U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 1, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT
For the transition period from to
----------- -----------
Commission File No. 0-15030
WINTER SPORTS, INC.
(Exact name of small business issuer as specified in its charter)
Montana 81-0221770
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
P.O. Box 1400, Whitefish, Montana 59937
----------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code (406) 862-1900
==============
Former name, former address & former fiscal year, if changed since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
----- ----
As of April 15, 1998 the number of shares outstanding of the issuer's common
stock, no par value, was 1,008,368.
Transition Small Business Disclosure Format Yes No x
----- ----
WINTER SPORTS, INC.
INDEX
Page No.
PART I.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
At:
March 1, 1998
March 2, 1997
May 31, 1997
Condensed Consolidated Statements of Operations
For The Periods:
December 8, 1997 - March 1, 1998
December 9, 1996 - March 2, 1997
June 1, 1997 - March 1, 1998
June 1, 1996 - March 2, 1997
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1997 - March 1, 1998
June 1, 1996 - March 2, 1997
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Conditions
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 1, March 2, May 31,
1998 1997 1997
ASSETS (Unaudited) (Unaudited) (Note 2)
------ ------------ ------------ --------------
CURRENT ASSETS
Cash and cash equivalents $ 320,471 $ 201,014 $ 122,322
Certificates of deposit 249,000 0 0
Receivables (Net of reserve for 120,986 436,227 111,650
bad debts of $69,500, $10,488
and $41,982 respectively)
Receivables - related parties 2,465 18,803 20,529
Income tax refund receivable 8,121 0 0
Current deferred tax asset 55,020 38,042 55,020
Inventories 529,561 509,102 409,916
Prepaid expenses 212,616 208,725 162,323
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,498,240 1,411,913 881,760
----------- ----------- -----------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 18,911,020 18,462,575 18,908,457
Accumulated depreciation (10,446,376) (9,408,303) (9,750,111)
----------- ----------- -----------
8,464,644 9,054,272 9,158,436
Construction in progress 5,568,378 1,733,556 1,460,769
Land and development costs 2,102,535 2,206,240 2,213,523
----------- ----------- -----------
NET PROPERTY AND EQUIPMENT 16,135,557 12,994,068 12,832,638
----------- ----------- -----------
OTHER ASSETS 288,777 339,859 304,811
----------- ----------- -----------
TOTAL ASSETS $17,922,574 $14,745,840 $14,019,209
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 721,994 $ 848,959 $ 494,476
Accounts payable - related parties 63,892 48,483 8,981
Employee compensation and 340,193 336,554 160,180
related expenses
Taxes other than payroll and income 220,780 189,328 140,249
Income taxes payable 0 169,422 157,323
Interest payable 0 0 0
Deposits and other unearned income 1,164,408 1,052,086 244,543
Other current liabilities 2,582 2,382 2,379
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 2,513,849 2,647,214 1,208,131
LONG-TERM DEBT 5,252,602 1,869,861 2,644,050
DEFERRED INCOME TAXES 1,343,227 1,379,508 1,343,227
----------- ----------- -----------
TOTAL LIABILITIES 9,109,678 5,896,583 5,195,408
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock (950 shares 24,500 24,500 24,500
authorized; $100 par value;
4% cumulative; 245, 245 &
245 outstanding)
Common stock (5,000,000 shares 4,099,174 4,099,174 4,099,174
authorized; no par value;
1,008,368, 1,008,368 & 1,008,368
outstanding)
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 4,668,703 4,705,064 4,679,608
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,812,896 8,849,257 8,823,801
----------- ----------- -----------
TOTAL LIABILITIES AND EQUITY $17,922,574 $14,745,840 $14,019,209
=========== =========== ===========
The accompanying notes are an integral part of these financial stateme
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Third Quarter Year To Date
------------- ------------
12/8/97 12/9/96 6/1/97 6/1/96
to to to to
3/1/98 3/2/97 3/1/98 3/2/97
----------- ----------- ----------- -------------
REVENUE
