<PAGE>
As filed with the Securities and Exchange Commission on June 14, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VAIL RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 7990 51-0291762
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
137 Benchmark Road
Avon, CO 81620
(970) 845-2500
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
See Table of Additional Registrants
--------------
Martha D. Rehm, Esq.
Senior Vice President and General Counsel
Vail Resorts, Inc.
137 Benchmark Road
Avon, CO 81620
(970) 845-2500
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
with a copy to:
James J. Clark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act, check the following and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Maximum
Title of Each Class of Amount to be Proposed Aggregate Amount of
Securities to be Registered Maximum Price Offering Price Registration
Registered Proposed Per Unit (1) Fee (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Senior
Subordinated Notes due
2009.................. $200,000,000 100% $200,000,000 $55,600
- --------------------------------------------------------------------------------
Guarantees of 8 3/4%
Senior Subordinated
Notes due 2009........ (3) (3) (3) (3)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
(3) Pursuant to Rule 457(n), no registration fee is required with respect to
the Guarantees.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
Primary
State or other Standard I.R.S.
jurisdiction of Industrial Employer
Exact name of registrant incorporation or Classification Identification
as specified in its charter organization Code Number No.
--------------------------- ---------------- -------------- --------------
<S> <C> <C> <C>
Vail Holdings, Inc. Colorado 551112 84-0568230
The Vail Corporation Colorado 71392 84-0601461
Beaver Creek Associates, Inc. Colorado 71392 84-0677537
Beaver Creek Consultants, Inc. Colorado 56151 84-0760348
Lodge Properties, Inc. Colorado 72111 84-0607010
Piney River Ranch, Inc. Colorado 71399 84-1147680
Vail Food Services, Inc. Colorado 72231 84-0596378
Vail Resorts Development
Company Colorado 23311 84-1242948
Vail Summit Resorts, Inc. Colorado 71392 43-1273996
Vail Trademarks, Inc. Colorado 541199 84-1253319
Vail/Arrowhead, Inc. Colorado 23311 84-1253320
Vail/Beaver Creek Resort
Properties, Inc. Colorado 531311 52-1479879
Beaver Creek Food Services,
Inc. Colorado 72231 84-0815288
Lodge Realty, Inc. Colorado 53121 13-3051423
Vail Associates Consultants,
Inc. Colorado 53121 84-0738502
Vail Associates Holdings, Ltd. Colorado 53139 84-1214955
Vail Associates Management
Company Colorado 531311 84-1248614
Vail Associates Real Estate,
Inc. Colorado 53121 84-1013094
Vail/Battle Mountain, Inc. Colorado 53139 84-1146997
Keystone Conference Services,
Inc. Colorado 72111 84-1075280
Keystone Development Sales,
Inc. Colorado 53121 43-1463384
Keystone Food and Beverage
Company Colorado 72231 84-0678950
Keystone Resort Property
Management Company Colorado 531311 84-0705922
Property Management Acquisition
Corp., Inc. Tennessee 531311 62-1634422
The Village at Breckenridge
Acquisition Corp., Inc. Tennessee 72111 62-1633660
GHTV, Inc. Delaware 551112 39-1284459
Gillett Broadcasting of
Maryland, Inc. Delaware 53139 52-1480854
Gillett Broadcasting, Inc. Delaware 551112 37-0920781
Gillett Group Management, Inc. Delaware 541618 62-1148746
</TABLE>
The address, including zip code, and telephone number, including area
code, of the principal executive offices of the additional registrants listed
above is: c/o Vail Resorts, Inc., 137 Benchmark Road, Avon, CO 81620, and the
telephone number at that address is (970) 845-2500.
2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not consummate the exchange offer until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell these notes and is not soliciting an offer to buy these +
+notes in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
SUBJECT TO COMPLETION DATED June 14, 1999
[LOGO OF VAIL RESORTS, INC.]
Exchange Offer
for
$200,000,000 Aggregate Principal Amount
of
8 3/4% Senior Subordinated Notes Due 2009
--------
Terms of Exchange Offer
. Expires 5:00 p.m., New . The exchange of the
York City time, on outstanding Notes will
1999, unless not be a taxable
extended. exchange for federal
income tax purposes.
. Subject to certain
customary conditions, . We will not receive any
which may be waived by cash proceeds from the
us. exchange offer.
. All outstanding 8 3/4% . The terms of the notes
Senior Subordinated to be issued in
Notes due 2009 that are exchange for the
validly tendered and outstanding Notes are
not withdrawn will be substantially identical
exchanged. to the outstanding
Notes, except for
. Tenders of outstanding certain transfer
Notes may be withdrawn restrictions and
any time prior to the registration rights
expiration of this relating to the
exchange offer. outstanding notes.
. Any outstanding Notes
not validly tendered
will remain subject to
existing transfer
restrictions.
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered by holders who tender their outstanding Notes in the
exchange offer.
There has not been previously any public market for the exchange notes that
will be issued in the exchange offer. We do not intend to list the exchange
notes on any national stock exchange or on the Nasdaq Stock Market. There can
be no assurance that an active market for such exchange notes will develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes to be distributed in the
exchange offer, nor have any of these organizations passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is , 1999.
<PAGE>
The exchange offer is not being made to, nor will we accept surrenders
for exchange from, holders of outstanding notes in any jurisdiction in which
the exchange offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. The Exchange Act file number for our SEC
filings is 001-09614. You may read and copy any document we file at the
following SEC public reference rooms:
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York
Washington, D.C. 20549 10048
You may obtain information on the operation of the public reference room
in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
The SEC allows us to "incorporate by reference" certain documents we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information in the documents incorporated
by reference is considered to be part of this prospectus, and information in
documents that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act.
. Annual Report on Form 10-K for the fiscal year ended July 31, 1998;
and
. Quarterly Reports on Form 10-Q for the quarters ended October 31,
1998 and January 31, 1999.
We will provide a copy of the documents we incorporate by reference, at
no cost, to any person who receives this prospectus, including any beneficial
owner of our common stock. To request a copy of any or all of these documents,
you should write or telephone us at the following address and telephone number:
Vail Resorts, Inc.
Post Office Box 7
Vail, Colorado 81658
Telephone: (970) 845-2500
Attention: Beth McMullen Lohman
To obtain timely delivery, you must make your request no later than
, 1999 (five business days prior to the expiration date for the exchange
offer).
i
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and other sections of this prospectus and in the documents
incorporated by reference in this prospectus.
Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, we cannot
assure you that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth below and elsewhere in this
prospectus, including under the section headed "Risk Factors." Such factors
include, among others, unfavorable weather conditions; our ability to obtain
financing on terms acceptable to us to finance our capital expenditure and
growth strategy; our ability to develop our resort and real estate operations;
competition in our resort businesses; our reliance on government permits for
our use of federal land; our ability to integrate and successfully operate
future acquisitions; and adverse changes in the real estate market. All
forward-looking statements attributable to us or any persons acting on our
behalf are expressly qualified in their entirety by these cautionary
statements.
Our risks are more specifically described in "Risk Factors" and in our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are
incorporated by reference in this prospectus. If one or more of these risks or
uncertainties materializes, or if underlying assumptions prove incorrect, our
actual results may vary materially from those expected, estimated or projected.
We will not update these forward-looking statements, even if new information,
future events or other circumstances have made them incorrect or misleading.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in, or
incorporated by reference into, this prospectus. The terms "the Company," "we,"
"us" and "our" as used in this prospectus refer to Vail Resorts, Inc. and its
subsidiaries and predecessors as a combined entity, except where it is clear
from the context that such term means only the parent company. On September 1,
1997 we changed our fiscal year end from September 30 to July 31. Accordingly,
"fiscal" in connection with a year prior to 1998 refers to the 12 months ended
September 30, while "fiscal" in connection with 1998 refers to the ten months
ended July 31 and "fiscal" in subsequent years refers to the 12 months ended
July 31. Unless otherwise specified, "ski season" shall mean the period from
the opening of any of our mountains for skiing to the closing of our last
mountain for skiing, typically late October to early May, and "skier day" shall
mean one guest accessing a ski mountain on any one day. "Beaver Creek" and
other designated trademarks are registered trademarks of Vail Resorts, Inc.
The Company
Vail Resorts is one of the leading resort operators in North America.
Through our four premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail"),
. Beaver Creek Resort--one of the world's premier family-oriented
mountain resorts ("Beaver Creek"),
. Breckenridge Mountain--an attractive destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge"), and
. Keystone Resort--a year-round family vacation destination
("Keystone").
We are one of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and guest
services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate proximate to our ski resorts from which we derive
significant strategic benefits and cash flow.
For the twelve months ended January 31, 1999, our revenue from resort
operations ("Resort Revenue") and Resort EBITDA (as hereinafter defined) was
$387.5 million and $98.3 million, respectively. Due principally to unusually
adverse weather conditions during the 1998-99 ski season, we announced that our
Resort EBITDA for the three months ended April 30, 1999 was lower than our
Resort EBITDA for the three months ended April 30, 1998. See "--Recent
Results."
Our principal executive office is located at 137 Benchmark Road, Avon,
Colorado 81620, and our phone number at that address is (970) 845-2500.
1
<PAGE>
Resorts
Vail--Located 100 miles from Denver, Vail is the largest and most popular
single ski mountain complex in North America, offering over 4,600 acres of
unique and varied ski terrain spanning approximately 20 square miles. Included
in this complex are Vail's world-famous Back Bowls, the largest network of high
speed quad chairlifts in the world, a top rated ski school and a wide variety
of dining and retail venues. We estimate that Vail's skier days will
approximate 1.33 million for the 1998-99 ski season. Vail hosted the World
Alpine Ski Championships in January 1999, the first time a North American ski
resort has been selected to host this prestigious event twice. For the last ten
years, Vail has been rated the number one ski resort in the United States by
the Mountain Sports and Living (f/k/a Snow Country) magazine survey.
Beaver Creek--Located ten miles west of Vail, Beaver Creek is one of the
world's premier family-oriented mountain resorts, offering its guests a
superior level of service in a pristine alpine setting. Since opening in 1980,
Beaver Creek has been one of the fastest growing ski resorts in North America,
with annual skier days increasing from 111,746 in the 1980-81 ski season to
approximately 610,000 during the 1998-99 ski season. With the connection
(through ski lifts and trails) of three distinct ski areas--Beaver Creek,
Arrowhead(TM) and Bachelor Gulch(TM)--Beaver Creek provides guests with a
European-style village-to-village ski experience. Beaver Creek offers a
distinct and varied vacation experience from Vail and was ranked number six in
the 1998 Mountain Sports and Living magazine survey. It has consistently been
rated among the top ten resorts in the United States in various other industry
surveys.
Breckenridge--Located approximately 85 miles west of Denver and 40 miles
east of Vail, Breckenridge offers over 2,000 acres of skiing on four different
mountain peaks, including open bowl skiing and excellent beginner and
intermediate ski terrain. The ski area is located adjacent to the Town of
Breckenridge, a Victorian mining town, which has numerous apres ski activities
and an extensive and growing bed base, making Breckenridge an attractive
destination resort for national and international skiers. We estimate that
Breckenridge's skier days will approximate 1.37 million for the 1998-99 ski
season, a new record for Breckenridge.
Keystone--Located 70 miles west of Denver and 15 miles from Breckenridge,
Keystone offers over 1,800 acres of skiable terrain. We estimate that
Keystone's skier days will approximate 1.24 million for the 1998-99 ski season.
Keystone has the largest and most advanced snowmaking capability of any
Colorado mountain resort with snowmaking coverage extending over nearly 50% of
Keystone's skiable acreage. Keystone also provides the largest single-mountain
night skiing experience in North America, with 17 lighted trails covering 2,340
vertical feet, offering a 12 1/2 hour ski day. Keystone is a planned family-
oriented community that offers numerous year-round activities, the majority of
which we operate, including the Keystone Conference Center, which is the
largest convention center in the Colorado Rocky Mountains.
Grand Teton--We have also entered into a contract to purchase the Grand
Teton Lodge Company ("Grand Teton"), for a total purchase price of $50 million.
Grand Teton is based in Jackson Hole, Wyoming and operates four premier resort
properties in and around Grand Teton National Park. Within the park, we will
operate the 37-cabin Jenny Lake Lodge, a AAA four-diamond lodge; Jackson Lake
Lodge, a picturesque 385-room lodge that boasts the most extensive meeting
facilities in any national park; and Colter Bay Village, a unique family resort
with 226 cabins as well as extensive camping and recreational facilities.
Outside the park, we will operate the Jackson Hole Golf and Tennis Club, the
top-rated golf course in the State of Wyoming. Adjacent to the golf course, we
will also own 30 acres of developable land suitable for future residential
development. For the twelve month period ended December 31, 1998, Grand Teton
had Resort Revenues and Resort EBITDA of $26.6 million and $7.9 million,
respectively. The transaction is expected to close by the summer of 1999, and
is subject to approval from the National Park Service.
2
<PAGE>
Business Strategy
A key component of the business strategy for our mountain resorts has
been to expand and enhance our core ski operations, while at the same time
increasing the scope, diversity and quality of the complementary activities and
services offered to our skiing and non-skiing guests throughout the year. This
focus has resulted in growth in skier days and lift ticket sales and has also
allowed us to expand our revenue base beyond our core ski operations. As a
result of this strategy, non-lift ticket revenue as a percentage of total
Resort Revenue has increased to over 63% of total Resort Revenue for the twelve
months ended January 31, 1999, as compared to 36% in fiscal 1985.
Our focus on developing a comprehensive destination resort experience has
also allowed us to attract a diverse guest population with an attractive
demographic and economic profile, including a significant number of affluent
and family-oriented destination guests, who tend to generate higher and more
diversified revenues per guest than day skiers from local population centers.
While our Resort Revenue per skier day is currently among the highest in the
industry, we estimate that we currently capture only 20% of the total vacation
expenditures of an average destination guest at our resorts. See "Business--
Resorts."
In connection with this strategy, we have completed numerous internal
growth initiatives over the past several years to add "new attractions" and
improve on-mountain facilities, including:
. expanding ski terrain at Beaver Creek by 30%,
. constructing seven high-speed four-passenger chairlifts and a state-
of-the-art gondola,
. building innovative family attractions such as Adventure Ridge(TM) and
Adventure Point(TM),
. introducing snowboarding at Keystone,
. significantly improving snowmaking systems at all of our resorts,
. adding 20 new restaurants and 3 private on-mountain clubs, and
. updating our guest-focused information systems, including introducing
resort-wide charging, which offers guests a cashless on-mountain
experience and "direct-to-lift" convenience.
Our total resort capital spending on these and other internal initiatives
over the past three calendar years has been in excess of $140 million.
As a complement to our internal growth strategy, we also selectively
acquire businesses in and around our resorts to (1) broaden our participation
in the services available to our guests, thereby allowing us to maintain and
improve the quality of our guests' experience, (2) increase our ability to
offer "package" vacation products to our guests, and (3) increase Resort
Revenue per skier day. Over the past 18 months, we have acquired for an
aggregate purchase price of approximately $72 million, five hotels operating a
total of 519 rooms and three property management operations which oversee
approximately 400 units. We have also secured additional contracts to manage
nearly 300 individual condominium units. Since acquiring these hotel
properties, we have significantly improved their occupancy, average daily rate,
operating margins and Resort EBITDA.
We have also recently expanded our retail presence by entering into a
joint venture, SSI Venture, with one of the largest retailers of ski- and golf-
related sporting goods in Colorado. SSI Venture operates approximately 70
retail and rental locations in Vail, Beaver Creek, Breckenridge, Keystone,
Denver, Boulder, Colorado Springs, Aspen and Telluride, thereby expanding our
operations throughout the Colorado market. We hold a 51.9% ownership interest
in SSI Venture.
We intend to acquire additional resorts which we believe can be
successfully integrated into our existing operations, can enhance our ability
to attract destination guests to all of our resorts and can benefit from our
capital investment and management expertise. Our 1997 acquisition of
Breckenridge and Keystone exemplifies this strategy. We believe we have
successfully broadened the appeal of these resorts to destination
3
<PAGE>
guests and improved their operating performance through capital investment,
coordinated marketing, improved central reservations and a common, four-resort
lift ticket. We have also realized efficiencies in our purchasing, information
systems, accounting and legal areas by sharing these functions across all of
our resorts.
We believe our pending acquisition of Grand Teton provides us with a
significant new opportunity to further leverage our hospitality, dining, retail
and recreation expertise. With its peak season from the late Spring through
early Fall, Grand Teton will significantly increase our summer Resort Revenue.
In addition, with four premier resort properties in and around Grand Teton
National Park, Grand Teton provides a platform to further grow our business in
the National Parks.
Real Estate
We also benefit from our extensive holdings of real property in proximity
to our resorts and from the activities of Vail Resorts Development Company
("VRDC"), our wholly-owned subsidiary. VRDC manages our real estate operations,
including the planning, oversight, marketing, infrastructure improvement and
development of Vail Resorts' real property holdings. VRDC generated $84.2
million in revenue from real estate operations for the twelve months ended July
31, 1998. As of January 31, 1999, the book value of our real estate held for
sale was approximately $155.0 million. In addition to the substantial cash flow
generated from real estate sales, our resort operations benefit from these
development activities through:
. the creation of additional resort lodging which is available to our
guests,
. the ability to control the architectural theme of our resorts,
. the creation of unique facilities and venues which provide us with the
opportunity to create new sources of recurring revenue, and
. the expansion of our property management and brokerage operations,
which are the preferred providers of these services for developments
on VRDC's land.
In order to facilitate the development and sale of its real estate
holdings, VRDC spends significant amounts on mountain improvements such as ski
lifts, snowmaking equipment and trail construction. While these mountain
improvements enhance the value of the real estate held for sale (for example,
by providing ski-in/ski-out accessibility), they also benefit resort
operations. In most cases, VRDC seeks to minimize our exposure to development
risks and maximize the long-term value of our real property holdings by selling
land to third party developers for cash payments prior to the commencement of
construction, while retaining approval of the development plans as well as an
interest in the developer's profit. We also typically retain the option to
purchase any commercial space created in a development. We are able to secure
these benefits from third party developers as a result of the high property
values and strong demand associated with property in close proximity to our
world class mountain resort facilities. See "Risk Factors--Future changes in
the real estate market could affect the value of our investments."
We also benefit from our interest in a joint venture ("Keystone JV")
which is developing a significant portion of the Keystone resort and has
approvals to add up to 3,400 residential and lodging units and up to 318,000
square feet of retail and restaurant space over the next 20 years. We believe
that the build-out of this real estate will result in increased skier days and
Resort Revenue per skier day and will significantly increase the number of
higher revenue destination guests at Keystone. See "Business--Real Estate."
Recent Results
On May 11, 1999, we sold and issued the outstanding Notes. The proceeds
from this offering were used to repay indebtedness under our credit facility
(which can be reborrowed).
On June 8, 1999, we announced that Resort Revenue for the third quarter
1999 increased 11% to $188.2 million from $170.1 million in the comparable
period last year. Total Revenue for the third quarter
4
<PAGE>
(which includes revenue from real estate operations) grew 16% to $202.2
million from $174.0 in the same quarter in fiscal 1998.
Resort EBITDA for the third quarter were $75.4 million versus $86.1
million in the same quarter of 1998, reflecting the overall weakness in
Colorado ski industry due largely to unfavorable weather conditions during the
1998-1999 ski season.
Net income for the third quarter was $30.2 million, or $0.87 per diluted
share, compared to $41.7 million, or $1.20 per diluted share, in the third
quarter of 1998.
For the nine months ended April 30, 1999, Resort Revenue increased 17% to
$379.3 million compared to $324.2 million in the same period of 1998. Total
Revenue grew to $410.8 million from $390.0 million in the first nine months of
fiscal 1998.
Resort EBITDA for the nine month period was $100.9 million compared to
$119.3 million in 1998.
Net income for the nine month period was $26.3 million, or $0.76 per
diluted share, compared to $46.9 million, or $1.35 per diluted share, in the
same period in fiscal 1998.
In the third quarter of fiscal 1999, revenue per skier day grew 14% to
$75.38 from $66.30 in the comparable quarter last year, despite a 3% decline
in skier days. Total skier days for the third quarter were 2.5 million
compared to 2.6 million last year.
We also announced that, on a preliminary basis, skier days for the 1998-
1999 total ski season for all four of our resorts combined are expected to be
4,588,607, a 3% decline from the 4,716,605 skier days reported in the 1997-
1998 ski season.
5
<PAGE>
The Exchange Offer
Registration Rights......... You are entitled to exchange your outstanding
Notes for freely tradeable exchange notes with
substantially identical terms. The exchange offer
is intended to satisfy your exchange rights.
After the exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your
outstanding Notes. Accordingly, if you do not
exchange your outstanding Notes, you will not be
able to reoffer, resell or otherwise dispose of
your outstanding Notes unless you comply with the
registration and prospectus delivery requirements
of the Securities Act, or there is an exemption
available.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our 8 3/4% Senior Subordinated Notes
due 2009, which have been registered under the
Securities Act, for $1,000 principal amount of
our outstanding 8 3/4% Senior Subordinated Notes
due 2009, which were issued in a private offering
on May 11, 1999. As of the date of this
prospectus, there are $200.0 million of
outstanding Notes. We will issue exchange notes
promptly after the expiration of the exchange
offer.
Resales..................... We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold
or otherwise transferred by you without
compliance with the registration and prospectus
delivery requirements of the Securities Act
provided that:
. you are acquiring the exchange notes in
the ordinary course of your business;
. you are not participating, do not intend
to participate and have no arrangement
or understanding with any person to
participate, in a distribution of the
exchange notes; and
. you are not an "affiliate" of ours.
If you do not meet the above criteria you will
have to comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any reoffer,
resale or other disposition of your exchange
notes.
Each broker or dealer that receives exchange
notes for its own account in exchange for
outstanding Notes that were acquired as a result
of market-making or other trading activities must
acknowledge that it will deliver this prospectus
in connection with any sale of exchange notes.
Expiration Date............. 5:00 p.m., New York City time, on , 1999,
unless we extend the expiration date.
6
<PAGE>
Conditions to the Exchange The exchange offer is subject to certain
Offer...................... customary conditions, which may be waived by us.
The exchange offer is not conditioned upon any
minimum principal amount of outstanding notes
being tendered.
Procedures for Tendering
Outstanding Notes.......... If you wish to tender outstanding Notes, you must
complete, sign and date the letter of
transmittal, or a facsimile of it, in accordance
with its instructions and transmit the letter of
transmittal, together with your Notes to be
exchanged and any other required documentation to
United States Trust Company of New York, who is
the exchange agent, at the address set forth in
the letter of transmittal to arrive by 5:00 p.m.
New York City time, on the expiration date. See
"The Exchange Offer--Procedures for Tendering
Outstanding Notes." By executing the letter of
transmittal, you will represent to us that you
are acquiring the exchange notes in the ordinary
course of your business, that you are not
participating, do not intend to participate and
have no arrangement or understanding with any
person to participate in the distribution of
exchange notes, and that you are not an
"affiliate" of ours. See "The Exchange Offer--
Procedures for Tendering Outstanding Notes."
Special Procedures for
Beneficial Holders......... If you are the beneficial holder of outstanding
Notes that are registered in the name of your
broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender in the
exchange offer you should contact the person in
whose name your outstanding Notes are registered
promptly and instruct such person to
tender on your behalf. See "The Exchange Offer--
Outstanding Notes."
Guaranteed Delivery If you wish to tender your outstanding Notes and
Procedures................. you cannot deliver your such Notes, the letter of
transmittal or any other required documents to
the exchange agent before the expiration date,
you may tender your outstanding Notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date.
Acceptance of Outstanding
Notes and Delivery of Subject to certain conditions, we will accept for
Exchange Notes............. exchange any and all outstanding Notes which are
properly tendered in the exchange offer before
5:00 p.m., New York City time, on the expiration
date. The exchange notes will be delivered
promptly after the expiration date. See "The
Exchange Offer--Terms of the Exchange Offer."
7
<PAGE>
Certain Federal Income Tax
Considerations............. The exchange of outstanding Notes for exchange
notes will not be a taxable event for federal
income tax purposes. You will not recognize any
taxable gain or loss as a result of exchanging
outstanding Notes for exchange notes, and you
will have the same tax basis and holding period
in the exchange notes as you had in the
outstanding Notes immediately before the
exchange. See "Certain Federal Income Tax
Considerations."
Exchange Agent..............
United States Trust Company of New York is
serving as exchange agent in connection with the
exchange offer. The address, telephone number and
facsimile number of the exchange agent are set
forth in "The Exchange Offer-- Exchange Agent."
8
<PAGE>
Summary of the Exchange Notes
The summary below describes the principal terms of the exchange notes.
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of Notes" section of this
prospectus contains a more detailed description of the terms and conditions of
the exchange notes.
Issuer...................... Vail Resorts, Inc.
Notes Offered............... Up to $200,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2009.
Interest Payment Dates...... Interest will accrue on the exchange notes from
the last interest payment date on which interest
was paid on the outstanding Notes surrendered in
exchange therefor or if no interest has been paid
on the outstanding Notes, from May 11, 1999 and
will be payable semi-annually on each May 15 and
November 15 of each year, commencing November 15,
1999.
Maturity.................... May 15, 2009.
Guarantees.................. Certain of our subsidiaries other than those
treated as unrestricted subsidiaries will
guarantee the exchange notes on a senior
subordinated basis. Future subsidiaries which are
deemed restricted subsidiaries will also be
required to guarantee the exchange notes if they
guarantee any other of our debt. See "Description
of Notes--Guarantees."
Ranking..................... The exchange notes will be unsecured senior
subordinated obligations and will be subordinated
to all our existing and future senior debt. The
exchange notes will rank equally with all our
other existing and future senior subordinated
debt and will rank senior to all our subordinated
indebtedness.
Our subsidiaries' guarantees with respect to the
exchange notes will be general unsecured senior
subordinated obligations of such guarantors and
will be subordinated to all of such guarantors'
existing and future senior debt. The guarantees
will rank equally with any senior subordinated
indebtedness of the guarantors and will rank
senior to such guarantors' subordinated debt.
Because the exchange notes are subordinated, in
the event of bankruptcy, liquidation or
dissolution, holders of the exchange notes will
not receive any payment until holders of senior
indebtedness have been paid in full. The term
"senior debt" is defined in the "Description of
Notes--Subordination" section of this prospectus.
At January 31, 1999, after giving effect to the
offering of the outstanding Notes and the
application of the net proceeds, we had $141.1
million of senior debt outstanding on a
consolidated basis.
9
<PAGE>
Redemption.................. We may redeem the exchange notes, in whole or in
part, at any time on or after May 15, 2004, at
the declining redemption prices set forth in this
prospectus plus accrued interest.
Optional Redemption.........
On or prior to May 15, 2002, we may redeem up to
35% of the exchange notes with the net proceeds
of certain equity offerings at 108.75% of the
principal amount thereof, plus accrued interest,
if at least 65% of the aggregate principal amount
of the exchange notes remains outstanding. See
"Description of Notes--Optional Redemption."
On or prior to May 15, 2004, we may also redeem
the exchange notes, in whole or in part, upon the
occurrence of a change of control at a make-whole
price as described under "Description of Notes--
Optional Redemption."
Change of Control........... Upon certain change of control events, if we do
not redeem the exchange notes, each holder of
exchange notes may require us to repurchase all
or a portion of its exchange notes at a purchase
price equal to 101% of the principal amount
thereof, plus accrued interest. Our ability to
repurchase the exchange notes upon a change of
control event will be limited by the terms of our
debt agreements, including our credit facility.
We cannot assure you that we will have the
financial resources to repurchase the exchange
notes. See "Description of Notes--Repurchase of
the Option of Holders--Change of Control."
Certain Covenants...........
The indenture that will govern the exchange notes
contains covenants that, among other things, will
limit our ability and the ability of certain of
our subsidiaries to:
. incur additional indebtedness,
. pay dividends on, redeem or repurchase
our capital stock,
. make investments,
. engage in transactions with affiliates,
. create certain liens,
. sell assets, or
. consolidate, merge or transfer all or
substantially all our assets and the
assets of our subsidiaries on a
consolidated basis.
These covenants are subject to important
exceptions and qualifications, which are
described in the "Description of Notes" section
of this prospectus.
Risk Factors................ See "Risk Factors" for a discussion of factors
you should carefully consider before deciding to
tender your outstanding Notes for exchange notes.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary historical data for the fiscal years 1996 and 1997 is derived
from actual audited results for such years. On September 1, 1997, we changed
our fiscal year end from September 30 to July 31. Accordingly, our fiscal year
1998 ended on July 31, 1998 and consisted of ten months. To see the audited
results for the ten months ended July 31, 1998, see "Selected Consolidated
Financial and Operating Data." Also included for comparative purposes are the
unaudited pro forma results for the twelve months ended July 31, 1997 and the
actual unaudited results for the twelve months ended July 31, 1998. These pro
forma results are not necessarily indicative of the actual results of
operations that would have been achieved nor are they necessarily indicative of
future results of operations. The summary historical data for the six months
ended January 31, 1998 and 1999 are derived from our unaudited consolidated
financial statements, which included all adjustments management considers
necessary to present fairly the financial results for these interim periods.
All of these adjustments were of a normal recurring nature. The results of such
interim periods are not necessarily indicative of results to be expected for
the full year due to the highly seasonal nature of our business (which
ordinarily produces losses for the first and fourth quarters). See "--Recent
Results" and "Risk Factors--Our resort business is highly seasonal."
<TABLE>
<CAPTION>
Pro Forma
Twelve Month Twelve Twelve Twelve
Fiscal Year Ended Months Months Six Months Ended Months
September 30, Ended Ended January 31, Ended
---------------------------- July 31, July 31, ------------------ January 31,
1995 1996 1997(1) 1997(2) 1998 1998 1999(3) 1999(3)
-------- -------- -------- ----------- ----------- -------- -------- -----------
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $292,127 $350,498 $154,144 $191,126 $ 387,480
Real estate............ 16,526 48,655 71,485 74,356 84,177 61,848 17,387 39,716
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 366,483 434,675 215,992 208,513 427,196
Operating expenses:
Resort................. 82,305 89,890 172,715 200,488 238,889 118,139 162,803 283,553
Real estate............ 14,983 40,801 66,307 64,646 74,057 55,647 12,140 30,550
Corporate expense(4)... 6,701 12,698 4,663 4,236 5,543 2,769 2,822 5,596
Depreciation and
amortization.......... 17,968 18,148 34,044 37,997 42,965 19,675 24,747 48,037
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 307,367 361,454 196,230 202,512 367,736
Income from operations.. 20,918 27,406 52,794 59,116 73,221 19,762 6,001 59,460
Interest expense....... (19,498) (14,904) (20,308) (16,799) (20,891) (11,195) (11,838) (21,534)
Net income (loss)...... 3,282 4,735 19,698 25,966 30,073 5,194 (3,928) 20,951
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,890 4,717 2,141 2,082 4,658
Resort EBITDA(4)(6).... 37,343 46,200 81,660 87,403 106,066 33,236 25,501 98,331
Real estate operating
income(7)............. 1,543 7,854 5,178 9,710 10,120 6,201 5,247 9,166
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 97,113 116,186 39,437 30,748 107,497
Resort capital
expenditures(9)....... 20,320 13,912 51,020 41,047 93,333 66,845 44,337 70,825
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.7x 2.7x 3.4x
Resort EBITDA to
interest expense...... 1.7 3.1 4.0 5.2 5.1 4.6
Resort EBITDA to pro
forma interest
expense(10)........... 3.5
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.4 2.4 3.1
Total EBITDA to
interest expense...... 1.9 3.6 4.3 5.8 5.6 5.0
Total EBITDA to pro
forma interest
expense(10)........... 3.8
Balance Sheet Data (at
period end):
Total assets........... $912,122 $1,036,072
Real estate held for
sale(11).............. 138,916 154,960
Long term debt
(including current
maturities)........... 284,014 334,832
Stockholders' equity... 462,624 459,647
</TABLE>
- --------
(footnotes appear on following page)
11
<PAGE>
- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisition of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) and the initial public offering of
our common stock (which occurred on February 4, 1997) as if such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the summary consolidated historical data for the six months
and twelve months ended January 31, 1999, are the results of operations of
our 51.9%-owned joint venture, SSI Venture (which commenced operations on
August 1, 1998). SSI Venture will not be a guarantor of the Notes. For the
six months ended January 31, 1999, SSI Venture had revenues of $38.7
million, income from operations of $4.1 million and EBITDA of $5.9
million. At January 31, 1999, SSI Venture had total assets of $46.7
million, total debt of $12.6 million and stockholders' equity of $17.4
million. We estimate that for the nine months ended April 30, 1999, the
EBITDA of SSI Venture will represent less than 12% of our Resort EBITDA.
See Note 16 to the Audited Consolidated Financial Statements of the
Company and Note 7 to the Unaudited Consolidated Condensed Financial
Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of
compensation expense related to the exercise of certain options held by
our former Chairman and Chief Executive Officer and (iii) $2.1 million
related to the termination of an employment agreement with our former
Chairman and Chief Executive Officer. For purposes of calculating Resort
EBITDA and Total EBITDA for this period, corporate expense excludes these
non-recurring charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a term
that has an established meaning under generally accepted accounting
principles ("GAAP"). We have included the information concerning Resort
EBITDA because our management believes it is an indicative measure of a
resort company's operating performance and is generally used by investors
to evaluate companies in the resort industry. Resort EBITDA does not
purport to represent cash provided by operating activities, and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. For information regarding
our historical cash flows from operating, investing and financing
activities, see our consolidated financial statements included elsewhere
in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the six months ended
January 31, 1999 and 1998, approximately $10 million for each period was
categorized as maintenance capital expenditures.
(10) Pro forma interest expense gives effect to the private offering of the
outstanding Notes on May 11, 1999 and the repayment of indebtedness under
our credit facility (which can be reborrowed) with the proceeds thereof.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
12
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors prior to exchanging outstanding Notes
for exchange notes in the exchange offer.
We are highly leveraged. At January 31, 1999, we had $334.8 million of
indebtedness, representing approximately 42% of our total capitalization. See
"Capitalization." Furthermore, subject to certain restrictions in our credit
facility and the indenture governing the exchange notes, we, along with our
subsidiaries, may incur additional indebtedness from time to time to finance
acquisitions, provide for working capital or capital expenditures or for other
purposes.
Our high level of indebtedness could have important consequences to you,
including limiting our ability to:
. obtain additional financing for acquisitions, working capital,
capital expenditures or other purposes,
. use operating cash flow in other areas of our business because we
must dedicate a substantial portion of these funds to make principal
payments and fund debt service,
. borrow additional funds or dispose of assets,
. compete with others who are not as highly leveraged, and
. react to changing market conditions, changes in our industry and
economic downturns.
We currently expect that we will be able to service our indebtedness out
of cash flow from operations. If we are unable to generate sufficient cash flow
to meet our debt service obligations, we will have to pursue one or more
alternatives, such as reducing or delaying capital expenditures, refinancing
debt, selling assets or raising equity capital. Each of these alternatives is
dependent upon financial, business and other general economic factors that
affect us, many of which are beyond our control. We cannot assure you that any
of these alternatives could be accomplished on satisfactory terms or that they
would yield sufficient funds to retire the Notes and the indebtedness senior to
the exchange notes. While we believe that our cash flow from operations will
provide an adequate source of long-term liquidity, a significant drop in
operating cash flows resulting from economic conditions, competition or other
uncertainties beyond our control would increase the need for alternative
sources of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Our future growth requires additional capital whose availability is not
assured. We intend to make significant investments in our resorts to maintain
our competitive position. We spent approximately $80.5 million and $51.0
million in the fiscal years ended July 31, 1998 and September 30, 1997,
respectively, on resort capital expenditures and expect to continue making
substantial resort capital expenditures. We could finance future expenditures
from any of the following sources:
. cash flow from operations,
. bank borrowings,
. public offerings of debt or equity,
. private placements of debt or equity, or
. some combination of the above.
We might not be able to obtain financing for future expenditures on
favorable terms.
Our recent or future acquisitions might not be successful. In recent
years, we have acquired several major resorts, including Keystone and
Breckenridge, and a number of real estate developments. Although we believe we
have enhanced our earnings and achieved cost savings by integrating these
acquisitions into our operations, we cannot assure you that we will be able to
continue this successful
13
<PAGE>
integration, manage these acquired properties profitably or increase our
profits from these operations. We would face various risks from additional
acquisitions (including the pending Grand Teton acquisition), including:
. inability to integrate acquired businesses into our operations,
. increased goodwill amortization,
. diversion of our management's attention, and
. unanticipated problems or liabilities.
These problems from future acquisitions could adversely affect our
operations and financial performance.
Our resort business is highly seasonal. We currently generate more than
80% of our revenue during the ski season, from November to April. We rely on
borrowings under our credit facility to support our capital requirements during
the unprofitable period between ski seasons, from May to October. If we are
unable to comply with the conditions of our credit facility or if the financing
we receive is insufficient for our needs, our inability to obtain adequate
financing outside of the ski season could have a material adverse effect on us.
Grand Teton, which we are in the process of acquiring, realizes most of its
revenues between May and October. However, this will only partially offset the
seasonal nature of our ski business.
Our future development might not be successful. We have significant
development plans for our resort and real estate operations. We could
experience significant difficulties completing these projects, including:
. delays in completion,
. our cost estimates may prove inaccurate,
. difficulty in receiving the necessary regulatory approvals, or
. we may not benefit from the projects as we expected.
We may not be able to fund these projects with cash flow from operations
and borrowings under our credit facility if we faced these difficulties.
We face significant competition. The number of people who ski in the
United States (as measured in skier days) has increased by approximately 4%
since the 1985-86 ski season and there is substantial competition among ski
resorts for these customers. The factors that are important to these customers
include:
. proximity to population centers,
. availability and cost of transportation to ski areas,
. ease of travel to ski areas (including direct flights by major
airlines),
. pricing of our products and services,
. snowmaking facilities,
. type and quality of skiing offered,
. duration of the ski season,
. weather conditions,
. number, quality and price of related services and lodging, and
. reputation.
We have many competitors for our ski vacationers, including ski resorts
in Utah, California, Nevada, New England and the other major resorts in
Colorado. Our destination guests can choose from any of these alternatives, as
well as non-skiing vacation destinations around the world. Our day skier
customers can choose from a number of nearby competitors, including Copper
Mountain, Telluride, Steamboat Springs, Winter Park
14
<PAGE>
and the Aspen resorts, as well as other forms of leisure such as attendance at
movies, sporting events and participation in other indoor and outdoor
recreational activities. This competition may adversely affect our skier days
and the pricing of our products and services.
We rely on government permits. Virtually all of our ski trails and
related activities on Vail, Breckenridge and Keystone and a substantial portion
on Beaver Creek are located on federal land. The United States Forest Service
has granted us permits to use these lands, but maintains the right to review
and approve the location, design and construction of improvements in these
areas and on many operational matters. The Forest Service can terminate most of
these permits if required in the public interest; however, the permit for a
large part of the Beaver Creek property is terminable at will. Although we do
not know of any permit used by a major ski resort then in operation that has
been terminated by the Forest Service over the opposition of the permitee, a
termination of any of our permits would adversely affect our business and
operations.
We have applied for several new permits for improvements and new
development and to renew and modify an existing permit. We have also sought to
renew and unify our permits for use of large parts of our Beaver Creek
property. While these efforts, if not successful, could impact our expansion
efforts as currently contemplated, we do not believe they would adversely
affect our results of operations or financial condition. Furthermore, Congress
may increase the fees we pay to the Forest Service for use of these federal
lands.
Grand Teton operates three resort properties within Grand Teton National
Park under a concession contract with the National Park Service. The concession
contract expires at the end of 2002, at which time the contract renewal will be
subject to a competitive bidding process. Should we not receive the renewal of
the concession contract, we would be compensated for the value of our
"possessory interest" in the assets of the three resort properties operated
under the concession contract, which is generally defined as the replacement
cost of such assets less depreciation.
We are subject to the risk of unfavorable weather conditions. We depend
upon favorable weather conditions and adequate snowfall during the winter ski
season to attract guests to our ski resorts. Our ski resorts have been affected
by aberrant weather patterns during the 1998-1999 ski season, which caused much
of our skiing terrain to be closed during the Christmas and New Year's
holidays. Our operating results could also be adversely affected by unfavorable
weather conditions and inadequate snowfall in future periods.
We are subject to the risk of an economic slowdown. Because our resorts
derive a significant portion of their revenues from the worldwide leisure
market, an economic recession or other significant economic slowdown could
adversely affect our business. We cannot assure you that a decrease in the
amount of discretionary spending by the public in the future would not have an
adverse effect on our business.
Apollo Ski Partners has influence over us. Apollo Ski Partners owns
approximately 99.9% of our outstanding shares of Class A Common Stock, giving
them approximately 22% of the combined voting power with respect to all matters
submitted for a vote of all stockholders. The holders of Class A Common Stock
elect a class of directors that constitutes two-thirds of our board of
directors. Accordingly, Apollo Ski Partners and, indirectly, Apollo Advisors,
L.P. (which indirectly controls Apollo Ski Partners) will be able to elect two-
thirds of our board of directors and control the approval of matters requiring
approval by the board of directors, including mergers, liquidations and asset
acquisitions and dispositions. In addition, Apollo Ski Partners and Apollo
Advisors, L.P. may be able to significantly influence decisions on matters
submitted for stockholder consideration.
Future changes in the real estate market could affect the value of our
investments. We have extensive real estate holdings in proximity to our
mountain resorts. We have invested approximately $56.9 million and $15.7
million in fiscal years 1997 and 1998, respectively, in our real estate
operations. We plan to make significant additional investments in the Keystone
JV and in developing property at all our resorts.
15
<PAGE>
The value of our real property and the revenue from related development
activities may be adversely affected by a number of factors, including:
. national and local economic climate,
. local real estate conditions (such as an oversupply of space or a
reduction in demand for real estate in an area),
. attractiveness of the properties to prospective purchasers and
tenants,
. competition from other available property or space,
. our ability to obtain adequate insurance,
. unexpected construction costs,
. government regulations and changes in real estate, zoning or tax
laws,
. interest rate levels and the availability of financing, and
. potential liabilities under environmental and other laws.
