as security for the Obligations under the Assignment of Purchase and Sale
Agreements. Borrower shall promptly update Lender in writing the status of the
Purchase and Sale Agreements at such intervals and in such form as Lender may
request and in any event no less frequently than once each month, and shall duly
perform its obligations under the Purchase and Sale Agreements. Borrower shall
obtain from First American Title Insurance Company, the escrow agent for the
deposit under the Purchase and Sale Agreements, a letter of agreement upon terms
and conditions satisfactory to Lender pursuant to which the escrow agreement
confirms the deposit balances it is holding, agrees to provide Lender with
information regarding the status of the deposits and acknowledges Lender's
security interest in the deposits subject however to the rights of the
purchasers under the Purchase and Sale Agreements.
Other than the Purchase and Sale Agreements, there are no Leases,
occupancies, rights, privileges or licenses in or to the Residential Units, the
Commercial Unit or any other part of the Mortgaged Property.
No leasing, brokerage or like commissions, fees or payments are due from
the Borrower or any other person to any third party or Affiliate in respect of
the Purchase and Sale Agreements in excess of the amount disclosed to Lender and
as set forth in the Project Budget.
SECTION 8.28. Other Material Real Property Agreements; No Options.
There are no material agreements pertaining to the Mortgaged Property, the
Improvements or the operation or maintenance of either thereof other than as
expressly described in this Agreement (including the Schedules hereto), the
Security Deed, or otherwise disclosed in writing to the Lender by the Borrower;
and no person or entity has any right or option to acquire the Mortgaged
Property or any portion thereof or interest therein.
SECTION 8.29. Effect of Draw Request. Each Draw Request submitted to
the Lender as provided in SECTION 3.1 hereof shall constitute an affirmation
that the representations and warranties contained in SECTION 8 of this Agreement
and in the other Loan Documents remain true and correct as of the date thereof;
and unless the Lender is notified to the contrary, in writing, prior to the
Drawdown Date of the requested Advance or any portion thereof, shall constitute
an affirmation that the same remain true and correct on the Drawdown Date.
SECTION 9. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower
covenants and agrees that, so long as the Loan is outstanding or the Lender has
any obligation to make any Advances:
SECTION 9.1. Punctual Payment. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loan and all other
amounts provided for in the Note, this Agreement and the other Loan Documents.
SECTION 9.2. Commencement, Pursuit and Completion of Construction. The
Borrower will continue construction of the Improvements, will diligently pursue
construction of all Improvements in accordance with the Construction Schedule,
will complete construction of the Improvements prior to the Completion Date, at
least 10 days prior to the expiration of the each Purchase and Sale Agreement
for each Unit, all in accordance with the Plans and Specifications, in full
compliance with the Condominium Declaration and all restrictions, covenants and
easements affecting the Project, all Requirements, and all Project Approvals,
and with all terms and conditions of the Loan Documents, the Purchase and Sale
Agreements, and the Condominium Declaration without deviation from the foregoing
and the requirements of the Purchase and Sale Agreements unless the Borrower
obtains the prior approval of the Lender, the purchasers under the Purchase and
Sale Agreement if required, and the surety company or companies issuing any
Payment and Performance Bonds in the amount of not less than the Construction
Contract. The Borrower will pay all sums and perform all such acts as may be
necessary or appropriate to complete such construction of the Improvements, free
from any liens, claims or assessments (actual or contingent) asserted against
the Project for any material, labor or other items furnished in connection
therewith.
SECTION 9.3. Correction of Defects. The Borrower will promptly correct
or cause to be corrected all defects in the Improvements or any departure from
the Plans and Specifications, the Requirements, the Condominium Declaration and
the Purchase and Sale Agreements not previously approved by the Lender and
purchasers.
SECTION 9.4. Records and Accounts. The Borrower will (a) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with generally accepted accounting principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties, contingencies, and other
reserves.
SECTION 9.5. Financial Statements, Certificates and Information. The
Borrower will deliver or cause to be delivered to the Lender:
<PAGE>
(a) Guarantor Financial Statements. As soon as practicable, but in any
event not later than one hundred twenty (120) days after the end of
each fiscal year of the Guarantor, the consolidated balance sheet of
the Guarantor at the end of such year and statement of income,
statement of retained earnings and statement of cash flows for such
year, each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with generally accepted accounting
principles consistently applied (except where otherwise noted), and
accompanied by an unqualified "audit" opinion for American Skiing
Company prepared by an independent certified public accounting firm
acceptable to Lender with the Guarantor's statement provided at a
consolidating level, and any management letter from such accounting
firm;
(b) Contingent Liabilities. Contemporaneously with the delivery of the
financial statements referred to in clause (a) above, a statement of
all contingent liabilities of the Guarantor which are not reflected in
such financial statements or referred to in the notes thereto, and a
statement of projected cash flows of the Borrower for the current
fiscal year, all in reasonable detail and certified by the principal
financial or accounting officer of the Borrower and Guarantor;
(c) Tax Returns. copies of all federal and state income tax returns as signed
and filed within fifteen (15) days of the last day when due (including any
extensions of the filing date) for Borrower and Guarantor;
(d) SEC Filings. with respect to the Guarantor, copies of all completed Forms
10K, 10Q and 8K filed by Guarantor with the U.S. Securities and Exchange
Commission, including without limitation Guarantor's annual audited
financial statements and quarterly interim statements; and
(e) Other. from time to time such other financial data and information as the
Lender may reasonably request regarding Borrower and Guarantor, including
quarterly internally prepared statements and financial covenant compliance
within 30 days of the end of each quarter.
SECTION 9.6. Year 2000 Compliance: All of Borrower's and Guarantor's
computer hardware and software shall provide the following functions:
(a) consistently handle date information before, during and after January 1,
2000, including, but not limited to, accepting date input, providing date
output and performing calculations on dates or portions of dates;
(b) function accurately in accordance with the specifications of such computer
hardware or software and without interruption before, during and after
January 1, 2000, without any change in operations associated with the
advent of the new century;
(c) respond to two-digit date input in a way that resolves any ambiguity as to
century in a disclosed, defined and predetermined manner; and
store and provide output of date information in ways that are unambiguous as to
century.
SECTION 9.7. Notices.
(a) Defaults. The Borrower will promptly notify the Lender in writing of
the occurrence of any Default or Event of Default, specifying the nature and
existence of such Default or Event of Default and what action the Borrower is
taking or proposes to take with respect thereto.
(b) Environmental Events. The Borrower will promptly give notice to the
Lender (i) of any material violation of any Environmental Law that the Borrower
reports in writing or is reportable by such Person in writing (or for which any
written report supplemental to any oral report is made) to any federal, state or
local environmental agency and (ii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, or any federal, state or local
environmental agency or board, that in either case involves the Project or has
the potential to materially affect the assets, liabilities, financial conditions
or operations of the Borrower or the Lender's liens or security interests
pursuant to the Security Documents.
(c) Notification of Claims against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Lender in writing of any
setoff, claims, withholdings or other defenses to which any of the Collateral,
or the Lender's rights with respect to the Collateral, are subject.
(d) Notice of Nonpayment. The Borrower will immediately notify the
Lender in writing if the Borrower receives any notice of nonpayment for amounts
in excess of $25,000 in the aggregate from all sources, whether oral or written,
from laborers, subcontractors or materialman for any labor or materials
furnished in connection with the construction of the Improvements.
(e) Notice of Litigation and Judgments. The Borrower and Guarantor will
give notice to the Lender in writing within fifteen (15) days of becoming aware
of any litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Project or affecting the Borrower or Guarantor or
to which the Borrower is or is to become a party involving an uninsured claim
against the Borrower or Guarantor that could reasonably be expected to have a
materially adverse effect on the Borrower or Guarantor and stating the nature
and status of such litigation or proceedings. The Borrower will give notice to
the Lender, in writing, in form and detail satisfactory to the Lender, within
ten (10) days of any judgment not covered by insurance, final or otherwise,
against the Borrower in an amount in excess of $25,000.00.
SECTION 9.8. Existence; Maintenance of Properties. The Borrower will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence as a Maine corporation. The Borrower will do or cause to be
done all things necessary to preserve and keep in full force all of its rights
and franchises.
The Borrower (a) will cause the Land and Improvements to be maintained
and kept in good condition, repair and working order and supplied with all
necessary equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will continue to engage primarily in the businesses now conducted by it and in
related businesses.
SECTION 9.9. Insurance; Bonds.
(a) The Borrower will obtain and maintain insurance with respect to the
Project as required by the Security Deed.
(b) The Borrower will itself obtain and maintain and will require the
Contractor to obtain and maintain at all times during the construction of the
Improvements the insurance required by the Construction Contract and such other
insurance as may be reasonably required by the Lender (including, without
limitation, commercial general liability insurance, comprehensive automobile
liability insurance, all-risk contractor's equipment floater insurance,
workmen's compensation insurance and employer liability insurance), and to
contain the written agreement of the insurer to give the Lender ten (10) days
prior written notice of cancellation, nonrenewal, modification or expiration.