Lifts $ 2,961,929 $ 3,257,827 $ 3,508,380 $ 3,899,328
Food, beverage and retail 869,997 1,046,928 1,283,169 1,569,853
Equipment rental and repair 356,224 331,312 385,834 360,949
Lodging 86,827 96,517 149,538 171,847
Lease, management and other fees 701,414 645,787 927,059 864,444
Lease, management and other fees
- related parties 37,528 17,873 78,165 126,046
Real estate sales - net 335,000 378,000 917,792 710,000
----------- ----------- ----------- -----------
TOTAL REVENUE 5,348,919 5,774,244 7,249,937 7,702,467
----------- ----------- ----------- -----------
COSTS AND EXPENSE
Direct expenses - lifts 615,357 617,044 1,210,738 1,302,160
Depreciation - lifts 401,665 342,973 401,665 342,973
Cost of food, beverage & retail 332,955 419,233 487,241 620,825
Cost of real estate sales 116,565 132,527 253,681 256,085
Payroll and related expenses 981,187 1,047,703 2,014,739 2,079,589
Direct expenses 347,829 389,509 844,842 852,076
Direct expenses - related party 39,605 15,889 39,605 41,412
Marketing 277,380 250,095 696,067 544,958
Marketing - related party 0 0 3,988 0
Depreciation and amortization 293,814 321,118 324,803 348,613
General and administrative 237,016 192,217 686,907 628,616
General and administrative
- related party 8,273 15,187 13,696 34,514
----------- ----------- ----------- ----------
TOTAL COSTS AND EXPENSES 3,651,646 3,743,495 6,977,972 7,051,821
----------- ----------- ----------- ----------
OPERATING INCOME 1,697,273 2,030,749 271,965 650,646
----------- ----------- ----------- ----------
OTHER INCOME (EXPENSE)
Interest income 0 1,114 1,226 4,559
Interest expense (97,004) (27,336) (241,343) (149,003)
Gain (loss) on disposal of assets 6,215 0 (2,176) (7,125)
Other (Expense) 242 4,232 (47,847) (73,570)
----------- ---------- ----------- ----------
TOTAL OTHER INCOME (EXPENSE) (90,547) (21,990) (290,140) (225,139)
----------- ---------- ----------- ----------
INCOME BEFORE INCOME TAXES 1,606,726 2,008,759 (18,175) 425,507
Provision for income taxes 643,296 802,745 (7,270) 169,421
----------- ----------- ----------- ----------
NET INCOME $ 963,430 $ 1,206,014 $ (10,905)$ 256,086
=========== =========== =========== ==========
INCOME (LOSS) PER COMMON SHARE $ 0.96 $ 1.20 $ (0.01)$ 0.25
=========== =========== =========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,008,368 1,008,368 1,008,368 1,008,368
=========== =========== =========== =======
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Period
--------------
6/1/97 6/1/96
to to
3/1/98 3/2/97
----------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 642,952 $ 2,295,925
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certificates of deposit (249,000) 0
Advances to affiliates 0 (37,250)
Payments from affiliates 0 34,000
Purchase of marketable securities 0 (1,184)
Proceeds from sale of assets 18,324 10,037
Property and equipment acquisitions (2,822,679) (1,259,906)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (3,053,355) (1,254,303)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draws on long-term revolver 7,078,132 4,223,320
Principal payments on long-term revolver (4,469,580) (5,145,518)
Payment of dividends 0 (5,834)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,608,552 (928,032)
----------- -----------
Net increase (decrease) in cash and 198,149 113,590
cash equivalents
Cash and cash equivalents at beginning of period 122,322 87,424
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 320,471 $ 201,014
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 241,597 $ 191,581
Income taxes (net of refunds) $ 157,832 $ (128,948)
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein are condensed according to 10-QSB
reporting requirements. They do not contain all information required by
generally accepted accounting principles to be included in a set of audited
financial statements. Accordingly, the financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements contained in the
Company's Annual Report for the year ended May 31, 1997.
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the interim periods presented.
Certain amounts in the March 2, 1997 financial statements have been reclassified
to conform with the March 1, 1998 presentation.