In addition, we run the risk that our new acquisitions may fail to
perform in accordance with our expectations, and that our estimates of the
costs of improvements for such properties may prove inaccurate. While we
attempt to mitigate our exposure to these risks by selling multi-family
development parcels to third-party developers who assume the risk of
construction or by pre-selling single-family homesites or condominium
residences to individual purchasers prior to the start of our construction
projects, we cannot assure you that we will continue to do so in the future.
Although we believe that the current market for the sale of our resort property
is strong, we cannot assure you that such market conditions will continue. See
"Business--Real Estate."
Year 2000. We are in the process of evaluating and resolving the
potential impact of the Year 2000 issue on our computerized systems and other
infrastructure that contain embedded technology. The Year 2000 issue is a
result of certain computer programs being written using two digits rather than
four to define the applicable year. Computer programs which are date-sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in major computer system or program failures or
miscalculations or equipment malfunctions. We recognize that the impact of the
Year 2000 issue extends beyond traditional computer hardware and software to
equipment used in operations, such as chairlifts, alarm systems and elevators,
as well as to third parties.
We have committed resources to conduct risk assessments and to correct
problems, where required, within each of the following areas: information
technology, operations equipment, and external parties. We expect to complete
our assessments, remediation, verification and testing of our information
technology and operations equipment by the end of October 1999. While we have
initiated communication with significant third parties to determine the extent
to which we are vulnerable to those third parties' failures to remediate their
own Year 2000 issue, we cannot guarantee that their Year 2000 issues would not
adversely affect our operations.
The total cost of our Year 2000 efforts is not expected to be material
with respect to our operations, liquidity or capital resources. We estimate the
multi-year cost of our Year 2000 project will be between $750,000 and $1.1
million. Of the total project cost, approximately $600,000 is attributable to
the purchase of new software or equipment which will be capitalized. The
remaining $150,000 to $500,000 will be expensed as incurred. Fiscal 1998 costs
were approximately $150,000, and costs for the six months ended January 31,
1999 were approximately $100,000. Costs exclude expenditures for systems which
were replaced under our regularly planned schedule.
There is still uncertainty around the scope of the Year 2000 issue and
its implications for us. At this time we cannot quantify the potential impact
of these failures. Due to the general uncertainty inherent in the Year 2000
problem, as well as, in part, the uncertainty of the Year 2000 readiness of
suppliers and the current
16
<PAGE>
status of our Year 2000 program, we are unable to determine at this time
whether any Year 2000 failures will have material adverse consequences on our
results of operations, liquidity or financial condition. Our Year 2000 program
and contingency plans are being developed to address issues within our control
and to reduce the level of our uncertainty about our Year 2000 issues.
Your claims are subordinated to our and our subsidiaries' senior
debt. Payments on the exchange notes and the guarantees are subordinated to all
of our and the guarantors' existing and future indebtedness, including amounts
under our credit facility, other than future indebtedness that expressly
provides that it is equal to or subordinated in right of payment to the
exchange notes and the guarantees. As a result, upon any distribution to our
creditors in a bankruptcy, liquidation or reorganization or similar proceeding
with respect to us or our property, the holders of our senior debt and our
guarantors' senior debt will be entitled to be paid in full before any payment
may be made with respect to the exchange notes and the guarantees. Claims in
respect of the exchange notes will be effectively subordinated to all
liabilities, including trade payables, of any of our subsidiaries that are not
subsidiary guarantors. At January 31, 1999, after giving effect to the offering
of the outstanding Notes and the application of net proceeds, we had $141.1
million of senior debt outstanding on a consolidated basis.
Our subsidiary, The Vail Corporation, is the borrower under our $450.0
million revolving credit facility and its obligations are guaranteed by us and
certain of our subsidiaries. At January 31, 1999, after giving effect to the
offering of the outstanding Notes and the application of the proceeds, we would
have had $60.3 million outstanding, $61.7 million of letters of credit issued
thereunder and remaining availability of $328.0 million, of which $220.0
million could have been borrowed under the most restrictive of the financial
covenants contained in the credit facility.
At January 31, 1999, SSI Venture had $12.5 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness."
Guarantees may be unenforceable due to fraudulent conveyance
statutes. Although laws differ among various jurisdictions, in general, under
fraudulent conveyance laws, a court could subordinate or avoid any subsidiary
guarantee if it found that:
. the guarantee was incurred with actual intent to hinder, delay or
defraud creditors, or
. the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the
following:
. insolvent or rendered insolvent because of the guarantee,
. engaged in business or transactions for which its remaining
assets constituted unreasonably small capital, or
. intended to incur, or believed that it would incur, debts
beyond its ability to pay at maturity.
If a court avoided a guarantee as a result of fraudulent conveyance, or
held it unenforceable for any other reason, noteholders would cease to have a
claim against the guarantor and would be creditors solely of Vail Resorts and
the remaining guarantors.
There are restrictions imposed by the terms of our indebtedness. The
operating and financial restrictions and covenants in our credit facility may
adversely affect our ability to finance future operations or capital needs or
to engage in other business activities. Our credit facility includes covenants
that will require us to meet certain financial ratios and financial conditions
which may require that we take action to reduce debt or to act in a manner
contrary to our business objectives. If we breach any of these restrictions or
covenants or suffer a material adverse change which restricts our borrowing
ability under our credit facility, we would be
17
<PAGE>
unable to borrow funds thereunder without a waiver. A breach could cause a
default under the exchange notes and our other debt. Our indebtedness may then
become immediately due and payable. We may not have or be able to obtain
sufficient funds to make these accelerated payments, including payments on the
Notes.
In addition, the indenture governing the exchange notes restricts, among
other things, our ability to:
. borrow money,
. pay dividends on stock or make certain other restricted payments,
. use assets as security in other transactions,
. make investments,
. enter into certain transactions with our affiliates, and
. sell certain assets or merge with other companies.
If we fail to comply with these covenants, we would be in default under
the indenture governing the exchange notes, and the principal and accrued
interest on the exchange notes would become due and payable. See "Description
of Notes--Certain Covenants."
We may not be able to purchase the exchange notes upon a change of
control. Upon certain change of control events, each holder of exchange notes
may require us to repurchase all or a portion of its exchange notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest. Our ability to repurchase the exchange notes upon a change of
control event could be limited by the terms of our debt agreements. Upon a
change of control event, we may be required to repay the outstanding principal
and any accrued interest on any other amounts owed by us under our credit
facility. We cannot assure you that we would be able to repay amounts
outstanding under our credit facility or obtain necessary consents under such
facilities to repurchase these exchange notes. Any requirement to offer to
purchase any exchange notes may result in our having to refinance our
outstanding indebtedness, which we may not be able to do. In addition, even if
we were able to refinance such indebtedness, such financing may be on terms
unfavorable to us. Certain provisions in our credit facility may delay, defer
or prevent a merger, tender offer or other takeover attempt. The term "Change
of Control" is defined in "Description of Notes--Certain Definitions."
There is currently no trading market for the exchange notes. The
exchange notes will be new securities for which there is currently no public
market. We do not intend to list the exchange notes on any national securities
exchange or quotation system. The Initial Purchasers in the offering of
outstanding Notes have advised us that they currently intend to make a market
in the exchange notes, but they are not obligated to do so and, if commenced,
may discontinue such market making at any time. Accordingly, no market may
develop for the exchange notes, and if a market does develop, it may have
limited or no liquidity. As outstanding Notes are tendered and accepted in the
exchange offer, the aggregate principal amount of outstanding Notes will
decrease, which will decrease their liquidity.
Failure to exchange your outstanding Notes will leave them subject to
transfer restrictions. If you do not exchange your outstanding Notes for
exchange notes, you will continue to be subject to the restrictions on
transfer of your outstanding Notes set forth in their legend because the
outstanding Notes were issued pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. In general, outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. We currently do not anticipate registering the outstanding
Notes under the Securities Act.
Blue sky restrictions on resale of exchange notes. In order to comply
with the securities laws of certain jurisdictions, the exchange notes may not
be offered or resold by any holder unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualifications is available and the requirements of such exemption have been
satisfied. We do not currently intend to register or qualify the resale of the
exchange notes in any such jurisdictions. However, an exemption is generally
available for sales to registered broker-dealers and certain institutional
buyers. Other exemptions under applicable state securities laws may also be
available.
18
<PAGE>
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations
under the registration rights agreement. We will not receive any cash proceeds
from the exchange offer.
The net proceeds from the sale of the outstanding Notes was approximately
$193.8 million. We used the net proceeds from the sale of the outstanding Notes
to repay indebtedness under our credit facility (which can be reborrowed).
CAPITALIZATION
The following table sets forth our capitalization as of January 31, 1999
and as adjusted to reflect the sale of the outstanding Notes and the
application of the net proceeds of that offering. See "Description of Certain
Indebtedness."
<TABLE>
<CAPTION>
Actual As Adjusted
---------- -------------
(In thousands, except
share amounts)
<S> <C> <C>
Cash.................................................... $ 17,704 $ 17,704
========== ==========
Short-term debt......................................... 2,087 2,087
Industrial Development Bonds............................ 63,200 63,200
Credit facilities....................................... 265,250 71,500
Senior Subordinated Notes............................... -- 200,000
Other................................................... 4,295 4,295
---------- ----------
Total debt.......................................... 334,832 341,082
Stockholders' equity:
Class A common stock, $0.01 par value, 20,000,000
shares authorized, 7,439,834 shares issued and
outstanding.......................................... 74 74
Common stock, $0.01 par value, 80,000,000 shares
authorized, 27,087,701 shares issued and
outstanding.......................................... 271 271
Additional paid-in capital............................ 402,514 402,514
Retained earnings..................................... 56,788 56,788
---------- ----------
Total stockholders' equity.......................... 459,647 459,647
---------- ----------
Total capitalization.................................... $ 794,479 $ 800,729
========== ==========
</TABLE>
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected historical consolidated financial
data for the periods indicated. The financial data for the twelve month fiscal
years ended September 30, 1996 and 1997 and the ten month fiscal year ended
July 31, 1998 are derived from our consolidated financial statements, which
have been audited by Arthur Andersen LLP, independent accountants, and should
be read in conjunction with those statements and related notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the other financial information included elsewhere in this
prospectus. Also included for comparative purposes are the unaudited pro forma
results for the twelve months ended July 31, 1997 and the actual unaudited
results for the twelve months ended July 31, 1998. These pro forma results are
not necessarily indicative of the actual results of operations that would have
been achieved nor are they necessarily indicative of future results of
operations. The financial data for the six months ended January 31, 1998 and
1999 are derived from our unaudited consolidated financial statements, which
included all adjustments management considers necessary to present fairly the
financial results for these interim periods. All of these adjustments were of a
normal recurring nature. The results of such interim periods are not
necessarily indicative of results to be expected for the full year due to the
highly seasonal nature of our business (which ordinarily produces losses for
the first and fourth quarters). See "Prospectus Summary--Recent Results" and
"Risk Factors--Our resort business is highly seasonal."
<TABLE>
<CAPTION>
Twelve Ten Pro Forma
Month Month Twelve Twelve
Fiscal Year Ended Fiscal Year Months Months Six Months Ended
September 30, Ended Ended Ended January 31,
---------------------------- July 31, July 31, July 31, --------------------
1995 1996 1997(1) 1998 1997(2) 1998 1998 1999(3)
-------- -------- -------- ----------- ----------- ----------- -------- ----------
(audited) (audited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $336,547 $292,127 $350,498 $154,144 $ 191,126
Real estate............ 16,526 48,655 71,485 73,722 74,356 84,177 61,848 17,387
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 410,269 366,483 434,675 215,992 208,513
Operating expenses:
Resort................. 82,305 89,890 172,715 217,764 200,488 238,889 118,139 162,803
Real estate............ 14,983 40,801 66,307 62,619 64,646 74,057 55,647 12,140
Corporate expense(4)... 6,701 12,698 4,663 4,437 4,236 5,543 2,769 2,822
Depreciation and
amortization.......... 17,968 18,148 34,044 36,838 37,997 42,965 19,675 24,747
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 321,658 307,367 361,454 196,230 202,512
Income from operations.. 20,918 27,406 52,794 88,611 59,116 73,221 19,762 6,001
Interest Expense....... (19,498) (14,904) (20,308) (17,789) (16,799) (20,891) (11,195) (11,838)
Net income (loss)....... 3,282 4,735 19,698 41,018 25,966 30,073 5,194 (3,928)
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,717 4,890 4,717 2,141 2,082
Resort EBITDA(4)(6).... 37,343 46,200 81,660 114,346 87,403 106,066 33,236 25,501
Real estate operating
income(7)............. 1,543 7,854 5,178 11,103 9,710 10,120 6,201 5,247
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 125,449 97,113 116,186 39,437 30,748
Resort capital
expenditures(9)....... 20,320 13,912 51,020 80,454 41,047 93,333 66,845 44,337
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.5x 2.7x 2.7x
Resort EBITDA to
interest expense...... 1.9 3.1 4.0 6.4 5.2 5.1
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.3 2.4 2.4
Total EBITDA to
interest expense...... 2.0 3.6 4.3 7.1 5.8 5.6
Ratio of earnings to
fixed charges(10)..... 1.1 1.6 2.6 4.9 3.6 3.4
Balance Sheet Data (at
period end):
Total assets........... $429,628 $422,612 $855,949 $912,122 $814,816 $912,122 $948,104 $1,036,072
Real estate held for
sale(11).............. 54,858 84,055 154,925 138,916 155,672 138,916 138,660 154,960
Long term debt
(including current
maturities)........... 191,313 144,750 265,062 284,014 236,347 284,014 291,041 334,832
Stockholders' equity... 167,694 123,907 405,666 462,624 417,187 462,624 432,708 459,647
</TABLE>
- --------
(footnotes appear on following page)
20
<PAGE>
- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisition of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) and the initial public offering of our
common stock (which occurred on February 4, 1997) as if such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the selected consolidated historical data for the six months
ended January 31, 1999, are the results of operations of our 51.9%-owned
joint venture, SSI Venture (which commenced operations on August 1, 1998).
SSI Venture will not be a guarantor of the Notes. For the six months ended
January 31, 1999, SSI Venture had revenues of $38.7 million, income from
operations of $4.1 million and EBITDA of $5.9 million. At January 31, 1999,
SSI Venture had total assets of $46.7 million, total debt of $12.6 million
and stockholders' equity of $17.4 million. We estimate that for the nine
months ended April 30, 1999, the EBITDA of SSI Venture will represent less
than 12% of our Resort EBITDA. See Note 16 to the Audited Consolidated
Financial Statements of the Company and Note 7 to the Unaudited
Consolidated Condensed Financial Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of compensation
expense related to the exercise of certain options held by our former
Chairman and Chief Executive Officer and (iii) $2.1 million related to the
termination of an employment agreement with our former Chairman and Chief
Executive Officer. For purposes of calculating Resort EBITDA and Total
EBITDA for this period, corporate expense excludes these non-recurring
charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a term that
has an established meaning under generally accepted accounting principles
("GAAP"). We have included the information concerning Resort EBITDA
because our management believes it is an indicative measure of a resort
company's operating performance and is generally used by investors to
evaluate companies in the resort industry. Resort EBITDA does not purport
to represent cash provided by operating activities, and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. For information regarding our historical
cash flows from operating, investing and financing activities, see our
consolidated financial statements included elsewhere in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the six months ended
January 31, 1999 and 1998, approximately $10 million for each period was
categorized as maintenance capital expenditures.
(10) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provisions for
interest expense. Fixed charges consist of interest expense, capitalized
interest, amortization of debt issuance costs, and a portion of the
operating lease expense deemed to be representative of the interest
factor.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this prospectus.
Introduction
Our revenues are derived primarily from the operations of our ski resorts
and from the sale of real estate in proximity to our resorts. We have and will
continue to acquire new resorts and properties and to undertake improvements on
existing resort areas to enhance our ability to attract customers for our
resort operations and real estate properties. While the value of our real
estate development is tied to the quality of our ski resorts, the development
of new lodging, conference centers and other facilities also benefits our
resort operations. Therefore, our future results of operations from both of
these sources will be affected by some of the same factors, including
competition in a static market, general economic conditions, consumer trends
and the success of our acquisition strategy.
On January 3, 1997, we acquired the Breckenridge, Keystone and Arapahoe
Basin mountain resorts as well as significant related real estate interests and
developable land. Pursuant to a consent decree with the United States
Department of Justice, the Company divested the Arapahoe Basin ski area on
September 5, 1997.
On September 1, 1997, the Company changed its fiscal year end from
September 30 to July 31. Accordingly, the Company's fiscal year 1998 ended on
July 31, 1998 and consisted of ten months. This Management's Discussion and
Analysis compares actual results for the ten months ended July 31, 1998 and
1997, and for the fiscal years ended September 30, 1997 and 1996. Supplemental
pro forma comparisons are presented for the ten and twelve-month periods ended
July 31, 1998 and 1997. Ten-month comparisons are presented to conform with the
actual ten-month transitional period, while twelve-month comparisons are
presented to compare year to date results for the Company's new fiscal year
ended July 31. Also presented for comparative purposes are the six months ended
January 31, 1999 and 1998.
Six Months Ended January 31, 1999 Compared to Six Months Ended January 31, 1998
<TABLE>
<CAPTION>
Six Six
Months Months Percentage
Ended Ended Increase Increase
January 31, 1999 January 31, 1998 (Decrease) (Decrease)
---------------- ---------------- ---------- ----------
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C>
Resort Revenue.......... $191,126 $154,144 $36,982 24.0%
Resort Operating
Expense................ 162,803 118,139 44,664 37.8%
</TABLE>
22
<PAGE>
Resort Revenue. Resort Revenue for the six months ended January 31, 1999
and 1998 is presented by category as follows:
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended Percentage
January 31, January 31, Increase Increase
1999 1998 (Decrease) (Decrease)
----------- ----------- ---------- ----------
(dollars in thousands,
except ETP amounts)
(unaudited)
<S> <C> <C> <C> <C>
Lift Ticket....................... $ 60,030 $ 63,935 $(3,905) (6.1)%
Ski School........................ 15,682 16,524 (842) (5.1)
Dining............................ 24,828 22,203 2,625 11.8
Retail/Rental..................... 39,320 9,591 29,729 310.0
Hospitality....................... 27,896 19,348 8,548 44.2
Other............................. 23,370 22,543 827 3.7
-------- -------- ------- -----
Total Resort Revenue............ $191,126 $154,144 $36,982 24.0 %
======== ======== ======= =====
Total Skier Days.................. 2,082 2,141 (59) (2.8)%
======== ======== ======= =====
ETP............................... $ 28.83 $ 29.86 $ (1.03) (3.4)%
======== ======== ======= =====
</TABLE>
Lift ticket revenue decreased due to a 2.8% decrease in total skier days
as well as a 3.4% decrease in ETP (effective ticket price, "ETP", is defined as
lift ticket revenue divided by total skier days). The Company attributes the
decrease in skier days to an extremely dry early ski season which had a
negative impact on the entire Colorado ski market, the October 19, 1998 fires
on Vail mountain and the Canadian dollar exchange rate which favored the
Canadian ski industry. The decrease in ETP is the result of a shift in the
proportion of total skier days to local and Front Range (Denver/Colorado
Springs) skier days (non-destination skier days). Lift tickets sold to local
and Front Range skiers tend to have a lower ETP than tickets sold to
destination guests. This shift mainly occurred due to the popularity of the
Buddy Pass, a discounted season pass for Keystone and Breckenridge resorts,
which accounted for a significant portion of local and Front Range skier days.
Ski and Snowboard School revenue decreased due to a decrease in skier
days and the shift in the proportion of total skier days to local and Front
Range skier days as Front Range skiers are less likely to purchase lessons than
destination skiers.
Dining revenue increased primarily as a result of the addition of 12
dining operations acquired in four hotel acquisitions, coupled with modest
growth at existing facilities. The Lodge at Vail acquisition added two fine
dining establishments, eight restaurants were added with the acquisition of The
Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB"), owners and operators of the
Village at Breckenridge, and the Inn at Keystone and the Great Divide Lodge
(formerly the Breckenridge Hilton) each added one dining facility.
The increase in Retail/Rental revenue is due to the addition of
approximately 30 retail and rental outlets provided by SSI Venture.
Hospitality revenue increased as a result of strong performance from
existing operations due in part to a combination of effective yield management
and expansion of the managed property inventory. The acquisitions of the Lodge
at Vail, the Great Divide Lodge, and the Inn at Keystone in fiscal 1998, and
VAB in fiscal 1999 also contributed significantly. In addition to adding
lodging capacity, the Lodge at Vail and VAB each added additional property
management operations. VAB also runs a vacation services operation/travel
agency.
23
<PAGE>
Other revenue increased as a result of the increased popularity of the
summer mountain activities including an additional new Alpine Slide at
Breckenridge, expanded contract services for Beaver Creek, Bachelor Gulch, and
Arrowhead Villages, growth in club operations, expanded licensing and
sponsorship contracts, and increases in commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $162.8 million for
the six months ended January 31, 1999, an increase of $44.7 million, or 37.8%,
compared to the six months ended January 31, 1998. The increase in Resort
Operating Expense is primarily attributable to the incremental expenses related
to the Company's acquisitions of the Inn at Keystone in January 1998, the Lodge
at Vail and the Great Divide Lodge in October 1997, the acquisition of VAB in
August 1998, and the consolidation of SSI Venture. A portion of the increase
can also be attributed to the increased variable expenses resulting from the
increased level of Resort Revenue derived from non-lift businesses such as
dining, retail/rental and hospitality operations. These operations tend to have
a greater level of variable operating expenses proportionate to revenues. These
increases have been partially offset by cost saving measures that have been
implemented at all levels of the Company's operations.
Real Estate Revenue. Revenue from real estate operations for the six
months ended January 31, 1999 was $17.4 million, a decrease of $44.4 million,
compared to the six months ended January 31, 1998. The decrease is attributed
to the sell-out of homesites at Bachelor Gulch Village in fiscal 1998. Revenue
for the six months of fiscal 1999 consists primarily of the sale of one luxury
residential penthouse condominium at the Lodge at Vail, the sale of three
development sites at Arrowhead Village and the Company's investment in Keystone
JV. Profits from Keystone JV during the six months ended January 31, 1999
included the sale of 130 village condominium units, primarily at the River Run
development, and 57 single-family homesites surrounding an 18-hole golf course
development. Real estate revenue for the six months ended January 31, 1998
consisted primarily of the sales of 34 single-family home-sites at Bachelor
Gulch, one multi-family homesite at Arrowhead and four luxury residential
condominiums at the Golden Peak base area of Vail mountain.
Real Estate Operating Expense. Real estate operating expense for the six
months ended January 31, 1999 was $12.1 million, a decrease of $43.5 million,
compared to the six months ended January 31, 1998. The decrease in real estate
operating expense is due to the sell-out of homesites at Bachelor Gulch Village
in fiscal 1998. Real estate cost of sales for the six months ended January 31,
1999 consists primarily of the cost of sales and real estate commissions
associated with the sale of one luxury residential penthouse condominium at the
Lodge at Vail and the sale of three development sites in at Arrowhead Village.
Real estate cost of sales for the six months ended January 31, 1998 consisted
primarily of the cost of sales and real estate commissions associated with the
sales of 34 single-family homesites at Bachelor Gulch, one multi-family
homesite at Arrowhead, and four luxury residential condominiums at the Golden
Peak base area of Vail mountain. Real estate operating expenses include
selling, general and administrative expenses associated with the Company's real
estate operations.
Corporate expense. Corporate expense increased by $53,000 or 1.9% for the
six months ended January 31, 1999 as compared to the six months ended January
31, 1998. Corporate expense includes certain executive salaries, directors' and
officers' insurance, investor relations expenses and tax, legal, audit,
transfer agent, and other consulting fees.
Depreciation and Amortization. Depreciation and amortization expense
increased by $5.1 million for the six months ended January 31, 1999 as compared
to the six months ended January 31, 1998. The increase was primarily
attributable to the inclusion of depreciation and amortization associated with
the three hotel acquisitions in fiscal 1998 and one hotel acquisition and the
SSI Venture discussed above in fiscal 1999 and an increased fixed asset base
due to fiscal 1999 capital improvements.
Interest expense. During the six months ended January 31, 1999, and the
six months ended January 31, 1998, the Company recorded interest expense of
$11.8 million and $11.2 million, respectively, relating
24
<PAGE>
primarily to the Company's credit facilities and the Industrial Development
Bonds in fiscal 1999 and fiscal 1998. The increase in interest expense for the
six months ended January 31, 1999 compared to the six months ended January 31,
1998, is attributable to a higher average balance outstanding on the credit
facility due to amounts drawn for the hotel acquisition and working capital
funding to SSI Venture made during the first quarter, and the SSI Venture
credit facility established in the second quarter. The increase in interest
expense was partially offset by favorable interest rates.
Ten Months Ended July 31, 1998 Compared To Ten Months Ended July 31, 1997
The actual results of the ten months ended July 31, 1998 compared to the
actual results of the ten months ended July 31, 1997 discussed below are not
comparable due to our acquisition of Keystone and Breckenridge on January 3,
1997. Accordingly, the usefulness of the comparisons presented below is
limited, as the ten months ended July 31, 1997 includes the results of such
acquisition for the period from January 4 to July 31 while the ten months ended
July 31, 1998 includes the results of such acquisition for the full ten-month
period. Please see pro forma results of operations included elsewhere in this
Management's Discussion and Analysis.
Resort Revenue. Resort Revenue for the ten months ended July 31, 1998 was
$336.5 million, an increase of $88.0 million, or 35.4%, compared to the ten
months ended July 31, 1997. The increase was primarily attributable to the
inclusion of the acquisition of Keystone and Breckenridge for the full ten-
month period in fiscal 1998 but only for the period from January 4 to July 31
in fiscal 1997, and increases in lift ticket, ski school, dining, retail and
rental, hospitality and other revenues at all four resorts during fiscal 1998.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, an increase of $64.6 million, or 42.1%, as
compared to the ten months ended July 31, 1997. The increase in Resort
Operating Expense is attributable to the inclusion of the acquisition of
Keystone and Breckenridge for the full ten months in fiscal 1998 but only for
the period from January 4 to July 31 in fiscal 1997, and increased variable
expenses resulting from the increased level of non-lift Resort Revenue during
the ten months ended July 31, 1998.
Real Estate Revenue. Revenue from real estate operations for the ten
months ended July 31, 1998 was $73.7 million, an increase of $12.6 million,
compared to the ten months ended July 31, 1997. Revenue for the ten months of
fiscal 1998 consisted primarily of the sales of 37 single-family homesites and
five multi-family sites in the Bachelor Gulch Village development ($45.7
million), and the sale of four luxury residential condominiums at the Golden
Peak base area of Vail Mountain ($18.7 million). Revenue for the first ten
months of fiscal 1997 consisted primarily of the sales of 63 single-family
homesites in the Bachelor Gulch Village development ($46.6 million) and eight
residential condominiums.
Real Estate Operating Expense. Real estate operating expense for the ten
months ended July 31, 1998 was $62.6 million, an increase of $7.7 million,
compared to the ten months ended July 31, 1997. Real estate cost of sales for
the first ten months of fiscal 1998 consisted primarily of the cost of sales
and real estate commissions associated with the sale of 37 single-family
homesites and five multi-family sites in the Bachelor Gulch Village development
and four luxury residential condominiums at the Golden Peak base area of Vail
Mountain. Real estate cost of sales for the first ten months of fiscal 1997
consisted primarily of the cost of sales and real estate commissions associated
with the sale of 63 single-family homesites in the Bachelor Gulch Village
development and eight residential condominiums.
Corporate Expense. Corporate expense increased by $880,000 for the ten
months ended July 31, 1998, as compared to the ten months ended July 31, 1997.
Corporate expense includes certain executive salaries, directors' and officers'
insurance, investor relations expenses and tax, legal, audit, transfer agent
and other consulting fees. The increase over fiscal 1997 is primarily
attributable to an increase in investor relations costs, transfer agent fees
and public reporting costs.
25
<PAGE>
Depreciation and Amortization. Depreciation and amortization expense
increased by $9.2 million for the ten months ended July 31, 1998. The increase
was primarily attributable to the inclusion of depreciation expense and
amortization of goodwill for the acquisition of Keystone and Breckenridge for
the full ten-month period in fiscal 1998 but only for the period from January 4
to July 31 of fiscal 1997, and capital expenditures made in fiscal 1997 at all
four resorts.
Interest Expense. During the ten months ended July 31, 1998, and the ten
months ended July 31, 1997, the Company recorded interest expense of $17.8
million and $17.2 million, respectively. Interest expense related primarily to
the credit facility (See Note 6(b) of Notes to Consolidated Financial
Statements) and the Industrial Development Bonds (see Note 6(a) of Notes to
Consolidated Financial Statements) in fiscal 1998 and fiscal 1997, as well as
certain then outstanding senior subordinated notes in fiscal 1997. The Company
maintained a higher average balance outstanding under its credit facility in
fiscal 1998 due to amounts drawn for the hotel acquisitions, resort capital
expenditures and investments in real estate. The higher interest on the credit
facility in fiscal 1998 was partially offset by the interest incurred in fiscal
1997 on the $165 million in debt assumed in the acquisition of Keystone and
Breckenridge, higher interest rates on certain outstanding senior subordinated
notes which were outstanding until March 1997, and the one-time contractual
redemption premium on the early redemption of such senior subordinated notes.
Gain/Loss on the Sale of Fixed Assets. During the ten months ended July
31, 1998, the Company recorded a loss on the sale of fixed assets of $1.7
million. This loss was primarily attributable to the removal and write-off of a
fixed grip chairlift at Keystone Mountain. The lift is being replaced with a
new high-speed quad chairlift consistent with the Company's initiative to
increase uphill skier capacity and overall guest service. Additionally, the
Company wrote off certain retail software systems which will not be used by its
new retail joint venture in fiscal 1999.
Fiscal Year Ended September 30, 1997 ("Fiscal 1997") Compared to Fiscal Year
Ended September 30, 1996 ("Fiscal 1996")
Resort Revenue. Resort Revenue for fiscal 1997 was $259.0 million, an
increase of $118.8 million, or 84.6%, compared to fiscal 1996. The increase was
attributable primarily to (i) the inclusion of the results of the Acquired
Resorts from January 4, 1997 ($104.8 million) and (ii) increases in lift
ticket, ski school, food service, retail and rental, hospitality and other
revenues.
Resort Operating Expense. Resort Operating Expense was $172.7 million for
fiscal 1997, representing an increase of $82.8 million, or 92.1%, as compared
to fiscal 1996. The increase in Resort Operating Expense is primarily
attributable to (i) the inclusion of the results of the Acquired Resorts from
January 4, 1997 ($69.1 million), (ii) increased variable expenses resulting
from the increased level of Vail/Beaver Creek Resort Revenue and skier days in
fiscal 1997, (iii) expenses associated with new Vail/Beaver Creek food service
and retail/rental operations and (iv) a one-time reorganization charge of $2.2
million in the third quarter of fiscal 1997.
Real Estate Revenue. Revenue from real estate operations for fiscal 1997
was $71.5 million, an increase of $22.8 million, compared to fiscal 1996.
Revenue for fiscal 1997 consisted primarily of the sales of 65 single-family
homesites in the Bachelor Gulch Village development which totaled $47.5
million, two luxury residential condominiums at the Golden Peak base area of
Vail Mountain totaling $8.0 million, various condominiums in Beaver Creek
Village totaling $4.2 million and Arrowhead Village land sales of approximately
$5.1 million. Revenue for fiscal 1996 consisted primarily of the sales of 30
single-family homesites in the Strawberry Park development at Beaver Creek
Resort which totaled $30.9 million.
Real Estate Operating Expense. Real estate operating expense for fiscal
1997 was $66.3 million, an increase of $25.5 million, compared to fiscal 1996.
Real estate cost of sales for fiscal 1997 consisted primarily of the cost of
sales and real estate commissions associated with the sales of 65 single-family
homesites in the
26
<PAGE>
Bachelor Gulch Village development, two luxury residential condominiums at the
Golden Peak base area of Vail Mountain, various condominiums in Beaver Creek
Village, and Arrowhead Village land sales. Real estate cost of sales for fiscal
1996 consisted primarily of the cost of sales and real estate commissions
associated with the sale of 30 single-family homesites in the Strawberry Park
development at Beaver Creek Resort.
Corporate Expense. Corporate expense was $4.7 million for fiscal 1997, a
decrease of $8.0 million as compared to fiscal 1996. For periods prior to
fiscal 1997, corporate expense included the costs associated with the Company's
holding company structure and overseeing multiple lines of business, including
the discontinued operations. In fiscal 1997, corporate expense includes certain
personnel, tax, legal, directors' and officers' insurance and other consulting
fees relating solely to the Company's resort and real estate operations.
Corporate expense for fiscal 1996 includes the following nonrecurring charges:
(i) $2.1 million related to the termination of an employment agreement with the
Company's former Chairman and Chief Executive Officer, (ii) $4.5 million
related to nonrecurring payments to certain holders of employee stock options,
and (iii) $1.9 million of compensation expense related to the exercise of stock
options by the Company's former Chairman and Chief Executive Officer. Excluding
the effect of those items, corporate expense increased by approximately
$400,000.
Depreciation and Amortization. Depreciation and amortization expense was
$34.0 million for fiscal 1997, an increase of $15.9 million, as compared to
fiscal 1996. The increase was primarily attributable to the inclusion of the
results of Keystone and Breckenridge from January 4, 1997 ($14.1 million) and
Vail/Beaver Creek capital expenditures made in fiscal 1996 and the first
quarter of fiscal 1997.
Interest Expense. During fiscal 1997 and fiscal 1996, the Company
recorded interest expense of $20.3 million and $14.9 million, respectively,
which relates primarily to the Company's then outstanding senior subordinated
notes, the Industrial Development Bonds, and the Company's credit facility. The
increase in interest expense from fiscal 1996 to fiscal 1997 is attributable to
the interest incurred on the $165 million in debt assumed in the acquisition of
Keystone and Breckenridge and the contractual redemption premium incurred in
the early redemption of the 12 1/4% senior subordinated notes due 2004,
partially offset by interest reductions due to redemptions totaling $54.5
million in principal amount of senior subordinated notes in the first half of
fiscal 1996.
Pro Forma Results of Operations--Ten Months Ended July 31, 1998 Compared to Ten
Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the ten months ended July 31, 1997 assume the acquisition of Keystone and
Breckenridge occurred on October 1, 1996. These pro forma results are not
necessarily indicative of the actual results of operations that would have been
achieved nor are they necessarily indicative of future results of operations.
The unaudited pro forma financial information below excludes the results of
Arapahoe Basin, which the Company divested in September 1997. The audited
summarized information for the ten months ended July 31, 1998 are provided for
comparative purposes.
<TABLE>
<CAPTION>
Ten (Pro Forma)
Months Ten Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ----------- ----------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Resort Revenue.......... $336,547 $280,949 $55,598 19.8%
Resort Operating
Expense................ 217,764 183,086 34,678 18.9%
</TABLE>
27
<PAGE>
Resort Revenue. Pro forma Resort Revenue for the ten months ended July
31, 1998 and 1997 are presented by category as follows:
<TABLE>
<CAPTION>
Ten (Pro Forma)
Months Ten Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Lift Tickets......................... $147,128 $135,827 $11,301 8.3%
Ski School........................... 38,647 34,462 4,185 12.1
Dining............................... 48,246 39,580 8,666 21.9
Retail/Rental........................ 19,975 17,400 2,575 14.8
Hospitality.......................... 43,127 29,967 13,160 43.9
Other................................ 39,424 23,713 15,711 66.3
-------- -------- ------- ----
Total Resort Revenue................. $336,547 $280,949 $55,598 19.8%
======== ======== ======= ====
Total Skier Days..................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP.................................. $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
</TABLE>
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village,
making it an
28
<PAGE>
attractive retail shopping destination, and the newly renovated and expanded
Golden Peak facility at the base of Vail Mountain. Two new rental operations
were opened in Beaver Creek Village and one new retail/rental operation was
opened in a strategic location at the base of Peak 8 in Breckenridge, where the
Company formerly had no presence in the retail/rental market. The Company's
retail and rental business also benefited from continuing improvements in
inventory management and store product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier visits and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, compared to $183.1 million for the ten
months ended July 31, 1997. As a percentage of Resort Revenue, Resort Operating
Expense decreased from 65.2% to 64.7% in the ten months ended July 31, 1998.
The overall increase in Resort Operating Expense is attributable to increased
variable operating expenses resulting from the increased level of Resort
Revenue derived from non-lift businesses such as dining, retail/rental,
hospitality and other operations.
Pro Forma Results of Operations--Twelve Months Ended July 31, 1998 Compared to
Twelve Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the twelve months ended July 31, 1997 assume the acquisition of the
Keystone and Breckenridge occurred on August 1, 1996. These pro forma results
are not necessarily indicative of the actual results of operations that would
have been achieved nor are they necessarily indicative of future results of
operations. The unaudited pro forma financial information below excludes the
results of Arapahoe Basin, which the Company divested in September 1997. The
unaudited summarized information for the twelve-months ended July 31, 1998 are
provided for comparative purposes.
<TABLE>
<CAPTION>
Twelve (Pro Forma)
Months Twelve Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ------------- -------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C>
Resort Revenue....................... $350,498 $292,127 $58,371 20.0%
Resort Operating Expense............. 238,889 200,488 38,401 19.2%
</TABLE>
29
<PAGE>
Resort Revenue. Pro forma Resort Revenue for the twelve-months ended July
31, 1998 and 1997 is presented by category as follows:
<TABLE>
<CAPTION>
Twelve (Pro Forma)
Months Twelve Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ------------- ---------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C>
Lift Tickets....................... $147,128 $135,827 $11,301 8.3%
Ski School......................... 38,647 34,462 4,185 12.1
Dining............................. 52,371 43,099 9,272 21.5
Retail/Rental...................... 20,799 17,165 3,634 21.2
Hospitality........................ 47,128 34,065 13,063 38.3
Other.............................. 44,425 27,509 16,916 61.5
-------- -------- ------- ----
Total Resort Revenue............. $350,498 $292,127 $58,371 20.0%
======== ======== ======= ====
Total Skier Days................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP................................ $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
</TABLE>
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village
making it an attractive retail shopping destination, and the newly renovated
and expanded Golden Peak facility at the base of
30
<PAGE>
Vail Mountain. Two new rental operations were opened in Beaver Creek Village
and one new retail/rental operation was opened in a strategic location at the
base of Peak 8 in Breckenridge where the company formerly had no presence in
the retail/rental market. The Company's retail and rental business also
benefited from continuing improvements in inventory management and store
product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier days and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch, and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $238.9 million for
the twelve months ended July 31, 1998, compared to $200.5 million for the
twelve months ended July 31, 1997. As a percentage of Resort Revenue, Resort
Operating Expense was 68.2% and 68.6% for the twelve months ended July 31, 1998
and 1997, respectively. The overall increase in Resort Operating Expense is
attributable to increased variable expenses resulting from the increased level
of Resort Revenue derived from non-lift businesses such as dining,
retail/rental, hospitality and other operations.
Liquidity and Capital Resources
We have historically provided funds for operating expenditures, debt
service, capital expenditures and acquisitions through a combination of cash
flow from operations, short-term and long-term borrowings and sales of real
estate.
Our cash flows from investing activities have historically consisted of
payments for acquisitions, resort capital expenditures, and investments in real
estate.
During the ten months ended July 31, 1998, we acquired three hotel
properties: the Great Divide Lodge (f/k/a Breckenridge Hilton), The Lodge at
Vail, The Inn at Keystone and certain other assets, for an aggregate purchase
price of $54.3 million (net of cash acquired in the transactions). We have
since incurred approximately $7.3 million during the ten months ended July 31,
1998 to substantially complete a new wing of The Lodge at Vail. We sold a
penthouse condominium acquired as part of the acquisition in January 1999 for a
total purchase price of $3.3 million.
On August 1, 1998, we entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. We
contributed our retail and rental operations to the joint venture for a 51.9%
ownership interest in SSI Venture. Specialty Sports, Inc. contributed 30 stores
located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge to the
joint venture and holds a 48.1% share in SSI Venture.
Resort capital expenditures for the ten months ended July 31, 1998 were
$80.5 million, of which management estimates approximately $15 million
represented maintenance capital expenditures. Investments in real estate for
that period were $15.7 million, which included $3.1 million of mountain
improvements, including ski lifts and snowmaking equipment, which are related
to real estate development but which also benefit resort operations. The
primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements at Keystone Mountain, (ii) terrain and facilities
improvements at Breckenridge, (iii) expansion of the grooming fleet at Vail and
Beaver Creek Mountains, (iv) retail/rental and restaurant additions in Beaver
Creek Village, (v) new high-speed quad chairlifts at Breckenridge and Keystone,
(vi) upgrades to office and front-line information systems, and (vii) the
addition of a new wing at The Lodge at Vail. The primary projects included in
investments in real estate were (i) continuing infrastructure related to Beaver
Creek, Bachelor Gulch and Arrowhead Villages, (ii) golf course development, and
(iii) investments in developable land at strategic locations at all four
mountain resorts.
31
<PAGE>
During the six months ended January 31, 1999, we acquired one hotel
property, The Village at Breckenridge, and certain other related assets for a
total purchase price of $33.8 million. We simultaneously entered into a
contract to sell certain of the acquired assets for $10 million which closed in
April 1999.
Resort capital expenditures for the six months ended January 31, 1999
were $44.3 million, of which management estimates approximately $10.0 million
represents maintenance capital expenditures. Investments in real estate for
that period were $14.4 million. The primary projects included in resort capital
expenditures were (i) trail and infrastructure improvements and a new high-
speed quad chairlift at Keystone Mountain, (ii) upgrades to the snowmaking
system at Keystone, (iii) terrain and facilities improvements and a new on-
mountain restaurant at Breckenridge, (iv) expansion of the children's ski
school at Beaver Creek, (v) expansion of Adventure Ridge at Vail, (vi)
development of Adventure Point at Keystone, (vii) expansion of the grooming
fleet at all four resorts, (viii) upgrades to office and frontline information
systems, and (ix) significant renovations of the Great Divide Lodge as well as
minor renovations of our other hotels. The primary projects included in
investments in real estate were (i) continuing infrastructure related to Beaver
Creek, Bachelor Gulch and Arrowhead Villages, (ii) continuing construction of
the Arrowhead Alpine Club, (iii) development of the Red Sky Ranch residential
golf resort, and (iv) investments in developable land at all four mountain
resorts.
The seasonal nature of our construction activity results in the
concentration of capital expenditures in the May-December periods.