(c) The Borrower will require the Borrower's Architect and any other
architect, engineer or design professional providing services in connection with
the construction of the Improvements to obtain, provide evidence of and maintain
professional liability insurance covering any claims asserted with respect to
the Project for such insurance to be in such amounts and form, to include such
coverages and endorsements, and to be issued by such insurers as shall be
approved by the Lender, and to contain the written agreement of the insurer to
give the Lender ten (10) days prior written notice of cancellation, nonrenewal,
modification or expiration.
(d) The Borrower will obtain and provide to the Lender or will cause the
Contractor to obtain and provide to the Lender such Payment and Performance
Bonds in 100% of the amount of the Construction Contract naming the Lender under
a "dual obligee" rider, all in form, and issued by a bonding company
satisfactory to Lender.
SECTION 9.10. Taxes/Liens.
The Borrower will pay all taxes, assessments and other governmental
charges in accordance with the Security Deed.
The Borrower will promptly pay and discharge (by bonding or otherwise)
all claims for labor, material or supplies that if unpaid might by law become a
lien or charge against the Project or any part thereof or might affect the
priority of the lien created by the Security Deed with respect to any Advance
made or to be made by the Lender under this Agreement.
SECTION 9.11. Inspection of Project, Other Properties and Books.
(a) The Borrower shall permit the Lender and the Construction Inspector,
at the Borrower's expense, to visit and inspect the Project and all materials to
be used in the construction thereof and will cooperate with the Lender and the
Construction Inspector during such inspections (including making available
working drawings of the Plans and Specifications); provided that this provision
shall not be deemed to impose on the Lender or the Construction Inspector any
obligation to undertake such inspections.
(b) The Borrower shall permit the Lender to examine the general books of
account of the Borrower (and to make copies thereof and extracts therefrom) and
to discuss the affairs, finances and accounts of the Borrower with, and to be
advised as to the same by, its officers, all at such reasonable times and
intervals as the Lender may reasonably request.
SECTION 9.12. Compliance with Laws, Contracts, Licenses, and Permits. Each
of the Borrower and Guarantor will comply with, (a) the applicable laws and
regulations wherever its business is conducted, including all Environmental Laws
and all Requirements, (b) the provisions of its corporate charter, and other
charter documents and by-laws, (c) all agreements and instruments by which it or
any of its properties may be bound, including the Architect's Contract, the
Construction Contract, the Purchase and Sale Agreements, the Requirements and
all restrictions, covenants and easements affecting the Project, (d) all
applicable decrees, orders and judgments, and (e) all licenses and permits
required by applicable laws and regulations for the conduct of its business or
the ownership, use or operation of its properties, including, in the case of the
Borrower, all Project Approvals.
SECTION 9.13. Project Approvals/Easement Agreements. The Borrower will
promptly obtain all Project Approvals and Easement Agreements not heretofore
obtained by the Borrower and will furnish evidence thereof promptly upon
request. The Borrower shall comply with the Requirements and Project Approvals
to construct the Improvements and to use, occupy and operate the Project
following completion. The Borrower will also promptly obtain all utility
installations and connections required for the Project, and will furnish with
evidence thereof. Lender shall not be required to make or continue any Advances
if Borrower has not obtained the Easement Agreements required under this
Agreement.
SECTION 9.14. Use of Proceeds. The Borrower will use the proceeds to
construct on the Land two 6 story buildings known as buildings 8 and 9 with a
total of 192,559 square feet of space plus 170 underground parking spaces,
containing 149 Residential Units located on the upper 5 floors and a Commercial
Unit on the first floors containing 38,370 square feet of front
desk/administrative areas and commercial space, common spaces and related
infrastructure located at The Canyons Ski Area, Summit County, Utah (the
"Improvements") in accordance with the Plans and Specifications and the
requirements of the Purchase and Sale Agreements and for paying for Project
Costs in accordance with the Project Budget.
SECTION 9.15. Project Costs. The Borrower will pay all Project Costs in
excess of the Loan Amount, regardless of the amount.
SECTION 9.16. Required Equity/Insufficiency of Loan Proceeds.
Borrower shall obtain a minimum Required Equity consisting of $4,000,000
in cash, Land and services supplied by the Guarantor plus the initial deposits
from the Purchase and Sale Agreements for the Residential Units in the amount of
$3,989,170, and of which shall be invested into the Project prior to the first
Loan Advance. In addition within 30 days of the completion of the roof for the
Project, Borrower shall obtain $3,989,170 in additional cash deposits from the
purchasers of the Residential Units under the Purchase and Sale Agreements,
which sum shall be invested directly in the Project before additional Loan
Advances will be made.
If at any time while the Loan Advance is outstanding or the Lender has
any obligation to make Advances hereunder, the Lender shall in its sole
discretion determine that the remaining undisbursed portion of the Loan Advance
for the Project, together with the undisbursed or undrawn balance of Required
Equity Funds and any other sums previously applied to Project Costs or deposited
by the Borrower with the Lender in connection with the Loan, is or will be
insufficient to fully complete and equip the Improvements in accordance with the
Plans and Specifications and the Purchase and Sale Agreements, to pay all other
Project Costs, to pay all interest accrued or to accrue on the Loan during the
term of the Loan from and after the date hereof, and to pay all other sums due
or to become due under the Loan Documents (or as to any budget category or line
item in the Project Budget, if the undisbursed funds for such category or line
item are or will be insufficient to fully pay for the costs attributed to such
budget category or line item), regardless of how such condition may be caused,
the Borrower will, within seven (7) days after written notice of such
determination from the Lender, deposit with and pledge to the Lender such sums
of money in cash as the Lender may require, in an amount sufficient to remedy
the condition described in such notice, and sufficient to pay any liens for
labor and materials alleged to be due and payable at that time in connection
with the Improvements.
At the Lender's option, no further Advances need be made until this
section has been complied with. All such monies deposited shall be additional
security for the Obligations and shall be disbursed by Lender in the same manner
as Advances before any further Advances of the Loan proceeds shall be made.
SECTION 9.17. Laborers, Subcontractors and Materialmen. The Borrower will
furnish to the Lender at its request, from time to time, affidavits listing all
subcontractors, materialmen, and any other Persons who might or could claim
statutory or common law liens and are furnishing or have furnished labor or
material to the Project or any part thereof and their invoices and demands for
payment. The Borrower will also furnish from time to time upon request of
Lender, lien waivers bearing a then current date and prepared on a form
satisfactory to the Lender from the Contractor and such subcontractors or
materialmen as the Lender may designate.
SECTION 9.18. Further Assurances.
(a) Regarding Construction. The Borrower will furnish all instruments,
documents, boundary surveys, footing or foundation surveys, certificates, plans
and specifications, title and other insurance, reports and agreements and each
and every other document and instrument required to be furnished under this
Agreement and the other Loan Documents.
(b) Regarding Preservation of Collateral. The Borrower will execute and
deliver to the Lender such further documents, instruments, assignments and other
writings, and will do such other acts necessary or desirable to establish,
preserve and protect the Collateral, as the Lender may reasonably require.
(c) Regarding this Agreement. The Borrower will cooperate with, do such
further acts and execute such further instruments and documents as the Lender
shall reasonably request to carry out to its satisfaction the transactions
contemplated by this Agreement and the other Loan Documents.
SECTION 9.19. Financial Covenants. The Borrower covenants and agrees that,
so long as the Loan is outstanding:
a) Appraised Value. The outstanding balance of the Loan shall not at
any time exceed seventy-seven percent (77%) of the Appraised Value
of the entire Mortgaged Property. If as a result of any such
Appraisal such ratio is greater than the percentages of the Loan
specified above and Borrower fails to reduce the outstanding Loan
balance or provide additional collateral securing the Loan then
such event shall, at the option of Lender, be an Event of Default
under this Agreement which shall entitle Lender to exercise any
one or more default remedies under the Loan Documents as set forth
in said documents and this Agreement.
b) Borrower's Liquidity. Borrower shall obtain and maintain on hand a
minimum of Ten Million Dollars ($10,000,000.00) in cash or
marketable securities consisting obligations of the United States
of America or securities listed and regularly traded national
securities exchanges in the United States (i.e., New York or
NASDAQ national market securities) and which are acceptable to
Lender, or in the alternative Borrower shall have not less than
$10,000,000 in cash readily available under written, binding
commitments arising out of the Guarantor's $85,000,000
subordinated debt offering all in form and substance acceptable to
Lender.
c) Guarantor Tangible Net Worth. Guarantor shall maintain a tangible
net worth equal to or greater than the sum of: Forty Million
Dollars ($40,000,000); plus, Ten percent (10%) of Guarantor's net
income after July 26, 1998, measured on a consolidated basis as of
the end of each fiscal quarter.
d) Guarantor's EBITDA. Guarantor shall maintain a ratio of "Earnings
Before Interest, Taxes, Depreciation and Amortization of Deferred
Charges" (EBITDA) to cash interest expense liabilities incurred of
not less than 1.25 to 1.00 measured on a consolidated basis as of
the end of each fiscal quarter. "EBITDA" means, calculated for the
period of the previous four fiscal quarters, the consolidated net
earnings of Guarantor plus the aggregate amounts deducted in
determining such net income in respect of interest expenses,
taxes, depreciation and amortization; but not, however, giving
effect to extraordinary losses or gains in calculating net income.