NOTE 2 - May 31, 1997
The balance sheet at May 31, 1997 has been condensed from the audited financial
statements at that date.
NOTE 3 - EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is based on net income after deducting
dividends paid on preferred stock of $0 and $980 for the quarters ended March 1,
1998 and March 2, 1997 respectively. The weighted average number of shares
outstanding were 1,008,368 and 1,008,368 for the quarters ended March 1, 1998
and March 2, 1997, respectively.
NOTE 4 - SEASONAL NATURE OF OPERATIONS
The Company's operations are highly seasonal in nature. Revenues, earnings and
cash flow are generated principally from the winter operations of lifts and
related facilities. It is the Company's practice to recognize substantially all
of the year's depreciation expense in the third and fourth quarters in order to
better match expenses incurred in generating revenues during the Company's main
periods of business. The Company also generates revenues from the sale of real
estate which is ongoing throughout the fiscal year. Therefore, the results of
operations for the interim periods ended March 1, 1998 and March 2, 1997 are not
necessarily indicative of the results to be expected for the full year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
During the second quarter ended December 7, 1997 the Company settled its
unrelated lawsuits filed by individuals who were seeking damages for alleged
personal injuries resulting from accidents occurring on the Company's property.
The amounts of the settlements have been charged to General & Administrative
expenses in the second quarter ended December 7, 1997.
During the second quarter ended December 7, 1997, the Company received a final
determination from the U.S. Forest Service (USFS) regarding the USFS's audit of
the Company's records for the fees paid to the USFS for fiscal years 1992, 1993,
1994 and 1995. The amount of the final determination was $34,891 and was
charged to Direct Expenses - Lifts in the second quarter ended December 7, 1997.
NOTE 6 - NOTE PAYABLE
The Company currently has a loan agreement with Bank of America National Trust
and Savings Association, doing business as Seafirst Bank (Seafirst). The
agreement provides for an $8,750,000 revolving, reducing line of credit which
matures on June 1, 2007. The agreement contains covenants that require minimum
net worth, a fixed charge coverage ratio and restrict investment, disposition of
assets, capital expenditures, outside borrowing and payment of dividends. Each
June 1, the amount available under the line reduces by $650,000. At March 1,
1998 $3,497,398 was unused of the $8,750,000 available under the instrument. At
March 2,1997 $4,515,311 was unused of the $6,500,000 available under the
instrument. The loan bears interest at or below the institutions' prime rate.
NOTE 7 - BUSINESS SEGMENT INFORMATION
The Company operates principally in two industries: the operation of a ski area
and the sale of real estate. Financial information by industry segment for the
first three quarters of 1998 and 1997 is summarized as follows:
Ski Area Real Estate Consolidated
----------- ------------ ------------
Third Quarter
- -------------
Quarter Ended 3/1/98
Net sales $ 5,009,919 $ 339,000 $ 5,348,919
Operating income $ 1,532,860 $ 164,413 $ 1,697,273
Depreciation and amortization $ 691,666 $ 3,813 $ 695,479
Identifiable assets $12,488,858 $ 2,256,982 $17,922,574
Capital expenditures $ 14,108 $ 0 $ 14,108
Quarter Ended 3/2/97
Net sales $ 5,394,744 $ 379,500 $ 5,774,244
Operating income $ 1,828,833 $ 201,916 $ 2,030,749
Depreciation and amortization $ 659,660 $ 4,431 $ 664,091
Identifiable assets $12,488,858 $ 2,256,982 $14,745,840
Capital expenditures $ 747,087 $ 0 $ 747,087
Year to Date
- ------------
6/1/97 to 3/1/98
Net sales $ 6,328,145 $ 921,792 $ 7,249,937
Operating income (loss) $ (242,691) $ 514,656 $ 271,965
Depreciation and amortization $ 712,316 $ 14,152 $ 726,468
Identifiable assets $12,488,858 $ 2,256,982 $17,922,574
Capital expenditures $ 2,822,679 $ 0 $ 2,822,679
6/1/96 to 3/2/97
Net sales $ 6,987,467 $ 715,000 $ 7,702,467
Operating income $ 309,794 $ 340,852 $ 650,646
Depreciation and amortization $ 677,424 $ 14,162 $ 691,586
Identifiable assets $12,488,858 $ 2,256,982 $14,745,840
Capital expenditures $ 1,259,906 $ 0 $ 1,259,906
