<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION NO. 333-33369
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SNOWDANCE, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7011 04-338-3839
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
ROUTE 44
BROWNSVILLE, VERMONT 05037
(802) 484-7000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN H. PLAUSTEINER
CHIEF EXECUTIVE OFFICER
SNOWDANCE, INC.
ROUTE 44
BROWNSVILLE, VERMONT 05037
(802) 484-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DENNIS N. BERMAN, ESQ. LAWRENCE B. FISHER, ESQ.
SONNENSCHEIN NATH & ROSENTHAL ORRICK, HERRINGTON & SUTCLIFFE LLP
1221 AVENUE OF THE AMERICAS 666 FIFTH AVENUE
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10103
(212) 768-6700 (212) 506-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is to be a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
registration statement of the earlier effective registration statement for the
same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF NUMBER OF SHARES OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock(2)......................................... 1,150,000 shares $ 9.00 $10,350,000 $ 3,136.36
Representative's Warrants............................... 100,000 Warrants(3) $ .001 $ 100 (3)
Common Stock underlying the Representative's
Warrants (4)........................................... 100,000 shares(4) $10.80 $ 1,080,000 $ 327.27
Totals.................................................. -- -- $11,430,100 $ 3,463.63
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 150,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(3) No fee due pursuant to Rule 457(g).
(4) Pursuant to Rule 416, the Registration Statement also covers such additional
shares of Common Stock as may be issued as a result of the anti-dilution
provisions of the Representatives' Warrants.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
ALSO REGISTERED HEREBY ARE AN INDETERMINATE NUMBER OF SHARES OF COMMON
STOCK THAT MAY BE SOLD IN MARKET-MAKING TRANSACTIONS BY JOSEPHTHAL LYON & ROSS
INCORPORATED, WHICH MAY BE AN AFFILIATE OF THE COMPANY.
________________________________________________________________________________
<PAGE>
<PAGE>
SNOWDANCE, INC.
CROSS REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
--------------------------------------------------------------- ------------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front Cover Page of
Prospectus................................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus........ Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors........................... Outside Front Cover Page; Prospectus
Summary; Risk Factors
4. Use of Proceeds................................................ Use of Proceeds
5. Determination of Offering Price................................ Outside Front Cover Page; Risk Factors;
Underwriting
6. Dilution....................................................... Dilution; Risk Factors
7. Selling Security Holders....................................... Principal and Selling Stockholders
8. Plan of Distribution........................................... Underwriting
9. Legal Proceedings.............................................. Business
10. Directors, Executive Officers, Promoters and Control Persons... Management
11. Security Ownership of Certain Beneficial Owners and
Management................................................... Principal and Selling Stockholders
12. Description of Securities to be Registered..................... Description of Capital Stock; Underwriting
13. Interest of Named Experts and Counsel.......................... Not Applicable
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................... Description of Capital Stock
15. Organization Within Last Five Years............................ Prospectus Summary; Business; Certain
Transactions
16. Description of Business........................................ Prospectus Summary; Business
17. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property........................................ Business
19. Certain Relationships and Related Transactions................. Business; Certain Transactions
20. Market For Common Equity and Related Stockholder Matters....... Outside Front Cover Page; Risk Factors;
Dividend Policy; Description of Capital
Stock; Shares Eligible for Future Sale
21. Executive Compensation......................................... Management
22. Financial Statements........................................... Index to Financial Statements
23. Changes in and Disagreements With Accountants and Financial
Disclosure................................................... Not Applicable
</TABLE>
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1997
PROSPECTUS
1,000,000 SHARES
SNOWDANCE, INC.
COMMON STOCK
Snowdance, Inc., a Delaware corporation (the 'Company'), hereby offers
1,000,000 shares of common stock, par value $0.001 per share (the 'Common
Stock'). Prior to this offering (the 'Offering'), there has been no public
market for the Common Stock, and there can be no assurance that such a market
will develop or be sustained after completion of this Offering. It is presently
anticipated that the initial public offering price will be between $7.00 and
$9.00 per share. For information regarding the factors considered in determining
the initial public offering price of the Common Stock, see 'Underwriting.' The
Company intends to make an application to include the Common Stock on the Nasdaq
SmallCap Market under the symbol 'SDNC' and on the Pacific Exchange under the
symbol 'SNO.'
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION. SEE 'RISK FACTORS' BEGINNING ON PAGE 7 AND 'DILUTION.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share........................................................... $ $ $
Total(3)............................................................ $ $ $
</TABLE>
(1) Does not include compensation payable to Josephthal Lyon & Ross Incorporated
('Josephthal') and Cruttenden Roth Incorporated ('Cruttenden', which
together with Josephthal are the representatives of the several
underwriters, (the 'Representatives')) in the form of a non-accountable
expense allowance equal to 2.5% of the gross proceeds of this Offering.
Josephthal may be deemed to have a 'conflict of interest' with the Company
as defined by Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. ('NASD'). Therefore, Cruttenden is acting as a
Qualified Independent Underwriter as that term is defined in Rule 2720. See
'Underwriting' for information concerning indemnification and contribution
arrangements with, and other compensation payable to, the Underwriters.
(2) Before deducting estimated expenses of $780,000 payable by the Company which
includes the non-accountable expense allowance payable to the
Representatives.
(3) Certain stockholders of the Company (the 'Selling Stockholders') have
granted to the Underwriters a 45-day option to purchase up to an additional
150,000 shares of Common Stock upon the same terms and conditions as set
forth above, solely to cover over-allotments, if any. If such over-allotment
option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ , and $ , respectively.
See 'Underwriting.'
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this offering and to reject any order in whole or in part. It is expected
that delivery of the shares of Common Stock offered hereby will be made against
payment on or about , 1997 at the offices of Josephthal Lyon &
Ross Incorporated, New York, New York.
This Prospectus is also to be used by Josephthal, which may be an affiliate
of the Company, in connection with offers and sales relating to market-making
transactions in the Common Stock in which Josephthal acts as principal.
Josephthal may also act as agent in such transactions. Sales will be made at
prices related to the prevailing prices at the time of sale.
------------------------
<TABLE>
<S> <C>
JOSEPHTHAL LYON & ROSS CRUTTENDEN ROTH
INCORPORATED INCORPORATED
</TABLE>
, 1997
<PAGE>
<PAGE>
[Inside Front Cover]
[PHOTOS]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
THE COMPANY WILL FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS CERTIFIED BY AN INDEPENDENT PUBLIC ACCOUNTING FIRM
AND WILL MAKE AVAILABLE QUARTERLY REPORTS CONTAINING UNAUDITED FINANCIAL
STATEMENTS FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise noted, all information in this
Prospectus assumes: (i) that the Underwriters' over-allotment option to purchase
up to 150,000 shares of Common Stock from certain stockholders of the Company
(the 'Selling Stockholders') has not been exercised; (ii) that the acquisition
of Hogback Mountain has been consummated (the 'Hogback Acquisition'); (iii) that
the Representatives' Warrants to purchase 100,000 shares of Common Stock have
not been exercised; (iv) that all of the interests in each of Ascutney Mountain
Resort, L.P. and its affiliates, directly or indirectly, shall have been
exchanged for shares of common stock of Snowdance, Inc. (the 'Combination
Transaction') and (v) the conversion of a portion of the Related Loans (as
defined in 'Certain Transactions') to a capital contribution to the Company. See
'Business -- Business Strategy -- Opportunities For Further Development,'
'Certain Transactions' and 'Underwriting.'
Unless the context otherwise requires, the term 'Company' refers to (a)
Ascutney Mountain Resort, L.P. and its affiliates, as such entities existed
prior to the consummation of this Offering and the Combination Transaction, when
used with respect to historical information herein contained, and (b) Snowdance,
Inc. and its subsidiary as such entities exist immediately following this
Offering, when used with respect to information about events occurring upon
completion of or after this Offering and the Hogback Acquisition or when giving
pro forma effect thereto.
This Prospectus includes forward-looking statements which involve known and
unknown risks and uncertainties or other factors that may cause actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed under the heading 'Risk Factors.' An
investment in the securities offered hereby involves a high degree of risk. See
'Risk Factors.'
THE COMPANY
Snowdance, Inc. owns and operates one of the premier fully-integrated, all
season mountain resorts in New England and further seeks to develop and operate
other fully-integrated year-round recreational resorts focusing on affordable
family vacations. The Company intends to develop resorts that emphasize skiing,
snowboarding and other winter recreational activities as well as warm weather
activities such as golf, tennis and hiking, thereby offering true year-round
amenities. The Company believes that the opportunity to develop and sell the
property surrounding these amenities could provide it with its greatest
potential source of cashflow and income. Such property related development is
expected to include timeshare sales of hotel suites (also known as weekly
vacation ownership intervals), and may also include condominium construction and
sales, and second home and land sales.
While the Company's strategy is to offer its guests many of the benefits
provided by the larger ski destination resorts, it retains a family-oriented
personal atmosphere. The Company's emphasis on affordable family vacations
permeates most aspects of its business. The Company believes that, as compared
to its competitors, it charges lower fees for the various amenities it offers,
and the prices of its lodging and meals are more reasonable.
To date, the Company has focused its resources on developing its first
fully-integrated family-oriented property, the Ascutney Mountain Resort
('Ascutney' or the 'Resort') located in Brownsville, Vermont. Recently, the
Company agreed to acquire its second property for potential future development
called Hogback Mountain in Marlboro, Vermont. Upon successful implementation of
its strategy at Ascutney, the Company intends to seek other opportunities that
fit its strategy of developing and operating year-round affordable, family
resorts.
ASCUTNEY MOUNTAIN RESORT
Ascutney was ranked among the top three ski resorts in the eastern United
States for value by Skiing magazine in its 1995 survey. It was also ranked one
of the top four ski resorts for families in the
3
<PAGE>
<PAGE>
same survey. Ascutney is a four-season destination resort that includes one of
Vermont's major ski areas, a 212-room hotel (the fourth largest resort hotel in
Vermont) which is suited for timeshare sales due to its large number of suites,
an 18,000 square foot comprehensive sports and fitness center, approximately
30,000 square feet of conference facilities, several restaurants and condominium
units, all set in a charming New England style village.
While the Resort offers its guests many of the benefits provided by larger
ski facilities, it also retains a family-oriented, friendly atmosphere. The
Company provides a comprehensive destination resort experience by combining
quality ski facilities and resort services, including convenient ski-on/ski-off
lodging, with attractive four season amenities. The Resort attracts guests
primarily due to its affordable family-oriented vacations in a self-contained
resort village with easy accessibility from most major metropolitan areas in the
northeastern United States.
Since 1983, more than $85 million was invested in connection with the
expansion and development of the Resort. The Resort is one of Vermont's 14 major
ski resorts, with a 1,530 foot vertical rise on Mt. Ascutney. The ski area
includes four chairlifts, 31 trails and 115 skiable acres. Snowmaking capability
covers approximately 75% of the skiable terrain. There are approximately 20
miles of cross-country trails which range from open meadows suitable for
beginners to mountain touring trails suitable for more advanced skiers. At the
base of the mountain, tubing, ice skating, children's programs and apres ski
entertainment are available. The Resort's skier days exceeded 53,000 during the
1996-97 ski season, representing an increase of approximately 26% since the
commencement of operations in 1993 under its current management team.
To enhance the marketing and sales of the Resort's real estate, the
Company's expansion plans for the Resort include the possible development of an
18-hole golf course with surrounding residential units, as well as additional
commercial development. The Company also plans to continue to enhance the skiing
experience at Ascutney through additional expansion of skiable terrain and
upgrades to ski lifts, snowmaking and grooming.
A key objective of the Company is to begin selling weekly vacation
ownership intervals ('VOIs'), popularly known as timeshares, in its hotel at the
base of Mt. Ascutney. The Company has had discussions with a number of real
estate and vacation ownership development companies and has executed a letter of
intent with Westerly Resorts Group, Inc., an experienced VOI developer and
marketer with projects in the Caribbean and Colorado. Marketing of more than
5,000 VOIs in Ascutney's hotel is anticipated to commence in 1998. The Company
believes its hotel is an attractive VOI property due to, among other reasons,
the high number of suites in its hotel (many of which are duplex units), the
presence of existing and planned year-round amenities and Ascutney's proximity
to most major population centers of the Northeast, all of which can be reached
within 2 to 5 hours of driving time. (Air transportation is available at the
Lebanon, New Hampshire airport near Dartmouth College less than 20 miles away.)
HOGBACK MOUNTAIN
Upon closing of this Offering, the Company will acquire substantially all
of the assets of Hogback Mountain ('Hogback Mountain'), which comprises
approximately 800 acres of land located in southern Vermont, approximately 20
miles from the Mt. Snow and Haystack ski areas. The assets of Hogback Mountain
also include buildings whose tenants are currently a restaurant, a gift shop and
a nature museum. As Hogback Mountain offers an unobstructed, panoramic view of
three states and is within 30 minutes driving distance to several ski areas,
golf courses, large lakes, annual music festivals and other attractions, the
Company believes that Hogback Mountain offers attractive development potential.
Hogback Mountain is one of the tallest mountains in southern Vermont and is
situated on both sides of Route 9, a primary east-west thoroughfare in Vermont.
The Company intends to explore possible development opportunities regarding the
land at Hogback Mountain, including an examination of zoning and other
regulatory approvals necessary for any development. The Company also intends to
4
<PAGE>
<PAGE>
lease the buildings including the restaurant and gift shop at Hogback Mountain
to the current owner and operator of such businesses, the Vermont Natural
Company.
As consideration for the purchase of the Hogback Mountain assets, the
Company will issue an aggregate of 625,000 shares of Common Stock to Skyline
Partners, L.P., a New York limited partnership and the owner of the Hogback
Mountain assets. Skyline Partners, L.P. and Vermont Natural Company are
affiliates of Josepththal. See 'Underwriting.'
OTHER POSSIBLE OPPORTUNITIES
The Company believes there are other possible development opportunities
available to it. The Company further believes that there is strong interest in
families seeking affordable vacations in year-round resorts near their primary
residences that offer many of the amenities found at larger destination resorts
but on a friendlier, more personal level. The Company's management team combines
experience in ski resort operation, mountain resort development and finance, and
the Company believes that its management is well suited to carry out its
business strategy.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered......................... 1,000,000 shares
Common Stock to be outstanding after the
offering................................... 4,125,000 shares(1)
Use of proceeds by the Company............... The Company intends to apply the net proceeds of the Offering to:
upgrade its ski lifts, snowmaking, grooming and trail systems;
develop the Resort's real estate; purchase mountain equipment;
make hotel and resort improvements; retire certain debt; and
working capital and general corporate purposes, including
possible business acquisitions. See 'Use of Proceeds.'
Risk factors................................. This Offering involves a high degree of risk and immediate and
substantial dilution. See 'Risk Factors' and 'Dilution.'
Proposed Nasdaq SmallCap Symbol.............. SNDC
Proposed Pacific Exchange Symbol............. SNO
</TABLE>
- ------------
(1) Excludes 150,000 shares of Common Stock underlying options available for
future grants under the Company's 1997 Stock Option Plan for Non-Employee
Directors. See 'Management -- 1997 Stock Option Plan for Non-Employee
Directors.'
Snowdance, Inc. was incorporated in 1997, as successor to each of Ascutney
Mountain Resort Hotel, L.P., Ascutney Mountain Resort, L.P. and Ascutney
Mountain Resort Realty, L.P. The Company's principal executive offices are
located at Route 44, Brownsville, Vermont 05037, and its telephone number is
(802) 484-7000. The Company maintains a web site at http://www.ascutney.com. The
contents of the Company's web site are not a part of this Prospectus.
5
<PAGE>
<PAGE>
SUMMARY FINANCIAL DATA
The summary financial information set forth below should be read in
conjunction with financial statements appearing elsewhere in this Prospectus.
The summary historical financial data presented below has been derived from the
Company's financial statements. The unaudited pro forma and as adjusted summary
financial data are derived from the unaudited pro forma and as adjusted
financial data presented elsewhere in this Prospectus. The statement of
operations data for the six-month period ended June 30, 1997 is not necessarily
indicative of the results of operations that may be expected for the full year.
<TABLE>
<CAPTION>
AS
PRO FORMA ADJUSTED
HISTORICAL HISTORICAL PRO FORMA AS ADJUSTED HISTORICAL SIX MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED JUNE 30, ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ---------------------- JUNE 30, JUNE 30,
1995 1996 1996(1) 1996(2) 1996 1997 1997(1) 1997(2)
------------ ------------ ------------ ------------ ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues................. $3,866,418 $3,983,218 $ 3,983,218 $3,983,218 $2,004,522 $2,365,325 $2,365,325 $2,365,325
Net loss................. (576,689) (1,500,819) (1,700,819) (1,614,829) (745,666) (200,467) (240,467) (194,868)
Weighted average shares
outstanding............ 2,500,000 2,500,000 3,125,000 4,125,000 2,500,000 2,500,000 3,125,000 4,125,000
Loss per common share.... $(.23) $(.60) $(.54) $(.39) $(.30) $(.08) $(.08) $(.05)
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA AS ADJUSTED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1996 1997 1997(3) 1997(4)
------------ ----------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Balance sheet data:
Total assets................................................... $1,589,366 $ 1,515,927 $6,515,927 $12,295,927
Long-term debt................................................. 2,481,025 2,945,146 1,764,579 1,039,579
Total liabilities.............................................. 3,638,521 3,705,324 2,524,757 1,644,757
Stockholders' equity (deficit)................................. (2,049,155) (2,189,397) 3,991,170 10,651,170
</TABLE>
- ------------
(1) Pro forma to give effect to (i) the Hogback Acquisition, (ii) the conversion
of a portion of the Related Loans (as defined in 'Certain Transactions') to
a capital contribution to the Company and (iii) the compensation payable to
Susan and Steven Plausteiner under employment agreements to be entered into
upon the closing of the Offering as if such transactions had occurred on
January 1, 1996.
(2) As adjusted to give effect to the closing of the Offering and the
application of the estimated net proceeds therefrom as if the Offering had
occurred on January 1, 1996, as well as to give effect to the transactions
described in footnote (1) above.
(3) Pro forma to give effect to (i) the Hogback Acquisition and (ii) the
conversion of a portion of the Related Loans (as defined in 'Certain
Transactions') to a capital contribution to the Company as if such
transactions had occurred on June 30, 1997.
(4) As adjusted to give effect to the closing of the Offering and the
application of the estimated net proceeds therefrom as if the Offering had
occurred on June 30, 1997, as well as to give effect to the transactions
described in footnote (3) above.
6
<PAGE>
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative in nature and
involves a high degree of risk. Each prospective purchaser of the Common Stock
should carefully consider the following risk factors, as well as the other
information contained, and incorporated by reference, in this Prospectus before
making an investment decision. Information contained or incorporated by
reference in this Prospectus contains 'forward-looking statements' which can be
identified by the use of forward-looking terminology such as 'believes,'
'expects,' 'intends,' 'may,' 'will,' 'should' or 'anticipates' or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy or plans. See, e.g., 'Business -- Business Strategy.' No assurance
can be given that the future results covered by the forward-looking statements
will be achieved. The following matters constitute cautionary statements
identifying important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
vary materially or adversely from the future results covered in such
forward-looking statements. Factors that could cause actual results to vary
materially or adversely from the future results covered in such forward-looking
statements include, but are not limited to, those discussed below as well as
those discussed elsewhere in the Prospectus.
Limited Operating History; Significant and Continuing Losses. The Company
was formed in August 1993 in connection with the purchase of the assets of the
Ascutney Mountain Resort in an auction by the United States Bankruptcy Court for
the District of Vermont in accordance with Chapter 7 of the United States
Bankruptcy Code. The Ascutney Mountain Resort was purchased by three limited
partnerships, the predecessors in interest to the Company: Ascutney Mountain
Resort Hotel, L.P., Ascutney Mountain Resort, L.P. and Ascutney Mountain Resort
Realty, L.P. (collectively, the 'Limited Partnerships'). The Resort has only
operated under current management since September 1993 and, accordingly, the
Company has a limited operating history upon which an evaluation of the
Company's performance and prospects can be made. Since the inception of the
Limited Partnerships, the predecessors in interest to the Company, significant
annual losses have been incurred, including losses of $576,689 and $1,500,819,
for the years ended December 31, 1995 and 1996, respectively, and $240,467 for
the six months ended June 30, 1997. It is possible that losses and negative cash
flow will continue until such time, if ever, as the Company is able to generate
sufficient revenues to offset its operating costs. The Company's prospects must
be considered in light of the numerous risks, expenses, delays, problems and
difficulties frequently encountered in the establishment of a new business,
particularly in an industry characterized by vigorous competition. To address
these risks, the Company must, among other things, establish and increase market
acceptance of its products and services, respond effectively to competitive
pressures and successfully market its products and services. There can be no
assurance that the Company will generate significant revenues or maintain
profitable operations. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and Financial Statements.
Seasonality of Operations. Ski resort operations are highly seasonal. In
fiscal 1996 approximately 56% of the Company's operations revenue was generated
in the months of January, February, March and December, with approximately 44%
generated during the period from April to November. Furthermore, a significant
portion of operations revenue is generated on certain holidays, particularly
Christmas, President's Day and school spring breaks, and on weekends. Problems
during these peak periods, such as adverse weather conditions and equipment
failures, could have a material adverse effect on the Company's business,
financial condition and results of operations. Additionally, the Company has a
limited revolving line of credit on which it can draw during this period to
finance its working capital requirements. A reduction in this credit facility,
particularly during peak periods, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
Unfavorable Weather Conditions. The Company's ability to attract visitors
to the Resort is substantially influenced by weather conditions and the amount
of snowfall during the ski season. Adverse weather conditions typically
discourage visitors from participating in outdoor activities at the Resort. In
addition, unseasonably warm weather may result in inadequate snowfall, which
increases the cost of snowmaking, and could render snowmaking wholly or
partially ineffective in maintaining quality skiing conditions. Prolonged
periods of adverse weather conditions, or the occurrence of such conditions
7
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during peak periods of the ski season, could have a material adverse effect on
the Company's business, financial condition and results of operations.
Economic Downturn. Both skiing and golf are discretionary recreational
activities with relatively high participation costs. An economic downturn could
reduce spending on resort vacations and result in declines in the number of ski
visitors and revenues per visit at the Resort. A decrease in Resort visitors may
also result in a decrease in demand for Resort real estate. There can be no
assurance that an economic downturn will not have a material adverse effect on
the Company's business, financial condition and results of operations.
Uncertainty of Development of Vacation Ownership Intervals and Golf Course
Development. The Company's strategy is designed, in large part, to increase and
balance year-round utilization and to enhance real estate values at the Resort.
Accordingly, the Company's success will depend, in large part, upon its ability
to develop a more comprehensive resort experience beyond its ski operations,
including the development of vacation ownership intervals ('VOIs') at its
Resort. In connection with such efforts, the Company is expected to be largely
dependent upon an experienced developer and operator of resort real estate. The
Company has had discussions with a number of real estate and vacation ownership
development companies regarding the marketing and sale of VOIs in the Resort's
hotel as well as the development of additional units at the Resort. The Company
has executed a letter of intent with Westerly Resorts Group, Inc. (the 'Joint
Venture Partner'), an experienced VOI developer and marketer with projects in
the Caribbean and Colorado. The commitment to develop and market VOIs at the
Resort is subject to the execution of definitive documentation. There can be no
assurance that the Company will enter into any such agreement, or sell any VOIs
or construct any additional units in the event that any such agreement is
reached, nor can there be any assurance that vacation ownership operations would
be suitably developed and commenced in a timely manner or that the Company would
realize any benefits from such an operation or that the Joint Venture Partner
will not default on any of its obligations. See 'Business -- Vacation Ownership
Program.' The Company's business strategy also includes the possible development
and construction of a golf course. Although the previous owner of the Resort had
obtained a conceptual Land Use Permit under Vermont's principal environmental
law, Act 250, for a golf course at the Resort, no design or formal development
program has commenced or previously commenced for such golf course nor have any
current permits been obtained. The conceptual Land Use Permit formerly received
under Act 250 has expired. Accordingly, there can be no assurance that the
Company will develop a golf course in a timely manner, upon acceptable terms
favorable to the Company or at all.
Vacation Ownership Industry Operating Risks. The Company, through a
potential joint venture or other arrangement with the Joint Venture Partner (the
'Joint Venture'), intends to commence the sale of VOIs in the Resort's hotel,
designed to increase destination visitors to the Resort and increase total
Resort revenue. Accordingly, the Joint Venture's business is expected to be
subject to all of the operating risks inherent in the vacation ownership
industry. These risks include, but are not limited to, the possibility of an
oversupply of VOIs, a reduction in demand for VOIs, changes in travel and
vacation patterns, changes in governmental regulation of the vacation ownership
industry and increases in taxes or construction costs for new construction, as
well as negative publicity concerning the industry generally. The vacation
ownership industry is highly fragmented, containing a large number of
developers. In the past, the vacation ownership industry as a whole has
experienced a negative image as a result of various developers employing high
pressure sales and marketing tactics, constructing low quality units and
engaging in other potentially misleading practices. Consequently, negative
publicity with respect to any one or more developers in the vacation ownership
industry could have a disproportionate effect on all of the developers and
marketers in the industry. There can be no assurance that any arrangement
related to the marketing and sale of VOIs in the Resort's hotel will be reached.
Risks of Joint Venture Operations. The Company anticipates that it will
conduct its VOI business through the Joint Venture, which the Company may
co-manage. The Company's Joint Venture Partner may from time to time have
economic or business interests or goals which are inconsistent with the business
interests or goals of the Company. Further, the Company may be required to
consider the interests of such Joint Venture Partner in connection with
decisions concerning the operations of the
8
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Joint Venture. In addition, the Joint Venture may face government imposed or
other restrictions, from time to time, on its ability to transfer funds to the
Company. The Company also faces the risks that its Joint Venture Partner may be
unable to meet its economic or other obligations and that the Company may be
required or choose to fulfill those obligations.
Inexperience of the Company in Vacation Ownership Industry. As part of the
Company's business strategy, the Company, through the Joint Venture, plans on
entering a line of business that is not currently part of its core business. As
a result, the Company, with its Joint Venture Partner, may co-manage the
development of a VOI program constituting a line of business in which the
Company has not previously participated. Although the Company's strategy
includes the formation of a Joint Venture with the Joint Venture Partner in
order to mitigate risks associated with the VOI program, the arrangement is
expected to require the significant involvement of the Company's senior
management and may also involve the investment of additional capital. The
Company's senior management has no experience in the vacation ownership
industry. There can be no assurance that the Company will successfully implement
its VOI program. See 'Business -- Business Strategy.'
Growth Initiatives. The Company is currently engaged in and has plans for a
variety of development projects relating to the Resort's ski and hotel
operations as well as real estate operations. There can be no assurance (i) as
to when or whether such projects will be completed, (ii) that the Company's
estimated costs associated with such projects will prove to be accurate, (iii)
that the Company will receive the expected benefits from such projects, or (iv)
that the Company will receive the necessary regulatory approvals for such
projects. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and 'Business -- Business Strategy.'
Capital Expenditures and Possible Need for Additional Capital. The Company
operates in a capital intensive industry and requires significant capital
expenditures to maintain its competitive position. The Company expects to make
significant capital expenditures in the future to enhance and maintain the
operations of the Resort and to develop its real estate holdings. The Company
anticipates that, based on its present plans, the net proceeds of this Offering,
when combined with the Company's existing capital resources and anticipated
revenues from operations, will be sufficient to enable it to maintain its
current and planned operations for a period of at least 12 months after
consummation of this Offering. In the event that the Company's plans change or
its assumptions change or prove to be inaccurate or if the net proceeds of this
Offering or cash flow prove to be insufficient (due to unanticipated expenses or
otherwise), the Company may seek to minimize cash expenditures and/or obtain
additional financing in order to support its plan of operations. Additional
funding, whether obtained through public or private debt or equity financings,
or from strategic alliances, may not be available when needed or may not be
available on terms acceptable to the Company, if at all. Additional financings
may result in dilution to existing stockholders. Failure to secure needed
additional financing, if and when needed, may have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, at such time, when and if the Company should decide to purchase an
additional resort or property, the Company may require significant amounts of
additional capital in order to consummate any such transaction. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources' and 'Business -- Business
Strategy.'
Risks Associated with Possible Development Opportunities. Upon the
successful implementation of its strategy at Ascutney, the Company intends to
seek additional acquisition opportunities, some of which may be material. Future
acquisitions could be financed through a combination of internally generated
funds, bank borrowings, public offerings or private placements of equity (which
may cause dilution to existing holders of capital stock of the Company) or debt
securities, the combination of which will depend on the size of the acquired
resort or property and the Company's capital structure at the time of an
acquisition. However, there can be no assurance that attractive acquisition
candidates will be identified, that the Company will be able to make additional
acquisitions on terms favorable to it, that necessary financing will be
available on suitable terms, if at all, or that such acquisitions will be
permitted under applicable law. If the Company completes any acquisitions, it
will encounter various associated risks, including the possible inability of the
Company to integrate the acquired business into the Company's operations,
increased goodwill amortization and the possibility of significant losses during
the start-up phase of a new resort that could negatively impact the Company's
earnings.
9
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Significant management resources and time may be required to develop and operate
any acquired resorts or property and unanticipated problems or liabilities with
respect to such resorts or properties may further divert management's attention
from the Company as a whole, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
Competition in the Ski Resort Industry. The industry in which the Company
operates is highly competitive. The Resort competes for both destination and day
skiers with other mountain resorts in the United States, Canada and Europe,
including other ski resorts in Vermont (many of which have greater financial
resources, greater name recognition and a greater share of the market). The
competitive position of the Resort is dependent upon many variables, including
location and accessibility, quality of snow conditions and terrain, extent and
quality of Resort facilities, quality of service, price for services and nature
of reputation. There can be no assurance that the Company's principal
competitors will not be successful in capturing a share of the Company's present
or potential customer base. The Company also faces competition for destination
visitors from other leisure industry companies. Such competitors may be better
positioned to withstand adverse weather or economic conditions and they may have
greater financial resources to develop new attractions. With respect to day
skiers, the Resort faces competition from alternative recreational activities,
many of which have lower participation costs. See 'Business -- Competition.'
Control by Principal Stockholders. Following the Offering, Steven and Susan
Plausteiner, the Company's Chief Executive Officer and Chief Financial Officer,
respectively (the 'Principal Stockholders') will collectively beneficially own
or control approximately 60% of the Company's outstanding shares of Common
Stock, giving the Principal Stockholders approximately 60% of the combined
voting power with respect to all matters submitted for a vote of all
stockholders. Subsequent to the closing of the Offering, the Principal
Stockholders will collectively be able to elect all of the Board of Directors of
the Company, control the approval of matters requiring approval by the Board of
Directors and control decisions on matters submitted for stockholder
consideration. This concentration of ownership under certain circumstances could
have the effect of delaying or preventing a change in control of the Company.
Dependence on Key Employees. The success of the Company depends
significantly on its senior management, including Steven Plausteiner, the
Company's Chairman and Chief Executive Officer, Susan Plausteiner, the Company's
Chief Financial Officer, and Dusan Plausteiner, the Company's Chief Operating
Officer. Although the Company will have entered into employment agreements prior
to the consummation of the Offering with the Company's Chief Executive Officer
and the Chief Financial Officer, there can be no assurance that such individuals
will continue in their respective capacities with the Company for any particular
period of time. See 'Management -- Employment Agreements.' The unanticipated
departure of any key member of the Company's management team could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company does not have, and does not
contemplate securing, 'key-man' life insurance for any of its key employees. The
Company's future success also depends on its ability to attract and retain
additional highly qualified personnel experienced in the industry. Competition
for qualified personnel is intense and there can be no assurance that the
Company will be able to attract or retain personnel in the future. See
'Management.'
Permits and Regulatory Matters. The Company is subject to various laws and
regulations relating to the operation of its Resort and related activities,
which are administered by numerous federal, state and local governmental
agencies. In particular, development of the Company's property in Vermont is
subject to comprehensive Vermont environmental legislation, commonly referred to
as Act 250, as well as other state administrative regulations. This regulatory
framework, in general, encompasses such areas as water quantity and quality, air
quality, traffic considerations, availability of municipal services, use of
natural resources, impact of growth, energy conservation and utility services,
conformity with local and regional plans, and public building approvals,
together with a number of other safety and health regulations. Additionally,
each municipality has its own planning and zoning requirements. Permits and
approvals mandated by such regulation for development of any magnitude are often
numerous, significantly time-consuming and onerous to obtain and not guaranteed.
The permit processes are administered by numerous state, regional and local
boards and agencies with independent jurisdictions.
10
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<PAGE>
Permits, when received, are subject to appeal or collateral attack and, in some
cases, are of limited duration, after which review is necessary. These
requirements have a direct bearing on the ability of the Company or others to
further develop their resorts in Vermont. While the Company believes that its
operations are in full compliance in all material respects with applicable
federal, state and local requirements, the Company's growth and development
opportunities in Vermont may be limited and more costly as a result of
legislative, regulatory or municipal requirements. In particular, to further
expand the Resort's ski operations to the peak of Mt. Ascutney, the Company
would be required to lease land from either the State of Vermont and/or the Town
of West Windsor. Under the terms of such lease, either the Vermont Department of
Forests and Parks or the Town of West Windsor or both would be expected to have
the right to review and comment on the location, design and construction of
improvements on the leased land and on many operational matters. If the Company
does enter into such a lease, a termination of the lease could have a material
adverse effect on the Company's business, financial condition and results of
operations. To the Company's knowledge, no lease for a ski resort has ever been
terminated by the Vermont Department of Forests and Parks. The Company believes
that its relationship with all governmental agencies is good. See
'Business -- Regulation and Legislation.'
Regulation of Marketing and Sales of Vacation Ownership Intervals. The
marketing and sales of VOIs and related operations are subject to extensive
regulation by the federal government and states in which the Joint Venture's
VOIs are expected to be marketed and sold. The federal government and many
states have adopted specific laws and regulations regarding the sale of VOIs,
telemarketing and certain of the Joint Venture's other potential related
activities. However, no assurance can be given that the cost of complying with
laws and regulations in all jurisdictions in which the Joint Venture may conduct
sales of VOIs would not be significant, would not impair the cost-effectiveness
of the marketing programs, or that the Joint Venture would in fact be in
compliance with all applicable laws and regulations. See 'Business -- Regulation
and Legislation.'