SECTION 10. NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and
agrees that, so long as the Loan is outstanding or the Lender has any obligation
to make any Advances:
SECTION 10.1. Restriction on Leases/Release of Purchase and Sale
Agreements. The Borrower will not become a party to or agree to any Lease of the
Mortgaged Property without the prior approval of the Lender, except for leases
of the Commercial Unit upon commercially reasonable terms subject to the prior
consent of Lender which consent shall not be unreasonably withheld.
The Borrower will not amend, supplement or otherwise modify, or
terminate or cancel, or accept the surrender of, or grant any concessions to or
waive the performance of any material obligations of any purchaser under any
Purchase and Sale Agreement for Residential Units, without the prior approval of
the Lender. The Borrower will not, directly or indirectly, cause or permit to
exist any condition which would result in the termination or cancellation of, or
which would relieve the performance of any obligations of any tenant under any
Purchase and Sale Agreement for Residential Units.
SECTION 10.2. Restriction on Change Orders. The Borrower will not cause,
permit or suffer to exist any deviations from the Plans and Specifications and
will not approve or consent to any change order or construction change directive
without the prior approval of the Lender, each purchaser of Residential Units if
required, and the surety company or companies issuing any Payment and
Performance Bonds, if any.
SECTION 10.3. No Amendments, Terminations or Waivers. The Borrower will not
terminate, amend, or otherwise modify the Architect's Contract or the
Construction Contract without the prior approval of the Lender, and in the case
of the Construction Contract, of any surety or surety companies issuing any
Payment and Performance Bonds. The Borrower will not, directly or indirectly,
waive or agree or consent to the waiver of, the performance of any obligations
of any other party under the Architect's Contract or the Construction Contract.
SECTION 10.4. Compliance with Environmental Laws. The Borrower will not do
any of the following: (a) use any of the Real Estate or any portion thereof as a
facility for the handling, processing, storage or disposal of Hazardous
Materials (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous Materials
except in full compliance with Environmental Laws, (c) generate any Hazardous
Materials on any of the Real Estate except in full compliance with Environmental
Laws, or (d) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a Release.
SECTION 10.5 Distributions by Borrower/Transactions with Affiliates.
Borrower shall not declare or pay any dividends or other distributions on
corporate stock, whether in cash or in kind, or make any distributions of any
kind whatsoever out of the property, assets, income or revenues of Borrower on
account of or in respect to all or any of the stock of Borrower, unless
expressly permitted with the specific prior written consent of Lender.
Borrower will not enter into any leases make any loans or payments of
money (other than reasonable salaries and reimbursable expenses incurred in the
ordinary course of Borrower's business) to officers, directors, stockholders or
Affiliates of Borrower.
No officer, trustee, directors, shareholder or employee of Borrower or
any Affiliate of Borrower is presently a party to or shall engage in any
transaction with a Borrower, whether for services, for the rental or sale of
real or personal property, or in conjunction with any other transaction or any
nature, which results in a Borrower making a payment or providing other
consideration in excess of fair market value.
SECTION 10.6 Indebtedness. Borrower shall not create, incur, assume,
guarantee, agree to purchase, repurchase or provide funds in respect of, or
otherwise become or be or remain liable with respect to, any Indebtedness,
recourse or non-recourse, direct or indirect, nor guaranty or otherwise become
liable for the obligations of others, whether financial or contractual, except:
(a) The Indebtedness evidenced by the Note;
(b) The obligations of Borrower as a guarantor of the obligations of
Guarantor under the ASC East, Inc. $120 million 12% Senior
Subordinated Notes due 2006, which obligations shall remain unsecured
are fully subordinated to the obligations of Borrower under the Loan
and this Agreement;
(c) instruments endorsed for deposit in the ordinary course of Borrower's
business operations;
(d) unsecured trade Indebtedness incurred in the ordinary course of
business due not more than 60 days from the date the goods or services
are provided;
(e) The obligations of Borrower to Summit County, Utah under the Easement
Agreements; and
(f) the obligations of Borrower and Guarantor to Junior Creditor in the
principal amount not to exceed $2,097,495.60, provided that such
obligations are subject to the Subordination Agreement as herein
provided.
This limitation shall extend without limitation to guaranties, capitalized
leases, lease purchase agreements, operating or cash flow guaranties, and/or
joint venture or partnership financing.
SECTION 10.7 Liens. Borrower shall not create, incur, assume or permit to
exist any mortgage, lien, charge, security interest, attachment, lien or other
encumbrance on any of its properties or assets, whether voluntary or
involuntary, except:
(a) liens in respect of taxes, fees, assessments and other governmental
charges not yet due provided, however, that Borrower shall not be
required to pay any such tax, assessment, charge and other
governmental charges if the same shall not at the time be due and
payable or can be paid thereafter without penalty or if the validity
thereof shall currently be contested in good faith by appropriate
proceedings and, if Borrower shall have set aside on Borrower's books
adequate reserves with respect to such tax, assessment, or charge and
which do not in the aggregate materially detract from the value of the
property of Borrower or materially impair the sale of Residential
units in the Property;
(b) liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws or similar legislation or
in connection with appeal and similar bonds incidental to litigation,
mechanics', laborers' and materialmen's and similar liens, if the
obligations secured by such liens are not then delinquent or if such
obligations are being contested in good faith by Borrower and adequate
reserves have been set aside therefor, and which do not in the
aggregate materially detract from the value of the property of
Borrower or materially impair the use thereof in the operation of its
business or materially impair the sale of Residential units in the
Property;
(c) judgment liens for an award of Ten Thousand Dollars (U.S.$10,000.00)
or less which shall not have been in existence for more than sixty
(60) days after the creation thereof, or if a stay of execution shall
have been obtained, for a period longer than thirty (30) days after
the expiration of such stay; and
(d) junior mortgage in favor of Junior Creditor, subject however to the
Subordination Agreement, which agreement shall include provisions as
follows:
i) requiring the Junior Creditor to join in the creation of the
Condominium Units to the extent required to validly form a
condominium under the Utah Condominium Act.
ii) that insurance proceeds and condemnation awards with respect
to the Mortgaged Property shall be applied in such manner as
Lender may direct, including applicable to the expenses of
reconstruction and rebuilding of the Mortgaged Property or
to reduction of the Loan balance;
iii) providing that 100% of the net sale proceeds of the
Condominium Units shall be applied to the Loan until the
Loan is paid in full, and that the Junior Creditor shall
release its junior lien in order to permit the sale of
Condominium Units to buyers under the Purchase and Sale
Agreements; and
iv) contain such other provisions as Lender may require.
SECTION 10.7 Single Line of Business. Borrower is not engaged and will not
engage in any business other than the development, construction, ownership,
operation and sale of the Mortgaged Property.
SECTION 11. CONDITIONS TO INITIAL ADVANCES. The obligation of the Lender to
make the initial Advances on each Note shall be subject to the satisfaction of
the following conditions precedent:
SECTION 11.1 Initial Advance on Note . The obligation of the Lender to make
the initial Advances on the Note shall be subject to the satisfaction of the
following conditions precedent:
a) Loan Documents. Each of the Loan Documents shall have been duly
executed, acknowledged as required, delivered by the respective
parties thereto and recorded if required with the appropriate
recording office, shall be in full force and effect and shall be in
form and substance satisfactory to the Lender.
b) Purchase and Sale(s). The Purchase and Sale Agreements shall have been
duly executed by the respective parties thereto, shall be in full
force and effect, and shall be in form and substance satisfactory to
the Lender and in accordance with this Agreement and the Collateral
Assignment of Purchase and Sale Agreements.
c) Certified Copies of Organization Documents. With respect to each of
Borrower and Guarantor, Lender shall have received a certificate of
good standing from the Maine Secretary of State, and a certificate of
foreign corporation from the Utah Secretary of State, and if required
by Lender, a certified copy of the articles of incorporation, bylaws
and any other of its organization documents .
d) Resolutions. All actions necessary for the valid execution, delivery
and performance by the Borrower and Guarantor of this Agreement and
the other Loan Documents have been duly and effectively taken,
including without limitation delivery to Lender of resolutions adopted
by its directors authorizing the transactions described herein, each
certified by its clerk as of a recent date to be in full force and
effect.
e) Incumbency Certificate; Authorized Signers. The Lender shall have
received from each of the Borrower and Guarantor an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized
officer of the Borrower and Guarantor and giving the name of each
individual who shall be authorized to act on behalf of Borrower and
Guarantor.
f) Validity of Liens. The Security Documents shall create in favor of the
Lender a legal, valid and enforceable continuing first lien and
security interest in the Collateral.