Consequently, we categorize capital expenditures on a calendar rather than
fiscal year basis. For calendar 1999, we anticipate spending between $45 and
$55 million for resort capital expenditures and between $30 and $40 million for
real estate capital expenditures. Management estimates that for calendar 1999,
approximately $15 million to $20 million of resort capital expenditures will be
categorized as resort maintenance capital expenditures for mountain, lodging,
dining and other operations including information systems, with the remainder
of resort capital expenditures being used to fund strategic projects such as
the Category III expansion on Vail Mountain, a new high-speed six-passenger
chairlift at Breckenridge, and trail, hospitality and infrastructure
improvements across all four resorts. Primary real estate projects for calendar
1999 include construction of condominiums at Arrowhead, the Arrowhead Alpine
Club and Bachelor Gulch Club and further development of the Red Sky Ranch
residential golf resort. We plan to fund resort and real estate capital
expenditures with cash flow from operations and borrowings under our revolving
credit facility.
During the ten months ended July 31, 1998, we generated $21.2 million in
cash flow from our financing activities consisting of net borrowings under our
revolving credit facility and other debt of $15.7 million, $8 million received
from the exercise of employee stock options and the refund of a bond reserve
fund of $3.3 million, less the payment of $5.7 million due under a rights
distribution to certain option holders. During the six months ended January 31,
1999, we generated $48.0 million in cash from our financing activities
consisting of net long-term debt borrowings of $47.5 million and $0.5 million
received from the exercise of employee stock options.
At January 31, 1998 we had $41.2 million of outstanding Industrial
Development Bonds issued by Eagle County, Colorado. Interest accrues at 6.95%
per annum and the principal amount matures on August 1, 2019. Interest is
payable semi-annually on February 1 and August 1. The bonds are secured by the
Vail and Beaver Creek Mountain United States Forest Service permits.
We currently have a $450.0 million revolving credit facility maturing on
December 19, 2002. At January 31, 1999, after giving effect to the offering and
the application of the net proceeds, we would have had $60.3 million
outstanding, $61.7 million of letters of credit issued thereunder and remaining
availability of $328.0 million, of which $220.0 million could have been
borrowed under the most restrictive of the financial covenants contained in the
credit facility. Upon the consummation of the offering of outstanding Notes on
May 11, 1999, borrowings under our credit facility bear interest annually at
our option at the rate of (i) LIBOR (the London interbank offered rate for a
given interest period) plus a margin (ranging from .75% to 2.25%) or (ii) the
Base Rate (defined as the higher of the Federal Funds Rate, as published by the
Federal Reserve Bank of New York, plus 0.5%, or the agent's prime lending rate)
plus a margin up to .75%. In addition, we must pay a
32
<PAGE>
fee on the face amount of each letter of credit outstanding at a rate ranging
from .75% to 2.25%. We will pay a quarterly unused commitment fee ranging from
0.20% to 0.50%. The interest margins and commitment fee fluctuate based upon
the ratio of Funded Debt to our Resort EBITDA (as defined in our credit
facility). See "Description of Certain Indebtedness--Revolving Credit
Facility."
At January 31, 1999, SSI Venture had $12.5 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries. See "Description of Certain Indebtedness--SSI Venture
Credit Facility."
During the ten months ended July 31, 1998, 1,043,271 employee stock
options were exercised at exercise prices ranging from $6.85 to $24.00.
Additionally, 8,260 shares were issued to management under the restricted stock
plan. During the six months ended January 31, 1999, 51,260 employee stock
options were exercised at exercise prices ranging from $10.00 to $10.75.
Additionally, 8,751 shares were issued to management under our restricted stock
plan during the six months ended January 31, 1999.
Based on current levels of operations and cash availability, management
believes we are in a position to satisfy our working capital, debt service and
capital expenditure requirements for at least the next twelve months.
Seasonality
The Company's ski and resort operations are extremely seasonal in nature.
In particular, revenues and profits are substantially lower, historically
resulting in losses, in the first and fourth quarters due to the closure of its
ski operations. Based on the Company's fiscal year ended July 31, 1998, 87% of
total resort revenues were earned during the second and third fiscal quarters.
Inflation
Although the Company cannot accurately determine the precise effect of
inflation on its operations, management does not believe inflation has had a
material effect on the results of operations in the last three fiscal years.
When the cost of operating resorts increases, the Company generally has been
able to pass the increase on to its customers. However, there can be no
assurance that increases in labor and other operating costs due to inflation
will not have an impact on the Company's future profitability.
33
<PAGE>
BUSINESS
General
Vail Resorts is one of the leading resort operators in North America.
Through our four premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our major resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail");
. Beaver Creek Resort--one of the world's premier family-oriented
mountain resorts ("Beaver Creek");
. Breckenridge Mountain--an attractive destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge"); and
. Keystone Resort--a year-round family vacation destination
("Keystone").
We are one of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and
guest services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate from which we derive significant strategic benefits and
cash flow. We expect to develop and expand our non-mountain operations in the
coming years.
Industry
There are approximately 800 ski areas in North America, which generated a
total of approximately 70 million skier days during the 1997-98 ski season.
There are approximately 521 ski areas in the U.S., which generated
approximately 54 million skier days during the 1997-98 ski season. These
resorts range from small ski resort operations, which cater primarily to day
skiers from nearby population centers, to larger resorts which, given the scope
of their operations and their accessibility, are able to attract both day
skiers and destination resort guests who are seeking a comprehensive vacation
experience. While the day skier tends to focus primarily on lift ticket price
and round-trip travel time, destination travelers tend to make their choices
based on the number of amenities and activities offered, as well as the
perceived overall quality of the vacation experience. As a result, destination
guests generate significantly higher Resort Revenue per skier day than day
skiers. We believe we are one of a relatively small number of ski areas in
North America able to attract both the day skier and the destination guest and
provide a comprehensive vacation experience.
Within the United States, regional distribution of skier days during the
1997-98 ski season is estimated to have been as follows: Northeast (12.7
million); Southeast (4.3 million); Midwest (6.7 million); Rocky Mountain (19.1
million); and Pacific West (11.2 million). The 27 ski areas located in Colorado
currently account for 22% of total skier days in the United States, up from
approximately 18% in 1985-86. While total skier days generated by all United
States resorts have increased by a total of 4% since the 1985-86 ski season,
skier days generated by Colorado ski areas have grown by approximately 31%
during the same period. During the same time period, skier days at our resorts
have increased by 39%. We believe that the primary reasons for
34
<PAGE>
Colorado's growth relative to the rest of the United States include the quality
of the ski areas located in the state, the accessibility of its resorts from
major transportation centers and the relatively favorable climate of the Rocky
Mountains.
We believe that we benefit from certain trends and developments which
favorably impact the North American ski industry, including (1) advances in ski
equipment technology ("fat" skis and specially shaped skis) which facilitate
learning and make the sport easier to enjoy, thereby increasing an individual's
days skied per year and overall years of skiing, (2) the rapid growth of
snowboarding, which is increasing youth participation in "on-snow" sports, (3)
a greater focus on leisure and fitness and (4) a growing interest among
affluent families in purchasing second homes in mountain resort communities.
There can be no assurance, however, that such trends and developments will have
a favorable impact on the ski industry.
Snowboarding has energized interest in "on-snow" sports, primarily among
males between the ages of 13 and 24. According to the National Sporting Goods
Association (the "NSGA"), the number of snowboarders in the U.S. has increased
from 1.46 million in 1990 to 2.52 million in 1997, an increase of 73%. U.S.
skier days attributable to snowboarders have increased an average of 21% per
year over the past four years and snowboarders are currently estimated to
represent 21% of all U.S. skier days. With international markets believed to be
experiencing similar growth rates, snowboarding is among the fastest growing
sports in the world. Snowboarding was inaugurated as the newest Olympic sport
at the 1998 Winter Olympic Games in Nagano, Japan. Management believes that the
growth in snowboarding has had a positive impact on the ski industry and will
continue to be an important source of our lift ticket, ski school, retail and
rental revenue growth. We believe that the growth in snowboarding among
children and teens, who influence family vacation decisions, allows us to
attract additional family-oriented destination guests. Consequently, we are an
industry leader in the creation of snowboard attractions, programs and events.
The mountain resort industry is in a period of consolidation as the cost
of the infrastructure required to maintain competitiveness has increased,
thereby enhancing the position of larger and better capitalized resort owners.
The number of U.S. ski resorts has declined from approximately 709 in 1986 to
521 in 1998 and, based on industry estimates, the number of mountain resorts is
expected to decline further, as the majority of mountain resorts lack the
infrastructure, capital and management capability to compete in this multi-
dimensional and service-intensive industry. At the same time, the high cost of
mountain resort development and environmental restrictions have prevented new
resorts from being created. Since Beaver Creek opened in 1980, only one other
major ski facility has opened in the United States. Despite this consolidation,
the ski industry remains highly fragmented and we expect that no one resort
operator will account for more than 10% of the United States' 54 million skier
days for the 1997-98 ski season. We believe that the consolidation trend in the
mountain resort industry will continue, and we intend to selectively pursue
acquisition opportunities which we believe will provide attractive investment
returns.
Resorts
Vail
Opened in 1962, Vail is the largest and most popular single ski mountain
complex in North America, offering over 4,600 acres of unique and varied ski
terrain, spanning approximately 20 square miles. Included in this complex is
the largest network of high speed lifts in the world, a top-rated ski school
and a wide variety of dining and retailing establishments. Vail is ideally
suited for all levels of skiers as it has a balanced distribution of beginner,
intermediate and advanced terrain. Perhaps no single physical attribute defines
Vail better than the Back Bowls. More than seven miles wide, the Back Bowls are
one of the most distinctive terrain features found at any ski mountain in North
America and offer some of the finest skiing in the world. Vail typically
receives "dry" snowfall due to its central Rocky Mountain location and, by the
end of this, our 36th season, we expect to have attracted approximately 1.33
million skier days. For the last ten years, Vail has been rated the number one
ski resort in the United States by the Mountain Sports and Living (f/k/a Snow
Country) magazine survey.
35
<PAGE>
While Vail provides the largest and most varied ski terrain of any North
American mountain resort, we have received approval (subject to a pending
appeal) from the Forest Service for infrastructure development of bowl skiing
terrain within its current permit area known as Category III. Category III will
add 850 acres of new trails to the Back Bowls, increasing the ski terrain in
the Back Bowls by over 30%. With between 40% and 50% of the guests at Vail
Mountain classified as intermediate skiers, Category III represents a
significant expansion in non-expert bowl skiing for these skiers. The terrain's
high, north facing location typically yields extremely reliable snow conditions
and should allow for earlier and later ski season operations than Vail's
existing Back Bowls which face south. Although we believe that the completion
of this terrain expansion will significantly increase the number of skier days
at Vail, particularly in the early and late season non-peak periods, there can
be no assurance that such an increase will be achieved. See "Risk Factors--We
rely on government permits."
We have also consistently improved and expanded guest amenities at Vail
to increase Resort Revenue and Resort EBITDA. We currently own and operate 26
dining venues on the mountain and in the base villages and over 55,000 square
feet of retail, restaurant and commercial space located throughout the mountain
and at the three primary access points--Golden Peak, Vail Village and
Lionshead. Significant projects already completed include:
. The Golden Peak redevelopment, which replaced the entire base
facility at one of Vail Mountain's primary access points with a new
83,000 square foot facility. Included in the new base lodge are three
dining venues, a retail and rental outlet and skier services
facilities.
. A new high-speed quad chairlift at the Golden Peak base area and a
new 12 passenger gondola at the Lionshead base area, which improved
access to the mountain.
. Adventure Ridge, a non-ski activity center on the top of Vail
Mountain, which offers sledding and tubing, ice skating, snowmobile
tours, snow-biking, laser tag and a snowboard park in addition to
substantial day and evening retail and dining operations.
We are currently planning several additional resort attractions,
including:
. The Category III expansion which, subject to final government
approval, will increase the number of ski trails on Vail's renowned
Back Bowls by 850 acres. See "Risk Factors--We rely on government
permits."
. The redevelopment of our owned property in Lionshead, which will
create significant additional resort lodging and retail and
restaurant space. See "--Real Estate."
Beaver Creek
Beaver Creek, located ten miles west of Vail, consists of the Beaver
Creek, Arrowhead and Bachelor Gulch ski areas, and includes over 1,600 acres of
ski terrain. We acquired Beaver Creek in 1972 and opened the ski facilities
during the 1980-81 ski season. In 1993, we expanded Beaver Creek by acquiring
significant privately owned ski terrain and development property at Arrowhead
and Bachelor Gulch. This purchase allowed us to (1) develop a European style
village-to-village ski experience which interconnects, through ski lifts and
ski trails, the three distinct ski areas, (2) add significant intermediate
terrain, (3) improve skier distribution patterns across Beaver Creek and (4)
add mountain infrastructure capable of supporting anticipated skier growth.
Like Vail, Beaver Creek benefits from "dry" dependable snowfall in addition to
excellent snowmaking capabilities. Since its opening, Beaver Creek has
increased its skier days from 111,746 in 1980-81 to approximately 610,000 in
the 1998-99 ski season, making it one of the fastest growing mountain resorts
in North America. Management believes that the success of Beaver Creek has
resulted from its unique combination of ambiance, architecture and a variety of
groomed and natural terrain providing world-class skiing which appeals to
Beaver Creek's family-oriented destination guests. Beaver Creek operates 14
lifts, including six high speed quads. We also own and operate 19 restaurants
on-mountain and in the base areas, as
36
<PAGE>
well as over 130,000 square feet of retail, restaurant and commercial space
strategically located on and at the base of Beaver Creek. See "--Resort
Operations--Dining."
We have implemented a number of capital improvements at Beaver Creek,
including the build-out of the Beaver Creek Village core with a final series of
additions to fully integrate Beaver Creek Mountain with the European-style
village at its base. These additions included two residential and retail multi-
use complexes, a series of outdoor escalators to move guests through the
village to the mountain, the 527-seat Vilar Center for the Arts at Beaver Creek
as well as a year-round, outdoor ice-skating area.
One of the primary factors in the growth of Beaver Creek has been an
increase in resort lodging. In addition to the significant growth taking place
at Beaver Creek, there has been substantial development in the surrounding
communities of Avon, Edwards, Eagle and Gypsum, providing additional,
moderately-priced, resort lodging. We anticipate the substantial resort lodging
growth to continue from the buildout of the Bachelor Gulch Village and
Arrowhead Village resort communities, both of which offer unique slopeside
development opportunities due to our fee simple ownership of the mountain land,
and from the significant development taking place in the surrounding
communities. See "--Real Estate."
Breckenridge
Breckenridge is located approximately 85 miles west of Denver and 40
miles east of Vail. We estimate that Breckenridge's skier days will approximate
1.37 million for the 1998-99 season. Breckenridge offers over 2,000 acres of
skiing on four different mountain peaks, including open bowl skiing and
excellent beginner and intermediate ski terrain. Breckenridge's mountains are
interconnected by a network of 23 lifts, including six high-speed quad
chairlifts. Breckenridge currently operates 15 dining venues, both on- and off-
mountain, and over 17,000 square feet of on-mountain retail, restaurant and
commercial space.
Breckenridge benefits significantly from its location adjacent to the
Town of Breckenridge, a restored 140 year old Victorian mining town which has
over 20,000 beds, over 70 restaurants and bars and over 130 shops. Significant
apres ski activities and extensive bed base have made Breckenridge an
attractive destination to national and international destination guests. We
anticipate significant additional resort lodging growth will be fueled by third
party developers as well as by the development of our owned properties. See "--
Real Estate."
Since our acquisition of Breckenridge in January 1997, we have made
substantial capital improvements to the resort which we believe have enhanced
all aspects of the overall guest experience. We added two new high-speed quad
chairlifts, increased snowmaking capacity by 50% and opened the first new on-
mountain restaurant at Breckenridge in over 10 years. We also acquired and
completely renovated the Great Divide Lodge and upgraded the Bergenhof Lodge
and Vista Haus restaurant.
Future plans at Breckenridge include substantial upgrades to the newly-
acquired Village at Breckenridge, a primary port of entry to the mountain,
skiing terrain expansion on Peak 7, and residential and commercial development
of the Company's land at the Peak 8 base area and in the Town of Breckenridge.
Keystone
Keystone is located approximately 70 miles west of Denver and 15 miles
from Breckenridge. We estimate that Keystone's skier days will approximate 1.24
million for the 1998-99 ski season. Comprised of three mountains and
interconnected by a network of 20 lifts, including two high speed gondolas and
five high-speed quad chairlifts, Keystone provides over 1,800 skiable acres
suited to a wide variety of skier ability levels. Keystone has the largest and
most advanced snowmaking capability of any Colorado mountain resort with
snowmaking coverage extending over nearly 50% of Keystone's skiable acreage. As
a result, Keystone is typically among the first mountain resorts in the nation
to open each season and is one of the last to close.
37
<PAGE>
Keystone also provides the largest single-mountain night skiing experience in
North America. With 17 lighted trails covering 2,340 vertical feet from the
summit to the base, Keystone offers a 12 1/2 hour ski day which allows day
guests to customize their ski day and destination guests the opportunity to ski
on arrival days. Keystone is a planned family-oriented community which offers a
variety of year round activities, the majority of which we operate, including
24 on-mountain and in-valley restaurants and over 94,000 square feet of on-
mountain and in-valley retail, restaurant and commercial space.
In addition, the Keystone JV is developing a significant portion of the
Keystone resort and has master plan approvals to add up to 3,400 residential
and lodging units and up to 318,000 square feet of retail and restaurant space
over the next 20 years. We believe that the build-out of this real estate will
result in increased skier days and Resort Revenue per skier day and will
significantly increase the number of higher revenue destination guests at
Keystone. See "--Real Estate."
Since our purchase of Keystone in January 1997, we have added two new
high-speed quad chairlifts, created Area 51, Colorado's newest snowboard park,
and opened Adventure Point, an on-mountain day and night recreation area. In
addition, a new restaurant was added at the North Peak base area. The Keystone
Lodge, which already carries the AAA Four Diamond rating, has also undergone an
extensive two-phase renovation.
Our continuing plans for Keystone include the installation of Keystone's
sixth high-speed quad chairlift, on-going expansion of Adventure Point,
increased ski terrain and an expansion of the Keystone Conference Center.
Accessibility
Given their close proximity to Vail/Eagle County Airport ("Vail/Eagle
Airport") and the recently-completed Denver International Airport ("DIA"), all
of our ski resorts are easily accessible to national and international
destination resort guests, as well as to day travelers from the Denver
metropolitan area. The Vail/Eagle Airport is located within 25 miles of Beaver
Creek and can accommodate large jet aircraft from major metropolitan areas.
Nearly 45% of the destination guests who traveled by air to ski at Vail and
Beaver Creek during the 1997-98 ski season arrived through Vail/Eagle Airport,
up from only 9% in 1990. We estimate that approximately 55% of the destination
guests flying to Vail and Beaver Creek and a similar percentage of the
destination guests traveling to Breckenridge and Keystone arrive through DIA.
Over the last seven years, we have worked closely with the nation's major
airlines to significantly improve accessibility to our resorts through
Vail/Eagle Airport. As a result of these efforts, the number of daily non-stop
flights, total seats, major airlines and cities served by Vail/Eagle Airport
have increased significantly. Vail/Eagle Airport currently provides direct
flight access from 13 major cities and we expect that Vail/Eagle Airport will
continue to expand its operations and offer more direct flights from more North
American cities. Furthermore, we continue to work with the major airlines to
increase both direct and connecting international flights into Vail/Eagle
Airport. Presently, guests from major cities located in Europe, South America,
Mexico, New Zealand, Australia and the Pacific Rim can conveniently fly to the
Vail Valley with only a single stopover or connection through a major U.S.
city. We believe that the proximity of our ski resorts to Vail/Eagle Airport
provides us with a significant competitive advantage relative to other North
American destination ski resorts. In order to induce major air carriers to
offer flights from selected new cities to the Vail/Eagle Airport, we have
entered into agreements guaranteeing the carriers minimum seasonal revenue
associated with such flights. Payments to date under these agreements have not
been material.
Weather, Snowmaking and Grooming
Given their location in the Colorado Rocky Mountains, our ski resorts
receive some of the most reliable snowfall experienced anywhere in the world,
averaging between 20 and 30 feet of annual snowfall over the last 20 years,
which is significantly in excess of the average for all ski resorts in the
Rocky Mountains for such period.
38
<PAGE>
Despite the natural snowfall typically received by our mountain resorts,
we continue to invest in the latest technology in snowmaking systems and
actively acquire additional water rights to allow for future snowmaking
expansion. Additionally, we have invested significantly in the most extensive
fleet of snowgrooming equipment in the world. The use of our snowmaking systems
in the early-season and snowgrooming equipment throughout the season, help us
to provide top-to-bottom skiing at all of our mountain resorts in both early-
and late-season, as well as during periods of lower than average snowfall.
For the current 1998-1999 ski season, however, we experienced highly
aberrant weather conditions, which negatively impacted our financial
performance. See "Offering Memorandum Summary--Recent Results." Snowfall
through New Year's Day was the second lowest in forty years at Vail Mountain.
This resulted in only 38% of our total skiable terrain across our four resorts
being open to our guests on Christmas Day. These weather conditions continued
throughout the winter as snowfall in February and March was the third lowest
and temperatures in March were the second warmest since Vail opened.
Resort Operations
We derive Resort Revenue from a wide variety of sources, including lift
ticket sales, dining, ski school, equipment rental, retail stores, travel
reservation services, lodging, property, club and conference management, real
estate brokerage, licensing and sponsorship activities, recreational activities
(including golf and tennis facilities) and property, club and conference
management. Our ability to appeal to a broad spectrum of guests and offer a
wide selection of activities and services has enabled us to generate Resort
Revenue per skier day that is among the highest in the industry.
Lift Ticket Revenue. Lift ticket revenue represents our single largest
revenue source. Our favorable demographics and world-class resort facilities
have enabled us to achieve premium ticket pricing. The lead ticket price, which
for the 1998-99 ski season was $61 a day for Vail and Beaver Creek Mountains
and $52 a day for Breckenridge and Keystone, is among the highest in the
industry. To maximize skier volume during non-peak periods and attract certain
segments of the market, we also offer a wide variety of incentive ticket
programs, including season passes, student rates, group discounts and senior
discounts. We engage in yield management analysis to maximize our effective
ticket price (defined as total lift ticket revenue divided by total skier
days). During the 1997-98 ski season, we introduced interchangeable lift
tickets which were valid across all four of our resorts and Arapahoe Basin ski
area. This allowed guests to ski and snowboard at any of our resorts with one
lift ticket. We also introduced Peaks at Vail Resorts, a loyalty program
similar to an airline frequent flier program. The program rewards guests who
frequent the resorts with a system of points that can be accumulated and
redeemed for rewards during subsequent visits.
Dining. Dining is a key component in providing a satisfying guest
experience and has been an important source of revenue growth. We believe that
by owning and operating both on-mountain and base area restaurants, we can
better ensure the quality of products and services offered to our guests, as
well as capture a greater percentage of the guest's vacation expenditures. Our
strategies with respect to our dining operations include (1) focusing growth in
venues which allow for dining throughout the day and throughout the year,
including breakfast, lunch, apres ski, dinner, evening entertainment, group
functions and summer/non-ski season operations, (2) creating unique themed
environments to maximize guest enjoyment and revenue opportunities, (3) further
expanding on-mountain seating, (4) offering affordable family lunchtime and
evening dining and entertainment and (5) continuing affiliations with
institutions such as Johnson and Wales University, one of the largest culinary
and restaurant management schools in the world. The large number of dining
facilities we operate allow us to improve margins through large quantity
purchasing agreements and sponsorship relationships.
Our existing restaurant operations offer a wide variety of cuisine and
range from top-rated, full service sit-down restaurants to trailside express
food outlets. We operate 26 on-mountain and base restaurants in Vail, 19
restaurants in Beaver Creek, 15 restaurants in Breckenridge and 24 restaurants
in Keystone.
39
<PAGE>
On October 19, 1998, fires on Vail mountain destroyed certain of our
facilities including the ski patrol headquarters, a day skier shelter, the Two
Elk Lodge restaurant and the chairlift drive housing for the High Noon Life
(Chair #5). The fires have been determined to have been deliberately set and
are under investigation by federal, state and local law enforcement officials.
All of the facilities damaged are fully covered by our property insurance
policy. The incident is also covered under our business interruption insurance
policy. Although we are unable to estimate the total amount which will be
recovered through insurance proceeds, we do not believe the incident will have
a material impact on our ongoing financial results.
Hospitality. Our hospitality operations are designed to offer guests a
full complement of quality resort services and provide additional sources of
revenue and profitability. These operations include reservations, tour and
travel operations and hotel, property, club and conference center management.
We operate a consolidated central reservation center servicing our guests
in (1) Vail, Beaver Creek and the surrounding communities, (2) Keystone and (3)
Greater Summit County including Breckenridge and the communities surrounding
both Breckenridge and Keystone. The central reservation center is capable of
booking and selling airline and ground transportation, lodging, lift tickets,
ski school and most other activities at our resorts, earning commissions on
each third party sale. The center historically has handled over 150,000 calls
per year for Vail, Beaver Creek and the surrounding communities, over 300,000
calls per year for Keystone and approximately 60,000 calls per year for Greater
Summit County.
We have significantly improved our central reservation operations by (1)
creating preferred relationships with major travel companies, (2) increasing
purchases of bulk air and large blocks of room nights, (3) capitalizing on the
growth of our customer database, (4) expanding the variety of activities and
services offered and (5) improving cross-selling of our activities and
services, particularly prior to the guest's arrival at the resort.
We have also entered into preferred relationships with travel agent
consortiums representing approximately 9,000 North American travel agents.
These travel agents have agreed to emphasize our resorts as resorts of choice
to their clientele and in return receive certain commission overrides.
We believe there are significant advantages to continuing to grow and
increase the scope of our hotel and property management operations. Our hotel
and property management operations enable us to (1) leverage and enhance our
central reservations operations (2) ensure quality of the guest experience, (3)
offer full service vacation packages to our guests, affording us a competitive
advantage and (4) leverage the existing property management operation for
increased financial performance.
With the recent acquisitions of the Lodge at Vail, the Great Divide
Lodge, the Inn at Keystone and the Village at Breckenridge, we have taken the
first steps toward applying our hotel and property management strategy, already
in place at Keystone and Beaver Creek, to Vail and Breckenridge. We intend to
continue to expand our property management operations in Vail, Breckenridge and
Beaver Creek by securing new management contracts or through acquisitions.
Additionally, in Keystone, the Company expects to secure contracts on
additional condominiums and homes developed by the Keystone JV and third party
developers. See "--Real Estate."
Including the recent acquisitions mentioned above we currently own seven
hotels totaling approximately 730 rooms and suites, manage an additional hotel
with 42 rooms and suites and manage approximately 1,800 condominium units
across all four of our resorts.
Additionally, we own and operate the Keystone Conference Center, which is
the largest convention center in the Colorado Rocky Mountains. With meeting
facilities totaling 32,500 square feet and capable of accommodating groups of
up to 1,800, the Keystone Conference Center draws groups throughout the year
and is typically sold-out during the non-ski season.
40
<PAGE>
Ski and Snowboard School. We operate the world's largest ski and
snowboard school operation with over 2,000 instructors across the four ski
resorts. We estimate that it has one of the highest guest participation rates
in the industry. The success of the ski and snowboard school comes from:
. personalizing and enhancing the guest vacation experience,
. creating new teaching and learning systems (many of which we have
historically developed and sold to the Professional Ski Instructors
of America),
. introducing innovative teaching methods for children, including
separate children's centers, mountain-wide attractions and
educational programs like SKE-cology, themed entertainment and
teaching systems geared toward specific age groups, and
. continually creating new techniques to react to technological
advances in ski and snowboard equipment.
In addition, we have adopted a pay incentive program to reward
instructors based on guest satisfaction and repeat clientele. Future growth in
ski school revenue is expected to stem from significant growth in the sport of
snowboarding, for which we have qualified instructors, as well as teaching
opportunities resulting from the technological advances continuously taking
place in alpine skiing equipment.
Retail/Rental Operations. Prior to entering into the SSI Venture joint
venture, our retail division owned and operated all on-mountain locations and
selected base area locations. We operated approximately 40 retail and rental
outlets across our four resorts for the 1997-98 ski season. The on-mountain
retail locations offer ski accessories (i.e., hats, gloves, sunglasses,
goggles, handwarmers) and selected logo merchandise, all in locations which are
conveniently located for skiers. Off-mountain, we operated both ski and
snowboard equipment rental and full service retail locations. Among other
merchandise, our retail operations typically feature resort-related logo
merchandise and products of our sponsors. Our rental operations offer a wide
variety of ski and snowboard equipment for daily and weekly use.
On August 1, 1998, we entered into the SSI Venture joint venture with one
of the largest retailers of ski- and golf-related sporting goods in Colorado.
We contributed 36 of our 40 retail and rental locations in Vail, Breckenridge,
Keystone and Beaver Creek in exchange for a 51.9% interest in SSI Venture. Our
joint venture partners, Specialty Sports, Inc., contributed an additional 30
stores located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge. SSI
Venture currently owns and operates approximately 70 retail and rental
locations across Colorado. The owners and operators of Specialty Sports, Inc.,
the Gart family, have been operating in the sporting goods industry in Colorado
since 1929. Vail Resorts participates in the strategic and financial management
of the joint venture. We feel the new joint venture will greatly enhance our
guests' experience through increased focus on quality guest service and retail
product selection.
Other Resort Operations
Adventure Ridge(TM) and Adventure Point(TM). Vail completed the first
ever mountaintop activities center, known as Adventure Ridge(TM), during the
1996-97 season. Adventure Ridge(TM) offers terrain parks and half-pipes for
skiers and snowboarders, as well as activities for non-skiers such as an ice-
skating rink, tubing runs, snow-biking, snowmobile tours, and four dining
operations. Consistent with our strategy to expand our offering of on-mountain
activities, and given the success of Adventure Ridge(TM) at Vail, we are
developing Adventure Point(TM) at Keystone, which currently features a tubing
hill and a variety of children's attractions. These non-traditional attractions
play a large role in the expansion of activities for our guests and create a
competitive advantage for our resorts.
Commercial Leasing Operations. We own significant base area restaurant,
retail and other commercial space. The strategy of our leasing operation is to
secure the commercial locations adjacent to our resorts for retail, restaurant
and entertainment venues and then to carefully select the appropriate tenant
mix for these locations to provide a high quality and diverse selection of
retailers and restauranteurs. Our total leasable commercial space is currently
over 240,000 square feet. For the 1998-99 ski season, approximately 30% of our
41
<PAGE>
commercial space will be used for retail space, 38% for restaurant operations,
and the remaining 32% will be leased for office space and other uses.
Licensing and Sponsorship. An important part of our business strategy is
to leverage our brand name by entering into sponsorship relationships and
strategic alliances with world-class business partners, building our logo and
licensing business and gaining national and international exposure by hosting
special events. Our leading industry position, coupled with the demographics of
our customer base makes us an attractive partner. Our sponsors include America
West, American Airlines, Atlas Snowshoes, Avis Rent-A-Car, Bailey's Irish
Cream, Bolle America, Chevrolet, Coca-Cola, Coors Brewing Company, Compaq
Computers, Continental Airlines, Delta Air Lines, Evian, FILA, Hertz, Kendall-
Jackson, MCI WorldCom, Microsoft, Northwest Airlines, Pepsi-Cola, Sprint
Communications, TAG Heuer, THOR.LO, United Airlines and Yahoo!. Examples of the
types of relationships we have with our partners include Chevy Trucks, which
provides us with mountain vehicles and national marketing exposure, and Pepsi-
Cola, which, among other things, provides substantial marketing benefits. Our
sponsorship arrangements typically have three to five year terms and provide
benefits in the form of cash payments, expense reductions, capital improvements
and/or marketing exposure. We have licensed the use of our trademarks to over
one hundred companies for a variety of products such as apparel and sunglasses.
While terms of each license agreement vary, such agreements generally are for a
two year term and provide for the payment by the licensee of quarterly royalty
payments ranging from 6% to 8% of the gross wholesale price of the licensed
goods.
Private Membership Clubs. We are also active in the creation and
management of private membership clubs, which allows us to provide high-end
services and amenities to our upper-income guests, as well as evening dining
options and other services and activities to our overall guest population. Our
current clubs include (1) the Beaver Creek Club, which offers members luncheon
privileges at Beano's Cabin (which is open to the general public for dinner)
and certain golf, tennis and skiing amenities, (2) Game Creek Club, which
offers members luncheon privileges and is open to the general public for dinner
and (3) the Passport Clubhouse at Golden Peak, which provides members with a
reserved parking space, concierge services, a private dining facility and
locker and club facilities at the base of Vail Mountain. In addition,
construction is currently underway on the Arrowhead Alpine Club and the
Bachelor Gulch Club. We have pre-sold a significant number of memberships for
both of these clubs.
Promotions and Special Events. Our four resorts are frequently the sites
of special events and promotions. In addition to hosting annual World Cup
alpine skiing and World Cup mountain biking events, Vail Mountain and Beaver
Creek Mountain hosted the 1997 World Cup Skiing Finals and the 1999 World
Alpine Ski Championships. Vail previously hosted the World Championships in
1989 and is the first North American host site to have been selected by the
World Cup governing body twice. These events give us significant international
exposure. Television viewership for the 1999 World Alpine Ski Championships was
estimated to have been in excess of 500 million viewers worldwide.
Brokerage. Our real estate brokerage operations are conducted through a
joint venture in which we have a 50% interest. The joint venture was created in
June 1994 to facilitate the merger of our brokerage operations, Vail Associates
Real Estate, Inc., with the brokerage operations of Slifer, Smith & Frampton,
which combined the two largest brokerage operations in the Vail Valley. The
joint venture has a large share of both first-time developer sales and resales
throughout the Vail Valley, creating both a significant source of profitability
and a valuable source of information in planning and marketing our real estate
projects. In addition to profit distributions from the joint venture, we will
directly receive certain override payments on all brokerage revenue from sales
of our own property. Brokerage activities at Keystone are conducted by the
Keystone JV.
Other Revenue Sources. In addition to the revenue sources listed above,
we provide security and other village services to the Beaver Creek, Bachelor
Gulch and Arrowhead Villages. We also derive revenue during the non-ski season
by offering guests a variety of activities and services, including (1) golf and
tennis, (2) gondola and chair-lift rides for mountain-biking and sight-seeing,
(3) on-mountain and base area bike
42
<PAGE>
rentals, (4) on-mountain lunch operations, (5) wedding and group functions at
mountain and village restaurants, (6) white water rafting and (7) horseback
riding.
Marketing and Sales
The primary objectives of our marketing efforts include (1) building
demand during both peak and non-peak periods, (2) increasing overall sales
through targeted promotional programs in national and international markets,
and (3) continuing to increase the recognition and goodwill associated with the
Company's brand names and trademarks.
Our primary marketing method is direct print media advertising in ski
industry publications such as SKI and Mountain Sports and Living (f/k/a Snow
Country) and lifestyle publications such as Conde Nast Traveler and Bon
Appetit, whose readership reflects the demographic profile of our clientele.
Additionally we market directly to many of our guests through our website which
provides information regarding our guest services and amenities, live video of
on-mountain conditions and comprehensive on-line reservation capability. Our
website receives over 2 million visits annually. (Nothing contained on the
website shall be deemed to be incorporated herein.)
We are also very active in a number of promotional programs such as
discount programs offered through local retailers designed to attract day
skiers from local population centers, and loyalty programs which allow guests
to build points for lift ticket usage and participation in other related
activities, throughout each of our four ski resorts. In an effort to target
destination guests, a newspaper and radio advertising campaign is used in
markets which have direct air service to the Vail/Eagle Airport.
In addition to advertisements directed at the vacation guest, an
important part of our marketing activities also focus on attracting ski groups,
corporate meetings and convention business.
Real Estate
We benefit from our extensive holdings of real property at our resorts
throughout Summit and Eagle Counties and from the activities of VRDC, a wholly
owned subsidiary. VRDC manages our real estate operations, including the
planning, oversight, marketing, infrastructure improvement and development of
Vail Resorts' real property holdings. In addition to the substantial cash flow
generated from real estate sales, these development activities benefit the
Company's resort operations through (1) the creation of additional resort
lodging which is available to our guests, (2) the ability to control the
architectural theming of our resorts, (3) the creation of unique facilities and
venues (primarily restaurant and retail operations) which provide us with the
opportunity to create new sources of recurring revenue and (4) the expansion of
our property management and brokerage operations, which are the preferred
providers of these services for all developments on our land.
In order to facilitate the development and sale of our real estate
holdings, VRDC also invests in mountain improvements, such as ski lifts,
snowmaking equipment and trail construction. While these mountain improvements
enhance the value of the real estate held for sale (for example, by providing
ski-in/ski-out accessibility), they also benefit resort operations. In most
cases, VRDC seeks to minimize our exposure to development risks and maximize
the long-term value of our real property holdings by selling land to third
party developers for cash payments prior to the commencement of construction,
while retaining approval of the development plans as well as an interest in the
developer's profit. We also typically retain the option to purchase, any
retail/commercial space created in a development. We are able to secure these
benefits from third-party developers because of the high property values and
strong demand associated with property in close proximity to our mountain
resort facilities.
VRDC's principal activities include (1) the sale of single family
homesites to individual purchasers, (2) the sale of certain land parcels to
third-party developers for condominium, townhome, cluster home, lodge and mixed
use developments, (3) the zoning, planning and marketing of new resort
communities (such as
43
<PAGE>
Beaver Creek, Bachelor Gulch Village and Arrowhead), (4) arranging for the
construction of the necessary roads, utilities and mountain infrastructure for
new resort communities, (5) the development of certain mixed-use condominium
projects which are integral to resort operations (such as properties located at
a main base facility) and (6) the purchase of selected strategic land parcels,
which we believe can augment our existing land holdings or resort operations.
Our current development activities are focused on (1) the completion of
three of our resort communities, Beaver Creek, Bachelor Gulch Village and
Arrowhead, (2) preparing for the redevelopment of the Lionshead base area and
adjacent land holdings located within the town of Vail, (3) preparing for the
development of our real estate holdings in the Town of Breckenridge, (4)
participation with our joint venture partner in the development of our base
area land holdings at Keystone, and (5) the planning of our significant real
estate holdings in and around Avon and at the entrance to Beaver Creek.
Beaver Creek
Beaver Creek, which opened in 1980, has emerged as one of the world's
preeminent resort communities. Beaver Creek Village offers a wide array of
shopping, dining, lodging and entertainment options in addition to being the
primary skiing access point to Beaver Creek Mountain.
The Beaver Creek Village core is substantially complete, and our
remaining land holdings in Beaver Creek Resort consist of zoned multi-family
sites (requiring limited additional infrastructure expenditures) expected to
contain approximately 200 multi-family residences located at the entrances to
Beaver Creek Resort and 30 townhome units at the base of Beaver Creek Mountain.
We expect to sell these remaining land holdings over the next five years.
Bachelor Gulch Village
The Bachelor Gulch Village development, which will be the newest village
on Beaver Creek Mountain, is comprised of 1,410 acres of company-owned land
located in a valley between Arrowhead and Beaver Creek. A private residential
resort community zoned for 672 residential units, Bachelor Gulch Village is an
intimate mountain village architecturally modeled after the grand lodges of the
U.S. National Parks. It consists of private, upscale real estate enclaves, and
most of the homesites have ski-in/ski-out access. The village is a skiing
gateway to Beaver Creek Mountain, and plans incorporate approximately 68,000
square feet of retail, restaurant and commercial space.
Infrastructure development at Bachelor Gulch Village commenced in 1994
and was substantially completed in 1998. Through January 31, 1999, we have sold
103 single-family and 51 multi-family homesites, respectively. Our current
unsold inventory in Bachelor Gulch Village consists of one single-family
homesite, 12 cluster homesites, and development parcels zoned for 474
condominium, timeshare and lodge units. We expect to complete the sale of
substantially all of these parcels over the next five years.
Arrowhead
Arrowhead, known as "Vail's Private Address," is comprised of over 1,500
acres of company-owned land and is recognized for its country club approach to
residential and resort amenities. Home of the Country Club of the Rockies, a
private golf club designed by Jack Nicklaus, Arrowhead is already a well-
established private resort consisting of 500 residential units and features
amenities such as swimming, clay tennis courts, hiking, mountain biking and
private fly-fishing on the Eagle River, and privacy gates that assure
controlled access 24 hours a day. Arrowhead contains the westernmost skiing
access point to Beaver Creek Mountain.
Through January 31, 1999, we have sold 26 single-family lots and 188
multi-family units. Our current development activities are focused on the
development of Arrowhead Village, consisting of a 207 unit staged development
centered around a private alpine club. The current unsold inventory in
Arrowhead Village includes land zoned for 26 single-family homesites, 25
cluster homesites, four duplex homesites and 50 multi-family units.
44
<PAGE>
Lionshead
We are currently planning the redevelopment of our owned property in
Lionshead, together with related properties owned by third parties. Current
plans contemplate luxury hotel rooms, a significant number of condominiums and
timeshare units, significant additions to restaurant and retail space, an
employee housing complex and an office facility (intended to be used for Vail
Mountain's administrative and operations functions). The redevelopment of
Lionshead will require certain approvals from, and a cooperative partnership
with, the Town of Vail. There can be no assurance that we will receive such
approvals or cooperation, although we have recently received approval from the
Town of Vail on zoning entitlements.
Keystone
In 1994, over 500 acres of developable land at Keystone was contributed
to the Keystone JV. A master development plan has been approved which
contemplates continued development over the next 20 years. The plan calls for
the creation of six separate neighborhoods, each featuring distinctive
amenities and architecture based on the area's mining, ranching and railroad
history. At full buildout, there will be an estimated 4,600 residential homes
and lodging units and 382,000 square feet of commercial space as well as more
than 300 acres of open space at Keystone. A network of pedestrian trails and a
shuttle bus system are planned to link the neighborhoods and amenities.
As residential and commercial projects are completed, we have a priority
right to receive payments of up to $22.6 million for land contributed to the
Keystone JV, of which we have received payments of $2.0 million. An additional
$7.5 million is currently due. We also receive approximately 40% to 50% of the
profits generated by the Keystone JV and will have the opportunity to lease
commercial space created by the Keystone JV. The Keystone JV is involved in a
wide range of real estate development activities, including the planning,
infrastructure improvement, construction and marketing of all real property
improvements on its land. The Keystone JV seeks to minimize its exposure to
development and construction risks by pre-selling a significant portion of the
residential and lodging units prior to the commencement of construction of a
project and by individually financing each project through a secured
construction loan and equity investment.