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
For the For the
Period Period
6/1/97 6/1/96
to to
3/1/98 3/2/97
----------- ----------
Gross Revenues $ 7,249,937 $ 7,702,467
Net Income (Loss) $ (10,905) $ 256,086
Income (Loss) Per Common Share $ (0.01) $ 0.25
Total Assets $17,922,574 $14,745,840
Long-Term Debt less current portion $ 5,252,602 $ 1,869,861
RESULTS OF OPERATIONS, THIRD QUARTER AND YEAR-TO-DATE
Revenues
- --------
Total revenues for the third quarter were $5,348,919, a decrease of $425,325
(7%) from the same quarter of the prior year. The decrease was due to lower
lift, food, beverage and retail revenue. Guest visits declined significantly
from the same quarter in the prior year. Total revenues year to date were off
6% or $452,530 from last year, despite a 29% increase in year to date real
estate sales. For the year, lift, food, beverage and retail revenue were off by
$677,632 from the prior year.
Operating Expenses
- ------------------
Total operating expenses decreased by $91,847 (2%) from the same quarter of the
previous year. This decrease was attributable to the decrease in the sales of
food, beverage and retail during the same period. Year to date operating
expenses have decreased 1% or $73,850. Depreciation - lifts has increased by
$58,692 due to the upgrade of a fixed grip chairlift to a detachable chairlift
and the installation of a chairlift into the Hellroaring Basin. Marketing
expenses have increased by 28% (155,097) as the Company expanded its efforts to
gain an increased share in its four major markets. The Company intends to
continue to expand its presence in these markets in the future. General and
administrative expenses have increased by $58,291 due to a charge for a
receivable determined to be doubtful as to future collection.
Other Expenses
- --------------
Interest expense for the quarter ended March 1, 1998 was $96,984, an increase of
$69,647 or 255% higher than the third quarter of last year. Interest expense
rose by $92,340 or 62% over the first three quarters of the current fiscal year.
These increases were due to higher levels of interest bearing debt for the third
quarter and the first three quarters of the year. The year to date interest
expense of $241,343 for fiscal 1998 and $149,003 for fiscal 1997 is net of
capitalized construction period interest of $19,499 and $6,329 in the respective
periods.
The net income for the third quarter of the current year of $963,430 was
$242,586 or 20% less than during the same time period last year. The year to
date net loss of $10,905 was $266,990 less than the prior year's net income of
$256,085.
The Company's main periods of business occur in its fiscal third quarter, from
mid-November through mid-April. Due to the seasonal nature of the Company's
business, results in any one quarter are not necessarily indicative of the
results for the entire year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the third quarter of 1998 was $(1,015,609). This
represents an increase of $219,691 from the end of the same quarter last year.
The increase is primarily due to lower accounts payable and income taxes payable
at the end of the third quarter of the current year.
Total liabilities of $9,109,678 represent 103% of stockholders' equity at March
1, 1998 compared to $5,896,582 or 67% of stockholders' equity at March 2, 1997.
Management continually evaluates the Company's cash and financing requirements.
Over the years, the Company has obtained favorable financing from financial
institutions when necessary to fund off-season cash requirements and capital
acquisitions. The Company has a reducing revolving credit agreement which
provides flexible financial resources allowing the Company to meet short-term
needs and fund capital expenditures. The $8.75 million agreement reduces
available capacity by $650,000 each June 1. At March 1, 1998, there was
$5,252,602 outstanding on the line of credit. Financing of future development
and business opportunities is anticipated to include cash generated from
operations, issuance of additional debt and may also include additional equity
financing.
WINTER SPORTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 5 to the Condensed Consolidated
Financial Statements of this Form 10-QSB, which is incorporated
herein by reference.