g) Legal Opinions. The Lender shall have received favorable opinions
addressed to the Lender and dated as of the Closing Date, from Foster
Stewart Jr. Esq. of Portland, Maine, and from PARSON, BEHLE & LATIMER
of Salt Lake City, Utah in form and substance satisfactory to Lender
and Lender's counsel (i) stating that all Loan documents have been
duly authorized, executed and delivered by Borrower and Guarantor and
are valid, binding and enforceable against Borrower and Guarantor,
including, without limitation, the choice of law provisions of the
Loan documents subject to general principles of equity and bankruptcy
laws of general application, (ii) indicating the due organization,
legal existence and good standing of Borrower, and the Guarantor in
its state of organization and in the state where the Project is
located, (iii) indicating that the Condominium Declaration and the
Purchase and Sale Agreements are in compliance with the Utah
Condominium Act and all related Requirements subject to the recording
thereof (other than land use, building and other specialized codes)
applicable to the creation and sale of the Residential Units, and (iv)
stating that there is no action, suit or proceeding pending or
threatened against or affecting Borrower or the Project, before any
court, administrative agency, arbitrator or governmental authority
h) Certificate re Compliance of Improvements with the Requirements. A
certificate from the Architect or another qualified professional or
attorney acceptable to Lender indicating that the construction of the
Improvements and the use, occupancy and operation thereof following
completion of construction assuming that the improvements are
constructed in accordance with applicable plans and specifications,
that adequate utility services are currently available to service the
Project, and are in compliance with the Requirements.
i) Documentation under with Requirements. Copies of all permits,
correspondence, approvals, votes, actions and agreements evidencing
Borrower's and the Project's compliance with all Requirements.
j) Contractor's Consents. An agreement from the Contractor in favor of
Lender with respect to the Project in form and substance acceptable to
Lender including an agreement to notify Lender in the event of a
default and consenting to continue to the construction of the
Improvement for Lender under the Construction Contract in the event of
a default under any of the Loan Documents. k) Architect's Consents. An
agreement from the Architect in favor of Lender with respect to the
Project in form and substance acceptable to Lender including an
agreement to notify Lender in the event of a default and consenting to
the Lender's use of the plans and specifications prepared by such
Architect, without further cost to the Lender other than as specified
in the Borrower's Architect's contract, in the event of a default
under any of the Loan Documents.
l) Lien Search. The Lender shall have received a certification from Title
Insurance Company (which shall be updated from time to time at the
Borrower's expense upon request by the Lender) and from the Maine and
Utah Secretaries of State that a search of the public records
disclosed no liens, security agreements, mortgages, leases, financing
statements, agreements or other matters which affect the Collateral
and that no real estate taxes, assessments or other assessments are
past due, except for the Security Documents, and for Junior Creditor's
mortgage lien which shall be subject to the Subordination Agreement.
m) Notices. All notices required by any Governmental Authority under
applicable Requirements shall have been filed.
n) Performance; No Default. The Borrower shall have performed and
complied with this Agreement and no Event of Default exists.
o) Representations and Warranties. The representations of warranties made
in the Loan Documents or otherwise made by or on behalf of the
Borrower therewith or after the date thereof shall have been true and
correct in all respects when made and shall also be true and correct
in all respects on the Drawdown Date.
p) Proceedings and Documents. All proceedings in connection with this
Agreement and the other Loan Documents shall be satisfactory to the
Lender in form and substance, and the Lender shall have received all
information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as the
Lender and the Lender's counsel may reasonably require.
q) Construction Documents. Each of the Architect's Contract and
Construction Contract shall have been duly executed and delivered by
the respective parties thereto, shall be in full force and effect, and
shall be in form and substance satisfactory to the Lender. The
Construction Cost shall be established by contracts at least 80% of
the cost which are for a fixed price, and the total Construction Cost
shall not exceed $12,901,183.00 in the aggregate.
r) Subcontracts. The Borrower shall have delivered to the Lender, and the
Lender shall have approved, a list of all subcontractors and
materialmen who have been or, to the extent identified by the
Borrower, will be supplying labor or materials for the Project, a copy
of the subcontract to be used by the Contractor if any, and correct
and complete photocopies of all executed subcontracts and contracts.
s) Junior Creditor Agreements. The Borrower and Guarantor shall deliver
copies of all contracts and agreements with the Junior Creditor to
which they or any predecessors are a party or which may affect the
Mortgaged Property.
t) Other Contracts. The Borrower shall have delivered to the Lender
correct and complete photocopies of all other executed contracts with
contractors, engineers or consultants for the Project, and of all
development, management, brokerage, sales or leasing agreements for
the Project.
u) Construction Inspector Report. The Lender shall have received a
satisfactory report regarding the Plans and Specifications, the
Construction Contract and the Project Budget.
v) Deliveries. The following items or documents shall have been delivered
to the Lender by the Borrower and shall be in form and substance
satisfactory to the Lender:
(i) The commitment for the Title Policy with a current update of
title;
(ii) Duplicate originals or certified copies of all policies of
insurance required to be obtained and maintained during the
construction of the Improvements;
(iii) Evidence that the sum of (i) the proceeds of the Loan and
(ii) the unexpended portions of the Required Equity Funds
delivered to the Lender on the Closing Date or to be
delivered thereafter will be sufficient to cover all Project
Costs reasonably anticipated to be incurred to complete the
Improvements prior to Completion Date, to carry the Project
through the Maturity Date, to satisfy the requirements of
the Purchase and Sale Agreements and to satisfy the
obligations of the Borrower to the Lender under this
Agreement;
(iv) Evidence of access, availability of utilities and Project
Approvals as required by this Agreement and the Purchase and
Sale Agreements;
(v) An environmental site assessment report or reports of one or
more qualified environmental engineering or similar
inspection firms approved by the Lender, which report or
reports shall indicate a condition of the Land and any
existing improvements thereon in all respects satisfactory
to the Lender in its sole discretion and upon which report
or reports the Lender is expressly entitled to rely;
(vi) A Survey of the Land and Surveyor's Certificate;
(vii) Any Required Equity Funds from Borrower in excess of the
Loan proceeds as required in order to complete the Project
shall have been delivered to the Lender, to the extent then
due , and Lender acknowledges that the prepaid expenses
incurred and paid for by Borrower, Guarantor or their
affiliates with respect to the Project as set forth in the
Project Budget shall be considered a part of the Required
Equity subject to submission of appropriate verification
reasonably satisfactory to Lender; and
(viii) Evidence that the Purchase and Sale Agreements remain in
full force and effect.
(ix) Plans and Specifications and approval thereof by any
necessary Governmental Authority;
(x) Evidence that the sum of (a) the proceeds of the Loan and
(b) the unexpended portions of the Required Equity Funds
delivered to the Lender on the Closing Date or to be
delivered thereafter will be sufficient to cover all Project
Costs reasonably anticipated to be incurred to complete the
Improvements prior to Completion Date, to carry the Project
through the Maturity Date, to satisfy the requirements of
the Purchase and Sale Agreements and to satisfy the
obligations of the Borrower to the Lender under this
Agreement;
(xi) The Easement Agreements conforming to the requirements of
this Agreement;
(xii) Acknowledgment and agreement from the escrow agent
conforming to the requirements of this Agreement;
(xiii) The Subordination Agreement and
(xiv) A Draw Request complying with the provisions of SECTION 3.1
hereof.
SECTION 12. CONDITIONS OF SUBSEQUENT ADVANCES. The obligation of the Lender
to make any Advance after the initial Advance on each Note shall be subject to
the satisfaction of the following conditions precedent:
SECTION 12.1. Prior Conditions Satisfied. All conditions precedent to the
initial Advance and any prior Advance shall continue to be satisfied as of the
Drawdown Date of such subsequent Advance.
SECTION 12.2. Performance; No Default. The Borrower shall have performed
and complied with this Agreement, and on the Drawdown Date there shall exist no
Default or Event of Default.
SECTION 12.3. Representations and Warranties. Each of the representations
and warranties made by the Borrower in the Loan Documents or otherwise shall
have been true and correct in all respects on the date on when made and shall
also be true and correct in all material respects on the Drawdown Date of such
Advance (except to the extent of changes resulting from transactions
contemplated or permitted by the Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not adverse).
SECTION 12.4. No Damage. The Improvements shall not have been injured or
damaged by fire, explosion, accident, flood or other casualty, unless the Lender
shall have received insurance proceeds sufficient in the judgment of the Lender
to effect the satisfactory restoration of the Improvements and to permit the
completion thereof on or prior to the Completion Date.