As of January 31, 1999, the Keystone JV had constructed and sold 444
condominium and townhome units and 55 single-family homesites. Additionally,
there are 92 condominium and townhome units currently under construction and
scheduled for completion in 1999 of which 60 units have already been sold.
Commercial space developed through January 1999 includes 84,000 square feet
completed and an additional 32,000 square feet scheduled for completion in
1999. During the next five years, the Keystone JV expects to develop more than
700 new residential and lodging units and 124,000 square feet of commercial
space. In addition, Keystone's second championship golf course is currently
under construction with an opening planned for Summer 2000.
Breckenridge
We own approximately 270 acres of development land at one of the primary
base portals to Breckenridge plus 30 acres of development land near the center
of the Town of Breckenridge. VRDC is engaged in development planning for a new
base village, which is currently envisioned to include approximately 850
residential units, restaurant and retail space, a conference facility, and
other recreational amenities. Residential offerings will include ski-in/ski-out
single family homesites, multi-family condominium units, and townhouse units.
Avon
We own and are currently formulating plans for the development of two key
commercial sites in the Town of Avon. Avon is located at the entrance to Beaver
Creek Mountain and serves as a lodging base for resort guests. Our plans
currently include the construction of two mixed-use complexes which incorporate
lodging, dining, commercial space and a parking facility. The Town of Avon runs
a free shuttle bus service that
45
<PAGE>
transports guests throughout the town and up to Beaver Creek Village, thus
making the town an attractive and convenient source for lodging and dining
options. We expect to complete development of these sites over the next five
years.
Red Sky Ranch
We are in the planning stages for the Red Sky Ranch residential golf
resort development on a 700-acre parcel of land we own located approximately 10
miles west of Beaver Creek. Although this land is proximate to our Vail and
Beaver Creek resorts, it sits at a substantially lower elevation and has a
relatively moderate year-round climate, allowing for a longer golf season. We
anticipate the opening of this resort development in Summer 2003.
Employees
We currently employ approximately 6,200 year-round and 6,000 seasonal
employees. Approximately 90 of the seasonal employees are unionized. We
consider our employee relations to be good.
Regulation and Legislation
We have been granted the right to use federal land as the site for ski
lifts and trails and related activities, under the terms of the permits with
the Forest Service. The Forest Service has the right to review and approve the
location, design and construction of improvements in the permit area and many
operational matters. While virtually all of the skiable terrain on Vail
Mountain, Breckenridge, and Keystone is located on Forest Service land, a
significant portion of the skiable terrain on Beaver Creek Mountain, primarily
in the Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned
land. We have received approval from the Forest Service for infrastructure
development of bowl skiing terrain in Category III which is located within the
current Vail Mountain permit area. Certain opponents of the Category III
expansion filed a lawsuit against the Forest Service seeking to overturn this
approval and enjoin the project, and we intervened as an additional defendant
in the lawsuit. The federal district court denied the opponents' request for an
injunction, entered judgment for defendants, and dismissed the case. The
opponents' subsequent request for an injunction pending appeal was denied
without prejudice to the ultimate determination of their appeal. Their appeal
was briefed and argued on an expedited basis and is currently awaiting a
decision by the court.
We also received the approval of the Forest Service to develop a
chairlift, other skier facilities and associated skiing terrain on Peak 7 and a
teaching chairlift, two new ski trails and additional snowmaking on Peak 9, all
located at the Breckenridge. As part of that process, certain federal agencies
expressed concern about the analysis of potential future development on private
land that the Company owns below Peak 7. In response to an administrative
appeal of the Forest Service approval decision by certain individuals and
groups, the Regional Forester upheld the approval of these projects in November
1998. We have subsequently advised the Forest Service that we will postpone the
Peak 7 improvements, which will allow the Town of Breckenridge time to review a
development plan for the private land in question. Based upon the Town's
actions, the Forest Service will consider whether to conduct further
environmental review of the Peak 7 improvements. We have applied to the U.S.
Army Corps of Engineers for a wetlands permit for the Peak 7 improvements, but
the Corps has not yet issued a final decision on this application.
We have also sought approval from the Forest Service and other agencies
to develop chairlifts, associated skiing terrain, and snowmaking in Jones
Gulch, which is located within the current Keystone permit area. The Forest
Service has advised us that this development will be the subject of an
environmental impact statement, and work on this statement is currently
underway. Other agencies will conduct related reviews. The initial issues
include the potential effect of the expansion on wildlife and wetlands, and it
is possible that the future resolution of these issues could affect whether, in
what form, and under what conditions the project is approved. In December 1998,
the Corps of Engineers notified Keystone that it had preliminarily determined
that the wetlands permit for Keystone's snowmaking diversion limits such
diversions to 550 acre-feet annually. We disagree that the permit limits
diversions, and discussions with the Corps of Engineers are ongoing. We were
authorized to divert additional water to meet our snowmaking needs during 1998
and we believe that we will be authorized by the Corps of Engineers to continue
to divert sufficient water to meet our snowmaking needs during 1999 and
subsequent years.
46
<PAGE>
Our resort operations require permits and approvals from certain federal,
state, and local authorities, in addition to the Forest Service and Corps of
Engineers approvals discussed above. There can be no assurance that new
applications of existing laws, regulations, and policies, or changes in such
laws, regulations, and policies, will not occur in a manner that could have a
detrimental effect to us, or that material permits, licenses, or approvals will
not be terminated, non-renewed or renewed on terms or interpreted in ways that
are materially less favorable to us. Although we believe that we will be
successful in implementing our development plans and operations, no assurance
can be given that any particular permits and approvals will be obtained or
upheld on judicial review.
The permits originally granted by the Forest Service were (1) Term
Special Use Permits granted for 30-year terms, but which may be terminated upon
30 days written notice by the Forest Service if it determines that the public
interest requires such termination, and (2) Special Use Permits that are
terminable at will by the Forest Service. In November 1986, a new law was
enacted providing that Term Special Use Permits and Special Use Permits may be
combined into a unified single Term Special Use Permit that can be issued for
up to 40 years. Vail Mountain operates under a unified permit for the use of
12,950 acres that expires October 31, 2031. Breckenridge operates under a Term
Special Use Permit for the use of 3,156 acres that expires on December 31,
2029. Keystone operates under a Term Special Use Permit for the use of 5,571
acres that expires on December 31, 2032. The Beaver Creek property is covered
by a Term Special Use Permit covering 80 acres and a Special Use Permit
covering the remaining 2,695 acres, both expiring in 2006. We have exercised
our statutory right to convert our dual permits for the Beaver Creek Mountain
Resort into a unified permit for the maximum period of 40 years and we are
currently in the process of negotiating the final terms of the unified permit.
The Forest Service can terminate most of these permits if it determines that
termination is required in the public interest. In addition, a large part of
the Beaver Creek property under permit is terminable at will. However, to our
knowledge, no recreational Special Use Permit or Term Special Use Permit for
any major ski resort then in operation has ever been terminated by the Forest
Service over the opposition of the permitee.
For use of our permits, we pay a fee to the Forest Service. Under
recently enacted legislation, retroactively effective to fiscal 1996, we pay a
fee to the Forest Service ranging from 1.5% to 4.25% of sales occurring on
Forest Service land. However, through fiscal 1998, we must pay the greater of
(1) the fee due under the new legislation or (2) the fees actually paid for
fiscal 1995 that were calculated under the former fee calculation method.
Included in the calculation are sales from, among other things, lift tickets,
ski school lessons, food and beverages, rental equipment and retail merchandise
sales.
Legal Proceedings
The athletic nature of our ski operations subjects us to litigation in
the ordinary course of business, including claims for personal injury and
wrongful death. We are currently defending 14 such lawsuits, all of which are
covered by extensive liability insurance subject to applicable self-insured
retentions. We are defending seven of such lawsuits under the Colorado Ski
Safety Act (the "Act"), a comprehensive assumption-of-risk statute. The Act
delineates the responsibilities of both ski resort operators and skiers. As
long as the ski resort operator complies with the Act's mandates, which consist
of markings in relation to ski lifts and man made obstructions, signage in
relation to closed areas and ski trails and their difficulty, designation of
the ski resort boundaries, closed trails and "danger areas" and flagging and
lighting certain maintenance equipment such as snowmobiles, the operator is
presumed to be not negligent in accidents involving injury to one of its
guests. The Act further provides that a skier injured through one of the
"inherent dangers and risks of skiing," which include weather and snow
conditions and collisions with manmade and natural objects and other skiers, is
barred from suing the mountain resort. Consequently, if we are successful in
asserting that a claim brought against us is covered by the Act, we will face
no liability for such claim (although there may be other claims not covered by
the Act that arise out of the same incident).
Other than the matters discussed in the preceding paragraphs and other
matters with respect to which we believe we have no material liability or as to
which we are adequately insured, we are not currently a defendant in any
material litigation and there are no material legal proceedings pending against
us or to which any of our property is subject and, to the knowledge of
management, no such proceedings have been threatened against us.
47
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information with respect to the directors
and executive officers of Vail Resorts.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Adam M. Aron............ 44 Chairman of the Board of Directors and Chief Executive Officer
of the Company
Frank J. Biondi, Jr..... 54 Director
Leon D. Black........... 47 Director
Craig M. Cogut.......... 45 Director
Stephen C. Hilbert...... 53 Director
Robert A. Katz.......... 32 Director
Thomas H. Lee........... 55 Director
William L. Mack......... 59 Director
Joe R. Micheletto....... 62 Director
Antony P. Ressler....... 38 Director
Marc J. Rowan........... 36 Director
John J. Ryan III........ 71 Director
John F. Sorte........... 51 Director
Bruce H. Spector........ 56 Director
William P. Stiritz...... 64 Director
James S. Tisch.......... 46 Director
Andrew P. Daly.......... 53 President and Director of the Company
James P. Donohue........ 58 Senior Vice President and Chief Financial Officer of the Company
John McD. Garnsey....... 49 Senior Vice President and Chief Operating Officer for Beaver Creek
James S. Mandel......... 48 Senior Vice President, Vail Resorts Development Company
Paul A. Testwuide....... 58 Senior Vice President of Resort Projects for Vail
James P. Thompson....... 55 President, Vail Resorts Development Company
Martha Dugan Rehm....... 48 Senior Vice President, General Counsel and Secretary of the Company
Bruce Mainzer........... 46 Senior Vice President of Marketing and Sales for the Company
John W. Rutter.......... 47 Senior Vice President and Chief Operating Officer for Keystone
William A. Jensen....... 46 Senior Vice President and Chief Operating Officer for Vail and
Acting Chief Operating Officer for Breckenridge
Porter Wharton III...... 49 Senior Vice President of Public Affairs
</TABLE>
Pursuant to the Restated Certificate of Incorporation and Restated Bylaws
of Vail Resorts, the Board is divided into two classes of Directors, denoted as
Class 1 and Class 2, each serving one-year terms. Class 1 directors are elected
by a majority vote of the holders of the Class A Common Stock and Class 2
directors are elected by a majority vote of the holders of the Common Stock.
The Class 1 directors are Messrs. Black, Cogut, Daly, Katz, Mack, Ressler,
Rowan, Ryan and Spector, and the Class 2 directors are Messrs. Aron, Biondi,
Hilbert, Lee, Micheletto, Sorte, Stiritz and Tisch.
Adam M. Aron was appointed the Chairman of the Board and Chief Executive
Officer of the Company in July 1996. Prior to joining the Company, Mr. Aron
served as President and Chief Executive Officer of Norwegian Cruise Line Ltd.
from July 1993 until July 1996. From November 1990 until July 1993, Mr. Aron
served as Senior Vice President of Marketing for United Airlines. From 1987 to
1990, Mr. Aron served as Senior Vice President of Marketing for the Hyatt
Hotels Corporation. Mr. Aron is also a director of Sunterra Corporation,
Florsheim Group, Inc., and Crestline Capital Corporation.
48
<PAGE>
Frank J. Biondi, Jr. was appointed a director of the Company in July
1996. Mr. Biondi is Chairman of Biondi Reiss Capital Management. Mr. Biondi
previously served as Chairman and Chief Executive Officer of Universal Studios
Inc. from April 1996 through November 1998. Mr. Biondi served as President and
Chief Executive Officer of Viacom, Inc. from July 1987 to January 1996. He has
also held executive positions with The Coca-Cola Company, Home Box Office Inc.
and Time Inc. Mr. Biondi currently is a director of Leake and Watts Services,
The Museum of Television and Radio, The Bank of New York and MiningCo.com, Inc.
Leon D. Black was appointed a director of the Company in October 1992.
Mr. Black is one of the founding principals of Apollo Advisors, L.P. ("Apollo
Advisors"), which was established in August 1990, and which, together with an
affiliate, acts as managing general partner of Apollo Investment Fund, L.P.
("Apollo Fund"), AIF II, L.P. and Apollo Investment Fund III, L.P., private
securities investment funds, of Apollo Real Estate Advisors, L.P. ("AREA")
which, together with an affiliate, acts as managing general partner of the
Apollo real estate investment funds and of Lion Advisors, L.P. ("Lion
Advisors"), which acts as financial advisor to and representative for certain
institutional investors with respect to securities investments. Mr. Black is
also a director of Converse, Inc., Samsonite Corporation and Telemundo Group,
Inc. Mr. Black is Mr. Ressler's brother-in-law.
Craig M. Cogut was appointed a director of the Company in October 1992.
Mr. Cogut is currently a senior principal of Pegasus Investors, L.P., which
acts as a managing general partner of private securities investment funds.
Prior thereto he was one of the founding principals of Apollo Advisors and of
Lion Advisors.
Stephen C. Hilbert was appointed a director of the Company in December
1995. Mr. Hilbert founded Conseco, Inc. in 1979 and serves as its Chairman,
President and Chief Executive Officer. Conseco, Inc. is a financial services
holding company based in Carmel, Indiana, which owns and operates life
insurance companies and provides investment management, administrative and
other fee-based services. Mr. Hilbert serves as a director of the Indiana State
University Foundation and the Indianapolis Convention and Visitor's
Association. He also serves on the Board of Trustees of both the Indianapolis
Parks Foundation and the U.S. Ski Team Foundation, as a Trustee of the Central
Indiana Council on Aging Foundation, and as a director of both the Indianapolis
Zoo and the St. Vincent Hospital Foundation.
Robert A. Katz was appointed a director of the Company in June 1996. Mr.
Katz is a principal of Apollo Advisors and Lion Advisors, with which he has
been associated since 1990. Mr. Katz is also a director of MTL, Inc., Aris
Industries, Inc. and Alliance Imaging, Inc.
Thomas H. Lee was appointed a director of the Company in January 1993.
Mr. Lee founded the Thomas H. Lee Company in 1974 and since that time has
served as its President. The Thomas H. Lee Company and the funds which it
advises invest in friendly leveraged acquisitions and recapitalizations. From
1966 through 1974, Mr. Lee was with First National Bank of Boston where he
directed the bank's high technology lending group from 1968 to 1974 and became
a Vice President in 1973. Prior to 1966, Mr. Lee was a Securities Analyst in
the institutional research department of L.F. Rothschild in New York. Mr. Lee
serves as a director of Atlantic Holding Corporation, Finlay Enterprises, Inc.,
First Security Services Corporation, Livent Inc. and Miller Import Corporation.
William L. Mack was appointed a director of the Company in January 1993.
Since 1963, Mr. Mack has been the President and Managing Partner of The Mack
Organization, an owner and developer of and investor in office and industrial
buildings and other commercial properties principally in the New York/New
Jersey metropolitan area as well as throughout the United States. Mr. Mack is a
founding principal of AREA. He has been Director of the Urban Development
Corporation for the State of New York since 1983. Mr. Mack is Chairman Emeritus
and Trustee of the Long Island Jewish Medical Center. Mr. Mack also serves as a
director of Bear Stearns Companies, Inc., the Mack-Cali Realty Corp. and
Metropolis Realty Trust, Inc.
Joe R. Micheletto was appointed a director of the Company in February
1997. Mr. Micheletto has been Chief Executive Officer and President of Ralcorp
Holdings, Inc. ("Ralcorp") since September 1996 and was Co-Chief Executive
Officer and Chief Financial Officer of Ralcorp from January 1994 to September
1996.
49
<PAGE>
From 1985 to 1994, he served as Vice President and Controller of Ralston Purina
Company. From 1991 to 1997, Mr. Micheletto served as Chief Executive Officer of
Ralston Resorts, Inc. Mr. Micheletto also serves as a director of Agribrands
International, Inc. and Ralcorp.
Antony P. Ressler was appointed a director of the Company in October
1992. Mr. Ressler is one of the founding principals of Apollo Advisors, L.P.,
Lion Advisors, L.P. and Ares Management, L.P. Mr. Ressler is also a director of
Allied Waste Industries, Inc., Berlitz International, Inc., Prandium, Inc.,
United International Holdings, Inc. and United Pan-Europe Communications N.V.
Mr. Ressler is Mr. Black's brother-in-law.
Marc J. Rowan was appointed a director of the Company in October 1992.
Mr. Rowan is one of the founding principals of Apollo Advisors and of Lion
Advisors. Mr. Rowan is also a director of NRT, Inc. and Samsonite Corporation.
John J. Ryan III was appointed a director of the Company in January 1995.
Mr. Ryan has been a financial advisor based in Geneva, Switzerland since 1972.
Mr. Ryan is a director of Artemis S.A. and Financiere Pinault S.A., private
holding companies in Paris, France, and he is also a director of Converse, Inc.
He is a Director of Evergreen Resources Inc., a publicly held oil and gas
exploration company. Mr. Ryan is President of J.J. Ryan & Sons, a closely held
textile trading corporation in Greenville, South Carolina.
John F. Sorte was appointed a director of the Company in January 1993.
Mr. Sorte has been President of New Street Advisors L.P., a merchant bank, and
of New Street Investments L.P., its broker-dealer affiliate, since he co-
founded both companies in March 1994. From 1992 to March 1994, Mr. Sorte was
President and Chief Executive Officer of New Street Capital Corporation, a
merchant banking firm. Mr. Sorte is also a director of WestPoint Stevens Inc.
and serves as Chairman of the Board of Directors of The New York Media Group,
Inc.
Bruce H. Spector was appointed a director of the Company in January 1995.
Mr. Spector has been a consultant to Apollo Advisors since 1992 and since 1995
has been a principal in Apollo Advisors. Prior to October 1992, Mr. Spector, a
reorganization attorney, was a member of the Los Angeles law firm of Stutman
Triester and Glatt. Mr. Spector is also a director of Telemundo Station Group,
Inc., United International Holdings, Inc. and Metropolis Realty Trust, Inc.
William P. Stiritz was appointed a director of the Company in February
1997. Mr. Stiritz became Chairman, CEO and President of Agribrands
International, Inc. in April 1998. Since 1982 he has served as Chairman of
Ralston Purina Company. Mr. Stiritz also serves separately as Chairman of
Ralcorp. Mr. Stiritz also is a director of the following companies: Angelica
Corporation, Ball Corporation, May Department Stores Company and Reinsurance
Group of America, Incorporated.
James S. Tisch was appointed a director of the Company in January 1995.
Mr. Tisch is President and Chief Operating Officer of Loews Corporation. He has
been with Loews Corporation since 1977. Prior to 1977, Mr. Tisch was with CNA
Financial Corporation. Mr. Tisch is Chairman of the Board of Directors of
Diamond Off-shore Drilling, Inc. and is a member of the Board of Directors of
CNA Financial Corporation and Loews Corporation. He is also Chairman of the
Federation Employment and Guidance Service, a member of the Board of Directors
of UJA-Federation of New York, and a Trustee of The Mount Sinai Medical Center.
Andrew P. Daly was appointed a director of the Company in June 1996. Mr.
Daly became President of Vail Associates, Inc. ("Vail Associates") in 1992 and
President of the Company in 1996. He joined Vail Associates in 1989 as
Executive Vice President and President of Beaver Creek Resort Company. Prior to
joining Vail Associates, Mr. Daly owned and was President of Lake Eldora Ski
Corporation, which operated the Eldora Mountain Resort ski area. From 1982 to
1987, Mr. Daly was Chief Executive Officer of Copper Mountain Resort, where he
held several positions from 1972 to 1982.
James P. Donohue became Senior Vice President and Chief Financial Officer
of the Company in October 1996. From 1991 to October 1996, Mr. Donohue served
as Senior Vice President and Chief Financial Officer of Fibreboard Corporation,
a manufacturer and distributor of building products, which also owned and
operated three ski resorts located in California. Prior to 1991, Mr. Donohue
was an Executive Vice President of Continental Illinois Bank., N.A.
50
<PAGE>
John McD. Garnsey joined the Company in May 1999 as Senior Vice President
and Chief Operating Officer for Beaver Creek. Mr. Garnsey served as President
of the Vail Valley Foundation from 1991 through April 1999 and as Vice
President from 1983 to 1991. Mr. Garnsey is also a director of the Vail Valley
Foundation, Bravo!Colorado, the Vilar Center for the Performing Arts at Beaver
Creek, Vail Valley Tourism and Convention Bureau and Ski Club Vail. In
addition, Mr. Garnsey was President of the Organizing Committee for the 1999
World Alpine Ski Championships.
William A. Jensen joined Breckenridge as Senior Vice President and Chief
Operating Officer in May 1997. Mr. Jensen was President of the Fibreboard
Resort Group from 1991 to 1996. He was Vice President of Sunday River Ski
Resort from 1989 to 1991 and from 1983 to 1989 Mr. Jensen was Vice President of
Kassbohrer of North America, a grooming vehicle manufacturer.
Bruce W. Mainzer joined the Company in June 1997 as Senior Vice President
of Marketing and was named Senior Vice President of Marketing and Sales in
August 1998. From 1996 to 1997, Mr. Mainzer was the Executive Vice President of
Marketing and Planning at Carnival Airlines in Miami. From 1994 to 1996,
Mr. Mainzer was Vice President of Marketing for Norwegian Cruise Line Ltd. From
1985 to 1994, Mr. Mainzer served in a variety of key marketing positions at
United Airlines including heading the departments of yield management, market
research and brand marketing.
James S. Mandel has served as Senior Vice President of Commercial
Development for Vail Resorts Development Company since April 1, 1999. From 1994
to December 1998, Mr. Mandel was the Senior Vice President and General Counsel,
and served as Secretary of the Company from 1995 to 1998. From January 1999
through March 1999, Mr. Mandel practiced law and was an advisor to and part-
time employee of the Company. From 1978 until joining the Company, Mr. Mandel
was a partner with Brownstein Hyatt Farber & Strickland, P.C., a Denver law
firm, and specialized in real estate development and corporate finance.
Martha Dugan Rehm became Senior Vice President, General Counsel and
Secretary of the Company in May 1999. Prior to joining the Company, Ms. Rehm
served since mid 1998 as Vice President and General Counsel of Corporate
Express. Inc., a supplier of office products and computer supplies to
corporations. Prior to 1998, she was a partner for many years with Holme
Roberts & Owen, LLP, a Denver-based law firm, where her practice included
general corporate law emphasizing corporate finance and securities
transactions. Ms. Rehm began practicing law with that firm in 1983.
John W. Rutter was appointed Senior Vice President and Chief Operating
Officer of Keystone Resort in May 1997. From 1991 to 1997, he was Executive
Vice President of Ski Operations for Ralston Resorts, Inc. From 1980 to 1991,
he was Vice President of Ski Operations for Keystone Resort and Arapahoe Basin.
Mr. Rutter also serves on the Management Committee of Keystone/Intrawest LLC.
Mr. Rutter is Chairman of the Board of Directors of the National Ski Areas
Association and serves on its Public Lands Committee.
Paul A. Testwuide became Senior Vice President and Chief Operating
Officer for Vail and Beaver Creek in 1998. From 1992 to 1998, he was Vice
President of Mountain Operations for Vail Associates. Mr. Testwuide was
Managing Director of Vail Mountain Operations from 1989 to 1992, Director of
Mountain Operations from 1976 to 1989 and served as the Director of Ski Patrol
from 1971 to 1976. Mr. Testwuide has held various management positions in
mountain operations since joining Vail Associates in 1963.
James P. Thompson joined Vail Resorts Development Company in 1993 in
connection with Vail Associates' acquisition of the Arrowhead at Vail
development. He joined Arrowhead at Vail in 1989, and served as its President.
Prior to joining Arrowhead at Vail, Mr. Thompson served as Vice President of
Moore and Company in Denver for 14 years, leading their land acquisitions,
syndications and development activities.
Porter Wharton III joined the Company in January 1999 as Senior Vice
President of Public Affairs. From 1985 to January 1999, Mr. Wharton was
Chairman and Chief Executive Officer of The Wharton Group, a Denver-based
national government relations and issues management consulting firm. He also
has served as a consultant to the Company since 1995.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Common Stock and Class A Common Stock as of March 15, 1999 by (i) each
person or entity who owns of record or beneficially five percent or more of any
class of capital stock, (ii) each director and named executive officer of the
Company and (iii) all directors and executive officers as a group. To our
knowledge, each of such stockholders has sole voting and investment power as to
the shares shown unless otherwise noted.
<TABLE>
<CAPTION>
Common Stock Class A Common Percent of
Beneficially Owned Stock Beneficially Owned Class A Common
------------------- ---------------------------- Stock and
Name of Percent Percent Common Stock
Beneficial Owner Shares of Class Shares of Class Beneficially Owned
---------------- ---------- -------- -------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Apollo Ski Partners,
L.P. (1)(2)............ -- -- 7,439,542 99.9% 21.5%
Ralcorp Holdings, Inc.
(3).................... 7,554,406 27.9% -- -- 21.9%
Ronald Baron (4)........ 11,906,200 44.0% -- -- 34.4%
Capital Research and
Management Company
(5).................... 1,519,600 5.6% -- -- 4.4%
All directors and
officers as a group, 14
persons (6)............ 868,654 3.2% -- -- 2.5%
</TABLE>
- --------
(1) Apollo Ski Partners was organized principally for the purpose of holding
Common Stock and Class A Common Stock of the Company. The general partner
of Apollo Ski Partners is Apollo Fund, a Delaware limited partnership and
a private securities investment fund. The managing general partner of
Apollo Fund is Apollo Advisors, a Delaware limited partnership, the
general partner of which is Apollo Capital Management, Inc. ("Apollo
Capital"), a Delaware corporation. Mr. Black, a director of the Company,
is a director of Apollo Capital. All officers, directors and shareholders
of Apollo Capital, including Messrs. Black, Katz, Mack, Ressler, Rowan and
Spector (directors of the Company), disclaim any beneficial ownership of
the Common Stock and Class A Common Stock of the Company owned by Apollo
Ski Partners. The address for Apollo Ski Partners is 2 Manhattanville
Road, Purchase, NY 10577.
(2) The Class A Common Stock is convertible into Common Stock (i) at the
option of the holder, (ii) automatically, upon transfer to a non-affiliate
of such holder and (iii) automatically, if less than 5,000,000 shares (as
such number shall be adjusted by reason of any stock split,
reclassification or other similar transaction) of Class A Common Stock are
outstanding.
(3) As reported by Ralcorp on Schedule 13D filed with the Securities and
Exchange Commission on February 13, 1997. The address for Ralcorp is 800
Market Street, Suite 1600, St. Louis, MO 63101.
(4) As reported by Ronald Baron and related entities on Schedule 13D/A filed
with the Securities and Exchange Commission on May 21, 1999. The address
for Ronald Baron is 767 Fifth Avenue, 24th Floor, New York, NY 10153.
(5) As reported by Capital Research and Management Company on Schedule 13G
filed with the Securities and Exchange Commission on February 11, 1999.
The address for Capital Research and Management Company is 333 South Hope
Street, Los Angeles, CA 90071.
(6) With the exception of 26,000 shares of Common Stock owned by Mr. Ressler,
no directors or officers of the Company directly own shares of Common
Stock (other than options to purchase Common Stock granted to officers of
the Company and as otherwise described in this prospectus).
52
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Revolving Credit Facility
Our revolving credit facility (as amended, the "Credit Facility") with
our subsidiary, The Vail Corporation, as borrower, NationsBank, N.A., as agent
(the "Agent"), certain other financial institutions, as lenders, and
NationsBanc Montgomery Securities LLC provides for debt financing up to an
aggregate principal amount of $450.0 million. The proceeds of the loans made
under the Credit Facility may be used to fund our working capital needs,
capital expenditures and other general corporate purposes, including the
issuance of letters of credit.
Borrowings under the Credit Facility bear interest annually at the
borrower's option at the rate of (i) LIBOR (the London interbank offered rate
for a given interest period) plus a margin (ranging from .75% to 2.25%) or (ii)
the Base Rate (defined as the higher of the Federal Funds Rate, as published by
the Federal Reserve Bank of New York, plus 0.5%, or the Agent's prime lending
rate) plus a margin up to .75%. In addition, the borrower must pay a fee on the
face amount of each letter of credit outstanding at a rate ranging from .75% to
2.25%. The borrower must also pay a quarterly unused commitment fee ranging
from .20% to .50%. The interest margins and fees described in this paragraph
fluctuate based upon the ratio of Funded Debt (as defined) to Resort EBITDA (as
defined). The Credit Facility matures on December 19, 2002.
The Vail Corporation's obligations under the Credit Facility are
unsecured and are guaranteed by us and certain of our subsidiaries.
The Credit Facility contains various covenants that limit, among other
things, subject to certain exceptions, indebtedness, liens, transactions with
affiliates, restricted payments and investments, mergers, consolidations and
dissolutions, sales of assets, dividends and distributions and certain other
business activities. The Credit Facility also contains certain financial
covenants, including a Funded Debt to Resort EBITDA, Senior Debt to Resort
EBITDA, Minimum Fixed Charge Coverage Ratio and Interest Coverage Ratio (each
as described in the Credit Facility).
At January 31, 1999, the borrower had various letters of credit
outstanding in the aggregate amount of $61.7 million, including letters of
credit in the amount of $47.2 million to secure metro district bonds issued in
connection with infrastructure and other costs at Bachelor Gulch Village. See
Note 11 to our Consolidated Financial Statements.
Industrial Revenue Bonds
Pursuant to an indenture (the "IRB Indenture") dated as of April 1, 1998,
between Eagle County, Colorado, as issuer (the "IRB Issuer"), and U.S. Bank
National Association, as trustee (the "IRB Trustee"), $41.2 million aggregate
principal amount of industrial revenue bonds (the "IRBs") were issued for the
purpose of providing funds to The Vail Corporation d/b/a Vail Associates, Inc.
("VAI") to refinance certain existing industrial revenue bonds. Pursuant to a
financing agreement (the "IRB Agreement") dated as of April 1, 1998, among the
IRB Issuer and VAI, the IRB Issuer loaned to VAI the proceeds of the issuance
of the IRBs and VAI agreed to make payments in the aggregate amount, bearing
interest at rates and payable at times, corresponding to the principal amount
of, interest rates on and due dates under the IRBs. The obligations of VAI
under the IRB Indenture, the IRB Agreement and the IRBs are secured by certain
multi-party agreements between VAI, the IRB Trustee and the U.S. Forest Service
(the "Permit Agreements") relating to the Vail Mountain and Beaver Creek
Mountain Forest Service Permits (the "Permits"). The Permit Agreements provide
that the U.S. Forest Service will cooperate with the IRB Trustee in obtaining a
new holder of the Permits (acceptable to the U.S. Forest Service in its sole
discretion) in the event of a default by VAI with respect to its obligations
under the IRBs. However, the Permit Agreements expressly provide that no
security interest is created in or collateral assignment made with respect to
the Permits.
53
<PAGE>
The IRBs mature, subject to prior redemption, on August 1, 2019. The IRBs
bear interest at the rate of 6.95% per annum, with interest payable semi-
annually on February 1 and August 1. The IRBs are subject to re-demption at the
option of VAI, at any time and from time to time on or after August 1, 2008,
and are subject to mandatory redemption if interest payments on the IRBs lose
their tax exempt status. Furthermore, in the event that VAI or one of its
affiliates incurs additional indebtedness with (1) senior or superior rights to
the Permits or (2) equivalent rights with respect to the Permits above an
aggregate principal amount of $250,000,000 (including the unpaid principal
amount of the IRBs) the IRBs will bear an interest rate of 7.45% per annum or,
under certain limited circumstances, may be subject to mandatory redemption.
We also have indebtedness in connection with $22.0 million of outstanding
industrial revenue bonds which we assumed in connection with our acquisition of
Keystone and Breckenridge. These IRBs consist of two series of refunding bonds
which were originally issued to finance the cost of sports and recreational
facilities at Keystone. The Series 1990 Sports Facilities Refunding Revenue
Bonds have an aggregate outstanding principal amount of $19.0 million. The
principal matures in installments in 2006 and 2008. These bonds bear interest
at a rate of 7.75% for bonds maturing in 2006 and 7.875% for bonds maturing in
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate outstanding principal amount of $3 million and bear interest at
7.125% for bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
SSI Venture Credit Facility
On December 30, 1998, SSI Venture established a credit facility that
provides debt financing up to an aggregate principal amount of $20 million. The
SSI Venture credit facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSI
Venture credit facility matures on the earlier of December 31, 2003 or the
termination date of the Credit Facility discussed above. The Vail Corporation
guarantees the SSI Venture credit facility. Minimum amortization under the
Tranche B Term Loan Facility is $625,000, $1.38 million, $1.75 million, $2.25
million, $2.63 million, and $1.38 million during the fiscal years 1999, 2000,
2001, 2002, 2003, and 2004, respectively. The SSI Venture credit facility bears
interest annually at the rates prescribed above for the Credit Facility. SSI
Venture also pays a quarterly unused commitment fee at the same rates as the
unused commitment fee for the Credit Facility.
54
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
Exchange Offer Registration Statement. We issued the outstanding Notes on
May 11, 1999. The Initial Purchasers have advised us that they subsequently
resold the outstanding Notes to "qualified institutional buyers" in reliance on
Rule 144A under the Securities Act and to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. As a
condition to the offering of the outstanding Notes, we entered into a
registration rights agreement dated May 11, 1999, pursuant to which we agreed
for the benefit of all holders of the outstanding Notes, at our own expense, to
do the following:
(1) to file the registration statement of which this prospectus is
a part with the SEC on or prior to 60 days after the closing date of the
outstanding Notes,
(2) to use our best commericially reasonable efforts to cause the
registration statement to be declared effective under the Securities Act
on or prior to 180 days after the closing date of the outstanding Notes,
(3) to use our commercially reasonable best efforts to keep the
registration statement effective until the closing of the exchange
offer, and
(4) to use our commerically reasonable best efforts to issue, on
or prior to 60 business days after the date on which the exchange offer
registration statement was declared effective.
We also agreed that promptly upon the registration statement being
declared effective, we would offer to all holders of the outstanding Notes an
opportunity to exchange the outstanding Notes for the exchange notes. Further,
we agreed to keep the exchange offer open for acceptance for not less than the
minimum period required under applicable Federal and state securities laws. For
each outstanding Note validly tendered pursuant to the exchange offer and not
withdrawn, the holder of the outstanding Note will receive an exchange note
having a principal amount equal to that of the tendered outstanding Note.
Interest on each exchange note will accrue from the last date on which interest
was paid on the tendered outstanding Note in exchange therefor or, if no
interest was paid on such outstanding Note, from the issue date.
The following is a summary of the registration rights agreement. It does
not purport to be complete and it does not contain all of the information you
might find useful. For further information you should read the registration
rights agreement, a copy of which has been filed as an exhibit to the
registration statement. The exchange offer is intended to satisfy certain of
our obligations under the registration rights agreement.
Transferability. We issued the outstanding notes on May 11, 1999 in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the outstanding notes may not be
offered or sold in the United States unless registered or pursuant to an
applicable exemption under the Securities Act and applicable state securities
laws. Based on no-action letters issued by the staff of the Commission with
respect to similar transactions, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for outstanding Notes may be offered
for resale, resold and otherwise transferred by holders of notes who are not
our affiliates without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that:
(1) any exchange notes to be received by the holder were acquired
in the ordinary course of the holder's business;
(2) at the time of the commencement of the exchange offer the
holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities
Act) of the exchange notes; and
(3) the holder is not an "affiliate" of the Company, as defined in
Rule 405 under the Securities Act, or, if it is an affiliate, that it
will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
55
<PAGE>
However, we have not sought a no-action letter with respect to the
exchange offer and we cannot assure you that the staff of the Commission would
make a similar determination with respect to the exchange offer. Any holder who
tenders his outstanding Notes in the exchange offer with any intention of
participating in a distribution of exchange notes (1) cannot rely on the
interpretation by the staff of the Commission, (2) will not be able to validly
tender outstanding Notes in the exchange offer and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions.
In addition, each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal accompanying this prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
acting in the capacity of an "underwriter" within the meaning of Section 2(11)
of the Securities Act. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
exchange notes received in exchange for outstanding notes where the outstanding
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Pursuant to the registration rights
agreement, we agreed to make this prospectus available to any such broker-
dealer for use in connection with any such resale.
Shelf Registration Statement. We will, at our cost, (a) as soon as
practicable, file with the SEC a shelf registration statement covering resales
of the outstanding Notes, but in any event, on or prior to the 60th day after
the date we become obligated to file the shelf registration statement, (b) use
our commercially reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or prior to the
180th day after the date we become obligated to file the shelf registration
statement and (c) use our commercially reasonable best efforts to keep the
shelf registration statement continually effective, supplemented and amended to
the extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities for a period of at least two years
following the effective date of such shelf registration statement (or shorter
period that will terminate when all the Notes covered by such shelf
registration statement have been sold pursuant to such shelf registration
statement or are otherwise no longer Transfer Restricted Securities), if:
(1) we are not required to file the exchange offer registration
statement or not permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or Commission policy
or
(2) any Initial Purchaser that is a Holder of Transfer Restricted
Securities notifies us prior to the 20th day following consummation of
the exchange offer that (a) it is prohibited by law or Commission policy
from participating in the exchange offer or (b) it may not resell the
exchange notes acquired by it in the exchange offer to the public
without delivering a prospectus and the prospectus contained in the
exchange offer registration statement is not appropriate or available
for such resales.
We will, in the event of the filing of the shelf registration statement,
provide to each holder of the outstanding Notes copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the outstanding Notes has become effective and
take certain other action as are required to permit unrestricted resales of the
outstanding Notes. A Holder of outstanding Notes who sells such outstanding
Notes pursuant to the shelf registration statement generally will (1) be
required to be named as a selling security holder in the related prospectus,
(2) be required to deliver the prospectus to purchasers, (3) be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and (4) be bound by the provisions of the
registration rights agreement which are applicable to the Holder (including
certain indemnification obligations). In addition, each Holder of the
outstanding Notes will be required to deliver information to be used in
connection with the shelf registration
56
<PAGE>
statement and to provide comments on the shelf registration statement within
the time periods set forth in the registration rights agreement in order to
have their outstanding Notes included in the shelf registration statement and
to benefit from the provisions regarding the increase in interest rate set
forth in the following paragraph.
Terms of the Exchange Offer
Upon satisfaction or waiver of all the conditions of the exchange offer,
we will accept, any and all outstanding Notes properly tendered and not
withdrawn prior to the expiration date and will issue the exchange notes
promptly after acceptance of the outstanding Notes. See "--Conditions to the
Exchange Offer" and "Procedures for Tendering Private Notes." We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding Notes accepted in the exchange offer. As of the date of
this prospectus, $200,000,000 aggregate principal amount of the outstanding
Notes are outstanding. Holders may tender some or all of their outstanding
Notes pursuant to the exchange offer. However, outstanding Notes may be
tendered only in integral multiples of $1,000.
The exchange notes are identical to the outstanding Notes except for the
elimination of certain transfer restrictions, registration rights, restrictions
on holding notes in certificated form and liquidated damages provisions. The
outstanding Notes will evidence the same debt as the outstanding Notes and will
be issued pursuant to, and entitled to the benefits of, the indenture pursuant
to which the outstanding Notes were issued and will be deemed one issue of
notes, together with the outstanding Notes.
This prospectus, together with the letter of transmittal, is being sent
to all registered holders and to others believed to have beneficial interests
in the outstanding Notes. Holders of outstanding Notes do not have any
appraisal or dissenters' rights under the indenture in connection with the
exchange offer. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
For purposes of the exchange offer, we will be deemed to have accepted
validly tendered private notes when, and as if we have given oral or written
notice thereof to the exchange agent. The exchange agent will act as our agent
for the purpose of distributing the exchange notes from us to the tendering
holders. If we do not accept any tendered outstanding Notes because of an
invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, we will return the unaccepted outstanding Notes,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender private notes in the exchange offer will not be
required to pay brokerage commissions or fees or, except as set forth below
under "--Transfer Taxes," transfer taxes with respect to the exchange of
outstanding Notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend the exchange offer, in
which case the term "expiration date" shall mean the latest date and time to
which the exchange offer is extended. In order to extend the exchange offer, we
will notify the exchange agent by oral or written notice and each registered
holder by means of press release or other public announcement of any extension,
in each case, prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. We reserve the right, in our
sole discretion, (1) to delay accepting any outstanding Notes, (2) to extend
the exchange offer, (3) to terminate the exchange offer if the conditions set
forth below under "--Conditions" shall not have been satisfied, or (4) to amend
the terms of the exchange offer in any manner. We will notify the exchange
agent of any delay, extension, termination or amendment by oral or written
notice. We will additionally notify each registered holder of any amendment. We
will give to the exchange agent written confirmation of any oral notice.
57
<PAGE>
Exchange Date
As soon as practicable after the close of the exchange offer we will
accept for exchange all outstanding Notes properly tendered and not validly
withdrawn prior to 5:00 p.m., New York City time, on the expiration date in
accordance with the terms of this prospectus and the letters of transmittal.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, and subject
to our obligations under the registration rights agreement, we (1) shall not be
required to accept any outstanding Notes for exchange, (2) shall not be
required to issue exchange notes in exchange for any outstanding Notes and (3)
may terminate or amend the exchange offer, if at any time before the acceptance
of such exchange notes for exchange, any of the following events shall occur:
(1)any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or
otherwise materially impair our ability to proceed with the exchange
offer;
(2) any change, or any development involving a prospective change,
in our business or financial affairs or any of our subsidiaries has
occurred which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(3) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(4) any governmental approval has not been obtained, which
approval we shall, in our sole discretion, deem necessary for the
consummation of the exchange offer as contemplated hereby; or
(5) the exchange offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any outstanding Notes
tendered, and no exchange notes will be issued in exchange for any such
outstanding Notes, if at such time any stop order shall be threatened by the
Commission or be in effect with respect to the registration statement of which
this prospectus is a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding Notes being tendered for exchange.