Competition in Vacation Ownership Intervals. As the Joint Venture develops
its marketing plan of VOIs, the Joint Venture may experience significant
competition for customers and for qualified personnel from other entities
engaged in the business of resort development, sales and operations, including
vacation interval ownership, condominiums, hotels and motels. Many well-known
lodging, hospitality and entertainment companies have begun to develop and sell
VOIs in resort properties, including ski resorts and other vacation resorts.
While many of the companies have targeted a different market segment than the
Company's market segment, there can be no assurance that the Company, the Joint
Venture and those companies will not compete on a direct or indirect basis or
more broadly. In such event, the Company will be required to compete with
companies that may have significantly greater resources. See
'Business -- Competition.'
Uncertainty of Adequacy of Insurance Coverage. The Company is insured
against property damage, business interruption and general liability. There can
be no assurance that such insurance will remain available to the Company at
commercially reasonable rates or that the amount of such coverage will be
adequate to cover any liability incurred by the Company. If the Company is held
liable for amounts exceeding the limits of its insurance coverage or for claims
outside the scope of that coverage, its business, financial condition and
results of operations could be materially adversely affected.
Potential Conflict of Interest of Josephthal. Under Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. ('NASD'),
Josephthal may be deemed to be an 'affiliate' of the Company and to have a
'conflict of interest' with the Company by virtue of the fact that affiliates of
Josephthal may be deemed to beneficially own greater than 10% of the voting
stock of the Company as a result of the consummation of the Hogback Acquisition.
See 'Underwriting.'
Ongoing Influence of the Representatives. Upon completion of the Offering,
(a) Josephthal and its affiliates will have beneficial ownership of 625,000
shares of Common Stock of the Company, (b) the Representatives will hold in the
aggregate warrants to purchase 100,000 shares of the Common Stock of the Company
and (c) Josephthal will have the right to designate a Board member for a period
of five years after the closing of the Offering. Josephthal also is the
exclusive financial advisor of the Company in connection with the Company's
discussions and negotiations with timeshare developers. Additionally, the
Company has granted to the Representatives a right of first refusal for a period
of three (3) years commencing on the closing of this Offering with respect to
any sales of securities to be made by the
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Company or any of its affiliates. These factors may result in the
Representatives having significant influence over the Company and/or result in
the Company having difficulty engaging any other investment advisor or
underwriter which may result in the failure of the Company to secure additional
financing if and when needed and therefore may have a material adverse effect on
the Company's business, financial condition and results of operations. See
'Underwriting.'
No Prior Public Market; Possible Volatility of Stock Price. Prior to the
Offering, there has been no public market for the Common Stock, and no assurance
can be given that an active public market for the Common Stock will develop or
be sustained after the Offering. Since there has been no active public market,
the initial public offering price may not bear any relationship to the actual
value of the Common Stock. The initial public offering price per share of the
Common Stock was determined by negotiations between the Company and the
Qualified Independent Underwriter and is not necessarily related to the
Company's asset value, net worth or other established criteria of value, and may
not be indicative of the prices that will prevail in the public market. The
Company believes that there are relatively few comparable companies that have
publicly-traded equity securities which may also impact the trading price of the
Common Stock after the Offering. See 'Underwriting.' In addition, the stock
market has from time to time experienced price and volume fluctuations that are
often unrelated to the operating performance of particular companies. The market
price of the Common Stock, similar to that of securities of other developing
companies, may be highly volatile. The market price of the Common Stock could be
subject to significant fluctuations in response to the Company's operating
results and other factors, and there can be no assurance that the market price
of the Common Stock will not decline below the initial public offering price.
Shares Eligible for Future Sale. Upon completion of this Offering, the
Company will have 4,125,000 shares of Common Stock outstanding. The 1,000,000
shares of Common Stock sold in this Offering will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the 'Securities Act'),
except for any shares which may be purchased by an 'affiliate' of the Company.
The Company and the Company's officers, directors and existing stockholders have
agreed, not to, directly or indirectly, offer, sell, contract to sell, transfer,
hypothecate or otherwise dispose of any shares of Common Stock or securities
convertible into Common Stock for a period of nine (9) months following the date
of the final Prospectus without the prior written consent of Josephthal and the
Company. After such time, 3,125,000 of the shares subject to this restriction
will be eligible for sale in the public market pursuant to Rule 144 under the
Securities Act, subject to volume limitations and other restrictions contained
in Rule 144. No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have on the
market price of the Common Stock from time to time. Sales of substantial amounts
of Common Stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise additional capital through an
offering of its equity securities. See 'Shares Eligible for Future Sale.'
Potential Adverse Effect of Representatives' Warrants. At the consummation
of this Offering, the Company will sell to the Representatives for nominal
consideration the Representatives' Warrants to purchase 100,000 shares of Common
Stock (the 'Representatives' Warrants'). The Representatives' Warrants will be
exercisable for a period of four years commencing one year from the date of this
Prospectus at an exercise price equal to 120% of the initial public offering
price per share of Common Stock. For the term of the Representatives' Warrants,
the holders thereof will have, at nominal cost, the opportunity to profit from a
rise in the market price of the Common Stock without assuming the risk of
ownership, with a resulting dilution in the interest of other security holders.
As long as the Representatives' Warrants remain unexercised, the Company's
ability to obtain additional capital might be adversely affected. Moreover, the
holders of the Representatives' Warrants may be expected to exercise such
Warrants at a time when the Company would, in all likelihood, be able to obtain
any needed capital through a new offering of its securities on terms more
favorable than those provided by the Representatives' Warrants. See
'Underwriting.'
Possible Adverse Effects of Authorization of Preferred Stock; Anti-takeover
Provisions. The Company's Certificate of Incorporation authorizes the issuance
of 100,000 shares of 'blank check' preferred stock with such designations,
rights and preferences as may be determined from time to time
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by the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the Company
will not do so in the future. The issuance of such preferred stock could make
the possible takeover of the Company or the removal of management of the Company
more difficult, discourage hostile bids for control of the Company in which
stockholders may receive premiums for their shares of Common Stock or otherwise
dilute the rights of holders of Common Stock and the market price of the Common
Stock.
Dividends. The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying any cash dividends in the foreseeable future.
Additionally, under the terms of the Company's loan agreement with the Vermont
Economic Development Authority ('VEDA'), the Company may not make distributions,
except certain distributions with respect to the offset of income tax
liabilities, without the consent of VEDA. See 'Dividend Policy.'
Dilution. The assumed initial offering price of $8.00 is substantially
higher than the net tangible book value per share of Common Stock. Investors
purchasing shares of Common Stock in this Offering will incur immediate and
substantial dilution of approximately $5.42 (68%) per share of Common Stock from
the assumed initial public offering price. In the event the Company issues
additional Common Stock in the future, investors of Common Stock pursuant to
this Offering may experience further dilution. See 'Dilution.'
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USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be approximately $6,660,000
based on an assumed initial public offering price of $8.00 per share, after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. The table below sets forth the intended application of
net proceeds of the Offering, the approximate dollar amount of such application
and the percentage of net proceeds of the Offering allocable to each intended
application.
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Upgrades of ski lifts, snowmaking, grooming and trail systems........... $ 2,970,000 44%
Purchase of mountain equipment and vehicles............................. 400,000 6%
Hotel and Resort improvements........................................... 920,000 14%
Development and offering of vacation ownership intervals................ 250,000 4%
Preliminary development of real estate (including Hogback Mountain and
possible development of golf course).................................. 500,000 8%
Prepayment of line of credit............................................ 900,000 13%
Working capital and general corporate purposes, including possible
business acquisitions................................................. 720,000 11%
------------- ---
Total.............................................................. $ 6,660,000 100%
------------- ---
------------- ---
</TABLE>
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of this Offering based upon the current status of its business
operations, its current plans and current economic and industry conditions.
Future events as well as changes in economic or competitive conditions or the
Company's business and the results of the Company's sales and marketing
activities may make shifts in the allocation of funds within or between each of
the items referred to above, or to new or other applications, necessary or
desirable. Furthermore, from time to time, the Company may evaluate possible
acquisitions of or investments in businesses, assets, products and technologies
that are complementary to those of the Company, for which a portion of the net
proceeds from this Offering may be used. The Company has no plans, commitments
or agreements with respect to any such investments or acquisitions, except as
set forth in this Prospectus.
The Company will not receive any of the proceeds from the sale of shares by
the Selling Stockholders in the event the Underwriters exercise the
over-allotment option.
The Company anticipates, based on its present plans and assumptions
relating to its operations, that the net proceeds of this Offering, when
combined with the Company's existing capital resources and anticipated revenues
from operations, will be sufficient to enable it to maintain its current and
planned operations for a period of at least 12 months after the consummation of
this Offering. In the event that the Company's plans change or its assumptions
change or prove to be inaccurate or if the net proceeds of this Offering or cash
flow prove to be insufficient (due to unanticipated expenses or otherwise), the
Company may seek to minimize cash expenditures and/or obtain additional
financing in order to support its plan of operations. However, there can be no
assurance that additional financing will be available to the Company when needed
or on terms acceptable to the Company, if at all. See 'Risk Factors -- Capital
Expenditures and Possible Need for Additional Capital.'
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share after this
Offering constitutes the dilution to investors in this Offering. Net tangible
book value per share is determined by dividing the net tangible book value of
the Company (total tangible assets less total liabilities) by the number of
outstanding shares of Common Stock.
At June 30, 1997, the net tangible book value of the Company, after giving
effect to the Combination Transaction, the Hogback Acquisition and the
conversion of a portion of the Related Loans (as defined in 'Certain
Transactions') to a capital contribution to the Company was $3,991,170,
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or $1.28 per share. After giving effect to the Combination Transaction, the
Hogback Acquisition, the conversion of a portion of the Related Loans (as
defined in 'Certain Transactions') to a capital contribution to the Company and
the sale of 1,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $8.00 per share and deducting underwriting
discounts and estimated expenses (including the non-accountable expense
allowance payable to the Representatives) of the Offering, the pro forma net
tangible book value of the Company as of June 30, 1997 would have been
$10,651,170, or $2.58 per share. This represents an immediate increase in net
tangible book value of $1.30 per share to the existing stockholders and an
immediate dilution of $5.42 (68%) per share to new investors. The following
table illustrates this dilution, on a per share basis:
<TABLE>
<S> <C>
Assumed initial public offering price of Common Stock................................... $8.00
-----
Net tangible book value before Offering................................................. 1.28
Increase attributable to new investors.................................................. 1.30
-----
Pro forma net tangible book value after Offering........................................ 2.58
-----
Total dilution to new investors......................................................... 5.42
-----
-----
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value per share of the Common Stock will not change
because the shares sold in the over-allotment will be outstanding shares held by
the Selling Stockholders.
DIVIDEND POLICY
The Company intends to retain all future earnings for the operation and
expansion of its business and does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. Any future determination as to the
payment of cash dividends will depend on a number of factors, including future
earnings, results of operations, capital requirements, the financial condition
and prospects of the Company and any restrictions under credit agreements
existing from time to time, as well as such other factors as the Board of
Directors may deem relevant. No assurance can be given that the Company will pay
any dividends in the future. Under the terms of the Company's loan agreement
with the VEDA, the Company may not make distributions, except certain
distributions with respect to the offset of income tax liabilities, without the
consent of VEDA.
CAPITALIZATION
Set forth below is the capitalization of the Company at June 30, 1997,
after giving pro forma effect to the Hogback Acquisition and the conversion of a
portion of the Related Loans to a capital contribution to the Company and as
adjusted to reflect the closing of the Offering and the application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ---------- -----------
<S> <C> <C> <C>
Long-term debt, excluding current installments.............. $ 2,945,146 $1,764,579 $ 1,039,579
Stockholders' equity (deficit):
Preferred Stock, $.01 par value; 100,000 shares
authorized; none issued and outstanding.............. -- -- --
Common Stock, $0.001 par value; 4,900,000 shares
authorized; 2,500,000 shares issued and outstanding
(actual), 3,125,000 shares issued and outstanding
(pro forma) and 4,125,000 shares issued and
outstanding (as adjusted)............................ 2,500 3,125 4,125
Additional paid in capital.................................. 1,110,225 7,290,167 13,949,167
Accumulated deficit......................................... (3,302,122) (3,302,122) (3,302,122)
----------- ---------- -----------
Total stockholders' equity (deficit)................... (2,189,397) 3,991,170 10,651,170
----------- ---------- -----------
Total capitalization.............................. $ 755,749 $5,755,749 $11,690,749
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
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SELECTED FINANCIAL DATA
The following table sets forth selected financial information for the
Company for the periods and at the dates indicated. The selected historical
statement of operations and balance sheet data, at or for each of the full
fiscal years presented below was derived from the financial statements of the
Company, which were audited by Deloitte & Touche LLP, independent auditors. The
selected financial data presented below should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and with the audited financial statements, including the notes
thereto, and other financial information appearing elsewhere in this Prospectus.
The unaudited pro forma and as adjusted selected financial data are derived from
the unaudited pro forma and as adjusted financial data presented elsewhere in
this Prospectus. The statement of operations data for the six-month period ended
June 30, 1997 is not necessarily indicative of the results of operations that
may be expected for the full year.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA AS ADJUSTED
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1996(1) 1996(2)
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Statement of operations data:
Revenues.................. $3,866,418 $ 3,983,218 $ 3,983,218 $ 3,983,218
Net loss.................. (576,689) (1,500,819) (1,700,819) (1,614,829)
Weighted average shares
outstanding............. 2,500,000 2,500,000 3,125,000 4,125,000
Loss per common share..... $(.23) $(.60) $(.54) $(.39)
<CAPTION>
HISTORICAL
SIX MONTHS PRO FORMA AS ADJUSTED
ENDED SIX MONTHS SIX MONTHS
JUNE 30, ENDED ENDED
---------------------- JUNE 30, JUNE 30,
1996 1997 1997(1) 1997(2)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Statement of operations data:
Revenues..................$2,004,522 $2,365,325 $2,365,325 $2,365,325
Net loss.................. (745,666) (200,467) (240,467) (194,868)
Weighted average shares
outstanding............. 2,500,000 2,500,000 3,125,000 4,125,000
Loss per common share..... $(.30) $(.08) $(.08) $(.05)
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA AS ADJUSTED
DECEMBER 31, 1996 JUNE 30, 1997 JUNE 30, 1997(3) JUNE 30, 1997(4)
----------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance sheet data:
Total assets................... $ 1,589,366 $1,515,927 $6,515,927 $ 12,295,927
Long-term debt................. 2,481,025 2,945,146 1,764,579 1,039,579
Total liabilities.............. 3,638,521 3,705,324 2,524,757 1,644,757
Stockholders' equity
(deficit).................... (2,049,155) (2,189,397) 3,991,170 10,651,170
</TABLE>
- ------------
(1) Pro forma to give effect to (i) the Hogback Acquisition, (ii) the conversion
of a portion of the Related Loans (as defined in 'Certain Transactions') to
a capital contribution to the Company and (iii) the compensation payable to
Susan and Steven Plausteiner under employment agreements to be entered into
upon the closing of the Offering as if such transactions had occurred on
January 1, 1996.
(2) As adjusted to give effect to the closing of the Offering and the
application of the estimated net proceeds therefrom as if the Offering had
occurred on January 1, 1996, as well as to give effect to the transactions
described in footnote (1) above.
(3) Pro forma to give effect to (i) the Hogback Acquisition and (ii) the
conversion of a portion of the Related Loans (as defined in 'Certain
Transactions') to a capital contribution to the Company as if such
transactions had occurred on June 30, 1997.
(4) As adjusted to give effect to the closing of the Offering and the
application of the estimated net proceeds therefrom as if the Offering had
occurred on June 30, 1997, as well as to give effect to the transactions
described in footnote (3) above.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In September 1993, the Company purchased the Resort and commenced
operations shortly thereafter. Since its first full year of operations in 1994,
the Company has increased revenues to $3.98 million in 1996. The increase in
revenues was attributable to more guests utilizing the Resort and higher average
prices for lift tickets and hotel room rates. In addition, with the start of its
fourth ski season in December 1996, management has been able to better control
costs while experiencing growth in revenues. The Company expects this trend to
continue which should positively affect the Company's net income. The Company
has a diversified revenue base which, for the past two fiscal years, has
averaged approximately 43% from room occupancy, 27% from skiing and fitness, 24%
from food and beverage and 6% from other revenue.
RESULTS OF OPERATIONS
The financial condition and results of operations of the Company (without
giving effect to the Hogback Acquisition) are described below. For information
regarding the financial condition of the Company and its results of operations
on a combined basis with those of Hogback Mountain, which will be purchased by
the Company concurrent with the closing of this Offering, please refer to the
Unaudited Pro Forma Financial Information and the Selected Financial Data
presented elsewhere in this Prospectus. The Company anticipates that the impact
of the purchase of Hogback Mountain on its statement of operations will be
immaterial.
SIX-MONTH PERIOD ENDED JUNE 30, 1997 (UNAUDITED) COMPARED TO THE SIX-MONTH
PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
Revenue and Gross Profit: Revenue for the first half of 1997 was
$2,365,325, an increase of $360,803 or 18.0% compared to the first half of 1996.
The increase was attributable to a higher volume of business as well as to price
increases of lift tickets and hotel room rentals. Rooms revenue increased by
21.9%, ski and fitness revenue increased by 22.3%, food and beverage revenue
increased by 9.2% and other revenue increased by 4.1%. The increase in lodging
revenue was primarily a result of a 9.0% increase in hotel occupancy combined
with a 10.2% increase in the average hotel room rates, as compared to the first
half of 1996. The increase in ski and fitness revenue was primarily attributable
to a 13.4% increase in the number of lift tickets sold, an increase of 7.2% in
the average lift ticket price and a 35.7% increase in ski school revenues.
Gross profit as a percentage of total revenues increased from 28.0% in the
first half of 1996 to 44.1% in the first quarter of 1997. This is primarily due
to better control of expenses combined with an 18.0% increase in revenue as
compared to the first half of 1996. The Company believes that it should be able
to continue to increase revenues without a significant increase in the cost of
sales, which should positively affect the Company's gross profit.
Operating Expenses: Operating expenses were $1,136,248 for the first half
of 1997, representing a decrease of $80,403 or 6.6%, as compared to the first
half of 1996. As a percentage of revenue, operating expenses declined from 60.7%
in the first half of 1996 to 48.0% in the first half of 1997. Since a majority
of the operating expenses do not fluctuate significantly with the level of
revenues, the Company believes its net income should continue to be positively
affected by increasing revenues.
Net Operating Loss: The Company had a net operating loss in the first half
of 1997 of $92,471 as compared to a net operating loss of $655,377 in the first
half of 1996, representing an increase of $562,906 or an improvement of 85.9%.
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FISCAL YEAR ENDED DECEMBER 31, 1996 ('FISCAL 1996') COMPARED TO FISCAL YEAR
ENDED DECEMBER 31, 1995 ('FISCAL 1995')
Revenue and Gross Profit: Revenue increased from $3,866,418 in Fiscal 1995
to $3,983,218 in Fiscal 1996. This increase was due to a higher number of guests
utilizing the Resort as well as price increases of lift tickets and hotel room
rates. Lodging revenue increased by 10.1%, ski and fitness revenue increased by
6.7%, other revenue decreased by 20.6% and food and beverage revenue decreased
by 4.0%. This decrease in food and beverage revenue resulted primarily from a
decline in banquet revenues attributable to one large, multi-day conference held
in Fiscal 1995 that was not repeated in Fiscal 1996.
Gross profit as a percentage of total revenues decreased from 37.3% in
Fiscal 1995 to 30.5% in Fiscal 1996. The increase in the cost of sales was
primarily attributable to an increase in labor and other expenses associated
with expanded resort activities and programs.
Operating Expenses: Operating expenses were $2,493,238 for Fiscal 1996,
representing an increase of $118,086 or 5.0%, as compared to Fiscal 1995. As a
percentage of revenue, operating expenses increased slightly from 61.4% in
Fiscal 1995 to 62.6% in Fiscal 1996.
Net Operating Income Loss: The Company incurred a net operating loss in
Fiscal 1996 of $1,277,145 as compared to a net operating loss of $933,944 in
Fiscal 1995. The increase in the net loss was primarily due to the increase in
the cost of sales.
LIQUIDITY AND CAPITAL RESOURCES
Since acquiring the Resort in 1993, the Company has funded operations from
debt and equity financing provided by its Principal Stockholders, a bank line of
credit and other loans guaranteed by its Principal Stockholders, the sale of
real estate and cash flow from operations. During Fiscal 1995 the Company
financed its shortfalls primarily with the sale of six condominium units, each
at a price of $110,000 and through $400,000 of additional equity financing from
its Principal Stockholders. In November 1995 the Company transferred ownership
of its remaining condominium units to its Principal Stockholders, which were
subsequently financed with individual loans secured by mortgages, the proceeds
of which were then loaned by the Principal Stockholders to the Company. In
Fiscal 1995, such loan proceeds totalled $500,500 of which $280,000 was used by
the Company to repay existing Company financing secured by the condominium
units. In Fiscal 1996, such additional loan proceeds totalled $700,000 of which
$99,915 was used to repay the remaining financing that was secured by the
condominium units. In addition, the Principal Stockholders contributed an
additional $650,000 of equity in Fiscal 1996. See 'Certain Transactions' and
Note 5 of Notes to Financial Statements.
In July 1997, the Company obtained a $1.5 million line of credit from
Mascoma Savings Bank bearing interest at the prevailing prime rate plus 1.75%,
as adjusted from time to time (effective rate of 10.25% as of August 31, 1997).
Approximately $900,000 was used to prepay the existing Fleet Bank line of credit
and to pay closing costs leaving an additional $600,000 of borrowing capacity
for working capital purposes. The Company intends to repay a portion of the
amount outstanding under the line of credit with the net proceeds of the
Offering. See 'Use of Proceeds.'
The Company also obtained a block grant loan in November 1994, having an
initial principal amount of $240,000 from the Town of West Windsor, Vermont. The
loan accrues interest at a rate of 5.0% per annum and has a maturity date of
February 20, 2010. The loan is guaranteed by the Company's Principal
Stockholders.
Additionally, the Company obtained a loan in May 1994, having an initial
principal amount of $400,000 from the Vermont Economic Development Authority.
The loan accrues interest at a rate of 5.5% per annum and has a maturity date of
June 3, 2004. The loan is guaranteed by the Company's Principal Stockholders and
has a balloon payment due at maturity of $171,639.
The net proceeds from the Offering will be used for upgrades and expansion
to the Resort's ski lifts, snowmaking, grooming and trail systems, purchase of
additional mountain
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equipment and vehicles, resort improvements, possible development of a golf
course on Resort property, development of a vacation ownership intervals
program, repayment of debt, and for working capital (including possible business
acquisitions). In addition, the 17 condominium units currently owned by the
Company's owners will be leased to Snowdance, Inc., and approximately
$1,180,000 of the related party debt will be contributed as capital. The ability
of the Company to successfully complete the Offering and its timing cannot be
determined at this time.
Upon the closing of the Offering, Snowdance, Inc. will acquire approximately
800 acres of land known as Hogback Mountain, located in Marlboro, Vermont. The
Company plans to explore possible development opportunities for this land. As
consideration for the purchase of this land, the Company will issue 625,000
shares of its common stock to the owners of the assets.
The Company believes that based on its present plans, the net proceeds of
this Offering, when combined with the Company's existing capital resources and
anticipated revenues from operations, will be sufficient to enable it to
maintain current and planned operations for a period of at least 12 months after
the consummation of this Offering. In the event that the Company's plans change
or its assumptions change or prove to be inaccurate or if the net proceeds of
this Offering or cash flow prove to be insufficient (due to unanticipated
expenses or otherwise), the Company may seek to minimize cash expenditures
and/or obtain additional financing in order to support its plan of operations.
Sources of capital may include additional equity or debt financings.
Additionally, future acquisitions could be financed through a combination of
internally generated funds, bank borrowings, public offerings or private
placements of equity (which may cause dilution to existing holders of capital
stock of the Company) or debt securities, the combination of which will depend
on the size of the acquired resort or property and the Company's capital
structure at the time of an acquisition.
Cash used by operating activities was $454,266 for the six months ended
June 30, 1997 compared to cash flow used for operating activities of $683,695
for the same period in 1996. Cash used for operating activities was $1,087,760
and $1,347,597 in Fiscal 1996 and 1995, respectively. The 33.6% improvement in
the first half of 1997 compared to the first half of 1996 was due to a
combination of increased revenues and slightly lower operating costs.
The Company's capital expenditures for the years ended December 31, 1995
and December 31, 1996 were $34,466 and $44,576, respectively. Assuming that the
Offering is successfully completed, management expects capital expenditures to
total approximately $3,000,000 over the next 12 months, approximately 80% of
which is intended to be spent upgrading the ski lifts, snowmaking, grooming and
trail systems.
Upon closing of the Offering, the Company will enter into three-year
employment agreements with Steven Plausteiner and with Susan Plausteiner. Steven
Plausteiner's agreement will provide for an annual base salary of $100,000 plus
a bonus determined by the Company's Board of Directors, and certain other
benefits. Susan Plausteiner's agreement will be substantially identical. See
'Management -- Employment Agreements.'
Management is not aware of any trends or events, commitments or
uncertainties which have not otherwise been disclosed that will or are likely to
impact liquidity in a material way.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's operating results may fluctuate from quarter to quarter as a
result of the seasonal nature of the ski resort operations. The Company
recognizes its highest revenue levels during its first fiscal quarter. This
quarter accounted for approximately 36.6% and 40.6% for Fiscal 1995 and Fiscal
1996 total revenues, respectively.
BUSINESS
OVERVIEW
Snowdance, Inc. owns and operates one of the premier fully-integrated, all
season mountain resorts in New England and further seeks to develop and operate
other fully-integrated year-round recreational
19
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resorts focusing on affordable family vacations. The Company intends to develop
resorts that emphasize skiing, snowboarding and other winter recreational
activities as well as warm weather activities such as golf, tennis and hiking,
thereby offering true year round amenities. The Company believes that the
opportunity to develop and sell the property surrounding these amenities could
provide it with its greatest potential source of cashflow and income. Such
property related development is expected to include timeshare sales of hotel
suites (also known as weekly vacation ownership intervals), and may also include
condominium construction and sales, and second home and land sales. The Company
has had discussions with a number of real estate and vacation ownership
development companies and has executed a letter of intent with Westerly Resorts
Group, Inc., an experienced VOI developer and marketer with projects in the
Caribbean and Colorado. Marketing of more than 5,000 VOIs in Ascutney's hotel is
anticipated to commence in 1998.
To date, the Company has focused its resources on developing its first
fully-integrated family-oriented property, the Ascutney Mountain Resort located
in Brownsville, Vermont. Recently, the Company agreed to acquire its second
property for potential future development called Hogback Mountain in Marlboro,
Vermont. Upon successful implementation of its strategy at Ascutney, the Company
intends to seek other opportunities that fit its strategy of developing and
operating year-round affordable, family resorts.
THE MOUNTAIN RESORT INDUSTRY
There are approximately 800 ski areas in North America, approximately 500
of which are located in the United States and approximately 300 of which are
located in Canada. During the 1996-97 ski season, these U.S. ski areas accounted
for approximately 52.5 million skier days (of which approximately 12.1 million
skier days were attributed to northeastern United States ski areas). A 'skier
day' is defined as one day representing a single day or night visit to a ski
area. The Company believes that of the 800 North American ski areas, only a
small number are fully-integrated, destination resorts.
North American ski resorts range from small regional ski areas which
primarily attract day skiers from nearby populations to large amenity-filled
resorts focused on destination visitors who seek a comprehensive vacation
experience. Day visitors generally tend to focus primarily on lift ticket prices
and resort accessibility. Destination visitors generally stay for one or more
nights, and primarily focus on the number of amenities and activities offered as
well as the perceived overall quality of their vacation experience. The Company
believes that destination visitors spend more on non-lift ticket items than day
visitors and may be less likely to change their skiing plans because of changes
in local weather conditions. As a result of these differences, destination
visitors generate significantly higher revenue per day than day visitors and
provide desirable balance to a resort's revenue mix.
While skier days generated by the Resort have grown by approximately 26%
since the 1993-94 ski season, total skier days generated by all United States
mountain resorts have decreased by a total of approximately 3.8% during the same
period. The Company believes that the primary reasons for the Resort's growth in
skier days since its acquisition by the current management team in 1993 relative
to the rest of the United States include the quality of the resort village, the
improved skiing experience and easy access from major metropolitan areas. See
'Risk Factors -- Limited Operating History; Significant and Continuing Losses.'
The mountain resort industry is characterized by significant barriers to
entry since the number of attractive sites is limited, the cost of resort
development is high and environmental regulations impose significant
restrictions on new development.
The Company believes that it benefits from current trends which favorably
affect the North American mountain resort industry, including (i) new innovative
equipment for skiers, such as parabolic or shaped skis which facilitate learning
and enhance performance, (ii) increased participation in mountain resort sports
such as snowboarding, mountain biking and hiking which are among the fastest
growing sports in North America and (iii) demographics under which (a) the large
'baby boom' generation is entering the 45-65 year age category which
traditionally is the age group with the largest number of buyers of vacation
property and (b) the 'echo boom' generation is entering the teenage years, one
of the age groups with the most skiing and snowboarding activity. Moreover, the
Company
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believes that these trends will continue to attract additional destination
guests and increase demand from affluent families for vacation real estate in
mountain resorts.
The Company believes that new ski equipment technologies, including
parabolic skis, will facilitate wider participation in downhill skiing.
Parabolic skis have a narrower mid-section than standard designs, generally
allowing for an easier curve and better control into parallel turns. Parabolic
skis are more flexible than standard skis and require less muscle strength to
turn, decreasing skier fatigue. The Company believes that as a result of the new
equipment technologies, it is easier for beginners to learn to ski, and for
intermediate and advanced skiers to perform beyond their present abilities. The
Company expects to benefit from the increased utilization of parabolic skis
which the Resort offers in its retail and rental shops and for which it provides
instruction through its ski school.
The Company believes that the growth in snowboarding will also have a
positive impact on the ski industry and will continue to be an important source
of lift ticket, ski school, retail and rental revenue growth for the Company. In
the United States, skier days attributable to snowboarders have increased an
average of 19% per year over the past 3 years and snowboarders are currently
estimated to represent 18% of all skier days in the United States. The
snowboarding population is expected to double as a percentage of skier days over
the next five years according to the 1995-96 survey of Transworld SNOWboarding
Business/National Ski Areas Association Resort Survey. Much of this growth can
be attributed to the greater acceptance of snowboarding as a competitive amateur
sport. In 1985, only 7% of U.S. ski resorts allowed snowboarding, while
approximately 93% do as of 1997. Also, the International Olympic Committee
recently designated snowboarding as a demonstration event at the 1998 Winter
Games in Nagano, Japan.
While snowboarding has increased interest in 'on-snow' sports among 13 to
24 year old males, the sport is increasingly appealing to a wider group of
enthusiasts. According to a recent survey by Ski Industries America, the average
age of snowboarders has risen to approximately 24 years old, and nearly
one-third of all current snowboarders is female. The Company further believes
that the growth in snowboarding among children and teens, who influence family
vacation decisions, should allow the Resort to attract additional family
destination guests. Consequently, the Resort has constructed a 'snowboard park,'
offers snowboarding lessons through its ski school and provides snowboarding
equipment in its retail and rental shops. The Company generally intends to place
greater emphasis on the Resort's snowboard attractions, programs and events.
RESORT OPERATIONS
The Company currently owns and controls all of the Resort's operations
enabling it to capture a high percentage of the total spending by its year-round
guests during their visit to the Resort. Accordingly, while lift ticket sales
are traditionally the largest source of revenues for most ski resorts, the
Company has a diversified revenue mix, including lodging, food services, lift
tickets, ski school, sports and fitness center, day care and retail shops.
Lodging revenue was the largest source of revenue in 1996, accounting for
approximately 43% of total Resort revenue. The Company expects non-lift ticket
revenue will continue to grow at a greater rate than lift ticket revenue as a
result of the ongoing expansion of activities and services offered by the
Company at the Resort.
ASCUTNEY MOUNTAIN RESORT
In 1995, Ascutney was ranked among the top three ski resorts for value and
the top four ski resorts for families, in the eastern United States by Skiing
magazine (October 1995). Since 1983, more than $85 million was invested in
connection with the expansion and development of the Resort. Ascutney is a
four-season, fully-integrated, destination resort that includes one of Vermont's
major ski areas, a 212-room hotel (the fourth largest resort hotel in Vermont)
which is suited for timeshare sales due to its larger number of suites, an
18,000 square foot comprehensive sports and fitness center, a three-story base
lodge, a ski and rental shop, four restaurants, approximately 30,000 square feet
of conference facilities and 17 slope-side condominium units to be leased from
the present owners, all set in a charming New England style village.
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While the Resort offers its guests many of the benefits provided by larger
ski facilities, it also retains a family-oriented, friendly atmosphere. The
Company provides a comprehensive destination resort experience by combining
quality ski facilities and resort services, including convenient ski-on/ski-off
lodging, with attractive four season amenities. The Resort attracts guests
primarily due to its affordable family-oriented vacations in a self-contained
resort village with easy accessibility from most major metropolitan areas in the
northeastern United States.
The Resort is conveniently located in central Vermont's Connecticut River
Valley in Brownsville, Vermont, at the foot of Mt. Ascutney. The Resort is six
miles from, and is the closest major Vermont ski resort to, Interstate I-91, one
of the two main highways in Vermont. The Resort is easily accessible from most
major metropolitan areas in the northeastern United States from which it
attracts the majority of its visitors. During the 1996-97 ski season, the
majority of the Resort's visitors resided in Connecticut, Massachusetts, Vermont
and New York. Hartford, Boston and Albany are within a 2 1/2 hour drive and
Providence, Montreal and New York City are within a 4 1/2 hour drive. The Resort
is 18 miles from the Lebanon, New Hampshire airport which provides daily service
to and from Boston, New York, Newark and Albany and five miles from the Amtrak
train station in Windsor, Vermont. Approximately 15 miles from the Resort lies
Woodstock, Vermont, a quaint New England village where guests can visit numerous
art galleries, antique and specialty shops. The town of Manchester, Vermont,
located approximately 50 miles from the Resort, is one of Vermont's busiest
summer tourist attractions featuring designer discount outlets as well as
specialty shops.