SECTION 12.5. Receipt of the Lender. The Lender shall have received the
following items or documents which shall be in form and substance satisfactory
to the Lender:
(a) Draw Request. A Draw Request complying with the requirements of this
Agreement;
(b) Endorsement to Title Policy. A "date down" endorsement to the Title
Policy indicating no change in the state of title and containing no
survey exceptions not approved by the Lender, which endorsement shall
increase the amount of the Title Policy to the aggregate amount of the
Loan advanced on or before the effective date of such endorsement;
(c) Current Survey. An updated Survey if required by the Title Insurance
Company or the Lender;
(d) Approval by Construction Inspector. Approval of the Draw Request for
such Advance by the Construction Inspector;
(e) Lien Waivers under Construction Contracts. Evidence that the
Construction Contract is in full force and effect, without any change
orders which have not been approved by Lender, and that lien waivers
as required by Lender and the Title Insurance Company have been
obtained from the Contractor and such all contractors, subcontractors,
materialmen or suppliers as Lender may require, all in form and
substance satisfactory to the Lender and the Title Insurance Company;
and
(f) Purchase and Sale Agreements. Evidence that the Purchase and Sale
Agreements remain in full force and effect.
SECTION 12.6. Release of Retainage. In addition to the conditions
hereinbefore set forth in this Article 12, the Lender's obligation to make any
Advance of Retainage shall be subject to receipt by the Lender of the following:
(a) Purchasers. Evidence satisfactory to the Lender that the purchasers
under the Purchase and Sale Agreements have approved the construction
of the Improvements in accordance with the Purchase and Sale
Agreements, such that each purchaser is obligated to close under the
Purchase and Sale Agreements.
(b) Project Approvals. Evidence satisfactory to the Lender that the
Borrower has obtained all remaining Project Approvals from, given all
notices to, and taken all such other actions with respect to, such
Governmental Authority as may be required under the Requirements for
the permanent use and occupancy of the Improvements for their intended
uses.
(c) Approval by Construction Inspector. Notification from the Construction
Inspector to the effect that the Improvements have been completed in a
good and workmanlike manner in accordance with the Plans and
Specifications.
(d) Final Survey. If required by the Title Company or Lender, a final
Survey acceptable to the Lender showing the as-built location of the
completed Improvements.
(e) Certificate of the Borrower's Architect. A certificate of the
Borrower's Architect that the Improvements have been completed in
accordance with the Plans and Specifications and that the Improvements
comply with all applicable Requirements and Project Approvals and are
in all respects (except for work to be performed by tenants) ready for
occupancy.
(f) Payment of Costs. Evidence satisfactory to the Lender that all sums
due for the construction of the Improvements have been paid in full
(or will be paid out of the funds requested to be advanced) and that
no party claims or has a right to claim any statutory or common law
lien arising out of the Project.
(g) Final Lien Waivers. Final lien waivers (in a form satisfactory to the
Lender and the Title Insurance Company) from the Contractor and such
laborers, subcontractors and materialmen as may be requested by the
Lender, duly executed and, if requested, notarized.
(h) Consent by Surety. Satisfactory evidence that the surety company or
companies issuing any Payment and Performance Bonds, if any, have
consented to final payment to the Contractor or any subcontractor
named as principal therein.
(i) Warranties. Copies of the warranty issued by the Contractor
to the Borrower pursuant to the Construction Contract, if
any, and of all other warranties issued to the Borrower by
subcontractors and manufacturers for labor performed and
materials supplied in connection with the construction of
the Improvements.
(j) Insurance. Duplicate original or certified copies of all policies
of insurance required by the Security Deed to be obtained and
maintained by the Borrower following completion of construction of
the Improvements.
SECTION 13. EVENTS OF DEFAULT AND REMEDIES.
SECTION 13.1. Events of Default. If any of the following ("Events of
Default" or if either or both notice or lapse of time is required, then, prior
to such notice and/or lapse of time, "Defaults") shall occur:
(a) Borrower fails to make payment when due and payable within ten (10)
days of when due, of the (i) interest or (ii) principal or any other
amount due on either the Note after same shall have become due,
whether at the stated date of maturity or any accelerated date of
maturity or at any time fixed for payment; or
(b) Borrower fails to pay as and when due and payable any other sums
required to be paid by Borrower under any Loan Documents (including,
but not limited to, any payments required for taxes and insurance
premiums) and continuance of such failure for a period of ten (10)
days after written notice thereof from Lender; or
(c) Borrower fails to duly observe or perform any other term, covenant,
condition or agreement contained in this Agreement or the Loan
Documents, and the continuance of such failure for a period of thirty
(30) days after written notice thereof from Lender, except as
otherwise provided herein; or
(d) any representation or warranty made in writing by or on behalf of
Borrower herein or in connection with any of the transactions
contemplated hereby shall prove to have been false or incorrect in any
material respect on the date as of which made; or
(e) any violation of the loan to value covenants set forth in Article IV
of this Agreement; or
(f) any other event of default which continues beyond any applicable cure
period, either under any other Loan Documents, including without
limitation any Security Documents, Guaranty or under other agreement
entered into between Lender and the Borrower, whether or not it is
governed by or secures this Agreement; or
(g) Borrower or Guarantor fails to pay at maturity or within any
applicable grace period any obligation for money borrowed or credit
advanced, or any other material agreement by which it is bound,
evidencing or securing money borrowed or credit advanced, including
without limitation the loan from the Junior Creditor, and such failure
or default shall continue without waiver thereof --- beyond any period
of grace provided with respect thereto, which failure or default shall
or could have a material adverse effect upon the financial condition
of Borrower or Guarantor provided, however, that Borrower and
Guarantor shall not be required to pay any such third -------- -------
party debt, tax, assessment, charge or levy if the same shall not at
the time be due and payable or can be paid thereafter without penalty
or if the validity thereof shall currently be contested in good faith
by appropriate proceedings and, except as to debts, and if Borrower
shall have set aside on Borrower's books adequate reserves with
respect to such judgment, tax, assessment, charge or levy; or
(h) The entry of a decree or order for relief with respect to Borrower or
Guarantor in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law or appointing a receiver,
liquidator, trustee, custodian (or similar official) of any Borrower;
or
(i) The commencement by any Borrower and/or Guarantor of a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by any Borrower or
Guarantor to the appointment of or taking possession by a receiver,
liquidator, trustee, custodian (or other similar official) of any
Borrower or for any substantial part of its property, or the making by
any Borrower of any assignment for the benefit of creditors, or the
insolvency or the failure of any Borrower generally to pay its debts
as such debts become due, or the taking of action by any Borrower in
furtherance of any of the foregoing; or
(j) if any order shall be entered in any proceeding by or against any
Borrower or Guarantor decreeing or permitting the dissolution or
liquidation of Borrower and/or Guarantor or the winding-up of its
affairs and such order shall remain in effect for more than thirty
days, whether or not consecutive; or
(k) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days after notice thereof to
Borrower and/or Guarantor, whether or not consecutive, any final
judgment against Borrower and/or Guarantor beyond any applicable
appeal period, in an amount in excess of $10,000 or which precludes
Borrower's sale of individual Residential units in the Mortgaged
Property; or
(l) if any of the Loan Documents shall be canceled, terminated, revoked or
rescinded otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of Lender, or
any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents shall be commenced
by or on behalf of Borrower and/or Guarantor, or any court or any
other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof; or
(m) Borrower and/or Guarantor shall be indicted for a federal crime, a
punishment for which could include the forfeiture of any assets of
Borrower and/or Guarantor
THEN and in any such event, Lender may, at its option, without further
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(1) Forthwith suspend or terminate, in the discretion of Lender, the
commitment of Lender to make Loans to Borrower hereunder and
Lender shall be relieved of all obligations to make any Loans to
Borrower, provided that Borrower shall not be relieved of any of
its obligations hereunder or under the Loan Documents, and that
Lender may immediately suspend Advances upon a Default without
need to await the expiration of any notice or cure period
established above;
(2) Declare all amounts owing hereunder or with respect to the Note
due and payable in full together with all interest thereon and all
other payments due hereunder and under the Note, all without
presentment, demand, notice or protest, all of which are hereby
waived;
(3) Exercise any one or all of the rights and remedies of mortgagee,
secured party and creditor under the Loan Documents, the
provisions of the Uniform Commercial Code and any other applicable
law upon default by a borrower, whether by suit in equity, action
at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this
Agreement and the other Loan Documents or any instrument pursuant
to which the Obligations to such Lender are evidenced, and, if
such amount shall have become due, by declaration or otherwise,
proceed to enforce the payment thereof or any other legal or
equitable right of such Lender. Such remedies may be exercised in
such order and at such times as Lender deems appropriate, against
all or portions of the Collateral. No remedy herein conferred upon
any Lender or the Agent or the holder of any Note is intended to
be exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
(4) Set-off against any and all deposits, accounts, certificate of
deposit balances, claims, or other sums at any time credited by or
due from Lender and against all other property of Borrower in the
possession of any Lender or under its control.
(5) Obtain the appointment of a receiver upon application to a court
of competent jurisdiction as a matter of right and without regard
to the asserted value of the security for the Obligations, with
the receiver having the express power and authority to complete
the Improvements, to perform the Borrower's obligations under the
Purchase and Sale Agreements and to deliver deeds and other
closing documents under the Purchase and Sale Agreements.
