<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1995
------------------
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-2374
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CRYSTAL MOUNTAIN, INC.
----------------------
(Exact name of registrant as specified in its charter)
WASHINGTON
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(State of Incorporation)
91-0683256
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(IRS Employer
Identification No.)
ONE CRYSTAL MOUNTAIN BLVD, CRYSTAL MOUNTAIN, WASHINGTON 98022
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(Address of principal executive offices)
Registrant's telephone number, including area code: (360) 825-3865
--------------
Securities registered under Section 12(b) of the Act:
None
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Securities registered pursuant of Section 12(g) of the Act:
Class A. Common Stock, par value $50 with lift ticket privilege.
----------------------------------------------------------------
(Title of class)
Class B. Common Stock, par value $20 with lift ticket privilege.
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(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes /X/ No / /
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $9,272,000.
<PAGE> 2
As of October 31, 1995 there were 26,609 Class A and 710 Class B common shares
outstanding, of which 26,256 shares of Class A and 710 shares of Class B are
held by non-affiliates. Aggregate market value of Class A voting stock held by
non-affiliates of the registrant as of October 31, 1995 is $8,533,200.
The aggregate market value of the Class B common stock cannot be determined
since there is no market for the sale or exchange of shares.
Documents incorporated by reference:
Annual report to security holders for fiscal year ended
September 30, 1995 filed November 11, 1995
Proxy statement filed November 11, 1995
Transitional Small Business Disclosure
Format (Check one) Yes No X
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<PAGE> 3
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C> <C>
Part I:
Item 1 - Desccription of Business Pages 3-5 of the Fiscal 1995 Annual
Report to Shareholders for the year
ended September 30, 1995.
Item 2 - Description of Property Pages 3-5 of the Fiscal 1995 Annual
Report to Shareholders for the year
ended September 30, 1995.
Part II:
Item 5 - Market for Common Equity and Page 1 of the Fiscal 1995 Annual
Related Stockholder Matters Report to Shareholders for the year
ended September 30, 1995.
Item 6 - Management's Discussion and Pages 15-16 of the Fiscal 1995 Annual
Analysis or Plan of Operation Report to Shareholders for the year
ended September 30, 1995.
Item 7 - Financial Statements Pages 6-14 of the Fiscal 1995 Annual
Report to Shareholders for the year
ended September 30, 1995.
Item 8 - Changes In and Disagreements Page 8 of the Registrant's definitive
with Accountants on Accounting and Proxy Statement for its 1994 and 1995
Financial Disclosure Annual Meeting of Shareholders.
Part III:
Item 9 - Directors, Executive Officers, ) Registrant's definitive Proxy Statement
Promotors and Control Persons, ) for its 1995 Annual Meeting of
Compliance with Sector 16(a) ) Shareholders which involves the
of the Exchange Act ) election of directors and which will be
) filed with the Commission within 120
Item 10 - Executive Compensation ) days after the close of the fiscal year.
)
Item 11 - Security Ownership of )
Certain Beneficial Owners )
and Management )
)
Item 12 - Certain Relationships and )
Related Transactions )
</TABLE>
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Information required with respect to description of the Registrant's business is
incorporated by reference to pages 3 through 5 of the Fiscal 1995 Annual Report
to Shareholders.
ITEM 2. DESCRIPTION OF PROPERTY
Information required with respect to the Registrant's property is incorporated
by reference to pages 3 through 5 of the Fiscal 1995 Annual Report to
Shareholders.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various personal injury lawsuits arising in the
ordinary course of business, none of which, if resolved against the Company,
would have a material adverse impact on the operations or results of the
Company. The Company has liability insurance which will cover pending litigation
claims. The Company's deductible under its liability insurance policies on any
single claim is $50,000 up to a maximum of $150,000 for all claims in any single
year. The Company is not a party to any other pending or known legal proceedings
governmental or otherwise.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required with respect to the Registrant's common stock and related
shareholder matters is incorporated herein by reference to the caption entitled
"Shareholder Information" on Page 1 of the Fiscal 1995 Annual Report to
Shareholders.
<PAGE> 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Information required with respect to the Registrant's financial condition,
changes in financial condition, and results of operations is incorporated herein
by reference to Pages 15 through 16 of the Fiscal 1995 Annual Report to
Shareholders.
ITEM 7. FINANCIAL STATEMENTS
The required financial statements are incorporated herein by reference to Pages
6 through 14 of the Fiscal 1995 Annual Report to Shareholders.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The information concerning Changes In and Disagreements with Accountants On
Accounting and Financial disclosures required by Item 8 of Form 10-KSB is set
forth under the caption "Accountants" on Page 8 of the Registrant's definitive
Proxy Statements for the 1994 and 1995 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this report and
is incorporated herein by reference.
The Company employed Langlow, Tolles & Co., P.S., as its independent public
accountants during the past fiscal year from October 1, 1993 to August 9, 1994.
Langlow Tolles was dismissed as accountants for the Company on August 9, 1994
and Moss Adams was employed as its accountants on that date. The change in
accountants was recommended by the Budget/Audit/Finance Committee and approved
by the Board of Directors. During the two most recent fiscal years, there were
no disagreements with the former accountants on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure. The principal accountant's report on the financial statements has
never contained an adverse opinion or a disclaimer of opinion, or been modified
as to uncertainty, audit scope, or accounting principles.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
The information concerning Directors required by Item 9 of Form 10-KSB is set
forth under the caption "Election of Directors" on Page 3 of the Registrant's
definitive Proxy Statement for the 1995 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this report and
is incorporated herein by reference.
Information required with respect to Registrant's executive officers is
incorporated herein by reference to Pages 6 through 7 of the Registrant's
definitive Proxy Statement for its 1995 Annual Meeting of Shareholders which
will be filed with the Commission within 120 days after the close of the fiscal
year.
The executive officers of the Corporation who are not directors are listed in
the following table with a description of their occupations for the past five
years:
<TABLE>
<CAPTION>
Principal Occupation During
Name Age Position Last Five Years
- ---- --- -------- ---------------------------
<S> <C> <C> <C>
Peter G. Gillis 40 V.P. Mountain Mr. Gillis joined Crystal Mountain in 1990
Operations as Vice President of Mountain Operations.
Prior to Crystal, he worked as the
assistant General Manager for Bretton Woods
Ski Area in New Hampshire from 1987 through
1990.
</TABLE>
ITEM 10. EXECUTIVE COMPENSATION
The information concerning Executive Compensation required by Item 10 of Form
10-KSB is set forth under the caption "Executive Compensation" on Pages 7
through 8 of the Registrant's definitive Proxy Statement for the 1995 Annual
Meeting of Shareholders to be filed pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this report and is incorporated herein by reference.
Effective October 1, 1994 the Vice President of Mountain Operations, Peter G.
Gillis was covered by a Deferred Compensation Contract by which the Company
contributes cash to a special account that will be available to Mr. Gillis when
his employment terminates. The Company contributed $6,500 to the account for the
year ended September 30, 1995.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 11 of Form 10-KSB is set forth under the
caption "Voting Securities and Principal Holders Thereof" on Page 2 of the
Registrant's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 12 of Form 10-KSB is set forth under the
caption "Certain Relationships and Related Transactions" on Page 8 of the
Registrant's definitive Proxy Statement for the 1995 Annual meetings of
Shareholders to be filed pursuant to Regulation 14A with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report and is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following are filed as part of this report:
(1) Financial Statements
See Annual Report to Shareholders incorporated by reference.
<TABLE>
<CAPTION>
Page in Annual
Report to Shareholders
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<S> <C>
Financial Statements Index:
Independent Auditors' Report 14
Balance Sheet as of September 30, 1995 and 1994 6
Statement of Operations for the years ended
September 30, 1995 and 1994 7
Statement of Cash Flows for the years ended
September 30, 1995 and 1994 8
Statement of Changes in Stockholders' Equity for the
years ended September 30, 1995 and 1994 9
Notes to the Financial Statements 9-14
</TABLE>
(2) Exhibits: See subparagraph (c) below
(b) There were no reports filed on Form 8-K during the fiscal year ended
September 30, 1995.
(c) See Exhibit Index on Pages 9 and 10
<PAGE> 8
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Commission Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Crystal Mountain, Inc.
(Registrant)
/s/ Thomas F. Leonard
- -----------------------------------
THOMAS F. LEONARD
President
/s/ PETER G. GILLIS
- -----------------------------------
Peter G. Gillis
Vice President, Mountain Operations
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ ROBERT E. CARLSON
- -------------------------- Chairman of the Board,
E. Carlson Director December 11, 1995
/s/ W. DAVID SCHODDE, JR.
- -------------------------- Vice Chairman of
W. David Schodde, Jr. the Board, Director December 11, 1995
/s/ THOMAS F. LEONARD
- --------------------------
Thomas F. Leonard President and Director December 11, 1995
/s/ LAWRENCE E. HARD
- --------------------------
Lawrence E. Hard Secretary and Director December 11, 1995
/s/ DELIGHT S. MAHALKO
- --------------------------
Delight S. Mahalko Treasurer and Director December 11, 1995
</TABLE>
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<TABLE>
<S> <C> <C>
/s/ WILLIAM S. COGHILL
- --------------------------
William S. Coghill Director December 11, 1995
/s/ NANCY K. DEES
- --------------------------
Nancy K. Dees Director December 11, 1995
/s/ PETER F. DELAUNAY
- --------------------------
Peter F. DeLaunay Director December 11, 1995
/s/ ROBERT J. DIERCKS
- --------------------------
Robert J. Diercks Director December 11, 1995
/s/ WILLILAM W. JEUDE
- --------------------------
William W. Jeude Director December 11, 1995
/s/ JAMES C. MARTINSON
- --------------------------
James C. Martinson Director December 11, 1995
/s/ DAVID W. GOSSARD
- --------------------------
David W. Gossard Director December 11, 1995
</TABLE>
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
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<S> <C>
1.1 * Form of best efforts underwriting agreement
1.2 * Form of supplement to underwriting agreement
3.1 * Articles of incorporation
3.2 * Bylaws
5.1 * Opinion of LeSourd & Patten, P.S.
5.2 * IRS determination letter as to the qualification of the
401(k) plan
8.1 * Opinion of LeSourd & Patten, P.S.
8.2 * Opinion of LeSourd & Patten, P.S.
10.1 * Term note with Seattle Trust and Savings Bank dated
August 14, 1985
10.2 * Term note with Seattle Trust and Savings Bank dated
July 9, 1986
10.3 * Revolving promissory note with Seattle Trust and
Savings Bank dated March 1, 1987
10.4 * Loan agreement with Seattle Trust and Savings
Bank dated June 30, 1985, with amendments
10.5 * Security agreement for liabilities to Seattle Trust and
Savings Bank
10.6 * Deed of trust, security agreement and assignment for
term note and revolving promissory note
10.7 * Employment contract with Thomas F. Leonard
10.8 * Thirty-year term special use United States Forestry
Service permit issued April 6, 1962
10.9 * Year-to-year United States Forest Service permit
issued April 9, 1962
10.10 * Form of Escrow Agreement with Key Trust Company
of the Northwest
10.11 * Form of Subscription Agreement with Harber,
McLean & Co. (California and Washington residents)
10.12 * Form of Subscription Agreement (existing with
shareholders residing in states other than Washington
and California)
10.13 * Loan Commitment from Key Bank of Puget Sound
dated January 7, 1988
10.14 * Forty-year ski area term special use United States Forest
Service permit issued April 1, 1992
10.15 * Lease agreements between the Company and Zion
Credit Corporation dated September 30, 1993
10.16 * Lease agreement between the Company and
National Lease Financing Services dated June 7, 1994
10.17 * Term note with Seattle First National Bank dated
October 5, 1990
</TABLE>
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<TABLE>
<S> <C>
10.18 * Amendments to term note with Seattle First National Bank
10.19 * Letter dated October 24, 1994 from Seattle First
National Bank to the Company waiving certain matters
related to term note between Seattle First National Bank
and the Company
10.20 * Crystal Mountain 401(k) Retirement Savings Plan dated
January 1, 1991
10.21 Term note with Seafirst Bank dated September 14, 1995
10.22 Lease agreement between the Company and the
CIT Group/Equipment Financing, Inc. dated
December 7, 1994
10.23 Employment agreement with Thomas F. Leonard dated
February 2, 1995
10.24 Deferred compensation plan and agreement with
Thomas F. Leonard dated February 2, 1995
10.25 Employment agreement with Peter G. Gillis dated
February 25, 1995
10.26 Deferred compensation plan agreement with
Peter G. Gillis dated February 2, 1995
10.27 Letter dated November 7, 1995 from Seattle First National
Bank to the Company waiving certain matters related to the
term note between Seattle First National Bank and the
Company
13.1 * Annual report to security holders dated September
30, 1994
13.2 Annual report to security holders dated September 30,
1995.
15.1 * Letter of Langlow Tolles & Company, P.S. regarding
unaudited interim financial information
16.1 * Letter from the Registrant's former independent
accountant
22.1 * Proxy Statement for annual meeting of shareholders
23.1 * Consent of LeSourd & Patten, P.S.
23.3 * Consent of Langlow Tolles & Company, P.S.
23.4 * Consent of Garvey, Schubert & Barer
24.1 * Power of attorney
27.1 Financial Data Schedule Fiscal Year Ended
September 30, 1995
28.1 * Master plan for Crystal Mountain Resort
</TABLE>
* Previously filed
<PAGE> 1
================================================================================
EXHIBIT 10.21
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
between
SEATTLE-FIRST NATIONAL BANK,
as Lender,
and
CRYSTAL MOUNTAIN, INC.,
as Borrower.
Dated as of the 14th day of September, 1995.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I DEFINITIONS.................................................. 1
Section 1.1 Certain Defined Terms..................................... 1
Section 1.2 Accounting Terms.......................................... 7
ARTICLE II THE LOANS.................................................... 7
Section 2.1 The Loans................................................. 7
Section 2.2 Manner of Initial Borrowing............................... 7
Section 2.3 Repayment of Principal.................................... 8
Section 2.4 Revolving Feature of Loans................................ 9
Section 2.5 Interest.................................................. 9
ARTICLE III GENERAL PROVISIONS........................................... 13
Section 3.1 Promissory Notes.......................................... 13
Section 3.2 Prepayment................................................ 13
Section 3.3 Manner of Payments........................................ 13
ARTICLE IV CONDITIONS OF LENDING........................................ 14
Section 4.1 Conditions to Initial Loan................................ 14
Section 4.2 Conditions to All Loans................................... 15
ARTICLE V REPRESENTATIONS AND WARRANTIES............................... 16
Section 5.1 Corporate Existence and Power............................. 16
Section 5.2 Corporate Authorization................................... 16
Section 5.3 Government Approvals, Etc................................. 16
Section 5.4 Binding Obligations, Etc.................................. 16
Section 5.5 Litigation................................................ 16
Section 5.6 Financial Condition....................................... 17
Section 5.7 Title and Liens........................................... 17
Section 5.8 Taxes..................................................... 17
Section 5.9 Federal Reserve Regulations............................... 18
Section 5.10 ERISA..................................................... 18
Section 5.11 Permit Status............................................. 18
Section 5.12 Representations as a Whole................................ 18
ARTICLE VI AFFIRMATIVE COVENANTS........................................ 18
Section 6.1 Use of Proceeds........................................... 18
Section 6.2 Preservation of Corporate Existence, Etc.................. 18
Section 6.3 Visitation Rights......................................... 19
Section 6.4 Keeping of Books and Records.............................. 19
Section 6.5 Compliance With Laws; Maintenance of
Permits................................................... 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 6.6 Other Obligations......................................... 19
Section 6.7 Financial Information..................................... 19
Section 6.8 Notification.............................................. 20
Section 6.9 Additional Payments; Additional Acts...................... 20
Section 6.10 Tangible Net Worth........................................ 21
ARTICLE VII NEGATIVE COVENANTS........................................... 21
Section 7.1 Dividends, Purchase of Stock, Etc......................... 21
Section 7.2 Liquidation, Merger, Sale of Assets....................... 22
Section 7.3 Indebtedness.............................................. 22
Section 7.4 Guaranties, Etc........................................... 22
Section 7.5 Investments............................................... 22
Section 7.6 Liens..................................................... 23
Section 7.7 Capital Expenditures...................................... 23
Section 7.8 Operations................................................ 23
ARTICLE VIII EVENTS OF DEFAULT............................................ 23
Section 8.1 Events of Default......................................... 23
Section 8.2 Consequences of Default................................... 26
ARTICLE IX MISCELLANEOUS................................................ 26
Section 9.1 No Waiver; Remedies Cumulative............................ 26
Section 9.2 Governing Law............................................. 27
Section 9.3 Mandatory Arbitration..................................... 27
Section 9.4 Notices................................................... 28
Section 9.5 Assignment................................................ 28
Section 9.6 Severability.............................................. 28
Section 9.7 Conditions Not Fulfilled.................................. 28
Section 9.8 Entire Agreement; Amendment............................... 28
Section 9.9 Release of Collateral..................................... 28
Section 9.10 Construction.............................................. 29
Section 9.11 Counterparts.............................................. 29
</TABLE>
Exhibits:
- --------
EXHIBIT A - NOTE
EXHIBIT B - AMENDMENT NUMBER TWO TO DEED OF TRUST,
SECURITY AGREEMENT AND ASSIGNMENT OF
PERMITS AND CONTRACT RIGHTS, LEASES AND RENTS
EXHIBIT C - AMENDMENT NUMBER TWO TO SECURITY AGREEMENT
EXHIBIT D - AMENDMENT NUMBER TWO TO ASSIGNMENT IN TRUST
OF SPECIAL USE PERMIT
EXHIBIT E - AMENDMENT NUMBER TWO TO ASSIGNMENT IN TRUST
OF TERM SPECIAL USE PERMIT
EXHIBIT F - LEGAL OPINION
EXHIBIT G - INTEREST RATE NOTICE
ii
<PAGE> 4
Schedules:
- ---------
SCHEDULE 1 REINVESTMENT ALLOWANCE
SCHEDULE 2 MAXIMUM LOAN BALANCE AS IT RELATES TO SKIP PAYMENTS
SCHEDULE 3 PREPAYMENT FEES FOR LIBOR LOANS
SCHEDULE 4 PERMITTED LIENS
iii
<PAGE> 5
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made
as of 14th day of September, 1995, between SEATTLE-FIRST NATIONAL BANK, as
Lender, and CRYSTAL MOUNTAIN, INC., as Borrower.
RECITALS
WHEREAS, Lender and Borrower entered into a First Amended and Restated
Loan Agreement dated as of October 5, 1990 (the "Prior Loan Agreement"),
pursuant to which Lender agreed to make certain revolving credit and term loans
to Borrower; and
WHEREAS, Lender and Borrower now desire to amend and restate the Prior
Loan Agreement as hereinafter set forth.
NOW, THEREFORE, Lender and Borrower agree to amend and restate the
terms and conditions of the Prior Loan Agreement as follows:
I
DEFINITIONS
I.1 Certain Defined Terms. As used in this Agreement, the following
terms have the following meanings, which apply to both the singular and plural
forms of the terms defined:
"Additional Loan Documents" means this Agreement, the Note,
Amendment Number Two to Deed of Trust, Amendment Number Two to Security
Agreement, Amendment Number Two to Assignment in Trust of Special Use Permit,
and Amendment Number Two to Assignment in Trust of Term Special Use Permit.
"Adjusted LIBOR Rate" shall mean, with respect to any LIBOR Loan
for any Applicable Interest Period, an interest rate per annum equal to the
LIBOR Margin plus a fraction whose numerator is the applicable LIBOR Rate and
whose denominator is 1 minus the sum stated as a decimal of any basic,
supplemental, marginal, emergency or other reserve, if any, required to be
maintained against "Eurocurrency liabilities" as specified in Regulation D of
the Board of Governors of the Federal Reserve System.
<PAGE> 6
"Amendment Number Two to Assignment in Trust of Special Use Permit"
means that certain Amendment Number Two to Assignment in Trust of Special Use
Permit, in substantially the form of Exhibit D hereto, dated as of the date of
this Agreement, executed by Borrower and the U.S. Forest Service, amending the
Assignment in Trust of Special Use Permit, together with the Consent to
Assignment in Trust executed by the U.S. Forest Service in connection with such
amendment.
"Amendment Number Two to Assignment in Trust of Term Special Use
Permit" means that certain Amendment Number One to Assignment in Trust of
Special Use Permit, in substantially the form of Exhibit E hereto, dated as of
the date of this Agreement, executed by Borrower amending the Assignment in
Trust of Term Special Use Permit, together with the Consent to Assignment in
Trust executed by the U.S. Forest Service in connection with such amendment.
"Amendment Number Two to Deed of Trust" means that certain
Amendment Number Two to Deed of Trust, Security Agreement and Assignment of
Permits and Contracts Rights, Leases and Rents, in substantially the form of
Exhibit B hereto, dated as of the date of this Agreement, executed by Borrower,
as grantor, in favor of Lender, as beneficiary, amending the Deed of Trust.
"Amendment Number Two to Security Agreement" means that certain
Amendment Number Two to Security Agreement, in substantially the form of Exhibit
C hereto, dated as of the date of this Agreement, executed by Borrower, as
debtor, in favor of Lender, as secured party, amending the Security Agreement.
"Applicable Interest Period" means, with respect to any Loan, the
period commencing on the date such Loan was made or continued pursuant to
Section 2.5(b) and ending:
(a) One, two, three or six months thereafter in the case of a
LIBOR Loan as specified in the Interest Rate Notice given by Borrower in respect
of such Loan;
(b) at maturity in the case of a Prime Rate Loan;
provided, however, that no Applicable Interest Period for any Loan may end later
than the expiration of the Commitment Period.
"Applicable Interest Rate" means, for each Loan (or portion of a
Loan), the Adjusted LIBOR Rate or the Prime Rate, as designated by Borrower and
specified in the Interest Rate Notice
2
<PAGE> 7
given with respect to that Loan (or portion of that Loan) or as otherwise
determined pursuant to Section 2.5(b).
"Assignment in Trust of Special Use Permit" means that certain
Assignment in Trust dated as of June 10, 1988 executed by Borrower assigning to
Lender the Special Use Permit, together with the Consent to Assignment in Trust
executed in connection therewith by the U.S. Forest Service, as such amendment
and consent may be amended from time to time including, without limitation, as
amended by that certain Amendment Number One to Assignment in Trust of Special
Use Permit dated as of October 5, 1990 and by that certain Amendment Number Two
to Assignment in Trust of Special Use Permit.
"Assignment in Trust of Term Special Use Permit" means that certain
Assignment in Trust dated as of June 10, 1988 executed by Borrower assigning to
Lender the Term Special Use Permit, together with the Consent to Assignment in
Trust executed in connection therewith by the U.S. Forest Service, as such
assignment and consent may have been or may be amended from time to time
including, without limitation, as amended by that certain Amendment Number One
to Assignment in Trust of Term Special Use Permit dated as of October 5, 1990
and by that certain Amendment Number Two to Assignment in Trust of Term Special
Use Permit.
"Assignments in Trust" means the Assignment in Trust of Special Use
Permit and the Assignment in Trust of Term Special Use Permit.
"Borrower" means Crystal Mountain, Inc., a Washington corporation,
and any Successor.
"Business Day" means a day, other than a Saturday or a Sunday, on
which banks are open for business in Seattle, Washington.
"Cash Flow" for any fiscal year shall be, for such fiscal year,
Borrower's consolidated after-federal tax Net Cash Income for such year as
determined pursuant to the Robert Morris Associates Cash Flow Analysis less the
sum of (a) $250,000 and (b) the reinvestment allowance for such year set out in
Schedule 1 and (c) required payments during such year on existing long term debt
identified on Schedule 4.
"Collateral" means all real and personal property of Borrower, now
or hereafter acquired, except that which has been
3
<PAGE> 8
released from the lien of the Security Documents pursuant to Section 9.9.
"Deed of Trust" shall mean that certain Deed of Trust, Security
Agreement and Assignment of Permits and Contract Rights, Leases and Rents dated
as of the 15th day of June, 1988, executed by Borrower, as grantor, in favor of
Lender, as beneficiary, as amended from time to time including, without
limitation, as amended by that certain Amendment Number One to Deed of Trust,
Security Agreement and Assignment of Permits and Contract Rights, Leases and
Rents dated as of October 5, 1990, and by that certain Amendment Number Two to
Deed of Trust, Security Agreement and Assignment of Permits and Contract Rights,
Leases and Rents.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" has the meaning defined in Section 8.1.
"Government Approval" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"Governmental Authority" means the government of the United States
or any State or any political subdivision of any thereof or any branch,
department, agency, instrumentality, court, tribunal or regulatory authority
which constitutes a part or exercises any sovereign power of any of the
foregoing.
"Indebtedness" means for any person (a) all items of indebtedness
or liability (except capital, surplus, deferred credits and reserves, as such)
which would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date as of which indebtedness is
determined, (b) indebtedness secured by any Lien, whether or not such
indebtedness shall have been assumed, (c) any other indebtedness or liability
for borrowed money or for the deferred purchase price of property or services
for which such person is directly or contingently liable as obligor, guarantor,
or otherwise, or in respect of which such person otherwise assures a creditor
against loss, and (d) any other obligations of such person under leases which
shall have been or should be recorded as capital leases.
"Lender" means Seattle-First National Bank, a national banking
association, and any Successor.
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"LIBOR Business Day" means any Business Day when the London
Interbank Market is open for business.
"LIBOR Loan" means any Loan or portion thereof bearing interest at
the Adjusted LIBOR Rate.
"LIBOR Margin" means a per annum interest rate equal to 2.5% above
the LIBOR Rate effective as of the date of election to convert to a LIBOR Loan,
and, if default shall occur in the payment when due of any such installment,
from the maturity of that installment until it is paid in full at a per annum
rate equal to 4% above such LIBOR Rate.