ASCUTNEY MOUNTAIN SKI AREA
The Ascutney Mountain ski area is one of Vermont's 14 major ski resorts
with a 1,530 foot vertical rise on Mt. Ascutney. Ascutney Mountain's skier days
exceeded 53,000 during the 1996-97 ski season, representing an increase of
approximately 26% since the commencement of the Company's operations in 1993
under its current management team. The ski area includes 4 chairlifts, 31
trails, and 115 skiable acres with an approximately equal distribution of
beginner, intermediate and expert terrain, including an International Skiing
Federation-sanctioned giant slalom trail. The ski area is supported by a
three-story base lodge with a cafeteria and lounge seating a total of 500
persons, a two-story ski and rental shop and various maintenance and storage
buildings. Snowmaking capability covers approximately 75% of the skiable
terrain. There are approximately 20 miles of cross-country trails which range
from open meadows suitable for beginners to mountain touring trails suitable for
more advanced skiers. At the base of the mountain, tubing, ice skating,
children's programs and apres ski entertainment are available. Unlike many
Vermont ski resorts, the Company owns all of the land on which the ski
facilities are currently located. The Company operates its facilities 7 days a
week for skiing and related winter activities from approximately mid-November
until the following mid-April.
Lift Ticket Sales. The Company's goal is to manage lift ticket yields to
obtain premium prices during peak periods and increase aggregate lift ticket
revenue during non-peak periods. Accordingly, the Company offers a wide
selection of lift tickets which vary in price and usage. In all categories there
is a reduced price for junior tickets. Unlike the majority of ski resorts, the
Company sells junior priced tickets for guests up to the age of 16 years old as
opposed to the traditional 12 years; this expanded discount is intended to
attract the family market that largely frequents the Resort. Discounted lift
tickets and programs, including local school programs, group purchases, Vertical
Value discount card purchases and co-promotions with local and national
businesses are designed to bolster business during non-peak periods. Introduced
in 1995, the Vertical Value discount card was implemented to increase lift
ticket revenues as well as to encourage non-peak usage by offering greater
discounts during midweek and early and late seasons. The Company also markets
and sells hotel packages which combine accommodations, lift tickets and dining.
Such packages facilitate vacation planning while providing the Resort with
multi-day lift ticket sales.
Ski School. The Company operates a ski school at the Resort that offers a
variety of programs to skiers, targeted to different ability levels and age
groups, including Flying D.U.C.K.S., Young Olympians and Mini Olympians
children's programs. The Company anticipates further growth in ski school
revenue resulting from technological advances in alpine skiing equipment, for
which the ski school has qualified instructors, and from the growth in
snowboarding. The Company has approximately
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60 instructors on its ski school staff. The Company has adopted a compensation
incentive program to reward instructors based on guest satisfaction.
ASCUTNEY MOUNTAIN RESORT HOTEL, LODGING AND RELATED OPERATIONS
Lodging. The Ascutney Mountain Resort Hotel is a 212-room hotel,
constructed in 1984, situated in five buildings at the base of Mt. Ascutney. The
rooms are approximately equally divided between standard hotel rooms and suites
which through lock-out capabilities may be rented as 1, 2 or 3-bedroom suites.
Each suite has a full kitchen, a dining room and a living room with a fireplace
and deck. The hotel is located along the lower ski slopes with each building
having direct ski-on/ski-off access to the slopes. The main hotel building
houses the 140-seat Harvest Inn Restaurant, Brown's Tavern, Biscotti's pizzeria
and game room, the two-story Crow's Nest lounge/function room, additional retail
space and conference space. The conference space in the hotel can accommodate
groups from approximately 20 to 500 people. In addition, the Resort also
includes approximately 17 condominium units at the base of the mountain, to be
leased from the present owners, which together with the hotel, can accommodate
up to approximately 700 people.
Food and Beverage Service. Food and beverage service is an increasingly
important component in providing a satisfying guest experience at the Resort and
has been a significant source of revenue for the Company. The Company owns and
operates the Resort's four on mountain food and beverage facilities with more
than 500 seats. As a year-round mountain resort, the Resort generates food and
beverage revenues throughout the non-ski season, including banquet revenues from
groups utilizing the Resort's conference facilities and from wedding receptions.
Retail Shops. The Company owns and leases commercial space for a retail and
ski rental shop (with two locations at the Resort) containing approximately
3,500 square feet of sale/service area which is operated on a concession basis
by a third party only during the ski season. The shop sells ski accessories such
as goggles, sunglasses, hats and gloves as well as hard goods such as skis,
snowboards, boots and ski apparel.
ASCUTNEY MOUNTAIN RESORT SPORTS AND FITNESS CENTER
The Resort's sports and fitness center of approximately 18,000 square feet,
refurbished in the fall of 1993, is located adjacent to the hotel. The center
includes one indoor and one outdoor Olympic-sized swimming pool, seven outdoor
tennis courts (five har-tru and two all weather), an aerobics studio, two
racquetball courts, saunas, free-weights, nautilus and aerobic equipment. The
Company believes that the center is the only comprehensive sports and fitness
facility of this size in the area and attracts membership from a 20 mile radius.
The center, which is complimentary to hotel guests, sells monthly and
annual memberships. In addition, the center offers daily walk-in passes and
coupon books for single admissions. While the number of memberships varies
seasonally, on a monthly basis the number of club memberships ranges from
approximately 150 to 400 members. Additional fitness center revenues are derived
from personal training sessions, massage fees, racquetball fees and tennis and
swim instruction.
OPERATING STRENGTHS
The Company believes that the following operating strengths provide
competitive advantages which should enable it to achieve significant growth.
Upon the successful implementation of its strategy at Ascutney, the Company
intends to seek to acquire resorts or properties that are well suited to utilize
the operating strengths of the Company.
CONTROL OF RESORT OPERATIONS
The Company controls multiple revenue sources at the Resort, thereby
diversifying its revenue mix and ensuring consistency and quality of its
operations. In addition to operating the ski lifts, the Company currently
manages virtually all ancillary operations at the Resort, including lodging,
food services, the ski school, the sports and fitness center and a day care
program. The Company's ownership
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of the commercial property at the Resort allows it to ensure that its retail
space enhances the overall appeal of the Resort.
APPEAL TO FAMILY VISITORS
While the Company's strategy is to offer its guests many of the benefits
provided by the larger ski destination resorts, it retains a family-oriented
personal atmosphere. The Company's emphasis on affordable family vacations
permeates most aspects of its business. The Company believes that, as compared
to its competitors, it charges lower fees for the various amenities it offers,
and the prices of its lodging and meals are more reasonable. The Company's
special programs and services are principally targeted to family destination
guests who tend to generate higher and more diversified revenues per guest than
day skiers. Programs range from the Mini Olympian and Young Olympian ski
schools, which are separate from the adult ski school, to supervised evening
programs such as Cheddar's Happy Hours, movies, puppet shows and Parents' Night
Out. In addition, the Company believes that the convenience of the
self-contained Resort village which offers ski-on/ski-off lodging in large
suites, coupled with virtually all facilities being located within walking
distance, is particularly attractive to families. Based on a survey by the
National Skier Opinion Survey for the 1996-97 ski season, more of the Resort's
visitors had children under the age of 16 and a higher percentage of visitors to
the Resort were accompanied by their children than the regional average of other
ski resorts.
ACCESSIBILITY AND LOCATION
The Resort is strategically located in central Vermont and is within
several hours driving distance from most major metropolitan areas in the
northeastern United States. The Company believes that the Resort's proximity to
Interstate I-91, one of the two main highways in Vermont, provides it with a
significant competitive advantage relative to most of the other major Vermont
mountain resorts. The northeastern corridor of the United States represents the
second largest concentration of skier days in North America. Vermont had the
largest number of skier days during the 1996 - -97 ski season of all the
northeastern states. Additionally, Vermont benefits from an average of 250
inches of snowfall annually.
VACATION OWNERSHIP INTERVALS
The Company believes that its hotel is an attractive VOI property due to,
among other reasons, the high number of suites in its hotel (many of which are
duplex units), the presence of existing and planned year-round amenities and
Ascutney's proximity to most major population centers in the northeastern United
States, all of which can be reached within 2 to 5 hours of driving time. The
Company further believes that there is strong interest in families seeking
affordable vacations in year-round resorts near their primary residences that
offer many of the amenities found at larger destination resorts but on a
friendlier, more personal level. Marketing of more than 5,000 VOIs in Ascutney's
hotel is anticipated to commence in 1998. The Company believes that the
opportunity to develop and sell the property surrounding its existing and
year-round amenities could provide it with its greatest potential source of
cashflow and income.
MANAGEMENT TEAM
Members of the Company's senior management team are recognized leaders in
the mountain resort industry. The Company's senior management team consists of
three individuals who are responsible for strategic direction, as well as
oversight of its business, including Resort operations and real estate
development activities. Together, the senior management team has over 50 years
of experience in the mountain resort industry, and have held positions on the
Boards of Directors of such recognized public and private organizations as the
Vermont Ski Areas Association and Vermont Economic Development Authority. Also,
the Company's Chief Operating Officer during a 20-year period held various
positions at Mount Snow, a leading Vermont ski resort, including Vice
President -- Operation and Planning of Mount Snow Development Corporation, Vice
President for Planning and Maintenance of Mount Snow Hotel Corporation and
Operations Manager of Mount Snow. In addition, the Company's Chief Operating
Officer served as the Director of Whiteface Mountain Ski Center responsible for
planning
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and development of the Ski Center in preparation for the 1980 Winter Olympics in
Lake Placid, New York. He was later promoted to Vice President for the Olympic
Regional Development Authority in charge of planning and construction for all of
the 1980 Winter Olympic venues.
BUSINESS STRATEGY
The Company's operating formula links the staged expansion of its mountain
ski facilities at the Resort with the strategic development of its real estate.
The Company's primary objective is to maximize and diversify its revenue sources
by capitalizing on its operating strengths and through expansion of the Resort
and the development of its real estate as described below. This strategy is
designed to increase and balance year-round utilization and to enhance real
estate values at the Resort. The implementation of this strategy begins with the
continued enhancement of the skiing experience coupled with hotel improvements.
In addition, the Company has the capacity to expand ski operations to the peak
of Mt. Ascutney.
The Company intends to implement a multi-stage plan to realize the
significant value of its real estate. The Company plans to commence the sale of
VOIs in the Resort's hotel, designed to increase destination visitors to the
Resort and increase total Resort revenue. The intended sale of VOIs, commonly
known as timeshares, in the Resort's hotel is expected to be carefully managed
by the Company, in conjunction with its Joint Venture Partner. To enhance the
marketing and sales of the Resort's real estate, the Company's expansion plans
include the possible addition of an 18-hole golf course with additional adjacent
residential units, as well as additional commercial development. Finally, the
Company also intends to explore possible development opportunities regarding its
other real estate holdings, including examinations of zoning and other
regulatory approvals necessary for any such development. The Company believes
that the integration of the Resort with further real estate development should
attract increasing numbers of visitors and buyers of real estate.
The expansion of the Resort's mountain facilities, the offering of vacation
ownership intervals and the Company's further development of its real estate
holdings should together add to the Company's ability to increase year-round
utilization of the Resort. Specifically, the Company's strategy to maximize
revenues is as follows:
EXPANSION OF SKI AND YEAR-ROUND OPERATIONS
An important component of the Company's business strategy is the expansion
and enhancement of its core ski operations, while at the same time increasing
the range of complementary activities and services offered to its guests
throughout the year. The Company plans to enhance the skiing experience at the
Resort through major upgrades to the ski lifts, snowmaking, grooming and trail
systems. Principal improvements include the addition of one new high-speed quad
chairlift as well as the relocation of one of the existing chairlifts, which
will increase the mountain's total uphill capacity by more than 45% to
approximately 6,350 skiers per hour. In addition, the Company plans to increase
snowmaking capabilities at the Resort, bringing coverage to approximately 95% of
the skiable terrain. Major trail modifications have been designed to allow
different levels of skiers to utilize more of the mountain when combined with
the planned increased snowmaking. Further, the Company intends to explore
expanding the Resort's operations to a higher elevation on Mt. Ascutney, which
if successfully achieved would result in the Resort having the fourth highest
vertical rise of any Vermont ski operation. The plan also provides for the
acquisition of Resort equipment and is expected to include both on-road and
off-road vehicles such as snow groomers. See 'Use of Proceeds.'
The Company also seeks to increase year-round utilization of the Resort by
developing more summer and shoulder season activities and amenities. The Company
believes that increases in utilization during the summer and shoulder seasons
should enhance the Company's ability to attract additional restaurants and
shops, thereby enhancing the four-season appeal of the Resort and the demand for
and market value of its Resort real estate property. The Resort offers guests a
variety of activities during the non-ski season, including mountain biking (on
approximately 20 miles of the Resort's cross country trails), outdoor tennis,
swimming and hiking. Canoeing, horseback riding and fishing can be arranged for
at nearby facilities. Additionally, visitors during the summer and shoulder
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seasons can take advantage of golf courses, historic sites, museums and antique
shops located near the Resort area. The 'shoulder season' is defined as the
off-season periods between the winter and summer seasons.
RESORT HOTEL IMPROVEMENTS
The Company plans hotel improvements as well as the acquisition of Resort
equipment and computer systems. The major components of the improvements
include: selected hotel refurbishing of rooms and common areas, expanded
activity areas for children's programs, expansion of hotel dining facilities and
infrastructure improvements to roads and hotel parking lots. See 'Use of
Proceeds.' With the improvements contemplated by the Company's plan, the Resort
is expected to attract more hotel guests thereby increasing hotel occupancy and
increasing utilization of other existing Resort services such as food services,
ski school, day care and children's programs.
VACATION OWNERSHIP PROGRAM
The Company has had discussions with a number of real estate and vacation
ownership development companies regarding the marketing and sale of up to 5,000
VOIs in the Resort's hotel as well as development of additional units of new
construction at the Resort. The Company believes its hotel is an attractive VOI
property due to, among other reasons, the high number of suites in its hotel
(many of which are duplex units), the presence of existing and planned
year-round amenities and Ascutney's proximity to most major population centers
of the Northeast, all of which can be reached within 2 to 5 hours of driving
time. (Air transportation is available at the Lebanon, New Hampshire airport
near Dartmouth College less than 20 miles away). The Company has executed a
letter of intent with Westerly Resorts Group, Inc. (the 'Joint Venture
Partner'), an experienced VOI developer and marketer with projects in the
Caribbean and Colorado. In accordance with the letter of intent with the Joint
Venture Partner, the Company will be responsible for the management of the
operations of the Ascutney Mountain Resort Hotel and its Joint Venture Partner
will be responsible for the marketing and sale of all VOIs in the hotel.
Further, pursuant to the letter of intent, the Joint Venture will pay the
Company a fixed fee equal to 25% of the gross sales price of each VOI sold by
the Joint Venture. Additionally, after payment and/or reimbursement for all
other expenses of the Joint Venture, all net profits of the Joint Venture,
subject to certain limitations and adjustments with respect to the calculation
of expenses, will be distributed as follows: 67.5% to the Company and 32.5% to
the Joint Venture Partner. The commitment to develop and market VOIs at the
Resort is subject to the execution of definitive documentation. By entering into
the Joint Venture with the Joint Venture Partner, the Company intends to
mitigate risks associated with the VOI program. Additionally, the Company, along
with its Joint Venture Partner, intends to manage any inventory risk by
initially offering for sale only part of the Resort's hotel on a VOI basis,
while operating the remainder of the Resort's hotel on a traditional overnight
basis. See 'Risk Factors -- Uncertainty of Development of Vacation Ownership
Intervals and Golf Course Development.'
The Company plans to initiate a VOI program for the Resort's hotel prior to
any new construction of additional units at the Resort, whereby fixed weekly
intervals will be sold in fully-furnished vacation units. The offering program
is expected to begin in 1998. When the Company's VOI program commences, the
Resort will be one of only two fully-integrated, destination resorts in Vermont
that offers a VOI program. The Company believes that the offering of VOIs in its
existing hotel will increase destination visitors to the Resort, which should
increase revenues for the Resort including lift tickets, food and beverage,
retail and other sources.
The Joint Venture is expected to direct its marketing and sales efforts for
VOIs in the Resort's hotel generally to family households in the middle and
upper middle income brackets who previously have visited the Resort or prefer
outdoor recreational activities at destination locations. It is anticipated that
the Joint Venture will spend significant amounts in the future on real estate
marketing and sales as it offers VOIs in the Resort's hotel. The primary method
of marketing the Resort's vacation ownership property is expected to be through
direct mail mini-vacation invitations. The Joint Venture intends to provide
hotel accommodations to prospective purchasers at reduced prices while they tour
the Resort.
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Sales personnel are expected to be generally experienced in VOI sales and to
participate in ongoing training.
The resort component of the vacation industry is serviced primarily by two
alternatives for overnight accommodations: (i) commercial lodging establishments
and (ii) timeshare or 'vacation ownership' resorts. Commercial lodging consists
of hotels and motels in which a room is rented on a nightly, weekly or monthly
basis for the duration of the visit and is supplemented by rentals of
privately-owned condominium units or homes. For many vacationers, particularly
those with families, a lengthy stay at a quality commercial lodging
establishment can be very expensive. In addition, availability of commercial
lodging may be limited during peak periods.
VOIs have been one of the fastest growing segments of the hospitality
industry over the past two decades. The number of vacation ownership resorts
throughout the world increased from approximately 630 in 1981 to approximately
4,350 in 1996. From 1988 to 1996 vacation ownership sales grew at about 15% per
year, reaching approximately $5 billion in total worldwide sales in 1996.
Although sales of VOIs have grown from under $500 million annually in 1980 to
approximately $5 billion in 1996, the Company believes there is substantial
capacity for additional growth since less than 2% of all households in the
United States owned a VOI as of 1996. According to the American Resort
Development Association, the typical vacation interval owner is
upper-middle-income, middle-aged, and well-educated. Additionally, of VOI owners
in the United States, 69.5% have incomes over $50,000, and 67.5% are 45 years of
age or older. The median annual household income of owners of VOIs in the United
States is approximately $71,000 and over one-third of United States VOI owners
have children aged 18 or younger living at home. The Company believes that its
Resort can capitalize on the growth of VOIs because its visitors' demographics
are similar to those of the typical VOI purchaser. In addition, over one-third
of VOI owners are from the northeast, the region from which the Resort draws
approximately 75% of its visitors.
The Company believes that a significant part of the success of the vacation
ownership industry may be attributable to the growth of timeshare exchanges
which have increased flexibility to owners of VOIs. Such timeshare exchange
companies allow owners to exchange weeks and locations. Of the 4,350 worldwide
vacation ownership resorts, approximately 95% are associated with an exchange
company, with such companies arranging approximately 80% of the timeshare
vacations taken worldwide each year. The Company expects that the Joint Venture
will associate itself with one of the leading exchange companies. The Company
believes that another significant factor contributing to the current success of
the vacation ownership industry is the entry into the vacation ownership market
of some of the world's major lodging, hospitality and entertainment companies,
such as Marriott International, Inc., The Walt Disney Company, Hyatt
Corporation, Four Seasons Hotels and Inter-Continental Hotels and Resorts.
The Company anticipates that the Joint Venture will offer financing to
purchasers of up to approximately 90% of the purchase price of a VOI. It is
anticipated that a significant number of purchasers of the Company's VOIs will
avail themselves of such financing. The Company believes that such financing is
expected to be attractive to purchasers who find it convenient to handle all
facets of the purchase of VOIs through a single source and because down payments
required by such financing are intended to be similar to those required by banks
and mortgage companies which offer such type of credit. The typical financing
extended by the Joint Venture is intended to be a term of approximately seven
years and at a fixed interest rate.
Many state and local authorities have imposed restrictions and additional
regulations on developers of vacation ownership properties. The Company is
subject to various regulatory requirements including state and local approvals.
These restrictions are expected to generally increase the cost of selling VOIs.
In compliance with state laws, the Company expects that the Joint Venture may
provide its vacation ownership purchasers with a public disclosure statement
which contains, among other items, detailed information about the surrounding
vicinity, the Resort and the purchaser's rights and obligations as an interval
owner.
The Company expects that the Joint Venture's customer financing activities
will also be subject to extensive regulation, which may include the
Truth-in-Lending -- Regulation Z, the Fair Debt Collection Practices Act, the
Equal Credit Opportunity Act -- Regulation B, the Electronic Funds Transfer
Act -- Regulation E, the Home Mortgage Disclosure Act -- Regulation C, Unfair or
Deceptive Acts or
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Practices -- Regulation AA, the Real Estate Settlement Procedures Act, the
Consumer Credit Protection Act and the Right to Financial Privacy Act. The
Company believes that the Joint Venture will be in compliance in all material
respects with such regulations.
DEVELOPMENT OF REAL ESTATE
In light of the Resort's existing amenities, significant amount of
developable land and attractive location, the Company believes that the Resort
has numerous potential opportunities for further real estate development. The
Company believes that similar factors which motivate skier visits to the Resort,
such as accessibility, four-season attractions, amenities and proximity to major
markets, should also tend to enhance values of the Company's real estate over
time. Approximately 400 acres of the Company's land at the Resort are currently
undeveloped. The Company also owns related infrastructure such as water and
wastewater systems (which can support an additional 390 residential units at the
Resort), certain roads, parking lots and maintenance facilities.
The Company plans to further develop its real estate holdings as part of
the overall expansion of the Resort. The original master development plan of the
previous owner of the Resort contemplated approximately 560 residential units
(172 of which have already been built), an 18-hole golf course, and further
commercial development. The Company believes that its current supply of land at
the Resort can support real estate development activities for approximately 10
to 15 years. The Company may also consider opportunities to add to its inventory
of available land. By carefully managing the number and mix of new real estate
interests it markets each year, the Company intends to achieve attractive
returns through a balanced utilization of the Resort and its real estate.
Previous plans for the Resort included the future construction of an
18-hole golf course to be surrounded by 100 to 140 townhouse units. In 1986, the
previous owner of the Resort had applied for conceptual approval in accordance
with Vermont's principal environmental law, Act 250, for a golf course at the
Resort and was issued a conceptual Land Use Permit on the basis of the
application, which permit has since expired. The District Environmental
Commission which issued the conceptual Land Use Permit found that the proposed
golf course and residential units were in conformance with the West Windsor Town
Plan. While these plans and projects were never completed, the Company believes
that potential opportunities still exist for these and other projects to be
constructed on the approximately 400 acres currently available for development
at the Resort. The Company is assessing the possibility of development of an
18-hole golf course with additional adjacent residential units, all on land
currently owned by the Company.
Typically, golf is a primary attraction for mountain resorts in the summer
and shoulder seasons, generating revenues from greens fees, cart rentals and
pro-shop sales and should increase the overall demand for Resort real estate. In
addition, in such resorts, golf is also responsible for generating a significant
portion of the food and beverage and lodging revenues during the summer. The
developable land parcels adjacent to a golf course generally achieve higher
selling prices than other real estate. The Company believes that golf-related
revenues may become an increasingly significant component of the Resort's
aggregate revenues in the future.
OPPORTUNITIES FOR FURTHER DEVELOPMENT
Upon the closing of this Offering, the Company will acquire substantially
all the assets of a former day ski area known as Hogback Mountain, which covers
approximately 800 acres of land located in southern Vermont and includes
buildings whose tenants are currently a restaurant, a gift shop and two small
museums, the businesses of which are not being acquired by the Company. Hogback
Mountain is located within 20 miles of the Mount Snow and Haystack ski areas and
offers an unobstructed, panoramic view of three states. Hogback Mountain is
within 30 minutes driving distance to several ski areas, golf courses, large
lakes, annual music festivals and other attractions. The Company believes that
Hogback Mountain offers attractive development potential.
One of the tallest mountains in southern Vermont, Hogback Mountain is
situated adjacent to Route 9, a primary east-west thoroughfare in Vermont. Route
9 connects Brattleboro in the southeast
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corner of Vermont with Bennington in the southwest corner and is one of the most
traveled roads in Vermont.
Over the years, the Hogback Mountain property developed in a number of
ways. A small ski area with a total of 24 trails and slopes and a base lodge was
developed. The ski area has not been operating since the mid 1980's. In
addition, a restaurant and gift shop as well as a few rental cottages were
built. Two small museums were also established, one of which is currently
expanding to a newer facility at Hogback Mountain. The Company believes that
Hogback Mountain could support cross-country and downhill skiing, snowmobiling
and other winter activities as well as certain summer and shoulder season
activities in the event that the necessary regulatory approvals were obtained
and appropriate development resources were expended. Hogback Mountain is
currently registered with VAST, the Vermont Association of Snow Travelers, a
snowmobiling association. The Company intends to explore possible development
opportunities regarding the land at Hogback Mountain, including an examination
of zoning and other regulatory approvals necessary for any development.
As consideration for the purchase of Hogback Mountain, the Company will
issue an aggregate of 625,000 shares of Common Stock to Skyline Partners, L.P.,
a New York limited partnership and the owner of the 800 acres of land at Hogback
Mountain and the buildings whose tenants are currently the Skyline Restaurant,
gift shop and the two small museums at Hogback Mountain. Pursuant to the
purchase and sale agreement, subsequent to the closing of the Offering, at the
option of the Company, Skyline Partners, L.P. may manage the Hogback Mountain
property in accordance with a management agreement between the Company and
Skyline Partners, L.P., pursuant to which the Company shall pay a monthly fee to
Skyline Partners, L.P. in an amount to be mutually agreed upon by the parties.
The Company also intends to lease the buildings including the Skyline
Restaurant and gift shop at Hogback Mountain to the Vermont Natural Company, the
current owner and operator of such businesses. The lease will be on a
month-to-month basis, terminable by the Company or by the tenant on 30 days
notice, at a rent in an amount to be mutually agreed upon by the parties. The
Company will not, however, be purchasing any portion of the businesses operating
on such premises. Skyline Partners, L.P. and, its wholly owned subsidiary,
Vermont Natural Company, are affiliates of Josephthal. See 'Certain
Transactions' and 'Underwriting.'
Upon the successful implementation of its strategy at Ascutney, the Company
intends to seek other opportunities that fit its core strategy of developing and
operating year-round affordable, family resorts. The Company believes there are
other possible development opportunities available to it. The Company further
believes that there is strong interest in families seeking affordable vacations
in year-round resorts near their primary residences that offer many of the
amenities found at larger destination resorts but on a friendlier, more personal
level. The Company's management team combines experience in ski resort
operation, mountain resort development and finance, and the Company believes
that its management is well suited to carry out its business strategy.
RESORT MARKETING AND SALES
The primary objectives of the Company's marketing strategy for its
operations include (i) increasing the Company's market share of northeastern ski
visitors by continuing to increase the recognition associated with the Resort,
(ii) building demand during both peak and non-peak periods and (iii) expanding
the summer and shoulder season business of the Resort.
The Company's marketing methods include print media advertising in ski
industry and lifestyle publications whose readership the Company believes
generally reflects the demographic profile of the Resort's customers. The
Company is also active in a number of promotional programs such as discount
programs offered through local retailers designed to attract local day skiers.
Since 1995, the Company has produced its own magazine which promotes the
Resort's features and attractions while promoting the surrounding region as
well. In addition, the Company uses direct mail advertising and is placing
increasing emphasis on its web site which has generated up to 44,000 hits in a
single month.
Given the Resort's characteristics and layout, the Company's marketing
efforts concentrate on both the family vacation market and the conference
market. With the convenience of a self-contained resort village, coupled with
large hotel suites, the Company believes that the Resort is particularly well
suited for families with young children. In addition, the Resort has also
attracted group and conference
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business including corporate meetings, conventions, weddings and ski groups. The
Resort has fifteen function rooms that range in size from approximately 500
square feet to over 4,000 square feet and can accommodate groups from as small
as 20 to as large as 500. The Company believes that the Resort ranks among the
top four conference centers in Vermont. In fiscal 1996, group and conference
sales revenues were approximately 30% of the Resort's lodging and food and
beverage revenues.
To increase awareness of the Ascutney name, the Company has entered into
sponsorship relationships with local and national companies and has hosted
several entertainment events, including concerts of the Vermont Symphony
Orchestra. The Resort has also hosted a number of sporting events including the
Mountain Dew'tm' Vertical Challenge and the Boston College Winter Carnival.
REGULATION AND LEGISLATION
The Company is subject to various laws and regulations relating to the
operation of its Resort and related activities, which are administered by
numerous federal, state and local governmental agencies. Additionally, the
mountain resort industry is subject to extensive regulation. The Company is or
may be subject to various federal, state and local environmental, zoning and
other statutes and regulations regarding the sale, subdivision, and acquisition
of real estate and timeshare interests and their financing. The Company believes
that it is in full compliance in all material respects with such applicable laws
and regulations.
Development of the Company's property in Vermont is subject to
comprehensive environmental legislation, commonly referred to as Act 250, as
well as state administrative regulations. This regulatory framework, in general,
encompasses such areas as water quantity and quality, air quality, traffic
considerations, availability of municipal services, use of natural resources,
impact of growth, energy conservation and utility services, conformance with
local and regional plans, and public building approvals, together with a number
of other safety and health regulations. Additionally, each municipality has its
own planning and zoning requirements.
Permits and approvals mandated by such regulation for development of any
magnitude are often numerous, significantly time-consuming and onerous to obtain
and not guaranteed. The permit processes are administered by numerous state,
regional and local boards and agencies with independent jurisdictions. Permits
when received are subject to appeal or collateral attack and, in some cases, are
of limited duration, after which review is necessary. These requirements have a
direct bearing on the ability of the Company or others to further develop their
resorts in Vermont. All other Vermont ski areas are also subject to similar
processes. While the Company believes that its operations and development goals
are and will be in full compliance in all material respects with applicable
federal, state and local requirements, it must be recognized that growth and
development opportunities within Vermont may be limited and more costly as a
result of these legislative, regulatory or municipal requirements.
An application for an Act 250 Permit was filed by the previous owner of the
Resort for conceptual approval of a master plan for the Resort, including 560
condominiums and an 18-hole golf course. The District Environmental Commission
of the State of Vermont (the 'Commission') issued a conceptual Land Use Permit
in response to such application. The Commission found that the project described
in the application would not cause or result in a detriment to public health,
safety or general welfare under the criteria described in 10 V.S.A., Section
6086(a). However, the conceptual Land Use Permit issued by the Commission in
August 1987 has expired. A new application and subsequent approval thereof, as
well as other regulatory approvals, would be needed if the Company decided to
develop a golf course.
The Company would need to lease additional land from either the State of
Vermont or the Town of West Windsor or both if it were to expand ski operations
to the peak of Mt. Ascutney. Under the terms of the lease, either the Vermont
Department of Forests and Parks and/or the Town of West Windsor would be
expected to have the right to review and comment on the location, design and
construction of improvements on the leased land and on many operational matters.
The Vermont Department of Forests and Parks leases land to most major ski areas
in Vermont. The terms of such leases are substantially similar for all ski areas
and the payment is calculated as a percentage of gross lift ticket revenues
based on the number of lifts that a ski area builds on state-owned land. See
'Risk Factors -- Permits and Regulatory Matters.'
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COMPETITION
The ski industry is highly competitive. The Company competes with mountain
resort areas in the United States, Canada and Europe for both destination and
day skiers, including mountain resorts in Vermont (many of which have greater
financial resources, greater name recognition and a greater share of the
market). The Company also competes with other leisure industry companies,
including warm weather resorts, for the vacation guest. The Company's major
North American competitors include the major New England ski areas, Colorado and
Utah mountain resorts, the Lake Tahoe mountain resorts in California and Nevada,
the Quebec mountain resorts and the major ski areas in the Canadian Rockies.
Many of the Company's current competitors have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial and marketing resources than the Company. The Company believes that
the Resort is one of a relatively small number of ski areas in North America
able to attract both the day skier and the destination guest by providing a
comprehensive vacation experience. The competitive position of the Resort is
dependent upon many diverse factors such as proximity to major metropolitan
areas, prevailing weather conditions, availability and cost of transportation to
the Resort, pricing of ski services offered, snowmaking capabilities, type and
quality of skiing offered, duration of the ski season, the number, quality and
price of related services and lodging facilities, and the reputation of the
Resort.
Additionally, as the Company through the Joint Venture develops the VOI
program at the Resort, it may experience significant competition for customers
and for qualified personnel from other entities engaged in the business of
resort development, sales and operations, including vacation interval ownership,
condominiums, hotels and motels. Beginning in 1984 with the successful entry of
Marriott International, Inc. into the VOI business, many of the world's leading
lodging and hospitality companies have begun to develop and sell VOIs. Major
companies which now operate or are developing VOI resorts include The Walt
Disney Corporation, Hilton Hotels Corporation, Hyatt Corporation, Four Seasons
Hotels and Inter-Continental Hotels and Resorts. These companies possess
significantly greater financial, marketing, personnel and other resources than
those of the Company. Nevertheless, the vacation ownership industry remains
highly fragmented with many of North America's vacation ownership resorts owned
and operated by small, regional companies. Furthermore, there are other hotels
and vacation resorts in the Company's market that provide competitive
alternatives to the purchase of a VOI at the Resort.
EMPLOYEES
As of June 30, 1997, the Company had approximately 75 full-time, year-round
employees (approximately 30% engaged in hotel operations, approximately 12%
engaged in mountain operations, approximately 19% engaged in food and beverage
operations and approximately 39% engaged in administrative and other
miscellaneous operations) and approximately 175 additional peak-season employees
(approximately 17% engaged in hotel operations, approximately 56% engaged in
mountain operations, approximately 14% engaged in food and beverage operations
and approximately 13% engaged in administrative and other miscellaneous
operations). The Company believes that its employee relations are satisfactory.
LEGAL PROCEEDINGS
The Company from time to time is involved in litigation 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 business, financial condition or results of operations.
The athletic nature of the Company's ski operations subjects the Company to
litigation in the ordinary course of business, including claims for personal
injury. The Company maintains liability insurance that it considers adequate to
insure claims related to usual and customary risks associated with the operation
of a ski resort. See 'Risk Factors -- Adequacy of Insurance Coverage.'
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company upon the closing of the Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY
- ------------------------------------ ----- -----------------------------------------------------------
<S> <C> <C>
Steven H. Plausteiner............... 37 Chairman of the Board and Chief Executive Officer
Susan D. Plausteiner................ 37 Director, Chief Financial Officer and Secretary
Dusan Plausteiner................... 63 Director and Chief Operating Officer
David N. Deutsch.................... 38 Director
Henry B. Lunde...................... 53 Director
Dan Purjes.......................... 47 Director
</TABLE>
STEVEN H. PLAUSTEINER co-founded the Company and has served as its Chairman
of the Board and its Chief Executive Officer since its inception. From April
1993 to January 1994, Mr. Plausteiner served as Senior Managing Director in
charge of Mortgage Backed Securities Sales and Trading at Smith Barney Inc. From
May 1991 to April 1993, Mr. Plausteiner served as a Managing Director of Daiwa
Securities America Inc. in the Collateralized Mortgage Obligations (CMO) area.