Lender may proceed to realize, from time to time, upon any portion or all
of the collateral security for such amounts then due and payable, in such order
as Lender may elect. No remedy herein conferred upon Lender is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative and
shall be in addition to all other remedies given hereunder or at law.
SECTION 13.2. Completion of Project. If any one or more of the Events of
Default shall have occurred, regardless of whether the obligation to make
Advances has been terminated or the Note accelerated under SECTION 13.1, the
Lender may cause the Project to be completed and may enter upon the Land and
construct, equip and complete the Project, with such changes therein as the
Lender may, from time to time, and in its sole discretion, deem appropriate. In
connection with any construction of the Project, the Lender may either directly
or through a receiver:
(a) use any funds of the Borrower, including any balance which may be held
by the Lender as security or, if Borrower is entitled to the same the
funds held in escrow under the Purchase and Sale Agreements, and any
funds remaining unadvanced under the Loan;
(b) employ existing contractors, subcontractors, agents, architects,
engineers, and the like, or terminate the same and employ others;
(c) employ security watchmen to protect the Project;
(d) make such additions, changes and corrections in the Plans and
Specifications as shall, in the judgment of the Lender, be necessary
or desirable;
(e) take over and use any and all Personal Property contracted for or
purchased by the Borrower, if appropriate, or dispose of the same as
the Lender sees fit;
(f) execute all applications and certificates on behalf of the Borrower
which may be required by any Governmental Authority or Requirements or
contract documents or agreements;
(g) pay, settle or compromise all existing or future bills and claims
which are or may be liens against the Project, or may be necessary for
the completion of the Improvements or the clearance of title to the
Project;
(h) enter into new Purchase and Sale Agreements, and modify or amend
existing Purchase and Sale Agreements, all as the Lender shall deem to
be necessary or desirable;
(i) prosecute and defend all actions and proceedings in connection with
the construction of the Improvements or in any other way affecting the
Land or the Improvements and take such action and require such
performance as the Lender deems necessary under any Payment and
Performance Bonds;
(j) fulfill any obligations of Borrower under the Requirements and the
Purchase and Sale Agreements; and
(k) take such action hereunder, or refrain from acting hereunder, as the
Lender may, in its sole and absolute discretion, from time to time
determine, and without any limitation whatsoever, to carry out the
intent of this SECTION 13.2.
The Borrower shall be liable to the Lender for all costs paid or incurred for
the construction, equipping and completion of the Project, whether the same
shall be paid or incurred hereunder or otherwise. All payments made or
liabilities incurred by the Lender hereunder of any nature whatsoever shall be
deemed Advances under this Agreement and shall be secured by the Security
Documents. To the extent that any costs so paid or incurred by the Lender,
together with all other Advances made by the Lender hereunder, exceed the Loan
Amount, the amount of such excess costs shall be added to the Loan Amount, and
the Borrower's obligation to repay the same, together with interest thereon at
the Default Rate, shall be deemed to be evidenced by this Agreement and secured
by the Security Documents. Lender shall not be obligated to continue such
construction longer than it shall see fit and it may thereafter, at any time,
change any course of action undertaken by it or abandon such construction and
decline to make further payments, whether or not the Project shall have been
completed. The construction, equipping and completion of the Project shall be
deemed to include any action necessary to cure any Event of Default by the
Borrower under any of the terms and provisions of any of the Loan Documents.
SECTION 13.3 Other Remedies. If any one or more of the Events of Default
shall have occurred, then regardless of any other actions taken by Lender, the
Lender may proceed to protect and enforce its rights and remedies under this
Agreement, the Note or any of the other Loan Documents by suit in equity, action
at law or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations are evidenced,
including the appointment of a receiver. No remedy under this Agreement or in
any of the other Loan Documents is intended to be exclusive of any other remedy.
Each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or thereunder or now or hereafter existing at law
or in equity or by statute or any other provision of law.
SECTION 13.4 Waivers. The Borrower hereby waives to the extent not
prohibited by applicable law (a) all presentments, demands for performance,
notices of nonperformance (except to the extent required by the provisions
hereof or of any of the other Loan Documents), protests and notices of dishonor,
(b) any requirement of diligence or promptness on the Lender's part in the
enforcement of its rights (but not fulfillment of its obligations) under the
provisions of this Agreement or any of the other Loan Documents, and (c) any and
all notices of every kind and description which may be required to be given by
any statute or rule of law and any defense of any kind which the Borrower may
now or hereafter have with respect to its liability under this Agreement or
under any of the other Loan Documents.
The rights, remedies, powers, privileges, and discretions of the
Lender hereunder shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have. No delay or omission by the Lender in exercising
or enforcing any of the Lender's rights and remedies shall operate as, or
constitute a waiver thereof. No waiver by the Lender of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Lender's rights or remedies, and no other agreement or transaction,
of whatever nature entered into between the Lender and the Borrower at any time,
either express or implied, shall preclude the other or further exercise of the
Lender's rights and remedies. No waiver by the Lender of any of the Lender's
rights and remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of the
Lender's rights and remedies and all of the Lender's rights, remedies, powers,
privileges, and discretions under any other agreement or transaction are
cumulative, and not alternative or exclusive, and may be exercised by the Lender
at such time or times and in such order of preference as the Lender in its sole
discretion may determine.
Notice: Under Maine law, no promise, contract or agreement to lend
money, extend credit, forbear from collection of a debt or make any
other accommodation for the repayment of a debt for more than Two
Hundred and Fifty Thousand Dollars ($250,000) may be enforced in court
against Lender unless the promise, contract or agreement is in writing
and signed by Lender. Accordingly, Borrower cannot enforce any oral
promise unless it is contained in a loan document signed by Lender, nor
can any change, forbearance or other accommodation relating to the
loan, this agreement or any other loan document be enforced, unless it
is in writing and signed by Lender.
SECTION 13.5 No Obligation of Lender to Complete Improvements. In the event
that the Lender exercises the right to take possession of the Improvements and
the Project under this Agreement, whether directly or through a receiver, it
shall not be obligated to continue the construction of the Project at all or, if
it does so continue the construction, longer than it shall deem appropriate, in
its sole discretion, and may at any time abandon such construction and equipment
and refuse to make further payments for the account of the Borrower, whether or
not the Project have been completed and without affecting the validity of the
Security Documents and any other security given by the Borrower to the Lender
for advances already made under this paragraph and other provisions of this
Agreement.
SECTION 14. SETOFF. Regardless of the adequacy of any collateral, during
the continuance of any Event of Default, any deposits (general or specific, time
or demand, provisional or final, regardless of currency, maturity, or the branch
of the Lender where such deposits are held) or other sums credited by or due
from the Lender to the Borrower and any securities or other property of the
Borrower in the possession of the Lender may be applied to or set off against
the payment of the Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to the Lender.
SECTION 15. EXPENSES. The Borrower agrees to pay (a) the reasonable costs
of producing and reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Lender (other than
taxes based upon the Lender's net income), including any recording, transfer,
mortgage or intangibles taxes in connection with the Security Deed, or other
taxes payable on or with respect to the transactions contemplated by this
Agreement, including any taxes payable by the Lender after the Closing Date, (c)
all title insurance premiums, and the reasonable fees, expenses and
disbursements of the Lender's counsel to the Lender incurred in connection with
the preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, the making of each Advance hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(d) the fees, expenses and disbursements of the Lender incurred in connection
with the preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, and the making of each Advance hereunder
(including all fees paid to the Construction Inspector, Appraisal fees, and
surveyor fees) (e) all reasonable out-of-pocket expenses (including reasonable
attorneys' and paralegals' fees and costs, and the fees and costs of
consultants, accountants, auctioneers, receivers, brokers, property managers,
appraisers, investment bankers or other experts retained by the Lender in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or the administration thereof after the
occurrence of a Default or Event of Default and (ii) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to the
Lender's relationship with the Borrower or defending any counterclaims, cross
claims or attacks against Lender by Borrower or any other Person, and (f) all
reasonable fees, expenses and disbursements of the Lender incurred in connection
with UCC searches, UCC filings, title rundowns, title searches or mortgage
recordings. The covenants of this Section shall survive payment or satisfaction
of payment of all amounts owing with respect to the Note.
SECTION 16. INDEMNIFICATION. Except for Lender's gross negligence or
willful misconduct or Lender's breach of Lender's obligations under this
Agreement or the Loan Documents, the Borrower agrees to indemnify and hold
harmless the Lender from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby and thereby including, without limitation, (a) any brokerage, leasing,
finders or similar fees, (b) any disbursement of the proceeds of any of the
Advances, (c) any condition of the Project whether related to the quality of
construction or otherwise, (d) any actual or proposed use by the Borrower of the
proceeds of any of the Advances, (e) any actual or alleged violation of any
Requirements or Project Approvals, (f) the Borrower entering into or performing
this Agreement or any of the other Loan Documents or (g) Borrower's failure to
comply with the Purchase and Sale Agreements or any other obligations to the
purchasers of Condominium Units, of (h) with respect to the Borrower and their
respective properties and assets, the violation of any Environmental Law, the
Release or threatened Release of any Hazardous Materials or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Materials (including, but not limited to claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding. In
litigation, or the preparation therefor, the Lender shall be entitled to select
its own counsel and, in addition to the foregoing indemnity, the Borrower agrees
to pay promptly the reasonable fees and expenses of such counsel. If, and to the
extent that the obligations of the Borrower under this Section are unenforceable
for any reason, the Borrower hereby agrees to make the maximum contribution to
the payment in satisfaction of such obligations which is permissible under
applicable law.