Consequences of Failure to Exchange
Any outstanding Notes not tendered pursuant to the exchange offer will
remain outstanding and continue to accrue interest. The outstanding Notes will
remain "restricted securities" within the meaning of the Securities Act.
Accordingly, prior to the date that is one year after the later of the issue
date and the last date on which we or any of our affiliates was the owner of
the outstanding Notes, the outstanding Notes may be resold only (1) to us, (2)
to a person whom the seller reasonably believes is a "qualified institutional
buyer" purchasing for its own account or for the account of another "qualified
institutional buyer" in compliance with
58
<PAGE>
the resale limitations of Rule 144A, (3) to an Institutional Accredited
Investor that, prior to the transfer, furnishes to the trustee a written
certification containing certain representations and agreements relating to
the restrictions on transfer of the Notes (the form of this letter can be
obtained from the trustee), (4) pursuant to the limitations on resale provided
by Rule 144 under the Securities Act, (5) pursuant to the resale provisions of
Rule 904 of Regulation S under the Securities Act, (6) pursuant to an
effective registration statement under the Securities Act, or (7) pursuant to
any other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to compliance with
applicable state securities laws. As a result, the liquidity of the market for
non-tendered outstanding Notes could be adversely affected upon completion of
the exchange offer. The foregoing restrictions on resale will no longer apply
after the first anniversary of the issue date of the outstanding Note or the
purchase of the outstanding Notes from us or an affiliate.
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees.
Expenses incurred in connection with the exchange offer will be paid by
us and are estimated in the aggregate to be approximately $[ ] which
includes the fees and expenses of the trustee and the exchange agent,
accounting and legal fees and other miscellaneous fees and expenses.
Accounting Treatment
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expenses of the
exchange offer over the term of the exchange notes.
Procedures for Tendering Outstanding Notes
The tender of outstanding Notes pursuant to any of the procedures set
forth in this prospectus and in the letter of transmittal will constitute a
binding agreement between the tendering holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal. The tender of outstanding Notes will constitute an
agreement to deliver good and marketable title to all tendered outstanding
Notes prior to the expiration date free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind.
Except as provided in "--Guaranteed Delivery Procedures," unless the
outstanding Notes being tendered are deposited by you with the exchange agent
prior to the expiration date and are accompanied by a properly completed and
duly executed letter of transmittal, we may, at our option, reject the tender.
Issuance of exchange notes will be made only against deposit of tendered
outstanding notes and delivery of all other required documents.
Notwithstanding the foregoing, DTC participants tendering through its
Automated Tender Offer Program ("ATOP") will be deemed to have made valid
delivery where the exchange agent receives an agent's message prior to the
expiration date.
Accordingly, to properly tender outstanding notes, the following
procedures must be followed:
Notes held through a Custodian. Each beneficial owner holding
outstanding Notes through a DTC participant must instruct the DTC participant
to cause its outstanding Notes to be tendered in accordance with the
procedures set forth in this prospectus.
Notes held through DTC. Pursuant to an authorization given by DTC to the
DTC participants, each DTC participant holding outstanding Notes through DTC
must (1) electronically transmit its acceptance through ATOP, and DTC will
then edit and verify the acceptance, execute a book-entry delivery to the
exchange agent's account at DTC and send an agent's message to the exchange
agent for its acceptance, or (2)
59
<PAGE>
comply with the guaranteed delivery procedures set forth below and in a notice
of guaranteed delivery. See "--Guaranteed Delivery Procedures--Notes held
through DTC."
The exchange agent will (promptly after the date of this prospectus)
establish accounts at DTC for purposes of the exchange offer with respect to
outstanding notes held through DTC. Any financial institution that is a DTC
participant may make book-entry delivery of interests in outstanding Notes into
the exchange agent's account through ATOP. However, although delivery of
interests in the outstanding Notes may be effected through book-entry transfer
into the exchange agent's account through ATOP, an agent's message in
connection with such book-entry transfer, and any other required documents,
must be, in any case, transmitted to and received by the exchange agent at its
address set forth under "--Exchange Agent," or the guaranteed delivery
procedures set forth below must be complied with, in each case, prior to the
expiration date. Delivery of documents to DTC does not constitute delivery to
the exchange agent. The confirmation of a book-entry transfer into the exchange
agent's account at DTC as described above is referred to herein as a "Book-
Entry Confirmation."
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express acknowledgement
from each DTC participant tendering through ATOP that such DTC participants
have received a letter of transmittal and agree to the bound by the terms of
the letter of transmittal and that we may enforce such agreement against such
DTC participants.
Cede & Co., as the holder of the global note, will tender a portion of
the global note equal to the aggregate principal amount due at the stated
maturity for which instructions to tender are given by DTC participants.
By tendering, each holder and each DTC participant will represent to us
that, among other things, (1) it is not our affiliate, (2) it is not a broker-
dealer tendering outstanding Notes acquired directly from us for its own
account, (3) the exchange notes acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of such holder and (4) it has
no understandings with any person to participate in the exchange offer for the
purpose of distributing the exchange notes.
We will not accept any alternative, conditional, irregular or contingent
tenders (unless waived by us). By executing a letter of transmittal or
transmitting an acceptance though ATOP, as the case may be, each tendering
holder waives any right to receive any notice of the acceptance for purchase of
its outstanding Notes.
We will resolve all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered outstanding Notes, and
such determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of
which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any condition to the exchange offer and any
irregularities or conditions of tender as to particular outstanding Notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding. Unless
waived, any irregularities in connection with tenders must be cured within such
time as we shall determine. We, along with the exchange agent, shall be under
no duty to give notification of defects in such tenders and shall not incur
liabilities for failure to give such notification. Tenders of outstanding Notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO US
OR DTC.
60
<PAGE>
The method of delivery of outstanding Notes, letters of transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or letters of
transmittal and, except as otherwise provided in the applicable letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the expiration date to permit
delivery to the exchange agent prior to the expiration date.
Guaranteed Delivery Procedures
Notes held through DTC. DTC participants holding outstanding Notes
through DTC who wish to cause their outstanding Notes to be tendered, but who
cannot transmit their acceptances through ATOP prior to the expiration date,
may cause a tender to be effected if:
(1) guaranteed delivery is made by or through a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act, including:
. a bank;
. a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government
securities broker;
. a credit union;
. a national securities exchange, registered securities association
or clearing agency; or
. a savings institution that is a participant in a Securities
Transfer Association recognized program;
(2) prior to the expiration date, the exchange agent receives from
any of the above institutions a properly completed and duly executed
notice of guaranteed delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form provided
with this prospectus; and
(3) book-entry confirmation and an agent's message in connection
therewith are received by the exchange agent within three NYSE trading
days after the date of the execution of the notice of guaranteed
delivery.
Notes held by Holders. Holders who wish to tender their outstanding
Notes but (1) whose outstanding Notes are not immediately available and will
not be available for tendering prior to the expiration date, or (2) who cannot
deliver their outstanding Notes, the letter of transmittal, or any other
required documents to the exchange agent prior to the expiration date, may
effect a tender if:
. the tender is made by or through any of the above-listed
institutions;
. prior to the expiration date, the exchange agent receives from any
above-listed institution a properly completed and duly executed
notice of guaranteed delivery, whether by mail, hand delivery,
facsimile transmission or overnight courier, substantially in the
form provided with this prospectus; and
. a properly completed and executed letter of transmittal, as well
as the certificate(s) representing all tendered outstanding Notes
in proper form for transfer, and all other documents required by
the letter of transmittal, are received by the exchange agent
within three NYSE trading days after the date of the execution of
the notice of guaranteed delivery.
Withdrawal Rights
You may withdraw tenders of outstanding Notes, or any portion of your
outstanding Notes in integral multiples of $1,000 principal amount due at the
stated maturity, at any time prior to 5:00 p.m., New York City
61
<PAGE>
time, on the expiration date. Any outstanding Notes properly withdrawn will be
deemed to be not validly tendered for purposes of the exchange offer.
Notes held through DTC. DTC participants holding outstanding Notes who
have transmitted their acceptances through ATOP may, prior to 5:00 p.m., New
York City time, on the expiration date, withdraw the instruction given thereby
by delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC participant, the principal amount due at the stated maturity of outstanding
Notes to which such withdrawal related and the signature of the DTC
participant. Receipt of such written notice of withdrawal by the exchange agent
effectuates a withdrawal.
Notes held by Holders. Holders may withdraw their tender of outstanding
Notes, prior to 5:00 p.m., New York City time, on the expiration date, by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal. Any such
notice of withdrawal must (1) specify the name of the person who tendered the
outstanding notes to be withdrawn, (2) contain a description of the outstanding
Notes to be withdrawn and identify the certificate number or numbers shown on
the particular certificates evidencing such outstanding notes and the aggregate
principal amount due at the stated maturity represented by such outstanding
notes and (3) be signed by the holder of such outstanding Notes in the same
manner as the original signature on the letter of transmittal by which such
outstanding Notes were tendered (including any required signature guaranties),
or be accompanied by (x) documents of transfer in a form acceptable to us, in
our sole discretion and (y) a properly completed irrevocable proxy that
authorized such person to effect such revocation on behalf of such holder. If
the outstanding Notes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal is effective
immediately upon written, telegraphic or facsimile notice of withdrawal even if
physical release is not yet effected.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program; provided, however, that signatures on the notice of
withdrawal need not be guaranteed if the outstanding Notes being withdrawn are
held for the account of any of the institutions listed above under "--
Guaranteed Delivery Procedures."
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC participant or a holder of outstanding Notes, as the case may
be, in the same manner as the person's name appears on its transmission through
ATOP or letter of transmittal, as the case may be, to which such withdrawal
relates. If a notice of withdrawal is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
so indicate when signing and must submit with the revocation appropriate
evidence of authority to execute the notice of withdrawal. A DTC participant or
a holder may withdraw an instruction or a tender, as the case may be, only if
such withdrawal complies with the provisions of this prospectus.
A withdrawal of a tender of outstanding Notes by a DTC participant or a
holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new letter of
transmittal, as the case may be, in accordance with the procedures described
herein.
62
<PAGE>
Exchange Agent
United States Trust Company of New York has been appointed as exchange
agent for the exchange offer. Questions, requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent addressed as follows:
By Registered or Certified Mail:
United States Trust Company of New York
as Exchange Agent
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Hand after 4:30 p.m. or By Overnight Courier:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Facsimile: By Telephone:
(212) 780-0592 (212) 548-6565
Attention: Customer Service
The exchange agent also acts as trustee under the Indenture.
Transfer Taxes
Holders of outstanding Notes who tender their outstanding Notes for
exchange notes will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct us to register exchange notes in
the name of, or request that outstanding Notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
63
<PAGE>
DESCRIPTION OF NOTES
General
The outstanding Notes were and the exchange notes will be, issued
pursuant to an Indenture (the "Indenture"), dated as of May 11, 1999, among the
Company, as Issuer, The Vail Corporation, Vail Holdings, Inc. and each of the
other Guarantors, as guarantors, and United States Trust Company of New York,
as trustee (the "Trustee"). The terms of the exchange notes are identical in
all material respects to the outstanding Notes, except that the exchange notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will not contain certain provisions
providing for liquidated damages under certain circumstances described in the
Registration Rights Agreement, the provisions of which will terminate upon the
consummation of the exchange offer. The following summary of certain provisions
of the Indenture and the Notes does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Indenture (including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended) and the
Notes. Copies of the proposed form of Indenture and Registration Rights
Agreement can be requested by prospective investors from the Company at the
address and telephone number set forth under "Where You Can Find More
Information." The definitions of certain terms used in the following summary
are set forth below under "Certain Definitions." For purposes of this
"Description of Notes," the term "Company" refers only to Vail Resorts, Inc.
and not to any of its Subsidiaries and the term "Notes" refers to both the
outstanding Notes and the exchange notes.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt of the
Company. As of January 31, 1999, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom, the Company and the
Guarantors would have had consolidated Senior Debt of approximately $141.1
million outstanding. The Indenture, subject to certain limitations, permits the
incurrence of additional Senior Debt in the future. As of the date of the
Indenture, all of the Company's consolidated Subsidiaries are Restricted
Subsidiaries, other than SSI Venture, LLC and Vail Associates Investments, Inc.
However, under certain circumstances, the Company will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the Indenture.
The obligations of the Company under the Notes are guaranteed, jointly
and severally on a senior subordinated basis, by the Guarantors. The Subsidiary
Guarantee of each Guarantor will be subordinated in right of payment to all
existing and future Senior Debt of such Guarantor. See "--Subsidiary
Guarantees."
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $300.0 million (of
which $200.0 million is being issued in the Offering) and will mature on May
15, 2009. Interest on the Notes will accrue at the rate of 8 3/4% per annum and
will be payable semi-annually in arrears on May 15 and November 15 of each
year, commencing on November 15, 1999, to Holders of record on the immediately
preceding May 1 and November 1, respectively. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of original issuance. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. Principal of and
premium, if any, interest and Liquidated Damages, if any, on the Notes will be
payable at the office or agency of the Company maintained for such purpose or,
at the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders of the Notes at their respective addresses
set forth in the register of Holders of Notes; provided that all payments of
principal, premium, if any, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency will be the
office of the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
64
<PAGE>
Subordination
The payment (by set-off, redemption, repurchase or otherwise) of
principal of and premium, if any, interest and Liquidated Damages, if any, on
the Notes (including with respect to any repurchases of the Notes) is
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or, at the option of the holders of Senior Debt of the
Company, in Cash Equivalents, of all Obligations in respect of Senior Debt of
the Company, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company upon any liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, the
holders of Senior Debt of the Company are entitled to receive payment in full
in cash or, at the option of the holders of Senior Debt of the Company, in Cash
Equivalents, of all Obligations due or to become due in respect of such Senior
Debt (including interest after the commencement of any such proceeding, at the
rate specified in the applicable Senior Debt) before the Holders of Notes are
entitled to receive any payment of principal of, or premium, if any, interest
or Liquidated Damages, if any, on the Notes, and until all Obligations with
respect to Senior Debt of the Company are paid in full in cash or, at the
option of the holders of Senior Debt of the Company, in Cash Equivalents, any
distribution of any kind or character to which the Holders of Notes would be
entitled shall be made to the holders of Senior Debt of the Company (except
that Holders of Notes may receive Permitted Junior Securities and payments made
from the trust described under "--Legal Defeasance and Covenant Defeasance" or
"--Satisfaction and Discharge of Indenture").
The Company also shall not, directly or indirectly, (1) make, any payment
of principal of, or premium, if any, interest or Liquidated Damages, if any, on
the Notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance" or "--Satisfaction and
Discharge of Indenture," if no default of the kind referred to in clause (a)
below had occurred and was continuing, and no Payment Blockage Notice (as
defined below) was in effect, at the time amounts were deposited with the
Trustee as described therein) or (2) acquire any of the Notes for cash or
property or otherwise or make any other distribution with respect to the Notes
if
(a) any default occurs and is continuing in the payment when due, whether
at maturity, upon any redemption, by declaration or otherwise, of any principal
of, or premium, if any, or interest on, any Designated Senior Debt of the
Company or
(b) any other default occurs and is continuing with respect to Designated
Senior Debt of the Company that permits holders of the Designated Senior Debt
of the Company as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the holders of such Designated Senior Debt of the Company.
Payments on the Notes may and shall be resumed (1) in the case of a
payment default, upon the date on which such default is cured or waived or
otherwise has ceased to exist and (2) in the case of a nonpayment default, upon
the earlier of the date on which such nonpayment default is cured or waived or
otherwise has ceased to exist or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt of the Company has been accelerated and such
acceleration remains in full force and effect. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such nonpayment default shall have been waived
for a period of not less than 90 days. Each Holder by such Holder's acceptance
of a Note irrevocably agrees that if any payment or payments shall be made
pursuant to the Indenture and the amount or total amount of such payment or
payments exceeds the amount, if any, that such Holder would be entitled to
receive upon the proper application of the subordination provisions of the
Indenture, then such Holder will be obliged to pay over the amount of such
excess payment to the holders of Senior Debt of the Person that made
65
<PAGE>
such payment or payments or their representative or representatives, as
instructed in a written notice of such excess payment, within ten days of
receiving such notice.
The Indenture further requires that the Company promptly notify holders
of Senior Debt of the Company and the Guarantors if payment of the Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Offering and the application of the net proceeds
therefrom, the principal amount of consolidated Senior Debt of the Company and
Guarantors outstanding at January 31, 1999 would have been approximately $141.1
million. The Indenture limits, through certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Restricted Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" of any Person means (i) any Indebtedness of such
Person outstanding under the Credit Agreement and (ii) any other Senior Debt of
such Person, the principal amount of which is $25 million or more and that has
been designated by the Company as "Designated Senior Debt" of such Person.
"Permitted Junior Securities" means Equity Interests (other than
Disqualified Stock) in the Company or debt securities that are subordinated to
all Senior Debt of the issuer of such debt securities (and any debt securities
issued in exchange for Senior Debt of the issuer of such debt securities) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt.
"Senior Debt" of any Person means (i) the Obligations of such Person
under the Credit Agreement, including, without limitation, Hedging Obligations
and reimbursement obligations in respect of letters of credit and bankers
acceptances, and (ii) any other Indebtedness of such Person, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt of a
Person will not include (v) any obligation to, in respect of or imposed by any
environmental, landfill, waste management or other regulatory governmental
agency, statute, law or court order, (w) any liability for federal, state,
local or other taxes, (x) any Indebtedness of such Person to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred by such Person in violation of the Indenture
(except to the extent that the original holder thereof relied in good faith
after being provided with a copy of the Indenture upon an Officer's Certificate
of such Person to the effect that the incurrence of such Indebtedness did not
violate the Indenture).
Subsidiary Guarantees
The Company's payment obligations under the Notes are jointly and
severally guaranteed (the "Subsidiary Guarantees") by all of the Company's
consolidated Subsidiaries existing on the Closing Date, other than SSI Venture,
LLC and Vail Associates Investment, Inc. See Note 3 to "Selected Consolidated
Financial and Operating Data." The Subsidiary Guarantee of each Guarantor are
subordinated in right of payment to the same extent as the obligations of the
Company in respect of the Notes, as set forth in the Indenture, to the prior
payment in full in cash or, at the option of the holders of Senior Debt of such
Guarantor, in Cash Equivalents, of all Senior Debt of such Guarantor, which
would include any Guarantee issued by such Guarantor that constitutes Senior
Debt of such Guarantor, including Guarantees of Indebtedness under the Credit
Agreement. The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary after the
Closing Date, or any Unrestricted Subsidiary shall cease to be an Unrestricted
Subsidiary and shall become a Restricted Subsidiary, then, unless such
Subsidiary is not required to guarantee and has not guaranteed the Company's
Obligations under the Credit Agreement and has not guaranteed any other
Indebtedness of the Company or any Restricted Subsidiary, such Subsidiary shall
become a Guarantor in accordance with the terms of the Indenture. A Subsidiary
shall, without limitation, be
66
<PAGE>
deemed to have guaranteed Indebtedness of another Person if such Subsidiary has
Indebtedness of the kind described in clause (ii) or clause (iii) of the
definition of the term "Indebtedness." The obligations of each Guarantor under
its Subsidiary Guarantee will be limited to the maximum amount that would not
result in the obligations of such Guarantor under its Subsidiary Guarantee
constituting a fraudulent conveyance under applicable law.
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
Person, whether or not affiliated with such Guarantor, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to another Person,
unless (1) the Person formed by or surviving such consolidation or merger (if
other than such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a Person organized and
existing under the laws of the United States of America, any state thereof, or
the District of Columbia and expressly assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes and the Indenture and
(2) immediately after giving effect to such transaction, no Default or Event of
Default exists. The provisions of clause (i) of the preceding sentence shall
not apply if the Person formed by or surviving the relevant consolidation or
merger or to which the relevant sale, assignment, transfer, lease, conveyance
or other disposition shall have been made is the Company, a Guarantor or a
Person that is not, after giving effect to such transaction, a Restricted
Subsidiary of the Company.
The Indenture provides that in the event of (1) a merger or consolidation
to which a Guarantor is a party, then the Person formed by or surviving such
merger or consolidation (if, after giving effect to such transaction, other
than the Company or a Restricted Subsidiary of the Company) shall be released
and discharged from the obligations of such Guarantor under its Subsidiary
Guarantee, (2) a sale or other disposition (whether by merger, consolidation or
otherwise) of all of the Equity Interests of a Guarantor at the time owned by
the Company and its Restricted Subsidiaries to any Person that, after giving
effect to such transaction, is neither the Company nor a Restricted Subsidiary
of the Company, or (3) the release and discharge of a Guarantor from all
obligations under Guarantees of (a) Obligations under the Credit Agreement and
(b) any other Indebtedness of the Company or any of its Restricted
Subsidiaries, then in each such case such Guarantor shall be released and
discharged from its obligations under its Subsidiary Guarantee; provided that,
in the case of each of clauses (1) and (2), (i) the relevant transaction is in
compliance with the Indenture, and (ii) the Person being released and
discharged shall have been released and discharged from all obligations it
might otherwise have under Guarantees of Indebtedness of the Company or any of
its Restricted Subsidiaries and, in the case of each of clauses (1), (2) and
(3), immediately after giving effect to such transaction, no Default or Event
of Default shall exist.
Optional Redemption
Except as described below, the Notes are not redeemable at the Company's
option prior to May 15, 2004. Thereafter, the Notes are subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on May 15 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................... 104.375%
2005................................... 102.916%
2006................................... 101.458%
2007 and thereafter.................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to May 15, 2002,
the Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes theretofore issued under the
67
<PAGE>
Indenture at a redemption price equal to 108.75% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more
Equity Offerings; provided that (1) at least 65% of the original aggregate
principal amount of Notes remain outstanding immediately following each such
redemption and (2) such redemption shall occur within 60 days of the closing of
any such Equity Offering.
In addition, upon the occurrence of a Change of Control (as defined
below) at any time prior to May 15, 2004, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice given within 30 days following
such Change of Control, at the Make-Whole Price, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
shall cease to accrue on Notes or portions of Notes called for redemption.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, unless notice of redemption
of the Notes in whole has been given pursuant to the provisions of the
Indenture described above under "Optional Redemption", the Company is obligated
to make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 30 days following a Change of Control, the Company will mail
a notice to each Holder with a copy to the Trustee describing the transaction
or transactions that constitute the Change of Control and offering to
repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. In addition, the
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions
68
<PAGE>
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Company is not required to make a Change of Control Offer following a
Change of Control if a third party makes such a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn pursuant to
such Change of Control Offer.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. However, restrictions in the Indenture
described herein on the ability of the Company and its Restricted Subsidiaries
to incur additional Indebtedness, to grant Liens on their respective
properties, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require repurchase of the Notes, and there can be
no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such repurchase. Such restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances,
make more difficult or discourage any leveraged buyout of the Company or any of
its Subsidiaries by their management. While such restrictions cover a wide
variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Indenture may not afford the Holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions and may provide that certain change
of control events with respect to the Company would constitute events of
default thereunder. In the event a Change of Control occurs at a time when the
Company is prohibited from repurchasing Notes, the Company could seek the
consent of its lenders to the repurchase of Notes or could attempt to refinance
or repay the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from repurchasing Notes. In such case, the Company's failure to
repurchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of the Notes.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole. Although there is case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
69
<PAGE>
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (1) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a Board Resolution ) of the assets or Equity
Interests issued or sold or otherwise disposed of and (2) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of (x) cash or Cash Equivalents or (y) a controlling interest in
another business or fixed or other long-term assets, in each case, in a Similar
Business; provided that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets or Equity
Interests such that the Company or such Restricted Subsidiary are released from
further liability and (b) any securities, notes or other obligations received
by the Company or such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash within 90 days
or are guaranteed (by means of a letter of credit or otherwise) by an
institution specified in the definition of "Cash Equivalents" (to the extent of
the cash received or the obligations so guaranteed) shall be deemed to be cash
or Cash Equivalents for purposes of this provision, subject to application as
provided in the following paragraph.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, at its option, may (1) apply such Net Proceeds to permanently
prepay, repay or reduce any Senior Debt of the Company (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings) or
(2) apply such Net Proceeds to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, in a Similar Business, or determine to
retain such Net Proceeds to the extent such Net Proceeds constitute such a
controlling interest or long-term asset in a Similar Business. Pending the
final application of any such Net Proceeds, the Company may invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10 million,
the Company will be required to make an offer to all Holders of Notes (and
holders of other Indebtedness of the Company to the extent required by the
terms of such other Indebtedness) (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes (and such other Indebtedness) that does not
exceed the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase, in accordance with
the procedures set forth in the Indenture. To the extent that the aggregate
principal amount of Notes (and such other Indebtedness) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes (and such other Indebtedness) tendered exceeds the
amount of Excess Proceeds, the Notes (and such other Indebtedness) to be
purchased will be selected on a pro rata basis. Upon completion of an Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Asset
Sale Offer must be commenced within 60 days following the date on which the
aggregate amount of Excess Proceeds exceeds $10 million and remain open for at
least 30 and not more than 40 days (unless otherwise required by applicable
law). The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions. In the event the Company is
required to make an Asset Sale Offer at a time when the Company is prohibited
from repurchasing Notes, the Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to refinance or repay the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited
70
<PAGE>
from repurchasing Notes. In such case, the Company's failure to repurchase
tendered Notes would constitute an Event of Default under the Indenture which
would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of the Notes.
Any other credit agreements or other agreements governing indebtedness to
which the Company becomes a party may require that the Company and its
Subsidiaries apply all proceeds from certain asset sales to repay in full
outstanding obligations thereunder prior to the application of such proceeds to
repurchase outstanding Notes.
Certain Covenants
Restricted Payments
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, (1) declare or pay any dividend or
make any other payment or distribution on account of the Company's Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or to any direct or indirect
holders of the Company's Equity Interests in their capacity as such (other than
dividends or distributions (a) payable in Equity Interests (other than
Disqualified Stock) of the Company, (b) payable in Capital Stock or assets of
an Unrestricted Subsidiary of the Company or (c) payable to the Company or any
Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company, or any Equity Interests of any of its Restricted Subsidiaries held by
any Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company, any Equity Interests then
being issued by the Company or a Restricted Subsidiary of the Company or any
Investment in a Person that, after giving effect to such Investment, is a
Restricted Subsidiary of the Company); (3) make any payment on or with respect
to, or purchase, redeem, repay, defease or otherwise acquire or retire for
value, any Indebtedness of the Company or any Guarantor that is subordinated in
right of payment to the Notes or any Guarantee thereof, except a regularly
scheduled payment of interest or principal or sinking fund payment (other than
the purchase or other acquisition of such subordinated Indebtedness made in
anticipation of satisfying any sinking fund payment due within one year from
the date of acquisition); or (4) make any Restricted Investment (all such
payments and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments declared or made by the
Company and its Restricted Subsidiaries after the Closing Date
(without duplication and excluding Restricted Payments permitted
by clauses (2) and (3) of the following paragraph), is less than
the sum of
. 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after
the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit);
plus
71
<PAGE>
. 100% of the aggregate net cash proceeds and the fair
market value of any assets or property (as determined in
good faith by the Board of Directors of the Company)
received by the Company from the issue or sale since the
Closing Date of Equity Interests of the Company (other
than Disqualified Stock), or of Disqualified Stock or
debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests
or Disqualified Stock or convertible debt securities sold
to a Subsidiary of the Company and other than
Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock); plus
. with respect to Restricted Investments made after the
Closing Date, the net reduction of such Restricted
Investments as a result of (x) any disposition of any
such Restricted Investments sold or otherwise liquidated
or repaid, to the extent of the net cash proceeds and the
fair market value of any assets or property (as
determined in good faith by the Board of Directors of the
Company) received, (y) dividends, repayment of loans or
advances or other transfers of assets to the Company or
any Restricted Subsidiary of the Company or (z) the
portion (proportionate to the Company's interest in the
equity of a Person) of the fair market value of the net
assets of an Unrestricted Subsidiary or other Person
immediately prior to the time such Unrestricted
Subsidiary or other Person is designated or becomes a
Restricted Subsidiary of the Company (but only to the
extent not included in the first subclause of this clause
(c)); provided that the sum of items (x), (y) and (z) of
this subclause shall not exceed, in the aggregate, the
aggregate amount of such Restricted Investments made
after the Closing Date.
The foregoing provisions will not prohibit (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture, (2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than any Disqualified Stock, except to the
extent that such Disqualified Stock is issued in exchange for other
Disqualified Stock or the net cash proceeds of such Disqualified Stock is used
to redeem, repurchase, retire or otherwise acquire other Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from the second clause of clause (c) of the preceding
paragraph; (3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness in exchange for, or out of the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (4) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any
employees, officers or directors of the Company or any of its Restricted
Subsidiaries or, upon the death, disability or termination of employment of
such officers, directors and employees, their authorized representatives in an
aggregate amount not to exceed in any twelve month period, $2.0 million plus
the aggregate net cash proceeds from any issuance during such period of Equity
Interests by the Company to such employees, officers, directors, or
representatives plus the aggregate net cash proceeds from any payments on life
insurance policies in which the Company or its Restricted Subsidiaries is the
beneficiary with respect to such employees, officers or directors the proceeds
of which are used to repurchase, redeem or acquire Equity Interests of the
Company held by such employees, officers, directors or representative; (5) the
repurchase of Equity Interests of the Company deemed to occur upon the exercise
of stock options or similar arrangement if such Equity Interests represents a
portion of the exercise price thereof; or (6) additional Restricted Payments in
an amount not to exceed $15 million; provided, however, that at the time of,
and after giving effect to, any Restricted Payment permitted under clauses (4)
or (6) no Default or Event of Default shall have occurred and be continuing.
72
<PAGE>
In the case of any Restricted Payments made other than in cash, the
amount thereof shall be the fair market value on the date of such Restricted
Payment of the asset(s) or securities proposed to be transferred or issued by
the Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. The fair market value of any such asset(s) or securities
shall be determined in good faith by the Board of Directors of the Company.
Where the amount of any Investment made other than in cash is otherwise
required to be determined for purposes of the Indenture, then unless otherwise
specified such amount shall be the fair market value thereof on the date of
such Investment, and fair market value shall be determined in good faith by the
Board of Directors of the Company.
Designation of Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments (including without limitation any direct or indirect obligation to
subscribe for additional Equity Interests or maintain or preserve such
subsidiary's financial condition or to cause such person to achieve any
specified level of operating results) by the Company and its Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so designated will
be deemed to be Investments at the time of such designation and, except to the
extent, if any, that such Investments are Permitted Investments at such time,
will reduce the amount otherwise available for Restricted Payments. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Investment would
be permitted at such time and if such Restricted Subsidiary otherwise meets (or
would meet concurrently with the effectiveness of such designation) the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock,"
and (2) no Default or Event of Default would be in existence following such
designation.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company's Restricted Subsidiaries will not issue
any shares of Preferred Stock (other than to the Company or a Restricted
Subsidiary of the Company); provided, however, that the Company and the
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Consolidated Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred would have been equal to or greater than 2 to 1, determined on a pro
forma basis, as if the additional Indebtedness had been incurred at the
beginning of such four-quarter period and no Event of Default shall have
occurred and be continuing after giving effect on a pro forma basis to such
incurrence.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness under the Credit Agreement in an
aggregate amount outstanding (with letters of credit being deemed
for all purposes of the Indenture to have a principal amount equal
to the maximum potential liability of the Company and its Restricted
Subsidiaries in respect thereof) at any time not to exceed the
greater of (x) $450 million and (y) 3.5 times Consolidated Resort
73
<PAGE>
EBITDA for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is being
incurred less, in each case, the aggregate amount of such
Indebtedness permanently repaid with the Net Proceeds of any Asset
Sale;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness represented by the Notes (including
the Exchange Notes), the Guarantees thereof and the Indenture in
the principal amount of Notes originally issued on the Closing
Date;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company and its Restricted
Subsidiaries of additional Indebtedness (other than Hedging
Obligations) in an aggregate principal amount not to exceed $50
million at any time outstanding;
(v) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
assets or a new Restricted Subsidiary (including Indebtedness that
was incurred by the prior owner of such assets or by such
Restricted Subsidiary prior to such acquisition by the Company and
its Restricted Subsidiaries); provided that the aggregate
principal amount of Indebtedness incurred pursuant to this clause
(v) does not exceed $20 million at any time outstanding;
(vi) the incurrence by the Company and its Restricted
Subsidiaries of Permitted Refinancing Indebtedness;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and its Restricted Subsidiaries; provided, however, that
any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary of the Company, and any
sale or other transfer of any such Indebtedness to a Person that
is not the Company or a Restricted Subsidiary of the Company,
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations incurred for the
purpose of hedging against fluctuations in currency values or for
the purpose of fixing or hedging interest rate risk with respect
to any floating rate Indebtedness of the Company or any of its
Restricted Subsidiaries permitted by the Indenture; provided that
the notional principal amount of any Hedging Obligations does not
significantly exceed the principal amount of Indebtedness to which
such agreement relates;
(ix) the Guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company permitted by the Indenture;
(x) the incurrence of Indebtedness arising from agreements
providing for indemnification, adjustment of purchase price, earn
out or other similar obligations, in each case incurred in
connection with the acquisition or disposition of any business or
assets or subsidiaries of the Company permitted by the Indenture;
and
(xi) the Indebtedness incurred from time to time under a
revolving credit facility of SSI Venture in an aggregate amount
outstanding at any time not to exceed $10 million, so long as SSI
Venture remains a Restricted Subsidiary of the Company.
For purposes of determining the amount of any Indebtedness of any Person
under this covenant, (a) the principal amount of any Indebtedness of such
Person arising by reason of such Person having granted or assumed a Lien on its
property to secure Indebtedness of another Person shall be the lower of the
fair market
74
<PAGE>
value of such property and the principal amount of such Indebtedness
outstanding (or committed to be advanced) at the time of determination; (b) the
amount of any Indebtedness of such Person arising by reason of such Person
having Guaranteed Indebtedness of another Person where the amount of such
Guarantee is limited to an amount less than the principal amount of the
Indebtedness so Guaranteed shall be such amount as so limited; and (c)
Indebtedness shall not include a non-recourse pledge by the Company or any of
its Restricted Subsidiaries of Investments in any Person that is not a
Restricted Subsidiary of the Company to secure the Indebtedness of such Person.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company, in its sole discretion, either (a) shall classify (and may later
reclassify) such item of Indebtedness in one of such categories in any manner
that complies with this covenant or (b) shall divide and classify (and may
later redivide and reclassify) such item of Indebtedness into more than one of
such categories pursuant to such first paragraph.
Liens
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) (a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness or other obligations owed
to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries, (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries or (iv) guarantee the Notes or any renewals or refinancings
thereof, in each case except for such encumbrances or restrictions (other than
encumbrances and restrictions in respect of clause (iv) of this sentence)
existing under or by reason of (a) Existing Indebtedness as in effect on the
Closing Date, (b) the Credit Agreement as in effect as of the Closing Date, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Agreement as in effect on the Closing Date, (c) the Notes, any Guarantee
thereof and the Indenture, (d) applicable law, (e) any instrument governing
Indebtedness or Equity Interests of a Person acquired by the Company or any of
its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Equity Interests were incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the Equity Interests,
properties or assets of any Person, other than the Person, or the Equity
Interests, property or assets of the Person, so acquired; provided that, in the
case of Indebtedness, such Indebtedness was permitted by the Indenture, (f) by
reason of customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired or proceeds therefrom, (h) customary restrictions in asset
or stock sale agreements limiting transfer of such assets or stock pending the
closing of such sale, (i) customary non-assignment provisions in contracts
entered into in the ordinary course of business, or (j) Permitted Refinancing
Indebtedness; provided
75
<PAGE>
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a Person organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after giving effect to such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Restricted Subsidiary of the Company, the Company or the Person formed
by or surviving any such consolidation or merger (if other than the Company),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company, immediately preceding the transaction and (B) will, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "Incurrence
of Indebtedness and Issuance of Preferred Stock."
Nothing contained in the foregoing paragraph shall prohibit (i) any
Restricted Subsidiary from consolidating with, merging with or into, or
transferring all or part of its properties and assets to the Company or (ii)
the Company from merging with an Affiliate for the purpose of reincorporating
the Company in another jurisdiction to realize tax or other benefits; provided,
however, that in connection with any such merger, consolidation or asset
transfer no consideration, other than common stock (that is not Disqualified
Stock) in the surviving Person or the Company shall be issued or distributed.
Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate payments or consideration in excess
of $5.0 million, a Board Resolution authorizing and determining the fairness of
such Affiliate Transaction approved by a majority of the independent members of
the Board of Directors of the Company and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
payments or consideration in excess of $15.0 million, an opinion as to the
fairness to the Company or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.
The foregoing provisions will not prohibit (i) reasonable fees and
compensation paid to and indemnity provided on behalf of officers, directors,
employees, agents or consultants of the Company or any Restricted Subsidiary of
the Company as determined in good faith by the Company's Board of Directors or
senior
76
<PAGE>
management including, without limitation, any issuance of Equity Interests of
the Company pursuant to stock option, stock ownership or similar plans; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) any agreement or arrangement as in effect on the Closing Date and
publicly disclosed or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement or arrangement thereto so long as any such amendment or replacement
agreement or arrangement is not more disadvantageous to the Company or its
Restricted Subsidiaries, as the case may be, in any material respect than the
original agreement as in effect on the Closing Date; (iv) loans or advances to
employees and officers of the Company and its Restricted Subsidiaries not in
excess of $5 million at any time outstanding; and (v) any Permitted Investment
or any Restricted Payment that is permitted by the provisions of the Indenture
described above under the caption "Restricted Payments".
Limitation on Layering Debt
The Indenture provides that (A) the Company will not, directly or
indirectly, incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is by its terms subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the Notes and (B) no Guarantor will, directly or indirectly, incur,
create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is by its terms subordinate or junior in right of payment to
any Senior Debt of such Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantee of such Guarantor.
Additional Subsidiary Guarantees
The Indenture provides that if any Restricted Subsidiary of the Company
after the date of the Indenture shall become or be required to become a
guarantor under the Credit Agreement, or shall become a guarantor of any other
Indebtedness of the Company or any Restricted Subsidiary, then such Restricted
Subsidiary shall become a Guarantor, in accordance with the terms or the
Indenture; provided that if such Restricted Subsidiary is released and
discharged from all obligations under such guarantees, it shall be released and
discharged from its obligations under its Subsidiary Guarantee as described
under "--Subsidiary Guarantees" above.
Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company and its Restricted Subsidiaries will agree that, for so
long as any Notes remain outstanding, they will furnish to the Holders and to
securities analysts and
77
<PAGE>
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due (whether payable at maturity, upon redemption or repurchase or
otherwise) of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with the provisions
described under the caption "Merger, Consolidation or Sale of Assets"; (iv)
failure by the Company to comply with the provisions described under the
captions "Change of Control" or "Asset Sale" (whether or not prohibited by the
subordination provisions of the Indenture) (other than a failure to purchase
Notes pursuant to an offer commenced under such provisions, which shall be
subject to clause (ii) above) for 30 days after written notice by the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Notes; (v) failure by the Company or any of its Restricted Subsidiaries for 60
days after written notice by the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes to comply with any of its other
agreements in the Indenture or the Notes other than those referred to in
clauses (i), (ii), (iii) or (iv) above; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Significant Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Significant Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the Closing Date, which default
(a) is caused by a failure to pay principal after final maturity of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10 million or more without such Indebtedness being discharged or such
acceleration having been cured, waived or rescinded within 30 days of
acceleration; (vii) failure by the Company or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $10 million and
either (a) any creditor commences enforcement proceedings upon any such
judgment or (b) such judgments are not paid, discharged or stayed for a period
of 60 days; (viii) except as permitted by the Indenture, any Guarantee of the
Notes by a Significant Subsidiary shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect, or any Guarantor which is a Significant Subsidiary or any Person
acting on behalf of any such Guarantor, shall deny or disaffirm its obligations
under its Guarantee of the Notes; and (ix) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes and all other Obligations thereunder to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company, all outstanding Notes will become due and payable without
further action or notice. Holders of the Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal, premium, if any, interest or Liquidated Damages, if any,) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or any
Guarantor with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes
78
<PAGE>
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
principal, premium, if any, interest or Liquidated Damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or such Guarantor under the Notes, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of and premium, if any, interest
and Liquidated Damages, if any, on the Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium, if any, interest and
Liquidated Damages, if any, on the outstanding Notes on the Stated Maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (b) since
the Closing Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes, as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United
79
<PAGE>
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit); (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under, any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that after
the 91st day following the deposit, the trust fund will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Satisfaction and Discharge of the Indenture
The obligations of the Company and the other Guarantors under the
Indenture will terminate when (i) either (a) all outstanding Notes have been
delivered to the Trustee for cancellation, or (b) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable, will become due and payable within one year or are to be called for
redemption within one year under irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name and
at the expense of the Company and the Company has irrevocably deposited or
caused to be deposited with the Trustee, in trust, funds in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of (and
premium, if any, on) and interest and Liquidated Damages, if any, to the date
of maturity or date of redemption, (ii) the Company has paid or caused to be
paid all sums payable by the Company under the Indenture, and (iii) the Company
has delivered an Officers' Certificate and an Opinion of Counsel relating to
compliance with the conditions set forth in the Indenture.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture, or the Notes thereof may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
80
<PAGE>
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the price to be paid, or
the timing of redemption or payment, upon redemption of the Notes or, after the
Company has become obligated to make a Change of Control Offer or an Asset Sale
Offer, amend, change or modify the obligation of the Company to make or
consummate such Change of Control Offer or Asset Sale Offer; (iii) reduce the
rate of or change the time for payment of interest or Liquidated Damages, if
any, on any Note; (iv) waive a Default or Event of Default in the payment of
principal of or premium, interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration); (v) make any Note payable in
money other than that stated in the Notes; (vi) except pursuant to the terms of
the Indenture, release any Guarantor from its Guarantee of the Notes; (vii)
make any change in the subordination provisions in the Indenture that adversely
affects the rights of any Holder of any Notes in any material respect or any
change to any other provision thereof that adversely affects the rights of any
Holder of Notes under the subordination provisions of the Indenture in any
material respect (it being understood that amendments to the provisions of the
Indenture described above under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" which may have the effect of
increasing the amount of Senior Debt that the Company and its Restricted
Subsidiaries may incur shall not, for purposes of this clause (vii), be deemed
to be a change that adversely affects in a material respect the rights of any
Holder of Notes under the subordination provisions of the Indenture; or (viii)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or any Guarantor's obligations to
Holders of Notes in the case of a merger, consolidation or sale of assets, to
provide security for the Notes, to add a Guarantor, to make any change that
would provide any additional rights or benefits to the Holders of Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder in any material respect, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
Concerning the Trustee
The Trustee has been appointed by the Company as Registrar and Paying
Agent with respect to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days and apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to the Trustee against any
loss, liability or expense.