"LIBOR Rate" shall mean, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal to the offered rate
for deposits in U.S. Dollars for the Applicable Interest Period commencing on
the first day of such Applicable Interest Period (the "Reset Date") which
appears on the display designated as the "LIBO" page in the Reuter Monitor Money
Rates Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major banks) as
of 11:00 a.m., London time, on the day that is two Business Days preceding the
Reset Date. If at least two such offered rates appear on such Reuter's screen
LIBO page, the LIBOR Rate in respect of that Reset Date will be the arithmetic
mean of such offered rates. In the event such Reuters screen LIBO page is not
published, the LIBOR Rate shall be determined from an alternate,
generally-recognized source mutually agreeable to Lender and Borrower, and, in
the absence of such agreement, Borrower shall not have an option to select the
Adjusted LIBOR Rate.
"Lien" means, for any person, any security interest, pledge,
mortgage, charge, assignment, hypothecation, encumbrance, attachment,
garnishment, execution or other voluntary or involuntary lien upon or affecting
the revenues of such person or any real or personal property in which such
person has or hereafter acquires any interest, except (a) liens for taxes which
are not delinquent or which remain payable without penalty or the validity or
amount of which is being contested in good faith by appropriate proceedings upon
stay of execution of the enforcement thereof; (b) liens imposed by law (such as
mechanics' liens) incurred in good faith in the ordinary course of business
which are not delinquent or which remain payable without penalty or the validity
or amount of which is being contested in good faith by appropriate proceedings
upon stay of execution of the enforcement
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thereof; and (c) deposits or pledges under workmen's compensation, unemployment
insurance, social security or other similar laws or made to secure the
performance of bids, tenders, contracts (except for repayment of borrowed
money), or leases, or to secure statutory obligations or surety or appeal bonds
or to secure indemnity, performance or other similar bonds given in the ordinary
course of business.
"Loan" means a loan by Lender to Borrower pursuant to Article II.
"Loan Commitment" has the meaning defined in Section 2.1.
"Loan Commitment Period" has the meaning defined in Section 2.1.
"Loan Documents" means this Agreement, the Note, and the Security
Documents.
"Note" has the meaning defined in Section 3.1.
"Permits" means all now existing or hereafter issued permits
(including, without limitation, the Special Use Permit and the Term Special Use
Permit) issued by the U.S. Forest Service to Borrower providing for the use of
the lands of the Crystal Mountain Winter Sports Area, as such permits have been
amended, renewed, extended and modified to the date hereof and any future
permits issued in replacement, extension or renewal of the existing permits.
"Prime Rate" means on any day the publicly announced prime rate
charged on that day by Lender at its principal office.
"Security Agreement" means that certain Security Agreement dated as
of June 15, 1988, executed by Borrower in favor of Lender covering all personal
property of the Borrower, as such agreement may be amended from time to time
including, without limitation, as amended by that certain Amendment Number One
to Security Agreement dated as of October 5, 1990, by that certain by Amendment
Number Two to Security Agreement.
"Security Documents" shall include all of those documents pursuant
to which Lender obtains or perfects a security interest or lien on the
Collateral. Such documents shall include, with limitation, the following
documents: (a) the Deed
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of Trust; (b) the Assignments in Trust; and (c) the Security Agreement.
"Skier Days" is a basic measure in the ski industry of skier
visitations. Any type of single day skiing ticket issued, regardless of the
revenue received, counts as one skier day. For purposes of allocating skier days
to season pass holders, season pass usage is estimated according to industry
standard formulas.
"Special Use Permit" means that certain Special Use Permit No.
8509120389 issued to Borrower on April 9, 1962 by the White River Ranger
District, Snoqualmie National Forest, State of Washington, acting through the
U.S. Forest Service, as such permit may be amended, extended or renewed from
time to time.
"Successor" means, for any corporation or banking association, any
successor by merger or by consolidation, or by acquisition of substantially all
of the assets of the predecessor.
"Tangible Net Worth" has the meaning defined in Section 6.10.
"Tax" means, for any person, any tax, assessment, duty, levy,
impost or other charge imposed by any Governmental Authority on such person or
on any property, revenue, income, or franchise of such person and any interest
or penalty with respect to any of the foregoing.
"Term Special Use Permit" means that certain Term Special Use
Permit No. 8509120390 issued to Borrower on April 6, 1962 by the White River
Ranger District, Snoqualmie National Forest, State of Washington, acting for the
U.S. Forest Service, as such permit may be amended, extended or renewed from
time to time.
"Termination Date" has the meaning defined in Section 2.3(c).
"U.S. Forest Service" means United States Department of Agriculture
acting by and through the United States Forest Service.
I.2 Accounting Terms. Except as otherwise provided herein, accounting
terms not specifically defined shall be construed, and all accounting procedures
shall be performed, in accordance with
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generally accepted United States accounting principles consistently applied.
II
THE LOANS
II.1 The Loans. Lender agrees on the terms and conditions of this
Agreement to make loans (the "Loans") to Borrower from time to time on Business
Days during the period beginning on the date of execution of the Loan Agreement
dated as of June 15, 1988 between Borrower and Lender and ending on December 31,
1995 (the "Loan Commitment Period") in the aggregate principal sum of $7,000,000
(the "Loan Commitment"). The Loans shall continue to be secured by a lien on the
Collateral created by the Security Documents.
II.2. Manner of Initial Borrowing. Except as provided in Section 2.4
with respect to the revolving feature of the Loans, Loan disbursements will be
made only during the Loan Commitment Period and only in payment of expenses
incurred by Borrower for the authorized purposes described in Section 6.1. As
disbursements are required by Borrower for the foregoing purposes, Borrower
shall give Lender at least 2 Business Days prior written notice specifying the
requested date of each borrowing and the amount thereof. Such notice shall,
further, specify the expected application of the Loan proceeds and shall be
accompanied by such invoices or other proof of costs and such proof of project
completion and compliance with project budgets as Lender shall reasonably
require. Each notice shall be irrevocable and shall constitute a representation
and warranty by Borrower that as of the date of the notice the statements set
forth in Article V hereof are true and correct and that no Event of Default or
event which, with notice or lapse of time or both, would constitute an Event of
Default has occurred and is continuing.
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II.3 Repayment of Principal.
(a) Mandatory Installment Payments. Except as provided in
subparagraph (b) below, on May 31, 1996 and on each May 31st thereafter through
the May 31st next preceding the Termination Date, (each such May 31st is
hereinafter called a "Payment Date") Borrower shall pay to Lender an installment
of the principal amount of the Loans in an amount equal to the lesser of (1) the
then-outstanding principal balance of the Loans or (2) $250,000 plus (if
positive) 50% of the estimated Cash Flow for the fiscal year ending on the next
succeeding September 30th; provided, however, that in no event shall the
installment payment required pursuant to this Section 2.3(a) be more than
$750,000. On the December 31st following each Payment Date, the payments will be
adjusted either upward or downward, as necessary, to equal the amount that would
have been payable on such Payment Date based upon the actual Cash Flow for the
fiscal year ending on the September 30th immediately following the Payment Date.
Any such adjustments shall, as appropriate, either be added to or subtracted
from the then-outstanding principal balance of the Loans.
(b) Skipped Payments. In the event that, due to conditions beyond
the control of Borrower, Skier Days during the 1995-96 ski season are less than
295,000, Borrower may, in the discretion of Lender (which will not be
unreasonably withheld), skip the mandatory principal payment described in
subparagraph (a) above on the Payment Date next succeeding such ski season. At
Lender's option, on the Payment Date next following ski seasons after the
1995-96 ski season, Borrower may skip the mandatory payment required by
subparagraph (a) if (i) due to conditions beyond the control of Borrower, during
the immediately preceding ski season Borrower experienced Skier Days of less
than 295,000 and (ii) on such Payment Date the outstanding principal balance of
the Loans will be below the amount set out in Schedule 2 for such Payment Date.
Notwithstanding anything in this Section to the contrary, Borrower shall not be
entitled to skip two consecutive Payment Dates.
(c) Termination Date. Regardless of any other provision in this
Agreement to the contrary, the entire then-outstanding principal balance of the
Loans shall be due and payable on May 31, 2002, unless, pursuant to subparagraph
(b) above, Skier Days during the 2001-2002 ski season permit Borrower to skip
the payment due on May 31, 2002, in which event the
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entire then-outstanding principal balance shall be due and payable on May 31,
2003. (The date the final installment of principal is due pursuant to this
subparagraph (c) is called the "Termination Date.")
II.4 Revolving Feature of Loans. At any time, Lender will permit the
outstanding principal balance of the Loans to revolve as provided hereinafter.
If Borrower requests Lender to implement the sweep feature, cash generated from
Borrower's operations and deposited in Borrower's demand deposit account
maintained with Lender will be swept by Lender on a twice weekly basis of all
amounts in excess of $100,000 and such swept amounts shall be applied to the
then-outstanding principal balance of the Loans. As required under Section
2.3(a), the Borrower agrees to make principal payments on the Loans. Any such
payment will represent a reduction in the Loan Commitment amount, which limits
the amount available under the Loans for the next succeeding twelve months.
Borrower further agrees that for 60 consecutive days each twelve-month payment
period (June 1 - May 31 annually) they will keep the principal balance of the
Loans $2,300,000 below the Loan Commitment for the same payment period. The
failure of the Borrower to repay the Loans to the extent necessary to cause such
60-day repayment provision to occur shall constitute an Event of Default under
Section 8.1(a) hereof.
II.5 Interest. Interest
(a) Floating Rate. Unless Borrower shall have elected pursuant to
subparagraph (b) below to fix the interest rate, Borrower shall pay interest on
the unpaid principal amount of each installment of the Loans until same shall be
due and payable at a per annum rate equal to 0.5% above the Prime Rate (changing
as the Prime Rate changes) and, if default shall occur in the payment when due
of any such installment, from the maturity of that installment until it is paid
in full at a per annum rate equal to 4% above the Prime Rate (changing as the
Prime Rate changes). Accrued but unpaid interest on Loans, including Prime Rate
Loans and LIBOR Loans, shall be paid on the first day of each fiscal quarter and
on any prepayment of the Loans. Notwithstanding the foregoing, accrued interest
on any Loan shall be payable on demand after the occurrence of an Event of
Default.
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(b) LIBOR Loans.
(i) The Borrower may, on at least three LIBOR Business Days',
prior notice, elect to have interest accrue on any Loan or any portion thereof
at the Adjusted LIBOR Rate for an Applicable Interest Period. Such notice
(herein, an "Interest Rate Notice") shall be given in writing or orally and
promptly confirmed in writing and shall be deemed delivered when communicated to
Lender (in the case of an oral notice) by any one of the following individuals:
the acting or current Chairman, President, or Manager of Finance and Accounting,
or when received by Lender (in the case of written notice) except that an
Interest Rate Notice communicated to or received by Lender after 10:00 a.m.,
Tacoma time, on any Business Day, shall be deemed to have been delivered or
received on the next Business Day. Each written Interest Rate Notice and each
confirmation of an oral Notice shall be in substantially the form of Exhibit G
hereto; provided, however, that Lender may rely on any oral Interest Rate Notice
even if Lender does not receive a written confirmation. Any such Interest Rate
Notice shall be irrevocable and shall constitute a representation and warranty
by Borrower that as of the date of such Interest Rate Notice, the statements set
forth in Article V are true and correct in all material respects (subject to any
waivers of the terms thereof then in effect in accordance with the terms of this
Agreement) and that no Default or Event of Default has occurred and is
continuing.
(ii) The ability of Borrower to select the Adjusted LIBOR Rate
shall be subject to the following conditions: (i) the aggregate of all Loans to
accrue interest at the Adjusted LIBOR for any Applicable Interest Period shall
be in an amount of not less than $250,000 and an integral multiple of $100,000;
(ii) the Lender shall not have given notice pursuant to Section 2.5(c) that the
Adjusted LIBOR Rate selected by Borrower is not available; (iii) Borrower shall
not at any time have more than a total of 12 Applicable Interest Periods
relating to LIBOR loans outstanding; and (iv) no Default or Event of Default
shall have occurred and be continuing.
(iii) In the absence of an effective request for the
application of the Adjusted LIBOR Rate, the Loans or remaining portions thereof
shall accrue interest at the Adjusted Prime Rate.
(iv) The fee for such conversion privilege shall be $2,500,
which fee is payable at the time the election is made.
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(v) If Borrower delivers an Interest Rate Notice and Borrower
thereafter declines to take such Adjusted LIBOR Rate or a condition precedent to
the making of such Loan is not satisfied or waived, Borrower shall indemnify the
Lender for all losses and any costs which Lender may sustain as a consequence
thereof including, without limitation, the costs of reemployment of funds at
rates lower than the cost to Lender of such funds. A certificate of the Lender
setting forth the amount due to it pursuant to this Section 2.5(b)(v) and the
basis for, and the calculation of, such amount shall be binding evidence of the
amount due to it hereunder, absent a showing by Borrower of manifest or
demonstrable error. Payment of the amount owed shall be due within ten days
after Borrower's receipt of such certificate.
(c) Unavailable Adjusted LIBOR Rate. If, for any reason, Lender
determines that a fair and adequate means does not exist for establishing the
Adjusted LIBOR Rate or that the making or continuation of any LIBOR Loan by
Lender has become unlawful, then Lender may give notice of that fact to Borrower
and such determination shall become conclusive and binding absent a showing by
Borrower of manifest or demonstrable error. After such notice has been given and
until Lender notifies Borrower that the circumstances giving rise to such notice
no longer exist, such rate shall no longer be available. Any subsequent request
by Borrower to have interest accrue at such rate shall be deemed to be a request
for interest to accrue at the Adjusted Prime Rate. If Lender shall thereafter
determine to permit borrowing at the Adjusted LIBOR Rate, Lender shall notify
Borrower in writing of that fact, and Borrower shall then once again become
entitled to request that such rate apply to the Loans in accordance with Section
2.5(b) hereof.
(d) Compensation for Increased Costs. In the event that after the
date hereof any change occurs in any applicable law, regulation, treaty or
directive or interpretation thereof by any Governmental Authority charged with
the administration or interpretation thereof, or any condition is imposed by any
Governmental Authority after the date hereof or any change occurs in any
condition imposed by any Governmental Authority on or prior to the date hereof
which:
(i) subjects Lender to any Tax (other than any Tax measured by
Lender's net income or gross revenues), or changes the basis of taxation of any
payments to Lender on account of principal of or interest on any LIBOR Loan, the
Note
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(to the extent the Note evidences a LIBOR Loan) or fees in respect of Lender's
obligation to make LIBOR Loans or other amounts payable with respect to such
LIBOR Loans; or
(ii) imposes, modifies or determines applicable any reserve,
deposit or similar requirements against any assets held by, deposits with or for
the account of, or loans or commitments by, any office of Lender in connection
with the LIBOR Loans to the extent the amount of which is in excess of, or was
not applicable at the time of computation of, the amounts provided for in the
definition of LIBOR Rate; or
(iii) affects the amount of capital required to be maintained
by banks generally or corporations controlling banks and Lender determines the
amount by which Lender or any corporation controlling Lender is required to
maintain or increase its capital is increased by, or based upon, the existence
of this Agreement or of Lender's Loans or Commitment hereunder;
(iv) imposes upon Lender any other condition with respect to
LIBOR Loans or its obligation to make LIBOR Loans;
which, as a result thereof, (1) increases the cost to Lender of making or
maintaining the LIBOR Loans or its Commitment hereunder, or (2) reduces the net
amount of any payment received by Lender in respect of the LIBOR Loans (whether
of principal, interest, commitment fees or otherwise), or (3) requires Lender to
make any payment on or calculated by reference to the gross amount of any sum
received by it in respect of its LIBOR Loans, in each case by an amount which
any Lender in its sole judgment deems material, then and in any such case
Borrower shall pay to Lender on demand such amount or amounts as will compensate
Lender for any increased cost, deduction or payment actually incurred or made by
Lender. The demand for payment by Lender shall be delivered to Borrower within a
reasonable period after the additional cost is incurred or the amount received
is reduced or the subject payment is made, and shall state the subjection or
change which occurred or the reserve or deposit requirements or other conditions
which have been imposed upon Lender or the request, direction or requirement
with which it has complied, together with the date thereof, the amount of such
cost, reduction or payment and the manner in which such amount has been
calculated. The statement of Lender as to the additional amounts payable
pursuant to this Section 2.5(d) shall be, absent a showing by Borrower of
manifest or demonstrable error, conclusive evidence of the amounts due
hereunder.
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The protection of this Section 2.5(d) shall be available to Lender
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, treaty, directive, condition or interpretation
thereof. In the event that Borrower pays Lender the amount necessary to
compensate Lender for any charge, deduction or payment incurred or made by
Lender as provided in this Section 2.5(d) and such charge, deduction or payment
or any part thereof is subsequently returned to Lender as a result of the final
determination of the invalidity or inapplicability of the relevant law,
regulation, treaty, directive or condition, then Lender shall remit to Borrower
the amount paid by Borrower which has actually been returned to Lender (together
with any interest actually paid to Lender on such returned amount).
III
GENERAL PROVISIONS
III.1 Promissory Notes. Borrower's obligation with respect to payment
of principal of, and interest on, the Loans shall be evidenced by a promissory
note in the form of Exhibit A hereto (collectively, the promissory note, as
amended, extended or renewed from time to time, shall be called the "Note").
III.2 Prepayment. Any Loan may be prepaid at any time. No prepayment
fee shall be assessed in connection with the prepayment of any Loan other than a
Loan after same has been converted to a LIBOR Loan pursuant to Section 2.5(b).
If such a LIBOR Loan is paid prior to the end of the Applicable Interest Period,
a prepayment fee computed in the manner set out in Schedule 3 shall be assessed
and paid at the time of such prepayment. Such fee shall apply in all
circumstances where any installment of the LIBOR Loan is paid prior to the end
of the Applicable Interest Period, regardless of whether such payment is
voluntary, mandatory or the result of Lender's collection efforts.
III.3 Manner of Payments.
(a) Except as otherwise provided herein, all payments of principal
and interest on any Loan and all other amounts payable hereunder by Borrower to
Lender shall be made by paying the same in immediately available funds to Lender
at its Tacoma Commercial Banking Office not later than 10:00 a.m. on the date on
which such payment shall become due.
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(b) Borrower hereby authorizes Lender, if and to the extent any
payment is not promptly made pursuant to this Agreement, to charge from time to
time against any or all of the accounts of Borrower with Lender any amount due
hereunder or under the Note.
(c) All computations of interest and fees shall be made on the
basis of a year of 365 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or fees are payable; provided, however, that, if Borrower elects pursuant to
Section 2.5(b) to fix the interest rate on the Loans, such LIBOR Rate shall be
computed on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
(d) Whenever any payment hereunder shall be stated to be due or
whenever the last day of any interest period would otherwise occur on a day
other than a Business Day, such payment shall be made and the last day of such
interest period shall occur on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of payment
of interest or commitment fees, as the case may be, unless such extension would
cause such payment to be made or the last date of such interest period to occur
in the next following calendar month, in which case such payment shall be made
and the last day of such interest period shall occur on the next preceding
Business Day.
IV
CONDITIONS OF LENDING
IV.1 Conditions to Initial Loan. In addition to the conditions set
forth in Section 4.2, the obligation of Lender to make the initial Loan after
the date hereof is subject to fulfillment of the following conditions:
(a) Loan Documents. Lender shall have received all of the
Additional Loan Documents, duly executed and delivered.
(b) Corporate Certificates. Lender shall have received all of the
following, each satisfactory to Lender in form and substance:
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(i) Certified copies of the Articles of Incorporation and
Bylaws of Borrower;
(ii) Certificate of good standing dated as of a recent date
issued by the Secretary of State of Washington with respect to Borrower;
(iii) Certified copies of resolutions adopted by the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents to which it is a party; and
(iv) Incumbency certificates describing the office and
identifying the specimen signatures of the individuals signing the Loan
Documents on behalf of Borrower.
(c) Legal Opinion. Lender shall have received a legal opinion of
the law firm of LeSourd & Patten, counsel to Borrower, substantially in the form
of Exhibit F hereto and as to such other matters as Lender may reasonably
request.
(d) Certificate. Lender shall have received a certificate of
Borrower's chief financial officer or president as to the accuracy of Borrower's
representations and warranties set forth in Article V.
(e) Insurance. Lender shall have been furnished with evidence
satisfactory to Lender that all insurance required by the Security Documents is
in full force and effect and that Lender's rights therein, as contemplated
hereby or by the Security Documents, have been perfected.
(f) Priority of UCC Financing Statements. Certificates from the
Secretaries of State of the States of Washington as to the due filing and first
priority, except as otherwise disclosed on Schedule 4 hereto, of the UCC
financing statements executed by Borrower, as Debtor, in favor of Lender, as
Secured Party, describing the personal property Collateral.
(g) Title Guarantee. Lender shall have obtained, at Borrower's
expense, a modification of the title insurance insuring the Deed of Trust to
include an ALTA modification endorsement, which modified policy shall insure
that the Deed of trust is a first and valid lien on the subject property subject
only to such exceptions as Lender shall find acceptable.
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IV.2 Conditions to All Loans. The obligation of Lender to fund any
Loans hereunder, including the initial Loan, is subject to fulfillment of the
following conditions:
(a) Prior Conditions. All of the conditions set forth in Section
4.1 shall have been satisfied.
(b) Notice of Borrowing. Lender shall have received the notice of
borrowing and accompanying material required pursuant to Section 2.2 in respect
of such Loan.
(c) No Default. At the date of the Loan no Event of Default or
event that with the giving of notice or the lapse of time or both would
constitute an Event of Default shall have occurred and be continuing or will
have occurred as the result of the making of the Loan, and the representations
and warranties of Borrower in Article V shall be true on and as of such date
with the same force and effect as if made on and as of such date.
(d) Other Information. Lender shall have received such other
statements, opinions, certificates, documents and information as it may
reasonably request in order to satisfy itself that the foregoing conditions have
been fulfilled.
V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
V.1 Corporate Existence and Power. Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of
Washington, is qualified to do business in each other jurisdiction where the
conduct of its business or the ownership of its properties requires such
qualification, and has full corporate power, authority and legal right to carry
on its business as presently conducted, to own and operate its properties and
assets, and to execute, deliver and perform the Loan Documents.
V.2 Corporate Authorization. The execution, delivery and performance by
Borrower of the Loan Documents and any borrowing hereunder have been duly
authorized by all necessary corporate action of Borrower, do not require any
shareholder approval or the approval or consent of any trustee or the holders of
any Indebtedness of Borrower, except such as have been obtained (certified
copies thereof having been delivered to Lender), do
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not contravene any law, regulation, rule or order binding on it or its Articles
of Incorporation or Bylaws and do not contravene the provisions of or constitute
a default under any indenture, mortgage, contract or other agreement or
instrument to which Borrower is a party or by which Borrower or any of its
properties may be bound or affected.
V.3 Government Approvals, Etc. No Government Approval or filing or
registration with any Governmental Authority is required for the making and
performance by Borrower of the Loan Documents or in connection with any of the
transactions contemplated hereby, except such as have been heretofore obtained
and are in full force and effect (certified copies thereof having been delivered
to Lender). Borrower has obtained, or will obtain before required, all
Governmental Approvals necessary for the completion of the improvements to its
property for which Loan proceeds are intended to be used as set forth in Section
6.1.
V.4 Binding Obligations, Etc. The Loan Documents have been duly
executed and delivered by Borrower and constitute the legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms.
V.5 Litigation. There are no actions, proceedings, investigations, or
claims against or affecting Borrower now pending before any court, arbitrator or
Governmental Authority (nor to the knowledge of Borrower has any thereof been
threatened nor does any basis exist therefor) which if determined adversely to
Borrower would be likely to have a material adverse effect on the financial
condition or operations of Borrower or to result in a judgment or order against
Borrower (in excess of insurance coverage) for more than $200,000, except as
reflected in the financial statements referred to in Section 5.6.
V.6 Financial Condition. The balance sheet of Borrower as of September
30, 1994, and the related statements of income and retained earnings of Borrower
for the fiscal year then ended, copies of which have been furnished to Lender,
fairly present the financial condition of Borrower as at such date and the
results of operations of Borrower for the period then ended, all in accordance
with generally accepted accounting principles consistently applied. Borrower did
not have on such date any contingent liabilities for Taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in that balance
sheet and in the notes to those financial statements. Since that date, there has
been no
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material adverse change in the financial condition or operations of Borrower.
V.7 Title and Liens. Borrower has good and marketable title to each of
the properties and assets reflected in its balance sheet referred to in Section
5.6 (except such as have been since sold or otherwise disposed of in the
ordinary course of business and except to the extent that the terms of the
Permits affect the marketability of Borrower's interest thereunder or in the
improvements on the land covered by the Permits). No assets or revenues of
Borrower are subject to any Lien except as required or permitted by this
Agreement or disclosed on Schedule 4. All properties of Borrower and Borrower's
use thereof comply with applicable zoning and use restrictions and with
applicable laws and regulations relating to the environment. Lender has a
perfected security interest and lien on all of the Collateral (except that
Lender's lien on the Permits is perfected only to the extent such perfection is
achieved by the Assignment in Trust and Consent to Assignment in Trust
identified in the "Security Documents" definition) as security for all
obligations of Borrower under the Loan Documents and such security interest or
lien is of first priority (subject only to the liens described in Schedule 4).
V.8 Taxes. Borrower has filed all tax returns and reports required of
it, has paid all taxes which are due and payable, and has provided adequate
reserves for payment of any Tax whose payment is being contested. The charges,
accruals and reserves on the books of Borrower in respect of Taxes for all
fiscal periods to date are accurate.
V.9 Federal Reserve Regulations. Borrower is not engaged principally or
as one of its important activities in the business of extending credit for the
purpose of purchasing or carrying any margin stock (within the meaning of
Federal Reserve Regulation U), and no part of the proceeds of any Loan will be
used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any other
purpose that violates the applicable provisions of any Federal Reserve
Regulation. Borrower will furnish on request to Lender a statement conforming
with the requirements of Regulation U.