SECTION 17. LIABILITY OF THE LENDER. No action shall be commenced by the
Borrower for any claim against the Lender under the terms of this Agreement
unless written notice thereof, specifically setting forth the claim of the
Borrower, shall have been given to the Lender at least fifteen (15) Business
Days prior to the commencement of such action. In no event shall the Lender be
liable to the Borrower, or anyone claiming by, under or through the Borrower,
for any special, exemplary, punitive or consequential damages, whatever the
nature of the breach of the terms of this Agreement by the Lender, such damages
and claims therefor being expressly waived by the Borrower.
SECTION 18. RIGHTS OF THIRD PARTIES. This Agreement including without
limitation the obligation to make Advances, are solely and exclusively for the
benefit of the Lender; no other Person may enforce or shall be deemed to be a
beneficiary thereof. In particular, the Lender makes no representations and
assumes no obligations as to third parties concerning the quality of the
construction by the Borrower of the Improvements or the absence therefrom of
defects or Lender's requirement of compliance with this Agreement or the Loan
Documents.
SECTION 19. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in the Note, in any of the other
Loan Documents shall be deemed to have been relied upon by the Lender,
notwithstanding any investigation heretofore or hereafter made by Lender, shall
survive the making of the Advances, and shall continue in full force and effect
so long as any amount due under this Agreement or the Note or any of the other
Loan Documents remains outstanding or the Lender has any obligation to make any
Advances.
SECTION 20. PARTICIPATION; ETC.
SECTION 20.1. Participations. The Lender may sell participations to one or
more banks or other entities in all or a portion of the Lender's rights and
obligations under this Agreement and the other Loan Documents; provided that (a)
any such sale or participation shall not affect the rights and duties of the
Lender hereunder to the Borrower.
SECTION 20.2. Pledge by the Lender. The Lender may at any time pledge all
or any portion of its interest and rights under this Agreement (including all or
any portion of the Note) to any of the twelve Federal Reserve Banks organized
under SECTION 4 of the Federal Reserve Act, 12 U.S.C. SECTION 341. No such
pledge or the enforcement thereof shall release the Lender from its obligations
hereunder or under any of the other Loan Documents.
SECTION 20.3. No Assignment by the Borrower. The Borrower shall not assign
or transfer any of its rights or obligations under any of the Loan Documents
without the prior approval of the Lender.
SECTION 21. RELATIONSHIP. The relationship between the Lender and the
Borrower is solely that of a lender and borrower, and nothing contained herein
or in any of the other Loan Documents shall in any manner be construed as making
the parties hereto joint venturers, partners, fiduciaries or any other
relationship other than lender and borrower.
SECTION 22. NOTICES. Each notice, demand, election or request provided for
or permitted to be given pursuant to this Agreement shall be given as specified
in the Note.
SECTION 23. GOVERNING LAW. This Agreement and each of the other Loan
Documents, except as otherwise specifically provided therein shall for all
purposes be construed in accordance with and governed by the laws of Maine
(excluding the laws applicable to conflicts or choice of law), except to the
extent the Security Documents are required to be governed by the laws of the
State of Utah.
SECTION 24. CONSENT TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE
STATES OF MAINE AND UTAH OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND (B) WAIVES
ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF
ANY, TO TRIAL BY JURY, (II) TO OBJECT TO JURISDICTION WITHIN THE STATES OF UTAH
AND MAINE OR VENUE IN ANY PARTICULAR FORUM WITHIN THE STATES OF UTAH AND MAINE,
AND (III) TO THE RIGHT, IF ANY, TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN ACTUAL DAMAGES.
NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT THE LENDER FROM BRINGING ANY
SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY COLLATERAL AND
AGAINST THE BORROWER, AND AGAINST ANY PROPERTY OF THE BORROWER, IN ANY OTHER
STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY
STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN
THAT THE LAWS OF THE STATE OF MAINE SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF
THE BORROWER AND THE LENDER HEREUNDER OR THE SUBMISSION HEREIN BY THE BORROWER
TO PERSONAL JURISDICTION WITHIN THE STATES OF UTAH AND MAINE.
SECTION 25. HEADINGS. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
SECTION 26. COUNTERPARTS. This Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate
counterpart
originals.
SECTION 27. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except as provided in SECTION 28.
Entire Agreement. This Agreement, together with the other Loan
Documents, (a) constitutes the entire and final understanding and agreement of
the parties with respect to the general subject matter hereof, including without
limitation any obligation to lend money or extend credit, or to delay in the
collection or enforcement of any such obligation; (b) supersedes all prior
negotiations, discussions, and agreements with respect thereto; (c) may not be
contradicted by evidence of any alleged oral agreement; and (d) may not be
amended, modified, or rescinded in any manner except by written agreement signed
by the parties which clearly and unequivocally expresses an intent to amend,
modify, or rescind the same.
SECTION 28. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly set forth in any particular provision of this Agreement, any consent
or approval required or permitted to be given by the Lender may be given, and
any term of this Agreement or of any other Loan Document may be amended, and the
performance or observance by the Borrower of this Agreement or such other Loan
Documents, the continuance of any Default or Event of Default may be waived
with, but only with, the written consent of the Lender. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Lender in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No Advance made by the Lender hereunder during the
continuance or any Default or Event of Default shall constitute a waiver
thereof. No notice to or demand upon the Borrower shall entitle the Borrower to
other or further notice or demand in similar or other circumstances.
SECTION 29. TIME OF THE ESSENCE. Time is of the essence.
SECTION 30. SEVERABILITY. The provisions of this Agreement are severable,
and if any one clause or provision hereof shall be held invalid or unenforceable
in whole or in part, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, and shall not in any manner affect
any other clause or provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
a sealed instrument as of December 18, 1998 at Portland, Maine.
The Canyons Resort Properties, Inc.
by: /s/ Mark P. Girard
- ----------------------------- --------------------------------
Witness its Vice President
KEYBANK NATIONAL ASSOCIATION
by: John Shea
- ----------------------------- --------------------------------
Witness its Vice President
First Amendment to
CONSTRUCTION LOAN AGREEMENT
This FIRST AMENDMENT TO CONSTRUCTION LOAN AGREEMENT is made by and
between THE CANYONS RESORT PROPERTIES, INC., a Maine corporation authorized to
do business in Utah (collectively the "Borrower") having its principal place of
business and mailing address at Sunday River Access Road, P.O. Box 450, Bethel,
ME 04217 and KEYBANK NATIONAL ASSOCIATION, a national bank with a place of
business at 70 Federal Street, Boston, Massachusetts 02110 (the "Lender" or
"Bank").
Whereas Borrower and Lender entered into a Construction Loan Agreement
dated December 18, 1998 (the "Loan Agreement"), the terms of which are
incorporated herein by reference;
Whereas Borrower and Lender desire to amend certain provisions of the
Loan Agreement identified below.
NOW THEREFORE, the parties hereby agree as follows:
I. Project Budget
The budget for total estimated Project Costs originally attached to the
Loan Agreement as Exhibit D is hereby amended to include Exhibit D-1, which
shall control in the event of any conflict.
Amended Section 9.19 re Financial Covenants
Section 9.19 of the of the Loan Agreement is hereby amended and
restated as follows:
"SECTION 9.19. Financial Covenants. The Borrower covenants and agrees that,
so long as the Loan is outstanding:
a) Appraised Value. The outstanding balance of the Loan shall not at any
time exceed seventy-seven percent (77%) of the Appraised Value of the
entire Mortgaged Property. If as a result of any such Appraisal such
ratio is greater than the percentages of the Loan specified above and
Borrower fails to reduce the outstanding Loan balance or provide
additional collateral securing the Loan then such event shall be an
Event of Default under this Agreement at the option of Lender, which
shall entitle Lender to exercise any one or more default remedies
under the Loan Documents as set forth in said documents and this
Agreement.
b) Borrower's Liquidity. [deleted]
c) Guarantor Tangible Net Worth. Guarantor shall maintain a Tangible Net
Worth equal to or greater than Sixty Million Dollars ($60,000,000).