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.6 Employment agreement between Michele Reese and Winter
Sports, Inc. as of December 22, 1997
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 1, 1998.
c. Financial Data Schedule
WINTER SPORTS, INC.
FORM 10-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Winter Sports, Inc.
-------------------
(Registrant)
Date: April 15, 1998 /s/Michael J. Collins
- ----------------------- --------------------------------
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: April 15, 1998 /s/Joann M. Gould
- ----------------------- --------------------------------
Joann M. Gould
Controller & Assistant Secretary
(Principal Accounting Officer)
Date: April 15, 1998 /s/Thomas E. Cullen
- ----------------------- --------------------------------
Thomas E. Cullen
Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
March 1, 1998 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAR-01-1998
<CASH> 569,471
<SECURITIES> 0
<RECEIVABLES> 192,951
<ALLOWANCES> 69,500
<INVENTORY> 529,561
<CURRENT-ASSETS> 1,498,240
<PP&E> 26,581,933
<DEPRECIATION> 10,446,376
<TOTAL-ASSETS> 17,922,574
<CURRENT-LIABILITIES> 2,513,849
<BONDS> 5,252,602
0
24,500
<COMMON> 4,099,174
<OTHER-SE> 4,689,222
<TOTAL-LIABILITY-AND-EQUITY> 17,922,574
<SALES> 2,200,961
<TOTAL-REVENUES> 7,249,937
<CGS> 740,922
<TOTAL-COSTS> 6,977,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,343
<INCOME-PRETAX> (18,175)
<INCOME-TAX> (7,270)
<INCOME-CONTINUING> (10,905)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,905)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
This Agreement made this 22nd day of December, 1997, by and between WINTER
SPORTS, INC., a Montana corporation, with its principal place of business
located in Whitefish, Montana ("Employer"), and MICHELE REESE of Whitefish,
Montana ("Employee").
1. Employment. The Employer employs the Employee and the Employee accepts
employment upon the terms and conditions of this Agreement.
2. Term. The term of this Agreement shall begin on December 22, 1997 and
shall terminate on December 21, 2000, unless sooner terminated as provided
herein (see paragraph 12).
3. Compensation. The Employer shall pay the Employee the following annual
salary, payable in equal installments every two weeks:
December 22, 1997 through December 21, 1998 - $72,500.00
Effective December 22, 1998 and again on December 22 of each succeeding year of
this Agreement, the above salary shall be adjusted upward by an amount equal to
five percent (5%) of the preceding year's salary, provided that each annual
adjustment to salary shall be contingent upon the Employer meeting or exceeding
its combined budgeted income before taxes for the preceding fiscal year. If the
budget criteria have not been met, there shall be no increase in salary for the
applicable year. In addition, the Employee shall be entitled to provisions of
the Cash Bonus Program set forth later in this Agreement.
4. Duties. The Employee shall serve the Employer as Vice President of
Marketing, Guest Services, and Communications. These duties shall include,
without limitation, the general management and supervision of the Marketing,
Guest Services, and Ticket operations' activities and endeavors, increasing the
Employer's market share and number of skier visits, increasing non-skier
business and revenues, and such other duties as may from time to time be
assigned by the Employer.
5. Extent of Services. The Employee shall devote her entire time and
attention to the Employer's business, unless otherwise agreed to by the Employer
and Employee.
6. Working Environment. The Employee shall have a private office,
secretarial help, and other facilities and services that are suitable to her
position and appropriate for the performance of her duties.
NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION UNDER THE
MONTANA UNIFORM ARBITRATION ACT.
7. Disclosure of Information. The Employee acknowledges that the
Employer's business dealings are a valuable, special and unique asset of the
Employer's business. The Employee shall not, during and after the term of her
employment, disclose all or any part of the information to which she becomes
privileged regarding the Employer's business.
8. Expenses. The Employee may incur reasonable expenses for promoting the
Employer's business, including expenses for entertainment, travel, and similar
items. The Employer will reimburse the Employee for all such expenses upon the
Employee's periodic presentation of an itemized account of such expenditures.