V.10 ERISA. No "reportable event" (as that term is defined in Section
4043 of ERISA) has occurred and is continuing with respect to any employee
benefit plan or other plan maintained for employees of Borrower.
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V.11 Permit Status. Borrower is in good standing as a permittee under
the Permits and has received no notice of default under the Permits or notice of
termination of the Permits from the U.S. Forest Service or any notice that the
U.S. Forest Service intends not to renew, extend or reissue the Permits in a
timely fashion and on terms satisfactory to Borrower prior to the end of the
existing terms thereof.
V.12 Representations as a Whole. This Agreement, the financial
statements referred to in Section 5.6, and all other instruments, documents,
certificates and statements furnished to Lender by Borrower, taken as a whole,
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained herein or
therein not misleading.
VI
AFFIRMATIVE COVENANTS
So long as Lender shall have any commitment hereunder and until payment
in full of each Loan and performance of all other obligations of Borrower under
the Loan Documents, Borrower agrees to do all of the following unless Lender
shall otherwise consent in writing.
VI.1 Use of Proceeds. The proceeds of the Loan shall be used
exclusively for Borrower's capital expenditures approved in advance by Lender
and for Borrower's working capital needs.
VI.2 Preservation of Corporate Existence, Etc. Borrower will preserve
and maintain its corporate existence, rights, franchises and privileges in
Washington.
VI.3 Visitation Rights. At any reasonable time, and from time to time,
Borrower will permit Lender to examine and make copies of and abstracts from the
records and books of account of and to visit the properties of Borrower and to
discuss the affairs, finances and accounts of Borrower with any of its officers
or directors.
VI.4 Keeping of Books and Records. Borrower will keep adequate records
and books of account in which complete entries will be made, in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of Borrower.
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VI.5 Compliance With Laws; Maintenance of Permits. Borrower will comply
in all material respects with all laws, regulations, rules, and orders of
Governmental Authorities applicable to Borrower or to its operations or
property, except any thereof whose validity is being contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof.
Without limitation on the foregoing, Borrower will comply with all requirements
of the Permits and will at a time prior to the expiration of the term of each
Permit enter into such renewal or replacement Permits as are necessary to assure
that its business may be carried out at the existing Crystal Mountain Winter
Sports Area in the manner set forth in its business plans presented to Lender.
VI.6 Other Obligations. Borrower will pay and discharge before the same
shall become delinquent all Indebtedness, taxes and other obligations for which
Borrower is liable or to which its income or property is subject and all claims
for labor and materials or supplies which, if unpaid, might become by law a Lien
upon assets of Borrower, except any thereof whose validity or amount is being
contested in good faith by Borrower in appropriate proceedings with provision
having been made to the satisfaction of Lender for the payment thereof in the
event the contest is determined adversely to Borrower.
VI.7 Financial Information. Borrower will deliver to Lender:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Borrower, the balance sheet of Borrower as of the
end of such fiscal year and the related statements of income and retained
earnings and statement of changes in financial position of Borrower for such
year, accompanied by the audit report thereon by independent certified public
accountants selected by Borrower and approved by Lender (which reports shall be
prepared in accordance with generally accepted accounting principles
consistently applied and shall not be qualified by reason of restricted or
limited examination of any material portion of Borrower's records and shall
contain no disclaimer of opinion or adverse opinion except such as Lender in its
sole discretion determines to be immaterial);
(b) as soon as available and in any event within 30 days after
the end of each month unaudited balance sheet and statement of income and
retained earnings of Borrower as of the end of such month (including the fiscal
year to the end of such
21
<PAGE> 26
month), accompanied by a certificate of the chief financial officer of Borrower
that such unaudited balance sheet and statement of income and retained earnings
have been prepared in accordance with generally accepted accounting principles
consistently applied and present fairly the financial position and the results
of operations of Borrower as of the end of and for such month and that since the
fiscal year-end report referred to in subparagraph (a) there has been no
material adverse change in the financial condition or operations of Borrower as
shown on the balance sheet as of said date;
(c) Borrower's winter budget and summer budget prior to the
commencement of each respective season;
(d) as soon as available, all reports sent by Borrower to its
shareholders and all quarterly and annual reports filed by Borrower with the
Securities and Exchange Commission and each other Governmental Authority having
jurisdiction over Borrower; and
(e) all other statements, reports and other information as
Lender may reasonably request concerning the financial condition and business
affairs of Borrower.
VI.8 Notification. Promptly after learning thereof, Borrower will
notify Lender of (a) the details of any action, proceeding, investigation or
claim against or affecting Borrower instituted before any court, arbitrator or
Governmental Authority or, to Borrower's knowledge, threatened to be instituted,
which, if determined adversely to Borrower, would be likely to have a material
adverse effect on the financial condition or operations of Borrower or to result
in a judgment or order against Borrower (in excess of insurance coverage) for
more than $200,000; (b) any substantial dispute between Borrower and any
Governmental Authority; (c) any labor controversy which has resulted in or, to
Borrower's knowledge, threatens to result in a strike which would materially
affect the business operations of Borrower; and (d) the occurrence of any Event
of Default or other event which, with notice or lapse of time or both, would
constitute an Event of Default.
VI.9 Additional Payments; Additional Acts. From time to time, Borrower
will (a) pay or reimburse Lender on request for all expenses, including legal
fees, actually incurred by Lender in connection with the preparation of the Loan
Documents or the making of any Loan or the enforcement by judicial proceedings
or otherwise of any of the rights of Lender under the Loan
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<PAGE> 27
Documents; (b) obtain and promptly furnish to Lender evidence of all such
Government Approvals as may be required to enable Borrower to comply with its
obligations under this Agreement; and (c) execute and deliver all such
instruments and perform all such other acts as Lender may reasonably request to
carry out the transactions contemplated by this Agreement.
VI.10 Tangible Net Worth. At all times during the fiscal year of
Borrower ending September 30, 1995, Borrower shall maintain a Tangible Net Worth
of at least $2,700,000. During each fiscal year of Borrower thereafter, the
Tangible Net Worth shall be increased by an amount equal to 75% of Borrower's
net profit for the preceding year. Borrower shall at all times a ratio of
Indebtedness to Tangible Net Worth of not more than 2.0 to 1. "Tangible Net
Worth" means the excess of total assets over total liabilities, excluding,
however, from the determination of total assets (a) all assets which should be
classified as intangible assets (such as goodwill, patents, trademarks,
copyrights, franchises, and deferred charges (including unamortized debt
discount and research and development costs), (b) treasury stock, (c) cash held
in a sinking or other similar fund established for the purpose of redemption or
other retirement of capital stock, (d) to the extent not already deducted from
total assets, reserves for depreciation, depletion, obsolescence or amortization
of properties and other reserves or appropriations of retained earnings which
have been or should be established in connection with the business conducted by
the relevant corporation, and (e) any revaluation or other write-up in book
value of assets subsequent to the fiscal year of such corporation last ended at
the date of the Prior Loan Agreement.
VII
NEGATIVE COVENANTS
So long as the Commitment of Lender shall be outstanding and until
payment in full of the Note and performance of all other obligations of Borrower
under this Agreement, Borrower agrees that it will not do any of the following
unless Lender shall otherwise consent in writing.
VII.1 Dividends, Purchase of Stock, Etc. Borrower shall not (a) declare
or pay any dividend (except dividends payable in its capital stock or, pursuant
to its Articles of Incorporation, in lift privileges) on any shares of any class
of its capital stock, nor (b) apply any assets to the purchase, redemption or
other retirement of, or set aside any sum for the payment of any
23
<PAGE> 28
dividends on or for the purchase, redemption or other retirement of, or make any
other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of Borrower; provided, however, that
dividends may be paid if: (i) on the last Payment Date prior to such payment the
Loan balance was equal to or less than the amount set out on Schedule 2 for such
Payment Date, and (ii) at the time such dividend is paid no Event of Default, or
event that with the giving of notice or the lapse of time or both shall
constitute an Event of Default, shall have occurred or be continuing or will
result from the payment of such dividend.
VII.2 Liquidation, Merger, Sale of Assets. Borrower shall not
liquidate, dissolve or enter into any merger, consolidation, joint venture,
partnership or other combination nor sell, lease, or dispose of such portion of
its business or assets (excepting sales of goods in the ordinary course of
business) as constitutes in the opinion of Lender a substantial portion thereof
except that Borrower may sell, lease or dispose of assets which have been
released from Lender's lien pursuant to Section 9.9 and may enter into joint
ventures or partnerships with respect to such assets.
VII.3 Indebtedness. Borrower shall not create, incur or become liable
for any Indebtedness except (a) any Loan, (b) existing Indebtedness reflected on
the balance sheet referred to in Section 5.6 (except any renewal or extension of
such Indebtedness or any portion thereof to a date on or before the final
maturity of any Loan), (c) current accounts payable or accrued, incurred by
Borrower in the ordinary course of business, (d) Indebtedness to vendors for the
deferred purchase price of real or personal property used by Borrower in its
business and (e) Indebtedness for money borrowed from banks which does not in
the aggregate in any fiscal year of Borrower exceed the amount set out as a
reinvestment allowance for such year in Schedule 1.
VII.4 Guaranties, Etc. Borrower shall not assume, guaranty, endorse or
otherwise become directly or contingently liable for, or obligated to purchase,
pay or provide funds for payment of, any obligation or Indebtedness of any other
person, except by endorsement of negotiable instruments for deposit or
collection or by similar transactions in the ordinary course of business.
VII.5 Investments. Borrower shall not make any loan or advance to any
person or purchase or otherwise acquire the capital stock, assets or obligations
of, or any interest in, any
24
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person, except (a) commercial bank time deposits maturing within one year, (b)
marketable general obligations of the United States or a State or marketable
obligations fully guarantied by the United States, (c) short-term commercial
paper with the highest rating of a generally recognized rating service, (d)
overnight federal funds and (e) the acquisition of assets at the Crystal
Mountain Winter Sports Area that are presently owned and operated by Borrower's
subpermittees or lessees, such as the grocery store or ski school.
VII.6 Liens. Borrower shall not create, assume or suffer to exist any
Lien except (a) Liens in favor of Lender, (b) existing Liens set out in Schedule
4, (c) Liens to secure Indebtedness permitted by Section 7.3, and (d) for the
deferred price of property, but only if they are limited to such property and
its proceeds and do not exceed 80% of the fair market value thereof.
VII.7 Capital Expenditures. Borrower may not, during any fiscal year,
make expenditures for fixed assets or other capital expenditures which, in the
aggregate, have a purchase, construction and installation cost exceeding the sum
of (a) the reinvestment allowance for such fiscal year set out in Schedule 1
plus (b) the expenditures permitted pursuant to the following sentence. Borrower
may expend 50% of Cash Flow in any fiscal year for fixed assets or other capital
expenditures if (i) no Event of Default has then occurred and is continuing and
(ii) the Loan balance as of the Payment Date occurring in such fiscal year and
as of the next following Payment Date is, or will be, less than or equal to the
Loan balance that would be then-outstanding if the Loan, as disbursed pursuant
to Section 2.2, were amortized evenly over 7 annual installment payments
starting on May 31, 1996 and ending on May 31, 2002. Borrower may with Lender's
prior written approval (which shall not be unreasonably withheld) make
expenditures pursuant to the preceding sentence prior to its fiscal year end
based on pro forma financial statements and its capital expenditure budget.
VII.8 Operations. Borrower shall not engage in any activity or
introduce any major product which is substantially different from or unrelated
to the present business activities or products of Borrower nor discontinue any
major product or any portion of Borrower's present business activities which
constitutes a substantial portion thereof. Borrower shall not enter into any
significant contracts or other agreements except in the usual course of its
business.
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VIII
EVENTS OF DEFAULT
VIII.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" hereunder.
(a) Payment Default. Borrower shall fail (i) to pay any
principal or interest due on the Loans in accordance with the terms of the Loan
Documents or (ii) default shall be made in the payment of any other sum required
under the Loan Documents and such default under this clause (ii) shall continue
for a period of three Business Days; or
(b) Breach of Warranty. Any representation or warranty made or
deemed made by Borrower under or in connection with this Agreement or any Note
shall prove to have been incorrect in any material respect when made; or
(c) Breach of Covenant. Borrower shall fail to perform or
observe any other covenant, obligation or term of the Loan Documents and such
failure shall remain unremedied for 30 days after written notice thereof shall
have been given to Borrower by Lender; or
(d) Cross-default. Borrower shall fail (i) to pay when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) any Indebtedness (except any Loan) or any interest or premium thereon
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness, or (ii)
to perform any term or covenant on its part to be performed under any agreement
or instrument relating to any such Indebtedness and required to be performed and
such failure shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such failure to perform is to
accelerate or to permit the acceleration of the maturity of such Indebtedness,
or (iii) any such Indebtedness shall be declared to be due and payable or
required to be prepaid (other than by regularly scheduled required prepayment)
prior to the stated maturity thereof; or
(e) Voluntary Bankruptcy, Etc. Borrower shall (i) file a
petition seeking relief for itself under Title 11 of the United States Code, as
now constituted or hereafter amended,
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or file an answer consenting to, admitting the material allegations of or
otherwise not controverting, or fail timely to controvert a petition filed
against it seeking relief under Title 11 of the United State Code, as now
constituted or hereafter amended; or (ii) file such petition or answer with
respect to relief under the provisions of any other now existing or future
applicable bankruptcy, insolvency, or other similar law of the United States of
America or any State thereof or of any other country to jurisdiction providing
for the reorganization, winding-up or liquidation of corporations or an
arrangement, composition, extension or adjustment with creditors; or
(f) Involuntary Bankruptcy, Etc. An order for relief shall be
entered against Borrower under Title 11 of the United States Code, as now
constituted or hereafter amended, which order is not stayed; or upon the entry
of an order, judgment or decree by operation of law or by a court having
jurisdiction in the premises which is not stayed adjudging it a bankrupt or
insolvent under, or ordering relief against it under, or approving as properly
filed a petition seeking relief against it under the provisions of any other now
existing or future applicable bankruptcy, insolvency or other similar law of the
United States of America or any State thereof or of any other country or
jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee
or custodian of Borrower or of any substantial part of its property, or ordering
the reorganization, winding-up or liquidation of its affairs, or upon the
expiration of 120 days after the filing of any involuntary petition against it
seeking any of the relief specified in Section 8.1(e) or this Section 8.1(f)
without the petition being dismissed prior to that time; or
(g) Insolvency, Etc. Borrower shall (i) make a general
assignment for the benefit of its creditors, or (ii) consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, or
custodian of all or a substantial part of the property of Borrower, or (iii)
admit its insolvency or inability to pay its debts generally as they become due,
or (iv) fail generally to pay its debts as they become due, or (v) take any
action (or suffer any action to be taken by its director or shareholders)
looking to the dissolution or liquidation of Borrower; or
(h) Judgment. A final judgment or order for the payment of
money in excess of $50,000 or its equivalent in
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another currency shall be rendered against Borrower and such judgment or order
shall continue unsatisfied and in effect for a period of 30 consecutive days; or
(i) Prepayment. Borrower shall, at any time after the
occurrence and during the continuance of an Event of Default or an event that
with the giving of notice or the lapse of time or both would constitute an Event
of Default, make any payment of principal of any Indebtedness (except any Loan)
which is not required to be made at the time of such payment by the terms of
such Indebtedness; or
(j) Condemnation. Such portion of the properties of Borrower as
in the opinion of Lender constitutes a substantial portion shall be condemned,
seized or appropriated; or
(k) Government Approvals, Etc. Any Government Approval or
registration or filing with any Governmental Authority now or hereafter required
in connection with the performance by Borrower of its obligations set forth in
the Loan Documents or required in connection with the conduct of Borrower's
business shall be revoked, withdrawn or withheld or shall fail to remain in full
force and effect; or
(l) Other Government Action. Any act of any Governmental
Authority shall (in the opinion of Lender) deprive Borrower of any substantial
right, privilege or franchise, or substantially restrict the exercise thereof,
and such act shall not be revoked or rescinded within 60 days after it shall
have become effective or within 30 days after notice from Lender, whichever
first occurs; or
VIII.2 Consequences of Default. If any Event of Default shall occur and
be continuing, then in any such case and at any time thereafter so long as any
such Event of Default shall be continuing, Lender may at its option immediately
terminate the Loan Commitment and, if any Loan shall have been made, Lender may
at its option declare the principal of and the interest on any Loan and all
other sums payable by Borrower hereunder or thereunder to be immediately due and
payable, whereupon the same shall become immediately due and payable without
protest, presentment, notice or demand, all of which Borrower expressly waives
and, additionally, Lender may take all action permitted by the Security
Documents or otherwise at law to realize on the Collateral.
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IX
MISCELLANEOUS
IX.1 No Waiver; Remedies Cumulative. No failure by Lender to exercise,
and no delay in exercising, any right, power or remedy under the Loan Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or remedy under the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy.
The exercise of any right, power, or remedy shall in no event constitute a cure
or waiver of any Event of Default nor prejudice the right of Lender in the
exercise of any right hereunder, unless in the exercise of such right, all
obligations of Borrower under the Loan Documents are paid in full. The rights
and remedies provided herein and therein are cumulative and not exclusive of any
right or remedy provided by law.
IX.2 Governing Law. The Loan Documents shall be governed by and
construed in accordance with the laws of the State of Washington, U.S.A.
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IX.3 Mandatory Arbitration.
(a) At the request of either Lender or Borrower, any
controversy or claim between Lender and Borrower, arising from or relating to
this Agreement or any of the other Loan Documents, or arising from an alleged
tort, shall be settled by arbitration in Seattle, Washington. The United States
Arbitration Act shall apply even though this Agreement is otherwise governed by
Washington law. The proceedings shall be administered by the American
Arbitration Association under its commercial rules of arbitration. Any
controversy over whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered by any court
having jurisdiction over the parties. The institution and maintenance of an
action for judicial relief or pursuit of an ancillary or provisional remedy
shall not constitute a waiver of the right of either party, including the
plaintiff, to submit the controversy or claim to arbitration if such action for
judicial relief is tested. For the purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Section 9.3 is the
equivalent of the filing of a lawsuit, any claim or controversy which may be
arbitrated under this Section 9.3 is subject to any applicable statute of
limitations. The arbitrator(s) shall have the authority to decide whether any
such claim or controversy is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis. The parties consent to the joinder of any
guarantor, hypothecator, other party having an interest relating to the claim or
controversy being arbitrated in any proceedings under this Section 9.3.
(b) Notwithstanding the provision of Section 9.3(a), no case or
controversy shall be submitted to arbitration without the consent of all parties
if at the time of the proposed submission, such controversy or claim arises from
or relates to an obligation secured by real property.
(c) No provision of this Section 9.3 shall limit the right of
Borrower or Lender to exercise self-help remedies such as setoff, foreclosure,
retention or sale of any collateral, or obtaining any ancillary, provisional, or
interim remedies from a court of competent jurisdiction before, after, or during
the pendency of any arbitration proceeding. The exercise of any such remedy does
not waive the right of either party to request arbitration.
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IX.4 Notices. All notices and other communications provided for in this
Agreement shall be in writing and shall be mailed or sent or delivered to each
party at the address set forth under its name on the signature page hereof, or
at such other address as shall be designated by such party in a written notice
to the other party. Except as otherwise specified, all such notices and
communications if duly given or made shall be effective upon receipt if
delivered personally or, if mailed, two days after deposit in the United States
mail, first class postage prepaid, Certified or Registered.
IX.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, except that
Borrower may not assign or otherwise transfer all or any part of its rights or
obligations hereunder without the prior written consent of Lender, and any such
assignment or transfer purported to be made without such consent shall be
ineffective.
IX.6 Severability. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties waive any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
IX.7 Conditions Not Fulfilled. If the Loan Commitment or any portion
thereof is not borrowed owing to nonfulfillment of any condition precedent
specified in Article IV, neither Borrower nor Lender shall be responsible to the
other for any damage or loss by reason thereof, except that Borrower shall in
any event be liable to pay the fees, taxes, and expenses for which it is
obligated hereunder.
IX.8 Entire Agreement; Amendment. This Agreement comprises the entire
agreement of the parties and may not be amended or modified except by written
agreement of Borrower and Lender. No provision of this Agreement may be waived
except in writing and then only in the specific instance and for the specific
purpose for which given. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
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IX.9 Release of Collateral. At any time, on Borrower's written request,
Lender will release Collateral from the lien of its Security Documents in
accordance with the following conditions and procedures:
(a) All real and personal property then covered by Lender's
lien shall have been appraised at Borrower's expense within 60 days prior to the
date of such release by an appraiser selected mutually by Borrower and Lender
and the value of Borrower's properties shall have been separately itemized by
such appraiser in form satisfactory to Lender;
(b) The outstanding Loan balance as of the last Payment Date
immediately preceding the date of such release shall not exceed 75% of the
appraised value of the Collateral which will remain subject to the lien of the
Security Documents;
(c) Lender and Borrower shall, after the appraisal described in
subparagraph (a) has been completed, negotiate in good faith to designate
specific assets for release from Lender's lien. Absent contrary agreement
between Lender and Borrower, Collateral shall be released in the order of age,
with the oldest Collateral being released first; provided, however, that an item
of Collateral shall not be released if in Lender's reasonable judgment the
release of such Collateral would materially adversely affect in a way not
reflected in the appraisal the value of the items of remaining Collateral;
(d) No Collateral shall be released at any time when an Event
of Default, or an event that with the giving of notice or the lapse of time or
both would constitute an Event of Default, shall have occurred and be
continuing.
IX.10 Construction. In the event of any conflict between the terms,
conditions and provisions of this Agreement and those in the Security Documents,
the terms, conditions and provisions of this Agreement shall control.
IX.11 Counterparts. This Agreement or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized as of
the date first above written.
LENDER: SEATTLE-FIRST NATIONAL BANK
By ________________________________
Its __________________________
Address: Seattle-First National Bank
Tacoma Seafirst Financial Center
950 Pacific Ave., 5th Floor
Tacoma, WA 98402
Attn: Michael J. Scott
Telephone: (206) 305-3323
Facsimile: (206) 305-3354
BORROWER: CRYSTAL MOUNTAIN, INC.
By ________________________________
Its __________________________
By ________________________________
Its __________________________
Address: Crystal Mountain, Inc.
P.O. Box 1
Crystal Mountain, WA 98022
Attn: Manager, Finance &
Accounting
Telephone: _____________________
Facsimile: _____________________
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<PAGE> 38
SCHEDULE 1
REINVESTMENT ALLOWANCE
Fiscal Year Ending September 30, 1995 $422,130
1996 $443,237
1997 $465,398
1998 $488,668
1999 $513,102
2000 $538,757
2001 $565,695
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SCHEDULE 2
----------
MAXIMUM LOAN BALANCE
AS IT RELATES TO SKIP PAYMENTS
------------------------------
Maximum Loan
Payment Date Level
- ------------ ------------
May 31, 1996 $6,400,000
May 31, 1997 $5,700,000
May 31, 1998 $5,000,000
May 31, 1999 $4,300,000
May 31, 2000 $3,700,000
May 31, 2001 $3,000,000
May 31, 2002 $2,500,000
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SCHEDULE 3
----------
PREPAYMENT FEES FOR LIBOR LOANS
The amount of the fee to be paid pursuant to Section 3.2 shall depend
on the following:
(a) The amount by which interest rates have changed between the
Reference Date and the Prepayment Date. As used herein,
"Reference Date" shall mean the first day of an Applicable
Interest Period. As used herein, "Prepayment Date" shall mean
the date the Borrower either voluntarily or involuntarily
prepays a LIBOR Loan. Certain U.S. Treasury rates are used as
a benchmark to measure changes in interest rate levels.
A "reference rate" equal to the average interest rate
yield at the Reference Date for U.S. Government
Securities having maturities equivalent to that of
the applicable LIBOR Loan will be determined in the
manner described below for determining applicable
rates but will be established as of the Reference
Date for the Applicable Interest Period. This rate
represents interest rate levels at the time a
Revolving Loan is made or its interest rate fixed.
An "applicable rate," determined as described below,
represents interest rate levels as of the Prepayment
Date.
(b) The amount of principal prepaid.
(c) A payment fee factor (see "payment fee factor schedule"
below).
CALCULATION OF PAYMENT FEE
If the reference rate is lower than or equal to the applicable rate,
there is no payment fee.
If the applicable rate is lower than the reference rate, the payment
fee shall be equal to the difference between the reference rate and the
applicable rate (expressed as a decimal), multiplied by the appropriate factor
from the payment fee factor
36
<PAGE> 41
schedule, multiplied by the principal amount of the Loan which is prepaid.
37
<PAGE> 42
Example:
A LIBOR Loan with principal of $850,000 is fully prepaid with 4
months remaining prior to the end of the Applicable Interest
Period. A reference rate of 10% was assigned to the LIBOR Loan
when the rate was fixed. The applicable rate (as determined by
current 4-month U.S. Treasury rates) is 8.5%. Rates are
therefore judged to have dropped by 1.5% since the rate was
fixed, and a payment fee applies.
A payment fee factor of .37 is determined from the tables below,
and the payment fee is computed as follows:
Payment Fee = (.10-.085) x (.37) x ($850,000) = $4,717.50
APPLICABLE RATES
The applicable rate is equal to the Treasury Rate at the time of
prepayment for U.S. Government Securities having maturities equivalent to the
remaining portion of the Applicable Interest Period.
Rates listed in the Federal Reserve Statistical Release for maturities
of less than one year are on a discount rate basis, and these rates shall be
converted to a coupon equivalent basis, based upon a 360-day year. The
Statistical Release published on Monday shall be used for calculation of payment
fees payable on the following Tuesday through the following Monday, with
appropriate adjustment if the day of publication changes.