"Tangible Net Worth" shall mean the excess of (i) all assets of
Borrower excluding intangible assets such as goodwill, over (ii) all
liabilities of Borrower excluding Intercompany Debt and excluding the
Senior Note Guaranty for so long as it is a contingent liability, all
as determined in accordance with generally accepted accounting
principles consistently applied. "Intercompany Debt" shall mean the
Indebtedness of Guarantor to American Ski Company. "Senior Note
Guaranty" shall mean the guaranty by Borrower of the Series A and
Series B 12% Senior Subordinated Notes due 2006 pursuant to the
Indenture dated June 28, 1996.
d) Guarantor's EBITDA. [deleted]
e) Guarantor's Liquidity. Guarantor shall obtain and maintain a minimum
average of Seven Million Five Hundred Thousand Dollars ($7,500,000.00)
over the course of each fiscal quarter consisting of the sum of: (i)
Guarantor's unrestricted cash; (ii) funds which Guarantor is entitled
to borrow under Guarantor's Amended and Restated Credit Agreement
dated January 8, 1999 with BankBoston, N.A. as Agent for the lenders
in the amount of $58,000,000, inclusive of any cash in cash collateral
accounts; and (iii) Guarantor's marketable securities consisting
obligations of the United States of America or securities listed and
regularly traded national securities exchanges in the United States
(i.e., New York or NASDAQ national market securities) other than the
securities of an Affiliate and which are acceptable to Lender
(collectively the "Guarantor's Liquidity"). Lender shall have the
right to confirm with BankBoston N.A. or its successors and assigns
the availability of such funds under the Amended and Restated Credit
Agreement. The Guarantor's Liquidity shall be reported at the end of
each fiscal quarter of Guarantor, but be a measured average determined
on a weekly basis. Notwithstanding anything to the contrary contained
within, the minimum average of the Guarantor's Liquidity required for
the fiscal quarter ending October, 1999, under the foregoing formula
shall be reduced to Three Million Dollars ($3,000,000) for that one
fiscal quarter only, after which the required Guarantor's Liquidity
minimum of 7,500,000 shall be reinstated."
III. Additional Fee
In addition to the commitment fee in the amount of $217,500.00
previously paid, Borrower shall pay Lender an additional fee of $200,000 at the
time of the execution of this Agreement, and drawable from proceeds of the Loan.
IV. SECTION 10.7(d) re Wolf Mountain Subordination.
The provisions of SECTION 10.7(d) regarding Wolf Mountain Resort L.C., a
Utah limited liability company (the "Junior Creditor") is hereby amended and
restated as follows:
(d) junior mortgage in favor of Junior Creditor, subject however
to the Subordination Agreement, which agreement shall include
provisions as follows:
(i) requiring the Junior Creditor to join in the creation
of the Condominium Units to the extent required to
validly form a condominium under the Utah Condominium
Act.
(ii) that insurance proceeds and condemnation awards with
respect to the Mortgaged Property shall be applied in
such manner as Lender may direct, including
applicable to the expenses of reconstruction and
rebuilding of the Mortgaged Property or to reduction
of the Loan balance;
(iii) providing that 100% of the net sale proceeds of the
Condominium Units shall be applied to the Loan until
the Loan is paid in full, and that Junior Creditor
shall deliver into escrow with the Title Company
discharges and terminations of its junior mortgage to
be released upon payment in full of its $2,097,495.60
loan secured by the junior mortgage, subject to the
Guarantor's agreement to repay the Loan from Lender
to the level where the net available proceeds of sale
under the Purchase and Sale Agreements are sufficient
to repay in full the Junior Loan and the Loan; and
(iv) contain such other provisions as Lender may require.
V. Section 13.1 (g) . Revised Event of Default
Section 13.1 (g) regarding Events of Default" is hereby amended and
restated as follows:
"(g) Borrower or Guarantor or American Skiing Company ("ASC") fails to pay
at maturity or within any applicable grace period any obligation for
money borrowed or credit advanced, or any other material agreement by
which it is bound, evidencing or securing money borrowed or credit
advanced, including without limitation the loan from the Junior
Creditor to Borrower, and such failure or default shall continue
without waiver thereof beyond any period of grace provided with
respect thereto, which failure or default shall or could have a
material adverse effect upon the financial condition of Borrower or
Guarantor or ASC, provided, however, that Borrower and Guarantor or
ASC shall not be required to pay any such third party debt, tax,
assessment, charge or levy if the same shall not at the time be due
and payable or can be paid thereafter without penalty or if the
validity thereof shall currently be contested in good faith by
appropriate proceedings and in addition, except as to debts, if
adequate reserves with respect to such judgment, tax, assessment,
charge or levy have been established to the reasonable satisfaction of
Lender; or"
VI. Post Closing Easement Agreement and Other Matters
Borrower acknowledges that it has not provided the Easement Agreement
consisting of The Canyons Village Resort Easement and Management Agreement to be
entered into among ASC Utah, Inc., Guarantor and Borrower in form and substance
acceptable to Lender all to be recorded in the Summit County, Utah Public
Records with releases or subordinations from all other parties with liens or
interests therein, all to be in form and substance acceptable to Lender as of
the date of the execution of this Amendment.
As an interim measure, Borrower shall obtain and record the Interim
Easement Agreement with ASC Utah, Inc., Guarantor and Borrower. On or before May
30, 1999, Borrower shall obtain a consent and subordination from the mortgagees
of Guarantor and ASC Utah, Inc. in form and substance acceptable to Lender. On
or before June 30, 1999, Borrower shall be in full compliance with the foregoing
master Easement Agreement requirement identified in the first paragraph of this
section. In the event that Borrower fails to comply with the foregoing, Lender
may suspend subsequent advances on the Loan.
The Borrower further acknowledges that Lender's initial advance shall
not constitute a waiver of Lender's right to require that Borrower fully comply
with all other requirements for the initial advance under the Loan Agreement.
VII. Ratification.
Except as expressly set forth above, the Loan Agreement shall remain in
full force and effect. In requesting this First Amendment Borrower and Guarantor
hereby represents to Lender, and Lender in agreeing to this Agreement relies
upon the representation of Borrower and Guarantor, that: (i) the Loan Agreement,
Note and all other loan documents governing or securing the Loan Agreement and
Note delivered by Borrower and Guarantor to Lender are each legal, valid and
enforceable according to their respective terms; (ii) the Borrower and Guarantor
have no defenses or claims against Lender with respect to its obligations under
the Loan Agreement, Note or other loan documents; (iii) other than as are
reflected in any written, signed agreements between Lender and Borrower or
Guarantor in existence as of the date hereof and still in effect, there are no
amendments or modifications of the Loan Agreement, Note or the loan documents.
Nothing contained herein shall be deemed to waive, forgive or otherwise
relieve Borrower and Guarantor from their continuing obligations to comply with
the Loan Agreement, the Note and all other Loan Documents, including without
limitation compliance with the conditions precedent to the initial advance set
forth in Article 11 of the Loan Agreement. which Borrower acknowledges remains
unsatisfied as of this date.
IN WITNESS WHEREOF, the undersigned have duly executed this First
Amendment as a sealed instrument as of April ____, 1999 at Portland, Maine.
The Canyons Resort Properties, Inc.
By: /s/ Mark P. Girard
- ------------------------ -----------------------------------
Witness Its Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ John Shea
- ------------------------ -----------------------------------
Witness Its Vice President
Seen and agreed as guarantor:
AMERICAN SKIING COMPANY RESORT PROPERTIES, INC.
By: /s/ Mark P. Girard
- ------------------------ -----------------------------------
Witness Its Vice President
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-48449) of American Skiing Company of our report
dated October 14, 1998 relating to the consolidated financial statements, which
appears in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Boston, MA
October 21, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K, for the year ended July 25, 1999, of our report
dated October 1, 1999 (except with respect to the matter discussed in Note 17,
as to which the date is October 12, 1999) included in Registration Statement
File No. 1-13507.
Arthur Andersen LLP
Boston, MA
October 19, 1999
To the Board of Directors and Shareholders of American Skiing Company
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 27, 1997 and July 26, 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended July 26, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatements. 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.
/s/ PricewaterhouseCoopers LLP
Boston, MA
October 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-25-1999
<PERIOD-END> JUL-25-1999
<CASH> 9,003,000
<SECURITIES> 0
<RECEIVABLES> 6,474,000
<ALLOWANCES> 0
<INVENTORY> 10,837,000
<CURRENT-ASSETS> 42,906,000
<PP&E> 640,442,000
<DEPRECIATION> 111,288,000
<TOTAL-ASSETS> 907,502,000
<CURRENT-LIABILITIES> 161,046,000
<BONDS> 127,062,000
43,836,000
0
<COMMON> 303,000
<OTHER-SE> 268,663,000
<TOTAL-LIABILITY-AND-EQUITY> 907,502,000
<SALES> 317,050,000
<TOTAL-REVENUES> 317,050,000
<CGS> 26,808,000
<TOTAL-COSTS> 225,039,000
<OTHER-EXPENSES> 51,434,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,382,000
<INCOME-PRETAX> (43,007,000)
<INCOME-TAX> (15,057,000)
<INCOME-CONTINUING> (27,950,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,322,000)
<EPS-BASIC> (1.07)
<EPS-DILUTED> (1.07)
</TABLE>