81
<PAGE>
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness or preferred stock of any other Person existing at the time such
other Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness or preferred stock incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(collectively, "dispositions") of any assets or rights (including, without
limitation, by way of a Sale and Leaseback Transaction), other than
dispositions of inventory or sales or leases of real estate constituting Real
Estate Held for Sale in the ordinary course of business, and (ii) the issuance
of Equity Interests by any Restricted Subsidiary or the disposition by the
Company or a Restricted Subsidiary of Equity Interests in any of the Company's
Restricted Subsidiaries (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary of the Company), in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $3.0 million or (b) for net proceeds
in excess of $3.0 million. Notwithstanding the foregoing, the following will be
deemed not to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary; (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iii)
a Permitted Investment or Restricted Payment that is permitted by the covenant
described above under the caption "Restricted Payments;" (iv) a disposition of
Cash Equivalents solely for cash or other Cash Equivalents; (v) a disposition
in the ordinary course of business of used, worn-out, obsolete, damaged or
replaced equipment; (vi) the grant of licenses to third parties in respect of
intellectual property in the ordinary course of business of the Company or any
of its Restricted Subsidiaries, as applicable; (vii) any disposition of
properties or assets that is governed by the provisions described under "Change
of Control" or "Merger, Consolidation or Sale of Assets;" and (viii) the
granting or incurrence of any Permitted Lien.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company in full force and effect at the time of determination
and certified as such by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
82
<PAGE>
"Cash Equivalents" means (a) marketable obligations issued or
unconditionally guaranteed by the U.S. or issued by any of its agencies and
backed by the full faith and credit of the U.S., in each case maturing within
one year from the date of acquisition; (b) short-term investment grade domestic
and eurodollar certificates of deposit or time deposits that are fully insured
by the Federal Deposit Insurance Corporation or are issued by commercial banks
organized under the laws of the U.S. or any of its states having combined
capital, surplus, and undivided profits of not less than $100,000,000 (as shown
on its most recently published statement of condition); (c) commercial paper
and similar obligations rated "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" by Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"); (d) readily marketable tax-free municipal
bonds of domestic issuer rated "A-2" or better by Moody's or "A" or better by
S&P, and maturing within one year from the date of issuance; and (e) mutual
funds or money market accounts investing primarily in items described in
clauses (a) through (d) above.
"Change of Control" means, with respect to the Company or any successor
Person permitted under the covenant "Merger, Consolidation or Sale of Assets,"
the occurrence of any of the following: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Apollo and its Affiliates, acquires "beneficial ownership" (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total outstanding shares of Voting Stock (as defined)
except to the extent that, and so long as, Apollo and its affiliates hold the
right, by voting power, contract or otherwise, to elect or designate, and do so
elect or designate, a majority of the Company's Board of Directors; (b) the
Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or
any other corporation merges into the Company and, in the case of any such
transaction, the outstanding common stock of the Company is changed or
exchanged as a result, unless the shareholders of the Company immediately
before such transaction own, directly or indirectly, at least 51% of the
outstanding shares of Voting Stock of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction (except to the extent that,
and so long as, Apollo and its affiliates hold the right, by voting power or
otherwise, to elect or designate, and do so elect or designate, a majority of
the Board of Directors of the corporation resulting from such transaction); or
(c) the first day on which more than a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Closing Date" means the date of the closing of the sale of the Notes
initially issued pursuant to the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense,
and (iv) depreciation and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-
cash expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net Income, minus
(v) non-cash items increasing such Consolidated Net Income, in each case, for
such period without duplication on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Resort EBITDA of such Person for
such period to the Consolidated Interest Expense of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any
of its Restricted Subsidiaries incurs, assumes, Guarantees, redeems, repays or
otherwise retires any Indebtedness (other than revolving credit borrowings)
subsequent to the commencement of the period for which the Consolidated
Interest Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Consolidated Interest Coverage Ratio is
made (the "Calculation Date"), then the Consolidated Interest
83
<PAGE>
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, redemption, repayment or retirement of Indebtedness as
if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) (a) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions and (b) other transactions
consummated by the Company or any of its Restricted Subsidiaries with respect
to which pro forma effect may be given pursuant to Article 11 of Regulation S-X
under the Securities Act, in each case during the four-quarter reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Resort EBITDA for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in
the definition of Consolidated Net Income, (ii) the Consolidated Resort EBITDA
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded and (iii) the Consolidated Interest Expense attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent (x) that the obligations giving rise to such Consolidated
Interest Expense will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date, or (without
duplication) (y) such Consolidated Interest Expense is less than the
Consolidated Resort EBITDA attributable to such discontinued operations for the
same period.
"Consolidated Interest Expense" means with respect to any Person for any
period the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (ii)
the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, (iii) any interest
expense for such period on Indebtedness of another Person that is guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not
such Guarantee or Lien is called upon), in each case, on a consolidated basis
and in accordance with GAAP, and (iv) any Preferred Stock dividends paid in
cash by the Company or any of its Restricted Subsidiaries to a Person other
than the Company or any of its Restricted Subsidiaries, determined, in each
case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the net income (but not loss) of any Person that
is not a Restricted Subsidiary of such Person or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash by such Person during such period to
the referent Person or a Restricted Subsidiary thereof, (ii) the net income
(but not loss) of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income is not at the date of determination
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the consolidated stockholders' equity of such Person and its consolidated
Restricted Subsidiaries as of such date, less (without duplication) amounts
attributable to Disqualified Stock of such Person, in each case determined in
accordance with GAAP.
84
<PAGE>
"Consolidated Resort EBITDA" means, with respect to any Person for any
period, the Consolidated EBITDA of such Person for such period minus
consolidated real estate revenue of such Person and its Restricted Subsidiaries
for such period plus consolidated real estate operating expenses of such Person
and its Restricted Subsidiaries for such period minus any portion of such
Consolidated EBITDA attributable to Unrestricted Subsidiaries of such Person
for such period, in each case as reported on such Person's consolidated
statement of operations and determined on a consolidated basis and in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Closing Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Credit Agreement" means that certain amended and restated credit
agreement, dated as of May 1, 1999, by and among the Company, the Lenders named
therein, Nationsbank, N.A. as Agent, and NationsBanc Montgomery Securities LLC,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring on or prior to
91 days after the date on which the Notes mature shall not constitute
Disqualified Stock if (1) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable in any respect to the
holders of such Capital Stock than the terms applicable to the Notes and
described under the captions "Repurchase at the Option of Holders--Asset Sales"
and "Repurchase at the Option of Holders--Change of Control"; and (2) any such
requirement only becomes operative after compliance with such terms applicable
to the Notes, including the purchase of any Notes tendered pursuant thereto.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (1) a public or private sale of Capital Stock of
the Company and (ii) the sale of other securities convertible or exchangeable
into Capital Stock (other than Disqualified Stock) of the Company; provided, an
Equity Offering shall be deemed to occur with respect to all or a portion of
such securities only upon the conversion or exchange of such securities into
Capital Stock.
"Existing Indebtedness" means Indebtedness of the Company and the
Company's Subsidiaries (other than Indebtedness under the Credit Agreement and
the Notes) in existence on the Closing Date, until such Indebtedness is repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States from time to time.
85
<PAGE>
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means (i) each of the Company's Restricted Subsidiaries that
is a party to the Indenture on the date of execution and delivery of the
Indenture and (ii) each other Person that becomes a guarantor of the
obligations of the Company under the Notes and the Indenture from time to time
in accordance with the provisions of the Indenture described under the caption
"Certain Covenants--Additional Affiliate Guarantees", and their respective
successors and assigns; provided, however, that "Guarantor" shall not include
any Person that is released from its Guarantee of the obligations of the
Company under the Notes and the Indenture as described under "Subsidiary
Guarantees."
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap, cap or collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in currency exchange or interest rates.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (which purchase price
is due more than one year after taking title to such property) or services or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP; (ii) all indebtedness of others secured by a Lien on any
asset of such Person (whether or not such indebtedness is assumed by such
Person the amount of such obligation, to the extent it is without recourse to
such Person, being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured); (iii) to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person; provided, however, that (1) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such
indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP; and (2) Indebtedness shall not include any liability for federal, state,
local or other taxes; and (iv) with respect to any Restricted Subsidiary of the
Company, Preferred Stock of such Person (in an amount equal to the greater of
(x) the sum of all obligations of such Person with respect to redemption,
repayment or repurchase thereof and (y) the book value of such Preferred Stock
as reflected on the most recent financial statements of such Person).
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
excluding, however, trade accounts receivable and bank deposits made in the
ordinary course of business consistent with past practice. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the penultimate paragraph of
the covenant described above under the caption "Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under
86
<PAGE>
applicable law (including any conditional, sale or other title retention
agreement, any lease in the nature thereof, and any option or other agreement
to sell or give a Lien).
"Make-Whole Amount" means, with respect to any Note, an amount equal to
the excess, if any, of (a) the present value of the remaining principal,
premium, if any, and interest (other than accrued interest otherwise payable
upon redemption) payments that would be payable with respect to such Note if
such Note were redeemed on May 15, 2004, computed using a discount rate equal
to the Treasury Rate plus 50 basis points, over (b) the principal amount of
such Note.
"Make-Whole Average Life" means, with respect to any date of redemption
of Notes, the number of years (calculated to the nearest one-twelfth) from such
redemption date to May 15, 2004.
"Make-Whole Price" means, with respect to any Note, the greater of (a)
the sum of the principal amount of and Make-Whole Amount with respect to such
Note, and (b) the redemption price of such Note on May 15, 2004.
"Net Income" means, with respect to any Person, the net income (or loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (or
loss), together with any related provision for taxes on such gain (or loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to Sale and Leaseback Transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries
and (ii) any extraordinary or nonrecurring gain (or loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (or
loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale, but only as and when received, and any proceeds deemed to be
cash or Cash Equivalents pursuant to clause (b) of the first paragraph under
the caption "Asset Sales"), net of (i) the direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a result
thereof, (ii) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale, (iv) all distributions and other payments required to be made
to minority interest holders of a Restricted Subsidiary or joint venture as a
result of such Asset Sale, and (v) any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest (including post-petition
interest), penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holder" means Apollo Advisors, L.P., a Delaware limited
partnership, or any fund, investment vehicle or account managed, advised or
controlled by Apollo Advisors, L.P., or any of its Affiliates.
"Permitted Investments" means (i) any Investment in the Company or a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company and, to the extent required under the
Indenture, a Guarantor or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "Repurchase at the Option
of Holders--Asset Sales"; (v) any
87
<PAGE>
acquisition of assets received solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (vi) any Investment
in a Similar Business (including any Investment made in any Unrestricted
Subsidiaries in a Similar Business) if, after giving effect to such Investment,
the aggregate amount of all Investments made pursuant to this clause (vi) then
constituting Unrestricted Investments Outstanding does not exceed the greater
of (x) $75 million and (y) 7.5% of Total Consolidated Assets of the Company at
the time of such Investment; (vii) contributions of Real Estate Held for Sale
to Real Estate Joint Ventures; provided, in the case of any Investment made
pursuant to this clause (vii) or the preceding clause (vi), that after giving
effect to such Investment (a) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, and (b) the
Company would, at the time of such Investment and after giving pro forma effect
thereto as if such Investment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set
forth in the first paragraph of the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock;" and (viii)
Investments received in connection with the settlement of any ordinary course
obligations owed to the Company or any of its Restricted Subsidiaries.
"Permitted Liens" means (i) Liens in favor of the Company or any of its
Restricted Subsidiaries; (ii) Liens securing Senior Debt of the Company or any
Restricted Subsidiary of the Company; (iii) Liens on property or Equity
Interests of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets or Equity Interests
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
incurred or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business (other
than contracts in respect of borrowed money and other Indebtedness); (vi) Liens
existing on the Closing Date; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefore;
(viii) Liens securing the Notes or any Guarantee thereof; (ix) Liens securing
Permitted Refinancing Indebtedness to the extent that the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded was permitted to
be secured by a Lien; provided that such Liens do not extend to any assets
other than those that secured the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (x) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary of the Company
with respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (xi) Liens
securing Capital Lease Obligations; provided that such Liens do not extend to
any property or assets which are not leased property subject to such
Capitalized Lease Obligation; (xii) judgment liens not giving rise to an Event
of Default so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such judgment,
degree or order shall not have been finally terminated or the period within
such proceedings may be initiated shall not have expired; (xiii) Liens securing
obligations of the Company under Hedging Obligations; (xiv) purchase money
Liens securing Purchase Money Obligations; provided that the related
Indebtedness shall not be secured by any property or assets of the Company or
any Restricted Subsidiary other than the property or assets so acquired
pursuant to such Purchase Money Obligation; (xv) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods; (xvi) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
88
<PAGE>
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; provided that such Liens
do not extend to any property or assets which are not leased property subject
to such leases or subleases; and (xviii) Liens created for the benefit of all
of the Notes and/or any Guarantees thereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Hedging Obligations and other than
Indebtedness permitted to be incurred pursuant to clause (i), clause (iv) or
clause (vii) of the second paragraph under "--Incurrence of Indebtedness and
Issuance of Preferred Stock") of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus premium and
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date equal to or later than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated
in right of payment to the Notes or any Guarantee thereof, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes or
such Guarantee on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary that is an
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means an individual, limited or general partnership,
corporation, limited liability company, association, unincorporated
organization, trust, joint stock company, joint venture or other entity, or a
government or any agency or political subdivisions thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Money Obligations" of any Person means any obligations of such
Person or any of its Subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such person or any of its subsidiaries within 180 days of
such purchase.
"Real Estate Held for Sale" means, with respect to any Person, the real
estate of such Person and its Restricted Subsidiaries classified for financial
reporting purposes as Real Estate Held for Sale on the Closing Date or
thereafter acquired as Real Estate Held for Sale.
"Real Estate Joint Venture" means any Person engaged exclusively in the
acquisition, development and operation or resale of any real estate asset or
group of related real estate assets (and directly related activities).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
89
<PAGE>
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Similar Business" means any business conducted by the Company or any of
its Subsidiaries as of the Closing Date or any other recreation, leisure and/or
hospitality business including without limitation ski mountain resort
operations, or any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or is reasonably
ancillary thereto.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of at least a majority of the
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
"Total Consolidated Assets" means, with respect to any Person as of any
date, the book value of the assets of such Person and its Restricted
Subsidiaries as shown on the most recent consolidated balance sheet of such
Person.
"Treasury Rate" means, at any time of computation, the yield to maturity
at such time (as compiled by and published in the most recent statistical
release (or any successor release) of the Federal Reserve Bank of New York,
which has become publicly available at least two business days prior to the
date of the redemption notice or, if such statistical release (or successor
release) is no longer published, any generally recognized publicly available
source of similar market data) of United States Treasury securities with a
constant maturity most nearly equal to the Make-Whole Average Life; provided,
however, that if the Make-Whole Average Life is not equal to the constant
maturity of the United States Treasury security for which a weekly average
yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the Make-Whole Average Life is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to
a constant maturity of one year shall be used.
"Unrestricted Investments Outstanding" means, at any time of
determination, in respect of all Permitted Investments made pursuant to clause
(vi) of the definition of the term Permitted Investments, the excess, if any,
of (i) the sum of all Permitted Investments theretofore made by the Company or
any Restricted Subsidiary on or after the date of the Indenture pursuant to
clause (vi) of the definition of Permitted Investments over (ii) the amount of
all cash, and the fair market value of any assets or property, distributed as
dividends and distributions to the Company or a Restricted Subsidiary of the
Company (to the extent that the Company does not elect to include the amount of
such dividends and distributions in the computation of Consolidated Net Income
pursuant to the parenthetical of clause (i) of the definition thereof at the
time of determination), and all repayments of the principal amount of loans or
advances, the net cash proceeds, and the fair market value of assets or
property, received from sales or transfers, in respect of such Investments to
the Company or any of its Restricted Subsidiaries and any other reduction made
in cash of such Investments in such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary is not party
90
<PAGE>
to any agreement, contract, arrangement or understanding with the Company or
any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding comply with the covenant set
forth under "Transactions with Affiliates."
"Voting Stock" of any Person as of any date means classes of the Capital
Stock of such Person that is at the time entitled to vote in the election of at
least a majority of the directors, managers, trustees or other governing body
of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
91
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding Notes where such outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. We have agreed that for a period of 30 days after effectiveness of
the exchange offer registration statement, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the exchange notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any broker-
dealer that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit of any such resale of exchange
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. By acceptance of the
exchange offer, each broker-dealer that receives exchange notes pursuant to the
exchange offer hereby agrees to notify us prior to using this prospectus in
connection with the sale or transfer of exchange notes, and acknowledges and
agrees that, upon receipt of notice from us of the happening of any event which
makes any statement in this prospectus untrue in any material respect or which
requires the making of any changes in this prospectus in order to make the
statements herein not misleading (which notice we agree to deliver promptly to
such broker-dealer), such broker-dealer will suspend use of this prospectus
until we have amended or supplemented the prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such broker-dealer.
For a period of 30 days after effectiveness of the exchange offer
registration statement, we will promptly send additional copies of this
prospectus and any amendment or supplement thereto to any broker-dealer that
requests such documents in the letter of transmittal. We have agreed to pay all
expenses incident to the exchange offer (including the expenses of any one
special counsel for the holders of the Notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes participating in the exchange offer (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
92
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a discussion of certain U.S. federal income tax and
estate tax consequences of (i) the exchange of outstanding Notes for exchange
notes and (ii) the ownership and disposition of the exchange notes. For
purposes of this discussion, a "U.S. Holder" is a Holder that is an individual
who is a citizen or resident of the United States, a corporation or a
partnership that is organized in or under the laws of the United States or any
state thereof, an estate the income of which is includible in gross income for
U.S. tax purposes regardless of its source or, a trust the administration of
which is subject to the primary supervision of a United States court and as to
which one or more United States persons have the authority to control all
substantial decisions of the trust. A "Non-U.S. Holder" is a Holder that is not
a U.S. Holder. This summary applies only to Notes held as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). It does not discuss all of the tax consequences that may be
relevant to a Holder in light of its particular circumstances or to Holders
subject to special rules, such as tax-exempt organizations, dealers in
securities or foreign currencies, financial institutions, life insurance
companies, or regulated investment companies, or to Holders whose functional
currency is not the United States dollar or who hold the Notes as part of a
synthetic security, conversion transaction, or certain "straddle" or hedging
transactions. It also does not deal with holders other than Holders
participating in the exchange offer (except where otherwise specifically
noted). Persons considering participation in the exchange offer should consult
their own tax advisors concerning the application of United States federal
income tax laws to their particular situations as well as any consequences of
the exchange of outstanding Notes for exchange notes, and the ownership and
disposition of the exchange notes arising under the laws of any other taxing
jurisdiction.
The U.S. federal income tax and estate tax considerations set forth below
are based upon the Code and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified, possibly with retroactive effect, so as to result in U.S. federal
income tax consequences different from those presented below.
Federal Income Tax Consequences of Tendering Outstanding Notes for Exchange
Notes
Exchange Offer. The exchange of outstanding Notes for exchange notes
pursuant to the exchange offer should not be treated as an exchange or other
taxable event for United States federal income tax purposes because under
Treasury regulations, the exchange notes should not be considered to differ
materially in kind or extent from the outstanding Notes. Rather, the exchange
notes received by a holder should be treated as a continuation of the
outstanding Notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to holders who exchange
outstanding Notes for exchange notes pursuant to the exchange offer and any
such holder should have the same tax basis and holding period in the exchange
notes as it had in the outstanding Notes immediately before the exchange.
Federal Income Tax Consequences of Owning Exchange Notes
U.S. Holders
Interest. Interest on an exchange note will be taxable to a U.S. Holder
as ordinary interest income in accordance with the U.S. Holder's method of
accounting for U.S. federal income tax purposes.
Sale, Exchange or Redemption of an Exchange Note. A U.S. Holder will
recognize gain or loss, if any, on the sale, redemption or other taxable
disposition of an exchange note in an amount equal to the difference, if any,
between the U.S. Holder's adjusted tax basis in the exchange note and the
amount received therefor (other than amounts attributable to accrued and unpaid
interest on the exchange notes, which will be treated as interest for U.S.
federal income tax purposes). Subject to the market discount rules noted under
"--U.S. Holders--Market Discount and Bond Premium" below, gain or loss, if any,
recognized on the sale,
93
<PAGE>
redemption or other taxable disposition of a Note generally should be long-term
capital gain or loss if the exchange was held as a capital asset and was held
for more than one year as of the date of disposition.
Market Discount and Bond Premium. If a U.S. Holder acquires an exchange
note subsequent to its original issuance and the exchange note's principal
amount exceeds the U.S. Holder's initial tax basis in the exchange note by more
than a de minimis amount, the U.S. Holder will be treated as having acquired
the exchange note at a "market discount" equal to such excess. In addition, if
a U.S. Holder's initial tax basis in an exchange note exceeds the principal
amount of the exchange note, the U.S. Holder will generally be treated as
having acquired the exchange note with "bond premium" in an amount equal to
such excess. U.S. Holders should consult their tax advisers regarding the
existence, if any, and the tax consequences of market discount and bond
premium.
Backup Withholding and Information Reporting. A U.S. Holder of an
exchange note may be subject to information reporting and possible backup
withholding. If applicable, backup withholding would apply at a rate of 31%
with respect to interest on, or the proceeds of a sale, exchange, redemption,
retirement, or other disposition of, such exchange note, unless such U.S.
Holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact, or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable backup withholding rules.
Non-U.S. Holders
The Exchange Notes. The payment of interest on an exchange note will
generally not be subject to U.S. federal income tax (or to withholding of tax),
if (1) the interest is not effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, the interest is
not attributable to a permanent establishment in the United States, (2) the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote, (3)
the Non-U.S. Holder is not a controlled foreign corporation that is related to
us actually or constructively through stock ownership and (4) either (i) the
beneficial owner of the exchange note certifies to us or our agent, under
penalties of perjury, that it is not a U.S. Holder and provides its name and
address on U.S. Treasury Form W-8 (or on a suitable substitute form) or (ii) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the exchange note certifies under penalties
of perjury that such a Form W-8 (or suitable substitute form) has been received
from the beneficial owner by it or by a financial institution between it and
the beneficial owner and furnishes the payer with a copy thereof.
Recently adopted Treasury Regulations (the "Final Withholding
Regulations") will change the methods for satisfying the certification
requirement described in clause (4) above. The Final Withholding Regulations
also will require, in the case of Notes held by a foreign partnership that (i)
this certification generally be provided by the partners rather than by the
foreign partnership and (ii) the partnership provide certain information,
including a United States employer identification number. A look-through rule
would apply in the case of tiered partnerships. The Final Withholding
Regulations will become effective for payments made after December 31, 1999.
A Non-U.S. Holder will generally not be subject to U.S. federal income
tax on any gain realized in connection with the sale, exchange, retirement, or
other disposition of a Note, unless (i) the gain is effectively connected with
a trade for business of the Non-U.S. Holder in the United States (or, if a tax
treaty applies, the gain is attributable to a permanent establishment in the
United States); (ii) in the case of a Non-U.S. Holder who is an individual and
holds the Note as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year of the disposition and either (a) has
a "tax home" for United States federal income tax purposes in the United States
or (b) has an office or other fixed place of business in the United States to
which the gain is attributable; or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of United States federal income tax laws applicable
to certain United States expatriates.
94
<PAGE>
An exchange note held directly by an individual who, at the time of
death, is not a citizen or resident of the United States should not be
includible in such individual's gross estate for U.S. estate tax purposes as a
result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of our stock entitled to vote and, at the time of the individual's
death, if payments with respect to such Note would not have been effectively
connected with the conduct by such individual of a trade or business in the
United States. Even if the exchange note was includible in the gross estate
under the foregoing rules, the Note may be excluded under the provisions of an
applicable estate tax treaty.
Backup Withholding and Information Reporting. Interest payments on the
exchange notes made by us or any paying agent of ours to certain noncorporate
Non-U.S. Holders generally will not be subject to information reporting or
"backup withholding" if the certification described under "--Non-U.S. Holders--
The exchange note" above is received, provided in each case that the payer does
not have actual knowledge that the Holder is a U.S. Holder.
Payment of proceeds from a sale of an exchange note to or through the
U.S. office of a broker is subject to information reporting and backup
withholding unless the Non-U.S. Holder certifies as to its non-U.S. status or
otherwise establishes an exemption from information reporting and backup
withholding. Payment outside the United States of the proceeds of the sale of
an exchange note to or through a foreign office of a "broker" (as defined in
applicable U.S. Treasury Regulations) should not be subject to information
reporting or backup withholding, except that if the broker is a U.S. person, a
controlled foreign corporation for U.S. federal income tax purposes or a
foreign person 50% or more of whose gross income is from a U.S. trade or
business, information reporting should apply to such payment unless the broker
has documentary evidence in its records that the beneficial owner is not a U.S.
Holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption.
THE U.S. FEDERAL INCOME TAX AND ESTATE TAX DISCUSSION SET FORTH ABOVE IS
INTENDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR
HOLDER'S SITUATION. PERSONS CONSIDERING PARTICIPATING IN THE EXCHANGE OFFER
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING THE OUTSTANDING NOTES AND, OWNING AND DISPOSING OF THE EXCHANGE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING
RETROACTIVE CHANGES) IN U.S. FEDERAL AND OTHER TAX LAWS.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for
us by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York.
EXPERTS
The consolidated financial statements of Vail Resorts, Inc. and
subsidiaries as of July 31, 1998 and September 30, 1997 and for the ten-month
period ended July 31, 1998 and for the years ended September 30, 1997 and 1996,
included in this prospectus and elsewhere in the registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and included herein in reliance
upon the authority of said firm as experts in accounting and auditing.
95
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
VAIL RESORTS, INC.
<TABLE>
<S> <C>
Audited Consolidated Financial Statements
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of July 31, 1998 and September 30, 1997... F-3
Consolidated Statements of Operations for the ten months ended July 31,
1998 and the years ended September 30, 1997 and 1996.................... F-4
Consolidated Statements of Stockholders' Equity for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-5
Consolidated Statements of Cash Flows Operations for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Consolidated Condensed Interim Financial Statements
Consolidated Condensed Balance Sheets as of January 31, 1999 and July 31,
1998.................................................................... F-24
Consolidated Condensed Statements of Operations for the Three Months
Ended
January 31, 1999 and 1998............................................... F-25
Consolidated Condensed Statements of Operations for the Six Months Ended
January 31, 1999 and 1998............................................... F-26
Consolidated Condensed Statements of Cash Flows for the Six Months Ended
January 31, 1999 and 1998............................................... F-27
Notes to Consolidated Condensed Financial Statements..................... F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vail Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of VAIL
RESORTS, INC., formerly known as Gillett Holdings, Inc. (a Delaware
corporation), and subsidiaries as of July 31, 1998 and September 30, 1997 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the ten-month period ended July 31, 1998 and for the years ended
September 30, 1997 and 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 Vail Resorts, Inc. and
subsidiaries as of July 31, 1998 and September 30, 1997 and the results of
their operations and their cash flows for the ten-month period ended July 31,
1998 and for the years ended September 30, 1997 and 1996.
Arthur Andersen LLP
Denver, Colorado
October 15, 1998
F-2
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................. $ 13,366 $ 8,142
Restricted cash....................................... 6,146 6,561
Trade Receivables, net of allowances of $1,220 and
$742, respectively................................... 22,224 17,638
Notes receivable...................................... 4,263 4,469
Inventories........................................... 8,893 10,789
Deferred income taxes (Note 9)........................ 12,126 24,500
Other current assets.................................. 4,708 4,253
-------- --------
Total current assets................................ 71,726 76,352
Property, plant and equipment, net (Note 7)............. 501,371 411,117
Real estate held for sale............................... 138,916 154,925
Deferred charges and other assets....................... 12,605 12,217
Notes receivable, noncurrent portion.................... 1,372 1,073
Intangible assets, net (Note 7)......................... 186,132 200,265
-------- --------
Total assets........................................ $912,122 $855,949
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses (Note 7)........ $ 55,012 $ 70,171
Income taxes payable.................................. 2,239 325
Rights payable to stockholders........................ -- 5,707
Long-term debt due within one year (Note 6)........... 1,734 1,715
-------- --------
Total current liabilities........................... 58,985 77,918
Long-term debt (Note 6)................................. 282,280 263,347
Other long-term liabilities............................. 28,886 23,281
Deferred income taxes (Note 9).......................... 79,347 85,737
Commitments and contingencies (Note 11)
Stockholders' equity (Notes 1 and 14):
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares issued and outstanding......... -- --
Common stock--
Class A common stock, $.01 par value, 20,000,000
shares authorized, 7,639,834 and 11,639,834 shares
issued and outstanding as of July 31, 1998 and
September 30, 1997, respectively................... 76 116
Common Stock, $.01 par value, 80,000,000 shares
authorized, 26,817,346 and 21,765,815 shares issued
and outstanding as of July 31, 1998 and September
30, 1997, respectively............................. 269 218
Additional paid-in capital............................ 401,563 385,634
Retained earnings..................................... 60,716 19,698
-------- --------
Total stockholders' equity........................ 462,624 405,666
-------- --------
Total liabilities and stockholders' equity........ $912,122 $855,949
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Ten
Months Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Net revenues:
Resort............................. $336,547 $259,038 $140,288
Real estate........................ 73,722 71,485 48,655
-------- -------- --------
Total net revenues............... 410,269 330,523 188,943
Operating expenses:
Resort............................. 217,764 172,715 89,890
Real estate........................ 62,619 66,307 40,801
Corporate expense.................. 4,437 4,663 12,698
Depreciation and amortization...... 36,838 34,044 18,148
-------- -------- --------
Total operating expenses......... 321,658 277,729 161,537
-------- -------- --------
Income from operations............... 88,611 52,794 27,406
Other income (expense):
Investment income.................. 1,784 1,762 586
Interest expense................... (17,789) (20,308) (14,904)
Loss on disposal of fixed assets... (1,706) (182) (2,630)
Other expense...................... (736) (383) (1,500)
-------- -------- --------
Income before income taxes........... 70,164 33,683 8,958
Provision for income taxes (Note 9).. (29,146) (13,985) (4,223)
-------- -------- --------
Net income........................... $ 41,018 $ 19,698 $ 4,735
======== ======== ========
Net income per common share (Notes 2
and 4):
Basic.............................. $ 1.20 $ 0.66 $ 0.23
======== ======== ========
Diluted............................ $ 1.18 $ 0.64 $ 0.22
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
---------------------------------------- Paid-in Earnings Stockholders'
Class A Common Total Amount Capital (Deficit) Equity
---------- ---------- ---------- ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1995................... 12,817,692 6,943,984 19,761,676 $198 $135,561 $31,935 $ 167,694
Net income for the year
ended September 30,
1996................... -- -- -- -- -- 4,735 4,735
Shares issued pursuant
to stock grants
(Note 13).............. -- 238,324 238,324 2 1,989 -- 1,991
Rights payable to
stockholders........... -- -- -- -- (13,843) (36,670) (50,513)
Shares of Class A Common
Stock converted to
Common Stock (Note
14).................... (391,472) 391,472 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1996................... 12,426,220 7,573,780 20,000,000 200 123,707 -- 123,907
Net income for the year
ended September 30,
1997................... -- -- -- -- -- 19,698 19,698
Issuance of shares
pursuant to options
exercised (Note 13).... -- 744,482 744,482 7 10,212 -- 10,219
Issuance of shares in
acquisition of resort,
net (Note 5)........... -- 7,554,406 7,554,406 76 151,012 -- 151,088
Issuance of shares in
initial public
offering, net.......... -- 5,000,000 5,000,000 50 98,100 -- 98,150
Issuance of shares in
acquisitions of retail
space, net............. -- 106,761 106,761 1 2,348 -- 2,349
Compensation expense
related to employee
stock options.......... -- -- -- -- 255 -- 255
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (786,386) 786,386 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1997................... 11,639,834 21,765,815 33,405,649 334 385,634 19,698 405,666
Net income for the ten-
month period ended July
31, 1998............... -- -- -- -- -- 41,018 41,018
Issuance of shares
pursuant to options
exercised (Note 13).... -- 1,043,271 1,043,271 11 7,990 -- 8,001
Tax effect of stock
option excercises...... -- -- -- -- 7,669 -- 7,669
Restricted stock issue
(Note 13).............. -- 8,260 8,260 -- 270 -- 270
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (4,000,000) 4,000,000 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, July 31, 1998.. 7,639,834 26,817,346 34,457,180 $345 $401,563 $60,716 $ 462,624
========== ========== ========== ==== ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Ten Year Year
Months Ended Ended Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 41,018 $ 19,698 $ 4,735
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization....... 36,838 34,044 18,148
Deferred compensation payments in
excess of expense.................. -- (331) (814)
Noncash cost of real estate sales... 49,112 52,647 32,394
Noncash compensation related to
stock grants (Note 13)............. 285 306 25
Noncash compensation related to
stock options...................... -- 255 1,915
Noncash equity income............... (2,973) (701) --
Deferred financing costs
amortized.......................... 448 389 247
Loss on disposal of fixed assets.... 1,706 182 2,630
Deferred income taxes, net (Note
9)................................. 29,146 7,413 2,500
Changes in assets and liabilities:
Restricted cash..................... (415) 529 (575)
Accounts receivable, net............ (4,358) 2,089 475
Notes receivable, net............... (93) (4,469) --
Inventories......................... 2,497 (835) (418)
Accounts payable and accrued
expenses........................... (16,226) (10,712) 9,551)
Other assets and liabilities........ (2,642) 2,867 (4,947)
--------- --------- ---------
Net cash provided by operating
activities....................... 134,343 103,371 65,866
Cash flows from investing activities:
Cash paid in resort acquisition,
net of cash acquired............... -- (146,386) --
Cash paid in hotel acquisitions,
net of cash acquired............... (54,250) -- --
Resort capital expenditures......... (80,454) (51,020) (13,912)
Investments in real estate.......... (15,661) (56,947) (40,604)
Investments in joint venture........ -- 2,511 (200)
--------- --------- ---------
Net cash used in investing
activities....................... (150,365) (251,842) (54,716)
Cash flows from financing activities:
Proceeds from initial public
offering........................... -- 98,150 --
Proceeds from the exercise of stock
options............................ 8,001 -- --
Payments under Rights............... (5,707) (42,175) --
Refund of bond reserve fund......... 3,297 -- --
Proceeds from borrowings under
long-term debt..................... 334,000 235,000 84,000
Payments on long-term debt.......... (318,345) (139,984) (130,547)
--------- --------- ---------
Net cash provided by (used in)
financing activities............. 21,246 150,991 (46,547)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents.................... 5,224 2,520 (35,397)
Cash and cash equivalents:
Beginning of period................. 8,142 5,622 41,019
--------- --------- ---------
End of period....................... $ 13,366 $ 8,142 $ 5,622
========= ========= =========
Cash paid for interest............... $ 16,336 $ 20,166 $ 21,880
========= ========= =========
Taxes paid, net of refunds........... $ -- $ 1,925 $ 400
========= ========= =========
Supplemental disclosure of non-cash
transactions:
Issuance of common stock in resort
acquisition (Note 5)................ $ 151,088
=========
Assumption of liabilities in resort
acquisition (Note 5)................ $ 91,480
=========
Option exercise (Note 13)............ $ 2,740
=========
Issuance of common stock in purchase
of retail space..................... $ 2,349
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and
operates through various subsidiaries. Vail Resorts and its subsidiaries
(collectively, the "Company") currently operate in two business segments,
mountain resorts and real estate development. Vail Associates, Inc., an
indirect wholly-owned subsidiary of Vail Resorts, and its subsidiaries,
(collectively, "Vail Associates") operate four of the world's largest skiing
facilities on Vail, Breckenridge, Keystone and Beaver Creek mountains in
Colorado. The Breckenridge and Keystone mountain resorts (collectively, the
"Acquired Resorts"), together with the Arapahoe Basin mountain resort and
significant related real estate interests and developable land, were acquired
by the Company on January 3, 1997 (the "Acquisition"). The Company divested the
Arapahoe Basin mountain resort on September 5, 1997. Vail Resorts Development
Company ("VRDC"), a wholly-owned subsidiary of Vail Associates, Inc., conducts
the Company's real estate development activities. The Company's mountain resort
business, which is primarily composed of ski operations and related amenities,
is seasonal in nature with a typical ski season beginning in mid-October and
continuing through mid-May.
On September 1, 1997, the Company announced the change of its fiscal year
end from September 30 to July 31. Accordingly, the Company's fiscal year 1998
ended on July 31, 1998 and consisted of ten months. For fiscal 1998, the
Company filed a transitional interim report for the four months ended January
31, 1998, a quarterly report for the three months ended April 30, 1998 and will
file this annual report for the ten-months ended July 31, 1998. This annual
report for the ten-months ended July 31, 1998 includes statements of financial
position as of July 31, 1998, and September 30, 1997, results of operations and
statements of cash flows for the ten-months ended July 31, 1998 and twelve-
months ended September 30, 1997 and 1996.
2. Summary of Significant Accounting Policies
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. Investments in joint ventures are accounted for under the equity
method. All significant intercompany transactions have been eliminated.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. The carrying amounts reported in the balance sheet for cash
equivalents are at fair value.
Restricted Cash--Restricted cash represents amounts held as reserves for
self-insured worker's compensation claims, and owner and guest advance deposits
held in escrow for lodging reservations.
Inventories--The Company's inventories consist primarily of purchased retail
goods, food, and spare parts. Inventories are stated at the lower of cost,
determined using the first-in, first-out (FIFO) method, or market.
Property, Plant and Equipment--Property, plant and equipment is carried at
cost net of accumulated depreciation. Depreciation is calculated generally on
the straight-line method based on the following useful lives:
<TABLE>
<CAPTION>
Estimated
Life
---------
<S> <C>
Land improvements..................................................... 40
Buildings and terminals............................................... 40
Ski lifts............................................................. 15
Machinery, equipment, furniture and fixtures.......................... 3-12
Automobiles and trucks................................................ 3-5
</TABLE>
Ski trails are depreciated over the life of their respective United States
Forest Service permits.
F-7
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Real Estate Held for Sale--The Company capitalizes as land held for sale the
original acquisition cost (or appraised value as of the effective date, as
defined below), direct construction and development costs, property taxes,
interest incurred on costs related to land under development, and other related
costs (engineering, surveying, landscaping, etc.) until the property reaches
its intended use. The cost of sales for individual parcels of real estate or
condominium units within a project is determined using the relative sales value
method. Selling expenses are charged against income in the period incurred.
Interest capitalized on real estate development projects during fiscal years
1997 and 1996 totaled $0.5 million and $2.2 million, respectively. There was no
interest capitalized on real estate development projects during fiscal 1998.
The Company is a partner in the Keystone/Intrawest LLC ("Keystone JV"),
which is a joint venture with Intrawest Resorts, Inc. formed to develop land at
the base of Keystone Mountain. The Company contributed 500 acres of development
land as well as certain other funds to the joint venture. The Company's
investment in the Keystone JV including the Company's equity earnings from the
inception of the Keystone JV, are reported as real estate held for sale in the
accompanying balance sheet as of July 31, 1998. The Company recorded $2.9
million and $0.7 million in equity income for the ten-month period ended July
31, 1998 and fiscal year ended September 30, 1997, respectively.
Deferred Financing Costs--Costs incurred with the issuance of debt
securities are included in deferred charges and other assets, net of
accumulated amortization. Amortization is charged to interest expense over the
respective original lives of the applicable debt issues.
Interest Rate Agreements--Interest rate exchange agreements, defined as
swaps, are effective at creating synthetic instruments and thereby modifying
the Company's interest rate exposures. The Company enters into interest rate
swaps to minimize the impact of interest rate movements on the expense
associated with its floating rate debt. Net interest is accrued as either
interest receivable or payable with the offset recorded in interest expense.
Any premium paid is amortized over the life of the agreement.
Intangible Assets--"Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets" ("Excess Reorganization Value") represents the excess of
the Company's reorganization value over the amounts allocated to the net
tangible and other intangible assets of the Company upon emergence from
bankruptcy on October 8, 1992 (the "Effective Date"). The Company has
classified as goodwill the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Intangible assets are recorded net
of accumulated amortization in the accompanying consolidated balance sheet and
amortized using the straight-line method over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Excess reorganization value.................................... 20 years
Goodwill....................................................... 40 years
Trademarks..................................................... 40 years
Other intangibles.............................................. 3-15 years
</TABLE>
Long-lived Assets--The Company evaluates potential impairment of long-lived
assets and long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"). SFAS No. 121 establishes procedures for the review of recoverability,
and measurement of impairment, if necessary, of long-lived assets, goodwill and
certain identifiable intangibles held and used by an entity. SFAS No. 121
requires that those assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. SFAS No. 121 also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less estimated selling costs. As of July 31,
1998, management believes that there has not been any impairment of the
Company's long-lived assets, goodwill or other identifiable intangibles.
F-8
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition--Resort Revenues are derived from a wide variety of
sources, including sales of lift tickets, ski school tuition, dining, retail
stores, equipment rental, hotel operations, property management services,
travel reservation services, club management, real estate brokerage,
conventions, licensing and sponsoring activities and other recreational
activities, and are recognized as services are performed. Revenues from real
estate sales are not recognized until title has been transferred, and revenue
is deferred if the receivable is subject to subordination until such time as
all costs have been recovered. Until the initial down payment and subsequent
collection of principal and interest are by contract substantial, cash received
from the buyer is reported as a deposit on the contract.