38
<PAGE> 43
PAYMENT FEE FACTOR SCHEDULES
Months Remaining in the
Applicable Interest Period for LIBOR Loans(1)
0 1 2 3 4 5 6
--- --- --- --- --- --- --
Factors 0 .09 .18 .28 .37 .46 .55
- -----------------
(1) If the remaining Applicable Interest Period is between any two time
periods in the above schedules, interpolate between the corresponding factors.
Agent and Lenders are not required to actually reinvest the paid
principal in any U.S. Government Treasury obligations as a condition to
receiving a payment fee as calculated above.
39
<PAGE> 44
SCHEDULE 4
----------
PERMITTED LIENS
40
<PAGE> 45
EXHIBIT A
NOTE
$7,000,000 Date: September 14, 1995
Seattle, Washington
This promissory note ("Note") is made pursuant to and is subject to the
terms and conditions of the Second Amended and Restated Loan Agreement (the
"Loan Agreement") dated as of the date of this Note, executed and delivered by
CRYSTAL MOUNTAIN, INC., a Washington corporation ("Borrower") and SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Lender"). This Note amends and
renews that certain Secured Note dated as of October 5, 1990 in the principal
amount of $6,200,000 executed by Borrower payable to Lender. Terms used herein
that are not otherwise defined shall have the respective meaning set forth in
the Loan Agreement.
FOR VALUE RECEIVED, Borrower promises to repay to the order of Lender
all disbursements of the Loans made by Lender to Borrower on the dates and in
the installment amounts set forth in the Loan Agreement for repayment of the
Loans.
Borrower also hereby promises to pay to the order of Lender interest on
the unpaid principal amount hereof from the date hereof until such principal
amount is paid in full at the interest rates and at the times as are specified
in the Loan Agreement for payment of interest on the Loans.
1. This Note evidences Borrower's obligation to repay principal of, and
interest on, the Loans. Each Loan disbursement, Applicable Interest Rate,
Applicable Interest Period, and all payments made on account of the principal of
the Loans shall be recorded by Lender in its records and, prior to any transfer
hereof, endorsed on the grid attached hereto as Schedule A that is a part of
this Note; the failure to so record any such amount or any error in so recording
such amount shall not, however, limit or otherwise affect the obligations of
Borrower to repay the outstanding principal amount of the Loans, together with
all interest accruing thereon.
2. Each maker, surety, guarantor and endorser of this Note expressly
waives all notices, demands for payment, presentations for payment, notices of
intention to accelerate the maturity, protest and notice of protest as to this
Note.
<PAGE> 46
3. In the event this Note is placed in the hands of an attorney for a
collection, or suit is brought on the same, or the same is collected through
bankruptcy or other judicial proceedings, Borrower agrees and promises to pay a
reasonable attorney's fee and collection cost, including all out-of-pocket
expenses incurred by Lender.
4. This Note has been executed and delivered in and should be governed
by and construed in accordance with the laws of the State of Washington, USA.
Borrower hereby irrevocably submits to the jurisdiction of any state or any
federal court sitting in Seattle, King County, Washington, USA, in any action or
proceeding brought to enforce or otherwise arising out of or relating to this
Note and hereby waives any objection to venue in any such court and any claim
that such forum is an inconvenient forum.
5. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments and restrictions on prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
6. This Note is secured by the Collateral described in the Security
Documents.
CRYSTAL MOUNTAIN, INC.
By
----------------------------------
Its
-----------------------------
By
----------------------------------
Its
-----------------------------
2
<PAGE> 47
SCHEDULE A
To Crystal Mountain, Inc. Note
LOANS, MATURITIES, AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Interest Principal Paid Interest Principal Notation
Date Loan Rate or Prepaid Period Balance Made By
- ---- --------- -------- -------------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 48
EXHIBIT B
WHEN RECORDED, RETURN TO:
Davis Wright Tremaine
Attn: Ms. Christine A. McCabe
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101
================================================================================
AMENDMENT NUMBER TWO TO
DEED OF TRUST, SECURITY AGREEMENT
AND ASSIGNMENT OF PERMITS AND CONTRACT RIGHTS,
LEASES AND RENTS
THIS AMENDMENT NUMBER TWO TO DEED OF TRUST, SECURITY AGREEMENT AND
ASSIGNMENT OF PERMITS AND CONTRACT RIGHTS, LEASES AND RENTS ("Amendment") is
made as of this 14th day of September, 1995, between CRYSTAL MOUNTAIN, INC., a
Washington corporation ("Grantor"), and SEATTLE-FIRST NATIONAL BANK, a national
banking association ("Beneficiary").
WHEREAS, Beneficiary and Grantor entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan
Agreement"), pursuant to which Beneficiary agreed to make certain revolving
credit and term loans to Grantor; and
WHEREAS, Grantor executed a Deed of Trust, Security Agreement and
Assignment of Permits and Contract Rights, Leases and Rents dated June 15, 1988
and recorded on June 28, 1988 under Pierce County Auditor's Number 8806280189,
to DWTR&J Corp. as Trustee for the benefit of Beneficiary, as amended by that
certain Amendment Number One to Deed of Trust, Security Agreement and Assignment
of Permits and Contract Rights, Leases and Rents dated as of October 5, 1990 and
recorded on _________, 1990 under Pierce County Auditor's Number ______________
(as amended, the "Deed of Trust"); and
WHEREAS, Beneficiary and Grantor have agreed to amend and restate the
Prior Loan Agreement pursuant to the terms of that certain Second Amended and
Restated Loan Agreement dated as of
<PAGE> 49
the date hereof (as the same may be amended from time to time, the "Loan
Agreement"); and
WHEREAS, the parties hereto desire to amend the Deed of Trust by (a)
modifying the terms thereof to such extent as may be provided below, and (b)
expressly recognizing and affirming the continuing effectiveness and priority of
the lien of the Deed of Trust, as amended hereby, as to the sums owing
thereunder.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. AMENDMENT TO DEED OF TRUST. The description of "Obligations Secured"
set forth in subparagraph (a) of Section 1 of the Deed of Trust is hereby
deleted and the following paragraph is substituted in its stead:
(a) Payment of the sum of $7,000,000 with interest thereon
under the Loan Commitment (as such Loan Commitment is defined in the
Loan Agreement described below) according to the terms of the Second
Amended and Restated Loan Agreement dated as of the 14th day of
September, 1995, between Grantor and Beneficiary (as the same may be
amended from time to time, the "Loan Agreement") and the Note executed
by Grantor in the form of Exhibit A to the Loan Agreement, payable to
Beneficiary (the "Note," which term shall include all loan agreements
and notes evidencing the indebtedness secured by this Deed of Trust and
all replacements, renewals, modifications or extensions thereof);
2. AFFIRMATION OF SECURITY. The Deed of Trust, as amended by this
Amendment, is incorporated herein in its entirety by this reference, and Grantor
and Beneficiary jointly affirm and agree that the Deed of Trust, as amended,
secures the full performance of each and every obligation to be secured thereby
as described in the Loan Agreement and continues to be effective as, and to
constitute, a lien on the property described in the Deed of Trust to the full
extent of all obligations secured thereby.
3. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Deed of Trust shall remain in full force and effect and
Grantor expressly reaffirms and ratifies its obligations thereunder. To the
<PAGE> 50
extent there is any conflict between the provisions of the Deed of Trust and the
provisions of this Amendment, the terms of this Amendment shall control.
4. ACCESS TO LOAN AGREEMENT. A true and correct copy of the Loan
Agreement is maintained by the Beneficiary at the address set forth below the
Beneficiary's signature.
5. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Grantor and Beneficiary as of the day and year first above
written.
GRANTOR: CRYSTAL MOUNTAIN, INC.
P.O. Box 1
Crystal Mountain, WA 98022
By
---------------------------------------
Its
--------------------------------
By
---------------------------------------
Its
--------------------------------
BENEFICIARY: SEATTLE-FIRST NATIONAL BANK
Tacoma Seafirst Financial Center
950 Pacific Avenue, 5th Floor
Tacoma, WA 98402
By
---------------------------------------
Its
--------------------------------
3
<PAGE> 51
STATE OF WASHINGTON )
) ss.
COUNTY OF ______ )
On this___________ day of___________ , 1995, before me, a Notary Public
in and for the State of Washington, personally appeared ___________
and___________ , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons who executed this instrument, on oath
stated that they were authorized to execute the instrument, and acknowledged it
as the___________and___________ , respectively, of CRYSTAL MOUNTAIN, INC. to be
the free and voluntary act and deed of said corporation for the uses and
purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
______________________________________
NOTARY PUBLIC in and for the State
of Washington, residing at ___________
My appointment expires _______________
Print Name: __________________________
STATE OF WASHINGTON )
) ss.
COUNTY OF _______ )
On this _____ day of _______________, 1995, before me, a Notary Public
in and for the State of Washington, personally appeared ___________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that he was authorized to
execute the instrument, and acknowledged it as the___________of SEATTLE-FIRST
NATIONAL BANK to be the free and voluntary act and deed of said national banking
association for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
______________________________________
4
<PAGE> 52
NOTARY PUBLIC in and for the State
of Washington, residing at ____________
My appointment expires ________________
Print Name: ___________________________
5
<PAGE> 53
EXHIBIT C
AMENDMENT NUMBER TWO TO SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWO TO SECURITY AGREEMENT ("Amendment") is made
as of this 14th day of September, 1995, by CRYSTAL MOUNTAIN, INC., a Washington
corporation ("Borrower"), in favor of SEATTLE-FIRST NATIONAL BANK, a national
banking association ("Lender").
WHEREAS, Lender and Borrower have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan
Agreement"), pursuant to which Lender agreed to make certain revolving credit
and term loans to Borrower; and
WHEREAS, Borrower executed a Security Agreement dated June 15, 1988, in
favor of Lender, as amended by that certain Amendment Number One to Security
Agreement dated as of October 5, 1990 (as amended, the "Security Agreement");
and
WHEREAS, Lender and Borrower have agreed to amend and restate the Prior
Loan Agreement pursuant to the terms of that certain Second Amended and Restated
Loan Agreement dated as of the date hereof (as the same may be amended from time
to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Loan
Agreement, Borrower and Lender now wish to amend the terms of the Security
Agreement.
NOW, THEREFORE, Borrower hereby agrees to the following amendments to
the Security Agreement:
1. AMENDMENT TO SECURITY AGREEMENT. The final paragraph on page 2 of
the Security Agreement is hereby deleted and the following paragraph is
substituted in its stead:
THIS SECURITY INTEREST is given to secure the payment to
Lender when due of all amounts now due or which may become due to
Lender from Borrower under (a) that certain Second Amended and Restated
Loan Agreement dated as of the 14th day of September, 1995, between the
Lender and the Borrower (as the same shall be amended from time to
time, herein called the "Loan Agreement"), or (b) the Note (in the form
attached as Exhibit A to the Loan Agreement) as the same may be
amended, renewed or extended from time to time; or (c) this Security
Agreement or any other document
<PAGE> 54
or agreement contemplated by the Loan Agreement; and to secure the
Borrower's full and timely performance and observance of all covenants
and conditions contained in this Security Agreement, the Loan
Agreement, and the Note (all such amounts and obligations are
collectively hereinafter called the "Secured Obligations").
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Security Agreement shall remain in full force and effect and
Borrower expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Security Agreement
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Borrower and Lender as of the date first set forth above.
BORROWER: CRYSTAL MOUNTAIN, INC.
By
----------------------------------
Its
-----------------------------
By
----------------------------------
Its
-----------------------------
LENDER: SEATTLE-FIRST NATIONAL BANK
By
----------------------------------
Its
-----------------------------
2
<PAGE> 55
EXHIBIT D
AMENDMENT NUMBER TWO TO
ASSIGNMENT IN TRUST OF SPECIAL USE PERMIT
THIS AMENDMENT NUMBER ONE TO ASSIGNMENT IN TRUST OF SPECIAL USE PERMIT
("Amendment") is made as of this 14th day of September, 1995, by CRYSTAL
MOUNTAIN, INC., a Washington corporation ("Assignor"), in favor of SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Assignee").
WHEREAS, Assignor and Assignee have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan Agreement")
pursuant to which Assignee agreed to make certain revolving credit and term
loans to Assignor; and
WHEREAS, Assignor has executed an Assignment in Trust dated June 10,
1988, assigning to Assignee all of its interests and rights under and by virtue
of that certain Special Use Permit No. 8509120389 issued to the Assignor on
April 9, 1962 by the White River Ranger District, Snoqualmie National Forest,
State of Washington, acting for the U.S. Department of Agriculture, Forest
Service, as amended by that certain Amendment Number One to Assignment in Trust
of Special Use Permit dated as of October 5, 1990 (as amended, the "Assignment
in Trust"); and
WHEREAS, Assignor and Assignee have obtained the written consent of the
U.S. Department of Agriculture, Forest Service, to the Assignment in Trust; and
WHEREAS, Assignor and Assignee have agreed to amend and restate the
Prior Loan Agreement pursuant to the terms of that certain Second Amended and
Restated Loan Agreement dated as of the date hereof (as the same may be amended
from time to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Loan
Agreement, Assignor and Assignee now wish to amend the terms of the Assignment
in Trust.
NOW, THEREFORE, Assignor hereby agrees as follows:
1. AMENDMENT TO ASSIGNMENT IN TRUST. The first sentence of the second
paragraph of the Assignment in Trust is hereby deleted and the following
sentence is substituted in its stead:
The assignment is made in trust for the repayment of that
certain indebtedness payable by Assignor to Assignee
<PAGE> 56
in a total aggregate amount not to exceed $7,000,000, as evidenced by
and in accordance with the terms of that certain Second Amended and
Restated Loan Agreement, dated as of September 14, 1995, (as the same
may be amended from time to time, the "Loan Agreement") executed by
Assignor in favor of Assignee; and it is understood that Assignee shall
not be liable for nor have any responsibility for the performance of
any of the obligations undertaken, made, or assumed by Assignor under
said Special Use Permit so long as Assignee has not entered into actual
possession of Assignor's interests and rights under said Special Use
Permit, and until such time, Assignor shall remain fully responsible
and liable for the performance of any and all obligations under said
Special Use Permit, and Assignor hereby agrees to fully conform and
comply with all such obligations of said Special Use Permit so long as
any of the indebtedness secured by this assignment remains outstanding.
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Assignment in Trust shall remain in full force and effect and
Assignor expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Assignment in Trust
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Assignor and Assignee and Lender as of the date first set
forth above.
ASSIGNOR: CRYSTAL MOUNTAIN, INC.
By
----------------------------------
Its
-----------------------------
By
----------------------------------
Its
-----------------------------
2
<PAGE> 57
ASSIGNEE: SEATTLE-FIRST NATIONAL BANK
By
----------------------------------
Its
-----------------------------
3
<PAGE> 58
CONSENT TO AMENDMENT NUMBER TWO
TO ASSIGNMENT IN TRUST
Reference is made to that certain Special Use Permit No. 8509120389
issued to Crystal Mountain, Inc. on April 9, 1962 by the White River Ranger
District, Snoqualmie National Forest, State of Washington, acting for the U.S.
Department of Agriculture, Forest Service (the "Special Use Permit"). Reference
is further made to that certain Assignment in Trust dated June 10, 1988,
pursuant to which Crystal Mountain, Inc. assigned to Seattle-First National Bank
all of its interests and rights under and by virtue of the Special Use Permit
(the "Assignment in Trust").
The United States of America, through the Forest Service, U.S.
Department of Agriculture, reconfirms its consent to the Assignment in Trust and
further consents to that certain Amendment Number Two to Assignment in Trust
dated as of the 14th day of September, 1995, amending the terms of the
Assignment in Trust, subject, however, to the following conditions: (a) the
execution of this consent shall not be construed as a transfer of the Special
Use Permit or as a release of Crystal Mountain, Inc. or its surety from their
obligations to the United States under the Special Use Permit, and (b) the
execution of this consent shall not give Seattle-First National Bank any
authority for occupancy and use of National Forest Land under the Special Use
Permit except as agent for the permittee.
DATED this ____ day of ___________, 1995.
U.S. DEPARTMENT OF AGRICULTURE,
FOREST SERVICE
____________________________________________
4
<PAGE> 59
EXHIBIT E
AMENDMENT NUMBER TWO TO ASSIGNMENT IN
TRUST OF TERM SPECIAL USE PERMIT
THIS AMENDMENT NUMBER TWO TO ASSIGNMENT IN TRUST OF TERM SPECIAL USE
PERMIT ("Amendment") is made as of this 14th day of September, 1995, by CRYSTAL
MOUNTAIN, INC., a Washington corporation ("Assignor"), in favor of SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Assignee").
WHEREAS, Assignor and Assignee have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan Agreement")
pursuant to which Assignee agreed to make certain revolving credit and term
loans to Assignor; and
WHEREAS, Assignor has executed an Assignment in Trust dated June 10,
1988, assigning to Assignee all of its interests and rights under and by virtue
of that certain Term Special Use Permit No. 8509120390 issued to the Assignor on
April 6, 1962 by the White River Ranger District, Snoqualmie National Forest,
State of Washington, acting for the U.S. Department of Agriculture, Forest
Service, as amended by that certain Amendment Number One to Assignment in Trust
of Term Special Use Permit dated as of October 5, 1990 (as amended, the
"Assignment in Trust"); and
WHEREAS, Assignor and Assignee have obtained the written consent of the
U.S. Department of Agriculture, Forest Service, to the Assignment in Trust; and
WHEREAS, Assignor and Assignee have agreed to amend and restate the
Loan Agreement pursuant to the terms of that certain Second Amended and Restated
Loan Agreement dated as of the date hereof (as the same may be amended from time
to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Amended and
Restated Loan Agreement, Assignor and Assignee now wish to amend the terms of
the Assignment in Trust.
NOW, THEREFORE, Assignor hereby agrees as follows:
1. AMENDMENT TO ASSIGNMENT IN TRUST. The first sentence of the second
paragraph of the Assignment in Trust is hereby deleted and the following
sentence is substituted in its stead:
<PAGE> 60
The assignment is made in trust for the repayment of that
certain indebtedness payable by Assignor to Assignee in a total
aggregate amount not to exceed $7,000,000, as evidenced by and in
accordance with the terms of that certain Second Amended and Restated
Loan Agreement, dated as of September 14, 1995 (as the same may be
amended from time to time, the "Loan Agreement") executed by Assignor
in favor of Assignee; and it is understood that Assignee shall not be
liable for nor have any responsibility for the performance of any of
the obligations undertaken, made, or assumed by Assignor under said
Term Special Use Permit so long as Assignee has not entered into actual
possession of Assignor's interests and rights under said Term Special
Use Permit, and until such time, Assignor shall remain fully
responsible and liable for the performance of any and all obligations
under said Term Special Use Permit, and Assignor hereby agrees to fully
conform and comply with all such obligations of said Term Special Use
Permit so long as any of the indebtedness secured by this assignment
remains outstanding.
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Assignment in Trust shall remain in full force and effect and
Assignor expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Assignment in Trust
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Assignor and Assignee and Lender as of the date first set
forth above.
ASSIGNOR: CRYSTAL MOUNTAIN, INC.
By
---------------------------------
Its
----------------------------
By
---------------------------------
2
<PAGE> 61
Its
----------------------------
ASSIGNEE: SEATTLE-FIRST NATIONAL BANK
By
---------------------------------
Its
----------------------------
3
<PAGE> 62
CONSENT TO AMENDMENT NUMBER TWO
TO ASSIGNMENT IN TRUST
Reference is made to that certain Term Special Use Permit No.
8509120390 issued to Crystal Mountain, Inc. on April 6, 1962 by the White River
Ranger District, Snoqualmie National Forest, State of Washington, acting for the
U.S. Department of Agriculture, Forest Service (the "Term Special Use Permit").
Reference is further made to that certain Assignment in Trust dated June 10,
1988, pursuant to which Crystal Mountain, Inc. assigned to Seattle-First
National Bank all of its interests and rights under and by virtue of the Term
Special Use Permit (the "Assignment in Trust").
The United States of America, through the Forest Service, U.S.
Department of Agriculture, reconfirms its consent to the Assignment in Trust and
further consents to that certain Amendment Number Two to Assignment in Trust
dated as of the 14th day of September, 1995, amending the terms of the
Assignment in Trust, subject, however, to the following conditions: (a) the
execution of this consent shall not be construed as a transfer of the Term
Special Use Permit or as a release of Crystal Mountain, Inc. or its surety from
their obligations to the United States under the Term Special Use Permit, and
(b) the execution of this consent shall not give Seattle-First National Bank any
authority for occupancy and use of National Forest Land under the Term Special
Use Permit except as agent for the permittee.
DATED this ____ day of ___________, 1995.
U.S. DEPARTMENT OF AGRICULTURE,
FOREST SERVICE
________________________________________________
4
<PAGE> 63
EXHIBIT F
OPINION OF COUNSEL TO BORROWER
[On letterhead of LeSourd & Patten]
[Dated the date of September 14, 1995]
Seattle-First National Bank
Re: Crystal Mountain, Inc. Loan Agreement
Dear Sirs:
We have acted as counsel for Crystal Mountain, Inc. ("Borrower") in
connection with the financing transactions contemplated by the Second Amended
and Restated Loan Agreement dated as of September 14, 1995, (the "Loan
Agreement") between Seattle-First National Bank, as Lender, and Borrower. Terms
used and not otherwise defined herein have the meanings defined in the Loan
Agreement.
Execution of the following documents (collectively, the "Additional
Loan Documents") is contemplated by the Loan Agreement.
1. The Loan Agreement;
2. The Note;
3. Amendment Number Two to Deed of Trust;
4. Amendment Number Two to Security Agreement; and
5. Amendment Number Two to Assignment in Trust of Term Special
Use Permit and Amendment Number Two to Assignment in Trust of Special Use Permit
(collectively, the "Assignments in Trust").
In connection with this opinion we have examined executed copies of the
Loan Documents (including, without limitation, the Additional Loan Documents)
and originals or copies of such other documents, corporate records, certificates
and other statements
5
<PAGE> 64
of government officials, corporate officers and other representatives of the
persons referred to herein, and such other instruments as we have considered
necessary or appropriate for purposes of this opinion.
Based upon our review of the foregoing and subject to the
qualifications hereinafter stated, we advise you that in our opinion:
1. Corporate Existence and Power. Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Washington, is qualified to do business in each other jurisdiction where the
conduct of its business or the ownership of its properties requires such
qualification, and has full corporate power, authority and legal right to carry
on its business as presently conducted and to own and operate its properties and
assets. Borrower has full corporate power, authority and legal right to execute
and deliver the Additional Loan Documents and to perform all Loan Documents.
2. Corporate Authorization. The execution and delivery by Borrower of
the Additional Loan Documents and performance by Borrower of the Loan Documents,
as amended by the Additional Loan Documents, and any borrowing thereunder have
been duly authorized by all necessary corporate action of Borrower, do not
require any shareholder approval or the approval or consent of any trustee or
the holders of any Indebtedness of Borrower, except such as have been obtained
(certified copies thereof having been delivered to the Agent), do not contravene
any law, regulation, rule or order binding on them or their Articles of
Incorporation or Bylaws and do not contravene the provisions of or constitute a
default under any indenture, mortgage, contract or other agreement or instrument
to which Borrower, is a party or by which Borrower or any of its properties may
be bound or affected.
3. Government Approvals, Etc. No Government Approval or filing or
registration with any Governmental Authority is required for the making and
performance by Borrower of any Loan Document, except such as have been
heretofore obtained and are in full force and effect (certified copies thereof
having been delivered to Lender).
4. Binding Obligations, Etc. The Loan Documents have been duly executed
and delivered by Borrower and constitute the
6
<PAGE> 65
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
5. Litigation. There are no actions, proceedings, investigations, or
claims against or affecting Borrower now pending before any court, arbitrator or
Governmental Authority which if determined adversely to Borrower would be likely
to have a material adverse effect on the financial condition or operations of
Borrower or to result in a judgment or order against Borrower (in excess of
insurance coverage) for more than $200,000 in any one case.
6. Title and Liens. The Deed of Trust, Security Agreement and
Assignments in Trust create a valid security interest and lien in all property
of Borrower, all as security for all of Borrower's obligations to Lender in
respect of the Loan Commitment.
7. Federal Reserve Regulations. To the best of our knowledge, Borrower
is not engaged principally or as one of its important activities in the business
of extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Federal Reserve Regulation U).
The opinions expressed above are subject to the following
qualifications:
A. In rendering the foregoing opinions, we have relied upon
certificates from governmental agencies and responsible corporate officers of
Borrower as to questions of fact to the extent we have deemed such reliance
proper.
B. The enforceability of the obligations of Borrower under the Loan
Documents is subject to any applicable bankruptcy, insolvency or any similar
laws affecting creditors' rights generally and to general principles of equity
(whether asserted in an action in equity or at law).
C. We express no opinion as to the laws of any jurisdiction other than
the State of Washington and the federal laws of the United States.
Very truly yours,
7
<PAGE> 66
[signature of counsel for
Borrower]
8
<PAGE> 67
EXHIBIT G
INTEREST RATE NOTICE
To: Seattle-First National Bank
Tacoma Seafirst Financial Center
Tacoma, WA
INTEREST RATE NOTICE
Rate Requested: Adjusted LIBOR
Applicable Interest Period:
1 month / / 2 months / / 3 months / / 6 months / /
Requested first date of Interest Period: _______________
Amount to be converted: __________________________
(amount must be not less than $____________________
and must be an integral multiple of
$------------------)
Borrower hereby represents and warrants to Lenders that as of
the date hereof (a) the statements set forth in Article V of the Loan
Agreement are true and correct (subject to any waivers of the terms
thereof then in effect in accordance with the terms of this Agreement);
and (b) no Default or Event of Default (as defined in the Loan
Agreement) has occurred and is continuing or will result from
disbursement of the requested loan.