From September 1982 to February 1991, Mr. Steven Plausteiner held various
positions, including Senior Vice President -- Mortgage Trading Desk, of
Prudential Securities, Inc., formerly Prudential-Bache Securities, Inc. In 1995,
Mr. Plausteiner was elected to serve a one-year term on the Board of Directors
of the Vermont Ski Areas Association, the leading trade association of the
Vermont ski industry, and has been re-elected twice to serve successive one-year
terms. Mr. Plausteiner holds a Bachelor of Arts degree from Boston College.
SUSAN D. PLAUSTEINER co-founded the Company and has served as its Chief
Financial Officer since its inception. In September 1996, Ms. Plausteiner was
appointed by the Governor of Vermont to serve on the Board of Directors of the
Vermont Economic Development Authority, which promotes business development
through low cost and attractive loans. From October 1994 through September 1997,
Ms. Plausteiner served on the Board of Directors of the Vermont Chamber of
Commerce and in November 1994, she was appointed to the Board of Incorporators
for David's House, a charitable organization having its principal offices in
Hanover, New Hampshire. From September 1985 to June 1990, Ms. Plausteiner held
various positions, including Vice President -- Financial Institutions Group, of
Prudential Securities, Inc. Ms. Plausteiner is a graduate of Tufts University
from which she received a Bachelor of Arts degree and holds a Masters of
Business Administration degree from the Wharton School at the University of
Pennsylvania.
DUSAN PLAUSTEINER co-founded the Company and has served as its Chief
Operating Officer since its inception. Prior to joining the Company, he has held
numerous senior operation positions at several ski resorts in the northeastern
United States. From July 1990 to October 1993, Mr. Plausteiner served as Vice
President of Planning and Construction for the Olympic Regional Development
Authority, where he was in charge of planning and construction for the Whiteface
and Gore Mountain Ski Areas, all of the 1980 Olympic venues including the
bobsled and luge runs, the biathlon and cross-country complex, and the Olympic
ice arena in Lake Placid, New York. From October 1976 to June 1990, Mr.
Plausteiner held various positions, including Director and Associate Manager of
the Whiteface Ski Center in Lake Placid, New York, where he was, among other
things, responsible for planning and development of the Ski Center in
preparation for the 1980 Winter Olympics. From 1957 to 1976, Mr. Plausteiner
held various positions at Mount Snow, a leading Vermont ski resort, including
Vice President -- Operation and Planning of Mount Snow Development Corporation,
Vice President for Planning and Maintenance of Mount Snow Hotel Corporation and
Operations Manager of Mount Snow. In 1971, he was appointed to the Board of
Directors of the Mount Snow Corporation, the parent company for the Mount Snow
resort and ski operations, on which he served until June 1976. In 1973, Mr.
Plausteiner was appointed by the Governor of Vermont to the Vermont Tramway
Board where he chaired the Tramway Code Revision until June 1976.
32
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<PAGE>
DAVID N. DEUTSCH will serve as a Director of the Company commencing with
the closing of this Offering. Mr. Deutsch is the founder and President of David
N. Deutsch & Company, Inc., a private investment banking and strategic advisory
firm. Prior to founding the firm, Mr. Deutsch was Managing Director, Investment
Banking at Congress Financial Corporation ('Congress'), an asset-backed lender
specializing in the structuring, financing and refinancing of middle market
leveraged acquisitions and troubled companies from May, 1990 to August, 1993.
Before joining Congress, Mr. Deutsch held positions with a number of securities
firms, including Bear, Stearns & Co. Inc., where he was a Vice President
specializing in debt and equity financings from January, 1986 to December, 1989.
Previously at Drexel Burnham Lambert Incorporated, Mr. Deutsch was a member of
the Corporate Finance, High Yield and Convertible Bond departments.
HENRY B. LUNDE will serve as a Director of the Company commencing with the
closing of this Offering. Mr. Lunde is currently president of Stowe Mountain
Resort, a leading ski resort in North America. From 1969 to 1996, Mr. Lunde held
numerous positions at SKI Ltd., a mountain resort holding company which owned
ski resorts across the country including Killington, Vermont, Mount Snow,
Vermont, Haystack, Vermont, Waterville Valley, New Hampshire, Sugarloaf/USA,
Maine, and Bear Mountain, California, including President, Chief Operating
Officer and Director. Mr. Lunde has previously served on the Boards of Directors
of the Vermont Ski Areas Association, Resort Technology, Inc., a designer and
manufacturer of Snowmaking systems and equipment, Rutland Regional Medical
Center and the Proctor Bank. Mr. Lunde is currently serving on the Boards of
Directors of Fletcher Allen Health Care, a major regional medical center
located in Burlington, Vermont and The Vermont Health Plan, a non-profit,
Vermont-based health maintenance organization.
DAN PURJES will serve as a Director of the Company for the period
commencing with the closing of this Offering and ending on the earlier of the
date that is five (5) years from the closing of this Offering or the date of his
resignation or removal from the Board of Directors. Mr. Purjes has been Chairman
and CEO of Josephthal, an investment banking and brokerage firm and a member of
the New York Stock Exchange and other principal exchanges since 1988. Previous
to his appointment as CEO of Josephthal, he served as its Director of Investment
Banking. Prior to joining Josephthal in 1985, Mr. Purjes was a Vice President
with a number of securities firms including Bear Stearns & Co. and L.F.
Rothschild Unterberg Towbin. Mr. Purjes is also Chairman of NUR Advanced
Technologies, Ltd., a digital jet printer company. Mr. Purjes has B.S. and M.S.
degrees in Computer Sciences from the City College of New York School of
Engineering. Mr. Purjes is an affiliate of Josephthal. See 'Certain
Transactions.'
Ms. Susan Plausteiner is the wife of Mr. Steven Plausteiner and
daughter-in-law of Mr. Dusan Plausteiner. Mr. Steven Plausteiner is the son of
Dusan Plausteiner. There are no other family relationships among the officers
and directors of the Company.
Committees of the Board of Directors. Effective upon the closing of this
Offering, the Company will establish an Audit Committee which will consist of
such non-employee directors appointed upon the closing of the Offering as
designated by the Board of Directors. The Audit Committee will be responsible
for reviewing and making recommendations regarding the Company's employment of
independent auditors, the annual audit of the Company's financial statements and
the Company's internal accounting controls, practices and policies.
Additionally, the Company will establish a Compensation Committee which will
consist of those non-employee directors appointed upon the closing of the
Offering as designated by the Board of Directors. It will be responsible for
making recommendations to the Board of Directors regarding compensation
arrangements for executive officers of the Company, including annual bonus
compensation, and will consult with management of the Company regarding
compensation policies and practices. The Compensation Committee will also make
recommendations concerning the adoption of any compensation plans in which
management is eligible to participate, including the granting of stock options
or other benefits under such plans.
Directors' and Officers' Terms and Directors' Fees. Effective upon the
closing of this Offering, the Company's Board of Directors will consist of six
members. Each director is elected for a period of one year at the Company's
annual meeting of stockholders and serves until his or her successor is duly
elected and qualified. Directors who are not employees of the Company will
receive an annual retainer of $1,000 and options to purchase shares of the
Company's Common Stock pursuant to the Company's
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<PAGE>
<PAGE>
1997 Stock Option Plan for Non-Employee Directors. Each option will have a term
of five (5) years from the date of grant, unless earlier terminated. The options
are exercisable in whole or in part on the earlier of (i) the first anniversary
of the grant date of the option, or (ii) death, or (iii) disability. See
'Management -- 1997 Stock Option Plan for Non-Employee Directors.' All directors
will be reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors or committees thereof.
Directors who are also officers of the Company will not be compensated for their
services as directors.
Each of the executive officers serves at the pleasure of the Company's
Board of Directors. See 'Management -- Employment Agreements.'
EXECUTIVE COMPENSATION
No compensation was paid or was payable to the Chief Executive Officer
('CEO') of the Company and none of the Company's most highly compensated
executive officers had combined salaries and bonuses that equalled or exceeded
$100,000 for the years ended December 31, 1994, 1995 and 1996 (collectively,
with the CEO, the 'Named Executive Officers'). The primary reason that the
Company incurred such limited salary expense was due to the need to make
significant investment in its business during the period of the commencement of
the Company's operations under its new management team.
EMPLOYMENT AGREEMENTS
Steven H. Plausteiner will enter into a three-year employment agreement
with the Company which is to commence upon the closing of the Offering. Under
the terms of his employment agreement, Steven Plausteiner will be entitled to
receive an annual base salary of $100,000, which may be increased at the sole
discretion of the Board of Directors, plus a bonus determined by the Board of
Directors after considering the Company's profitability, the CEO's performance,
and the total compensation given to executives in a similar position at
companies similar to the Company. Steven Plausteiner will also be entitled to
receive benefits offered to the Company's senior executives generally by the
Company.
In the event of the termination of Steven Plausteiner's employment by the
Company, other than for 'cause', the termination of employment by Steven
Plausteiner for 'good reason' or the termination by Steven Plausteiner following
a breach by the Company of any material provision of the agreement, Steven
Plausteiner will be entitled to a lump sum payment equal to the annual base
salary for the remaining term of the employment agreement. In the event of the
death of Steven Plausteiner during the term of his employment agreement, his
designated beneficiary (or if none, his estate) shall receive a lump sum payment
equal to the annual base salary for the remaining term of the employment
agreement. The Company will pay the premiums for life insurance on behalf of
Steven Plausteiner.
Susan D. Plausteiner will enter into a three-year employment agreement with
the Company which is to commence upon the closing of the Offering. Susan
Plausteiner's employment agreement will be substantially identical to Steven
Plausteiner's employment agreement with the Company with the only difference
being the amount of the premium for term life insurance.
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (THE '1997 PLAN')
The 1997 Plan was approved by the Board of Directors in August 1997 and is
expected to be approved by the stockholders prior to the closing of the
Offering.
The purpose of the 1997 Plan is to promote the interests of the Company and
its stockholders by increasing the proprietary and vested interest of
non-employee Directors in the growth and performance of the Company.
The 1997 Plan provides for awards of nonqualified options to individuals
who are non-employee Directors of the Company or its affiliates (other than Mr.
Dan Purjes who may only receive awards after serving on the Board of Directors
for twelve consecutive months) as of the date of grant of an option to him
('Eligible Directors'). Unless earlier terminated pursuant to the terms of the
1997 Plan, each option shall have a term of 5 years from the date of grant. The
options are exercisable in whole or in
34
<PAGE>
<PAGE>
part on the earlier of (i) the first anniversary of the grant date of the
option, or (ii) death, or (iii) disability. The exercise price per share of
Common Stock shall be the greater of 100% of the fair market value per share on
the date the option is granted and the initial public offering price of the
Common Stock as set forth herein.
Pursuant to the 1997 Plan, each Eligible Director will be awarded an Annual
Grant (as defined below). Upon first election or appointment to the Board of
Directors at other than an annual meeting, each newly elected Eligible Director
will be granted an option to purchase a number of shares of Common Stock (the
'Initial Grant') determined by multiplying 7,500 by a fraction the numerator of
which is the number of whole months until the next Annual Grant and the
denominator of which is 12. Immediately following each annual meeting of the
stockholders commencing with the meeting in calendar year 1998, each Eligible
Director, provided that such Eligible Director has attended a required minimum
number of Board of Directors and committee meetings during the year, will be
granted an option to purchase 7,500 shares of Common Stock (an 'Annual Grant').
No Eligible Director may be awarded more than one Initial Grant.
The maximum number of shares of Common Stock with respect to which awards
may be granted under the 1997 Plan is 150,000. There are no outstanding awards
or options. Shares of Common Stock subject to options that terminate or expire
without the delivery of Common Stock will again be available for awards. Also,
shares tendered to the Company in satisfaction or partial satisfaction of the
exercise price of any award will increase the number of shares available for
awards except to the extent prohibited by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'). The shares of Common
Stock to be delivered under the 1997 Plan will be made available from the
authorized but unissued shares of Common Stock or from treasury shares.
The Company has agreed with the Representative that for a nine (9)-month
period commencing on the date of this Prospectus, that it will not, without the
consent of the Representative, adopt or propose to adopt any plan or arrangement
permitting the grant, issue or sale of any shares of its Common Stock or issue,
sell or offer for sale any of its Common Stock, or grant an option for its
Common Stock, except for options to purchase up to an aggregate of 150,000
shares of Common Stock which shall have an exercise price per share no less than
the greater of (a) the initial public offering price of the Common Stock set
forth herein and (b) the fair market value of the Common Stock on the date of
grant. No option or other right to acquire Common Stock granted, issued or sold
during this period shall permit (a) the payment with any form of consideration
other than cash, (b) payment of less than the full purchase price or exercise
price for such shares of Common Stock or other securities of the Company on or
before the date of issuance, or (c) the existence of stock appreciation rights,
phantom options or similar arrangements.
The 1997 Plan is administered by the Board of Directors. Subject to the
provisions of the 1997 Plan, the Board is authorized to interpret the 1997 Plan,
to establish, amend and rescind any rules and regulations relating to it and to
make all other determinations necessary or advisable for its administration;
provided, however, that the Board has no discretion with respect to the
selection of Directors to receive options, the number of shares of Common Stock
subject to any such options, the purchase price thereunder or the timing of
grants of options. The determinations of the Board in the administration of the
1997 Plan, as described herein, shall be final and conclusive.
The exercise price of options may be satisfied in cash or, if permitted by
the Board with respect to options granted after the nine (9) month period that
commences on the date of this Prospectus, at the time of grant, by exchanging
shares of Common Stock which have been owned by the optionee for at least six
months, or by a combination of cash and shares of Common Stock.
The options granted under the 1997 Plan may not be assigned or transferred,
except by will or the laws of descent and distribution.
No award may be granted under the 1997 Plan after the day following the
tenth annual meeting of stockholders at which Directors are elected.
The Board of Directors may amend or revise the 1997 Plan in whole or in
part at any time, subject to certain limitations set forth in the 1997 Plan.
35
<PAGE>
<PAGE>
CERTAIN TRANSACTIONS
COMBINATION TRANSACTION
Prior to the consummation of the Offering, the Resort was owned by three
Delaware limited partnerships which are affiliates of the Company: Ascutney
Mountain Resort Hotel, L.P., Ascutney Mountain Resort, L.P. and Ascutney
Mountain Resort Realty, L.P. (collectively, the 'Limited Partnerships'). In
addition, Ascutney Mountain Resort Foods, Inc., a Vermont corporation and
affiliate of the Company ('Foods'), is the holder of a liquor license for the
Resort. Further, Ascutney Mountain Resort Services, Inc., a Delaware corporation
and affiliate of the Company ('Services'), managed the Resort on behalf of the
Limited Partnerships. Immediately prior to the closing of this Offering, the
Company will acquire all of the partnership interests of each of the Limited
Partnerships and all of the outstanding shares of capital stock of Foods. It is
expected that Services will be dissolved.
Immediately prior to the closing of the Offering, all of the partnership
interests in each of the Limited Partnerships will be exchanged for an aggregate
of 2,500,000 shares of Common Stock of Snowdance, Inc. (the 'Combination
Transaction'). The amount of shares of Common Stock that will be issued by the
Company in exchange for all of the partnership interests in each of the Limited
Partnerships was determined by the parties. Each of the Limited Partnerships has
a corporate general partner which has a 1% interest in the Limited Partnership
of which it is general partner. All of the issued and outstanding shares in each
of the corporate general partners are owned by Susan D. Plausteiner. All other
interests in the Limited Partnerships are owned by Steven H. Plausteiner or
Susan D. Plausteiner. As a result of the Combination Transaction, immediately
prior to the closing of this Offering, all of the outstanding shares in the
Company will be owned by Steven H. Plausteiner or Susan D. Plausteiner. Based on
discussions with their tax advisor, the Company's management expects that the
Combination Transaction will be treated as an Internal Revenue Code Section 351
transaction and be tax free to the Company and the Limited Partnerships. The
Company has been advised by its tax advisors that in the event the Combination
Transaction is not treated as a tax free transaction, any resulting tax
liability would be the responsibility of the Principal Stockholders, not of the
Company or the Limited Partnerships. In addition, immediately prior to the
closing of this Offering, Steven H. Plausteiner and Susan D. Plausteiner will
contribute all of the outstanding shares of capital stock of Foods to Snowdance,
Inc. as a capital contribution and Foods will become a wholly-owned subsidiary
of Snowdance, Inc. As part of the Combination Transaction, the Company will
receive an ownership interest in 3/4 of 1 condominium unit which was previously
owned by Ascutney Mountain Resort Realty, L.P.
Immediately prior to the closing of this Offering, it is anticipated that
the Company, as lessee, will enter into a 'net' lease agreement with Steven H.
Plausteiner and Susan D. Plausteiner, as lessors, to lease 17 slope slide
condominium units. It is contemplated that the Company will pay all expenses
associated with each of the condominium units other than debt service on the
underlying mortgage loans and that the Company will have an option to buy each
condominium unit for a net purchase price of $110,000 at any time during the
initial lease term or any renewal term. The Company expects that the annual rent
for each condominium unit will be approximately $6,000 to $8,000 and that each
lease will have a term of 5 years with an option to renew for 5 years. The
foregoing lease transaction, though not the result of arms-length negotiations,
is on terms that the Company believes are at least as favorable as those which
the Company could have obtained from an independent third party.
Upon the closing of the Offering, the Company will have a policy to deal
with conflicts of interest by requiring that the affirmative vote of at least a
majority of the distinterested members of the Board of Directors present at any
meeting be required for any action of the Board of Directors and such policy
shall otherwise be in accordance with Delaware General Corporation Law.
AFFILIATE INVESTMENTS
Since acquiring the Resort in 1993, Steven and Susan Plausteiner have: (i)
provided cash to the Company of approximately $3,153,400 in the form of equity
financing, (ii) guaranteed loans for the Company having an aggregate initial
principal amount of $1,940,000 through June 30, 1997 and (iii) loaned the
Company approximately $1,737,500 through June 30, 1997 (the 'Related Loans'). It
is
36
<PAGE>
<PAGE>
expected that approximately $1,180,000 of the Related Loans currently
outstanding will be converted, prior to the closing of the Offering, by Steven
and Susan Plausteiner to a capital contribution to the Company. The remaining
$537,000 of Related Loans which were made by Steven and Susan Plausteiner in the
first six months of 1997 will continue to be obligations of the Company and
beginning July 1, 1997 to accrue interest at a rate of 8% per annum and mature
on June 30, 2007. To date, the Company has made no interest or principal
payments with respect to the $537,000 of Related Loans. All of the foregoing
funds were used by the Resort to recommence operations in the winter of 1993-94,
to improve the Resort's infrastructure, including upgraded snowmaking and
grooming capabilities and for working capital.
HOGBACK ACQUISITION
Upon the consummation of this Offering, the Company will exchange an
aggregate of 625,000 shares of Common Stock for Hogback Mountain which is
currently owned by Skyline Partners, L.P. The Company will lease certain
buildings located at Hogback Mountain to Vermont Natural Company. See
'Business -- Business Strategy -- Opportunities for Further Development.'
Skyline Partners, L.P. and its wholly-owned subsidiary, Vermont Natural Company
are controlled by Mr. Dan Purjes, the Chairman and Chief Executive Officer of
Josephthal, and a director of the Company upon the closing of this Offering.
Certain other affiliates of Josephthal are also beneficial owners of Skyline
Partners, L.P. See 'Underwriting.'
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, assuming that the Combination
Transaction and the Hogback Acquisition have been consummated as of the date
hereof, before and after giving effect to the sale of the shares of Common Stock
offered hereby, by (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
Director of the Company, (iii) each of the Named Executive Officers and (iv) all
Directors, Director-Nominees and Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
NAME AND ADDRESS NUMBER OF SHARES ---------------------------------------
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING(1) AFTER OFFERING(1)
- ------------------------------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C>
Steven H. Plausteiner(2)(3) ............... 2,500,000 80% 60.6%
c/o Snowdance, Inc.
Route 44
Brownsville, VT 05037
Susan D. Plausteiner(2)(3) ................ 2,500,000 80% 60.6%
c/o Snowdance, Inc.
Route 44
Brownsville, VT 05037
Skyline Partners, L.P.(3)(4) .............. 625,000 20% 15.2%
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue
New York, NY 10166
Dusan Plausteiner ......................... 0 -- --
c/o Snowdance, Inc.
Route 44
Brownsville, VT 05037
David N. Deutsch .......................... 0 -- --
c/o David N. Deutsch & Company, Inc.
150 East 58th St.
New York, NY 10155
Henry B. Lunde ............................ 0 -- --
RD # 1
Box 1022
Pittsford, VT 05763
Dan Purjes(5)(6)(7) ....................... 625,000 20% 15.2%
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue
New York, NY 10166
</TABLE>
37
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<PAGE>
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
NAME AND ADDRESS NUMBER OF SHARES ---------------------------------------
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING(1) AFTER OFFERING(1)
- ------------------------------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C>
All Directors, Director-nominees and
Executive Officers as a group (6
persons)................................. 3,125,000 100% 75.8%
</TABLE>
- ------------
(1) Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares listed in the table.
(2) Represents 1,250,000 shares held by Steven H. Plausteiner and 1,250,000 held
by Susan D. Plausteiner, each a Director and a Named Executive Officer of
the Company.
(3) Skyline Partners, L.P., and Steven H. Plausteiner and Susan D. Plausteiner
(each a 'Selling Stockholder'), have each granted to the Underwriters a
45-day option to purchase in the aggregate up to 150,000 additional shares
of Common Stock to cover over-allotments (up to the first 50,000 shares from
Skyline Partners L.P. and up to the next 100,000 shares from Steven and
Susan Plausteiner in equal amounts). See 'Underwriting.' If the
over-allotment is exercised in full, Skyline Partners, L.P. will own 575,000
shares, Steven Plausteiner will own 1,200,000 shares and Susan Plausteiner
will own 1,200,000 shares of the Common Stock after the Offering.
(4) Skyline Partners, L.P. is an entity controlled by Mr. Dan Purjes, who will
serve as a Director of the Company commencing with the closing of the
Offering. The general partner of Skyline Partners, L.P. is Skyline Partners,
Inc. Mr. Dan Purjes is the sole director of Skyline Partners, Inc.
(5) Mr. Purjes will serve as a Director of the Company commencing with the
closing of the Offering.
(6) Represents 625,000 shares of Common Stock held by Skyline Partners, L.P., an
entity which Mr. Purjes controls, and, accordingly he may be deemed to
beneficially own such shares.
(7) The directors and executive officers of Josephthal Lyon & Ross Incorporated
are Dan Purjes, Lawrence Rice, Charles Roden and Scott Weisman.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 4,900,000 shares of
Common Stock, par value $0.001 per share, and 100,000 shares of preferred stock,
par value $.01 per share, issuable in series (the 'Preferred Stock'). As of
September 15, 1997, there were no shares of Common Stock outstanding. Upon the
completion of this Offering and consummation of the Hogback transaction, there
will be 4,125,000 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding. If the over-allotment option is exercised in part or in full,
there will be no change to the Common Stock outstanding since the shares sold to
meet the over-allotment option will be from outstanding shares held by the
Selling Stockholders.
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation and By-Laws, in
each case as amended to date.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and other
liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares offered by the Company in this Offering will be, when issued and paid
for, fully paid and nonassessable.
38
<PAGE>
<PAGE>
PREFERRED STOCK
The Company's Certificate of Incorporation provides that the Board of
Directors (or a committee designated by the Board of Directors) is authorized,
subject to certain limitations prescribed by law, without further stockholder
approval, to issue from time to time up to an aggregate of 100,000 shares of
Preferred Stock in one or more series and to fix or alter the designations,
powers, preferences, rights and any qualifications, limitations and restrictions
of the shares of each such series thereof, including the dividend rights,
conversion rights, voting rights and the number of shares constituting any
series or designations of such series. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company. The rights, preferences and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. The Company has no present plans to issue any shares of
Preferred Stock.
REGISTRATION RIGHTS
The Representatives of the Underwriters, as holder of the Representatives'
Warrants, has 'piggyback' rights to include the shares underlying the
Representatives' Warrants in any registration statement filed by the Company
during the period ending six (6) years from the closing of this Offering and
also has 'demand' rights during the period ending five (5) years from the
closing of this Offering to require, by action of not less than the holders of a
majority of the Representatives' Warrants, up to one 'demand' registration by
the Company, of the shares underlying the Representatives' Warrants. In
addition, any holder of the Representatives' Warrants has 'demand' rights during
the period ending five (5) years from the closing of this Offering to require
one 'demand' registration of the shares underlying such holder's warrants,
solely at the expense of such holder.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the 'DGCL'). Subject to certain exceptions, Section 203
prohibits a publicly-held Delaware corporation from engaging in a 'business
combination' with an 'interested stockholder' for a period of three years
following the time that such stockholder became an interested stockholder,
unless the interested stockholder attained such status with the approval of the
Board of Directors, owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (subject to certain
exclusions), or unless the business combination is approved in a prescribed
manner. A 'business combination' includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an 'interested stockholder' is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock.
As permitted by the DGCL, the Certificate of Incorporation and By-Laws
provide that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director shall derive an improper personal benefit. In addition, the
Certificate of Incorporation provides that the Company shall, to the fullest
extent authorized by the DGCL, as amended from time to time, indemnify and hold
harmless all directors and officers against all expense, liability and loss
reasonably incurred or suffered by such indemnitee in connection therewith. Such
indemnification shall continue as to an indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the indemnitee's heirs,
executors and administrators. The right to indemnification includes the right to
be advanced funds from the Company for expenses incurred in defending any
proceeding for which a right to indemnification is applicable.
The Company's By-Laws provide that special meetings of the stockholders may
be called at any time by resolution of the Board of Directors, or by the
Chairman of the Board, or at the request of
39
<PAGE>
<PAGE>
stockholders owning 50% or more of the issued and outstanding capital stock of
the Company and entitled to vote, but may not generally be called by other
persons.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company anticipates that it
will have 4,125,000 shares of Common Stock outstanding, excluding the shares of
Common Stock issuable upon exercise of the Representatives' Warrants. The
1,000,000 shares of Common Stock offered hereby (1,150,000 if the Underwriter's
over-allotment option is exercised in full), will be freely tradeable without
restriction or further registration under the Securities Act, except for any
shares purchased by an 'affiliate' of the Company (in general, a person who has
a control relationship with the Company) which will be subject to the
limitations of Rule 144 adopted under the Securities Act. All of the remaining
3,125,000 shares are deemed to be 'restricted securities,' as that term is
defined under Rule 144 promulgated under the Securities Act, in that such shares
were issued and sold by the Company in private transactions not involving a
public offering.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of one percent of the total number of outstanding shares of the same
class or the average weekly trading volume during the four calendar weeks
preceding the sale. A person who has not been an affiliate of the Company for at
least the three months immediately preceding the sale and who has beneficially
owned shares of Common Stock for at least two years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
All of the Company's officers, directors and existing stockholders have
agreed not to, directly or indirectly, offer to sell, transfer, hypothecate or
otherwise encumber any of their shares of Common Stock for a period of nine (9)
months from the date of this Prospectus without the joint prior written consent
of Josephthal and the Company.
The Company has also agreed to grant and to cause all of its present and
future affiliates to grant to the Representatives a right of first refusal, for
a period of three (3) years commencing on the closing of this Offering, with
respect to any sale of securities to be made by the Company or any of its
affiliates, which right may be assigned by the Representatives to any of their
affiliates. If the gross proceeds of the offering are less than $6,000,000, such
right of first refusal only pertains to shares sold by existing stockholders
immediately prior to the closing of this Offering.
In addition, prior to this Offering, there has been no market for the
Common Stock and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the sale of its
equity securities. See 'Risk Factors -- No Prior Public Market; Possible
Volatility of Stock Price' and 'Risk Factors -- Shares Eligible for Future
Sale.'
40
<PAGE>
<PAGE>
UNDERWRITING
The Underwriters named below (the 'Underwriters'), for whom Josephthal Lyon
& Ross Incorporated and Cruttenden Roth Incorporated are acting as the
representatives (the 'Representatives'), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement (the 'Underwriting
Agreement'), to purchase from the Company and the Company has agreed to sell to
the Underwriters on a firm commitment basis the respective number of shares of
Common Stock (excluding the over-allotment shares) set forth opposite their
names:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ------------------------------------------------------------------------------------- ----------------
<S> <C>
Josephthal Lyon & Ross Incorporated..................................................
Cruttenden Roth Incorporated.........................................................
----------------
Total...................................................................... 1,000,000
----------------
----------------
</TABLE>
The Underwriters are committed to purchase all shares of the Common Stock
offered hereby if any of such shares are purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to
conditions precedent specified therein.
The Company has been advised by the Representatives that the Underwriters
propose to initially offer the shares of Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less concessions of not in excess of $. per
share. Such dealers may reallow a concession not in excess of $. per share
of Common Stock to other dealers. After the commencement of this Offering, the
public offering price, concession and reallowance may be changed by the
Representatives. No such change, however, shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
The Representatives have advised the Company that they do not anticipate
sales to discretionary accounts by the Underwriters to exceed five percent of
the total number of shares offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in connection with this
Offering. The Company has also agreed to pay to the Representatives an expense
allowance on a non-accountable basis equal to two and one-half percent (2 1/2%)
of the gross proceeds derived from the sale of the Common Stock underwritten,
none of which has been paid to date.
The Underwriters have been granted an option by the Selling Stockholders,
exercisable within forty-five (45) days after the date of this Prospectus, to
purchase up to an additional 150,000 shares of Common Stock (up to the first
50,000 shares from Skyline Partners, L.P. and up to the next 100,000 shares from
Steven and Susan Plausteiner in equal amounts) at the initial public offering
price per share of Common Stock offered hereby, less underwriting discounts and
the non-accountable expense allowance. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the Common
Stock offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional shares of Common Stock
proportionate to its initial commitment.
Josephthal has advised the Company that it currently intends to make a
market in the Common Stock but it is not obligated to do so and may discontinue
any such market making at any time without notice. Josephthal may be deemed an
affiliate of the Company by virtue of the fact that (i) an affiliate of
Josephthal has entered into a business transaction with the Company and has been
issued 625,000 shares of Common Stock in connection therewith, (ii) Josephthal
may provide advisory services to the Company in the future and (iii) an
affiliate of Josephthal shall serve on the Company's Board of Directors upon the
closing of the Offering.
This Prospectus is also to be used by Josephthal, which may be an affiliate
of the Company, in connection with offers, and sales relating to market-making
transactions in the Common Stock in which Josephthal acts as principal.
Josephthal may also act as agent in such transactions. Sales will be made at
prices related to the prevailing prices at the time of sale.
41
<PAGE>
<PAGE>
All of the Company's officers, directors and existing stockholders have
agreed not to, directly or indirectly, offer to sell, transfer, hypothecate or
otherwise encumber any of their securities for nine (9) months following the
date of this Prospectus without the joint prior written consent of Josephthal
and the Company. An appropriate legend shall be marked on the face of the
certificates representing all of such securities.
The Company has agreed that, for five (5) years after the closing of this
Offering, Josephthal will have the right to designate Dan Purjes to be elected
to the Company's Board of Directors. Josephthal has designated Mr. Purjes and
Mr. Purjes has indicated to Josephthal his intention to accept such designation.
In the event Josephthal elects not to designate Mr. Purjes to serve on the
Company's Board of Directors (or in the event Mr. Purjes rejects any such
designation), Josephthal may then designate a non-voting observer (reasonably
acceptable to the Company) to attend meetings of the Board of Directors.
The Company has also agreed that in connection with the Company's
discussions and negotiations with timeshare developers, Josephthal shall act as
the Company's exclusive financial advisor. Josephthal will receive a fee to be
mutually and reasonably agreed upon in good faith by the Company and Josephthal,
upon the consummation of a transaction with the Company and a timeshare
developer that Josephthal introduced to the Company.
In connection with this Offering, the Company has agreed to sell to the
Representatives, for nominal consideration, the Representatives' Warrants to
purchase from the Company 100,000 shares of Common Stock. The Representatives'
Warrants are initially exercisable for shares of Common Stock at a price per
share equal to 120% of the initial public offering price per share of Common
Stock for a period of four (4) years commencing one (1) year from the date of
this Prospectus and are restricted from sale, transfer, assignment, or
hypothecation for a period of twelve (12) months from the date hereof. The
Representatives' Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise of the Representatives'
Warrants. See 'Description of Capital Stock -- Registration Rights.'
The Company has also agreed to grant and to cause all of its present and
future affiliates to grant to the Representatives a right of first refusal, for
a period of three (3) years commencing on the closing of this Offering, with
respect to any sale of securities to be made by the Company or any of its
affiliates, which right may be assigned by the Representatives to any of their
affiliates. If the gross proceeds of the offering are less than $6,000,000, such
right of first refusal only pertains to shares sold by existing stockholders
immediately prior to the closing of this Offering.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See 'Available Information.'
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short positions, up to 150,000 shares of Common Stock, by
exercising the over-allotment option. In addition, the Representatives may
impose 'penalty bids' under contractual arrangements with the Underwriters,
whereby it may reclaim from an Underwriter (or dealer participating in the
Offering) for the account of other Underwriters, the selling concession with
respect to Common Stock that is distributed in the Offering but subsequently
purchased for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Common Stock at a level above that which might otherwise prevail in
the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
42
<PAGE>
<PAGE>
Upon the consummation of this Offering, the Company will exchange an
aggregate of 625,000 shares of its Common Stock for Hogback Mountain which is
currently owned by Skyline Partners, L.P. The Company also intends to lease the
buildings including the Skyline Restaurant and gift shop at Hogback Mountain to
Vermont Natural Company, the current owner and operator of such businesses. The
lease will be on a month-to-month basis, terminable by the Company or the tenant
on 30 days notice at a rent in an amount to be mutually agreed upon by the
parties. See 'Business -- Business Strategy -- Opportunities For Further
Development.' Skyline Partners, L.P. and, by its wholly-owned subsidiary, the
Vermont Natural Company are controlled by Mr. Dan Purjes, the Chairman and Chief
Executive Officer of Josephthal and a director of the Company upon the closing
of this Offering. Certain other affiliates of Josephthal are also beneficial
owners of Skyline Partners, L.P. and Vermont Natural Company.