Deferred Revenue--The Company records deferred revenue related to the sale
of season ski passes. The number of season pass holder visits is estimated
based on historical data and the deferred revenue is recognized throughout the
season based on this estimate. During the ski season the estimated visits are
compared to the actual visits and adjustments are made if necessary.
Advertising Costs--Advertising costs are expensed the first time the
advertising takes place. Advertising expense for the ten-month period ended
July 31, 1998 and the fiscal years ended September 30, 1997 and 1996 was $8.7
million, $8.8 million and $6.9 million, respectively. At fiscal years ended
July 31, 1998 and September 30, 1997, advertising costs of $0.9 million and
$1.3 million are reported as current assets in the Company's consolidated
balance sheets.
Income Taxes--The Company uses the liability method of accounting for income
taxes as prescribed by SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, a deferred tax liability or asset is recognized for the effect of
temporary differences between financial reporting and income tax reporting.
(See Note 9).
Net Income Per Share--In accordance with SFAS No. 128, "Earnings Per Share",
the company computes net income per share on both the basic and diluted basis
(See Note 4).
Fair Value of Financial Instruments--The recorded amounts for cash and cash
equivalents, receivables, other current assets, and accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
financial instruments. The fair value of amounts outstanding under the
Company's Credit Facilities approximates book value due to the variable nature
of the interest rate associated with that debt. The fair values of the
Company's Industrial Development Bonds and other long-term debt have been
estimated using discounted cash flow analyses based on current borrowing rates
for debt with similar maturities and ratings. The estimated fair values of the
Industrial Development Bonds and other long-term debt at July 31, 1998 and
September 30, 1997 are presented below (in thousands):
<TABLE>
<CAPTION>
September 30,
July 31, 1998 1997
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Industrial Development Bonds........... $64,560 $76,935 $61,263 $65,910
Other Long-Term Debt................... $ 1,370 $ 1,414 $ 1,662 $ 1,615
</TABLE>
Stock Compensation--The Company's stock option plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company has adopted the disclosure requirements
of SFAS No.123, "Accounting for Stock-Based Compensation" (See Note 13).
F-9
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications--Certain reclassifications have been made to the
accompanying consolidated financial statements for the years ended September
30, 1997 and 1996 to conform to the current period presentation.
New Accounting Standards--During fiscal year 1998, the Company adopted the
provisions of SFAS No. 128, "Earnings Per Share," which requires that the
company discloses both basic earnings per share and diluted earnings per share.
The Company adopted the provisions of SFAS No. 128 retroactively for 1997 and
1996, as required.
The Company is required to adopt SFAS No. 130, "Reporting Comprehensive
Income", in the first quarter of fiscal 1999. Upon adoption of SFAS No. 130,
the Company will report all changes in the Company's stockholders' equity other
than transactions with stockholders on the face of the income statement. The
Company currently does not have any transactions that would necessitate
disclosure of comprehensive income, however the Company will continue to
evaluate the impact of the pronouncement.
The Company is required to adopt SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", for fiscal year 1999. SFAS No. 131
will supercede the business segment disclosure requirements currently in effect
under SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise".
SFAS No. 131, among other things, establishes standards regarding the
information a company is required to disclose about its operating segments and
provides guidance regarding what constitutes a reportable operating segment.
The Company is currently evaluating disclosures under SFAS No. 131 compared to
current disclosures.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", will not have an effect on the Company because it
does not have a defined benefit pension plan.
The Accounting Standards Executive Committee ("AcSEC") issued Statement of
Position ("SOP") 98-1 providing guidance on accounting for the costs of
computer software developed or obtained for internal use. The effective date
for this pronouncement is for fiscal years beginning after December 15, 1998.
The Company is in the process of reviewing its current policies for accounting
for costs associated with internal software development projects and how they
may be affected by SOP 98-1.
The AcSEC issued SOP 98-5 which requires that all non-governmental entities
expense costs of start-up activities as incurred. The effective date for this
pronouncement is for fiscal years beginning after December 15, 1998. The
Company is in the process of reviewing its current policies for accounting for
costs associated with start-up activities and how they may be affected by SOP
98-5.
F-10
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Change in Fiscal Year End
On September 1, 1997, the Company changed its fiscal year end from September
30 to July 31, beginning with fiscal year 1998. Comparative results of
operations of the Company for the ten-months ended July 31, 1998 and 1997 are
as shown below. Also presented is the Company's 1998 fiscal year restated for
the July 31, 1998 year end.
<TABLE>
<CAPTION>
Ten-Months Ended
July 31, Twelve-Months
---------------------- Ended July
1998 1997 31, 1998
--------- ----------- -------------
(audited) (unaudited) (unaudited)
<S> <C> <C> <C>
Net Revenue:
Resort.................................... $336,547 $248,511 $350,498
Real estate............................... 73,722 61,104 84,177
-------- -------- --------
Net Revenues................................ 410,269 309,615 434,675
Operating Expenses:
Resort.................................... 217,764 153,212 238,889
Real Estate............................... 62,619 54,944 74,057
Corporate expense......................... 4,437 3,557 5,543
Depreciation and amortization............. 36,838 27,604 42,965
Reorganization charge..................... -- 2,200 --
-------- -------- --------
Total operating expenses.................... 321,658 241,517 361,454
-------- -------- --------
Income from operations...................... 88,611 68,098 73,221
Other income (expense):
Investment income......................... 1,784 1,372 2,174
Interest expense.......................... (17,789) (17,236) (20,891)
Gain (loss) on sale of fixed assets....... (1,706) (100) (1,788)
Other..................................... (736) 87 (1,217)
-------- -------- --------
Income before income taxes.................. 70,164 52,221 51,499
Credit (provision) for income taxes......... (29,146) (21,781) (21,426)
-------- -------- --------
Net income.................................. $ 41,018 $ 30,440 $ 30,073
======== ======== ========
Basic net income per common share........... $ 1.20 $ 1.06 $ 0.88
======== ======== ========
Diluted net income per common share......... $ 1.18 $ 1.02 $ 0.87
======== ======== ========
</TABLE>
F-11
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Net Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("EPS"), effective for periods ending after December
15, 1997, including interim periods. SFAS No. 128 establishes standards for
computing and presenting earnings per share. SFAS No. 128 requires the dual
presentation of basic (replaces primary EPS) and diluted EPS on the face of the
income statement and requires a reconciliation of numerators (net income) and
denominators (weighted average shares outstanding) for both basic and diluted
EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing
net income available to common shareholders by the weighted average shares
outstanding. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised resulting in
the issuance of common shares that would then share in the earnings of the
Company. The Company has adopted the requirements of SFAS No. 128 for the ten-
month period ended July 31, 1998. Pro forma presentation and disclosure
requirements are supplied for prior period comparisons in accordance with the
statement.
<TABLE>
<CAPTION>
Ten
Months Ended September 30, September 30,
July 31, 1998 1997 1996
---------------- ----------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Income Per Common Share
Net Income................. $41,018 $ 41,018 $ 19,698 $ 19,698 $ 4,735 $ 4,735
Weighted average shares
outstanding............... 34,204 34,204 30,067 30,067 20,266 20,266
Effect of dilutive stock
options................... -- 547 -- 912 -- 1,189
------- -------- -------- -------- ------- -------
Total shares............... 34,204 34,751 30,067 30,979 20,266 21,455
------- -------- -------- -------- ------- -------
Net Income Per Common
Share..................... $ 1.20 $ 1.18 $ 0.66 $ 0.64 $ 0.23 $ 0.22
======= ======== ======== ======== ======= =======
</TABLE>
5. Acquisitions
On January 3, 1997, the Company acquired from Ralston Foods, Inc. 100% of
the stock of Ralston Resorts, Inc., ("Ralston Resorts") the owner and operator
of the Breckenridge, Keystone and Arapahoe Basin mountain resorts located in
Summit County, Colorado, for a total purchase price, including direct costs, of
$297.3 million. In connection with the Acquisition, the Company refinanced
$139.7 million of indebtedness, issued 7,554,406 shares of Common Stock valued
at $151.1 million to Ralston Foods, Inc., assumed liabilities of $59.8 million
and incurred $9.0 million in acquisition costs. Pursuant to a consent decree
with the United States Department of Justice and the Attorney General of the
State of Colorado (the "Consent Decree"), the Company sold the assets
constituting the Arapahoe Basin mountain resort on September 5, 1997 for a sum
of $4.0 million.
The Acquisition was accounted for as a purchase combination. Under purchase
accounting, the acquisition cost was allocated to the assets and liabilities of
the Acquired Resorts based on their relative fair values.
The following unaudited pro forma results of operations of the Company for
the ten-months ended July 31, 1997 assume that the Acquisition occurred on
October 1, 1996. The unaudited pro forma results of operations include the
effects of the Company's initial public offering only from its effective date
of February 7, 1997. These pro forma results are not necessarily indicative of
the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations. The unaudited pro forma
financial information below excludes the results of Arapahoe Basin, which the
Company divested. The audited summarized financial information for the ten-
months ended July 31, 1998 are provided for comparative purposes.
F-12
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
(Pro Forma)
Ten Months Ten Months
Ended Ended
July 31, 1998 July 31, 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Resort revenue...................................... $ 336,547 $ 280,949
Real estate revenue................................. 73,722 63,025
Total revenues...................................... 410,269 343,974
Net income.......................................... 41,018 29,572
Basic net income per common share................... $ 1.20 $ 0.95
Diluted net income per common share................. $ 1.18 $ 0.91
</TABLE>
During the ten months ended July 31, 1998, the Company acquired three hotel
properties. On October 1, 1997, the Company purchased the assets constituting
the Great Divide Lodge (f/k/a Breckenridge Hilton) for a total purchase price
of $18.6 million. The Great Divide Lodge is a 208-room full service hotel,
located at the base of Breckenridge Mountain, and includes dining, conference
and fitness facilities. On October 7, 1997, the Company purchased 100% of the
outstanding stock of Lodge Properties, Inc., a Colorado corporation, ("LPI"),
for a total purchase price of $30.9 million. LPI owns and operates The Lodge at
Vail, a 59-room hotel with dining and conference facilities. LPI also provides
management services to an additional 40 condominiums and owns a parcel of
developable land strategically located at the primary base area of Vail
Mountain. On January 15, 1998 the Company purchased the assets constituting the
Inn at Keystone for a total purchase price of $9.3 million. The Inn at Keystone
is a 103-room full service hotel, located near Keystone Mountain, and includes
dining, conference and spa facilities. All acquisitions were accounted for as
purchase combinations and funded with cash from operations or proceeds from the
Revolving Credit Facility.
6. Long-Term Debt
Long-term debt as of July 31, 1998 and September 30, 1997 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
(d)
(e) Average September
Maturity Rate July 31, 1998 30, 1997
--------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Industrial Development Bonds (a)..... 1999-2020 7.38% $ 64,560 $ 61,263
Credit Facilities (b)................ 2003 7.39% 218,000 202,000
Other (c)............................ 1998-2002 6.09% 1,454 1,799
--------- ---------
284,014 265,062
Less: Current Maturities............. 1,734 1,715
--------- ---------
$ 282,280 $ 263,347
========= =========
</TABLE>
- --------
(a) At September 30, 1997 the Company had $41.2 million of outstanding
Industrial Development Bonds issued by Eagle County, Colorado which accrued
interest at 8% per annum and matured on August 1, 2009. Interest was
payable semi-annually on February 1 and August 1. The Company provided the
holder of these bonds a debt service reserve fund of $3.3 million, which
was netted against the principal amount for financial reporting purposes.
The Industrial Development Bonds were secured by the stock of the
subsidiaries of Vail Associates, Inc. and the Vail and Beaver Creek
Mountain United States Forest Service Permits. On April 9, 1998, the
Industrial Development Bonds issued by Eagle County, Colorado were
refinanced. Under the terms of the new agreement interest accrues at 6.95%
per annum and the $41.2 million bond principal amount matures on August 1,
2019. Interest is payable semi-annually on February 1 and August 1. The
previous debt service fund of $3.3 million was refunded to the company. The
bonds are secured by the Vail and Beaver Creek Mountain United States
Forest Service Permits. In connection with the Acquisition, the Company
assumed two series of refunding bonds. The Series 1990 Sports Facilities
Refunding Revenue Bonds have an aggregate principal amount of $20.4
million, bear interest at rates
F-13
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ranging from 7.2% to 7.875% and mature in installments in 1998, 2006 and
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate principal amount of $3 million and bear interest at 7.125% for
bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
(b) On September 30, 1997, the Company's Credit Facilities consisted of (i) a
$175 million Revolving Credit Facility, (ii) a $115 million Tranche A Term
Loan Facility and (iii) a $50 million Tranche B Term Loan Facility
(together with Tranche A, the "Term Loan Facilities") thereby providing
for aggregate debt financing of $340 million (collectively, the "Credit
Facilities"). The Revolving Credit Facility would have matured on April
15, 2003 and the Term Loan Facilities required minimum amortization
payments ranging from $11.5 to $41.0 million annually from 1998 to 2004.
On December 19, 1997, the Company refinanced its Credit Facilities to
provide an increase in aggregate debt financing from $340.0 million to
$450.0 million and to eliminate the required minimum amortization payments
under the Term Loan Facilities. All amounts outstanding under the
Revolving Credit Facility and the Term Loan Facilities at December 19,
1997 were refinanced under a single revolving credit facility maturing on
December 19, 2002. Interest on outstanding borrowings under the new
Revolving Credit Facility is payable at rates based upon either LIBOR
(5.69% at July 31, 1998) plus a margin ranging from .50% to 1.25% or prime
(8.5% at July 31, 1998) plus a margin of up to .125%. The Company also
pays a quarterly unused commitment fee ranging from .125% to .30%. The
interest margins fluctuate based upon the ratio of Funded Debt to the
Company's Resort EBITDA (as defined in the underlying Revolving Credit
Facility agreement).
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and
have maturities ranging from 1998 to 2002.
(d) Average borrowing rate for the ten months ended July 31, 1998.
(e) Maturity based on fiscal year end July 31, 1998.
Aggregate maturities for debt outstanding are as follows (in thousands):
Due during twelve-months ending July 31:
<TABLE>
<CAPTION>
As of
July 31,
1998
--------
<S> <C>
1999................................................................ $ 1,734
2000................................................................ 352
2001................................................................ 353
2002................................................................ 375
2003................................................................ 219,500
Thereafter.......................................................... 61,700
--------
Total Debt........................................................ $284,014
========
</TABLE>
7. Supplementary Balance Sheet Information (in thousands)
The composition of property, plant and equipment follows:
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Land and land improvements............................... $115,516 $95,124
Buildings and terminals.................................. 227,956 152,171
Machinery and equipment.................................. 175,453 146,741
</TABLE>
F-14
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Automobiles and trucks.................................. 10,900 14,958
Furniture and fixtures.................................. 35,968 28,282
Construction in progress................................ 21,851 33,691
-------- --------
587,644 470,967
Accumulated depreciation and amortization............... (86,273) (59,850)
-------- --------
$501,371 $411,117
======== ========
</TABLE>
Depreciation expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $28.4 million, $25.1 million and $11.4
million, respectively.
The composition of intangible assets follows:
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Trademarks.............................................. $ 42,611 $ 42,611
Other intangible assets................................. 38,802 38,244
Goodwill................................................ 125,307 118,469
Excess Reorganization Value (See Note 2)................ 24,593 37,702
-------- --------
$231,313 $237,026
Accumulated amortization................................ (45,181) (36,761)
-------- --------
$186,132 $200,265
======== ========
</TABLE>
Significant additions to intangible assets during the ten-months ended July
31, 1998 were primarily related to the acquisitions of three hotel properties
(See Note 5).
Amortization expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $8.4 million, $8.9 million and $6.8
million, respectively.
The composition of accounts payable and accrued expenses follows:
<TABLE>
<CAPTION>
July
31, September 30,
1998 1997
------- -------------
<S> <C> <C>
Trade payables............................................ $24,637 $25,236
Deposits.................................................. 4,516 10,050
Accrued salaries and wages................................ 8,930 9,026
Accrued interest.......................................... 3,051 1,448
Property taxes............................................ 4,144 5,943
Liability to complete real estate sold.................... 2,910 7,336
Other accruals............................................ 6,824 11,132
------- -------
$55,012 $70,171
======= =======
</TABLE>
8. Retirement and Profit Sharing Plans
The Company maintains a defined contribution retirement plan, qualified
under Section 401(k) of the Internal Revenue Code, for its employees. Employees
are eligible to participate in the plan upon attaining the age of 21 and
completing 1,500 hours of service since their employment commencement date or
one year of employment with a minimum of 1,000 hours of service. Participants
may contribute from 2% to 22% of their
F-15
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
qualifying annual compensation up to the annual maximum specified by the
Internal Revenue Code. The Company matches an amount equal to 50% of each
participant's contribution up to 6% of a participant's annual qualifying
compensation. The Company's matching contribution is entirely discretionary and
may be reduced or eliminated at any time.
Total profit sharing plan expense recognized by the Company for the ten
months ended July 31, 1998 and for the fiscal years of 1997 and 1996 was
$844,000, $731,000 and $594,000, respectively.
9. Income Taxes
At July 31, 1998, the Company has total federal net operating loss ("NOL")
carryovers of approximately $337 million for income tax purposes that expire in
the years 2004 through 2008. The Company will be able to use these NOLs to the
extent of approximately $8.0 million per year through October 8, 2007
(Section 382 amount). Consequently, the accompanying financial statements and
table of deferred items only recognize benefits related to the NOLs to the
extent of the Section 382 amount.
At July 31, 1998 the Company has approximately $2.8 million in unused
minimum tax credit carryovers. These tax credits have an unlimited carryforward
period.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of July 31, 1998 and September 30, 1997
are as follows (in thousands):
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Deferred income tax liabilities:
Fixed assets................................... $ 64,508 $ 66,324
Intangible assets.............................. 18,165 20,600
Other, net..................................... 745 --
-------- --------
Total........................................ 83,418 86,924
Gross deferred income tax assets:
Accrued expenses............................... 5,094 5,468
Net operating loss carryfowards................ 23,643 45,649
Minimum tax credit............................. 2,761 1,729
Other, net..................................... -- 963
-------- --------
Total........................................ 31,498 53,809
Valuation allowance for deferred income tax
assets.......................................... (15,301) (28,122)
-------- --------
Deferred income tax assets, net of valuation
allowance....................................... 16,197 25,687
-------- --------
Net deferred income tax liability................ $ 67,221 $ 61,237
======== ========
</TABLE>
The net current and noncurrent components of deferred income taxes
recognized in the July 31, 1998 and September 30, 1997 balance sheets are as
follows (in thousands):
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Net current deferred income tax asset............... $12,126 $24,500
Net noncurrent deferred income tax liability........ 79,347 85,737
------- -------
Net deferred income tax liability................... $67,221 $61,237
======= =======
</TABLE>
F-16
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant components of the provision for income taxes from continuing
operations are as follows (in thousands):
<TABLE>
<CAPTION>
Ten Months Year Ended Year Ended
Ended July September 30, September 30,
31, 1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal......................... $ 1,157 $ 622 $1,193
State........................... 1,082 277 175
------- ------- ------
Total current................. 2,239 899 1,368
Deferred:
Federal......................... 17,173 6,850 2,065
State........................... 1,920 727 435
------- ------- ------
Total deferred................ 19,093 7,577 2,500
Tax Benefit Related to Exercise of
Stock Options and Restricted
Stock............................ 7,814 5,509 355
------- ------- ------
$29,146 $13,985 $4,223
======= ======= ======
</TABLE>
A reconciliation of the income tax provision from continuing operations and
the amount computed by applying the U.S. federal statutory income tax rate to
income from continuing operations before income taxes is as follows:
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
At U.S. federal income tax rate... 35.0 % 35.0 % 35.0 %
State income tax, net of federal
benefit.......................... 4.8 % 3.3 % 4.7 %
Goodwill and Excess Reorganization
Value amortization............... 1.8 % 3.8 % 8.6 %
Other............................. (0.1)% (0.6)% (1.2)%
---- ---- ----
41.5 % 41.5 % 47.1 %
==== ==== ====
</TABLE>
10. Related Party Transactions
Corporate expense includes an annual fee of $500,000 for management services
provided by an affiliate of the majority holder of the Company's Class A Common
Stock. This fee is generally settled partially through use of the Company's
facilities and partially in cash. The fee for the ten-months ended July 31,
1998 and the years ended September 30, 1997 and 1996 was $417,000, $500,000 and
$500,000, respectively. At July 31, 1998, the Company's liability with respect
to this arrangement was $960,000.
Vail Associates has the right to appoint 4 of 9 directors of the Beaver
Creek Resort Company of Colorado ("Resort Company"), a non-profit entity formed
for the benefit of property owners and certain others in Beaver Creek. Vail
Associates has a management agreement with the Resort Company, renewable for
one-year periods, to provide management services on a fixed fee basis. During
fiscal years 1991 through 1998, the Resort Company was able to meet its
operating requirements through its own operations. Management fees and
reimbursement of operating expenses paid to the Company under its agreement
with the Resort Company during fiscal years 1998, 1997 and 1996 totaled $4.7
million, $4.9 million and $5.5 million, respectively. Related amounts due the
Company at July 31, 1998 were $109,000.
F-17
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1991, the Company loaned to Andrew P. Daly, the Company's President,
$300,000, $150,000 of which bears interest at 9% and the remainder of which is
non-interest bearing. The principal sum plus accrued interest is due no later
than one year following the termination, for any reason, of Mr. Daly's
employment with the Company. The proceeds of the loan were used to finance the
purchase and improvement of real property. The loan is secured by a deed of
trust on such property.
In 1995, Mr. Daly's spouse and James P. Thompson, President of VRDC, and his
spouse received financial terms more favorable than those available to the
general public in connection with their purchase of lots in the Bachelor Gulch
development. Rather than payment of an earnest money deposit with the entire
balance due in cash at closing, these contracts provide for no earnest money
deposit with the entire purchase price (which was below fair market value) paid
under promissory notes of $438,750 and $350,000 for Mr. Daly's spouse and Mr.
and Mrs. Thompson, respectively. Each are secured by a first deed of trust and
amortized over 25 years at 8% per annum interest, with a balloon payment due on
the earlier of five years from the date of closing or one year from the date
employment with the Company is terminated. The promissory notes were executed
upon the closings of the lot sales in December 1996.
11. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of the BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of the SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes and townhomes, and lodging units. As of July 31, 1998, the
Company has sold 102 single family homesites and 5 parcels to developers for
the construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Revolving Credit Facility. It is anticipated that as the
Bachelor Gulch community expands, BGMD will become self supporting and that
within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $15.6 million at July 31, 1998. The Company has allocated $9.6
million of that amount to the Bachelor Gulch Village homesites which were sold
as of July 31, 1998 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of July 31,
1998 and 1997 was $2.9 million and $1.4 million, respectively.
At July 31, 1998, the Company had various other letters of credit
outstanding in the aggregate amount of $17.2 million.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment though fiscal 2008. For
the ten-month period ended July 31, 1998, and the years ended September 30,
1997 and 1996, lease expense related to these agreements of $6.4 million, $6.2
million and $3.8 million, respectively, which is included in the accompanying
consolidated statements of operations.
F-18
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum lease payments under these leases as of July 31, 1998 are as
follows:
<TABLE>
<S> <C>
Due during fiscal year ending July 31:
1999............................................................. $ 4,334,493
2000............................................................. 2,992,051
2001............................................................. 2,563,510
2002............................................................. 1,743,934
2003............................................................. 1,689,097
Thereafter....................................................... 6,174,261
-----------
Total.......................................................... $19,497,346
===========
</TABLE>
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
12. Business Segments
The Company currently operates in two business segments, Resort and Real
Estate. Data by segment is as follows:
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Net Revenues:
Resort........................... $336,547 $259,038 $140,288
Real Estate...................... 73,722 71,485 48,665
-------- -------- --------
$410,269 $330,523 $188,943
======== ======== ========
Income from operations:
Resort........................... $ 81,945 $ 52,279 $ 32,250
Real Estate...................... 11,103 5,178 7,854
Corporate........................ (4,437) (4,663) (12,698)
-------- -------- --------
$ 88,611 $ 52,794 $ 27,406
======== ======== ========
Depreciation and amortization:
Resort........................... $ 36,838 $ 34,044 $ 18,148
Real Estate...................... -- -- --
-------- -------- --------
$ 36,838 $ 34,044 $ 18,148
======== ======== ========
Capital expenditures:
Resort........................... $ 80,454 $ 51,020 $ 13,912
Real Estate...................... 15,661 56,947 40,604
-------- -------- --------
$ 96,115 $107,967 $ 54,516
======== ======== ========
<CAPTION>
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Identifiable assets:
Resort........................... $501,371 $411,117 $197,279
Real Estate...................... 138,916 154,925 84,055
-------- -------- --------
$640,287 $566,042 $281,334
======== ======== ========
</TABLE>
F-19
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Stock Compensation Plans
At July 31, 1998, the Company has two stock-based compensation plans, which
are described below. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans. Had compensation cost for
the Company's two stock-based compensation plans been determined consistent
with SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
July
31, September 30, September 30,
1998 1997 1996
------- ------------- -------------
<S> <C> <C> <C>
Net income
As Reported.......................... $41,018 $19,698 $4,735
Pro forma............................ $39,320 $18,211 $4,420
Basic net income per share
As Reported.......................... $ 1.20 $ 0.66 $ 0.23
Pro forma............................ $ 1.15 $ 0.61 $ 0.22
Diluted net income per share
As Reported.......................... $ 1.18 $ 0.64 $ 0.22
Pro forma............................ $ 1.13 $ 0.59 $ 0.21
</TABLE>
The Company has two fixed option plans. Under the 1993 Plan, options
covering an aggregate of 2,045,510 shares of Common Stock may be issued to key
employees, directors, consultants, and advisors of the Company or its
subsidiaries and vest in equal installments over five years. Under the 1996
Plan, 1,500,000 shares of Common Stock may be issued to key employees,
directors, consultants, and advisors of the Company or its subsidiaries and
vest in equal installments over three to five years. Under both plans, the
exercise price of each option equals the market price of the Company's stock on
the date of the grant, and an option's maximum term is ten years.
F-20
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend
yield of 0% for each year, and expected volatility of 14.7%, 29.8% and 29.8%;
risk-free interest rates ranging from 5.49% to 6.61%, 5.66% to 6.68% and 5.66%
to 6.68%; and expected lives ranging from 6 to 8 years for each year. A summary
of the status of the Company's two fixed stock option plans as of July 31, 1998
and September 30, 1997 and 1996 and changes during the years ended on those
dates is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Weighted
Shares Average
Subject Exercise
Fixed Options to Option Price
-------------------------------------------------------- --------- --------
<S> <C> <C>
Balance at September 30, 1995........................... 2,033 $ 8
Granted............................................... 1,711 13
Exercised............................................. -- --
Forfeited............................................. (18) 7
------
Balance at September 30, 1996........................... 3,726 10
Granted............................................... 795 23
Exercised............................................. (1,573) 11
Forfeited............................................. (39) 10
------
Balance at September 30, 1997........................... 2,909 15
Granted............................................... 96 28
Exercised............................................. (1,043) 8
Forfeited............................................. (125) 17
------
Balance at July 31, 1998................................ 1,837 $18
======
</TABLE>
The following table summarizes information about fixed stock options
outstanding at July 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Weighted-Average Weighted- Weighted-
Exercise Shares Remaining Average Shares Average
Price Range Outstanding Contractural Life Exercise Price Exercisable Exercise Price
- ----------- ----------- ----------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 6-11 701,963 5.6 $ 9.06 616,363 $ 8.84
$20-25 1,065,000 8.6 22.44 353,667 22.00
$26-29 70,000 9.7 27.47 --
--------- -------
$ 6-29 1,836,963 7.5 $17.55 970,030 $13.64
========= =======
</TABLE>
During fiscal years 1997 and 1996, the Company granted restricted stock to
certain executives under the 1996 Plan. The aggregate number of shares granted
totaled 12,000 and 62,000 in fiscal 1997 and 1996, respectively. The shares
vest in equal increments over periods ranging from three to five years.
Compensation expense related to these restricted stock awards is charged
ratably over the respective vesting periods. No restricted stock was granted
during fiscal 1998, however 8,260 vested shares were issued.
14. Capital Stock
The Company has two classes of Common Stock outstanding, Class A Common
Stock and Common Stock. The rights of holders of Class A Common Stock and
Common Stock are substantially identical, except that, while any Class A Common
Stock is outstanding, holders of Class A Common Stock elect a class of
directors that constitutes two-thirds of the Board and holders of Common Stock
elect another class of directors
F-21
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
constituting one-third of the Board. At July 31, 1998 and September 30, 1997,
one shareholder owned substantially all of the Class A Common Stock and as a
result, has effective control of the Company's Board of Directors. The Class A
Common Stock is convertible into Common Stock (i) at the option of the holder,
(ii) automatically, upon transfer to a non-affiliate and (iii) automatically if
less than 5,000,000 shares (as such number shall be adjusted by reason of any
stock split, reclassification or other similar transaction) of Class A Common
Stock are outstanding. The Common Stock is not convertible. Each outstanding
share of Class A Common Stock and Common Stock is entitled to vote on all
matters submitted to a vote of stockholders. A 4,000,000 share block of Class A
Common stock was converted to Common Stock during Fiscal 1998 as they were sold
to a non-affiliated company of the prior holder.
15. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Fiscal 1998 ten-month transition period
-----------------------------------------
Three Three
Ten Months Months Months Four Months
Ended Ended Ended Ended
July 31, July 31, April January 31,
1998 1998 30, 1998 1998
---------- -------- -------- -----------
<S> <C> <C> <C> <C>
Resort revenue...................... $336,547 $ 26,303 $170,051 $140,193
Real estate revenue................. 73,722 18,417 3,912 51,393
Total revenue....................... 410,269 44,720 173,963 191,586
Income from operations.............. 88,611 (21,767) 75,226 35,152
Net income (loss)................... 41,018 (16,784) 41,663 16,139
Basic net income (loss) per common
share.............................. $ 1.20 $ (0.49) $ 1.21 $ 0.47
Diluted net income (loss) per common
share.............................. $ 1.18 $ (0.48) $ 1.20 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997
--------------------------------------------------------------
Three
Twelve Months Three Months Months Three Three Months
Ended Ended Ended Months Ended
September 30, September 30, June 30, Ended March December 31,
1997 1997 1997 31, 1997 1996
------------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Resort revenue.......... $259,038 $ 22,840 $ 28,031 $173,056 $ 35,111
Real estate revenue..... 71,485 9,596 9,878 2,229 49,782
Total revenue........... 330,523 32,436 37,909 175,285 84,893
Income from operations.. 52,794 (22,578) (17,701) 81,407 11,666
Net income (loss)....... 19,698 (15,937) (13,895) 44,463 5,067
Basic net income (loss)
per common share....... $ 0.66 $ (0.48) $ (0.42) $ 1.42 $ 0.24
Diluted net income
(loss)
per common share....... $ 0.64 $ (0.47) $ (0.40) $ 1.38 $ 0.23
During fiscal year 1998, the Company changed its fiscal year end from
September 30 to July 31. Quarterly results restated for twelve-months ended
July 31, 1998 are as follows:
<CAPTION>
Fiscal 1998
--------------------------------------------------------------
Three- Three-
Months Months Three-
Twelve-Months Three- Months Ended Ended Months Ended
Ended Ended April January 31, October 31,
July 31, 1998 July 31, 1998 30, 1998 1998 1997
------------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Resort revenue.......... $350,498 $ 26,303 $170,051 $136,322 $ 17,822
Real estate revenue..... 84,177 18,417 3,912 51,158 10,690
Total revenue........... 434,675 44,720 173,963 187,480 28,512
Income from operations.. $ 73,221 $(21,767) $ 75,226 $ 50,045 $(30,283)
Net income (loss)....... 30,073 (16,784) 41,663 25,946 (20,752)
Basic net income (loss)
per common share....... $ 0.88 $ (0.49) $ 1.21 $ 0.76 $ (0.61)
Diluted net income
(loss) per common
share.................. $ 0.87 $ (0.48) $ 1.20 $ 0.75 $ (0.59)
</TABLE>
F-22
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated
Notes due 2009, are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below) the "Guarantor Subsidiaries") except for SSI Venture LLC and
Vail Associates Investments, Inc. (together, the "Non-Guarantor Subsidiaries").
SSI Venture LLC is a 51.9% owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100% owned
corporation which owns real estate held for sale.
As SSI Venture LLC began operations on August 1, 1998, no financial
information for SSI Venture LLC existed prior to that date. In addition, in the
Company's opinion, the financial information of Vail Associates Investments,
Inc. as of and prior to July 31, 1998 is immaterial to the financial position
of the Company and would not have provided additional meaningful information to
investors. Therefore, the Company has not presented herein comparative
consolidated financial information of the Guarantor Subsidiaries and Non-
Guarantor Subsidiaries.
17. Subsequent Events
On August 1, 1998 the Company entered into a joint venture with one of the
largest retailers of ski and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture to be known as
SSI Venture LLC. The Company contributed its retail and rental operations to
the joint venture for a 51.9% share of the joint venture. Specialty Sports,
Inc. contributed an additional 30 stores located in Denver, Boulder, Aspen,
Telluride, Vail and Breckenridge. The owners and operators of Specialty Sports,
Inc., the Gart family, have been operating in the sporting goods industry in
Colorado since 1929 and will run the day-to-day operations of SSI Venture LLC.
Vail Resorts will participate in the strategic and financial management of the
joint venture.
On August 13, 1998 the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB"), for a total purchase price of
$33.8 million. VAB owns and operates The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies which currently
hold contracts for 360 condominium units, eight restaurants, approximately
28,000 square-feet of retail space leased to third parties, and approximately
32,000 square feet of convention and meeting space. In addition, the
acquisition includes the Maggie Building, that is generally considered to be
the prime base lodge of Breckenridge Mountain Resort, but until now, has
neither been owned nor managed by the Company. This transaction also included
VAB's other Breckenridge assets, including the Bell Tower Mall and certain
other real estate parcels for near-term development. Simultaneously, the
Company has entered into a contract to sell these same assets for $10 million
to East West Partners of Avon, Colorado, a highly-experienced mountain resort
real estate developer. The acquisition was funded with proceeds from our credit
facility.
F-23
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
January July 31,
31, 1999 1998
---------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................ $ 17,704 $ 19,512
Receivables.............................................. 57,683 26,487
Inventories.............................................. 24,426 8,893
Deferred income taxes.................................... 12,126 12,126
Other current assets..................................... 4,658 4,708
---------- --------
Total current assets................................. 116,597 71,726
Property, plant and equipment, net......................... 547,915 501,371
Real estate held for sale.................................. 154,960 138,916
Deferred charges and other assets.......................... 19,146 13,977
Intangible assets, net..................................... 197,454 186,132
---------- --------
Total assets......................................... $1,036,072 $912,122
========== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.................... $ 124,976 $ 55,012
Income taxes payable..................................... 2,239 2,239
Long-term debt due within one year....................... 2,087 1,734
---------- --------
Total current liabilities............................ 129,302 58,985
Long-term debt............................................. 332,745 282,280
Other long-term liabilities................................ 29,368 28,886
Deferred income taxes...................................... 76,705 79,347
Commitments and contingencies (Note 3).....................
Minority interest in net assets of consolidated joint
venture................................................... 8,305 --
Stockholders' equity
Common stock--
Class A common stock, $.01 par value, 20,000,000 shares
authorized, 7,439,834 and 7,639,834 shares issued and
outstanding as of January 31, 1999 and July 31, 1998,
respectively.......................................... 74 76
Common stock, $.01 par value, 80,000,000 shares
authorized, 27,087,701 and 26,817,346 shares issued
and outstanding as of January 31, 1999 and July 31,
1998, respectively.................................... 271 269
Additional paid-in capital............................... 402,514 401,563
Retained earnings........................................ 56,788 60,716
---------- --------
Total stockholders' equity........................... 459,647 462,624
---------- --------
Total liabilities and stockholders' equity........... $1,036,072 $912,122
========== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-24
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
January 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Net revenues:
Resort.................................................... $156,141 $136,322
Real estate............................................... 3,816 51,158
-------- --------
Total net revenues...................................... 159,957 187,480
Operating expenses:
Resort.................................................... 104,298 82,270
Real estate............................................... 4,530 43,693
Corporate expense......................................... 1,327 1,319
Depreciation and amortization............................. 12,946 10,153
-------- --------
Total operating expenses................................ 123,101 137,435
-------- --------
Income from operations...................................... 36,856 50,045
Other income (expense):
Investment income......................................... 490 585
Interest expense.......................................... (6,178) (6,108)
Gain on disposal of fixed assets.......................... 13 --
Other income (expense).................................... 136 (214)
Minority interest in consolidated joint venture........... (2,915) --
-------- --------
Income before income taxes.................................. 28,402 44,308
Provision for income taxes.................................. (11,872) (18,362)
-------- --------
Net income.................................................. $ 16,530 $ 25,946
======== ========
Net income per common share (Note 4):
Basic..................................................... $ 0.48 $ 0.76
-------- --------
Diluted................................................... $ 0.47 $ 0.75
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-25
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Net revenues:
Resort.................................................... $191,126 $154,144
Real estate............................................... 17,387 61,848
-------- --------
Total net revenues...................................... 208,513 215,992
Operating expenses:
Resort.................................................... 162,803 118,139
Real estate............................................... 12,140 55,647
Corporate expense......................................... 2,822 2,769
Depreciation and amortization............................. 24,747 19,675
-------- --------
Total operating expenses................................ 202,512 196,230
-------- --------
Income from operations...................................... 6,001 19,762
Other income (expense):
Investment income......................................... 905 1,095
Interest expense.......................................... (11,838) (11,195)
Gain (loss) on disposal of fixed assets................... 26 (82)
Other income (expense).................................... 139 (701)
Minority interest in consolidated joint venture........... (1,801) --
-------- --------
Income (loss) before income taxes........................... (6,568) 8,879
Benefit (provision) for income taxes........................ 2,640 (3,685)
-------- --------
Net income (loss)........................................... $ (3,928) $ 5,194
======== ========
Net income (loss) per common share (Note 4):
Basic..................................................... $ (0.11) $ 0.15
======== ========
Diluted................................................... $ (0.11) $ 0.15
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-26
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ (3,928) $ 5,194
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 24,747 19,675
Non-cash cost of real estate sales...................... 6,903 46,463
Non-cash compensation related to stock grants........... 225 179
Non-cash equity (income) loss........................... 1,574 (417)
Deferred financing costs amortized...................... 292 234
(Gain) Loss on disposal of fixed assets................. (26) 82
Deferred income taxes, net.............................. (2,640) 3,685
Minority interest in consolidated joint venture......... 1,801 --
Changes in assets and liabilities:
Accounts receivable, net................................ (30,186) (11,167)
Inventories............................................. 3,081 (3,665)
Accounts payable and accrued expenses................... 53,901 44,971
Other assets and liabilities............................ (2,493) (6,601)
-------- --------
Net cash provided by operating activities............. 53,251 98,633
Cash flows from investing activities:
Cash paid in hotel acquisitions, net of cash acquired... (33,800) (54,250)
Cash paid by consolidated joint venture in acquisition
of retail operations..................................... (10,516) --
Resort capital expenditures............................. (44,337) (66,845)
Investments in real estate.............................. (14,395) (14,300)
-------- --------
Net cash used in investing activities................. (103,048) (135,395)
Cash flows from financing activities:
Proceeds from the exercise of stock options............. 515 5,248
Payments under Rights................................... -- (5,603)
Proceeds from borrowings under long-term debt........... 100,866 325,000
Payments on long-term debt.............................. (53,392) (270,042)
-------- --------
Net cash provided by financing activities............. 47,989 54,603
-------- --------
Net increase (decrease) in cash and cash equivalents...... (1,808) 17,841
Cash and cash equivalents:
Beginning of period..................................... 19,512 10,217
-------- --------
End of period........................................... $ 17,704 $ 28,058
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-27
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and
operates through various subsidiaries. Vail Resorts and its subsidiaries
(collectively, the "Company") currently operate in two business segments,
mountain resorts and real estate development. The Vail Corporation, a wholly-
owned subsidiary of Vail Resorts, and its subsidiaries collectively, ("Vail
Associates") operate four of the world's largest skiing facilities on Vail,
Breckenridge, Keystone and Beaver Creek mountains in Colorado. Vail Resorts
Development Company ("VRDC"), a wholly-owned subsidiary of Vail Associates,
conducts the Company's real estate development activities. The Company's
mountain resort business, which is primarily composed of ski operations and
related amenities, is seasonal in nature with a typical ski season beginning in
mid-October to early November and continuing through late April to mid-May.
In the opinion of the Company, the accompanying consolidated condensed
financial statements reflect all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows for the
interim periods presented. All such adjustments are of a normal recurring
nature. Results for interim periods are not indicative of the results for the
entire year. The accompanying consolidated financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended July 31, 1998, included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1998.
2. Accounting Policies
The Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income", as of August 1, 1998. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. The adoption of this statement had no
impact on the Company's financial statements, as there are no differences
between net income (loss) and comprehensive income (loss) for the periods
reported herein.
3. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of the SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes, townhomes, and lodging units. As of January 31, 1999, the
Company has sold 103 single-family homesites and five parcels to developers for
the construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Revolving Credit Facility. It is anticipated that as the
Bachelor Gulch community expands, BGMD will become self supporting and that
within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $14.8 million at January 31, 1999. The Company has allocated $9.6
million of that amount to the Bachelor Gulch Village homesites which were sold
as of January 31, 1999 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of January 31,
1999 and July 31, 1998 was $3.6 million and $2.9 million, respectively.
F-28
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
At January 31, 1999, the Company had various other letters of credit
outstanding in the aggregate amount of $14.5 million.