DATED as of the ______ day of ______________, ______.
CRYSTAL MOUNTAIN, INC., a Washington corporation,
By By
------------------------- -------------------------
Its Authorized Signer Its Authorized Signer
9
<PAGE> 68
WHEN RECORDED, RETURN TO:
Davis Wright Tremaine
Attn: Ms. Christine A. McCabe
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101
===============================================================================
AMENDMENT NUMBER TWO TO
DEED OF TRUST, SECURITY AGREEMENT
AND ASSIGNMENT OF PERMITS AND CONTRACT RIGHTS,
LEASES AND RENTS
THIS AMENDMENT NUMBER TWO TO DEED OF TRUST, SECURITY AGREEMENT AND
ASSIGNMENT OF PERMITS AND CONTRACT RIGHTS, LEASES AND RENTS ("Amendment") is
made as of this 14th day of September, 1995, between CRYSTAL MOUNTAIN, INC., a
Washington corporation ("Grantor"), and SEATTLE-FIRST NATIONAL BANK, a national
banking association ("Beneficiary").
WHEREAS, Beneficiary and Grantor entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan
Agreement"), pursuant to which Beneficiary agreed to make certain revolving
credit and term loans to Grantor; and
WHEREAS, Grantor executed a Deed of Trust, Security Agreement and
Assignment of Permits and Contract Rights, Leases and Rents dated June 15, 1988
and recorded on June 28, 1988 under Pierce County Auditor's Number 8806280189,
to DWTR&J Corp. as Trustee for the benefit of Beneficiary, as amended by that
certain Amendment Number One to Deed of Trust, Security Agreement and Assignment
of Permits and Contract Rights, Leases and Rents dated as of October 5, 1990 and
recorded on October 25, 1990 under Pierce County Auditor's Number 901025011 (as
amended, the "Deed of Trust"); and
WHEREAS, Beneficiary and Grantor have agreed to amend and restate the
Prior Loan Agreement pursuant to the terms of that certain Second Amended and
Restated Loan Agreement dated as of the date hereof (as the same may be amended
from time to time, the "Loan Agreement"); and
<PAGE> 69
WHEREAS, the parties hereto desire to amend the Deed of Trust by (a)
modifying the terms thereof to such extent as may be provided below, and (b)
expressly recognizing and affirming the continuing effectiveness and priority of
the lien of the Deed of Trust, as amended hereby, as to the sums owing
thereunder.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. AMENDMENT TO DEED OF TRUST. The description of "Obligations Secured"
set forth in subparagraph (a) of Section 1 of the Deed of Trust is hereby
deleted and the following paragraph is substituted in its stead:
(a) Payment of the sum of $7,000,000 with interest thereon
under the Loan Commitment (as such Loan Commitment is defined in the
Loan Agreement described below) according to the terms of the Second
Amended and Restated Loan Agreement dated as of the 14th day of
September, 1995, between Grantor and Beneficiary (as the same may be
amended from time to time, the "Loan Agreement") and the Note executed
by Grantor in the form of Exhibit A to the Loan Agreement, payable to
Beneficiary (the "Note," which term shall include all loan agreements
and notes evidencing the indebtedness secured by this Deed of Trust and
all replacements, renewals, modifications or extensions thereof);
2. AFFIRMATION OF SECURITY. The Deed of Trust, as amended by this
Amendment, is incorporated herein in its entirety by this reference, and Grantor
and Beneficiary jointly affirm and agree that the Deed of Trust, as amended,
secures the full performance of each and every obligation to be secured thereby
as described in the Loan Agreement and continues to be effective as, and to
constitute, a lien on the property described in the Deed of Trust to the full
extent of all obligations secured thereby.
3. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Deed of Trust shall remain in full force and effect and
Grantor expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Deed of Trust and the
provisions of this Amendment, the terms of this Amendment shall control.
2
<PAGE> 70
4. ACCESS TO LOAN AGREEMENT. A true and correct copy of the Loan
Agreement is maintained by the Beneficiary at the address set forth below the
Beneficiary's signature.
5. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Grantor and Beneficiary as of the day and year first above
written.
GRANTOR: CRYSTAL MOUNTAIN, INC.
P.O. Box 1
Crystal Mountain, WA 98022
By
-------------------------------------
Its
---------------------------------
By
-------------------------------------
Its
---------------------------------
BENEFICIARY: SEATTLE-FIRST NATIONAL BANK
Tacoma Seafirst Financial Center
950 Pacific Avenue, 5th Floor
Tacoma, WA 98402
By
-------------------------------------
Its
---------------------------------
3
<PAGE> 71
STATE OF WASHINGTON )
) ss.
COUNTY OF ______ )
On this ______ day of _____________, 1995, before me, a Notary Public
in and for the State of Washington, personally appeared_____________
and_____________ , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons who executed this instrument, on oath
stated that they were authorized to execute the instrument, and acknowledged it
as the _____________and_____________ , respectively, of CRYSTAL MOUNTAIN, INC.
to be the free and voluntary act and deed of said corporation for the uses and
purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
__________________________________
NOTARY PUBLIC in and for the State
of Washington, residing at
My appointment expires
Print Name:
STATE OF WASHINGTON )
) ss.
COUNTY OF _______ )
On this _____ day of _______________, 1995, before me, a Notary Public
in and for the State of Washington, personally appeared_____________ ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that he was
authorized to execute the instrument, and acknowledged it as the_____________ of
SEATTLE-FIRST NATIONAL BANK to be the free and voluntary act and deed of said
national banking association for the uses and purposes mentioned in the
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
__________________________________
NOTARY PUBLIC in and for the State
of Washington, residing at
4
<PAGE> 72
My appointment expires __________________
Print Name: _____________________________
5
<PAGE> 73
AMENDMENT NUMBER TWO TO SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWO TO SECURITY AGREEMENT ("Amendment") is made
as of this 14th day of September, 1995, by CRYSTAL MOUNTAIN, INC., a Washington
corporation ("Borrower"), in favor of SEATTLE-FIRST NATIONAL BANK, a national
banking association ("Lender").
WHEREAS, Lender and Borrower have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan
Agreement"), pursuant to which Lender agreed to make certain revolving credit
and term loans to Borrower; and
WHEREAS, Borrower executed a Security Agreement dated June 15, 1988, in
favor of Lender, as amended by that certain Amendment Number One to Security
Agreement dated as of October 5, 1990 (as amended, the "Security Agreement");
and
WHEREAS, Lender and Borrower have agreed to amend and restate the Prior
Loan Agreement pursuant to the terms of that certain Second Amended and Restated
Loan Agreement dated as of the date hereof (as the same may be amended from time
to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Loan
Agreement, Borrower and Lender now wish to amend the terms of the Security
Agreement.
NOW, THEREFORE, Borrower hereby agrees to the following amendments to
the Security Agreement:
1. AMENDMENT TO SECURITY AGREEMENT. The final paragraph on page 2 of
the Security Agreement is hereby deleted and the following paragraph is
substituted in its stead:
THIS SECURITY INTEREST is given to secure the payment to
Lender when due of all amounts now due or which may become due to
Lender from Borrower under (a) that certain Second Amended and Restated
Loan Agreement dated as of the 14th day of September, 1995, between the
Lender and the Borrower (as the same shall be amended from time to
time, herein called the "Loan Agreement"), or (b) the Note (in the form
attached as Exhibit A to the Loan Agreement) as the same may be
amended, renewed or extended from time to time; or (c) this Security
Agreement or any other document or agreement contemplated by the Loan
Agreement; and to secure the Borrower's full and timely performance and
observance of
<PAGE> 74
all covenants and conditions contained in this Security
Agreement, the Loan Agreement, and the Note (all such amounts and
obligations are collectively hereinafter called the "Secured
Obligations").
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Security Agreement shall remain in full force and effect and
Borrower expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Security Agreement
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Borrower and Lender as of the date first set forth above.
BORROWER: CRYSTAL MOUNTAIN, INC.
By
___________________________________
Its
_____________________________
By
___________________________________
Its
_____________________________
LENDER: SEATTLE-FIRST NATIONAL BANK
By
___________________________________
Its
_____________________________
2
<PAGE> 75
AMENDMENT NUMBER TWO TO
ASSIGNMENT IN TRUST OF SPECIAL USE PERMIT
THIS AMENDMENT NUMBER ONE TO ASSIGNMENT IN TRUST OF SPECIAL USE PERMIT
("Amendment") is made as of this 14th day of September, 1995, by CRYSTAL
MOUNTAIN, INC., a Washington corporation ("Assignor"), in favor of SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Assignee").
WHEREAS, Assignor and Assignee have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan Agreement")
pursuant to which Assignee agreed to make certain revolving credit and term
loans to Assignor; and
WHEREAS, Assignor has executed an Assignment in Trust dated June 10,
1988, assigning to Assignee all of its interests and rights under and by virtue
of that certain Special Use Permit No. 8509120389 issued to the Assignor on
April 9, 1962 by the White River Ranger District, Snoqualmie National Forest,
State of Washington, acting for the U.S. Department of Agriculture, Forest
Service, as amended by that certain Amendment Number One to Assignment in Trust
of Special Use Permit dated as of October 5, 1990 (as amended, the "Assignment
in Trust"); and
WHEREAS, Assignor and Assignee have obtained the written consent of the
U.S. Department of Agriculture, Forest Service, to the Assignment in Trust; and
WHEREAS, Assignor and Assignee have agreed to amend and restate the
Prior Loan Agreement pursuant to the terms of that certain Second Amended and
Restated Loan Agreement dated as of the date hereof (as the same may be amended
from time to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Loan
Agreement, Assignor and Assignee now wish to amend the terms of the Assignment
in Trust.
NOW, THEREFORE, Assignor hereby agrees as follows:
1. AMENDMENT TO ASSIGNMENT IN TRUST. The first sentence of the
second paragraph of the Assignment in Trust is hereby deleted and the following
sentence is substituted in its stead:
The assignment is made in trust for the repayment of that
certain indebtedness payable by Assignor to Assignee in a total
aggregate amount not to exceed $7,000,000, as evidenced by and in
accordance with the terms of that
<PAGE> 76
certain Second Amended and Restated Loan Agreement, dated as of
September 14, 1995, (as the same may be amended from time to time, the
"Loan Agreement") executed by Assignor in favor of Assignee; and it is
understood that Assignee shall not be liable for nor have any
responsibility for the performance of any of the obligations
undertaken, made, or assumed by Assignor under said Special Use Permit
so long as Assignee has not entered into actual possession of
Assignor's interests and rights under said Special Use Permit, and
until such time, Assignor shall remain fully responsible and liable for
the performance of any and all obligations under said Special Use
Permit, and Assignor hereby agrees to fully conform and comply with all
such obligations of said Special Use Permit so long as any of the
indebtedness secured by this assignment remains outstanding.
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Assignment in Trust shall remain in full force and effect and
Assignor expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Assignment in Trust
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Assignor and Assignee and Lender as of the date first set
forth above.
ASSIGNOR: CRYSTAL MOUNTAIN, INC.
By
_________________________________
Its
_____________________________
By
_________________________________
Its
_____________________________
ASSIGNEE: SEATTLE-FIRST NATIONAL BANK
2
<PAGE> 77
By
__________________________________
Its
_____________________________
3
<PAGE> 78
CONSENT TO AMENDMENT NUMBER TWO
TO ASSIGNMENT IN TRUST
Reference is made to that certain Special Use Permit No. 8509120389
issued to Crystal Mountain, Inc. on April 9, 1962 by the White River Ranger
District, Snoqualmie National Forest, State of Washington, acting for the U.S.
Department of Agriculture, Forest Service (the "Special Use Permit"). Reference
is further made to that certain Assignment in Trust dated June 10, 1988,
pursuant to which Crystal Mountain, Inc. assigned to Seattle-First National Bank
all of its interests and rights under and by virtue of the Special Use Permit
(the "Assignment in Trust").
The United States of America, through the Forest Service, U.S.
Department of Agriculture, reconfirms its consent to the Assignment in Trust and
further consents to that certain Amendment Number Two to Assignment in Trust
dated as of the 14th day of September, 1995, amending the terms of the
Assignment in Trust, subject, however, to the following conditions: (a) the
execution of this consent shall not be construed as a transfer of the Special
Use Permit or as a release of Crystal Mountain, Inc. or its surety from their
obligations to the United States under the Special Use Permit, and (b) the
execution of this consent shall not give Seattle-First National Bank any
authority for occupancy and use of National Forest Land under the Special Use
Permit except as agent for the permittee.
DATED this ____ day of ___________, 1995.
U.S. DEPARTMENT OF AGRICULTURE,
FOREST SERVICE
____________________________________
4
<PAGE> 79
AMENDMENT NUMBER TWO TO ASSIGNMENT IN
TRUST OF TERM SPECIAL USE PERMIT
THIS AMENDMENT NUMBER TWO TO ASSIGNMENT IN TRUST OF TERM SPECIAL USE
PERMIT ("Amendment") is made as of this 14th day of September, 1995, by CRYSTAL
MOUNTAIN, INC., a Washington corporation ("Assignor"), in favor of SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Assignee").
WHEREAS, Assignor and Assignee have entered into a First Amended and
Restated Loan Agreement dated as of October 5, 1990 (the "Prior Loan Agreement")
pursuant to which Assignee agreed to make certain revolving credit and term
loans to Assignor; and
WHEREAS, Assignor has executed an Assignment in Trust dated June 10,
1988, assigning to Assignee all of its interests and rights under and by virtue
of that certain Term Special Use Permit No. 8509120390 issued to the Assignor on
April 6, 1962 by the White River Ranger District, Snoqualmie National Forest,
State of Washington, acting for the U.S. Department of Agriculture, Forest
Service, as amended by that certain Amendment Number One to Assignment in Trust
of Term Special Use Permit dated as of October 5, 1990 (as amended, the
"Assignment in Trust"); and
WHEREAS, Assignor and Assignee have obtained the written consent of the
U.S. Department of Agriculture, Forest Service, to the Assignment in Trust; and
WHEREAS, Assignor and Assignee have agreed to amend and restate the
Loan Agreement pursuant to the terms of that certain Second Amended and Restated
Loan Agreement dated as of the date hereof (as the same may be amended from time
to time, the "Loan Agreement"); and
WHEREAS, in order to reflect the changes embodied in the Amended and
Restated Loan Agreement, Assignor and Assignee now wish to amend the terms of
the Assignment in Trust.
NOW, THEREFORE, Assignor hereby agrees as follows:
1. AMENDMENT TO ASSIGNMENT IN TRUST. The first sentence of the second
paragraph of the Assignment in Trust is hereby deleted and the following
sentence is substituted in its stead:
The assignment is made in trust for the repayment of that
certain indebtedness payable by Assignor to Assignee in a total
aggregate amount not to exceed $7,000,000, as
<PAGE> 80
evidenced by and in accordance with the terms of that certain Second
Amended and Restated Loan Agreement, dated as of September 14, 1995 (as
the same may be amended from time to time, the "Loan Agreement")
executed by Assignor in favor of Assignee; and it is understood that
Assignee shall not be liable for nor have any responsibility for the
performance of any of the obligations undertaken, made, or assumed by
Assignor under said Term Special Use Permit so long as Assignee has not
entered into actual possession of Assignor's interests and rights under
said Term Special Use Permit, and until such time, Assignor shall
remain fully responsible and liable for the performance of any and all
obligations under said Term Special Use Permit, and Assignor hereby
agrees to fully conform and comply with all such obligations of said
Term Special Use Permit so long as any of the indebtedness secured by
this assignment remains outstanding.
2. REMAINING TERMS AND CONDITIONS UNCHANGED; AMENDMENT CONTROLS. Except
as expressly modified by the terms of this Amendment, all the terms and
conditions of the Assignment in Trust shall remain in full force and effect and
Assignor expressly reaffirms and ratifies its obligations thereunder. To the
extent there is any conflict between the provisions of the Assignment in Trust
and the provisions of this Amendment, the terms of this Amendment shall control.
3. COUNTERPARTS. This Amendment or the signature pages and
acknowledgments, may be executed in any number of counterparts for the
convenience of the parties, all of which, when taken together and after
execution by all parties hereto, shall constitute one and the same Amendment.
EXECUTED by Assignor and Assignee and Lender as of the date first set
forth above.
ASSIGNOR: CRYSTAL MOUNTAIN, INC.
By
____________________________________
Its
______________________________
By
____________________________________
Its
______________________________
2
<PAGE> 81
ASSIGNEE: SEATTLE-FIRST NATIONAL BANK
By
____________________________________
Its
______________________________
3
<PAGE> 82
CONSENT TO AMENDMENT NUMBER TWO
TO ASSIGNMENT IN TRUST
Reference is made to that certain Term Special Use Permit No.
8509120390 issued to Crystal Mountain, Inc. on April 6, 1962 by the White River
Ranger District, Snoqualmie National Forest, State of Washington, acting for the
U.S. Department of Agriculture, Forest Service (the "Term Special Use Permit").
Reference is further made to that certain Assignment in Trust dated June 10,
1988, pursuant to which Crystal Mountain, Inc. assigned to Seattle-First
National Bank all of its interests and rights under and by virtue of the Term
Special Use Permit (the "Assignment in Trust").
The United States of America, through the Forest Service, U.S.
Department of Agriculture, reconfirms its consent to the Assignment in Trust and
further consents to that certain Amendment Number Two to Assignment in Trust
dated as of the 14th day of September, 1995, amending the terms of the
Assignment in Trust, subject, however, to the following conditions: (a) the
execution of this consent shall not be construed as a transfer of the Term
Special Use Permit or as a release of Crystal Mountain, Inc. or its surety from
their obligations to the United States under the Term Special Use Permit, and
(b) the execution of this consent shall not give Seattle-First National Bank any
authority for occupancy and use of National Forest Land under the Term Special
Use Permit except as agent for the permittee.
DATED this ____ day of ___________, 1995.
U.S. DEPARTMENT OF AGRICULTURE,
FOREST SERVICE
_____________________________________
4
<PAGE> 1
EXHIBIT 10.22
Equipment Schedule No. 1
-----
Dated as of December 7, 1994
----------------
To Master Lease dated December 7, 1994
----------------
Acceptance Date 12/28/94
--------
Commencement Date 12/29/94
--------
Equipment Schedule to MASTER LEASE AGREEMENT dated as of
_______________________ between THE CIT GROUP/EQUIPMENT FINANCING, INC., as
Lessor and CRYSTAL MOUNTAIN, INC. as Lessee.
----------------------
This Equipment Schedule is entered into pursuant to the Master Lease
Agreement. All the terms and conditions of the Master Lease Agreement are
hereby incorporated herein and made a part hereof. In the event of a conflict
between the Master Lease Agreement and this Equipment Schedule, the provisions
of this Equipment Schedule shall prevail.
1. EQUIPMENT DESCRIPTION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Cost
Quantity Manufacturer Model/Feature Serial Number Description Per Unit
- -------- ------------ ------------- ------------- ----------- --------
See Schedule "A" consisting of 1 page attached hereto and made a part hereof.
</TABLE>
2. LESSOR'S AGGREGATE COST OF EQUIPMENT. $190,250.00
-----------
3. EQUIPMENT LOCATION. One Crystal Mountain Blvd.,
---------------------------
Crystal Mountain, WA 98002
---------------------------
4. ACCEPTANCE: Lessee confirms that (a) the Equipment described herein has
been delivered to it in good working order and condition, and has been
inspected and accepted by Lessee as of the Acceptance Date set forth above,
(b) no Event of Default exists, (c) no Event of Default will be caused by
the execution of this Schedule, (d) all Lessee's representations and
warranties are true and correct, and (e) the terms and provisions of the
Master Lease are hereby incorporated by reference and reaffirmed.
5. LEASE TERM.
a. INTERIM LEASE TERM. The interim term of the lease of the Equipment
shall commence on the Acceptance Date and shall continue until the
commencement of the Primary Lease Term defined below.
b. PRIMARY LEASE TERM. The primary term of the lease of Equipment shall
commence on the Commencement Date and shall continue for a term of
41 months from such Commencement Date.
--
6. RENT PAYMENTS.
a. INTERIM RENT. The rent for each item of Equipment during the Interim
Lease Term shall be an amount equal to 1/30th of the Primary Rent (defined
below) multiplied by the number of days from and including the Acceptance
Date to the Commencement Date which amount shall be payable on the
Commencement Date.
b. PRIMARY RENT. See attached Primary Rent Rider.
7. STIPULATED LOSS VALUES. The Stipulated Loss Values, expressed as a
percentage of Lessor's cost of the Equipment, are set forth in Exhibit A
attached hereto. The Stipulated Loss Value with respect to any item of
Equipment as of any rent payment date shall be an amount determined by
multiplying Lessor's cost of the item by the applicable percentage set
forth on Exhibit A. Any Stipulated Loss Value determined as of a date after
the final rent payment date will be determined by using the percentage for
the final rent payment date.
8. RETURN, OPERATION, MAINTENANCE, ADDITIONS. The return operation,
maintenance and additions provisions applicable to the Equipment are set
forth in Rider A attached hereto.
9. DEPRECIATION TAX ASSUMPTIONS. Equipment has a recovery period of 7 years.
---
10. NONREFUNDABLE PROCESSING/ORIGINATION FEE payable to The CIT Group/
Equipment Financing, Inc. $475.00
-------
11. ADDITIONAL PROVISIONS:
See attached Rider B consisting of 2 pages attached hereto and made a part
hereof.
IN WITNESS WHEREOF, this Equipment Schedule has been signed as of the date set
forth above.
LESSOR: LESSEE:
THE CIT GROUP/EQUIPMENT FINANCING, INC. CRYSTAL MOUNTAIN, INC.
By: /s/ J.R. Reilly By: /s/ Thomas F. Leonard
----------------------------------- --------------------------------
J.R. Reilly Thomas F. Leonard
- --------------------------------------- ------------------------------------
Print or Type Name Print or Type Name
Title: Agent Title: President
-------------------------------- -----------------------------
<PAGE> 2
Exhibit A to Schedule 1 to Master Lease
Dated December 7, 1994 between THE CIT GROUP/
EQUIPMENT FINANCING, INC., as Lessor and
CRYSTAL MOUNTAIN, INC., as Lessee.
Stipulated Loss Values
<TABLE>
<CAPTION>
Month of Percentage of
Term Lessor's Cost
- -------- -------------
<S> <C>
1 118.1%
2 114.0
3 109.8
4 105.6
5 101.4
6 102.1
7 102.7
8 103.4
9 104.0
10 104.7
11 105.3
12 106.0
13 101.7
14 97.5
15 93.2
16 88.8
17 84.4
18 84.9
19 85.4
20 85.9
21 86.4
22 86.9
23 87.4
24 87.9
25 83.5
26 79.1
27 74.6
28 70.1
29 65.6
30 65.9
31 66.2
32 66.6
33 66.9
34 67.3
35 67.6
36 68.0
37 63.4
38 58.9
39 54.3
40 49.6
41 45.0
</TABLE>
<TABLE>
<CAPTION>
LESSOR: LESSEE:
<S> <C>
THE CIT GROUP/EQUIPMENT FINANCING, INC. CRYSTAL MOUNTAIN, INC.
By: /s/ R. L. Reilly By: /s/ Thomas F. Leonard
----------------------------------- ------------------------------------
R. L. Reilly Thomas F. Leonard
- --------------------------------------- ----------------------------------------
Print or Type Name Print or Type Name
Title: Agent Title: President
-------------------------------- ---------------------------------
</TABLE>
<PAGE> 3
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Master Lease
Subscribed and sworn before me this 7th day of December, 1994.
Notary public in and for the State of Washington residing in Pierce County.
My commission expires July 6, 1998.
/s/ ANNE BOYLE
- ------------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
<PAGE> 4
CRYSTAL MOUNTAIN, INC.
Notarization attachment to the
Secretary's Certificate
Subscribed and sworn before me this 7th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expires July 6, 1998.
/s/ Anne Boyle
- -------------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
<PAGE> 5
SECRETARY'S CERTIFICATE
I, LAWRENCE E. HARD, do hereby certify that I am Secretary of CRYSTAL
MOUNTAIN, INC., a corporation duly organized and existing under the laws of the
State of WASHINGTON ("Corporation"); that I am the keeper of the seal of the
Corporation and corporation records, including without limitation, the Charter,
By-Laws and the minutes of the Board of Directors of the Corporation; that the
following is an accurate and compared transcript of the resolutions contained
in the minute book of the Corporation which resolutions were duly adopted and
ratified at a meeting of the Board of Directors of the Corporation duly
convened and held in accordance with the By-Laws and Charter of the Corporation
on the 7th day of December, 1994, at which time a quorum was present and acted
throughout; and that said resolutions have not in any way been modified,
repealed or rescinded, but are in full force and effect:
"RESOLVED, that any officer of the Corporation be and is hereby authorized
and empowered in the name and on behalf of this Corporation to enter into
one or more lease agreements with The CIT Group/Equipment Financing, Inc.
(hereinafter called "CIT") concerning personal property leased to the
Corporation; from time to time to modify, supplement or amend any such
agreements; and to do and perform all other acts and things deemed by such
officer to be necessary, convenient or proper to carry out any of the
foregoing; and be it
FURTHER RESOLVED, that any of the aforesaid officers, or his or her duly
elected or appointed successor in office, be and is hereby authorized and
empowered to do any acts, including but not limited to the mortgage, pledge
or hypothecation from time to time to CIT of any or all assets of this
Corporation to secure such leases, and to execute in the name and on behalf
of this Corporation, any instruments or agreements deemed necessary or
proper by CIT in respect of the collateral securing any obligations of this
Corporation, and to affix the seal of this Corporation to any mortgage,
pledge or other such instrument if so required or requested by CIT; and be it
FURTHER RESOLVED, that all that any officer shall have done or may do in
connection with the matters outlined above is hereby ratified and approved;
and be it
FURTHER RESOLVED, that the foregoing resolutions shall remain in full force
and effect until written notice of their amendment or recision shall have
been received by CIT and that receipt of such notice shall not affect any
action taken or advances made by CIT prior thereto and CIT is authorized to
rely upon said resolutions until receipt by it of written notice of any
change; and be it
FURTHER RESOLVED, that the Secretary be and is hereby authorized and
directed to certify to CIT that the foregoing resolutions and the provisions
thereof are in conformity with the Charter and By-Laws of this Corporation."