Since Josephthal may have a 'conflict of interest' with the Company as
defined in Rule 2720 of the NASD's Conduct Rules, the Offering is being made in
conformity with certain applicable provisions of Rule 2720 of the NASD.
Accordingly, the initial public offering price of the shares of Common Stock may
not be higher than as recommended by an independent investment banking firm
which qualifies as a 'qualified independent underwriter' and 'which shall also
participate in the preparation of the registration statement and prospectus . .
. and which shall exercise the usual standards of due diligence.' Cruttenden
Roth Incorporated is acting as a 'qualified independent underwriter.'
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price of the Common Stock was
determined by negotiation between the Company and the Qualified Independent
Underwriter. The factors considered in determining such prices and terms, in
addition to the prevailing market conditions, include the history of and the
prospects for the industry in which the Company competes, an assessment of the
Company's management, the prospects of the Company, its capital structure and
such other factors that were deemed relevant. The offering price does not
necessarily bear any relationship to the assets, appraised value, results of
operations or net worth of the Company.
Pursuant to Rule 2720 of the NASD, Cruttenden Roth Incorporated, a member
of the NASD, is required, in acting as a 'qualified independent underwriter,' to
undertake to the NASD the legal responsibilities and liabilities of an
underwriter under the Securities Act, specifically including those inherent in
Section 11 thereof. The Company will indemnify Cruttenden Roth Incorporated
against such liabilities, if any, to the extent permitted by law.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters
in connection with the Offering will be passed upon for the Company by
Sonnenschein Nath & Rosenthal, New York, New York. Orrick, Herrington &
Sutcliffe LLP, New York, New York has acted as counsel for the Underwriters in
connection with this Offering.
EXPERTS
The financial statements as of December 31, 1996 and for the years ended
December 31, 1996 and 1995 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the report of such firm given
upon their authority as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form SB-2 relating to the Common Stock
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information included in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto. Statements
contained in this Prospectus concerning the provisions or contents of any
contract, agreement or any other document referred to herein are not
43
<PAGE>
<PAGE>
necessarily complete. With respect to each such contract, agreement or document
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matters involved and each such
statement shall be deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected without change at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, DC 20549 and at the
Commission's regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
As a result of this Offering, the Company will become subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and regional offices referred to above. The Commission also
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The Common Stock is expected to be listed on
the American Stock Exchange and, upon such listing, such reports, proxy
statements and other information can also be inspected and copied at the offices
of the Nasdaq Stock Market, 1735 K Street, NW, Washington, DC 20006 and Pacific
Exchange, 301 Pine Street, San Francisco, California 94104.
The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements certified by independent
public accountants for each fiscal year and will make available quarterly
reports containing unaudited consolidated financial statements for the first
three quarters of each fiscal year.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (other than the
exhibits expressly incorporated in such documents by reference). Requests should
be directed to: Snowdance, Inc., Route 44, Brownsville, Vermont 05037,
Attention: Steven H. Plausteiner (telephone (802) 484-7000).
44
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Independent Auditors' Report....................................................................... F-2
Financial Statements:
Balance Sheets as of December 31, 1996 and June 30, 1997...................................... F-3
Statements of Operations for the Years Ended December 31, 1995 and 1996 and the Six Months
Ended June 30, 1996 and 1997................................................................. F-4
Statements of Changes in Stockholders' Deficit for the Years Ended December 31, 1995 and 1996
and the Six Months Ended June 30, 1997....................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996 and the Six Months
Ended June 30, 1996 and 1997................................................................. F-6
Notes to Financial Statements................................................................. F-7 - F-12
Pro Forma Financial Information.................................................................... F-13 - F-17
</TABLE>
F-1
<PAGE>
<PAGE>
The accompanying financial statements give effect to the consummation of
the Combination as described in Note 1 to the financial statements. The
following report is in the form that will be furnished by Deloitte & Touche LLP
upon consummation of the Combination assuming that no other material events have
occurred that would affect the accompanying financial statements or required
disclosures therein.
DELOITTE & TOUCHE LLP
New York, New York
September 29, 1997
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
SNOWDANCE, INC.
We have audited the accompanying balance sheet of Snowdance, Inc. (formerly
Ascutney Mountain Resort, L.P. and affiliated entities) (see Note 1 to the
financial statements) as of December 31, 1996 and the related statements of
operations, stockholders' deficit and cash flows for the years ended December
31, 1995 and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Snowdance, Inc. (formerly Ascutney Mountain
Resort, L.P. and affiliated entities -- See Note 1) as of December 31, 1996 and
the results of its operations and its cash flows for the years ended December
31, 1995 and 1996 in conformity with generally accepted accounting principles.
New York, New York
July 11, 1997 (October , 1997 as to Note 1)
F-2
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................................... $ 38,480 $ 34,341
Accounts receivable (less allowance for doubtful accounts of $8,000 in both
periods)...................................................................... 131,437 91,225
Other receivables.............................................................. 44,492 16,105
Inventories.................................................................... 47,402 34,061
Prepaid expenses............................................................... 33,237 44,103
------------ -----------
Total current assets...................................................... 295,048 219,835
Property and equipment -- net....................................................... 1,210,376 1,163,807
Deferred financing costs -- net..................................................... 77,118 72,662
Other assets........................................................................ 6,824 59,623
------------ -----------
Total assets........................................................................ $ 1,589,366 $ 1,515,927
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................................... $ 610,194 $ 320,763
Accrued expenses and other liabilities......................................... 179,354 98,321
Advance deposits............................................................... 151,328 123,008
Current portion of long-term debt.............................................. 216,620 218,086
------------ -----------
Total current liabilities................................................. 1,157,496 760,178
------------ -----------
Long-term debt:
Line of credit................................................................. 750,000 725,000
Loans payable.................................................................. 550,458 527,672
Notes to related party......................................................... 1,180,567 1,692,474
------------ -----------
Total long-term debt...................................................... 2,481,025 2,945,146
Commitments and contingencies.......................................................
Stockholders' deficit
Preferred stock (par value $.01 per share, 100,000 shares authorized, none
outstanding).................................................................. -- --
Common stock (par value $.001 per share, 4,900,000 shares authorized, 2,500,000
shares outstanding)........................................................... 2,500 2,500
Additional paid-in capital..................................................... 1,050,000 1,110,225
Accumulated deficit............................................................ (3,101,655) (3,302,122)
------------ -----------
Total stockholders' deficit............................................... (2,049,155) (2,189,397)
------------ -----------
Total liabilities and stockholders' deficit......................................... $ 1,589,366 $ 1,515,927
------------ -----------
------------ -----------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
------------------------- ------------------------
1995 1996 1996 1997
---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Lodging............................................. $1,540,267 $ 1,695,845 $ 764,385 $ 931,938
Food and beverage................................... 1,010,076 970,086 423,685 462,480
Ski and fitness..................................... 997,978 1,064,720 711,343 870,114
Other............................................... 318,097 252,567 105,109 100,793
---------- ----------- ---------- ----------
Total revenues................................. 3,866,418 3,983,218 2,004,522 2,365,325
---------- ----------- ---------- ----------
Cost of Sales:
Lodging............................................. 630,158 827,620 410,861 351,494
Food and beverage................................... 745,099 848,513 418,081 372,331
Ski and fitness..................................... 857,001 950,239 544,798 544,439
Other............................................... 192,952 140,753 69,508 53,284
---------- ----------- ---------- ----------
Total cost of sales............................ 2,425,210 2,767,125 1,443,248 1,321,548
---------- ----------- ---------- ----------
Gross profit................................... 1,441,208 1,216,093 561,274 1,043,777
---------- ----------- ---------- ----------
Operating Expenses:
Administrative and general.......................... 522,321 478,411 257,126 262,839
Sales and marketing................................. 572,351 592,732 275,233 236,937
Depreciation........................................ 116,656 122,714 60,685 62,254
Heat, light and power............................... 582,025 633,173 321,159 335,830
Insurance........................................... 103,181 145,842 67,875 64,893
Real estate and other taxes......................... 106,162 149,610 59,913 46,113
Repairs and maintenance............................. 372,456 370,756 174,660 127,382
---------- ----------- ---------- ----------
Total operating expenses....................... 2,375,152 2,493,238 1,216,651 1,136,248
---------- ----------- ---------- ----------
Net Operating Loss....................................... (933,944) (1,277,145) (655,377) (92,471)
---------- ----------- ---------- ----------
Other Income (Expense):
Interest income..................................... 386 2,174 1,654 583
Gain on sale of assets.............................. 562,267 18,115 18,701 --
Related party interest expense...................... (16,275) (85,027) (42,514) (49,164)
Interest expense.................................... (189,123) (158,936) (68,130) (59,415)
---------- ----------- ---------- ----------
Total other income (expense)................... 357,255 (223,674) (90,289) (107,996)
---------- ----------- ---------- ----------
Net Loss................................................. $ (576,689) $(1,500,819) $ (745,666) $ (200,467)
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Loss per Common Share.................................... $ (.23) $ (.60) $ (.30) $ (.08)
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Weighted average number of shares outstanding............ 2,500,000 2,500,000 2,500,000 2,500,000
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P AND AFFILIATED ENTITIES -- SEE NOTE 1)
STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN CAPITAL DEFICIT TOTAL
------------ --------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1995........................... $2,500 $ (940,317) $ (937,817)
Capital contributions......................... $ 400,000 400,000
Distributions................................. (78,361) (78,361)
Net loss...................................... (576,689) (576,689)
------------ --------------- ----------- -----------
Balance, December 31, 1995......................... 2,500 400,000 (1,595,367) (1,192,867)
Capital contributions......................... 650,000 650,000
Distributions................................. (5,469) (5,469)
Net loss...................................... (1,500,819) (1,500,819)
------------ --------------- ----------- -----------
Balance, December 31, 1996......................... 2,500 1,050,000 (3,101,655) (2,049,155)
Capital contributions (unaudited).................. 60,225 60,225
Net loss (unaudited).......................... (200,467) (200,467)
------------ --------------- ----------- -----------
Balance, June 30, 1997
(unaudited)...................................... $2,500 $ 1,110,225 $(3,302,122) $(2,189,397)
------------ --------------- ----------- -----------
------------ --------------- ----------- -----------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- ------------------------
1995 1996 1996 1997
----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss.......................................... $ (576,689) $(1,500,819) $(745,666) $ (200,467)
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation................................. 116,656 122,714 60,685 62,254
Amortization................................. 10,743 10,726 4,456 4,456
Gain on sale of assets....................... (562,267) (18,115) (18,701) --
Executive services contributed............... -- 60,000
Changes in assets -- (increase) decrease:
Accounts receivable..................... (105,181) 85,867 120,852 40,212
Other receivables....................... (50,404) 24,268 17,479 28,387
Inventory............................... (5,439) 1,856 14,773 13,341
Prepaid expenses........................ 15,354 (10,167) (38,549) (10,866)
Other assets............................ (2,345) (2,476) (2,476) (52,799)
Changes in liabilities -- increase
(decrease):
Accounts payable........................ 145,002 155,488 62,462 (289,431)
Advance deposits........................ 47,067 36,674 (43,945) (28,320)
Accrued expenses........................ (380,094) 6,224 (115,065) (81,033)
----------- ----------- --------- -----------
Net cash used in operating
activities....................... (1,347,597) (1,087,760) (683,695) (454,266)
----------- ----------- --------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment............... (34,466) (44,576) (13,955) (15,685)
Sales of property and equipment................... 587,653 19,053 19,595 --
----------- ----------- --------- -----------
Net cash provided by (used in) investing
activities...................................... 553,187 (25,523) 5,640 (15,685)
----------- ----------- --------- -----------
Cash Flows from Financing Activities:
Cash distributions................................ (5,172) (5,469) -- --
Increase in deferred financing costs.............. (32,788) -- (543) --
Loan borrowings................................... 3,537,515 3,215,000 1,285,000 2,172,000
Loan repayments................................... (2,999,204) (2,826,000) (908,811) (1,706,413)
Capital contributions from owners................. 400,000 650,000 250,000 225
----------- ----------- --------- -----------
Net cash provided by financing activities......... 900,351 1,033,531 625,646 465,812
----------- ----------- --------- -----------
Net Increase (Decrease) in Cash........................ 105,941 (79,752) (52,409) (4,139)
Cash, Beginning of Period.............................. 12,291 118,232 71,488 38,480
----------- ----------- --------- -----------
Cash, End of Period.................................... $ 118,232 $ 38,480 $ 19,079 $ 34,341
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Supplemental Disclosure of Non-Cash Investing and
Financing Activity:
Distribution of property to owners................ $ 73,189 $ -- $ -- $ --
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Capital contributed via executive services........ $ -- $ -- $ -- $ 60,000
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest.......... $ 200,324 $ 194,605 $ 73,220 $ 62,899
----------- ----------- --------- -----------
----------- ----------- --------- -----------
</TABLE>
See notes to financial statements.
F-6
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
1. BASIS OF PRESENTATION
Snowdance, Inc. is a Delaware corporation formed on August 7, 1997. On
, 1997, immediately prior to the date of this Prospectus,
Snowdance, Inc., in a transaction hereinafter referred to as the 'Combination,'
issued 1,250,000 shares of its common stock to each of Susan Plausteiner and
Steven Plausteiner in exchange for all of the partnership interests in three
limited partnerships: Ascutney Mountain Resort, L.P., Ascutney Mountain Resort
Hotel, L.P., and Ascutney Mountain Resort Realty, L.P. (the 'Partnerships'),
which together owned the Ascutney Mountain Resort in Brownsville, Vermont, and
for the common stock of Ascutney Mountain Foods, Inc. ('Foods'), the holder of
the resort's liquor license.
Each of the Partnerships had a general partner which had a 1% interest in
the limited partnership of which it was the general partner. All of the issued
and outstanding shares in each of the general partners (Snowdance Hotel Company,
Snowdance Ski Company and Snowdance Realty Company) were owned by Susan
Plausteiner. All of the limited partnership interests of the Partnerships and
all of the outstanding shares of Foods were owned by Susan and Steven
Plausteiner.
The Combination was accounted for as a reorganization of entities under
common control in a manner similar to a pooling of interests. Accordingly, the
accompanying financial statements reflect the operations of Snowdance, Inc. and
the Partnerships and Foods as if combined for all periods. All material
intercompany balances and transactions have been eliminated in combination. The
combined entities are hereinafter referred to as the 'Company.'
The Ascutney Mountain Resort is a four-season resort which includes a ski
area, an 18,000 square foot comprehensive fitness center, a 212 room hotel, four
restaurants, and 30,000 square feet of conference space. The resort was
purchased in the summer of 1993 for a cost of approximately $1.13 million and
reopened in December 1993.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the assets, ranging from 5 to 7 years for furniture and
equipment to thirty-nine years for buildings. The cost of maintenance, repairs,
minor renewals and improvements are charged to income as incurred.
The Company periodically reviews its property for impairment. Impairment is
determined to exist when estimated amounts recoverable through future operations
and sale of a property on an undiscounted basis are below that property's
carrying value. If a property is determined to be impaired, it must be written
down to its estimated fair value. Management of the Company believes that no
impairment exists at December 31, 1996.
INVENTORIES
Inventories consist primarily of food, beverages and supplies and are
stated at the lower of cost or market. Inventories are recorded using the FIFO
(first-in, first-out) method.
DEFERRED FINANCING COSTS
Deferred financing costs consist of costs directly associated with issuance
of debt and the line of credit. These costs are amortized over the life of the
related loans and credit line using the effective interest method. Accumulated
amortization was $30,345 at December 31, 1996.
F-7
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
INCOME TAXES
During the periods presented, the Company was comprised primarily of
partnerships for income tax purposes. The Partnerships are not taxable for U.S.
Federal income tax purposes. The partners report their distributive share of the
Partnerships' losses in their individual income tax returns.
For income tax purposes, Partnership results are reported for the calendar
year. The principal difference between the accounting policies used for tax
reporting purposes and those used for financial reporting is that depreciation
is calculated using accelerated methods. The tax basis of the Partnerships'
assets and liabilities is approximately $131,000 lower than the amounts reported
for financial statement purposes at December 31, 1996.
The other entities included in the Company for these financial statements
are taxable corporations, which did not have significant taxable income or
losses.
After the Combination, the Company will be a taxable corporation.
Accordingly, it will account for income taxes according to Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes,' and
record deferred taxes for the temporary differences between the tax bases of
assets and liabilities and the amounts reported in the financial statements.
ADVERTISING EXPENSE
The Company expenses advertising costs as incurred. The Company expensed
$314,535 in 1996 and $284,788 in 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 128, 'Earnings per Share' establishes
standards for computing and presenting earnings per share, and is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Statement No. 129, 'Disclosure of Information about Capital Structure'
establishes standards for disclosing information about an entity's capital
structure, and is effective for financial statements for periods ending after
December 15, 1997. Statement No. 130, 'Reporting Comprehensive Income'
establishes standards for reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after December 15, 1997.
Statement No. 131, 'Disclosures about Segments of an Enterprise and Related
Information' establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial statements
for periods beginning after December 15, 1997.
Management of the Company does not believe that these new standards will
have a material effect on the Company's reported operating results, per share
amounts, financial position or cash flows.
F-8
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
INTERIM FINANCIAL DATA
The interim financial data and related notes included herein are unaudited;
however, in the opinion of management, the Company's interim financial data for
the six month periods ended June 30, 1997 and 1996 includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of the interim periods. The operating results for
interim periods may not be indicative of the results expected for the full year.
3. PROPERTY AND EQUIPMENT -- NET
Major classifications of property and equipment are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Land........................................................................... $ 159,161
Buildings...................................................................... 820,610
Furniture, fixtures, and equipment............................................. 581,183
------------
1,560,954
------------
Less accumulated depreciation.................................................. (350,578)
------------
Property and equipment -- net.................................................. $1,210,376
------------
------------
</TABLE>
4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31, 1996 are
summarized as follows:
<TABLE>
<S> <C>
Payroll and payroll benefits...................................................... $ 87,309
Taxes............................................................................. 39,513
Utilities......................................................................... 25,601
Interest.......................................................................... 21,954
Other............................................................................. 4,977
--------
Total........................................................................ $179,354
--------
--------
</TABLE>
5. LONG-TERM DEBT
a. Loans Payable -- Loans payable at December 31, 1996 consisted of:
<TABLE>
<CAPTION>
BALANCE
LENDER MATURITY INTEREST RATE DECEMBER 31, 1996
- ----------------------------------------- ------------------ --------------- -----------------
<S> <C> <C> <C>
Vermont Economic Development Authority
('VEDA')(i)............................ June 3, 2004 5.50% per annum $ 352,600
West Windsor Block Grant(ii)............. February 20, 2010 5.00 per annum 229,225
-----------------
581,825
Less: Current Maturities................. 31,367
-----------------
Total long-term loans payable....... $ 550,458
-----------------
-----------------
</TABLE>
- ------------
(i) Guaranteed by the Company's current owners and by Snowdance Ski
Company and Snowdance Hotel Company. This loan has a balloon
payment at maturity of $171,639. Under the terms of this loan
agreement, the Company may not make distributions (except certain
distributions with respect to the offset of income tax
liabilities) without consent of VEDA.
(ii) Guaranteed by the Company's current owners.
F-9
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
Under the terms of the loans, interest and principal are payable monthly
until maturity, at which time the remaining principal balance is payable plus
any accrued interest.
b. Line of Credit -- Line of Credit payable at December 31, 1996 consisted
of:
<TABLE>
<CAPTION>
BALANCE BALANCE
LENDER MATURITY INTEREST RATE DECEMBER 31, 1996 JUNE 30, 1997
- ------------------------- ------------------ ------------- ----------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fleet Bank............... February 28, 2004 Prime + 1.75% $ 925,000 $ 880,000
</TABLE>
$175,000 of the line of credit is a current liability at December 31, 1996
and was paid during February 1997. The interest rate on this debt was 10.75% per
annum at December 31, 1996. Under the terms of the revolving line of credit, the
principal amount available is reduced by $175,000 annually, beginning in
February of 1996, with a scheduled balloon payment on the balance remaining at
maturity. This line of credit was guaranteed by the Company's current owners and
by Ascutney Mountain Resort Realty, L.P., Snowdance Ski Company, Snowdance Hotel
Company, and Snowdance Realty Company.
On June 30, 1997, the Company entered into a revolving line of credit
borrowing arrangement with Mascoma Bank. Total borrowings available under this
line of credit are $1,500,000, bear interest at the prime rate plus 1.75%, which
equalled 10.25% per annum at June 30, 1997, payable monthly, with principal due
on June 30, 1998. The debt is collateralized by a security interest in all
Resort assets, a first mortgage on the Company's real estate assets, as well as
on the two private residences owned by the Company's current owners and is
guaranteed by the Company's current owners. In July of 1997, the Company
borrowed $914,425 under this line and used the proceeds to prepay the Fleet Bank
line of credit and to pay loan fees and costs.
c. Notes Payable to Related Parties -- As part of its original purchase of
the resort, the Company acquired 24.75 condominium units. One of these units was
sold in 1994. In 1995, six of these units were sold through November for a gain
on sale of $562,267. In November of 1995, the Company transferred 17 units to
its current owners (cost basis of approximately $4,305 per unit, for a total of
$73,189). The current owners arranged for financial institution mortgage
financing collateralized by the condominium units, and loaned the proceeds to
the Company on terms which mirror the terms of the mortgage financing. The
Company is also entitled to use the condominium units as rental properties and
is responsible for all expenses relating to them (see Note 9).
Notes payable to related parties at December 31, 1996 consisted of the
following:
<TABLE>
<CAPTION>
INTEREST RATE BALANCE
MATURITY DECEMBER 31, 1996 DECEMBER 31, 1996
- ------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
June 21, 2025............................................... 9.287% per annum $ 497,079
February 1, 2026............................................ 7.500 per annum 275,887
July 1, 2026(i)............................................. 7.875 per annum 139,512
April 1, 2026(ii)........................................... 7.625 per annum 278,342
-----------------
1,190,820
Less current maturities..................................... 10,253
-----------------
Long term notes payable to related party.................... $ 1,180,567
-----------------
-----------------
</TABLE>
- ------------
(i) The interest rate will reset on every July 1 and will be equal to
the weekly average yield on United States Treasury securities
adjusted to a constant maturity of one year as made available by
the Federal Reserve Board plus three percentage points. The
interest rate shall not exceed 13.875%.
(ii) The interest rate will reset on every April 1 and will be equal
to the weekly average yield on United States Treasury securities
adjusted to a constant maturity of one year as made
F-10
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
available by the Federal Reserve Board plus three percentage points.
The interest rate shall not exceed 13.625%.
Under the terms of the notes payable to related parties, interest and
principal are payable monthly until maturity.
During the six months ended June 30, 1997, the Company's current
owners advanced the Company $537,000. These advances bear interest at the
rate of 8% beginning July 1, 1997, and mature June 30, 2007.
The scheduled principal maturities for the following five years,
including the loans payable, line of credit and notes payable to related
party are summarized below:
<TABLE>
<CAPTION>
YEAR TOTAL
- -------------------------------------------------------------------------------- ----------
<S> <C>
1997............................................................................ $ 216,620
1998............................................................................ 219,204
1999............................................................................ 221,960
2000............................................................................ 224,894
2001............................................................................ 228,019
Thereafter...................................................................... 1,586,948
----------
Total...................................................................... $2,697,645
----------
----------
</TABLE>
The Company's management believes that the fair value of its long-term
debt approximates its carrying value at December 31, 1996.
6. LEASES
The Company leases a ski rental shop to an unrelated third party. Rents
received by the Company were computed as 4.5% and 4.0% of the Company's gross
daily and season ticket sales in 1996 and 1995, respectively. Revenue earned
through this arrangement was $41,525 in 1996 and $26,679 in 1995.
7. LITIGATION
In the normal course of business, certain litigation is initiated against
the Company. Generally, those claims are insured and in the opinion of
management, disposition of litigation will not have a material adverse effect on
the Company's liquidity, financial position or results of operations.
8. EXECUTIVE COMPENSATION
The Company's current owners do not currently receive compensation from the
Company. The Company has determined that a reasonable salary expense for these
individuals would not be material to the Company's reported results of
operations or financial position for 1995 or 1996. Effective January 1, 1997,
the Company began to record compensation to its owners. Because no cash will be
paid for this compensation, it has been recorded as capital contributions by the
Company's owners; $60,000 was recorded as capital contributions during the six
months ended June 30, 1997 (see Note 9).
9. SUBSEQUENT EVENTS
PLANNED EQUITY OFFERING
During 1997, the Company's management decided to seek additional equity
capital through a planned public offering of 1,000,000 shares of common stock
(the 'Offering'). The net proceeds from the Offering, anticipated to be
approximately $6,660,000, would be used for upgrades and expansion to
F-11
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
the resort's ski lifts, snowmaking, grooming and trail systems, purchase of
additional mountain equipment and vehicles, resort improvements, possible
development of a golf course on resort property, development of a vacation
ownership intervals program, repayment of debt, and for working capital.
In addition, the 17 condominium units currently owned by the Company's owners
(see Note 5) will be leased to Snowdance, Inc. and approximately $1,180,567 of
the related party debt will be contributed as capital. The Company will enter
into three-year employment agreements with its current owners which will
commence upon the closing of the Offering. These agreements will provide for
annual salaries of $100,000 for each individual, annual bonuses as determined by
the Company's Board of Directors and certain benefits. The ability of the
Company to successfully complete the Offering and its timing cannot be
determined this time.
REAL ESTATE PURCHASE
Upon the closing of the Offering, Snowdance Inc. will acquire approximately
800 acres of land known as Hogback Mountain, located in Marlboro, Vermont. The
Company plans to explore potential development opportunities for this land. As
consideration for the purchase of this land, Snowdance, Inc. will issue 625,000
shares of its common stock to the owners of the assets, one of whom is a
partnership whose principal beneficial owner will serve as a Director of
Snowdance, Inc. upon completion of the Offering.
VACATION OWNERSHIP PROGRAM
In September of 1997, the Company executed a letter of intent with Westerly
Resorts Group, Inc. regarding establishing a joint venture to market and sell
vacation ownership intervals ('VOIs'), popularly known as timeshares, in the
resort's hotel. The commitment to develop and market VOIs at the resort is
subject to the execution of definitive documentation.
CAPITAL RESOURCES
In addition to the borrowing capacity added by the Mascoma Bank line of
credit discussed above, the Company's current owners have set aside funds from
their personal assets in an amount they deem sufficient to fund the Company's
operations through at least June 30, 1998, or until successful completion of the
Offering or another source of capital can be secured.
F-12
<PAGE>
<PAGE>
SNOWDANCE, INC.
(FORMERLY ASCUTNEY MOUNTAIN RESORT, L.P. AND AFFILIATED ENTITIES -- SEE NOTE 1)
PRO FORMA FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997 (UNAUDITED)
The pro forma and as adjusted financial information has been prepared to
show the effect of the Hogback Acquisition, the conversion of a portion of the
Related Loans to a capital contribution to the Company, and the compensation
payable to Susan and Steven Plaustiner under employment agreements to be entered
into upon the closing of the Offering. The as adjusted financial information has
been prepared to show the effect of the closing of the Offering and application
of the estimated net proceeds therefrom.
The pro forma and as adjusted balance sheets of the Company have been
prepared as if the above transactions occurred on June 30, 1997. The pro forma
and as adjusted statements of operations for the year ended December 31, 1996
and the six months ended June 30, 1997, have been prepared as if the above
transactions occurred on January 1, 1996.
The pro forma and as adjusted financial information is based upon available
information and upon certain assumptions, as set forth in the notes to the pro
forma and as adjusted financial information, that management of the Company
believes are reasonable in the circumstances.
This pro forma and as adjusted information does not purport to represent
what the Company's financial position or results of operations would actually
have been if the above transactions had in fact occurred on such dates or at the
beginning of such periods or the Company's financial position or results of
operations for any future date or period.
F-13
<PAGE>
<PAGE>
SNOWDANCE, INC.
PRO FORMA AND AS ADJUSTED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
AS ADJUSTED
HISTORICAL PRO FORMA PRO FORMA OFFERING JUNE 30,
JUNE 30, 1997 ADJUSTMENTS JUNE 30, 1997 ADJUSTMENTS 1997
------------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash........................... $ 34,341 $ 34,341 $ 6,660,000(b) $ 5,814,341
(880,000)(c)
Accounts receivable -- net..... 91,225 91,225 91,225
Other receivables.............. 16,105 16,105 16,105
Inventories.................... 34,061 34,061 34,061
Prepaid expenses............... 44,103 44,103 44,103
------------- -------------- -----------
Total current assets...... 219,835 219,835 5,999,835
Property and equipment -- net....... 1,163,807 $ 5,000,000(a) 6,163,807 6,163,807
Deferred financing costs............ 72,662 72,662 72,662
Other assets........................ 59,623 59,623 59,623
------------- -------------- -----------
Total assets.............. $ 1,515,927 $ 6,515,927 $12,295,927
------------- -------------- -----------
------------- -------------- -----------
LIABILITIES AND OWNERS' DEFICIT
Current liabilities:
Accounts payable............... $ 320,763 $ 320,763 $ 320,763
Accrued expenses and other
liabilities.................. 98,321 98,321 98,321
Advanced deposits.............. 123,008 123,008 123,008
Current portion long term
debt......................... 218,086 218,086 (155,000)(c) 63,086
------------- -------------- -----------
Total current
liabilities............. 760,178 760,178 605,178
------------- -------------- -----------
Line of credit...................... 725,000 725,000 (725,000)(c) --
Loans payable....................... 527,672 527,672 527,672
Notes to related party......... 1,692,474 (1,180,567)(d) 511,907 511,907
------------- -------------- -----------
Total long term debt...... 2,945,146 1,764,579 1,039,579
------------- -------------- -----------
------------- -------------- -----------
Commitments and Contingencies:
Stockholders' equity (deficit)
Common stock $.001 par value... 2,500 625(a) 3,125 1,000(b) 4,125
Additional paid in capital..... 1,110,225 4,999,375(a) 7,290,167 6,659,000(b) 13,949,167
1,180,567(d)
Accumulated deficit............ (3,302,122) (3,302,122) (3,302,122)
------------- -------------- -----------
Total stockholders' equity
(deficit)............... (2,189,397) 3,991,170 10,651,170
------------- -------------- -----------
Total liabilities and stockholders'
equity (deficit).................. $ 1,515,927 $ 6,515,927 $12,295,927
------------- -------------- -----------
------------- -------------- -----------
</TABLE>
See notes to pro forma and as adjusted financial statements
F-14
<PAGE>
<PAGE>
SNOWDANCE, INC.
PRO FORMA AND AS ADJUSTED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA OFFERING AS ADJUSTED
DECEMBER 31, 1996 ADJUSTMENTS DECEMBER 31, 1996 ADJUSTMENTS DECEMBER 31, 1996
----------------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Lodging................... $ 1,695,845 $ 1,695,845 $ 1,695,845
Food and beverage......... 970,086 970,086 970,086
Ski and fitness........... 1,064,720 1,064,720 1,064,720
Other..................... 252,567 252,567 252,567
----------------- ----------------- -----------------
Total revenues....... 3,983,218 3,983,218 3,983,218
Cost of sales:
Lodging................... 827,620 $85,027(f) 912,647 912,647
Food and beverage......... 848,513 848,513 848,513
Ski and fitness........... 950,239 950,239 950,239
Other..................... 140,753 140,753 140,753
----------------- ----------------- -----------------
Total cost of
sales.............. 2,767,125 2,852,152 2,852,152
Operating expenses:
Administrative and
general................. 478,411 200,000(e) 678,411 678,411
Sales and marketing....... 592,732 592,732 592,732
Depreciation.............. 122,714 122,714 122,714
Heat, light and power..... 633,173 633,173 633,173
Insurance................. 145,842 145,842 145,842
Real estate and other
taxes................... 149,610 149,610 149,610
Repairs and maintenance... 370,756 370,756 370,756
----------------- ----------------- -----------------
Total operating
expenses........... 2,493,238 2,693,238 2,693,238
Net operating loss............. (1,277,145) (1,562,172) (1,562,172)
----------------- ----------------- -----------------
Other income (expense):
Interest income........... 2,174 2,174 2,174
Gain on sale of assets.... 18,115 18,115 18,115
Related party interest
expense................. (85,027) 85,027(f) -- --
Interest expense.......... (158,936) (158,936) $85,990(g) (72,946)
----------------- ----------------- -----------------
Total other
expenses........... (223,674) (138,647) (52,657)
----------------- ----------------- -----------------
Net loss....................... $(1,500,819) $(1,700,819) $(1,614,829)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Loss Per Share................. $ (.60) $ (.54) $ (.39)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Weighted Average Number of
Shares(h).................... 2,500,000 3,125,000 4,125,000
</TABLE>
See notes to pro forma and as adjusted financial statements.
F-15
<PAGE>
<PAGE>
SNOWDANCE, INC.
PRO FORMA AND AS ADJUSTED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
AS ADJUSTED
HISTORICAL PRO FORMA PRO FORMA OFFERING JUNE 30,
JUNE 30, 1997 ADJUSTMENTS JUNE 30, 1997 ADJUSTMENTS 1997
------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Lodging............................. $ 931,938 $ 931,938 931,938
Food and beverage................... 462,480 462,480 462,480
Ski and fitness..................... 870,114 870,114 870,114
Other............................... 100,793 100,793 100,793
------------- ------------- -----------
Total revenues................. 2,365,325 2,365,325 2,365,325
------------- ------------- -----------
------------- ------------- -----------
Cost of sales:
Lodging............................. 351,494 $49,164(f) 400,658 400,658
Food and beverage................... 372,331 372,331 372,331
Ski and fitness..................... 544,439 544,439 544,439
Other............................... 53,284 53,284 53,284
------------- ------------- -----------
Total cost of sales............ 1,321,548 1,370,712 1,370,712
------------- ------------- -----------
------------- ------------- -----------
Operating expenses:
Administrative and general.......... 262,839 40,000(e) 302,839 302,839
Sales and marketing................. 236,937 236,937 236,937
Depreciation........................ 62,254 62,254 62,254
Heat, light and power............... 335,830 335,830 335,830
Insurance........................... 64,893 64,893 64,893
Real estate and other taxes......... 46,113 46,113 46,113
Repairs and maintenance............. 127,382 127,382 127,382
------------- ------------- -----------
Total operating expenses....... 1,136,248 1,176,248 1,176,248
------------- ------------- -----------
Net operating loss....................... (92,471) (181,635) (181,635)
------------- ------------- -----------
------------- ------------- -----------
Other income (expense):
Interest income..................... 583 583 583
Gain on sale of assets.............. -- -- --
Related party interest expense...... (49,164) 49,164(f) -- --
Interest expense.................... (59,415) (59,415) $45,599(g) (13,816)
------------- ------------- -----------
Total other expenses........... (107,996) (58,832) (13,233)
------------- ------------- -----------
Net Loss................................. $ (200,467) $ (240,467) $ (194,868)
------------- ------------- -----------
------------- ------------- -----------
Loss per share........................... (.08) (.08) (.05)
Weighted average number of shares(h)..... 2,500,000 3,125,000 4,125,000
</TABLE>
See notes to pro forma and as adjusted financial statements.