9. Vacations. The Employee shall be entitled each year to a vacation of
three weeks during which time her compensation shall be paid in full. The
Employee shall also be entitled to five weeks of unpaid time off, which time
periods will be mutually agreed upon by Employer and Employee.
10. Bonus. After the first year of this Agreement, the Employee will be
eligible to receive a cash bonus based on the following criteria:
To be defined by January 15, 1998 in "Exhibit A."
11. Annual Review. The Employee's performance pursuant to the terms of
this Agreement shall be reviewed twice each year by the President. Job
accountabilities and meeting financial goals will be the primary basis on which
the reviews will be conducted.
12. Termination with Cause. The Employer may terminate this Agreement
with cause at any time by giving thirty (30) days' written notice to the
Employee. In the event of such termination, the Employee shall receive six (6)
months' salary. Just cause shall be defined to include any reason which the
Employer believes will be in its best business interest or due to any conduct of
the Employee which the Employer believes may bring discredit upon herself or the
Employer.
13. Death During Employment. If the Employee dies during the term of
employment, the Employer shall pay to the Employee's estate the compensation
that otherwise would be payable to the Employee up to the end of the month in
which her death occurs.
14. Arbitration. Any controversy or claim arising out of, or relating to
this Agreement, or its breach, shall, at the option of the Employer, be settled
by arbitration in the City of Whitefish, Montana, in accordance with the then
governing rules of the American Arbitration Association. The prevailing party
shall be entitled to its reasonable costs and attorneys' fees. Judgment upon
the award my be entered and enforced in any court of competent jurisdiction.
15. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by certified mail to the
Employee's residence or to the Employer's principal office, as the case may be.
16. Waiver of Breach. The Employer's waiver of a breach of any provision
of this Agreement by the Employee shall not operate or be construed as a waiver
of any subsequent breach by the Employee. No waiver shall be valid unless in
writing and signed by an authorized officer of the Employer. Employer
acknowledges Employee may provide consulting to non-competing business entities.
17. Assignment. The Employee acknowledges that her services are unique
and personal. Accordingly, the Employee may not assign her rights or delegate
her duties or obligations under this Agreement. The Employer's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon the Employer's successors and assigns.
18. Entire Agreement. This Agreement contains the entire understanding of
the parties. It may not be changed orally, but only by an agreement in writing
signed by the party against whom the enforcement of any waiver, change,
modification, extension, or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
WINTER SPORTS, INC.
By /s/ Michael Collins
Michael Collins, President
Attest:
/s/ Anne Shaw Moran
Secretary
/s/ Michele Reese
Michele Reese
Addendum A January 20, 1998
Year-one performance development plan for Michele Reese
1. Team 1/3 of bonus potential
* Evaluate the team as it is currently staffed (March 98)
* Make immediate adjustments to staff inter-dependencies, responsibilities
and authorities as appropriate. (March 98)
* Develop long-range plan for staff realignment, adjustments, training and
responsibilities (July 98)
* Set working standards and implement them for each direct report and insure
performance (July 98)
* Devise and implement a problem solving process and attitude and review it
quarterly for improvements. (July 98)
2. Planning 1/3 of bonus potential
* Develop, sell and implement a multi-year plan for growth in visits to The
Big Mountain that will maximize shareholder value, exceed guest
expectations among key guest segments and provide opportunity for greater
year-round involvement by Flathead residents. (June 98)
* Evaluate current on-mountain activities, services and processes. (March
98)
* Make immediate adjustments to marketing, products, services and processes
as appropriate. (ongoing)
* Develop and implement a multi-year expansion program that will create
demand for and promote The Big Mountain as a primary recreation center of
the Flathead Valley and year-round Resort destination in the Northwest.
(July 98)
3. Financial 1/3 of bonus potential
* Work within existing budgets for 97/98
* Provide better input for forecasting, planning and future budgets.
* Supervise execution of all plans and programs to meet or exceed goals.
* Create new budgets for 98/99 and work within those limits.
Note:
The above will be reviewed at least every 6 months and adjusted as necessary.
Year-one bonus potential will equal 30% of the annual wage.
/s/ Michael Collins
/s/ Michele Reese