I DO FURTHER CERTIFY THAT THE MASTER LEASE AGREEMENT ENTERED INTO BY THE
CORPORATION AND CIT IS AN AGREEMENT REFERRED TO IN SAID RESOLUTIONS AND WAS
DULY EXECUTED PURSUANT THERETO AND THERE ARE NO RESTRICTIONS IMPOSED BY THE
CHARTER OR BY-LAWS OF THE CORPORATION RESTRICTING THE POWER OR AUTHORITY OF THE
BOARD OF DIRECTORS OF THE CORPORATION TO ADOPT THE FOREGOING RESOLUTIONS OR
UPON THE CORPORATION OR ITS OFFICERS TO ACT IN ACCORDANCE THEREWITH.
I do further certify that the following are names and specimen signatures of
officers of the Corporation empowered and authorized by the above resolutions,
each of which has been duly elected to hold and currently holds the office of
the Corporation set opposite his or her name:
<TABLE>
<CAPTION>
Name Office Signature
<S> <C> <C>
Thomas F. Leonard President /s/ Thomas Leonard
____________________ _______________________ ______________________
____________________ _______________________ ______________________
____________________ _______________________ ______________________
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Corporation this 7th day of DECEMBER, 1994.
(Corporate Seal) /s/ LAWRENCE E. HARD
--------------------------------
Secretary
<PAGE> 6
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Primary Rent Rider
Subscribed and sworn before me this 7th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expires July 6, 1998.
/s/ Ann Boyle
____________________
____________________________
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JULY 6, 1998
____________________________
<PAGE> 7
PRIMARY RENT RIDER
Attached to and made a part of Equipment Schedule No. 1 dated December 7, 1994,
to Master Lease dated December 7, 1994 between Crystal Mountain, Inc. as Lessee
and The CIT Group/Equipment Financing, Inc. as Lessor.
Primary rent. The rent for each item of equipment during the Primary
Lease Term shall consist of 20 rent payments. Five (5) equal consecutive
monthly rental payments of $9,240.15, each commencing on December 29, 1994 and
the same amount on the same date of each month thereafter, except no rental
payments will be due during May, June, July, August, September, October and
November of 1995; followed by five (5) equal consecutive monthly rental
payments of $9,240.15 each commencing on December 29, 1995 and the same amount
on the same date of each month thereafter, except no rental payments will be
due during May, June, July, August, September, October and November of 1996;
followed by five (5) equal consecutive monthly rental payments of $9,240.15
each commencing on December 29, 1996 and the same amount on the same date of
each month thereafter, except no rental payments will be due during May, June,
July, August, September, October and November of 1997; followed by five (5)
equal consecutive monthly rental payments of $9,240.15 each commencing on
December 29, 1997 and the same amount on the same date of each month thereafter
until fully paid.
<TABLE>
<CAPTION>
Lessee: Lessor:
<S> <C>
CRYSTAL MOUNTAIN, INC. THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ Thomas F. Leonard By: /s/ T.R. Reilly
--------------------------- ---------------------------
Title: President Title: Agent
------------------------ ------------------------
</TABLE>
<PAGE> 8
RIDER A
to Schedule 1 to Master Lease
dated DECEMBER 7, 1994
between The CIT Group/Equipment Financing, Inc., as Lessor,
and Crystal Mountain, Inc., as Lessee.
This Rider forms a part of the above-referenced Schedule to Master Lease. Terms
defined in the Schedule and Master Lease will have the same meanings when used
in this Rider unless otherwise defined.
1. RETURN.
Lessee shall, upon the expiration of the Lease and Storage Terms, return any
unsold units to the nearest manufacturers service center. Until such item of
Equipment is returned to Lessor pursuant to the provisions of this Section, all
of the provisions of this Lease with respect thereto shall continue in full
force and effect. Lessee shall pay all the costs and expenses in connection
with or incidental to the return of the Equipment, including, without
limitation, the cost of removing, dismantling by manufacturer's representative
(or anyone else designated by Lessor), assembling, packing, insuring and
transporting the Equipment. At the time of such return, the Equipment shall be
in the condition and repair required to be maintained by Section 3 of the Lease
and Section 2 hereof and free and clear of all Liens. At the expiration of the
Lease Term, Lessee shall provide 120 days storage for the units of Equipment
free of charge. During this period, each unit of Equipment must remain
assembled and operational.
2. OPERATION, MAINTENANCE, ADDITIONS.
(a) Lessee will, at its own expense, keep and maintain the Equipment in good
repair, condition and working order and furnish all parts, replacements,
mechanisms, devices and servicing required therefor so that the value,
condition and operating efficiency thereof will at all times be maintained
and preserved, reasonable wear and tear excepted. All such repairs, parts,
mechanisms, devices and replacements shall immediately, without further
act, become the property of Lessor and part of the Equipment. Without
limiting the generality of the foregoing provisions of this Subsection,
Lessee agrees that upon the required return of the Equipment to Lessor
pursuant to the Section 1 hereof, each item of Equipment shall comply with
the following criteria at minimum:
1. Any unsold units to be delivered to the nearest manufacturers service
center if unit remains unsold 120 days after expiration of the lease.
2. The unit must be capable of passing performance tests according to
manufacturers specifications.
3. All peripherals and additional systems on those pieces of equipment
must be intact and correctly operational.
4. All pneumatic, electrical, hydraulic and mechanical systems must be
operational according to manufacturers specifications.
(b) Lessee will not make or authorize any improvement, change, addition or
alteration to the Equipment (i) if such improvement, change, addition or
alteration will impair the originally intended function or use of the
Equipment or impair the value of the Equipment as it existed immediately
prior to such improvement, change, addition or alteration; or (ii) if any
parts installed in or attached to or otherwise becoming apart of the
Equipment as a result of any such improvement, change, addition or
alteration shall not be readily removable without damage to the Equipment.
Any part which is added to the Equipment without violating the provisions
of the immediately preceding sentence and which is not a replacement or
substitution for any property which was a part of the Equipment, shall
remain the property of Lessee and may be removed by Lessee at any time
prior to the expiration or earlier termination of the Lease Term. All such
parts shall be and remain free and clear of any Liens. Any such part which
is not so removed prior to the expiration or earlier termination of the
Lease Term shall, without further act, become the property of Lessor.
LESSOR: LESSEE:
THE CIT GROUP/EQUIPMENT FINANCING, INC. CRYSTAL MOUNTAIN, INC.
By: /s/ T.R. REILLY By: /s/ THOMAS F. LEONARD
---------------------------------- ----------------------------
T.R. Reilly Thomas F. Leonard
- -------------------------------------- --------------------------------
Print or Type Name Print or Type Name
Title: Agent Title: President
-------------------------------- --------------------------
<PAGE> 9
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Rider A
Subscribed and sworn before me this 7th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expires July 6, 1998.
/s/ ANNE BOYLE
- -------------------
----------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
---------------------------
<PAGE> 10
RIDER B
to Schedule 1 to Master Lease
dated DECEMBER 7, 1994
between The CIT Group/Equipment Financing, Inc., as Lessor,
and Crystal Mountain, Inc., as Lessee.
This Rider forms a part of the above-referenced Schedule to Master Lease. Terms
defined in the Schedule and Master Lease will have the same meanings when used
in this Rider unless otherwise defined.
1. Section 18 of the Master Lease is hereby deleted in its entirety and
the following language is substituted therefor:
"18. Upon expiration of the Primary Lease Term with respect to any
Schedule and payment by Lessee of all rentals set forth in such Schedule and
all other amounts due and payable under the Master Lease or such Schedule, and
provided that no Event of Default shall have occurred and be continuing,
Lessee, at its option, may either extend the Primary Lease term for an
additional term of twelve (12) months (the "Extended Lease Term") or purchase
all of Lessor's right, title and interest in and to all, but not less than all,
of the Equipment described in and covered by such Schedule for a cash purchase
price equal to the fair market sale value (as hereinafter defined) of such
Equipment determined as of the date of such expiration, plus, an amount equal
to all taxes (other than income taxes on any gain on such sale) costs and
expenses (including legal fees and expenses) incurred or paid by Lessor in
connection with such sale. Upon payment by Lessee of such purchase price, and
of all other amounts then due and payable by Lessee hereunder, Lessor shall
transfer title to such Equipment to Lessee on an "as-is, where-is" basis,
without recourse and without representation or warranty of any kind, express or
implied, other than a representation and warranty that such Equipment is free
and clear of any liens created by Lessor. In order to exercise such option,
Lessee must give irrevocable written notice to Lessor of Lessee's intention to
exercise such option at least ninety (90) days (but not more than 360 days)
prior to the expiration of the Primary Lease Term of such Schedule.
For purposes of this Section 18, the fair market sale value of the
Equipment as of any date shall be the cash price that an informed and willing
purchaser (other than a lessee currently in possession or a used equipment or
scrap dealer) unrelated to Lessor or Lessee would pay to purchase the Equipment
in an arm's length transaction. This fair market sale value shall be determined
by an independent appraiser (at Lessee's expense) selected by Lessor. The
appraiser shall determine such value without deduction for any expenses of
dismantling or removal of the Equipment and on the assumption that the item is
in the condition required by the terms of this Lease.
<PAGE> 11
If Lessee exercises its option to extend the Primary Lease term, all
provisions of the Master Lease shall be applicable during the Extended Lease
Term, except that (i) during the Extended Lease Term Lessee shall pay, in the
same manner as provided in the Schedule, rent in twelve consecutive monthly
installments commencing on Dec. 29, 1998, each in the amount of the fair
market rental value (as hereinafter defined) of the Equipment determined as of
the date of the expiration of the Primary Lease Term, and (ii) the Stipulated
Loss Value of each item of Equipment during the Extended Lease Term shall be
determined as of the last rent payment date occurring in the Primary Lease
Term. Upon expiration of the Extended Lease Term, the Lessee shall be
obligated either (a) to return such Equipment to Lessor in accordance with the
terms of the Master Lease, or (b) to purchase such Equipment from Lessor for a
cash purchase price equal to its fair market sale value determined as of the
expiration date of the Extended Lease Term, plus all other amounts set forth
in, and on the terms required by, the preceding paragraphs, of this Section 18."
For purposes of this Section 18, the fair market rental value of the
Equipment for the Extended Lease Term shall be equal to the rental value of the
Equipment which would be obtained in an arm's length transaction between an
informed and willing lessor under no compulsion to lease and an informed and
willing lessee-user (other than a lessee currently in possession) under no
compulsion to lease. This fair market rental value shall be determined by an
independent appraiser (at Lessee's expense) selected by Lessor and approved by
Lessee, which determination shall be made on the assumption that each item of
Equipment is free and clear of all liens and is in the condition and repair
required under the terms of the Master Lease.
2. At the expiration of the Primary Lease Term, if Lessee does not exercise
either the purchase option or renewal option set forth herein, Lessee shall be
obligated to return the Equipment to Lessor in accordance with the terms of the
Master Lease.
3. The provisions of this Rider shall apply only with respect to the
Equipment being leased pursuant to Schedule 1.
4. Except as amended hereby, the Master Lease and the Schedule shall remain
in full force and effect, and are in all respects hereby ratified and affirmed.
Lessor: Lessee:
The CIT Group/Equipment Crystal Mountain, Inc.
Financing, Inc.
By: /s/ T.R. Reilly By: /s/ Thomas F. Leonard
__________________________ _____________________________
Title: Agent Title: President
__________________________ _____________________________
2
<PAGE> 12
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Rider B
Subscribed and sworn before me this 7th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expires July 6, 1998.
/s/ ANNE BOYLE
- ------------------
---------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
---------------------------
<PAGE> 13
DELIVERY AND INSTALLATION CERTIFICATE
To: The CIT Group/Equipment Financing, Inc.
The undersigned hereby certifies that all of the goods, chattels and equipment
(all hereinafter called "equipment") described in the Equipment Schedule No. 1
dated December 7, 1994, to Master Lease dated December 7, 1994, between The CIT
Group/Equipment Financing, Inc. (Lessor) and the undersigned (Lessee), (the
"Lease") have been furnished to the undersigned at the location designated in
the Lease, that delivery and installation of the equipment have been fully
completed as required, and that the equipment has been inspected and accepted
by the undersigned as satisfactory on December 16, 1994. The undersigned
understands that you are relying on the foregoing certification in your
purchase of the equipment described in the Lease and, to induce you to purchase
the equipment, the undersigned agrees to settle all claims, defenses, setoffs
and counterclaims it may have with the Seller directly and will not set up any
thereof against you, that its obligation to you is absolute, and that you are
neither the manufacturer, distributor nor seller of the equipment and have no
knowledge or familiarity with it.
Dated: December 16, 1994 Lessee:
CRYSTAL MOUNTAIN, INC.
-------------------------------------
Name of individual, corporation or
partnership
By /s/ THOMAS F. LEONARD
-----------------------------------
Title President
--------------------------------
If corporation, have signed by
President, Vice President or Treasurer,
and give official title. If owner or
partner, state which.
Seller: Logan Manufacturing Co.
<PAGE> 14
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Delivery and Installation Certificate
Logan Manufacturing, Co.
Subscribed and sworn before me this 16th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expirers July 6, 1998.
/s/ ANNE BOYLE
- -----------------
---------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
---------------------------
<PAGE> 15
DELIVERY AND INSTALLATION CERTIFICATE
To: The CIT Group/Equipment Financing, Inc.
The undersigned hereby certifies that all of the goods, chattels and equipment
(all hereinafter called "equipment") described in the Equipment Schedule No. 1
dated DECEMBER 7, 1994, to Master Lease dated DEC. 7, 1994, between the CIT
Group/Equipment Financing, Inc. (Lessor) and the undersigned (Lessee), (the
"Lease") have been furnished to the undersigned at the location designated in
the Lease, that delivery and installation of the equipment have been fully
completed as required, and that the equipment has been inspected and accepted by
the undersigned as satisfactory on DECEMBER 7, 1994. The undersigned understands
that you are relying on the foregoing certification in your purchase of the
equipment described in the Lease and, to induce you to purchase the equipment,
the undersigned agrees to settle all claims, defenses, setoffs and counterclaims
it may have with the Seller directly and will not set up any thereof against
you, that its obligation to you is absolute, and that you are neither the
manufacturer, distributor nor seller of the equipment and have no knowledge or
familiarity with it.
Dated: DECEMBER 7, 1994 Lessee:
Crystal Mountain, Inc.
----------------------------------------------
Name of individual, corporation or partnership
By: /s/ Thomas F. Leonard Title: President
--------------------- ---------
If corporation, have signed by President,
Vice President or Treasurer, and give
official title. If owner or partner, state
which.
Seller: Kassbohrer All Terrain Vehicles Inc.
<PAGE> 16
CRYSTAL MOUNTAIN, INC.
Notorization attachment to the
Delivery and Installation Certificate
Kassbohrer
Subscribed and sworn before me this 7th day of December, 1994.
Notary Public in and for the State of Washington residing in Pierce County. My
commission expires July 6, 1998.
/s/ ANNE BOYLE
- ------------------
---------------------------
NOTARY PUBLIC
ANNE BOYLE
STATE OF WASHINGTON
MY COMM EXPIRES JUL 6, 1998
---------------------------
<PAGE> 1
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THE PARTIES to this Agreement made this 2nd day of February, 1995,
are CRYSTAL MOUNTAIN, INC., a Washington corporation ("Crystal"), and THOMAS F.
LEONARD of Crystal Mountain, Washington ("Leonard"), its President.
The parties agree as follows:
1. Position. Leonard continues to be retained by Crystal to
serve as its President. At Leonard's option, his services may be provided
through a corporation of which he is the sole shareholder. His powers and
duties as president shall be generally as set forth in the Bylaws and
specifically as shall be provided by the Board of Directors from time to time.
2. Term. This Agreement shall be effective October 1, 1994
through September 30, 1997, or until terminated by either party upon giving the
other party ten (10) days' written notice.
Except as provided below, there shall be no severance pay in
the event the termination is for any of the following reasons:
A. Voluntary termination by Leonard; or
B. The Board of Directors terminates Leonard for cause. For
purposes of this Agreement, "cause" means conviction of a felony, knowing action
or inaction by Leonard which significantly, adversely affects Crystal's
financial condition, or any knowing action of inaction by Leonard which
significantly, objectively, and adversely harms Crystal's operations or
reputation in the community.
3. Compensation. Leonard shall be compensated at a rate to be
established annually on or before October 1 of each year. In addition, he may
receive an incentive bonus based on his performance. Any such bonus plan will be
a subjective plan established on or before October 1, determined solely by the
Board of Directors containing those criteria felt by the Board to be those which
most materially affect Crystal's operations and future.
A Deferred Compensation Agreement ("Plan") has also been
arranged with regard to such compensation and such other amount(s) as are
identified by the Board of Directors as subject to the Plan.
4. Severance Pay. In the event that Leonard's employment is
terminated because of the following reasons, severance pay will be paid as
described below:
1
<PAGE> 2
A. In the event of voluntary termination by the Board of
Directors, for reasons other than cause, Leonard shall receive severance pay
equal to six (6) months' base salary (calculated without taking bonus payments
into account, if any) payable in equal monthly installments over a period of six
(6) months, together with insurance benefits as outlined in Section 5.C, below.
B. In the event of sale, merger, transfer of assets, or other
similar event which results in termination of Leonard's employment, Leonard
shall receive severance pay equal to his base salary (calculated without taking
bonus payments into account, if any) payable in equal monthly installments over
the remaining period of the unexpired term of this Agreement, as set forth in
Section 2, together with insurance benefits as outlined in Section 5.C, below.
In addition, in the event that Leonard's employment
is terminated for any reason (with or without cause), including disability or
death, Leonard, or his designated beneficiary in the event of his death, shall
be paid a lump sum salary continuation payment of $45,000 within thirty (30)
days following termination.
5. Benefits.
A. Housing. In view of the remote location of Crystal's
business premises, as a condition of Leonard's employment Crystal agrees to
provide, and Leonard is required to accept, suitable housing at Crystal
Mountain, which shall include all utilities and maintenance.
B. Transportation. Leonard shall be provided with a company car
for his business use, as needed to perform services hereunder, which shall
include all operating and maintenance costs.
C. Insurance. Leonard shall be provided with health and life
insurance under the company plan. In addition, Leonard may be eligible for life
insurance coverage in accordance with the Split-Dollar Insurance Agreements and
Assignments of Life Insurance Policy incorporated herein by this reference.
Under said Agreements, and Assignments, Crystal is entitled to repayment of
premiums advanced within thirty (30) days of Leonard's termination of
employment, and Crystal has the right to recover premiums advanced from the
proceeds of the policy, or its cash value, as the case may be. If, for any
reason, Crystal does not fully recover premiums advanced within said thirty (30)
day period, payments under Section 4 hereof shall be reduced accordingly.
D. Vacation and Sick Leave. Leonard will be granted reasonable
vacation time and sick leave.
2
<PAGE> 3
E. Business Expense. Leonard shall be reimbursed for all
reasonable business expenses incurred on behalf of Crystal.
F. Other Benefits. Leonard will be a participant in all other
benefits normally provided to Crystal's full- time employees, subject to any
eligibility requirements regularly applicable to such benefit programs.
6. Applicable Law. This contract and all rights hereunder shall
be governed by the applicable laws of the State of Washington.
7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and may not be modified except upon the
written agreement of the parties hereto.
CRYSTAL MOUNTAIN, INC.
/S/ THOMAS F. LEONARD /S/ ROBERT E. CARLSON
- --------------------------- -----------------------------
THOMAS F. LEONARD Robert E. Carlson
Chairman, Board of Directors
3
<PAGE> 1
EXHIBIT 10.24
DEFERRED COMPENSATION PLAN AND AGREEMENT
CRYSTAL MOUNTAIN, INC. (the "Corporation") establishes this Deferred
Compensation Plan and Agreement with THOMAS F. LEONARD ("Participant") this
2nd day of February, 1995.
I. PURPOSE
The Corporation establishes this Deferred Compensation Plan and
Agreement to enable the Participant to voluntarily defer a portion of his
compensation, or be credited with amounts otherwise identified by the Board,
until termination of his duties. The compensation, or other amounts identified
shall provide a means of retirement.
II. DEFINITIONS
Section 2.01. Plan means the Deferred Compensation Plan of the
Corporation established by this Agreement.
Section 2.02. Participant means the Key Employee, Thomas F. Leonard,
who is eligible for and has elected to participate in this plan.
Section 2.03. Beneficiary is a person designated by the Participant to
receive plan benefits in the event of the Participant's death.
Section 2.04. Board means the Board of Directors of the Corporation.
Section 2.05. Key Employee means Thomas F. Leonard, employee of the
Corporation, who is an officer and in a managerial, key position.
III. PARTICIPATION - ELECTION PROCEDURE
Participant may elect, in writing by delivery to the Board, to defer a
portion of his compensation otherwise payable to Participant. In addition,
Participant may be awarded with amounts identified by the Board as subject to
this Plan. As of the date of this Agreement, the Board has awarded $30,000 as
subject to this Agreement. In addition, the Board has confirmed an annual award
of 10 percent of compensation; for this purpose, "compensation" is defined as
gross salary, prior to any salary reductions or deferrals by the Participant.
For the 1994-1995 year this award amounts to $11,000; provided, for the
1994-1995 year, the $11,000 award will be credited at the rate of one-eighth per
month of service from the date of this agreement until September 30, 1995. In
future years, the 10 percent award will be credited at the rate of one-twelfth
per month of service.
<PAGE> 2
Any written compensation deferral election applies only to compensation
to be deferred in the period following the establishment of this Plan, and the
subsequent calendar year(s) following the year(s) of the election. In subsequent
years, the Participant must deliver the election to the Corporation prior to
January 1 of the calendar year to which the deferral of compensation relates.
IV. DEFERRED COMPENSATION
The Corporation will pay to Participant the amount of benefits
described in this Section. Benefits will be paid upon termination of employment.
The Board will maintain an account in the name of the Corporation and owned by
the Corporation, for Participant, which account will constitute a method of
valuing benefits only, and shall not constitute a trust under this Plan. The
account will reflect the total amount of deferred compensation, or amounts
identified by the Board, plus earnings or growth and less losses or reduction in
value credited or debited to the account. A Participant's account will continue
to be credited and debited as described herein until fully distributed.
Upon Participant's death, the Corporation will pay to his Beneficiary,
designated in writing, the value of his account. If a Participant does not have
a Beneficiary designation on file at the time of his death, then the Corporation
will pay his account to his surviving spouse or, if none, to the personal
representative of the Participant's estate.
V. ADMINISTRATION
Any benefits payable under this Agreement shall not be deemed salary or
other compensation to the Participant for the purpose of computing benefits to
which he may be entitled under any retirement plan or other arrangement of the
Corporation for the benefit of its employees.
Deferred compensation shall be subject to income tax withholding and
payroll taxes (FICA and FUTA) in accordance with federal, state, and local rules
concerning deferred compensation.
The Board will administer this Plan. The Board will conclusively
interpret the Plan provisions, and will decide all questions in application of
the Plan. The Board's decision will be final and binding on all parties.
The Corporation will pay the cost of the administration of this Plan.
Any notice or election required or permitted to be given will be in writing and
will be deemed filed on the date the Participant or Beneficiary personally
delivers the notice or election to the secretary of the Corporation or two
business days after sending the notice or election by certified mail.
<PAGE> 3
VI. NATURE OF PARTICIPANT'S INTEREST IN THE PLAN
A Participant's interest in this Plan and that of his designated
Beneficiary is an unsecured claim against the general assets of the Corporation
and neither the Participant nor his designated Beneficiary has any claim against
or right to the account until the Corporation distributes the account. All
amounts credited to an account are the general assets of the Corporation and may
be disposed of or used by the Corporation in such manner as it determines;
provided, at such time as amounts credited to the account are so disposed of or
used, the balance or lesser amount so disposed of or used at that time shall
continue as a method of valuing benefits under this Plan, and accrued earnings
shall thereafter be credited to the account, or such portion, at a semi-annual
rate equal to the six-month U.S. Treasury Bill rate in effect at that time, and
at the end of each six-month period thereafter.
A Participant or Beneficiary may not assign, pledge or otherwise
hypothecate any interest in this Plan and any attempt to assign, pledge or
encumber that interest is not valid.
V. TERM OF THE PLAN
The Plan and Agreement is effective upon its adoption by the Board of
Directors. The Plan and Agreement shall continue in effect until the benefits as
is distributed to the Participant or Beneficiary. The Board of Directors may
terminate the Plan at any time subject to the distribution requirements above.
VI. AMENDMENT
The Board of Directors may amend the plan at any time, without the
consent of any Participant or Beneficiary, provided, however, that no amendment
shall divest the Participant or Beneficiary of any benefits he or she would have
been entitled to prior to the effective date of the amendment.
CRYSTAL MOUNTAIN, INC.
By /s/ Robert E. Carlson
------------------------------
Robert E. Carlson
Its Chairman of the Board
By /s/ Lawrence E. Hard
------------------------------
Lawrence E. Hard
Its Secretary
/s/ THOMAS F. LEONARD
-------------------------------
THOMAS F. LEONARD
PARTICIPANT
<PAGE> 4
CRYSTAL MOUNTAIN, INC.
SUMMARY PLAN DESCRIPTION
1. Name of Plan. Crystal Mountain, Inc. Deferred Compensation Plan and
Agreement.
2. Name and Address of Plan Sponsor. Crystal Mountain, Inc.; One Crystal
Mountain Boulevard, Crystal Mountain, Washington 98022.