F-16
<PAGE>
<PAGE>
SNOWDANCE, INC.
NOTES TO PRO FORMA AND AS ADJUSTED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1996
(a) Reflects the acquisition of the Hogback assets through the issuance of
625,000 shares of common stock, par value $.001 per share, with a fair
value of $8 per share.
(b) Reflects the closing of the Offering and the application of the net
proceeds thereof. The Offering is assumed to include the issuance of
1,000,000 shares of common stock, par value $.001 per share, for $8 per
share, and offering expenses of $1,340,000 resulting in net proceeds to the
Company of $6,660,000.
(c) Reflects the assumed repayment of the balance outstanding on the Company's
line of credit as of June 30, 1997, $880,000, using a portion of the net
proceeds from the Offering.
(d) Reflects the conversion of $1,180,567 of the Related Loans to additional
paid-in capital of the Company.
(e) Reflects the accrual of compensation payable to Steven and Susan
Plausteiner under employment agreements to be entered into upon closing of
the Offering. Such agreements will provide for annual compensation of
$100,000 to each person. The June 30, 1997 adjustment reflects the
difference between the amount due under the employment agreements and the
amount recorded as compensation for those individuals in the historical
financial statements.
(f) Reflects the effect of the planned lease by the Company of the 17
Mountain's Edge condominium units from Steven and Susan Plausteiner.
For purposes of the pro forma financial information, it is assumed that
the lease expense would have been equivalent to the interest expense paid
on the Related Loans contributed to capital, so this adjustment
reclassifies the related party interest expense to leasing expense,
included in lodging cost of sales.
(g) Reflects the elimination of interest expense on the line of credit for the
applicable period. The line of credit is assumed to have been repaid as of
January 1, 1996, using a portion of the proceeds from the Offering as
described in (c) above.
(h) Historical loss per share is computed using 2,500,000 shares; pro forma
loss per share is computed using 3,125,000 weighted average common shares
outstanding; as adjusted loss per share is computed using 4,125,000
weighted average common shares outstanding.
F-17
<PAGE>
<PAGE>
_______________________________ _______________________________
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF ANY OFFER TO BUY COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................................................................... 3
Summary Financial Data................................................................................................. 6
Risk Factors........................................................................................................... 7
Use of Proceeds........................................................................................................ 14
Dilution............................................................................................................... 14
Dividend Policy........................................................................................................ 15
Capitalization......................................................................................................... 15
Selected Financial Data................................................................................................ 16
Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 17
Business............................................................................................................... 19
Management............................................................................................................. 32
Certain Transactions................................................................................................... 36
Principal and Selling Stockholders..................................................................................... 37
Description of Capital Stock........................................................................................... 38
Shares Elegible for Future Sale........................................................................................ 40
Underwriting........................................................................................................... 41
Legal Matters.......................................................................................................... 43
Experts................................................................................................................ 43
Available Information.................................................................................................. 43
Index to Financial Statements.......................................................................................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,000,000 SHARES
SNOWDANCE, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
JOSEPHTHAL LYON & ROSS
INCORPORATED
CRUTTENDEN ROTH
INCORPORATED
, 1997
_______________________________ _______________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ('DGCL'), inter alia,
empowers a Delaware corporation to indemnify any person 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 such person is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of any such threatened, pending or completed action or suit by or
in the right of the corporation if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and provided further that (unless a court of competent
jurisdiction otherwise provides) such person shall not have been adjudged liable
to the corporation. Any such indemnification shall be made by the corporation
only as authorized in each specific case upon a determination by the
shareholders or disinterested directors or by independent legal counsel in a
written opinion that indemnification is proper in the circumstances because the
indemnitee has met the applicable standard of conduct. The Certificate of
Incorporation of the Company provides that directors and officers shall be
indemnified as described above in this paragraph to the fullest extent permitted
by the DGCL; provided, however, that any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person shall be
indemnified only if such proceeding (or part thereof) was authorized by the
board of directors of the Company.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under Section 145.
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by the DGCL, no director of the Company shall be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. Section 102(b)(7) of the DGCL currently provides
that such provisions do not eliminate or limit the liability of a director (i)
for a breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (relating to the declaration of dividends and purchase or redemption of
shares in violation of the DGCL), or (iv) for any transaction from which the
director derived an improper personal benefit. Reference is made to the
Company's Certificate of Incorporation and By-Laws filed as Exhibits 3.1 and 3.2
hereto, respectively.
The Company expects to maintain directors' and officers' liability
insurance policies covering certain liabilities of persons serving as officers
and directors and providing reimbursement to the Company for its indemnification
of such persons.
Pursuant to the Underwriting Agreement to be entered into among the Company
and the Underwriters, officers and directors of the Company are indemnified for
certain liabilities, including liabilities incurred under the Securities Act of
1933, as amended.
II-1
<PAGE>
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts and the non-accountable expense allowance) expected to be
incurred in connection with the Offering described in this Registration
Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................................................... $ 3,463
NASD Examination Fee.................................................................................. $ 1,643
Nasdaq SmallCap Listing Fee........................................................................... $ 9,125
Pacific Exchange Listing Fee.......................................................................... $ 20,500
Accounting Fees and Expenses.......................................................................... $125,000
Printing and Engraving Expenses....................................................................... $ 75,000
Legal Fees and Expenses............................................................................... $300,000
Blue Sky Fees and Expenses............................................................................ $ 25,000
Transfer Agent Fees................................................................................... $ 10,000
Miscellaneous......................................................................................... $ 10,269
--------
Total............................................................................................ $580,000
</TABLE>
The foregoing items, except for the Securities and Exchange Commission and
NASD fees, are estimated. All expenses will be borne by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Company has issued the following securities that were not registered under the
Securities Act:
(a) Immediately prior to the closing of the Offering, all of the
partnership interests in each of the Limited Partnerships will be exchanged
for 2,500,000 shares of Common Stock of Snowdance, Inc. (the 'Combination
Transaction'). Each of the Limited Partnerships has a corporate general
partner which has a 1% interest in the Limited Partnership of which it is
general partner. All of the issued and outstanding shares in each of the
corporate general partners are owned by Susan D. Plausteiner. All other
interests in the Limited Partnerships are owned by Steven H. Plausteiner or
Susan D. Plausteiner. As a result of the Combination Transaction,
immediately prior to the closing of this Offering, all of the outstanding
shares in Snowdance, Inc. will be owned by Steven H. Plausteiner and Susan
D. Plausteiner. It is expected that the Combination Transaction will be
treated as an Internal Revenue Code Section 351 transaction and be tax free
to the Company and the Limited Partnerships. In addition, immediately prior
to the Closing of this Offering, Steven H. Plausteiner and Susan D.
Plausteiner will contribute all of the outstanding shares of capital stock
of Foods to Snowdance, Inc. as a capital contribution and Foods will become
a wholly-owned subsidiary of Snowdance, Inc. As part of the Combination
Transaction, the Company will receive an ownership interest in 3/4 of 1
condominium unit which was previously owned by Ascutney Mountain Resort
Realty, L.P.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
1.1 -- Proposed Form of Underwriting Agreement.
1.2 -- Proposed Form of Qualified Independent Underwriter Agreement
3.1** -- Certificate of Incorporation of the Company
3.2** -- By-Laws of the Company.
4.1* -- Form of specimen certificate representing the Company's Common Stock.
4.2** -- Form of Representative's Warrant Agreement including Form of Representative's Warrant.
5.1* -- Opinion of Sonnenschein Nath & Rosenthal.
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.1** --Loan and Security Agreement, dated June 30, 1997, among Ascutney Mountain Resort, L.P., Ascutney
Mountain Resort Hotel, L.P., Steven H. Plausteiner, Susan D. Plausteiner and Mascoma Savings Bank, fsb.
10.2** --Loan Agreement, dated May 6, 1994, among Ascutney Mountain Resort, L.P., Ascutney Mountain Resort
Hotel, L.P., and the Vermont Economic Development Authority.
10.3** --Loan and Security Agreement, dated November 3, 1994, among the Town of West Windsor, Vermont, Ascutney
Mountain Resort, L.P. and Ascutney Mountain Resort Hotel, L.P.
10.4** --Draft Purchase and Sale Agreement, dated as of August , 1997, by and between the Company and Skyline
Partners, L.P.
10.5 --Form of Lock-up Agreement.
10.6* --Form of Condominium Lease Agreement, dated as of , 1997, among the Company, Steven Plausteiner
and Susan Plausteiner.
10.7* --Form of Employment Agreement between the Company and Steven H. Plausteiner.
10.8* --Form of Employment Agreement between the Company and Susan D. Plausteiner.
10.9 --Form of 1997 Stock Option Plan for Non-Employee Directors.
10.10** --Form of Exchange Agreement among Ascutney Mountain Resort, L.P., Ascutney Mountain Resort Hotel, L.P.,
Ascutney Mountain Resort Realty, L.P. and the Company.
10.11* --Agreement, dated as of September , 1997, between Steven H. Plausteiner, Susan D. Plausteiner and the
Company.
10.12 --Form of Letter of Intent dated September 26, 1997, between the Company and Westerly Resorts Group, Inc.
23.1 --Consent of Deloitte & Touche LLP.
23.2* --Consent of Sonnenschein Nath & Rosenthal (to be included in Exhibit 5.1).
23.3 --Form of Consent of Messrs. Purjes, Lunde and Deutsch, Director Nominees.
24.1** --Powers of Attorney.
27.1 --Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes:
(a) That it will:
(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
'Calculation of Registration Fee' table in the effective registration
statement; and
(iii) include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat such
post-effective amendment as a new registration statement of the Securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
II-3
<PAGE>
<PAGE>
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) That it will provide to the Representative at the closing specified in
the Underwriting Agreement certificates in such denominations and registered in
such names as required by the Representative to permit prompt delivery to each
purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
liabilities under the Securities Act (other than the payment by the Company of
expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
Securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) That it will:
(1) For purposes of determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company under Rules
424(b)(1), or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at the time as
the initial bona fide offering of those Securities.
II-4
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form SB-2 and has authorized this Amendment No. 1
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Brownsville, State of Vermont, on this 30th day
of September, 1997.
SNOWDANCE, INC.
By: /s/ STEVEN H. PLAUSTEINER
...................................
STEVEN H. PLAUSTEINER
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ STEVEN H. PLAUSTEINER Chief Executive Officer and Director September 30, 1997
......................................... (Principal Executive Officer)
(STEVEN H. PLAUSTEINER)
/S/ SUSAN D. PLAUSTEINER Chief Financial Officer and Director September 30, 1997
......................................... (Principal Financial and Accounting
(SUSAN D. PLAUSTEINER) Officer)
* Chief Operating Officer and Director September 30, 1997
.........................................
(DUSAN PLAUSTEINER)
/s/ STEVEN H. PLAUSTEINER
.........................................
STEVEN H. PLAUSTEINER
AS ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 --Proposed Form of Underwriting Agreement...................................................
1.2 --Proposed Form of Qualified Independent Underwriter Agreement..............................
3.1** --Certificate of Incorporation of the Company...............................................
3.2** --By-Laws of the Company....................................................................
4.1* --Form of specimen certificate representing the Company's Common Stock......................
4.2** --Form of Representative's Warrant Agreement including Form of Representative's Warrant.....
5.1* --Opinion of Sonnenschein Nath & Rosenthal..................................................
10.1** --Loan and Security Agreement, dated June 30, 1997, among Ascutney Mountain Resort, L.P.,
Ascutney Mountain Resort Hotel, L.P., Steven H. Plausteiner, Susan D. Plausteiner and
Mascoma Savings Bank, fsb..................................................................
10.2** --Loan Agreement, dated May 6, 1994, among Ascutney Mountain Resort, L.P., Ascutney Mountain
Resort Hotel, L.P., and the Vermont Economic Development Authority.........................
10.3** --Loan and Security Agreement, dated November 3, 1994, among the Town of West Windsor,
Vermont, Ascutney Mountain Resort, L.P. and Ascutney Mountain Resort Hotel, L.P............
10.4** --Draft Purchase and Sale Agreement, dated as of August , 1997, by and between the Company
and Skyline Partners, L.P..................................................................
10.5 --Form of Lock-up Agreement..................................................................
10.6* --Form of Condominium Lease Agreement, dated as of , 1997, among the Company,
Steven Plausteiner and Susan Plausteiner...................................................
10.7* --Form of Employment Agreement between the Company and Steven H. Plausteiner.................
10.8* --Form of Employment Agreement between the Company and Susan D. Plausteiner..................
10.9 --Form of 1997 Stock Option Plan for Non-Employee Directors..................................
10.10** --Form of Exchange Agreement among Ascutney Mountain Resort, L.P., Ascutney Mountain Resort
Hotel, L.P., Ascutney Mountain Resort Realty, L.P. and the Company.........................
10.11* --Agreement, dated as of September , 1997 between Steven H. Plausteiner, Susan D.
Plausteiner and the Company.
10.12 --Form of Letter of Intent, dated September 26, 1997, between the Company and Westerly
Resorts Group, Inc.
23.1 --Consent of Deloitte & Touche LLP...........................................................
23.2* --Consent of Sonnenschein Nath & Rosenthal (to be included in Exhibit 5.1)...................
23.3 --Form of Consent of Director Nominee........................................................
24.1** --Powers of Attorney.........................................................................
27.1 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
<PAGE>
GRAPHIC APPENDIX
Front Cover -- Color silhouette of Mt. Ascutney
Inside Front Cover -- Color montage of Skiers and Resort
Inside Back Cover -- Color montage of Resort during non-winter months
Outside Back Cover -- Color silhouette panaroma of Mt. Ascutney with Skiers
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as .............'tm'
<PAGE>
<PAGE>
OH&S DRAFT
[Form of Underwriting Agreement - Subject to Additional Review]
1,000,000 SHARES OF COMMON STOCK
SNOWDANCE, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1997
JOSEPHTHAL LYON & ROSS INCORPORATED
CRUTTENDEN ROTH INCORPORATED
As Representatives of the
Several Underwriters listed on Schedule A hereto
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Floor
New York, New York 10166
Ladies and Gentlemen:
Snowdance, Inc., a Delaware corporation (the "Company")
confirms its agreement with Josephthal Lyon & Ross Incorporated ("Josephthal"),
Cruttenden Roth Incorporated ("Cruttenden") and each of the underwriters named
in Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 12), for
whom Josephthal and Cruttenden are acting as representatives (in such capacity,
Josephthal and Cruttenden each shall hereinafter sometimes be referred to as a
Representative and collectively as "you" or the "Representatives"), with respect
to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of the Company's
common stock, $.001 par value per share ("Common Stock"), set forth in Schedule
A hereto. Such shares of Common Stock are hereinafter referred to as the "Firm
Shares."
Upon your request, as provided in Section 3(b) of this
Agreement, Skyline Partners, L.P., Steven H. Plausteiner and Susan D.
Plausteiner (individually a "Selling Stockholder" and collectively, the "Selling
Stockholders") shall sell to the Underwriters, acting severally and not jointly,
up to an additional 150,000 shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Shares"). The Firm Shares and the Option
Shares are sometimes hereinafter referred to as the "Shares." The Company also
proposes to issue and sell to you warrants (the "Representatives' Warrants")
pursuant to the Representatives'
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Warrant Agreement (the "Representatives' Warrant Agreement") for the purchase of
an additional 100,000 shares of Common Stock. The shares of Common Stock
issuable upon exercise of the Representatives' Warrants are hereinafter referred
to as the "Representatives' Shares." The Firm Shares, the Option Shares, the
Representatives' Warrants and the Representatives' Shares (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333-33369), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Shares and the Option Shares under the Securities Act
of 1933, as amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the rules and regulations (the "Regulations") of the Commission
under the Act. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriters, and
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations)), is
hereinafter called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus or any part
of any thereof and no proceedings for a stop order suspending the effectiveness
of the Registration Statement or any of the Company's securities have been
instituted or are pending or to the Company's knowledge, threatened. Each of the
Preliminary Prospectus, the Registration Statement and the Prospectus at the
time of filing thereof conformed with the requirements of the Act and the Rules
and Regulations, and none of the Preliminary Prospectus, Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in conformity
with written information
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furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date and each Option
Closing Date, if any, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and will conform to the requirements of the Act
and the Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of any Underwriter expressly for use
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. Except as described in the Prospectus, the Company does not own
an interest in any corporation, partnership, trust, joint venture or other
business entity. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing. The Company has all requisite corporate power and authority, and
the Company has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the Prospectus;
the Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state and local laws, rules and regulations; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, position, prospects,
value, operation, properties, business or results of operations of the Company.
The disclosures in the Registration Statement concerning the effects of federal,
state and local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material respects and
do not omit to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to
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issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Representatives' Warrant Agreement and as described in
the Prospectus. The Securities and all other securities issued or issuable by
the Company conform or, when issued and paid for, will conform, in all respects
to all statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable
and the holders thereof have no rights of rescission with respect thereto, and
are not subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company. The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the
description thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale of the Securities has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the Underwriters
or the Representatives, as the case may be, will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
(f) The financial statements, including the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and the results
of operations of the Company at the respective dates and for the respective
periods to which they apply and the pro forma financial information included in
the Registration Statement and Prospectus presents fairly, on a basis consistent
with that of the audited financial statements included therein, what the
Company's pro forma capitalization would have been for the respective periods
and as of the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. There has
been no adverse change or development involving a material prospective change in
the condition, financial or otherwise, or in the earnings, position, prospects,
value, operation, properties, business, or results of operations of the Company
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus,
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Summary Financial
Data," "Selected Financial Data," "Capitalization," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," fairly present,
on the basis stated in the Prospectus, the information set forth therein, have
been derived from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus.
(g) The Company (i) has paid all federal, state,
local, and foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under
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Chapters 21 through 24 of the Internal Revenue Code of 1986 (the "Code"), and
has furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax
is payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Securities, (ii) the purchase by the Underwriters
of the Securities from the Company and the purchase by the Representatives of
the Representatives' Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement or the Representatives'
Warrant Agreement, or (iv) resales of the Shares in connection with the
distribution contemplated hereby.
(i) The Company maintains insurance policies,
including, but not limited to, general liability and property insurance, which
insures the Company and its employees, against such losses and risks generally
insured against by comparable businesses. The Company (A) has not failed to give
notice or present any insurance claim with respect to any matter, including but
not limited to the Company's business, property or employees, under the
insurance policy or surety bond in a due and timely manner, (B) does not have
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has not failed to pay any premiums due and payable thereunder,
or (C) has not failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or business of, the
Company which (i) questions the validity of the capital stock of the Company,
this Agreement or the Representatives' Warrant Agreement or of any action taken
or to be taken by the Company pursuant to or in connection with this Agreement
or the Representatives' Warrant Agreement, (ii) is required to be disclosed in
the Registration Statement which is not so disclosed (and such proceedings as
are summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and
authority to authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Representatives' Warrant Agreement and to consummate the
transactions provided for in such agreements; and this Agreement and the
Representatives' Warrant Agreement have each been duly and properly authorized,
executed and delivered by the Company. Each of this Agreement and the
Representatives' Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provisions may be limited under applicable
laws or the
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public policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representatives'
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the terms of, (i)
the certificate of incorporation or by-laws of the Company, (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties.
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required for the
issuance of the Shares pursuant to the Prospectus and the Registration
Statement, the issuance of the Representatives' Warrants, the performance of
this Agreement and the Representatives' Warrant Agreement and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Shares, or the Representatives' Warrants,
except such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Shares, and the Representatives' Warrants to be
sold by the Company hereunder.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which any of its assets, properties or business may
be subject have been duly and validly authorized, executed and delivered by the
Company, and constitute the legal, valid and binding agreements of the Company,
enforceable against the Company, in accordance with their respective terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto on Form SB-2, and there
are no contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required, and the exhibits which
have been filed are in all material respects complete and correct copies of the
documents of which they purport to be copies.
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(n) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock, or
any material change in the debt (long or short term) or liabilities or material
adverse change in or affecting the general affairs, management, financial
operations, stockholders' equity or results of operations of the Company.
(o) No default exists in the due performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which the property or assets (tangible or intangible) of the Company is
subject or affected.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. There are no pending investigations involving the Company by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or is imminent.
(q) Except as described in the Prospectus, the Company
does not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all reporting, disclosure and other requirements of
the Code and ERISA as they relate to any such ERISA Plan. Determination letters
have been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating that such
ERISA
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Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(r) Neither the Company nor any of its employees,
directors, stockholders, partners, or affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus,
none of the patents, patent applications, trademarks, service marks, trade names
and copyrights, and licenses and rights to the foregoing presently owned or held
by the Company are in dispute so far as known by the Company or are in any
conflict with the right of any other person or entity. The Company (i) owns or
has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (ii) is not obligated or under any liability
whatsoever to make any payment by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service mark,
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise.
(t) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus, to be owned or leased by it free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects,
or other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
(u) Deloitte & Touche LLP ("D&T") whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the Rules
and Regulations.
(v) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all of the holders of the
Common Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock have executed an agreement
(individually, a "Lock-Up Agreement," collectively, the "Lock-Up Agreements")
pursuant to which each such person has agreed not to, directly or indirectly,
offer to sell, sell, grant any option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein for a period of not less than nine
(9) months following the effective date of the Registration Statement without
the prior written consent of Josephthal.
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The Company will cause the Transfer Agent, as defined below, to mark an
appropriate legend on the face of stock certificates representing all of such
securities and to place "stop transfer" orders on the Company's stock ledgers.
(w) Except as described in the Prospectus under
"Underwriting," there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of its officers, directors, stockholders,
partners, employees or affiliates that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(x) The Common Stock has been approved for quotation
on the Nasdaq Small Cap Market ("Nasdaq") and the Pacific Exchange ("PE").
(y) Neither the Company nor any of its officers,
employees, agents, or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company,
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions, between or
among the Company and any officer, director, or Principal Stockholder (as such
term is defined in the Prospectus) of the Company or any partner, affiliate or
associate of any of the foregoing persons or entities.
(bb) Any certificate signed by any officer of the
Company, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a
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representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(cc) The minute books of the Company have been made
available to the Underwriters and contains a complete summary of all meetings
and actions of the directors, stockholders, audit committee, compensation
committee and any other committee of the Board of Directors of the Company,
respectively, since the time of its incorporation, and reflects all transactions
referred to in such minutes accurately in all material respects.
(dd) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company.
(ee) The Company has as of the effective date of the
Registration Statement (i) entered into an employment agreement with each of
[Steven H. Plausteiner and Susan D. Plausteiner], in the form filed as Exhibits
____, ___, ___, and ____, respectively, to the Registration Statement and (ii)
purchased term key-man insurance on the life of [Steven H. Plausteiner and Susan
D. Plausteiner] in the amount of $1,000,000 each, which policies name the
Company as the sole beneficiary thereof.
(ff) As of the date hereof, the Company has effected:
(i) the reorganization pursuant to which all of the partnership interests in
Ascutney Mountain Resort Hotel, L.P., Ascutney Mountain Resort, L.P. and
Ascutney Mountain Resort Realty (collectively, the "Limited Partnerships") will
be exchanged for an aggregate 2,000,000 shares of Common Stock of the Company
(the "Combination Transaction"). The Combination Transactions has been duly and
validly authorized by the Company, and all certificates, agreements, contracts,
minutes or other documents necessary to effect the Combination Transaction
(collectively, the "Combination Transaction Documents") have been duly and
validly authorized, executed and delivered and, if necessary, filed with the
appropriate regulatory body, government agency or other body, domestic or
foreign, by the appropriate parties, and constitute the legal, valid and binding
agreements of such parties, enforceable against each of them in accordance with
their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the execution or delivery of any of the Combination
Transaction Documents by the parties thereto, the performance by the Company
hereunder or by the Company and the Limited Partnerships thereunder, or
consummation of the transactions contemplated herein or therein, conflicts with
or will conflict with or results or will result in any breach or violation of
the terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the Company
pursuant to the terms of, (A) the certificate of incorporation or by-laws of the
Company, (B) any license, contract, collective
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bargaining agreement, indenture, mortgage, deed of trust, lease, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which it is or may
be bound or to which its respective properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (C) any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties. The
Combination Transaction Documents effectively convey to the Company all right,
title and interest to the business of the Company as described in the
Prospectus; and the descriptions in the Registration Statement of the
Reorganization are accurate and fairly present the information required to be
shown with respect thereto by Form SB-2.
2. Representations and Warranties of the Selling Stockholders.
Each of the Selling Stockholders represents and warrants to,
and agrees with, the Underwriters as of the date hereof, and as of the Option
Closing Date, if any, with respect to such Selling Stockholders respective
Option Shares as follows:
(a) Such Selling Stockholder has now and will have on
each Option Closing Date, if any, good and valid title to the Option Shares free
and clear of any lien, charge, claim, encumbrance, pledge, security interest,
stockholders' agreement, voting trust, community property right, defect in
title, equitable interest or other equities or restrictions of any kind
whatsoever (including any liability for estate or inheritance taxes and claims
of any creditor, devisee, legatee or beneficiary); other than as described in
this Agreement or disclosed in the Registration Statement or Prospectus, there
are no outstanding options, warrants, rights or other agreements or arrangements
with respect to any of the Option Shares; the Selling Stockholder has and will
have on each Option Closing Date, if any, full right, power and authority to
sell, transfer and deliver the Option Shares hereunder; and upon delivery of the
Option Shares against payment of the purchase price therefor as contemplated in
this Agreement, each of the Underwriters, who has purchased in good faith and
without notice of any adverse claim, will receive good and marketable title to
the Option Shares purchased by it, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, stockholders' agreement, voting trust,
community property right, defect in title, equitable interests or other equities
or restrictions of any kind whatsoever (including any liability for estate or
inheritance taxes and claims of any creditor, devisee, legatee or beneficiary).
(b) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the forms theretofore furnished by the
Representatives, a Stock Power (the "Stock Power") a Power of Attorney (the
"Power of Attorney") and a Letter of Transmittal and a Custody Agreement (the
"Custody Agreement"); each of the Custody Agreement and the Seller Lock-Up
Agreement constitutes a legal, valid and binding agreement of the Selling
Stockholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
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(c) All authorizations, approvals, consents and orders
necessary for the execution and delivery by such Selling Stockholder of this
Agreement, the Custody Agreement and the Seller Lock-Up Agreement and the sale
and delivery of the Option Shares hereunder (other than such authorizations,
approvals, orders or consents as may be necessary under federal or state
securities laws) have been obtained and are in full force and effect; and such
Selling Stockholder has full right, power and authority to enter into and
perform its obligations under this Agreement, the Custody Agreement, the Stock
Power, the Power of Attorney and the Seller Lock-Up Agreement.
(d) Such Selling Stockholder has not distributed and
will not distribute any prospectus or other offering material in connection with
the distribution of the Securities.
(e) This Agreement has been duly authorized (if
applicable), executed and delivered by such Selling Stockholder and is a legal,
valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except (i) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting creditors' rights
generally, (ii) as enforceability of any indemnification or contribution
provisions may be limited under applicable laws or the public policies
underlying such laws and (iii) that the remedies of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings may be
brought. The execution, delivery and performance of this Agreement, the Custody
Agreement and the Seller Lock-Up Agreement and the consummation of the
transactions contemplated hereby and thereby by such Selling Stockholder has not
conflicted and will not conflict with and has not resulted and will not result
in a breach of or default under (i) any will, license, contract, indenture,
mortgage, lease, deed of trust, voting trust agreement, bond, debenture,
stockholders' agreement, note, loan or credit agreement or other agreement or
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder is or may be bound or to which any of its properties (including the
Option Shares) is or may be subject, or any indebtedness, or (ii) any statute,
judgment, decree, order, rule or regulation applicable to such Selling
Stockholder of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body, domestic or foreign, having jurisdiction
over such Selling Stockholder or any of such Selling Stockholder's activities or
properties (including the Option Shares), except for conflicts, breaches and
defaults which will not adversely affect the consummation by such Selling
Stockholder of the transactions contemplated hereby.
(f) The sale of the Option Shares hereunder is not
prompted by any information concerning the Company or any of the Subsidiaries
which is material and adverse to the Company and the Subsidiaries taken as a
whole and which is not set forth in the Prospectus; the information relating to
such Selling Stockholder, the transactions between such Selling Stockholder or
its employees, agents or affiliates, if any, and the Company or any of the
Subsidiaries and all securities of the Company or any of the subsidiaries owned
by such Selling Stockholder (collectively, "Seller Information") set forth in
the Registration Statement and the Prospectus, as so amended or supplemented,
does not and at the Closing Date and each Option Closing Date, if any, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; all information furnished by or on behalf of such Selling
Stockholder in writing for
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use in each Preliminary Prospectus, the Registration Statement and the
Prospectus, or any amendment or supplement thereto, is and at the Closing Date
and each Option Closing Date, if any, will be true, correct and complete in all
material respects; and there are not now and will not be at the Closing Date and
each Option Closing Date, if any, any agreements, contracts or other documents
or instruments providing for indemnification, contribution or reimbursement to
such Selling Stockholder or its employees, agents, or affiliates, if any, (as
defined in Section 8) by the Company or any of the Subsidiaries with respect to
the offer or sale of the Option Shares or the distribution contemplated hereby
(other than those provisions of the By-Laws or the Certificate of Incorporation,
as amended, of the Company relating to the indemnification of directors of the
Company in their capacity as such).
(g) Nothing material has come to the attention of such
Selling Stockholder to cause such Selling Stockholder to believe that the
Company's representations and warranties contained in this Agreement are
inaccurate in any material respect.
(h) There is not pending or, to the knowledge of such
Selling Stockholder, threatened against such Selling Stockholder or involving
its properties or activities any material action, inquiry, investigation, suit
or proceeding (and, to the knowledge of such Selling Stockholder, there are no
circumstances that would be expected to give rise to the same) which (i)
questions the validity of this Agreement, the Custody Agreement, the Stock
Power, the Power of Attorney, the Seller Lock-Up Agreement or any action taken
or to be taken by such Selling Stockholder in connection herewith or therewith,
(ii) has or reasonably would be expected to materially adversely affect the
Company which is not disclosed in the Prospectus or (iii) reasonably would be
expected to adversely affect the consummation by such Selling Stockholder of the
transactions contemplated hereby or thereby.
(i) Except as and to the extent disclosed in the
Registration Statement or the Prospectus, such Selling Stockholder does not have
any registration rights, rights of first refusal, co-sale rights, preemptive
rights or other similar rights with respect to any securities of the Company;
such Selling Stockholder has waived all of those rights which it may have with
respect to the Option Shares and the transactions contemplated hereby; and such
Selling Stockholder does not have any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those disclosed in the Registration Statement or the Prospectus.
(j) Such Selling Stockholder has not since the initial
filing of the Registration Statement with the Commission (i) sold, bid for,
purchased, attempted to induce any person to purchase or paid anyone any
compensation for soliciting purchases of any securities of the Company or (ii)
paid or agreed to pay to any person any compensation for soliciting another
person or entity to purchase any securities of the Company (in each case, except
for the sale of the Option Shares to the Underwriters hereunder and except as
permitted by federal and state securities laws).
(k) Such Selling Stockholder has not taken and will
not take, directly or indirectly, any action which is designed to or which has
constituted or which might
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reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of the Company to facilitate the distribution of the
Securities.
(l) Any certificate signed by or on behalf of such
Selling Stockholder and delivered to the Underwriters or Underwriters' Counsel
shall be deemed a representation and warranty by such Selling Stockholder to the
Underwriters or Underwriters' Counsel as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities and
Representatives' Warrants.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter, and
each Underwriter, severally and not jointly, agrees to purchase from the Company
at a price of $_______ [93% of the initial public offering price] per share of
Common Stock, that number of Firm Shares set forth in Schedule A opposite the
name of such Underwriter, plus any additional number of Firm Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 12 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, each Selling Stockholder hereby grants an
option to the Underwriters, severally and not jointly, to purchase all or any
part of an additional 150,000 shares of Common Stock at a price of $____ [93% of
the initial public offering price] per share of Common Stock. The option granted
hereby will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Shares upon notice by the Representatives to the
Company and the Selling Stockholders setting forth the number of Option Shares
as to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for any such Option Shares. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representatives, the
Company and the Selling Stockholders. Nothing herein contained shall obligate
the Underwriters to make any over-allotments. No Option Shares shall be
delivered unless the Firm Shares shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of Josephthal
Lyon & Ross Incorporated at 200 Park Avenue, 24th Floor, New York, New York
10166, or at such other place as shall be agreed upon by the Representatives and
the Company. Such delivery and payment shall be made at 10:00 a.m. (New York
City time) on _______________, 1997 or at such other time and date as shall be
agreed upon by the Representatives and the Company, but not less than three (3)
nor more than seven (7) full business days after the effective date of the
Registration Statement (such time
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and date of payment and delivery being herein called "Closing Date"). In
addition, in the event that any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Shares shall be made at the above mentioned office of the
Representatives or at such other place as shall be agreed upon by the
Representatives, the Company and the Selling Stockholders on each Option Closing
Date as specified in the notice from the Representatives to the Company.
Delivery of the certificates for the Firm Shares and to the order of the Selling
Stockholders for the Option Shares, if any, shall be made to the Underwriters
against payment by the Underwriters, severally and not jointly, of the purchase
price for the Firm Shares and to the order of the Selling Stockholders for the
Option Shares, if any, to the order of the Company for the Firm Shares and the
Option Shares, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Shares then being
purchased which the number of Firm Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Firm Shares,
subject in each case to such adjustments as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Firm Shares and the Option Shares, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least two (2) business days prior to the Closing Date or
the relevant Option Closing Date, as the case may be. The certificates for the
Firm Shares and the Option Shares, if any, shall be made available to the
Representatives at such office or such other place as the Representatives may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and
sell to the Representatives, Representatives' Warrants at a purchase price of
$.001 per warrant, which warrants shall entitle the holders thereof to purchase
an aggregate of 100,000 shares of Common Stock. The Representatives' Warrants
shall be exercisable for a period of four years commencing one year from the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) of the initial public offering price of the shares of
Common Stock. The Representatives' Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit 4.3 to the
Registration Statement. Payment for the Representatives' Warrants shall be made
on the Closing Date.
4. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representatives deem advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representatives may from time to time increase or
decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representatives, in their discretion deem
advisable. The Underwriters may enter into one of more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
5. Covenants and Agreements of the Company and the Selling
Stockholders.
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(a) The Company covenants and agrees with each of the
Underwriters as follows:
i) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representatives shall not previously have been
advised and furnished with a copy, or to which the Representatives shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
ii) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representatives and confirm the
notice in writing, (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission
authority shall enter a stop order or suspend such qualification at any time,
the Company will make every effort to obtain promptly the lifting of such order.
iii) The Company shall file the Prospectus (in form
and substance satisfactory to the Representatives) or transmit the Prospectus by
a means reasonably calculated to result in filing with the Commission pursuant
to Rule 424(b)(1) (or, if applicable and if consented to by the Representatives,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifteenth business day after the effective date
of the Registration Statement.
iv) The Company will give the Representatives notice
of its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representatives with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not
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file any such prospectus to which the Representatives or Orrick, Herrington &
Sutcliffe LLP ("Underwriters' Counsel"), shall object.
v) The Company shall endeavor in good faith, in
cooperation with the Representatives, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Representatives may
designate to permit the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representatives agrees that such action
is not at the time necessary or advisable, use all reasonable efforts to file
and make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
vi) During the time when a prospectus is required to
be delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act and the Exchange Act, as
now and hereafter amended and by the Rules and Regulations, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and the Prospectus,
or any amendments or supplements thereto. If at any time when a prospectus
relating to the Securities or the Representatives' Shares is required to be
delivered under the Act, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, 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, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Representatives
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be satisfactory to Underwriters' Counsel, and the Company will
furnish to the Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may request.
vii) As soon as practicable, but in any event not
later than 45 days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (90 days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Representatives, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
viii) During a period of seven years after the date
hereof, the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial
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statements audited by independent public accountants) and unaudited quarterly
reports of earnings, and will deliver to the Representatives:
a) concurrently with furnishing such quarterly reports
to its stockholders, statements of income of the Company for
each quarter in the form furnished to the Company's
stockholders and certified by the Company's principal
financial or accounting officer;
b) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end
of the preceding fiscal year, together with statements of
operations, stockholders' equity, and cash flows of the
Company for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public
accountants;
c) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
d) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the NASD or any securities exchange;
e) every press release and every material news item or
article of interest to the financial community in respect of
the Company, or its affairs which was released or prepared by
or on behalf of the Company; and
f) any additional information of a public nature
concerning the Company (and any future subsidiary) or its
businesses which the Representatives may request.
During such seven-year period, if the Company has an active
subsidiary, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
ix) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
x) The Company will furnish to the Representatives or
on the Representatives' order, without charge, at such place as the
Representatives may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Representatives may request.
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xi) On or before the effective date of the
Registration Statement, the Company shall provide the Representatives with true
copies of duly executed, legally binding and enforceable agreements pursuant to
which for a period of 9 months from the effective date of the Registration
Statement, the holders of all shares of Common Stock and holders of securities
exchangeable or exercisable for or convertible into shares of Common Stock,
agree that it or he or she will not directly or indirectly, issue, offer to
sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein, except as expressly set forth in the
respective Lock-up Agreements. During the 9 month period commencing with the
effective date of the Registration Statement, the Company shall not, without the
prior written consent of the Representatives, sell, contract or offer to sell,
issue, transfer, assign, pledge, hypothecate, distribute, or otherwise dispose
of, directly or indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent authorizing
it to place appropriate legends on the certificates representing the securities
subject to the Lock-up Agreements and to place appropriate stop transfer orders
on the Company's ledgers.
xii) Neither the Company, nor any of its officers,
directors, stockholders, nor any of their respective affiliates (within the
meaning of the Rules and Regulations) will take, directly or indirectly, any
action designed to, or which might in the future reasonably be expected to cause
or result in, stabilization or manipulation of the price of any securities of
the Company.
xiii) The Company shall apply the net proceeds from
the sale of the Securities in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus. Except as described in the
Prospectus, no portion of the net proceeds will be used, directly or indirectly,
to acquire any securities issued by the Company.
xiv) The Company shall timely file all such reports,
forms or other documents as may be required (including, but not limited to, a
Form SR as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Rules and Regulations, and all
such reports, forms and documents filed will comply as to form and substance
with the applicable requirements under the Act, the Exchange Act, and the Rules
and Regulations.
xv) The Company shall furnish to the Representatives
as early as practicable prior to each of the date hereof, the Closing Date and
each Option Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants, as stated in their
letter to be furnished pursuant to Section 7(k) hereof.
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xvi) The Company shall cause the Common Stock to be
quoted on Nasdaq and the PE, or such other regional exchange as the
Representatives shall reasonably request, and for a period of seven (7) years
from the date hereof, use its best efforts to maintain the Nasdaq and PE or
other exchange quotation of the Common Stock to the extent outstanding.
xvii) For a period of five (5) years from the Closing
Date, the Company shall furnish to the Representatives at the Representatives'
request and at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Common Stock, (ii) the list of holders of all of the
Company's securities and (iii) a Blue Sky "Trading Survey" for secondary sales
of the Company's securities prepared by counsel to the Company.
xviii) As soon as practicable, (i) but in no event
more than 5 business days before the effective date of the Registration
Statement, file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities and (ii) but in no event more than 30
days from the effective date of the Registration Statement, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Moody's OTC Manual and to continue such inclusion for a period
of not less than seven (7) years.
xix) The Company hereby agrees that it will not for a
period of thirteen (13) months from the effective date of the Registration
Statement, adopt, propose to adopt or otherwise permit to exist any employee,
officer, director, consultant or compensation plan or arrangement permitting the
grant, issue or sale of any shares of Common Stock or other securities of the
Company (i) in an amount greater than an aggregate of 150,000 shares of Common
Stock, (ii) at an exercise or sale price per share less than the greater of (a)
the initial public offering price of the Shares set forth herein and (b) the
fair market value of the Common Stock on the date of grant or sale, (iii) to any
direct or indirect beneficial holder on the date hereof of more than 10% of the
issued and outstanding shares of Common Stock at an exercise price greater than
110% of the fair market value of the Common Stock on the date of the grant, (iv)
with the payment for such securities with any form of consideration other than
cash, (v) upon payment of less than the full purchase or exercise price for such
shares of Common Stock or other securities of the Company on the date of grant
or issuance, or (vi) permitting the existence of stock appreciation rights,
phantom options or similar arrangements.
xx) Until the completion of the distribution of the
Shares, the Company shall not without the prior written consent of the
Representatives and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
xxi) For a period equal to the lesser of (i) seven (7)
years from the date hereof, and (ii) the sale to the public of the
Representatives' Shares, the Company will not take any action or actions which
may prevent or disqualify the Company's use of Form SB-2 (or other appropriate
form) for the registration under the Act of the Representatives' Shares.
xxii) For a period of five (5) years after the
effective date of the Registration Statement, Josephthal shall have the right to
designate for election Dan Purjes to
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the Company's Board of Directors (the "Board"). In the event Josephthal elects
not to exercise such right, then it may designate one (1) individual to attend
meetings of the Company's Board. The Company shall notify Josephthal of each
meeting of the Board and the Company shall send to such individual all notices
and other correspondence and communications sent by the Company to members of
the Board. Such individual shall be reimbursed for all out-of-pocket expenses
incurred in connection with his attendance of meetings of the Board.
xxiii) For a period of three (3) years from the date
hereof, Josephthal shall have a right of first refusal for any sale of
securities to be made by the Company or any of its affiliates, which right shall
be assignable by Josephthal to any of its affiliates. The Company, for a period
of three (3) years from the date hereof, will consult, and cause its affiliates
to consult, with Josephthal with regard to any such sale of securities and will
offer, or cause any of its affiliates to offer to Josephthal the opportunity, on
terms not more favorable to the Company, or its affiliates than they can secure
elsewhere, to purchase or sell any such securities. If Josephthal fails to
accept in writing a proposal under this paragraph made by the Company or any of
its affiliates within 15 business days after receipt of a written detailed
notice containing such proposal, then Josephthal shall not have further claim or
right with respect to such proposal. If, thereafter, such proposal is modified,
the Company shall again consult, and cause each present or future affiliate to
consult, with Josephthal in connection with such modification and shall in all
respects have the same obligations and adopt the same procedures with respect to
the modified proposal as are provided herein with respect to the original
proposal.
(b) Each Selling Stockholder severally covenants and agrees as
to himself, herself or itself with the Underwriters that:
i) Such Selling Stockholder consents to the use of
the Prospectus and any amendment or supplement
thereto by the Underwriters and all dealers to whom
the Option Shares may be sold, both in connection
with the offering or sale of the Option Shares and
for such period of time thereafter as such Prospectus
is required by law to be delivered in connection
therewith.
ii) Such Selling Stockholder has reviewed the
Registration Statement and the Prospectus and will
comply with all agreements and satisfy all conditions
on his, her or its part to be complied with or
satisfied pursuant to this Agreement, the Stock
Power, the Custody Agreement, and the Power of
Attorney at or prior to the Closing Date, and will
advise his, her or its Attorney-in-Fact prior to the
Closing Date or Option Closing Date, if any, as
applicable, if any statement to be made on behalf of
such Selling Stockholder in the certificates
contemplated by Sections 7(h) and 7(j) hereof would
be inaccurate if made as of such Closing Date.
6. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date (to the extent not paid at the Closing
Date) all expenses and fees (other
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than fees of Underwriters' Counsel, except as provided in (iv) below) incident
to the performance of the obligations of the Company under this Agreement and
the Representatives' Warrant Agreement, including, without limitation, (i) the
fees and expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing,
(including mailing and handling charges) filing, delivery and mailing (including
the payment of postage with respect thereto) of the Registration Statement and
the Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealer
Agreements, and related documents, including the cost of all copies thereof and
of the Preliminary Prospectuses and of the Prospectus and any amendments thereof
or supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the Securities including, but not
limited to, (x) the purchase by the Underwriters of the Shares and the purchase
by the Representatives of the Representatives' Warrants from the Company, (y)
the consummation by the Company of any of its obligations under this Agreement
and the Representatives' Warrant Agreement, and (z) resale of the Shares by the
Underwriters in connection with the distribution contemplated hereby, (iv) the
qualification of the Securities under state or foreign securities or "Blue Sky"
laws and determination of the status of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith
(such fees not to exceed $50,000), (v) costs and expenses in connection with due
diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating of
the Securities by qualified rating agencies, (viii) the fees payable to the
Commission and the NASD, and (ix) the fees and expenses incurred in connection
with the quotation of the Securities on Nasdaq, the PE and any other exchange.
(b) If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 7 or Section 13, the
Company shall reimburse and indemnify the Representatives for all of their
actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less any amounts already paid pursuant to Section 6(c)
hereof.
(c) The Company further agrees that, in addition to
the expenses payable pursuant to subsection (a) of this Section 6, it will pay
to the Representatives on the Closing Date by certified or bank cashier's check
or, at the election of the Representatives, by deduction from the proceeds of
the offering contemplated herein a non-accountable expense allowance equal to
two and one-half percent (2.5%) of the gross proceeds received by the Company
from the sale of the Firm Shares, all of which shall be paid upon the Closing
Date. In the event the Representatives elect to exercise the over-allotment
option described in Section 2(b) hereof, the Selling Stockholders agree to pay
to the Representatives on the Option Closing Date (by certified or bank
cashier's check or, at the Representatives' election, by deduction from the
proceeds of the Option Shares) a non-accountable expense allowance equal to two
and one-half percent (2.5%) of the gross proceeds received by the Selling
Stockholders from the sale of the Option Shares.
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7. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company and the Selling
Stockholders herein as of the date hereof and as of the Closing Date and each
Option Closing Date, if any, with respect to the Company and the Selling
Stockholders, as the case may be, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
the officers of the Company and of the Selling Stockholders made pursuant to the
provisions hereof; and the performance by the Company and the Selling
Stockholders on and as of the Closing Date and each Option Closing Date, if any,
of their respective covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become
effective not later than 12:00 Noon, New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representatives, and, at the Closing Date and each Option Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied with
to the reasonable satisfaction of Underwriters' Counsel. If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, the price of the
Shares and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representatives of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representatives shall not have advised the
Company that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact which, in the Representatives' opinion, is material, or
omits to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representatives' opinion, is material, or
omits to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the
Representatives shall have received from Underwriters' Counsel, such opinion or
opinions with respect to the organization of the Company, the validity of the
Securities, the Representatives' Warrants, the Registration Statement, the
Prospectus and other related matters as the Representatives may request and
Underwriters' Counsel shall have received such papers and information as they
request to enable them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have
received the favorable opinion of Sonnenschein Nath & Rosenthal, counsel to the
Company, dated the Closing Date,
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addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the
laws of its jurisdiction, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite
corporate power and authority; and the Company has obtained
any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in
material compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all
federal, state and local laws, rules and regulations; the
Company has not received any notice of proceedings relating to
the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially
adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or
results of operations of the Company. The disclosures in the
Registration Statement concerning the effects of federal,
state and local laws, rules and regulations on the Company's
business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a
fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were
made;
ii) to the best of such counsel's knowledge, the
Company does not own an interest in any other corporation,
partnership, joint venture, trust or other business entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and
any amendment or supplement thereto, under "Capitalization"
and "Description of Capital Stock," and the Company is not a
party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this
Agreement, the Representatives' Warrant Agreement and as
described in the Prospectus. The Securities, and all other
securities issued or issuable by the Company conform in all
material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive
rights of any holders of any security
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of the Company. The Shares, the Representatives' Warrants and
the Representatives' Shares to be sold by the Company
hereunder and under the Representatives' Warrant Agreement are
not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable
and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of
the Shares, the Representatives' Warrants and the
Representatives' Shares has been duly and validly taken; and
the certificates representing the Shares and the
Representatives' Warrants are in due and proper form. The
Representatives' Warrants constitute valid and binding
obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement and the
Representatives' Warrant Agreement of the Shares and the
Representatives' Warrants, respectively, to be sold by the
Company, the Underwriters and the Representative,
respectively, will acquire good and marketable title to such
Securities free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest, or other restriction
or equity of any kind whatsoever. No transfer tax is payable
by or on behalf of the Underwriters in connection with (A) the
issuance by the Company of the Shares, (B) the purchase by the
Underwriters and the Representatives of the Shares and the
Representatives' Warrants, respectively, from the Company, (C)
the consummation by the Company of any of its obligations
under this Agreement or the Representatives' Warrant
Agreement, or (D) resales of the Shares in connection with the
distribution contemplated hereby;
iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and
no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or Prospectus or any
part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the
best of such counsel's knowledge, threatened or contemplated
under the Act;
v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments
or supplements thereto (other than the financial statements
and other financial and statistical data included therein, as
to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the
Rules and Regulations;
vi) to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required
by the Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement (or required
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<PAGE>
to be filed under the Exchange Act if upon such filing they
would be incorporated, in whole or in part, by reference
therein) and the Prospectus and filed as exhibits thereto, and
the exhibits which have been filed are correct copies of the
documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus
and any supplement or amendment thereto of contracts and other
documents to which the Company is a party or by which it is
bound, including any document to which the Company is a party
or by which it is bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are
accurate in all material respects and fairly represent the
information required to be shown by Form SB-2; (C) there is
not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including,
without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of
the Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), (y)
questions the validity of the capital stock of the Company or
this Agreement or the Representatives' Warrant Agreement, or
of any action taken or to be taken by the Company pursuant to
or in connection with any of the foregoing; (D) no statute or
regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and
(E) there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court
or arbitrator or governmental body, agency or official (or any
basis thereof known to such counsel) in which there is a
reasonable possibility of an adverse decision which may result
in a material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders'
equity, value, operation, properties, business or results of
operations of the Company, which could adversely affect the
present or prospective ability of the Company to perform its
obligations under this Agreement or the Representatives'
Warrant Agreement or which in any manner draws into question
the validity or enforceability of this Agreement or the
Representatives' Warrant Agreement;
vii) the Company has full legal right, power and
authority to enter into each of this Agreement and the
Representatives' Warrant Agreement, and to consummate the
transactions provided for herein and therein; and each of this
Agreement and the Representatives' Warrant Agreement have been
duly authorized, executed and delivered by the Company. Each
of this Agreement and the Representatives' Warrant Agreement,
assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in
accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of
the
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Company's execution or delivery of this Agreement and the
Representatives' Warrant Agreement, its performance hereunder
or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business
as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, the Prospectus and
any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes
or will constitute a default under, or result in the creation
or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of
any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company, (B)
any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument to which
the Company is a party or by which it is or may be bound or to
which any of its respective properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (C)
any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or any of its activities
or properties;
viii) except as described in the Prospectus, no
consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws,
as to which no opinion need be rendered) is required in
connection with the issuance of the Shares pursuant to the
Prospectus, the issuance of the Representatives' Warrants, and
the Registration Statement, the performance of this Agreement
and the Representatives' Warrant Agreement, and the
transactions contemplated hereby and thereby;
ix) the properties and business of the Company
conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus;
and the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or
leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
x) to the best knowledge of such counsel, the Company
is not in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, partnership agreement,
note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which the property
or assets
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(tangible or intangible) of the Company is subject or
affected; and the Company is not in violation of any term or
provision of its certificate of incorporation by-laws, or in
violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
xi) the statements in the Prospectus under
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES
ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel,
and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
xii) the Shares have been accepted for quotation on
Nasdaq and the PE;
xiii) the persons listed under the caption "PRINCIPAL
STOCKHOLDERS" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in regulation 13d-3 under
the Exchange Act) of the securities set forth opposite their
respective names thereunder as and to the extent set forth
therein;
xiv) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other
entity has the right to include and/or register any securities
of the Company in the Registration Statement, require the
Company to file any registration statement or, if filed, to
include any security in such registration statement;
xv) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings
for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or
financial consulting arrangement or any other arrangements,
agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the
NASD;
xvi) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements are legal,
valid and binding obligations of parties thereto, enforceable
against the party and any subsequent holder of the securities
subject thereto in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles
in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law);
xvii) except as described in the Prospectus, the
Company does not (A) maintain, sponsor or contribute to any
ERISA Plans, (B) maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section
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3(35) of ERISA, and (C) has never completely or partially
withdrawn from a "multiemployer plan";
xviii) neither the execution of the Combination
Transaction Documents nor the consummation of the transactions
contemplated thereby, nor the consummation of any other of the
transactions contemplated herein or therein by the Limited
Partnerships, nor the fulfillment of the terms hereof or
thereof by the Limited Partnerships, will conflict with,
result in a breach of, or constitute a default under the
respective articles of incorporation or by-laws of any of the
Limited Partnerships or the terms of any other agreement or
instrument to which any of the Limited Partnerships or any of
their respective subsidiaries is a party or by which any of
their prospective properties are bound or affected, or any
order, regulation or judgement applicable to any of the
Limited Partnerships or any of their respective subsidiaries
of any court regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over any
of the Limited Partnerships or any of their prospective
subsidiaries; and
xiv) the Combination Transaction Documents (i) have
been duly authorized, executed and delivered by the Limited
Partnerships and constitute valid and binding obligations of
the Limited Partnerships enforceable in accordance with their
respective terms and (ii) effectively convey from the Limited
Partnerships to the Company all right, title and interest to
the business of the Limited Partnerships as described in the
Prospectus.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
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In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company, and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the
Representatives and they are justified in relying thereon. Such opinion shall
also state that Underwriters' counsel is entitled to rely thereon.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Sonnenschein Nath & Rosenthal, counsel to
the Company, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of Option
Closing Date the statements made by Sonnenschein Nath & Rosenthal, in its
opinion delivered on the Closing Date.
(e) On the Closing Date, the Underwriters shall have
received the favorable opinion of Sonnenschein, Nath & Rosenthal, in its
capacity as counsel for the Selling Shareholders, dated the Closing Date,
addressed to the Underwriters, in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
i) Each Selling Stockholder has full legal
right, power and authority to enter into this Agreement and to
sell, assign, transfer and deliver in the manner provided
herein the Selling Stockholders' Shares sold by such Selling
Stockholder; this Agreement has been duly authorized, executed
and delivered by such Selling Stockholder; and this Agreement,
assuming due authorization, execution and delivery by each
other party hereto and further assuming it is a valid and
binding agreement of the Underwriters, is a valid and legally
binding agreement of such Selling Stockholder, enforceable
against such Selling Stockholder in accordance with its terms
(except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and by
general principles of equity relating to the availability of
remedies and except its rights to indemnity and contribution
may be limited by applicable law);
ii) None of the execution, delivery or
performance of this Agreement, the Stock Power, the Power of
Attorney, and the Custody Agreement by such Selling
Stockholder and the consummation by such Selling Stockholder
of the transactions herein and therein contemplated, to the
best of such counsel's knowledge, conflict with or result in a
breach of, or default under, any indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note
agreement or other agreement or other instrument to which such
Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which
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any of the property of such Selling Stockholders is subject,
or the charter or by-laws of any such Selling Stockholders
that is a corporation, and nothing has come to such counsel's
attention which causes such counsel to believe that such
actions will result in any violation of any law, rule,
administrative regulation or court decree applicable to such
Selling Stockholder (other than state securities or blue sky
laws or regulations, as to which counsel need not express any
opinion);
iii) A Stock Power, Power of Attorney, and
the Custody Agreement have been duly authorized, executed and
delivered by each Selling Stockholder and, assuming the due
authorization, execution and delivery of the Custody Agreement
by the other parties thereto, each constitutes the valid and
binding agreement of each Selling Stockholder enforceable in
accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and by general
principles of equity relating to availability of remedies and
except as rights to indemnity or contribution may be limited
by applicable law); and
iv) Upon the delivery of the Selling
Stockholders' Shares to be included in the Selling
Stockholders' Shares and sold hereunder by such Selling
Stockholders and payment therefor in accordance with the terms
of this Agreement, the Underwriters will have acquired all
rights of such Selling Stockholder to the Selling
Stockholders' Shares sold by such Selling Stockholder
hereunder, and in addition will have acquired good and
marketable title to such Selling Stockholders' Shares free and
clear of any adverse claim.
At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinion of each of Sonnenschein, Nath &
Rosenthal, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of Option
Closing Date the respective statements made by each of Sonnenschein, Nath &
Rosenthal, in their respective opinions delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the
Option Closing Date, if any, Underwriters' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or the Selling Stockholders herein contained.
(g) Prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth
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in the Registration Statement and Prospectus which is materially adverse to the
Company; (iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness; (iv) the Company shall not
have issued any securities (other than the Securities); the Company shall not
have declared or paid any dividend or made any distribution in respect of its
capital stock of any class; and there has not been any change in the capital
stock of the Company, or any material change in the debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise); (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or threatened (or circumstances giving rise to same) against the Company, or
affecting any of its properties or business before or by any court or federal,
state or foreign commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vii) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option
Closing Date, if any, the Underwriters shall have received a certificate of the
Company signed by the principal executive officer and by the chief financial or
chief accounting officer of the Company, dated the Closing Date or Option
Closing Date, as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus and this
Agreement, and that:
i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as
of the Closing Date or the Option Closing Date, as the case
may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may
be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued,
and no proceedings for that purpose have been instituted or
are pending or, to the best of each of such person's
knowledge, after due inquiry are contemplated or threatened
under the Act;
iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto,
contain all statements and information required to be included
therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes
any 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 and neither the
Preliminary Prospectus nor any supplement thereto included any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; and
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iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and
including the Closing Date or the Option Closing Date, as the
case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or
contingent; (b) the Company has not paid or declared any
dividends or other distributions on its capital stock; (c) the
Company has not entered into any transactions not in the
ordinary course of business; (d) there has not been any change
in the capital stock of the Company or any material change in
the debt (long or short-term) of the Company; (e) the Company
has not sustained any material loss or damage to its property
or assets, whether or not insured; (g) there is no litigation
which is pending or threatened (or circumstances giving rise
to same) against the Company, or any affiliated party of any
of the foregoing which is required to be set forth in an
amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not
been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) On the Closing Date, the Underwriters shall have
received a certificate dated the Closing Date, from each Selling Stockholder
(which may be signed by the Attorney-in- Fact) to the effect that each such
Selling Stockholder has carefully examined the Registration Statement and the
Prospectuses and this Agreement, and that:
i) The representations and warranties of such Selling
Stockholder in this Agreement are true and correct, as if made
at and as of the Closing Date, and such Selling Stockholder
has complied with all the agreements and satisfied all the
conditions to be performed or satisfied by such Selling
Stockholder at or prior to the Closing date; and
ii) The Registration Statement and Prospectuses and,
if any, each amendment and each supplement thereto, contain
all statements required to such Selling Stockholder's
knowledge to be included therein regarding such Selling
Stockholder, and none of the Registration Statement nor any
amendment thereto includes any untrue statement of a material
fact regarding such Selling Stockholder or omits to state any
material fact regarding such Selling Stockholder required to
such Selling Stockholder's knowledge to be stated therein or
necessary to make the statements therein regarding such
Selling Stockholder not misleading, and no Prospectus (an any
supplements thereto) or any Preliminary Prospectus includes or
included any untrue statement of a material fact regarding
such Selling Stockholder or omits or omitted to state a
material fact regarding such Selling Stockholder required to
such Selling Stockholder's knowledge to be stated therein or
necessary in order to make the statements therein regarding
such Selling Stockholder, in light of the circumstances under
which they are made, not misleading.
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(j) By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
in all respects to the Underwriters and Underwriters' Counsel, from Deloitte &
Touche LLP;
i) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the applicable Rules and Regulations;
ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in
all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations
thereunder and that the Representatives may rely upon the
opinion of Deloitte & Touche LLP with respect to such
financial statements and supporting schedules included in the
Registration Statement;
iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of the Company, a reading of the
latest available minutes of the stockholders and board of
directors and the various committees of the boards of
directors of the Company, consultations with officers and
other employees of the Company responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would
lead them to believe that (A) the pro forma financial
information contained in the Registration Statement and
Prospectus does not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Rules and Regulations or is not fairly presented in conformity
with generally accepted accounting principles applied on a
basis consistent with that of the audited financial statements
of the Company or the unaudited pro forma financial
information included in the Registration Statement, (B) the
unaudited financial statements and supporting schedules of the
Company included in the Registration Statement do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company included in the Registration
Statement, or (C) at a specified date not more than five (5)
days prior to the effective date of the Registration
Statement, there has been any change in the capital stock of
the Company, any change in the long-term debt of the Company,
or any decrease in the stockholders' equity of the Company or
any decrease in the net current assets or net assets of the
Company as compared with amounts shown in the June 30, 1997
balance sheets included in the Registration Statement, other
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than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease, and (D) during
the period from June 30, 1997 to a specified date not more
than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues
or net earnings of the Company or increase in net earnings per
common share of the Company, in each case as compared with the
corresponding period beginning June 30, 1996 other than as set
forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such
decrease;
iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the
amount of liabilities of the Company (including a break-down
of commercial paper and notes payable to banks);
v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Representatives may
request.
(l) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Deloitte & Touche LLP a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (k) of this Section hereof except that the specified date referred
to shall be a date not more than five days prior to the Closing Date or the
Option Closing Date, as the case may be, and, if the Company has elected to rely
on Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (k) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representatives and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(m) The Company shall have delivered to the
Representatives a letter from Deloitte & Touche LLP addressed to the Company
stating that they have not during the immediately preceding two year period
brought to the attention of the Company's management any "weakness" as defined
in Statement of Auditing Standards No. 60 "Communication of Internal Control
Structure Related Matters Noted in an Audit," in any of the Company's internal
controls.
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(n) On each of the Closing Date and Option Closing
Date, if any, there shall have been duly tendered to the Representatives for the
several Underwriters' accounts the appropriate number of Shares.
(o) No order suspending the sale of the Securities in
any jurisdiction designated by the Representatives pursuant to subsection (A)(v)
of Section 5 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(p) On or before the Closing Date, the Company shall
have executed and delivered to the Representatives, (i) the Representatives'
Warrant Agreement substantially in the form filed as Exhibit 4.3 to the
Registration Statement in final form and substance satisfactory to the
Representatives, and (ii) the Representatives' Warrants in such denominations
and to such designees as shall have been provided to the Company.
(q) On or before the Closing Date, the Shares shall
have been duly approved for quotation on Nasdaq and the PE subject to official
notice of issuance.
(r) On or before the Closing Date, there shall have
been delivered to the Representatives all of the Lock-Up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
(s) On or before the Closing Date, the Company shall
have effected the Combination Transaction as described in the Prospectus.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representatives may terminate
this Agreement or, if the Representatives so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification.
(a) The Company and the Selling Stockholders, agree to
indemnify and hold harmless each of the Underwriters (for purposes of this
Section 8 "Underwriter" shall include the officers, directors, partners,
employees, agents and counsel of the Underwriter, including specifically each
person who may be substituted for an Underwriter as provided in Section 12
hereof), and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions, proceedings, investigations,
inquiries, and suits in respect thereof), whatsoever (including but not limited
to any and all costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against such action, proceeding,
investigation, inquiry or suit, commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriter or such controlling
person may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon (A) any untrue statement or alleged untrue statement of a
material
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fact contained (i) in any Preliminary Prospectus, the Registration Statement or
the Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 8 collectively called "application")
executed by the Company or based upon written information furnished by the
Company filed, delivered or used in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq, PSE or any other securities
exchange, (B) the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), or (C) any breach of any representation, warranty,
covenant or agreement of the Company contained herein or in any certificate by
or on behalf of the Company or any of its officers delivered pursuant hereto
unless, in the case of clause (A) or (B) above, such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
any Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be.
The liability of each Selling Stockholder under this paragraph
shall be limited to the proportion thereof which the number of shares of Common
Stock sold by such Selling Stockholder bears to all shares of Common Stock
purchased by the Underwriters, but in no event shall such Selling Stockholder be
liable under this paragraph for an amount exceeding the aggregate purchase price
received by such Selling Stockholder from the Underwriters for the shares of
Common Stock sold by such Selling Stockholder hereunder. Neither Selling
Stockholder will be liable to the Underwriters or any person controlling the
Underwriters with respect to (i) any untrue statement or omission or alleged
untrue statement or omission made by the Company or by any other Selling
Stockholder or (ii) any breach of any representation, warranty, covenant or
agreement of the Company.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company or the Selling Stockholder may have
at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act, and each
Selling Stockholder to the same extent as the foregoing indemnity from the
Company to the Underwriters but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any application
made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to any Underwriter by such Underwriter
expressly for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any such
application, provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters in
connection with this Offering. The Company and each Selling Stockholder
acknowledges that the statements with respect to the public offering of
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the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to be
made against one or more indemnifying parties under this Section 8, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 8 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any such
action, investigation, inquiry, suit or proceeding is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action, investigation, inquiry, suit or proceeding on behalf of
the indemnified party or parties), in any of which events such fees and expenses
of one additional counsel shall be borne by the indemnifying parties. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action,
investigation, inquiry, suit or proceeding or separate but similar or related
actions, investigations, inquiries, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 8 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
investigation, inquiry, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party form all liability arising out of such claim, action, suit or
proceeding
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and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 8, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 8 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriters are the indemnified party, the relative benefits received
by the Company and/or the Selling Stockholders on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts received by the Underwriters
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, or the Selling Stockholders or by the Underwriters, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions, investigations, inquiries, suits or
proceedings in respect thereof) referred to above in this subdivision (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action,
claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director and each
Selling Stockholder of the Company shall have the same rights to contribution as
the Company, subject in each case to this subparagraph (d). Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit, inquiry, investigation or proceeding against such party in respect
to which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall
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not relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company or of any Selling
Stockholder submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements at the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties and agreements of the
Company and the Selling Stockholders, as the case may be, and their respective
indemnity agreements contained in Section 8 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
any Underwriter, the Company, any Selling Stockholder, any controlling person of
any Underwriter, or the Company or any Selling Stockholder, and shall survive
termination of this Agreement or the issuance, sale and delivery of the
Securities to the Underwriters and the Representatives, as the case may be.
10. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representatives, in their discretion, shall release the Shares
for sale to the public; provided, however, that the provisions of Sections 6, 8
and 11 of this Agreement shall at all times be effective. For purposes of this
Section 10, the Shares to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representatives of telegrams to
securities dealers releasing such shares for offering or the release by the
Representatives for publication of the first newspaper advertisement which is
subsequently published relating to the Shares.
11. Termination.
(a) Subject to subsection (b) of this Section 11, the
Representatives shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representatives's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority;
- 40 -
<PAGE>
<PAGE>
or (vii) if a moratorium in foreign exchange trading has been declared; or
(viii) if the Company shall have sustained a loss material or substantial to the
Company by fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representatives' opinion, make it inadvisable to proceed
with the delivery of the Securities; or (viii) if there shall have occurred any
outbreak or escalation of hostilities or any calamity or crisis or there shall
have been such a material adverse change in the conditions or prospects of the
Company, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representatives' judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (ix) if either Steven H.
Plausteiner or Susan D. Plausteiner shall no longer serve the Company in his or
her present capacity.
(b) If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 11(a) the Company
shall promptly reimburse and indemnify the Representatives for all of their
actual out-of-pocket expenses, including the fees and disbursements of counsel
for the Underwriters (less amounts, if any, previously paid pursuant to Section
6(c) above). Notwithstanding any contrary provision contained in this Agreement,
if this Agreement shall not be carried out within the time specified herein, or
any extension thereof granted to the Representatives, by reason of any failure
on the part of the Company to perform any undertaking or satisfy any condition
of this Agreement by it to be performed or satisfied (including, without
limitation, pursuant to Section 7 or Section 13) then, the Company shall
promptly reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters. In addition, the Company shall remain liable for all Blue Sky
counsel fees (such fees not to exceed $50,000) and expenses and filing fees.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to Sections 7, 11, 12 and 13 hereof), and whether or not this Agreement
is otherwise carried out, the provisions of Section 6 and Section 8 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
12. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 11 or
Section 13 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Shares to be purchased
on such date, the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
- 41 -
<PAGE>
<PAGE>
(b) if the number of Defaulted Securities exceeds 10%
of the total number of Firm Shares, this Agreement shall
terminate without liability on the part of any non-defaulting
Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representatives shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
13. Default by the Company or any Selling Stockholder. If the
Company or any Selling Stockholders shall fail at the Closing Date or at any
Option Closing Date, as applicable, to sell and deliver the number of Shares
which it is obligated to sell hereunder on such date, then this Agreement shall
terminate (or, if such default shall occur with respect to any Option Shares to
be purchased on an Option Closing Date, the Underwriters may at the
Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Shares from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 6, Section 8 and Section 11 hereof. No
action taken pursuant to this Section shall relieve the Company or any Selling
Stockholder, as the case may be, from liability, if any, in respect of such
default.
14. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives c/o Josephthal Lyon & Ross Incorporated, 200 Park Avenue, 24th
Floor, New York, New York 10166, Attention: Scott A. Weisman, with a copy to
Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103,
Attention: Lawrence B. Fisher, Esq. Notices to the Company shall be directed to
the Company at Snowdance, Inc., Route 44, Brownsville, Vermont 05037, Attention:
Steven H. Plausteiner, Chief Executive Officer, with a copy to Sonnenschein Nath
& Rosenthal, 1221 Avenue of the Americas, New York, New York 10020, Attention:
Dennis M. Berman, Esq. .
15. Parties. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriters, the Company, the Selling
Stockholders and the controlling persons, directors and officers referred to in
Section 8 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
16. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
- 42 -
<PAGE>
<PAGE>
17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
18. Entire Agreement; Amendments. This Agreement and the
Representatives' Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representatives,
the Company and the Selling Stockholders.
If the foregoing correctly sets forth the understanding among
the Underwriters, the Company and the Selling Stockholders, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
SNOWDANCE, INC.
By:
--------------------------------
Steven H. Plausteiner
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
JOSEPHTHAL LYON & ROSS INCORPORATED
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
------------------------------------------
CRUTTENDEN ROTH INCORPORATED
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
------------------------------------------
- 43 -
<PAGE>
<PAGE>
SELLING STOCKHOLDERS
By:
------------------------------------------
As Attorney-in-Fact for the Selling
Stockholders Named in Schedule B hereto.
- 44 -
<PAGE>
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
================================================================================
Number of Firm Shares
Name of Underwriters to be Purchased
- -------------------- ---------------------
- --------------------------------------------------------------------------------
<S> <C>
Josephthal Lyon & Ross Incorporated........................
Cruttenden Roth Incorporated...............................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total................................................. 1,000,000
=========
================================================================================
</TABLE>
- 45 -
<PAGE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
================================================================================
Number of Firm Shares
Name of Selling Stockholder to be Purchased
- -------------------- ---------------------
- --------------------------------------------------------------------------------
<S> <C>
Skyline Partners, L.P......................................
Steven H. Plausteiner......................................
Susan D. Plausteiner.......................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total................................................. 150,000
=========
================================================================================
</TABLE>
- 46 -
<PAGE>
<PAGE>
SNOWDANCE, INC.
1,000,000 Shares
Common Stock, $.001 par value
"QUALIFIED INDEPENDENT UNDERWRITER" AGREEMENT
New York, New York
_____ __, 1997
The undersigned, Snowdance, Inc. (the "Company"), a Delaware corporation,
hereby agrees with Cruttenden Roth Incorporated ("Cruttenden") as follows:
1. Introduction. The Company proposes to issue and sell to the public,
1,000,000 shares of common stock, $.001 par value, of the Company (the "Common
Stock") (the "Offering"). Pursuant to Rule 2720 of the National Association of
Securities Dealers, Inc. (the "NASD") Conduct Rules ("Rule 2720") the Company,
as an affiliate of NASD members, may participate in the Offering only if the
price at which the Shares is to be offered to the public is no higher than the
price recommended by a "Qualified Independent Underwriter" (as such phrase is
defined by Rule 2720) who participates in the preparation of the registration
statement and prospectus relating to the Offering and exercises customary
standards of due diligence with respect thereto.
As hereinafter used, the term "Registration Statement" means the
registration statement on Form SB-2 (No. 333-____) (including the related
preliminary prospectus, financial statements, exhibits and all other documents
to be filed as a part thereof or incorporated therein) for the registration of
the offer and sale of the Shares under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (collectively, the "Act"), filed with
the Securities and Exchange Commission (the "Commission"), and any amendments
thereto, and the term "Prospectus" means the prospectus including any
preliminary or final prospectus (including the form of final prospectus as filed
with the Commission) pursuant to Rule 424(b) under the Act and any amendments or
supplements thereto, to be used in connection with the Offering.
2. Rule 2720 Requirement. Cruttenden hereby confirms its agreement as
set forth in Rule 2720, and agrees to act as the "Qualified Independent
Underwriter" for the Offering. Cruttenden represents that, as appropriate, it
satisfies or will satisfy at the times designated in Rule 2720 the other
requirements set forth therein.
3. Consent. Cruttenden hereby consents to be named in the Registration
Statement and Prospectus as having acted as
<PAGE>
<PAGE>
the "Qualified Independent Underwriter." Except as permitted by the immediately
preceding sentence or to the extent required by law, all references to
Cruttenden in the Registration Statement or Prospectus or in any other filing,
report, document, release or other communication prepared, issued or transmitted
in connection with the Offering by the Company or any corporation controlling,
controlled by or under common control with the Company, or by any director,
officer, employee, representative or agent of any thereof, shall be subject to
Cruttenden's prior written consent with respect to form and substance.
4. Material Facts. The Company represents and warrants to Cruttenden
that at the time the Registration Statement or any amendment or supplement
thereto becomes effective, the Registration Statement and, at the time the
Prospectus is filed with the Commission (including any preliminary prospectus
and the form of prospectus filed with the Commission pursuant to Rule 424(b))
and at all times subsequent thereto, to and including the date on which payment
for and delivery of the Shares (such date being referred to herein as the
"Closing Date"), the Prospectus (as amended or supplemented if it shall have
been so amended or supplemented) will contain all material statements which are
required to be stated therein in accordance with the Act and will conform to all
other requirements of the federal securities laws, and will not, on such dates,
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Company further represents and warrants that any further filing,
report, document, release or communication which in any way refers to Cruttenden
or to the services to be performed by it pursuant to this Agreement will not
contain any untrue or misleading 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.
5. Availability of Information. The Company hereby agrees to provide
Cruttenden, at the Company's expense, all information and documentation with
respect to the Company's business, financial condition and other matters as
Cruttenden may deem relevant, including, without limitation, copies of all
correspondence with the Commission, certificates of its officers, opinions of
its counsel and comfort letters from its auditors. The above mentioned
certificates, opinions of counsel and comfort letters shall be provided to
Cruttenden as it may request on the effective date of the Registration Statement
and on the closing date of the Offering. The Company will make reasonably
available to Cruttenden, its auditors, counsel, and officers and directors to
discuss with Cruttenden any aspect of the Company or its business which
Cruttenden may deem relevant. In addition, the Company, at Cruttenden's request,
will cause to be delivered to Cruttenden, copies of any certificates, opinions,
letters and reports and shall cause the person issuing such certificates,
opinions, letters or reports to authorize Cruttenden to rely
2
<PAGE>
<PAGE>
thereon to the same extent as if addressed directly to Cruttenden. The Company
represents and warrants to Cruttenden that all such information and
documentation provided pursuant to this paragraph 6 will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading. In addition, the Company will promptly
advise Cruttenden of all telephone conversations with the Commission which
relate to or may affect the Offering.
6. Indemnification.
(a) Subject to the conditions set forth below, the Company hereby
agrees that it will indemnify and hold Cruttenden and each officer, partner,
employee or representative of Cruttenden and each person controlling, controlled
by or under common control with Cruttenden within the meaning of Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the rules and regulations thereunder (individually, an
"Indemnified Person") harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all legal fees and other expenses and disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or proceeding,
including any inquiry or investigation, commenced or threatened, or any claim
whatsoever or in appearing or preparing for appearance as a witness in any
action, suit or proceeding including any inquiry, investigation or pretrial
proceeding such as a deposition) to which such Indemnified Person may become
subject under the Act, the Exchange Act, or other federal or state statutory law
or regulation at common law or otherwise, arising out of, based upon, or in any
way related or attributed to (i) this Agreement, (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus or any other filing report, document, release or
communication, whether oral or written referred to in paragraph 5 hereof or 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, (iii)
any application or other document executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in order to
qualify the Shares under the securities or Blue Sky laws thereof, or 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, (iv)
the breach of any representation or warranty made by the Company in this
Agreement, or (v) the performance by Cruttenden as the "Qualified Independent
Underwriter" pursuant to this Agreement unless as a direct result of
Cruttenden's gross negligence, bad faith or willful misfeasance. The Company
further agree that upon demand by an Indemnified Person at any time or from time
to time, they will promptly reimburse such Indemnified Person for, any loss,
claim, damage, liability, cost or expense as to which the Company has
indemnified such person pursuant hereto. Notwithstanding the foregoing
provisions of
3
<PAGE>
<PAGE>
this paragraph 7, any such payment or reimbursement by the Company of fees,
expenses or disbursements incurred by an Indemnified Person in any proceeding in
which a final judgment by a court of competent jurisdiction (after all appeals
or the expiration of time to appeal) is entered against such Indemnified Person
as a direct result of such person's gross negligence, bad faith or willful
misfeasance will be promptly repaid to the Company.
(b) Promptly after receipt by an Indemnified Person under paragraph
(a) above of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the Company under
paragraph (a), notify the Company in writing of the commencement thereof; but
the omission to so notify the Company will not relieve the Company from any
liability which either may have to any Indemnified Person otherwise than under
this paragraph 7. In case any such action is brought against any Indemnified
Person, and such Indemnified Person notifies the Company of the commencement
thereof, the Company will be entitled to participate therein and, to the extent
that they may elect by written notice delivered to the Indemnified Person
promptly after receiving the aforesaid notice from such Indemnified Person, to
assume the defense thereof with counsel reasonably satisfactory to such
Indemnified Person: provided, however, that if the defendants in any such action
include both the Indemnified Person and the Company or any corporation
controlling, controlled by or under common control with the Company, or any
director, officer, employee, representative or agent of any thereof, and the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to such other defendant, the Indemnified Person shall have the right
to select separate counsel to represent it. Upon receipt by the Indemnified
Person of notice from the Company setting forth the Company's irrevocable
election to assume the defense of such action and approval by the Indemnified
Person of such counsel, the Company will not be liable to such Indemnified
Person under this paragraph 7 for any fees of counsel subsequently incurred by
such Indemnified Person in connection with the defense thereof (other than the
reasonable costs of investigation subsequently incurred by such Indemnified
Person) unless (x) the Indemnified Person shall have employed separate counsel
in accordance with the provision of the next preceding sentences, (y) the
Company, within a reasonable time after notice of commencement of the action,
shall not have employed counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person, or (z) the Company shall have
authorized in writing the employment of counsel for the Indemnified Person at
the expense of the Company, and except that, if clause (x) or (z) is applicable,
such liability shall be only in respect of the counsel referred to in such
clause (x) or (z).
4
<PAGE>
<PAGE>
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
paragraph 7 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company to Cruttenden on grounds of policy or
otherwise, the Company and Cruttenden shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigation or defending of same) to which the
Company and Cruttenden may be subject in such proportion so that Cruttenden is
responsible for that portion represented by the percentage that its fee under
this Agreement bears to the aggregate public offering price appearing on the
cover page of the Prospectus and the Company is responsible for the balance,
except as the Company may otherwise agree to reallocate a portion of such
liability with respect to such balance with any other person; provided, however,
that no person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the Act shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
paragraph (c), any person controlling, controlled by or under common control
with Cruttenden, or any partner, director, officer, employee, representative or
any agent of any thereof, shall have the same rights to contribution as
Cruttenden and each person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to clause (y) of this paragraph (c). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against the other party under this paragraph (c),
notify such party from whom contribution may be sought, but the omission to so
notify such party shall not relieve the party from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this paragraph (c). The indemnity and contribution agreements contained in
this paragraph 7 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Indemnified Person or any
termination of this Agreement.
7. Authorization by Company. The Company represents and warrants to
Cruttenden that this Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding obligation of the Company.
8. Notice. Whenever notice is required to be given pursuant to this
Agreement, such notice shall be in writing and shall be mailed by first class
mail, postage prepaid, addresses (a) if to Cruttenden, at 18301 Von Karman,
Irvine, California 92715, Attention: _____________ and (b) if to the Company, at
Route 44, Brownsville, Vermont 05037, Attention: Steven H. Plausteiner.
5
<PAGE>
<PAGE>
9. Governing Law. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed by the
laws of the State of New York applicable to agreements made and to be performed
wholly within such jurisdiction.
10. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, Cruttenden and the Company and the controlling persons,
directors and officers referred to in paragraph 7 hereof, and their respective
successors, legal representative and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
6
<PAGE>
<PAGE>
If the foregoing correctly sets forth the understanding between Cruttenden
and the Company, please so indicate in the space provided below for that purpose
whereupon this letter shall constitute a binding agreement between us.
SNOWDANCE, INC. CRUTTENDEN ROTH INCORPORATED
By:_______________________ By: ____________________________________
7
<PAGE>
<PAGE>
Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Floor
New York, N.Y. 10166
Ladies and Gentlemen:
In order to induce Joseph Lyon & Ross Incorporated, or an
affiliate thereof (collectively, "Josephthal" or the "Underwriter") and
Snowdance, Inc. (the "Company") to enter into an underwriting agreement (the
"Underwriting Agreement") with respect to the proposed public offering of
securities issued by the Company, the undersigned intending to be legally bound
hereby agrees that for a period commencing on the date hereof and ending nine
(9) months following the effective date of the registration statement (the
"Registration Statement") relating to the underwritten public offering of
securities issued by the Company, he, she or it will not, without the prior
written consent of Josephthal, directly or indirectly, issue, offer to
sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any securities issued by the
Company, including common stock or securities convertible into or exchangeable
or exercisable for or evidencing any right to purchase or subscribe for any
shares of common stock ("Securities") (either pursuant to Rule 144 of the
regulations under the Securities Act of 1933, as amended, or otherwise) whether
or not beneficially owned by the undersigned, or dispose of any beneficial
interest therein.
In addition, the undersigned agrees that for the period
commencing on the date hereof and extending twelve (12) months following the
effective date of the Registration Statement, any sales of Securities shall be
made through the Underwriter in accordance with its customary brokerage
policies, either on a principal or agency basis.
In order to enable the aforesaid covenants, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
Transfer Agent of the Company's securities with respect to any of the Company's
securities registered in the name of the undersigned or beneficially owned by
the undersigned.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York without giving effect to
the choice of law or conflicts of laws principles.
Dated: , 1996 -------------------------------
---------------- Signature
- ----------------------------- --------------------------------
Print Address Print Name
- ----------------------------- --------------------------------
Print Address Print Social Security Number or
Taxpayer I.D. Number
<PAGE>
<PAGE>
FORM OF
SNOWDANCE, INC.
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE
The purpose of the Snowdance, Inc. 1997 Stock Option Plan For
Non-Employee Directors (as set forth herein and as amended from time to time,
the "Plan") is to encourage qualified persons to become and remain directors of
Snowdance, Inc. (the "Company") and to promote the interests of the Company and
its stockholders by increasing the proprietary and vested interest of the
non-employee Directors in the growth and performance of the Company.
ARTICLE II
DEFINITIONS
2.1 "Annual Meeting" means an annual meeting of the stockholders of the
Company.
2.2 "Article" means an Article of this Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Common Stock" means the common stock, par value $0.001 per share, of the
Company.
2.5 "Director" means a member of the Board.
2.6 "Effective Date" shall have the meaning provided in Article XII.
2.7 "Eligible Director" means a Director who is not an employee of the Company
or any of its affiliates as of the date of any grant of an Option to
him/her; provided, however, that in no event shall Mr. Dan Purjes be deemed
an Eligible Director until he has served as a Director for twelve (12)
consecutive months and his first grant shall be an Annual Grant made with
respect to the Annual Meeting on or after such twelve (12) consecutive
months if he is an Eligible Director at such time.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 "Fair Market Value" of a security means, as of any applicable date:
(i) if the security is listed for trading on a national securities
exchange or the NASDAQ National Market, the closing price, regular way, of
the security as reported on the consolidated transaction reporting system
applicable to such security, or if no such reported sale of the security
shall have occurred on such date, on the next preceding date on which there
was such a reported sale, or
<PAGE>
<PAGE>
(ii) if the security is not listed for trading on a national
securities exchange or the NASDAQ National Market, but is listed on the
NASDAQ SmallCap Market, the average of the closing bid and asked prices,
regular way, on the NASDAQ SmallCap Market or, if no such prices shall have
been so reported for such date, on the latest preceding date for which such
prices were so reported.
2.10 "Grantee" means the holder of an Option or any person entitled to exercise
an Option under Article VI.
2.11 "Option" means a right to purchase Common Stock granted under this Plan.
2.12 "Prospectus" means the final prospectus dated , 1997 issued in connection
with the initial public offering of Common Stock.
2.13 "Section 16 Person" means a person who is subject to potential liability
under Section 16(b) of the Exchange Act with respect to transactions
involving equity securities of the Company.
2.14 "Term" shall have the meaning provided in Article 5.2.
ARTICLE III
ADMINISTRATION
The Plan is intended to allow Eligible Directors to receive Options and
to require no discretionary action by any administrative body with regard to any
transaction under the Plan. Subject to the provisions of the Plan, the Board
shall have the power to construe and interpret the Plan, to determine all
questions (including factual questions) arising thereunder, and to establish,
amend and rescind any rules for the administration of the Plan as it may deem
desirable; provided, however, that no such interpretation or rule shall change
those Directors eligible to receive Options, change the number of Options that
may be granted under the Plan, change the number of shares of Common Stock
subject to any Options or the terms upon which, or the times at which, or the
periods within which, such Options may be exercised. Any decision of the Board
in the administration of the Plan shall be final. No Director shall be liable
for anything done or omitted to be done by such Director or by any other
Director in connection with the Plan, except for such Director's willful
misconduct.
ARTICLE IV
AMOUNT OF COMMON STOCK
The aggregate number of shares of Common Stock in respect of which
Options may be exercised shall not exceed 150,000, subject to adjustment
pursuant to Article VII. Such shares of Common Stock shall be authorized but
unissued shares of Common Stock or treasury shares. If any Options terminate or
expire without being exercised in whole or in part, new Options may be granted
covering the shares not purchased under such lapsed Options.
-2-
<PAGE>
<PAGE>
ARTICLE V
GRANT OF OPTIONS
5.1 Grant of Options.
(a) Regular Grant. Immediately following the date of each Annual
Meeting commencing with the meeting following the close of fiscal year
1997, each Eligible Director who is first elected to serve as a Director or
who is re-elected to serve as a Director shall automatically be granted an
Option in respect of 7,500 shares of Common Stock (each, an "Annual
Grant"). For the purposes of the Plan, only Eligible Directors who attend
75% of Board and committee meetings applicable to such Eligible Director
during the fiscal year immediately preceding the applicable Annual Meeting
shall be granted an Annual Grant and shall be deemed an Eligible Director
for such purposes.
(b) Initial Grant. Upon first election or appointment to the Board at
other than an Annual Meeting, each such newly elected or appointed Eligible
Director shall, on the date of such appointment or election, be granted an
Option to purchase a number of shares of Common Stock determined by
multiplying 7,500 by a fraction, the numerator of which is the number of
whole months until the date of the next regular grant pursuant to Section
5.1(a) and the denominator of which is 12 (the "Initial Grant"). No
Eligible Director will be awarded more than one Initial Grant.
5.2 Term of Options. Unless earlier terminated as provided herein, each Option
shall have a term of 5 years from the date of grant (the "Term").
5.3 Exercise Price. The exercise price per share of Common Stock shall (subject
to any adjustment pursuant to Article VII) be the greater of:
(a) 100% of the Fair Market Value of a share of Common Stock on the
date of grant and
(b) 100% of the initial public offering price of a share of Common
Stock as set forth in the Prospectus.
5.4 Option Agreements. Each Option shall be evidenced by an agreement in such
form as the Board shall prescribe from time to time which shall set forth
or incorporate by reference the terms and conditions of the Option.
ARTICLE VI
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<PAGE>
<PAGE>
EXERCISE OF OPTIONS
6.1 Vesting. An Option shall become exercisable, in whole or in part, on the
earlier of (i) the first anniversary of the grant date of such Option, or
(ii) death, or (iii) disability; provided in each such case that the
Grantee has remained an Eligible Director at all times since such grant
date.
6.2 Exercise. An Option shall be exercised by delivery to the Company during
the Term of the Option of (i) written notice of the exercise specifying the
number of shares of Common Stock to be purchased and (ii) payment in full
for the shares of Common Stock being acquired thereunder. Payment may be
made in cash or alternatively, if permitted by the Board at the time of
grant, the exercise price may be paid, in whole or in part, by exchanging
previously owned shares of Common Stock that have been held by the Director
for at least 6 months with a Fair Market Value equal to the portion of the
Option exercise price not elected to be paid in cash; provided that with
respect to Options granted during the nine months following the date of the
Prospectus, the exercise price shall be paid in cash only. Common Stock
tendered to the Company in satisfaction or partial satisfaction of the
exercise price of any award will increase the number of shares available
for awards except to the extent prohibited by Rule 16b-3 under the Exchange
Act.
6.3 Limitation on Transferability of Options. An Option by its terms shall not
be transferable by the Grantee other than by will or by the laws of descent
and distribution, and shall be exercisable, during the lifetime of the
Grantee, only by the Grantee.
6.4 Exercise After Termination of Directorship. If a person shall cease to be
an Eligible Director for any reason while holding an unexpired Option that
has not been fully exercised, such Option shall thereupon terminate;
provided that such person, or in the case of his death or adjudication of
incompetency, his executor, administrator, distributees, guardian or legal
representative, as the case may be, may exercise the Option (to the extent
that it was exercisable pursuant to Section 6.1 on the date the person
ceased to be an Eligible Director) at any time until the earliest to occur
of (i) one year after the date such person ceased to be an Eligible
Director, or (ii) the expiration of the Term of such Option.
6.5 Exercise after Death. If an Option is exercised by the executors,
administrators, legatees or distributees of the estate of a deceased
Grantee or by the guardian or legal representative of a Grantee, the
Company shall be under no obligation to issue Common Stock thereunder
unless it is satisfied that the person or persons exercising the Option are
the duly appointed legal representatives of the optionee or of the deceased
optionee's estate or the proper legatees or distributees of such estate, as
applicable.
ARTICLE VII
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
7.1 Adjustments. If the outstanding Common Stock is changed by reason of
reorganization, merger, consolidation, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, rights offering,
combination, spinoff, exchange of shares, or the like, an
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<PAGE>
<PAGE>
appropriate adjustment shall be made by the Board to (i) the aggregate
number of shares then-remaining available under the Plan, (ii) the number
of shares of Common Stock in respect of which Options are subsequently to
be granted, and (iii) to the extent that the following adjustments are
necessary to preserve the economic value of unexercised Options, the number
or type of shares of Common Stock subject to, and the exercise price of,
outstanding Options.
7.2 No Fractional Shares. If a fraction of a share would otherwise result from
any adjustment pursuant to Section 7.1, the adjusted share amount shall be
reduced to the next lower whole number.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. The expenses of the Plan shall be borne by the Company. Any taxes
imposed on a Grantee upon exercise of an Option shall be paid by such
Grantee.
8.2 No Right to Re-Election. Neither the Plan nor any action taken hereunder
shall be construed as giving any Director any right to be retained or
re-elected as a Director.
8.3 Securities Registration. The Company shall not be obligated to deliver any
shares of Common Stock hereunder until such shares have been listed on each
securities exchange or national market system on which the Common Stock may
then be listed, and until there has been compliance with such state or
federal laws as the Company may deem applicable.
8.4 Taxes. The Company shall not be required to issue shares of Common Stock
upon the exercise of an Option unless the Grantee first pays to the Company
such amount, if any, as may be requested by the Company to satisfy any
liability to withhold federal, state, local or foreign income or other
taxes relating to such exercise.
8.5 Rights as Stockholder. A Grantee shall not by reason of any Option have any
right as a stockholder of the Company with respect to the shares of Common
Stock which may be deliverable upon exercise of such Option until such
shares have been delivered to him.
8.6 Severability. If all or any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not
declared to be unlawful or invalid. Any Article or part of an Article so
declared to be unlawful or invalid shall, if possible, be construed in a
manner which gives effect to the terms of such Article or part of an
Article to the fullest extent possible while remaining lawful and valid.
8.7 Applicable Law. The law of Delaware, except its law with respect to choice
of law, shall be controlling in all matters relating to the Plan, except to
the extent that such laws are preempted by the federal laws of the United
States of America.
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<PAGE>
<PAGE>
ARTICLE IX
AMENDMENT
9.1 Amendment. The Board may amend or revise the Plan in whole or in part at
any time; provided, however, that:
(i) no amendment of the Plan shall adversely affect the rights of any
Grantee under an Option without the consent of such Grantee;
(ii) subject to section 7.1, the following amendments or revisions
shall be subject to approval of the holders of a majority of the Company's
outstanding capital stock:
(a) an increase in the number of shares of Common Stock as to
which Options may be granted;
(b) a change in the number of shares of Common Stock which may be
optioned to any single individual;
(c) the vesting conditions, terms of exercisability, timing,
amount or exercise price of Options;
(d) an extension of the term of the Plan or the term of an Option
previously granted;
(e) a change in the class of individuals eligible to be granted
an Option; or
(f) any change which requires an amendment of the Company's
Certificate of Incorporation; and
(iii) any amendment or revision of the Plan, subject to the provisions
of Section 9.1(i) and (ii) above, shall be subject to the approval of the
holders of a majority of the shares of Common Stock present and entitled to
vote at a meeting of the Company's stockholders to the extent that such
approval is required by the listing requirements of any securities exchange
or national market system on which are then listed the Company's equity
securities.
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<PAGE>
<PAGE>
ARTICLE X
APPROVAL OF PLAN
This Plan shall be contingent on the approval thereof by the
stockholders of the Company no later than the first Annual Meeting of
Stockholders held after the adoption by the Board of the Plan. No Option granted
hereunder shall be effective, nor shall any such Option be exercised or any
shares of Common Stock issued or purchased hereunder, prior to the approval of
the Plan by the stockholders of the Company.
ARTICLE XI
TERMINATION
The Plan shall terminate on the day following the tenth Annual Meeting
at which Directors are elected, unless sooner terminated by the Board. Any
termination of the Plan shall not affect any Option then outstanding.
ARTICLE XII
EFFECTIVE DATE
The Plan shall become effective on _______________ __, 1997.
Executed this ___ day of _________, 1997.
SNOWDANCE, INC.
By: _________________________________
Title: _________________________________
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<PAGE>
<PAGE>
SNOWDANCE, INC.
ROUTE 44
P.O. BOX 699
BROWNSVILLE, VT 05037
802-484-7000
September 26, 1997
Westerly Resorts Group, Inc.
70 Main Street
New Canaan, CT 06840
Attention: James P. Graves
Re: Ascutney Mountain Resort
Gentlemen:
This Letter of Intent sets forth the preliminary understanding of
Snowdance, Inc., a Delaware corporation ("Snowdance"), and Westerly Resorts
Group, Inc., a U.S. Virgin Islands corporation ("Westerly"), regarding the
formation of a joint venture to offer weekly vacation ownership intervals
("VOIs") in the Ascutney Mountain Resort Hotel in Brownsville, Vermont, on
substantially the terms set forth on Exhibit A attached hereto. This Letter of
Intent is subject to the terms and conditions of definitive agreements
(satisfactory to the parties and their respective counsel) containing
substantially the terms of Exhibit A as well as other customary and desirable
terms and conditions.
If the foregoing meets with your approval, kindly sign this Letter of
Intent in the space provided below.
Yours very truly,
SNOWDANCE, INC.
By:
_____________________________
ACCEPTED AND AGREED:
WESTERLY RESORTS GROUP, INC.
By:
__________________________
Name:
__________________________
Title:
__________________________
Date:
___________________________
<PAGE>
<PAGE>
September 26, 1997
Exhibit A
Snowdance, Inc./Westerly Resorts Group, Inc.
Timeshare Joint Venture Preliminary Terms
1. Structure. Snowdance, Inc. ("Snowdance") and Westerly Resorts
Group, Inc. ("Westerly") intend to form a joint venture (the "Joint Venture") to
offer weekly vacation ownership intervals ("VOIs") in the Ascutney Mountain
Resort Hotel (the "Hotel"). The parties intend that the Joint Venture be
structured as a Delaware limited liability company or such other entity as the
parties may mutually agree upon.
2. Resort Director Responsibilities.
(a) Snowdance will act as the manager (the "Resort Director"), and be
responsible for the management, of the operations of the Hotel and the Ascutney
Mountain Resort before, during and after the term of the Joint Venture.
(b) Snowdance will fund the refurbishment of the Hotel units as
reasonably determined to by Snowdance.
(c) Resort Director will make available suitable sales office space at
the Resort as reasonably determined by Resort Director.
(d) Resort Director will make available for purchase "mini vacation"
and other reasonable promotions as the Resort Director and the Marketing
Director (as defined in Section 3 below) may agree upon, including preliminarily
rooms in the Hotel at approximately 50% of published rates, food and beverage
services at approximately 70% of published prices and ski lift tickets at
approximately $20 per ticket for the 1997-1998 winter season.
3. Marketing Director Responsibilities.
(a) Westerly will act as the manager (the "Marketing Director"), and
be responsible, for the marketing and sale of all VOIs including but not limited
to the preparation and implementation of a marketing plan and marketing programs
as well as the hiring, training and compensation of all sales representatives
and/or sales persons.
(b) Marketing Director will fund all operations of the Joint Venture,
including but not limited to any losses of the Joint Venture.
(c) Marketing Director will be responsible for administering the
timeshare operations of the Joint Venture, including preparation and completion
of all purchase and sales agreements for VOIs, as well as reporting on a regular
basis to the members of the Joint Venture regarding the progress of the Joint
Venture, its financial condition and results of operations.
(d) Marketing Director will negotiate and enroll the Joint Venture
with a recognized timeshare exchange company reasonably acceptable to the
Marketing Director and the Resort Director.
4. Revenues, Profits and Distributions.
(a) The Joint Venture will pay to Snowdance a fixed 25% of the gross
sales price of each VOI sold by the Joint Venture.
(b) After payment and/or reimbursement for all other expenses of the
Joint Venture (as reasonably approved by the Resort Director and the Marketing
Director), all net profits of the Joint Venture will be shared and distributed
as follows:
Snowdance 67.5%
Westerly 32.5%
<PAGE>
<PAGE>
Provided, however,
(i) During the first 90 days from commencement of the operations
of the Joint Venture, if actual expenses of the Joint Venture
exceed 60% of the gross sales of the Joint Venture (as determined
for such period as the Resort Director and Marketing Director
shall agree), then for purposes of calculating Snowdance's share
of the net profits of and distributions from the Joint Venture,
the expenses of the Joint Venture will be assumed to be 60% of
gross sales;
(ii) If actual expenses of the Joint Venture exceed 50% of the
gross sales of the Joint Venture (as determined for such period
as the Resort Director and Marketing Director shall agree), then
for purposes of calculating Snowdance's share of the net profits
of and distributions from the Joint Venture, the expenses of the
Joint Venture will be assumed to be 50% of gross sales and
(iii) If actual expenses of the Joint Venture are less than 43%
of the gross sales of the Joint Venture (as determined for such
period as the Resort Director and Marketing Director shall
agree), then for purposes of calculating Snowdance's share of the
net profits of and distributions from the Joint Venture, the
expenses of the Joint Venture will be assumed to be 43% of gross
sales.
(c) Sample Scenario Analysis
<TABLE>
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Actual Joint Venture Expenses 40.00% 45.00% 50.00% 55.00% 60.00%
- --------------------------------------------------------------------------------------------------------------------------
Snowdance Percentage of Gross 46.60% 45.25% 41.88% 41.88% 41.88%
Sales of VOIs (including 25% fixed
payment to Snowdance for VOIs)
- --------------------------------------------------------------------------------------------------------------------------
Westerly Percentage of Gross Sales 13.40% 9.75% 8.12% 3.12% -1.88%
of VOIs
==========================================================================================================================
</TABLE>
(d) The payment set forth in Section 4(a) and the distribution of net
profits to the members of the Joint Venture will occur upon such times as the
Resort Director and the Marketing Director shall agree.
<PAGE>
<PAGE>
EXHIBIT 23.1
The accompanying financial statements give effect to the consummation of
the Combination as described in Note 1 to the financial statements. The
following consent is in the form that will be furnished by Deloitte & Touche LLP
upon consummation of the Combination assuming that no other material events have
occurred that would affect the accompanying financial statements or required
disclosures therein.
DELOITTE & TOUCHE LLP
New York, New York
September 30, 1997
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Snowdance, Inc. on
Form SB-2 of our report dated July 11, 1997 (October , 1997 as to Note 1),
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings 'Selected
Financial Data' and 'Experts' in such Prospectus.
New York, New York
September 30, 1997
<PAGE>
<PAGE>
FORM OF DIRECTOR CONSENT
I, ________________, do hereby consent to the use of my name in the
Registration Statement on Form SB-2 to be filed by Snowdance, Inc. on
September , 1997 in connection with the issuance of 1,000,000 shares of its
Common Stock.
------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 38,480 34,341
<SECURITIES> 0 0
<RECEIVABLES> 183,929 115,330
<ALLOWANCES> 8,000 8,000
<INVENTORY> 47,402 34,061
<CURRENT-ASSETS> 295,048 219,835
<PP&E> 1,560,954 1,576,639
<DEPRECIATION> 350,578 412,832
<TOTAL-ASSETS> 1,589,366 1,515,927
<CURRENT-LIABILITIES> 1,157,496 760,178
<BONDS> 2,481,025 2,945,146
<COMMON> 2,500 2,500
0 0
0 0
<OTHER-SE> (2,051,655) (2,191,897)
<TOTAL-LIABILITY-AND-EQUITY> 1,589,366 1,515,927
<SALES> 3,983,218 2,365,325
<TOTAL-REVENUES> 4,003,507 2,365,908
<CGS> 2,767,125 1,321,548
<TOTAL-COSTS> 5,260,363 2,457,796
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 8,000 0
<INTEREST-EXPENSE> 243,963 108,579
<INCOME-PRETAX> (1,500,819) (200,467)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 3,983,218 2,365,325
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,500,819) (200,467)
<EPS-PRIMARY> (.60) (.08)
<EPS-DILUTED> 0 0
<PAGE>