3. Name, Address and Telephone Number of Plan Administrator. Crystal
Mountain, Inc.; One Crystal Mountain Boulevard, Crystal Mountain,
Washington 98022, (206) 663-2264.
4. Name and Address of Agent for Service of Legal Process. Lawrence E.
Hard, c/o Crystal Mountain, Inc.; One Crystal Mountain Boulevard,
Crystal Mountain, Washington 98022
5. Employer Identification Number: 91-0683256.
Plan Number - 002.
6. Plan Fiscal Year. September 30.
7. Type of Welfare Benefit Plan. Executive Deferred Compensation Plan.
8. Participants. One (1) participant: Thomas F. Leonard.
9. Type of Administration of Plan.
The Plan provides benefits under the terms of a Deferred Compensation
Plan and Agreement.
10. Sources of Contributions to the Plan.
Employer - 100 percent by identification of amount(s) subject to the
Plan, and by Participant deferral of compensation.
11. Terms of Plan. Upon Participant's termination of employment,
Participant or his Beneficiary will receive benefits equal to amounts
identified by the Employer as subject to the Plan, plus amounts
deferred by Participant, plus earnings or growth and less losses or
reduction in value credited or debited to an account owned by the
Corporation and maintained as a method of measuring benefits in the
manner described in the Plan.
<PAGE> 5
This is a general, brief description of benefits under the
Plan. Any discrepancy between this Summary and the Plan document, which
is on file in the offices of the Corporation shall be governed by the
Plan document.
12. ERISA Rights.
As a participant in the Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA provides that all Plan participants shall be entitled to:
(a) Examine, without charge, at the Plan Administrator's office and
at other specified locations (such as worksites) all Plan
documents, including insurance contracts and copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports and Plan descriptions.
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Plan
Administrator may make a reasonable charge for the copies.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the employee
benefit plan. The people who operate this Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other Plan
participants and beneficiaries. No one, including your employer, or any other
person may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a benefit or from exercising your rights under ERISA. If your
claim for a benefit is denied in whole or in part, you must receive a written
explanation of the reason for the denial. You have the right to have the Plan
reviewed and your claim reconsidered. Under ERISA, there are avenues you can
take to enforce the above rights. For instance, you may file suit in a Federal
court. In such a case, the court may require the Plan Administrator to provide
the materials and pay you up to $100 a day until you receive the materials,
unless the materials were not sent because of reasons beyond the control of the
Plan Administrator. If you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or Federal court. If it should
happen that Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in Federal court. The court
will decide who should pay court costs and legal fees. If you are unsuccessful,
the court may order you to pay these costs and fees, for example, if it finds
your claim is frivolous. If you have any questions about your Plan, you should
contact the Plan Administrator. If you have any questions about this statement
or about your rights under ERISA, you should
<PAGE> 6
contact the nearest Area Office of the U.S. Labor--Management Services
Administration, Department of Labor.
12. Appeal Procedure.
A participant or a beneficiary ("Claimant") may file with the Plan
Administrator a written claim for benefits, if the participant or beneficiary
determines the distribution procedures of the Plan have not provided him his
proper Nonforfeitable Accrued Benefit. The Plan Administrator must render a
decision on the claim within 60 days of the Claimant's written claim for
benefits. The Plan Administrator must provide adequate notice in writing to the
Claimant whose claim for benefits under the Plan and the Plan Administrator has
denied. The Plan Administrator's notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Plan Administrator based its denial;
(c) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Plan Administrator
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Plan Administrator in writing within the
75-day period will render the Plan Administrator's
determination final, binding and conclusive.
If the Claimant should appeal to the Plan Administrator, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Claimant, or his duly authorized representative, may review pertinent Plan
documents. The Plan Administrator will re-examine all facts related to the
appeal and make a final determination as to whether the denial of benefits is
justified under the circumstances. The Plan Administrator must advise the
Claimant of its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the 60-day limit unfeasible, but in no event may
the Plan Administrator render a decision respecting a denial for a claim for
benefits later than 120 days after its receipt of a request for review.
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THE PARTIES to this Agreement made this 25th day of February, 1995,
are CRYSTAL MOUNTAIN, INC., a Washington corporation ("Crystal"), and PETER
GILLIS of Crystal Mountain, Washington ("Gillis"), its Vice President.
The parties agree as follows:
1. Position. Gillis continues to be retained by Crystal to serve
as its Vice President. At Gillis's option, his services may be provided
through a corporation of which he is the sole shareholder. His powers and
duties as vice president shall be generally as set forth in the Bylaws and
specifically as shall be provided by the Board of Directors from time to time.
2. Term. This Agreement shall be effective October 1, 1994,
through September 30, 1997, or until terminated by either party upon giving the
other party ten (10) days' written notice.
Except as provided below, there shall be no severance pay in
the event the termination is for any of the following reasons:
A. Voluntary termination by Gillis; or
B. The Board of Directors terminates Gillis for cause.
For purposes of this Agreement, "cause" means conviction of a felony, knowing
action or inaction by Gillis which significantly, adversely affects Crystal's
financial condition, or any knowing action of inaction by Gillis which
significantly, objectively, and adversely harms Crystal's operations or
reputation in the community.
3. Compensation. Gillis shall be compensated at a rate to be
established annually on or before October 1 of each year.
A Deferred Compensation Agreement ("Plan") has also been
arranged with regard to such compensation and such other amount(s) as are
identified by the Board of Directors as subject to the Plan.
4. Severance Pay. In the event that Gillis's employment is
terminated because of the following reasons, severance pay will be paid as
described below:
A. In the event of voluntary termination by the Board of
Directors, for reasons other than cause, Gillis shall receive severance pay
equal to six (6) months' base salary (calculated without taking bonus payments
into account, if any) payable in equal monthly installments over a period of
six (6) months.
<PAGE> 2
B. In the event of sale, merger, transfer of assets, or
other similar event which results in termination of Gillis's employment,
Gillis shall receive severance pay equal to his base salary (calculated
without taking bonus payments into account, if any) payable in equal monthly
installments over the remaining period of the unexpired term of this Agreement,
as set forth in Section 2.
5. Benefits.
A. Housing. In view of the remote location of Crystal's
business premises, as a condition of Gillis's employment Crystal agrees to
provide (at no cost to Gillis), and Gillis is required to accept, suitable
housing at Crystal Mountain, which shall include all utilities and maintenance.
B. Transportation. Gillis shall be provided with a
reimbursement allowance for use of his car for business use, as needed to
perform services hereunder. In the future, at the discretion of Crystal,
Gillis may be provided with a company car for his business use.
C. Insurance. Gillis shall be provided with health and
life insurance under the company plan.
D. Vacation and Sick Leave. Gillis will be granted
reasonable vacation time and sick leave.
E. Business Expense. Gillis shall be reimbursed for all
reasonable business expenses incurred on behalf of Crystal.
F. Other Benefits. Gillis will be a participant in all
other benefits normally provided to Crystal's full- time employees, subject to
any eligibility requirements regularly applicable to such benefit programs.
6. Applicable Law. This contract and all rights hereunder shall
be governed by the applicable laws of the State of Washington.
7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and may not be modified except upon the
written agreement of the parties hereto.
CRYSTAL MOUNTAIN, INC.
/s/ Peter Gillis /s/ Robert E. Carlson
- --------------------------- -----------------------------
PETER GILLIS Robert E. Carlson
Chairman, Board of Directors
<PAGE> 1
EXHIBIT 10.26
DEFERRED COMPENSATION PLAN AND AGREEMENT
CRYSTAL MOUNTAIN, INC. (the "Corporation") establishes this Deferred
Compensation Plan and Agreement with PETER GILLIS ("Participant") this 2nd day
of February, 1995.
I. PURPOSE
The Corporation establishes this Deferred Compensation Plan and
Agreement to enable the Participant to voluntarily defer a portion of his
compensation, or be credited with amounts otherwise identified by the Board,
until termination of his duties. The compensation, or other amounts identified
shall provide a means of retirement.
II. DEFINITIONS
Section 2.01. Plan means the Deferred Compensation Plan of the
Corporation established by this Agreement.
Section 2.02. Participant means the Key Employee, Peter Gillis, who is
eligible for and has elected to participate in this plan.
Section 2.03. Beneficiary is a person designated by the Participant to
receive plan benefits in the event of the Participant's death.
Section 2.04. Board means the Board of Directors of the Corporation.
Section 2.05. Key Employee means Peter Gillis, employee of the
Corporation, who is an officer and in a managerial, key position.
III. PARTICIPATION - ELECTION PROCEDURE
Participant may elect, in writing by delivery to the Board, to defer a
portion of his compensation otherwise payable to Participant. In addition,
Participant may be awarded with amounts identified by the Board as subject to
this Plan. As of the date of this Agreement, the Board has confirmed an annual
award of 10 percent of compensation; for this purpose, "compensation" is defined
as gross salary, prior to any salary reductions or deferrals by the Participant.
For the 1994-1995 year this award amounts to $6500; provided, for the 1994-1995
year, the $6500 award will be credited at the rate of one-eighth per month of
service from the date of this agreement until September 30, 1995. In future
years, the 10 percent award will be credited at the rate of one-twelfth per
month of service.
<PAGE> 2
Any written compensation deferral election applies only to compensation
to be deferred in the period following the establishment of this Plan, and the
subsequent calendar year(s) following the year(s) of the election. In subsequent
years, the Participant must deliver the election to the Corporation prior to
January 1 of the calendar year to which the deferral of compensation relates.
IV. DEFERRED COMPENSATION
The Corporation will pay to Participant the amount of benefits
described in this Section. Benefits will be paid upon termination of employment.
The Board will maintain an account in the name of the Corporation and owned by
the Corporation, for Participant, which account will constitute a method of
valuing benefits only, and shall not constitute a trust under this Plan. The
account will reflect the total amount of deferred compensation, or amounts
identified by the Board, plus earnings or growth and less losses or reduction in
value credited or debited to the account. A Participant's account will continue
to be credited and debited as described herein until fully distributed.
Upon Participant's death, the Corporation will pay to his Beneficiary,
designated in writing, the value of his account. If a Participant does not have
a Beneficiary designation on file at the time of his death, then the Corporation
will pay his account to his surviving spouse or, if none, to the personal
representative of the Participant's estate.
V. ADMINISTRATION
Any benefits payable under this Agreement shall not be deemed salary or
other compensation to the Participant for the purpose of computing benefits to
which he may be entitled under any retirement plan or other arrangement of the
Corporation for the benefit of its employees.
Deferred compensation shall be subject to income tax withholding and
payroll taxes (FICA and FUTA) in accordance with federal, state, and local rules
concerning deferred compensation.
The Board will administer this Plan. The Board will conclusively
interpret the Plan provisions, and will decide all questions in application of
the Plan. The Board's decision will be final and binding on all parties.
The Corporation will pay the cost of the administration of this Plan.
Any notice or election required or permitted to be given will be in writing and
will be deemed filed on the date the Participant or Beneficiary personally
delivers the notice or election to the secretary of the Corporation or two
business days after sending the notice or election by certified mail.
<PAGE> 3
VI. NATURE OF PARTICIPANT'S INTEREST IN THE PLAN
A Participant's interest in this Plan and that of his designated
Beneficiary is an unsecured claim against the general assets of the Corporation
and neither the Participant nor his designated Beneficiary has any claim against
or right to the account until the Corporation distributes the account. All
amounts credited to an account are the general assets of the Corporation and may
be disposed of or used by the Corporation in such manner as it determines;
provided, at such time as amounts credited to the account are so disposed of or
used, the balance or lesser amount so disposed of or used at that time shall
continue as a method of valuing benefits under this Plan, and accrued earnings
shall thereafter be credited to the account, or such portion, at a semi-annual
rate equal to the six-month U.S. Treasury Bill rate in effect at that time, and
at the end of each six-month period thereafter.
A Participant or Beneficiary may not assign, pledge or otherwise
hypothecate any interest in this Plan and any attempt to assign, pledge or
encumber that interest is not valid.
V. TERM OF THE PLAN
The Plan and Agreement is effective upon its adoption by the Board of
Directors. The Plan and Agreement shall continue in effect until the benefits as
is distributed to the Participant or Beneficiary. The Board of Directors may
terminate the Plan at any time subject to the distribution requirements above.
VI. AMENDMENT
The Board of Directors may amend the plan at any time, without the
consent of any Participant or Beneficiary, provided, however, that no amendment
shall divest the Participant or Beneficiary of any benefits he or she would have
been entitled to prior to the effective date of the amendment.
CRYSTAL MOUNTAIN, INC.
By /s/ Robert E. Carlson
-------------------------------
Robert E. Carlson
Its Chairman of the Board
By /s/ Lawrence E. Hard
-------------------------------
Lawrence E. Hard
Its Secretary
/s/ Peter Gillis
-------------------------------
PETER GILLIS
PARTICIPANT
<PAGE> 4
CRYSTAL MOUNTAIN, INC.
SUMMARY PLAN DESCRIPTION
1. Name of Plan. Crystal Mountain, Inc. Deferred Compensation Plan and
Agreement.
2. Name and Address of Plan Sponsor. Crystal Mountain, Inc.; One Crystal
Mountain Boulevard, Crystal Mountain, Washington 98022.
3. Name, Address and Telephone Number of Plan Administrator. Crystal
Mountain, Inc.; One Crystal Mountain Boulevard, Crystal Mountain,
Washington 98022, (206) 663-2264.
4. Name and Address of Agent for Service of Legal Process.
Lawrence E. Hard, c/o Crystal Mountain, Inc.; One Crystal Mountain
Boulevard, Crystal Mountain, Washington 98022
5. Employer Identification Number: 91-0683256.
Plan Number - 003.
6. Plan Fiscal Year. September 30.
7. Type of Welfare Benefit Plan. Executive Deferred Compensation Plan.
8. Participants. One (1) participant: Peter Gillis.
9. Type of Administration of Plan.
The Plan provides benefits under the terms of a Deferred Compensation
Plan and Agreement.
10. Sources of Contributions to the Plan.
Employer - 100 percent by identification of amount(s) subject to the
Plan, and by Participant deferral of compensation.
11. Terms of Plan. Upon Participant's termination of employment,
Participant or his Beneficiary will receive benefits equal to amounts
identified by the Employer as subject to the Plan, plus amounts
deferred by Participant, plus earnings or growth and less losses or
reduction in value credited or debited to an account owned by the
Corporation and maintained as a method of measuring benefits in the
manner described in the Plan.
<PAGE> 5
This is a general, brief description of benefits under the
Plan. Any discrepancy between this Summary and the Plan document, which
is on file in the offices of the Corporation shall be governed by the
Plan document.
12. ERISA Rights.
As a participant in the Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA provides that all Plan participants shall be entitled to:
(a) Examine, without charge, at the Plan Administrator's office and
at other specified locations (such as worksites) all Plan
documents, including insurance contracts and copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports and Plan descriptions.
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Plan
Administrator may make a reasonable charge for the copies.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the employee
benefit plan. The people who operate this Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other Plan
participants and beneficiaries. No one, including your employer, or any other
person may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a benefit or from exercising your rights under ERISA. If your
claim for a benefit is denied in whole or in part, you must receive a written
explanation of the reason for the denial. You have the right to have the Plan
reviewed and your claim reconsidered. Under ERISA, there are avenues you can
take to enforce the above rights. For instance, you may file suit in a Federal
court. In such a case, the court may require the Plan Administrator to provide
the materials and pay you up to $100 a day until you receive the materials,
unless the materials were not sent because of reasons beyond the control of the
Plan Administrator. If you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or Federal court. If it should
happen that Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in Federal court. The court
will decide who should pay court costs and legal fees. If you are unsuccessful,
the court may order you to pay these costs and fees, for example, if it finds
your claim is frivolous. If you have any questions about your Plan, you should
contact the Plan Administrator. If you have any questions about this statement
or about your rights under ERISA, you should
<PAGE> 6
contact the nearest Area Office of the U.S. Labor--Management Services
Administration, Department of Labor.
12. Appeal Procedure.
A participant or a beneficiary ("Claimant") may file with the Plan
Administrator a written claim for benefits, if the participant or beneficiary
determines the distribution procedures of the Plan have not provided him his
proper Nonforfeitable Accrued Benefit. The Plan Administrator must render a
decision on the claim within 60 days of the Claimant's written claim for
benefits. The Plan Administrator must provide adequate notice in writing to the
Claimant whose claim for benefits under the Plan and the Plan Administrator has
denied. The Plan Administrator's notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Plan Administrator based its denial;
(c) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Plan Administrator
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Plan Administrator in writing within the
75-day period will render the Plan Administrator's
determination final, binding and conclusive.
If the Claimant should appeal to the Plan Administrator, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Claimant, or his duly authorized representative, may review pertinent Plan
documents. The Plan Administrator will re-examine all facts related to the
appeal and make a final determination as to whether the denial of benefits is
justified under the circumstances. The Plan Administrator must advise the
Claimant of its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the 60-day limit unfeasible, but in no event may
the Plan Administrator render a decision respecting a denial for a claim for
benefits later than 120 days after its receipt of a request for review.
<PAGE> 1
EXHIBIT 10.27
[SEAFIRST LETTERHEAD]
November 7, 1995
Thomas F. Leonard
President
Chrystal Mountain, Inc.
1 Crystal Mountain Blvd.
Enumclaw, WA 98022
Dear Tom:
This is to inform you that we waive, effective upon your acknowledgment and
acceptance below on or before November 30, 1995 the following provisions of our
Second and Restated Loan Agreement dated September 14, 1995:
6.10 the section of same which reads -- Borrower shall at all times
maintain a ratio of indebtedness to tangible net worth of not more than 2.0
to 1. and
7.7 Capital Expenditures -- maximum
This waiver is for fiscal year ending September 30, 1995. This waiver relates
only to the above provisions and is only for the fiscal year ending September
30, 1995. This waiver shall not be construed as a course of conduct. All other
conditions not specifically waived hereby shall be strictly construed.
Please acknowledge your acceptance by signing below and returning this letter
by November 30, 1995.
Sincerely,
Seattle-First National Bank
SW Commercial Banking -- Team 2 Borrower Acknowledgment:
Crystal Mountain, Inc.
/s/ M J Scott By: /s/ Thomas F. Leonard
- -------------------- ------------------------
Michael J. Scott Title: President
Vice President Date: 11/11/95
<PAGE> 1
EXHIBIT 13.2
FIVE YEAR SELECTED DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues $ 9,272 $ 8,889 $ 9,643 $ 8,176 $ 7,730
Income From Operations* $ 813 $ 984 $ 1,591 $ 1,354 $ 1,260
Income (Loss) Before Tax $ (493) $ (239) $ 394 $ 69 $ (114)
Net Income (Loss) $ (438) $ (239) $ 384 $ 159 $ 12
Earnings (Loss) Per Share** $ (16.03) $ (8.75) $ 14.04 $ 5.80 $ .44
BALANCE SHEET DATA
Working Capital $ (1,093) $ (767) $ (866) $ (618) $ (392)
Total Assets $ 8,826 $ 8,844 $ 9,052 $ 8,787 $ 9,297
Long-term Debt $ 4,442 $ 4,346 $ 4,276 $ 4,628 $ 5,266
Shareholders' Equity $ 2,700 $ 3,138 $ 3,377 $ 2,994 $ 2,835
STATISTICAL DATA
Skier Visits 320 311 362 303 301
Days of Operation (Winter) 155 122 139 128 136
Opening Day (Winter) Nov. 6 Dec. 10 Nov. 24 Nov. 23 Nov. 30
</TABLE>
* Income from operations are net of depreciation, amortization and interest
expenses.
** Earnings per share are based upon 27,319 weighted average shares
outstanding for all years presented.
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of shareholders will be held on December 11, 1995 at 7:30
p.m. at the Seattle Marriott Hotel, 3201 South 176th Street, Seattle, Washington
98188.
FORM 10-KSB
A copy of the Company's Form 10-KSB annual report to the Securities and
Exchange Commission is available upon written request to Lawrence Hard,
Secretary.
DIVIDEND POLICY
It has been Company policy to retain all earnings to fund business
development and growth. The Company has never declared or paid cash dividends
and does not intend to do so in the foreseeable future. As provided in Article V
of the Articles of Incorporation, a shareholder holding 20 or more shares of
Class A common stock is entitled to purchase the equivalent value of one lead
ticket for each share of Class A common stock so held. The price of such tickets
purchased by shareholders is no more than 10% of the current price to the
public.
STOCK MARKET ACTIVITY
The Company is aware several brokerage firms are making a market in the
common stock. Transfers in the stock do occur through private transactions. The
following table sets forth the range of prices at which the Company's stock was
sold in the public market by quarter:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
December 1993 $ 305 $ 270
March 1994 $ 310 $ 290
June 1994 $ 305 $ 305
September 1994 $ 390 $ 310
December 1994 $ 310 $ 310
March 1995 $ 320 $ 310
June 1995 $ 325 $ 310
September 1995 $ 325 $ 325
</TABLE>
HOLDERS
There were 26,609 Class A and 710 Class B common shares outstanding at both
September 30, 1995 and 1994.
1
<PAGE> 2
CORPORATE MESSAGE
To our shareholders:
The early opening of November 6 created much optimism in the market and
within our staff. We all had visions of a record year at the beginning of
December. By mid December the untimely period of record warmth had begun and the
dreams of a record year quickly faded. Rain and high winds during the critical
holiday period of Christmas and New Years were a major disappointment. At this
point in the season we felt that a good year was still possible. Unfortunately
this was followed by the warmest January and February in Puget Sound history and
the erosion of our business levels continued.
The overall result was a skier visits level of 320,000, just over the
311,000 of the previous year and well behind the 362,000 of 1993. The early
opening lead to a 155 day season, 33 days (27%) longer than 1994 and 16 days
longer than 1993. The added expenses of this longer season and relatively soft
revenues lead to a disappointing year end loss.
Crystal and other ski resorts face the challenge of dealing with seasonal
variations in weather and at the same time maintaining a sense of long term
progress in the eyes of the paying guest regarding facilities and service
improvements. We have focused our improvements this year on high impact guest
service areas and enhancements to product value. Our decision to lease three new
snow cats while disposing of two and introducing the Easy Load lift loading
moving carpets to Chair 9 and Midway Shuttle reflects the Board's belief that
these will strengthen our competitive position. These and other improvements are
aimed at making Crystal easier to enjoy for all ability levels and more
appealing to families.
Your Board and management remain optimistic about the future of Crystal
while recognizing the unique character of this weather dependent business.
Ultimately the special relationship you have to the Company, as frequent users
and champions supporting our efforts while providing important feedback for
improvement, is a strength that will enhance our likelihood of success in the
future. All of Crystal's employees are committed to maintaining Crystal's
position as the "Favorite Washington Ski Area" and to making you proud of your
affiliation with Crystal.
On behalf of Crystal's Board, Management, and Employees:
Bob Carlson
- -----------------------------------
Bob Carlson
Chairman of the Board
Tom Leonard
- -----------------------------------
Tom Leonard
President
2
<PAGE> 3
CRYSTAL MOUNTAIN--WASHINGTON STATE'S BEST SKI RESORT
Crystal Mountain, Inc. (the Company), owns and operates a mountain resort
facility in the beautiful Cascade Mountains of Washington State. The resort,
located at the headwaters of Silver Creek in the Mt. Baker--Snoqualmie National
Forest, is adjacent to Mt. Rainier National Park. Crystal Mountain is
conveniently located near the greater Seattle metropolitan area. It serves the
Puget Sound region and attracts vacationers from throughout the northwestern
United States and Canada.
CRYSTAL MOUNTAIN--THE SKI RESORT
Crystal is comprised of over 4,300 acres, which are used under a special
permit from the United States Forest Service. The village elevation at Crystal
is 4,400 feet and the summit is 7,002 feet. Our Northway run drops below the ski
village to 3,900 feet, providing a 3,102 foot vertical drop. The terrain offers
skiing for individuals of all ages and levels of experience. The resort has ten
chair lifts consisting of a high speed quadruple lift, a regular speed quadruple
lift, three triple-chair lifts and five double-chair lifts plus one beginner
handle-tow. The resort employs approximately 650 people during peak operations
of which 45 are full time, year-round employees.
The state's largest single ski area, Crystal was incorporated in 1955 and
opened in 1962. We are proud of our position of national recognition for
excellent skiing. Crystal continues to be rated as one of the top resorts in the
Pacific Northwest. Crystal remains known as a friendly, family-oriented,
intimate, value-priced ski resort with a well-developed mountain.
Crystal primarily serves day visitors but is the only resort in Washington
state with both hotel and condominium facilities within walking distance to the
base lift facilities. The Company owns and operates a 20 room hotel, a main
lodge with two restaurants and an entertainment bar, the Summit House
Restaurant, a business conference center, a ski rental and repair facility, and
numerous support facilities. Concessionaires own and operate two hotels, and a
restaurant with a bar and delicatessen. Another concessionaire also operates a
ski shop which is in a facility owned by the Company. In addition, 96 privately
owned condominium units have been built at Crystal of which, pursuant to Forest
Service requirements, 20% must be available to the public.
CRYSTAL MOUNTAIN--THE SUMMER RESORT
During late spring, summer and early fall, Crystal offers scenic rides to
the summit on two chairlifts; fine dining at the Summit House Restaurant; and
mountain biking, hiking, swim- ming, tennis, and disc golf. There are RV
hookups, a base area restaurant, and both hotel and condominium accommodations
offering meeting rooms serving both tourists and groups. In the summer, Crystal
can be reached from several scenic highways offering breathtaking views of the
Cascade Mountains.
IMPROVING THE SKIING EXPERIENCE
Each year the Company strives to introduce new facilities and services to
maintain itself as a leader in the skiing industry. During Fiscal 1994, we
introduced the First Tracks automated ticketing system. This is the most
advanced ticketing system available allowing the skier a variety of pricing
options. The system gives the skier the ability to bypass the conventional
ticket system using our automated computerized lift access, Ski Key. The Company
created Club Vertical allowing skiers to track their vertical feet skied. In the
past, Club Vertical members earned premiums based upon usage of the mountain not
unlike the airline frequent flyer programs. In response to member feedback we
have revised the Club Vertical plan replacing most premium offers with $5 off
every day they ski.
We have remodeled our day lodge to include a guest service center. From this
center we can assist our guests with any situation, provide current and accurate
information about skiing conditions, grooming, weather, mountain tours, and even
issue guests their Club Vertical Ski Key. This information will be updated by
our guest service center every hour beginning at 5:00am.
3
<PAGE> 4
This year Crystal Mountain becomes one of the first ski areas in the country
to offer Easy Load moving carpet system on two of our busier chairs. The load
carpet installations are in direct response to our skiers request to reduce lift
stoppages and to improve our lifts' efficiency to move people up the mountain.
Other improvements include our recommitment to our most valued skiers with
lower season pass prices and families by restructuring our family discounts to
reflect the realities of single parent families. We have enlarged the unload
zone in front of the ticket plaza and designated the enlarged areas as a family
drop off zone to make getting the entire family out of the car and onto the hill
as convenient as possible. This winter we are introducing a new product, The Ski
School Pass, for teens and youths taking multiweek ski lessons beginning in
early January 1996. These passes are designed to make learning to ski very
affordable and allow more opportunities for the students to improve their skills
and become life long skiers and snowboarders.
Crystal Mountain is famous for having some of the best extreme skiing
terrain in the Pacific Northwest. But we are equally committed to providing
intermediate and beginner skiers with great skiing. We increased our grooming
fleet to enable us to consistently groom more of the mountain every night and
provide a wide variety of well groomed runs every ski day.
An increase in our inventory of snowboards will allow us to better meet the
demands of the rapidly growing snowboard market. We upgraded our ski tuning
machine so that we can repair skis and snowboards quickly and expertly. Our demo
rental center continues to be very successful. This year we are adding
performance rental packages to our inventory for those guests who desire to rent
equipment for the day that can perform at a level their skill demands.
We are also proud to announce the opening of our business conference center
in the space formerly occupied by the Crystal Cookhouse. We now provide evening
dining and live entertainment at the Rafters restaurant. A dance floor was also
a recent addition to Rafters. These modifications have enhanced the interest and
excitement of our night skiing and provided more opportunity to attract groups
needing conference space.
We are nearing the completion of the final phase of our 1983 Master Plan.
The remaining elements include the construction of a restaurant at the top of
the Rendezvous lift, expansion of the Summit House, expanding base area service
facilities, and further developing night skiing. We are conducting extensive
environmental studies of the entire Crystal Mountain area to assure compliance
with the Revised Record of Decision and The President's Forest Plan. These
studies will also further the development of the next Master Plan. The planning
process will include shareholder and public input and must be completed by 1999.
Environmental regulations, Federal land ownership policies, and capital
availability will guide the outcome of the Master Plan.
MARKET DEVELOPMENT
Crystal competes primarily with eight local ski areas including the four
Snoqualmie Pass areas, Stevens Pass, White Pass, Mission Ridge and Mt. Baker.
Additional competition comes from the regional destination resorts at Mt.
Bachelor, Mt. Hood, Sun Valley and Whistler/Blackcomb. Crystal continues to
pursue the local Seattle Metropolitan Area with program sales and promotions. In
addition, direct and group sales are made through community and fraternal
organizations, businesses and hotels. The addition of the First Tracks ticketing
system gives us unique ability to track guest usage and customize promotions and
product offerings for groups and individuals.
Despite the many competitive alternatives and the unusual operating problems
associated with weather conditions inherent to the ski resort industry, Crystal
has maintained a relatively consistent level of skier visits.
4
<PAGE> 5
COMPLIANCE WITH GOVERNMENTAL REGULATIONS AND
ENVIRONMENTAL LAWS
The Company works to maintain a positive relationship with the Forest
Service as "partners in recreational development."
The land occupied by the Company is regulated by a 40-year Ski Area-Term
Special Use Permit issued in 1992. In addition, the Company has two separate
30-year term Special Use Permits covering the condominium facilities. The
continued use of these permit areas is subject to certain regulations common to
all ski areas developed on United States Forest Lands. These include
restrictions on land use, environmental compliance, and water and sewer
regulations among others. Advance approval must be obtained from the United
States Forest Service for all construction, land alterations, and significant
repairs. In granting permission, the Forest Service considers the protection of
the natural esthetics of the land. The permits may be canceled at any time with
equitable consideration for improvements made to the area.
Annual fees paid to the Forest Service under these permits are determined by
a formula based upon the resort's fixed asset value and revenues. The rate for
1996 is expected to be 2% of the resort area revenue, after sales tax.
5
<PAGE> 6
BALANCE SHEET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 154,000 $ 148,000
Short-term investments (Note 2) 115,000 112,000
Accounts receivable 37,000 66,000
Inventories 160,000 100,000
Prepaid expenses 125,000 112,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 591,000 538,000
LAND IMPROVEMENTS, BUILDINGS AND EQUIPMENT,
net (Notes 3 and 4) 8,089,000 8,109,000
OTHER ASSETS 146,000 197,000
- -----------------------------------------------------------------------------------------------------------------
$ 8,826,000 $ 8,844,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 4) $ - $ 400,000
Accounts payable 383,000 126,000
Accrued liabilities 759,000 404,000
Interest payable 94,000 92,000
Deferred income 107,000 70,000
Current portion of bank note payable and leases 341,000 213,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,684,000 1,305,000
BANK NOTE PAYABLE AND CAPITAL LEASE OBLIGATIONS,
net of current portion (Notes 4 and 5) 4,442,000 4,346,000
DEFERRED INCOME TAX (Note 6) - 55,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 6,126,000 5,706,000
- -----------------------------------------------------------------------------------------------------------------
COMMITMENTS (Notes 8 and 9)
STOCKHOLDERS' EQUITY
Common stock--
Class A, $50 par value per share,
90,000 shares authorized, 26,609 issued and outstanding 1,331,000 1,331,000
Class B, $20 par value per share,
25,000 shares authorized, 710 issued and outstanding 14,000 14,000
Additional paid-in capital 505,000 505,000
Retained earnings 850,000 1,288,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 2,700,000 3,138,000
- -----------------------------------------------------------------------------------------------------------------
$ 8,826,000 $ 8,844,000
============= =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
REVENUES
Mountain operations $ 7,083,000 $ 6,698,000
Food services 2,189,000 2,191,000
- -----------------------------------------------------------------------------------------------------------------
9,272,000 8,889,000
- -----------------------------------------------------------------------------------------------------------------
EXPENSES
Mountain operations 3,726,000 3,452,000
Food services 1,950,000 1,773,000
General and administrative 2,783,000 2,680,000
Depreciation and amortization 955,000 894,000
Interest 351,000 329,000
- -----------------------------------------------------------------------------------------------------------------
9,765,000 9,128,000
- -----------------------------------------------------------------------------------------------------------------
Loss before income taxes (493,000) (239,000)
Income tax benefit 55,000 -
- -----------------------------------------------------------------------------------------------------------------
NET LOSS (438,000) $ (239,000)
============= =============
NET LOSS PER COMMON SHARE $ (16.03) $ (8.75)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 27,319 27,319
============= =============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (438,000) $ (239,000)
Adjustments to reconcile loss to net cash
provided by operating activities
Deferred income tax (55,000) -
Depreciation and amortization 955,000 894,000
Loss on disposition of assets 25,000 -
Change in
Accounts receivable 29,000 (5,000)
Inventories (60,000) (26,000)
Prepaid expenses (13,000) (27,000)
Other assets 51,000 (28,000)
Accounts payable 257,000 (242,000)
Accrued liabilities 357,000 (176,000)
Deferred income 37,000 (22,000)
- -----------------------------------------------------------------------------------------------------------------
1,145,000 129,000
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments (3,000) (4,000)
Capital expenditures, net (960,000) (598,000)
- -----------------------------------------------------------------------------------------------------------------
(963,000) (602,000)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) from line of credit (400,000) 400,000
Net borrowings on bank note payable 235,000 -
Principal payments on long-term debt and leases (11,000) (3,572,000)
Borrowings on long-term debt - 3,643,000
- -----------------------------------------------------------------------------------------------------------------
(176,000) 471,000
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 6,000 (2,000)
CASH AND CASH EQUIVALENTS
Beginning of year 148,000 150,000
- -----------------------------------------------------------------------------------------------------------------
End of year $ 154,000 $ 148,000
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the year for interest $ 349,000 $ 304,000
============= =============
Cash paid during the year for income taxes $ - $ 3,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Additional
Common Paid-In Retained
Stock Capital Earnings Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1993 $ 1,345,000 $ 505,000 $ 1,527,000 $ 3,377,000
Net loss (239,000) (239,000)
- -----------------------------------------------------------------------------------------------------------------
BALANCE, September 30, 1994 1,345,000 505,000 1,288,000 3,138,000
Net loss (438,000) (438,000)
- -----------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995 $ 1,345,000 $ 505,000 $ 850,000 $ 2,700,000
============= ============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
OPERATIONS -- Crystal Mountain, Inc. (the Company), owns and operates a
year-round mountain resort facility in the Cascade Mountains of Washington
State. The Company's facilities are located on land owned by the U.S. Government
and operations are carried out under a U.S. Forest Service Special Use Permit
(Note 9). The resort has two distinct seasons with skiing and other winter
activities occurring from November through April and summer operations occurring
from May through September.
CASH EQUIVALENTS -- Investments with maturities of three months or less at
the date of purchase are considered to be cash equivalents for purposes of the
statement of cash flows (Note 2).
SHORT-TERM INVESTMENTS -- Short-term investments are recorded at the lower
of amortized cost or fair value and consist of investments with maturities of
three months to one year (Note 2).
INVENTORIES -- Inventories are stated at the lower of cost (first-in,
first-out basis) or market.
9
<PAGE> 10
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- -------------------------------------------------------------------------------
LAND IMPROVEMENTS, BUILDINGS AND EQUIPMENT -- Land improvements, buildings
and equipment are stated at cost and depreciated or amortized using
straight-line and accelerated methods over the estimated useful lives of the
assets or the lease term, whichever is less. The estimated useful lives are as
follows:
Lifts 15-20 years
Land improvements 12-20 years
Buildings and utilities 5-20 years
Equipment 3-10 years
INCOME TAXES -- Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and the tax basis of
assets and liabilities that will result in taxable or deductible amounts in the
future based on currently enacted tax laws and rates.
FINANCIAL INSTRUMENTS AND CREDIT RISK -- Financial instruments which
potentially subject the Company to significant concentrations of credit risk
consist principally of cash, cash equivalents, and short-term investments. The
Company maintains cash accounts and investments with highly creditworthy
financial institutions and credit risk is deemed to be minimal.
ADVERTISING AND PROMOTION EXPENSE -- Advertising and promotion costs are
expensed when incurred or expensed ratably over the year in relation to revenue.
The Company expensed $383,000 and $355,000 in 1995 and 1994, respectively, for
advertising and promotion costs.
NOTE 2 - DISCRETIONARY FUNDS
- -------------------------------------------------------------------------------
The Company's Board of Directors has restricted cash equivalents and
short-term investments for future corporate purposes as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Cash and cash equivalents $ 154,000 $ 148,000
Short-term investments 115,000 112,000
Restricted by Board (264,000) (254,000)
---------- ----------
Cash available for operations $ 5,000 $ 6,000
========== ==========
</TABLE>
10
<PAGE> 11
NOTE 3 - LAND IMPROVEMENTS, BUILDINGS, AND EQUIPMENT
Land improvements, buildings, and equipment are recorded at cost and
consist of:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Lifts $ 5,940,000 $ 5,952,000
Land improvements 2,674,000 2,664,000
Buildings and utilities 6,070,000 5,635,000
Equipment 3,377,000 3,103,000
-------------- -------------
18,061,000 17,354,000
Less accumulated depreciation and amortization (9,972,000) (9,245,000)
-------------- -------------
$ 8,089,000 $ 8,109,000
============== =============
</TABLE>
NOTE 4 - BANK NOTE PAYABLE
On September 14, 1995, Crystal amended and restated its loan agreement
with SeaFirst Bank. The agreement terminates May 31, 2002 or 2003 depending on
certain covenants within the agreement. The agreement is secured by
substantially all assets of the Company. Additionally, the Bank has been
assigned, in trust, the Company's interest and rights under the Special Use
Permit (Note 9). The loan agreement allows Crystal to elect to have interest
accrue on any outstanding borrowings at LIBOR plus 2.5% or, interest is charged
at the bank's prime rate plus .5%.
The agreement contains additional financial covenants which must be met
annually. In 1995 and 1994, the Company was in compliance with or had obtained
waivers for such covenants.
The loan agreement provides for maximum borrowings of $7,000,000 through
December 31, 1995. The loan agreement requires annual principal payments of
$250,000 plus periodic payments based on estimated cash flow, as defined and
calculated by the bank. Annual and periodic principal payments represent a
reduction in the loan commitment amount, which limits available funds for the
succeeding twelve months. The agreement is a revolving note that requires the
Company to keep the principal balance of the loan below the loan commitment by a
certain amount, for a certain number of days. Future minimum repayments as of
September 30, 1995 are:
1996 $ 335,000
1997 250,000
1998 250,000
1999 250,000
2000 250,000
Thereafter 3,442,000
------------
$ 4,777,000
=============
The $400,000 line of credit outstanding at September 30, 1994 was repaid
during the 1995 fiscal year.
11
<PAGE> 12
NOTE 5 - CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under various capital lease
agreements which have interest rates ranging from 7.75% to 14.5%. The leases
expire in 1996. The present value of future minimum lease payments at September
30, 1995 and 1994 were $6,000 and $16,000, respectively.
NOTE 6 - INCOME TAXES
A reconciliation of the income tax provision (benefit) to the amounts
computed by applying the federal statutory income tax rate to income before
income tax is as follows:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
Amt % Amt %
------------------- -------------------
<S> <C> <C>
Income tax provision at
federal statutory rate $ - - $ - -
Deferred benefit (233,000) (47.2) (22,600) (9.5)
Increase in valuation allowance 178,000 36.1 22,600 9.5
------------------- -------------------
Income tax benefit
and effective tax rate $ (55,000) (11.1) $ - -
=================== ===================
</TABLE>
The components of deferred income tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Deferred income tax liability
Depreciation expense $ (500,000) $ (482,000)
------------ ------------
Deferred income tax assets
Net operating loss carryforwards
and credits 813,000 580,000
Valuation allowance (313,000) (153,000)
------------ ------------
Net deferred income tax assets 500,000 427,000
------------ ------------
Total deferred income tax liability $ - $ (55,000)
============ ============
</TABLE>
At September 30, 1995, the Company had approximately $2,437,000 of net
operating loss carry forwards for tax purposes which expire at various dates
from 2005 to 2009.
12
<PAGE> 13
NOTE 7 - 401(K) RETIREMENT SAVINGS PLAN
The Company has a 401(k) Plan which covers all eligible employees.
Participants may contribute up to 25% of their gross compensation to the Plan.
Employer matching contributions range from 25% to 100% of up to 6% of
participant contributions. Participants become 100% vested in employer contribu-
tions ratably over seven years. For 1995 and 1994, the Company's expense for
employer matching contributions were $34,000 and $33,000, respectively.
NOTE 8 - EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENTS
The Company has employment agreements with two key employees. These
agreements began October 1, 1994 and end September 30, 1997. The agreements
specify that these employees are to be compensated at a rate to be established
annually by the Company's Board of Directors. The agreements also provide for
severance pay. The benefits to be paid varies depending on the circumstances of
the termination. As of September 30, 1995, the maximum amount of severance pay
which the Company would be obligated to is $222,000.
A deferred compensation plan was made available to each employee covered
under the employment agreements. These plans are nonqualified and are maintained
to allow the Company to defer a portion of the employee's annual compensation.
In 1995, $48,000 was expensed as employer contributions for service in 1995 and
prior years.
NOTE 9 - COMMITMENTS
USE PERMIT -- Crystal Mountain operates under a Term Special Use Permit
issued by the United States Department of Agriculture, Forest Service. The
permit was renewed as of April 1, 1992 for forty years until April 1, 2032.
According to the permit, the Company is required to pay a graduated fee to the
Forest Service based on net revenue and gross fixed assets used. Fees paid to
the U.S. Forest Service in 1995 and 1994 amounted to approximately 2% of
revenue.
LEASES -- The Company leases equipment and an office facility under
operating lease agreements which expire in 1999. For 1995 and 1994, rent expense
amounted to $202,000 and $124,000, respectively. Future minimum payments under
the leases are:
1996 $ 225,000
1997 212,000
1998 165,000
1999 118,000
---------
$ 720,000
=========
13
<PAGE> 14
NOTE 10 - RELATED PARTY TRANSACTIONS
Certain services are provided by members of Crystal Mountain's Board of
Directors or their related companies. Amounts paid to related parties amounted
to $158,000 and $81,000 in 1995 and 1994, respectively.
NOTE 11 - COMMON STOCK
The Company has never declared or paid cash dividends and does not intend
to do so in the foreseeable future. The policy is to reinvest in facilities and
operating improvements. As provided in Article V of the Articles of
Incorporation, a shareholder holding 20 or more shares of Class A common stock
is entitled to purchase the equivalent value of one lead ticket for each share
of Class A common stock so held. The price of such tickets purchased by
shareholders is no more than 10% of the current price to the public.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Crystal Mountain, Inc.
We have audited the accompanying balance sheet of Crystal Mountain, Inc.
as of September 30, 1995 and 1994 and the related statements of operations,
changes in stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Crystal Mountain, Inc. as of
September 30, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
MOSS ADAMS LLP
Seattle, Washington
October 30, 1995
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
RESULTS OF OPERATIONS
The Company's business is subject to unusual seasonality and therefore
operating results are highly dependent upon weather conditions. Approximately
93% of the revenue is earned during the winter months, with the vast majority of
the earnings occurring between December 20 and March 10. Variability in weather,
a short revenue generating period and high fixed costs make earnings volatile.
During the summer and fall, significant expenses are incurred in preparing for
the ski season. The expense of operating ski lifts and ancillary services during
the ski season are relatively constant no matter the number of skiers. Once, the
earnings level covers these fixed expenses, net income grows rapidly due to the
low incremental cost of providing services.
FISCAL 1995 COMPARED TO FISCAL 1994
The 1994-1995 winter season proved just how vulnerable the Company is to
variations in the weather. This winter season began with one of the earliest
openings on November 6, 1994. Skiing conditions were excellent and business was
ahead of expectations. By the middle of December the Company was on track for a
record year for snowfall, skier visits and revenues.
Unseasonably warm weather arrived in mid December and continued until the
middle of March. Due to the warm and often stormy weather the Company did not
attract the expected number of daily paid skier visits during the core period of
the winter season. Unfortunately, much of the warm weather occurred during the
Christmas holidays, Martin Luther King weekend, and Presidents Day weekend which
are historically the Company's best revenue earning periods. During these three
periods alone the mountain normally services 83,000 paid skiers at full holiday
prices. This year however, only 41,000 skiers paid to ski at Crystal due to poor
weather conditions. This dramatically impacted revenues. The 42,000 drop in paid
skier visits represented a loss in potential revenues of more than $1,500,000.
In addition to poor paid skier visits during the holiday periods, non
holiday paid skier visits fell below normal levels by another 34,000 visits. The
Company was fortunate that the month of November was so strong and that we were
48,000 paid skier visits ahead before the weather deteriorated.
Overall skier visits were 3% higher in 1995, than 1994. The increase in paid
skier visits resulted in an increase in revenues of 4% or approximately $383,000
between 1995 and 1994. However, with the early November 6 opening, the Company
operated 27% longer in 1995 to attain these revenues. With the extra month of
operations the Company incurred increased operating expenses of 7% or
approximately $554,000 between 1995 and 1994. Even with a difficult year
interest expense was up only slightly at $351,000 for 1995, versus $329,000 in
1994.
The Company's operating results continue to be disappointing. The results
for 1995 included a year end net loss of $438,000 (loss of $16.03 per share) and
internally generated cash of $462,000. The 1994 year end net loss was $239,000
(loss of $8.75 per share) and internally generated cash was $655,000. But, even
under the difficult circumstances the Company has been able to maintain and
enhance our current level of services to provide the best possible skiing
experiences for our guests.
FISCAL 1994 COMPARED TO FISCAL 1993
Due to low snowfall during November 1993, the mountain was not opened until
after Thanksgiving. The December 10 opening was the latest in four years for
Crystal. Additionally, variable weather significantly reduced skier volumes
during the core earning season, including the Christmas holiday period.
Through
15
<PAGE> 16
January 1994, results were $2,000,000 and 90,000 skiers behind 1993 amounts on a
comparative basis. Fortunately, record snows came in mid-February resulting in
better comparative amounts for the second half of the season. For the second
half of the season, the 1994 skier days exceeded 1993 by 40,000 days.
Unfortunately, the revenue per skier visit is historically higher during the
first half of the season due to holiday prices and fewer promotional rates.
Therefore, the increase of skiers in the second half of the season generated
considerably less revenues than had those skiers come during the first half of
the season. Overall, skier visits were 14% lower in 1994 than in 1993. This
reduction in skier visits and the timing of these visits resulted in an 8% drop
in revenues or approximately $750,000 between 1994 and 1993. This reduction
occurred even with an increase from $28 to $31 for a lead adult ticket price and
with the introduction of the Children's Skier Improvement Center.
The Company reduced operating expenses by 2% in 1994 versus 1993, even with
the implementation of First Tracks, the new Children's Skier Improvement
Center and certain nonrecurring legal expenses associated with the rental shop
purchase. Unfortunately, because of the late start to the season, the Company
was required to carry debt costs incurred during the fall, farther into the
season. Due to carrying the debt longer and rising interest rates in 1994, the
Company incurred $74,000 more in interest costs from 1993.
The season's ending loss of $239,000 (loss of $8.75 per share) and
internally generated cash of $655,000 were disappointing as compared to the
profit in 1993 of $384,000 ($14.04 per share) and internally generated cash of
$1,345,000.
In spite of the difficult year, the Company added significant services and
still managed to limit the increase in total liabilities to only $31,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has maintained its financing arrangement with SeaFirst Bank
since 1988. The agreement was modified in 1990 to establish a seasonal line of
credit for $1,500,000 as part ofthe term debt agreement in 1993 to change the
interest rate provision, and in 1995 to consolidate the seasonal line of credit
with the term debt into one note that is a reducing, revolving line of credit.
The limit was increased to $7,000,000 which included the $450,000 that was a
preliminary commitment last year and another $300,000 in order to finance the
Easy Load moving carpet systems on two chair lifts. During the year the Company
exercised our skip payment option according to the terms of the note agreement.
The agreement with SeaFirst Bank requires that for 60 consecutive days each
12 month period (June 1 to May 31, annually) balances must be $2,300,000 below
the maximum commitment for the year. The interest rate is at the bank's prime
rate plus one half percent (.5%) or LIBOR plus two and a half percent (2.5%).
This agreement allows the Company to maximize the benefits of cash flow buildup
during the ski season by allowing the pay down of the term debt when high
volumes of cash are available. The Company is then allowed to borrow funds back
for its maintenance programs and capital projects through the summer and fall.
This arrangement avoids having to invest short term cash in traditional manners
and yields a higher effective return on short-term money.
Loan agreements with SeaFirst Bank contain restrictions regarding financial
ratios, payment of dividends, stock redemption, liquidation, mergers and sales
of a substantial portion of the Company's assets, all of which are pledged as
security for the Company debt with SeaFirst Bank. During both 1995 and 1994 the
Company was not in compliance with certain loan covenants and obtained waivers
from the bank. Management has developed a plan for 1996 that takes into account
the contingencies associated with the unpredictability of weather. Management
believes that this plan together with available capital resources and financing
are sufficient to meet the Company's cash flow needs.
16
<PAGE> 17
BOARD OF DIRECTORS
ROBERT E. CARLSON
Manager, Western Washington Fair Assoc.
WILLIAM S. COGHILL
Business Specialist
Tom Torkens, Sculpture and Design
NANCY K. DEES
Vice President of Puyallup School District
Board of Directors
PETER F. DELAUNAY
President
DeLaunay Communications, Inc.
ROBERT J. DIERCKS
Partner
Foster, Pepper & Shefelman
Attorney At Law
DAVID W. GOSSARD
Attorney At Law
Sole Practitioner
LAWRENCE F. HARD
Shareholder
LeSourd & Patten, P.S.
Attorney At Law
WILLIAM W. JEUDE
President, Univest Capital Corporation
THOMAS F. LEONARD
President
Crystal Mountain, Inc.
DELIGHT S. MAHALKO
Executive Secretary
Pacific Northwest Ski Areas Association
JAMES C. MARTINSON
Marketing Manager, Shadow Products Division
Sunrise Medical
W. DAVID SCHODDE, JR.
Pres., Enumclaw Landscape Maintenance, Inc.
Owner, Enumclaw Nursery
CORPORATE OFFICERS
ROBERT E. CARLSON
Chairman, Board of Directors
W. DAVID SCHODDE, JR.
Vice Chairman, Board of Directors
THOMAS F. LEONARD, President
PETER G. GILLIS, Vice President
Mountain Operations
LAWRENCE E. HARD, Secretary
DELIGHT S. MAHALKO, Treasurer
CORPORATION INFORMATION
CORPORATE HEADQUARTERS
CRYSTAL MOUNTAIN, INC.
1 Crystal Mountain Blvd
Crystal Mountain, Washington 98022
AUDITORS
MOSS ADAMS LLP
Seattle, Washington
ATTORNEYS
LESOURD & PATTEN, P.S.
Seattle, Washington
17
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THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM (A)
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