On October 19, 1998, fires on Vail Mountain destroyed certain of the
Company's facilities including the Ski Patrol Headquarters, a day skier
shelter, the Two Elk Lodge restaurant and the chairlift drive housing for the
High Noon Lift (Chair #5). Chair #5 and three other chairlifts, which sustained
minor damage, have been repaired and are currently fully operational. All of
the facilities damaged are fully covered by the Company's property insurance
policy. Although the Company is unable to estimate the total amount which will
be recovered through insurance proceeds, the Company does not expect to record
a loss related to the property damage. The incident is also covered under the
Company's business interruption insurance policy. The Company is unable to
estimate at this time the impact the incident will have in terms of business
interruption, however the Company expects the incident will not have a material
impact on its results of operations and cash flows due to mitigating measures
being undertaken by the Company and the insurance coverage.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment through fiscal 2008. For
the six months ended January 31, 1999, and January 31, 1998, lease expense
related to these agreements of $3.1 million and $3.3 million, respectively was
recorded and is included in the accompanying consolidated statements of
operations.
Future minimum lease payments under these leases as of January 31, 1999 are
as follows:
<TABLE>
<S> <C>
Due during fiscal year ending July 31:
1999.............................................................. $ 2,467,829
2000.............................................................. 2,992,051
2001.............................................................. 2,563,510
2002.............................................................. 1,743,934
2003.............................................................. 1,689,097
Thereafter........................................................ 6,174,261
-----------
Total........................................................... $17,630,682
===========
</TABLE>
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
F-29
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
4. Net Earnings (Loss) Per Common Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income available to common shareholders by the weighted average
shares outstanding. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
resulting in the issuance of common shares that would then share in the
earnings of the Company.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, 1999 January 31, 1999
---------------------------------------
(In thousands, except per share
amounts)
Basic Diluted Basic Diluted
--------- ------------------ ---------
<S> <C> <C> <C> <C>
Net earnings (loss) per common share:
Net earnings (loss).................. $ 16,530 $ 16,530 $ (3,928) $ (3,928)
Weighted average shares outstanding.. 34,574 34,574 34,555 34,555
Effect of dilutive stock options..... -- 289 -- 293
--------- --------- -------- --------
Total shares....................... 34,574 34,863 34,555 34,848
--------- --------- -------- --------
Net earnings (loss) per common
share............................... $ 0.48 $ 0.47 $ (0.11) $ (0.11)
========= ========= ======== ========
<CAPTION>
Three Months Ended Six Months Ended
January 31, 1998 January 31, 1998
---------------------------------------
(In thousands, except per share
amounts)
Basic Diluted Basic Diluted
--------- ------------------ ---------
<S> <C> <C> <C> <C>
Net earnings per common share:
Net earnings......................... $ 25,946 $ 25,946 $ 5,194 $ 5,194
Weighted average shares outstanding.. 34,194 34,194 34,010 34,010
Effect of dilutive stock options..... -- 535 -- 535
--------- --------- -------- --------
Total shares....................... 34,194 34,729 34,010 34,545
--------- --------- -------- --------
Net earnings per common share........ $ 0.76 $ 0.75 $ 0.15 $ 0.15
========= ========= ======== ========
</TABLE>
5. Acquisitions and Business Combinations
On August 1, 1998, the Company entered into a joint venture with one of the
largest retailers of ski-and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture named SSI Venture
LLC. The Company contributed its retail and rental operations to the joint
venture and holds a 51.9% share of the joint venture. Specialty Sports, Inc.
contributed 30 stores located in Denver, Boulder, Aspen, Telluride, Vail and
Breckenridge to the joint venture and holds a 48.1% share in the joint venture.
The owners and operators of Specialty Sports, Inc., the Gart family, have been
operating in the sporting goods industry in Colorado since 1929 and run the
day-to-day operations of SSI Venture LLC. Vail Resorts participates in the
strategic and financial management of the joint venture. SSI Venture LLC is a
fully consolidated entity in the Company's accompanying financial statements
with the minority interest in earnings and net assets appropriately reflected
on the financial statements.
F-30
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
On August 13, 1998, the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB") for a total purchase price of
$33.8 million. VAB owned and operated The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies which currently
hold contracts for approximately 360 condominium units, eight restaurants,
approximately 28,000 square feet of retail space leased to third parties, and
approximately 32,000 square feet of convention and meeting space. In addition,
the acquisition includes the Maggie Building, which is generally considered to
be the primary base lodge of Breckenridge Mountain Resort, but until now has
neither been owned nor managed by the Company. This transaction also included
VAB's other Breckenridge assets, including the Bell Tower Mall and certain
other real estate parcels that the Company simultaneously entered into a
contract to sell to East West Partners of Avon, Colorado for $10 million. The
acquisition was funded with proceeds from the Company's revolving credit
facility.
6. Long-Term Debt
Long-term debt as of January 31, 1999 and July 31, 1998 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
January 31, July 31,
Maturity(d) 1999 1998
----------- ----------- --------
<S> <C> <C> <C>
Industrial Development Bonds (a).............. 1999-2020 $ 63,200 $ 64,560
Credit Facilities (b)......................... 2003 266,500 218,000
Other (c)..................................... 1999-2028 5,132 1,454
-------- --------
334,832 284,014
Less: Maturities within 12 months............. 2,087 1,734
-------- --------
$332,745 $282,280
======== ========
</TABLE>
- --------
(a) The Company has $41.2 million of outstanding Industrial Development Bonds
issued by Eagle County, Colorado that mature on August 1, 2019. These bonds
accrue interest at 6.95% per annum, with interest being payable
semiannually on February 1 and August 1. In addition, the Company has
outstanding two series of refunding bonds. The Series 1990 Sports
Facilities Refunding Revenue Bonds had an original aggregate principal
amount of $20.4 million. The Company made a principal installment payment
of $1.4 million in September 1998. The remainder of the principal amount
matures in installments in 2006 and 2008. These bonds bear interest at
rates ranging from 7.2% to 7.9%. The Series 1991 Sports Facilities
Refunding Revenue Bonds have an aggregate principal amount of $3 million
and bear interest at 7.125% for bonds maturing in 2002 and 7.375% for bonds
maturing in 2010.
(b) The Company's credit facilities consist of a revolving credit facility
("Credit Facility") that provides for debt financing up to an aggregate
principal amount of $450 million. Borrowings under the Credit Facility bear
interest annually at the Company's option at the rate of (i) LIBOR (4.94%
at January 31, 1999) plus a margin ranging from 0.50% to 1.25% or (ii) the
higher of the federal funds rate, as published by the Federal Reserve Bank
of New York, (4.65% at January 31, 1999) plus 0.50%, or the agent's prime
lending rate, (7.75% at January 31, 1999) plus a margin of up to 0.125%.
The Company also pays a quarterly unused commitment fee ranging from 0.125%
to 0.30%. The interest margins fluctuate based upon the ratio of the
Company's total Funded Debt to the Company's Resort EBITDA (as defined in
the underlying Revolving Credit Facility). The Facility matures on December
19, 2002.
F-31
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
On December 30, 1998, SSI Venture LLC established a credit facility ("SSV
Facility") that provides debt financing up to an aggregate principal amount of
$20 million. The SSV Facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSV
Facility matures on the earlier of December 31, 2003 or the termination date of
the Credit Facility discussed above. Vail Associates guarantees the SSV
Facility. Minimum amortization under the Tranche B Term Loan Facility is
$625,000, $1.38 million, $1.75 million, $2.25 million, $2.63 million, and $1.38
million during the fiscal years 1999, 2000, 2001, 2002, 2003, and 2004,
respectively. The SSV Facility bears interest annually at the rates prescribed
above for the Credit Facility. SSI Venture LLC also pays a quarterly unused
commitment fee at the same rates as the unused commitment fee for the Credit
Facility.
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and have
maturities ranging from 1999-2028.
(d) Maturity years based on fiscal year end July 31.
Aggregate maturities for debt outstanding are as follows (in thousands):
<TABLE>
<CAPTION>
As of
January 31,
1999
Due during fiscal years ending July 31: -----------
<S> <C>
1999.............................................................. $ 721
2000.............................................................. 2,249
2001.............................................................. 2,256
2002.............................................................. 2,688
2003.............................................................. 258,180
Thereafter........................................................ 68,738
--------
Total Debt...................................................... $334,832
========
</TABLE>
F-32
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
7. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated
Notes due 2009, are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below), the "Guarantor Subsidiaries") except for SSI Venture, LLC and
Vail Associates Investments, Inc. (together, the "Non-Guarantor Subsidiaries").
SSI Venture, LLC is a 51.9% owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100% owned
corporation which owns real estate held for sale.
Presented below is the consolidated condensed financial information of
Vail Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries as of January 31, 1999 and for the six-month period
then ended. As SSI Venture, LLC began operations on August 1, 1998, no
financial information for SSI Venture, LLC existed prior to that date. In
addition, in the Company's opinion, the financial information of Vail
Associates Investments, Inc. as of and prior to July 31, 1998 is immaterial to
the financial position of the Company and would not provide additional
meaningful information to the investors. Therefore, the Company has not
presented herein comparative consolidated condensed financial information for
the six-month period ended January 31, 1998.
Investments in Subsidiaries are accounted for by the Parent Company and
Guarantor Subsidiaries using the equity method of accounting. Net income of
Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company's and
Guarantor Subsidiaries' investments in and advances to (from) Subsidiaries. Net
income of the Non-Guarantor Subsidiaries are reflected in Guarantor
Subsidiaries and Parent Company as equity in consolidated subsidiaries. The
elimination entries eliminate investments in Non-Guarantor Subsidiaries and
intercompany balances and transactions.
F-33
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Consolidating Condensed Balance Sheet
January 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents.......... $ -- $ 14,810 $ 2,894 $ -- $ 17,704
Receivables........... 321 54,640 2,722 -- 57,683
Inventories, net...... -- 6,977 17,449 -- 24,426
Deferred income
taxes................ 1,634 10,492 -- -- 12,126
Other current assets.. -- 4,022 636 -- 4,658
-------- ---------- ------- --------- ----------
Total current
assets............. 1,955 90,941 23,701 -- 116,597
Property, plant and
equipment, net......... -- 537,591 10,324 -- 547,915
Real estate held for
sale................... -- 150,634 4,326 -- 154,960
Deferred charges and
other assets........... 108 18,127 911 -- 19,146
Intangible assets, net.. -- 185,104 12,350 -- 197,454
Investments in
subsidiaries and
advances to (from)
parent................. 462,118 187,651 (5,136) (644,633) --
-------- ---------- ------- --------- ----------
Total assets........ $464,181 $1,170,048 $46,476 $(644,633) $1,036,072
======== ========== ======= ========= ==========
Current liabilities:
Accounts payable and
accrued expenses..... $ 1,167 $ 107,139 $16,670 $ -- $ 124,976
Income taxes payable.. 2,239 -- -- -- 2,239
Long-term debt due
within one year...... -- 728 1,359 -- 2,087
-------- ---------- ------- --------- ----------
Total current
liabilities........ 3,406 107,867 18,029 -- 129,302
Long-term debt.......... -- 321,495 11,250 -- 332,745
Other long-term
liabilities............ 1,128 28,240 -- -- 29,368
Deferred income taxes... -- 76,705 -- -- 76,705
Minority interest in net
assets of consolidated
joint venture.......... -- -- 8,305 -- 8,305
Total stockholders'
equity............. 459,647 635,741 8,892 (644,633) 459,647
-------- ---------- ------- --------- ----------
Total liabilities
and stockholders'
equity............. $464,181 $1,170,048 $46,476 $(644,633) $1,036,072
======== ========== ======= ========= ==========
</TABLE>
F-34
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Consolidating Condensed Statement of Operations
For the Six-Month Period Ended January 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $ -- $170,596 $38,678 $ (761) $208,513
Total operating
expenses............... 496 168,239 34,538 (761) 202,512
------- -------- ------- ------ --------
Income from
operations........... (496) 2,357 4,140 -- 6,001
Other income (expense).. 156 (10,528) (396) -- (10,768)
Minority interest in net
income of consolidated
joint venture.......... -- -- (1,801) -- (1,801)
------- -------- ------- ------ --------
Income (loss) before
income taxes......... (340) (8,171) 1,943 -- (6,568)
Benefit (provision)
for income taxes..... 137 2,503 -- -- 2,640
------- -------- ------- ------ --------
Net income (loss)
before equity in
income of
consolidated
subsidiaries......... (203) (5,668) 1,943 -- (3,928)
Equity in income of
consolidated
subsidiaries........... (3,725) 1,943 -- 1,782 --
------- -------- ------- ------ --------
Net income (loss)..... $(3,928) $ (3,725) $ 1,943 $1,782 $ (3,928)
======= ======== ======= ====== ========
</TABLE>
F-35
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Consolidating Condensed Statement of Cash Flows
For the Six-Month Period Ended
January 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities... $(629) $45,709 $ 8,171 $-- $ 53,251
Cash flows from
investing activities:
Cash paid in hotel
acquisitions, net of
cash acquired........ -- (33,800) -- -- (33,800)
Cash paid by
consolidate joint
venture in
acquisition of retail
operation............ -- -- (10,516) -- (10,516)
Resort capital
expenditures......... -- (41,272) (3,065) -- (44,337)
Investments in real
estate............... -- (14,395) -- -- (14,395)
----- ------- ------- ---- --------
Net cash provided by
(used in) investing
activities......... -- (89,467) (13,581) -- (103,048)
Cash flows from
financing activities:
Proceeds from the
exercise of stock
options.............. 515 -- -- -- 515
Proceeds from
borrowings under
long-term debt....... -- 93,165 7,701 -- 100,866
Payments on long-term
debt................. -- (53,392) -- -- (53,392)
Advances to (from)
affiliates........... 114 (717) 603 -- --
----- ------- ------- ---- --------
Net cash provided by
financing
activities......... 629 39,056 8,304 -- 47,989
----- ------- ------- ---- --------
Net increase in cash and
cash equivalents....... -- (4,702) 2,894 -- (1,808)
Cash and cash
equivalents:
Beginning of period... -- 19,512 -- -- 19,512
----- ------- ------- ---- --------
End of period......... $ -- $14,810 $ 2,894 $-- $ 17,704
===== ======= ======= ==== ========
</TABLE>
8. Subsequent Events
On February 19, 1999, the Company entered into a contract to purchase 100%
of the outstanding shares of Grand Teton Lodge Company, a Wyoming corporation,
from CSX Corporation for a total purchase price of $50 million. The transaction
is expected to close in the fourth quarter, and is subject to approval by the
National Park Service. The Grand Teton Lodge Company operates four resort
properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake Lodge,
Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton Lodge
Company operates the first three properties, all located within Grand Teton
National Park, under a concessionaire contract with the National Park Service.
Jackson Hole Golf & Tennis Club is located outside the park on property owned
by Grand Teton Lodge Company and includes approximately 30 acres of developable
land.
F-36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to
sell or buy any securities in any jurisdiction where it is unlawful. The infor-
mation in this prospectus is current as of , 1999.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information...................................... ii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 13
Use of Proceeds ......................................................... 19
Capitalization........................................................... 19
Selected Consolidated Financial and Operating Data ...................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 34
Management............................................................... 48
Principal Stockholders................................................... 52
Description of Certain Indebtedness ..................................... 53
The Exchange Offer....................................................... 55
Procedures for Tendering Outstanding Notes............................... 59
Description of Notes..................................................... 64
Plan of Distribution .................................................... 92
Certain Federal Income Tax Considerations................................ 93
Legal Matters ........................................................... 95
Independent Accountants.................................................. 95
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
[LOGO OF VAIL RESORTS, INC.]
Exchange Offer for $200,000,000 Aggregate Principal Amount of 8 3/4% Senior
Subordinated Notes due 2009
------------
PROSPECTUS
------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify the officers and directors of the
registrant under certain circumstances for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act.
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that to the fullest extent permitted by Delaware Law or another
applicable law, a director of the Company shall not be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Under current Delaware Law, liability of a director may not be
limited (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provision of the Certificate is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Company's Restated Bylaws (the
"Bylaws") provide that the Company shall indemnify its directors, officers and
employees to the fullest extent permitted by applicable law.
The Bylaws provide that the Company may indemnify any person who is or was
involved in any manner or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action, suit or proceeding by or in the right of the registrant to procure
a judgment in its town), by reason of the fact that he is or was or had agreed
to become a director, officer or employee of the registrant or is or was or had
agreed to become at the request of the board or an officer of the registrant a
director, officer or employee of another corporation, partnership, joint
venture, trust or other entity against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following exhibits are either filed herewith or, if so indicated,
incorporated by reference to the documents indicated in parentheses which have
previously been filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on the Effective Date.
(Incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
3.2 Amended and Restated By-Laws adopted on the Effective Date.
(Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.1 Form of Class 2 Common Stock Registration Rights Agreements
between the Company and holders of Class 2 Common Stock.
(Incorporated by reference to Exhibit 4.13 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
4.2 Purchase Agreement, dated as of May 6, 1999 among the Vail
Resorts, Inc., the guarantors named on Schedule I thereto, and
Bear, Stearns & Co. Inc., Nationsbanc Montgomery Securities LLC,
BT Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon
Smith Barney Inc.
4.3 Indenture, dated as of May 11, 1999 among Vail Resorts, Inc., the
guarantors named therein and the United States Trust Company of
New York, as trustee.
4.4 Form of Global Note (to be included in Exhibit 4.3).
4.5 Registration Rights Agreement, dated as of May 11, 1999 among Vail
Resorts, Inc., the guarantors signatory thereto and Bear, Stearns
& Co. Inc., Nationsbanc Montgomery Securities LLC, BT Alex. Brown
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney Inc.
5.1 Opinion of Cahill Gordon & Reindel as to the legality of the
exchange notes.
12 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP, independent public accountants.
24.1 Power of Attorney (set forth on the signature pages to this
Registration Statement).
25.1 Statement regarding eligibility of Trustee on Form T-1.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- --------
* To be filed by amendment.
II-2
<PAGE>
Item 22. Undertakings.
The undersigned Registrants hereby undertake:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Company's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that it
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the undersigned registrants (the "Registrants")
pursuant to the foregoing provisions, or otherwise, the Registrants have
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer, or controlling person of
the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, subject to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form S-4 within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of May, 1999.
VAIL RESORTS, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board, May 25, 1999
______________________________________ Chief Executive Officer
Adam M. Aron and Director
/s/ Andrew P. Daly President and Director May 25, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Chief Financial Officer May 25, 1999
______________________________________ (Principal Accounting
James P. Donohue Officer)
Director , 1999
______________________________________
Antony P. Ressler
/s/ Bruce H. Spector Director May 25, 1999
______________________________________
Bruce H. Spector
Director , 1999
______________________________________
Craig M. Cogut
Director , 1999
______________________________________
Frank Biondi
/s/ James S. Tisch Director May 25, 1999
______________________________________
James S. Tisch
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John F. Sorte Director May 25, 1999
______________________________________
John F. Sorte
/s/ John J. Ryan III Director May 25, 1999
______________________________________
John J. Ryan III
/s/ Joseph M. Micheletto Director May 25, 1999
______________________________________
Joseph M. Micheletto
/s/ Leon D. Black Director May 25, 1999
______________________________________
Leon D. Black
/s/ Marc J. Rowan Director May 25, 1999
______________________________________
Marc J. Rowan
/s/ Robert A. Katz Director May 25, 1999
______________________________________
Robert A. Katz
/s/ Stephen C. Hilbert Director May 25, 1999
______________________________________
Stephen C. Hilbert
Director , 1999
______________________________________
Thomas H. Lee
/s/ William L. Mack Director May 25, 1999
______________________________________
William L. Mack
Director , 1999
______________________________________
</TABLE> William Stiritz
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
BEAVER CREEK ASSOCIATES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
BEAVER CREEK CONSULTANTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
BEAVER CREEK FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul A. Testwuide Chairman of the Board, June 8, 1999
______________________________________ President and Director
Paul A. Testwuide (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
GHTV, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer June 8, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
GILLETT BROADCASTING, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer June 8, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
GILLETT BROADCASTING OF MARYLAND, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer June 8, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
GILLETT GROUP MANAGEMENT, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer June 8, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
KEYSTONE CONFERENCE SERVICES, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ John W. Rutter Senior Vice President and June 8, 1999
______________________________________ Director
John W. Rutter
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
KEYSTONE DEVELOPMENT SALES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President June 8, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President June 8, 1999
______________________________________
Martha Dugan Rehm
/s/ James P. Thompson Director June 8, 1999
______________________________________
James P. Thompson
/s/ John W. Rutter Director June 8, 1999
______________________________________
John W. Rutter
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
KEYSTONE FOOD & BEVERAGE COMPANY
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John W. Rutter Chairman of the Board, June 8, 1999
______________________________________ President and Director
John W. Rutter (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
KEYSTONE RESORT PROPERTY MANAGEMENT,
INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President June 8, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
/s/ John W. Rutter Senior Vice President and June 8, 1999
______________________________________ Director
John W. Rutter
/s/ James P. Thompson Director June 8, 1999
______________________________________
James P. Thompson
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
LODGE PROPERTIES, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
LODGE REALTY, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ James P. Thompson President and Director June 8, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ Victor Charles Viola Director June 8, 1999
______________________________________
Victor Charles Viola
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
PINEY RIVER RANCH, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ James P. Thompson Director June 8, 1999
______________________________________
James P. Thompson
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
PROPERTY MANAGEMENT ACQUISITION
CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Andrew P. Daly Executive Officer)
/s/ William A. Jensen President June 8, 1999
______________________________________
William A. Jensen
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL/ARROWHEAD, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ James P. Thompson President and Director June 8, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL ASSOCIATES CONSULTANTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL ASSOCIATES HOLDINGS, LTD.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ James P. Thompson President and Director June 8, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL ASSOCIATES INVESTMENTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ James P. Thompson Senior Vice President and June 8, 1999
______________________________________ Director
James P. Thompson
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL ASSOCIATES MANAGEMENT COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ James P. Thompson President and Director June 8, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President June 8, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL ASSOCIATES REAL ESTATE, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ James P. Thompson President and Director June 8, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President June 8, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
/s/ Theodore E. Ryczek Director June 8, 1999
______________________________________
Theodore E. Ryczek
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL/BATTLE MOUNTAIN, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chairman of the Board, June 8, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ James P. Thompson Director June 8, 1999
______________________________________
James P. Thompson
</TABLE>
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June 1999.
VAIL/BEAVER CREEK RESORTPROPERTIES,
INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James. P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
/s/ James P. Thompson Director June 8, 1999
______________________________________
James P. Thompson
</TABLE>
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
THE VAIL CORPORATION
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm each acting alone,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director
Adam M. Aron
/s/ Andrew P. Daly President, Chief Executive June 8, 1999
______________________________________ Officer and Director
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul A. Testwuide Chairman of the Board, June 8, 1999
______________________________________ President and Director
Paul A. Testwuide (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL HOLDINGS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew P. Daly and James P. Donohue and each acting alone, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements to this Registration
Statement and to file the same with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing necessary or appropriate to be done with
this Registration Statement and any amendments or supplements hereto, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board, June 8, 1999
______________________________________ Chief Executive Officer
Adam M. Aron and Director
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Chief Financial Officer June 8, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL RESORTS DEVELOPMENT COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director
Adam M. Aron
/s/ James P. Thompson Chief Executive Officer, June 8, 1999
______________________________________ President and Director
James P. Thompson
/s/ James P. Donohue Senior Vice President June 8, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
/s/ Andrew P. Daly Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ Marc J. Rowan Director June 8, 1999
______________________________________
Marc J. Rowan
/s/ Robert A. Katz Director June 8, 1999
______________________________________
Robert A. Katz
/s/ James S. Mandel Director June 8, 1999
______________________________________
James S. Mandel
</TABLE>
II-32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL SUMMIT RESORTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
VAIL TRADEMARKS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and June 8, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director June 8, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 8th day of June, 1999.
THE VILLAGE AT BRECKENRIDGE
ACQUISITION CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
and Andrew P. Daly, James P. Donohue and Martha Dugan Rehm and each acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with this Registration Statement and any amendments or supplements hereto, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William A. Jensen Chairman of the Board, June 8, 1999
______________________________________ President and Director
William A. Jensen (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and June 8, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and June 8, 1999
______________________________________ Director
</TABLE> Martha Dugan Rehm
II-35
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
VAIL RESORTS, INC.
GUARANTORS (named in Schedule I hereto)
----------
$200,000,000
8 3/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
May 6, 1999
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
<PAGE>
VAIL RESORTS, INC.
$200,000,000
8 3/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
------------------
May 6, 1999
New York, New York
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Vail Resorts, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Bear, Stearns & Co. Inc., Nationsbanc Montgomery Securities
LLC, BT Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon Smith Barney
Inc. (each, an "Initial Purchaser" and, collectively, the "Initial Purchasers")
$200,000,000 in aggregate principal amount of 8 3/4% Senior Subordinated Notes
due 2009 (the "Restricted Notes"), subject to the terms and conditions set forth
herein. The Restricted Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated the Closing Date (as defined), among the Company, the
Guarantors (as defined) and United States Trust Company of New York, as trustee
(the "Trustee"). The Notes (as defined) will be fully and unconditionally
guaranteed (the "Guarantees") as to payment of principal, interest, premium and
liquidated damages, if any, on an unsecured senior subordinated basis, jointly
and severally by each entity listed on Schedule I hereto (collectively, the
----------
"Guarantors"). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Indenture.
1. Issuance of Securities. The Company proposes, upon the terms
-----------------------
and subject to the conditions set forth herein, to issue and sell to the Initial
Purchasers an aggregate of $200,000,000 in principal amount of Restricted Notes.
The Restricted Notes and the Exchange Notes (as defined) issuable in exchange
therefor are collectively referred to herein as the "Notes."
<PAGE>
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Act"), the Restricted Notes (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QIB IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE
-2-
<PAGE>
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT."
2. Offering. The Restricted Notes will be offered and sold
--------
to the Initial Purchasers pursuant to an exemption from the registration
requirements under the Act. The Company has prepared a preliminary offering
memorandum, dated April 23, 1999 (the "Preliminary Offering Memorandum"), and a
final offering memorandum, dated May 6, 1999 (the "Offering Memorandum"),
relating to the Company and its subsidiaries and the Restricted Notes.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers (the "Exempt Resales") of the Restricted Notes on
the terms set forth in the Offering Memorandum, as amended or supplemented,
solely to (i) persons whom the Initial Purchaser reasonably believes to be
"qualified institutional buyers," as defined in Rule 144A under the Act ("QIBs")
and (ii) non-U.S. persons outside the United States in reliance upon Regulation
S ("Regulation S") under the Act (each, a "Reg S Investor"). The QIBs and the
Reg S Investors are collectively referred to herein as the "Eligible
Purchasers." The Initial Purchaser will offer the Restricted Notes to such
Eligible Purchasers initially at a price equal to 100% of the principal amount
thereof. Such price may be changed by the Initial Purchasers at any time without
notice.
Holders (including subsequent transferees) of the Restricted
Notes will have the registration rights set forth in the registration rights
agreement relating thereto (the "Registration Rights Agreement"), to be dated
the Closing Date, for so long as such Restricted Notes constitute "Transfer
Restricted Securities" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company and the Guarantors
will agree to file with the Securities and Exchange Commission (the
"Commission"), under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Company's 8 3/4% Senior Subordinated Notes due 2009 (the "Exchange
Notes") and Guarantees thereof to be offered in exchange for the Restricted
Notes and Guarantees thereof (the "Exchange Offer") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Restricted Notes, and to use their commercially reasonable best
efforts to cause such Registration Statements to be declared effective and to
consummate the Exchange Offer. This Agreement, the Notes, the Guarantees, the
Indenture and the Registration Rights Agreement are hereinafter referred to
collectively as the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the
---------------------------
representations, warranties and covenants contained in this Agreement, and
subject to its terms and
-3-
<PAGE>
conditions, the Company agrees to issue and sell to the Initial Purchasers, and
each Initial Purchaser agrees, severally and not jointly, to purchase from the
Company the principal amounts of Restricted Notes set forth opposite the name of
such Initial Purchaser on Schedule II hereto. The purchase price for the
-----------
Restricted Notes will be $971.25 per $1,000 principal amount Restricted Note.
(b) Delivery of the Restricted Notes shall be made, against payment of
the purchase price therefor, at the offices of Kramer Levin Naftalis & Frankel
LLP, 919 Third Avenue, New York, New York or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m., New
York City time, on May 11, 1999 or at such other time as shall be agreed upon by
the Initial Purchasers and the Company. The time and date of such delivery and
payment are herein called the "Closing Date."
(c) On the Closing Date, one or more Restricted Notes in definitive
global form, registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), having an aggregate amount corresponding to the aggregate
principal amount of the Restricted Notes (the "Global Note") sold pursuant to
Exempt Resales to Eligible Purchasers shall be delivered by the Company to the
Initial Purchasers (or as the Initial Purchasers directs), against payment by
the Initial Purchasers of the purchase price therefor, by wire transfer of same
day funds, to an account designated by the Company, provided that the Company
shall give at least two business days' prior notice to the Initial Purchasers of
the information required to effect such wire transfer. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 9:30 a.m.
on the business day immediately preceding the Closing Date.
4. Agreements of the Company and the Guarantors. Each of the
--------------------------------------------
Company and the Guarantors covenants and agrees with the Initial Purchasers as
follows:
(a) To advise the Initial Purchasers promptly and, if requested
by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any Notes or the
related Guarantees for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority and (ii) of the happening of
any event that makes any statement of a material fact made in the
Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires the making of any additions to or changes in the
Preliminary Offering Memorandum or the Offering Memorandum in order to
make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Company and the Guarantors
shall use their commercially reasonable best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of any Notes or the related Guarantees under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any Notes or the related Guarantees
-4-
<PAGE>
under any state securities or Blue Sky laws, the Company and the
Guarantors shall use their commercially reasonable best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as
many copies of the Preliminary Offering Memorandum and the Offering
Memorandum, including all documents incorporated therein by reference,
and any amendments or supplements thereto, as the Initial Purchasers may
reasonably request. The Company and the Guarantors consent to the use of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the
Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Offering Memorandum during
such period as in the opinion of counsel for the Initial Purchasers the
Offering Memorandum is required by law to be delivered in connection
with Exempt Resales and in connection with market-making activities of
the Initial Purchasers for so long as any Restricted Notes are
outstanding unless the Initial Purchasers shall previously have been
advised thereof and shall not have objected thereto within a reasonable
time after being furnished a copy thereof. The Company and the
Guarantors shall promptly prepare, upon the Initial Purchasers' request,
any amendment or supplement to the Offering Memorandum that may be
necessary or advisable in connection with such Exempt Resales or such
market making activities.
(d) If, during the period referred to in Section 4(c) above, any
event shall occur as a result of which, in the judgment of the Company
and the Guarantors or in the reasonable opinion of counsel for the
Company and the Guarantors or counsel for the Initial Purchasers, it
becomes necessary or advisable to amend or supplement the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if it is necessary or advisable to amend
or supplement the Offering Memorandum to comply with applicable law, (i)
to notify the Initial Purchasers and (ii) forthwith to prepare an
appropriate amendment or supplement to the Offering Memorandum so that
the statements therein as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so
that the Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for the
Initial Purchasers in connection with the qualification or registration
of the Restricted Notes and the Guarantees thereof under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may
reasonably request and to continue such qualification in effect so long
as required for the Exempt Resales; provided, however, that neither the
Company nor any Guarantor shall be required in connection therewith to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action
-5-
<PAGE>
that would subject it to service of process in suits or taxation, in
each case, other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt
Resales, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to the
performance of the obligations of the Company and the Guarantors
hereunder, including in connection with: (i) the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial
statements) and all amendments and supplements thereto required pursuant
hereto, (ii) the preparation (including, without limitation, duplication
costs) and delivery of all agreements, correspondence and all other
documents prepared and delivered in connection herewith and with the
Exempt Resales, (iii) the issuance, transfer and delivery of the
Restricted Notes and the Guarantees endorsed thereon to the Initial
Purchasers, (iv) the qualification or registration of the Notes and the
related Guarantees for offer and sale under the securities or Blue Sky
laws of the several states (including, without limitation, the cost of
printing and mailing a preliminary and final Blue Sky Memorandum and the
reasonable fees and disbursements of counsel for the Initial Purchasers
relating thereto), (v) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and all amendments and
supplements thereto, as may be requested for use in connection with
Exempt Resales, (vi) the preparation of certificates for the Notes
(including, without limitation, printing and engraving thereof), (vii)
the fees, disbursements and expenses of the Company's and the
Guarantors' counsel and accountants, (viii) all fees and expenses
(including fees and expenses of counsel) of the Company and the
Guarantors in connection with the approval of the Notes by DTC for
"book-entry" transfer, (ix) rating the Notes by rating agencies, (x) the
reasonable fees and expenses of the Trustee and its counsel, (xi) the
performance by the Company and the Guarantors of their other obligations
under this Agreement and the other Operative Documents and (xii)
"roadshow" travel and other expenses incurred in connection with the
marketing and sale of the Notes.
(g) To use the proceeds from the sale of the Restricted Notes in
the manner described in the Offering Memorandum under the caption "Use
of Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Notes.
(i) To use their respective commercially reasonable best efforts
to do and perform all things required to be done and performed under
this Agreement by them prior to or after the Closing Date and use their
respective commercially reasonable best efforts to satisfy all
conditions precedent on their part to the delivery of the Restricted
Notes.
-6-
<PAGE>
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Restricted Notes in a
manner that would require the registration under the Act of the sale to
the Initial Purchasers or the Eligible Purchasers of the Restricted
Notes or to take any other action that would result in the Exempt
Resales not being exempt from registration under the Act.
(k) For so long as any of the Notes remain outstanding and
during any period in which the Company and the Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), to make available to any holder or
beneficial owner of Restricted Notes in connection with any sale thereof
and any prospective purchaser of such Restricted Notes from such holder
or beneficial owner, the information required by Rule 144A(d)(4) under
the Act.
(l) To cause the Exchange Offer to be made in the appropriate
form to permit registered Exchange Notes and the Guarantees thereof to
be offered in exchange for the Restricted Notes and the Guarantees
thereof and to comply with all applicable federal and state securities
laws in connection with the Exchange Offer.
(m) To comply with the Registration Rights Agreement and the
representation letters to DTC relating to the approval of the Notes by
DTC for "book-entry" transfer.
(n) To effect the inclusion of the Notes in PORTAL and to obtain
approval of the Restricted Notes by DTC for "book-entry" transfer.
(o) During a period of two years following the Closing Date, to
deliver without charge to the Initial Purchasers, as they may reasonably
request, promptly upon their becoming available, copies of (i) all
reports or other publicly available information that the Company and the
Guarantors shall mail or otherwise make available to their
securityholders and (ii) all reports, financial statements and proxy or
information statements filed by the Company with the Commission or any
national securities exchange and such other publicly available
information concerning the Company or any of its subsidiaries.
(p) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared in the ordinary course by
the Company, copies of any unaudited interim financial statements for
any period subsequent to the periods covered by the financial statements
appearing or incorporated by reference in the Offering Memorandum.
(q) Not to take, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price
-7-
<PAGE>
of any security of the Company to facilitate the sale or resale of the
Notes. Except as permitted by the Act, neither the Company nor any
Guarantor will distribute any (i) preliminary offering memorandum,
including, without limitation, the Preliminary Offering Memorandum, (ii)
offering memorandum, including, without limitation, the Offering
Memorandum, or (iii) other offering material in connection with the
offering and sale of the Notes.
5. Representations and Warranties.
------------------------------
(a) The Company and the Guarantors, jointly and severally,
represent and warrant to the Initial Purchasers that:
(i) The Offering Memorandum as of its date and as of the Closing
Date does not and will not, and any supplement or amendment to them will
not, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties contained in this paragraph shall not apply to statements
in or omissions from the Offering Memorandum (or any supplement or
amendment thereto) made in reliance upon and in conformity with
information relating to the Initial Purchasers and the third sentence in
the penultimate paragraph on the cover page and the first and last three
paragraphs in the Plan of Distribution furnished to the Company and the
Guarantors in writing by the Initial Purchasers expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(ii) (A) The documents incorporated by reference in the Offering
Memorandum, when they were filed with the Commission, did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; (B) the documents incorporated by reference in
the Offering Memorandum when they were filed with the Commission
conformed in all material respects to the requirements of the Exchange
Act; and (C) any further documents so filed and incorporated by
reference in the Offering Memorandum or any further amendment or
supplement hereto, when such documents are filed with the Commission,
will conform in all material respects to the requirements of the
Exchange Act.
(iii) The accountants who have certified or will certify the
financial statements included or to be included as part of the Offering
Memorandum are independent accountants as required by the Act. The
historical consolidated financial statements, together with related
schedules and notes thereto, comply as to form in all material respects
with the requirements applicable to registration statements on Form
-8-
<PAGE>
S-1 under the Act and present fairly in all material respects the
consolidated financial position and results of operations of the Company
and its subsidiaries at the dates and for the periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods presented. The pro forma financial statements included in
the Offering Memorandum fairly present the information purported to be
shown therein at the respective dates thereof and for all respective
periods covered thereby and all adjustments have been properly applied.
(iv) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date, except
as set forth in the Offering Memorandum, there has not been any material
adverse change in the business, properties, operations, condition
(financial or other) or results of operations of the Company and the
subsidiaries (as defined below) taken as a whole, whether or not arising
from transactions in the ordinary course of business, and since the date
of the latest balance sheet of the Company included in the Offering
Memorandum, and except as described in the Offering Memorandum, (A)
neither the Company nor any subsidiary (1) has incurred or undertaken
any liabilities or obligations, direct or contingent, that are,
individually or in the aggregate, material to the Company and the
subsidiaries taken as a whole, or (2) entered into any transaction not
in the ordinary course of business that is material to the Company and
the subsidiaries taken as a whole; and (B) the Company has not declared
or paid any dividend on or made any distribution of or with respect to
any shares of its capital stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares
of its or its subsidiaries' capital stock. As used in this Agreement,
the term "subsidiary" means any corporation, partnership, joint venture,
association, company, business trust or other entity in which the
Company directly or indirectly (x) beneficially owns or controls at
least 50% of the outstanding voting securities having by the terms
thereof ordinary voting power to elect a majority of the board of
directors (or other body fulfilling a substantially similar function) of
such entity (irrespective of whether or not at the time any class or
classes of such voting securities shall have or might have voting power
by reason of the happening of any contingency) or (y) has the authority
or ability to control the policies of such entity (including, but
without limitation thereto, any partnership of which the Company or a
subsidiary is a general partner or owns or has the right to obtain a
majority of limited partnership interests and any joint venture in which
the Company or a subsidiary has liability similar to the liability of a
general partner of a partnership or owns or has the right to obtain at
least 50% of the joint venture interests); provided, however, that for
-------- -------
the purposes of any representations and warranties made in this Section
5, the term "subsidiaries" shall include Keystone/Intrawest LLC, Slifer,
Smith & Frampton/Vail Associates Real Estate, L.L.C. and SSI Venture LLC
only to the extent of the Company's actual knowledge (the Company hereby
representing to the Initial Purchasers that the Company does not manage
the day to day operations of either of such subsidiaries); and provided
--------
further, that, for the purposes of any representations
------- ----
-9-
<PAGE>
and warranties made in this Section 5, except for Section 5(a)(i) and
(ii), the term "subsidiaries" shall exclude Avon Partners II, Limited
Liability Company, Ski The Summit, Clinton Ditch & Reservoir Company, BC
Housing, LLC, Eagle Park Reservoir Company, Boulder/Beaver, LLC and
Eclipse Television and Sports Marketing LLC.
(v) When the Restricted Notes and the Guarantees thereof are
issued and delivered pursuant to this Agreement, no Restricted Note or
Guarantee thereof will be of the same class (within the meaning of Rule
144A under the Act) as securities of the Company or any Guarantor that
are listed on a national securities exchange registered under Section 6
of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(vi) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is a party. This Agreement has been duly and
validly authorized, executed and delivered by the Company and each
Guarantor and (assuming the due authorization, execution and delivery by
the Initial Purchasers) is a legal and binding obligation of the Company
and each Guarantor, enforceable against each of them in accordance with
its terms, subject to (A) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors rights generally and (B) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity except insofar as rights to
indemnification and contribution contained herein may be limited by
federal or state securities laws or related public policy).
(vii) The Indenture has been duly and validly authorized by the
Company and each Guarantor and, when duly executed and delivered by the
Company and each Guarantor (assuming the due authorization, execution
and delivery by the Trustee), will be a legal and binding agreement of
the Company and each Guarantor, enforceable against each of them in
accordance with its terms, subject to (A) applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors rights generally
and (B) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity except
insofar as rights to indemnification and contribution contained herein
may be limited by federal or state securities laws or related public
policy). On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
The Offering Memorandum contains a summary of the material terms of the
Indenture, which is accurate in all material respects.
-10-
<PAGE>
(viii) The Registration Rights Agreement has been duly and
validly authorized by the Company and each Guarantor and, when duly
executed and delivered by the Company and each Guarantor (assuming due
authorization, execution and delivery by the Initial Purchasers), will
be a legal and binding obligation of the Company and each Guarantor,
enforceable against each of them in accordance with its terms, subject
to (A) applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws now or hereafter in effect
relating to creditors rights generally and (B) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity except insofar as rights to
indemnification and contribution contained herein may be limited by
federal or state securities laws or related public policy). The Offering
Memorandum contains a summary of the material terms of the Registration
Rights Agreement, which is accurate in all material respects.
(ix) The Restricted Notes have been duly and validly authorized
by the Company for issuance and sale to the Initial Purchasers pursuant
to this Agreement and, when issued and authenticated in accordance with
the terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal and
binding obligations of the Company, enforceable against it in accordance
with their terms and entitled to the benefits of the Indenture, subject
to (A) applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws now or hereafter in effect
relating to creditors rights generally and (B) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity except insofar as rights to
indemnification and contribution contained herein may be limited by
federal or state securities laws or related public policy). The Offering
Memorandum contains a summary of the material terms of the Notes, which
is accurate in all material respects.
(x) The Guarantees of the Restricted Notes have been duly and
validly authorized by each of the Guarantors and, when executed and
delivered in accordance with the terms of the Indenture and when the
Restricted Notes have been issued and authenticated in accordance with
the terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal and
binding obligations of each of the Guarantors, enforceable against each
of them in accordance with their terms and entitled to the benefits of
the Indenture, subject to (A) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws now and
hereafter in effect relating to creditors rights generally and (B)
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity except insofar as
rights to indemnification and contribution contained herein may be
limited by federal or state securities laws or related public policy).
The Offering Memorandum contains a summary of the material terms of the
Guarantees, which is accurate in all material respects.
-11-
<PAGE>
(xi) The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, will
be the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms and entitled to the benefits
of the Indenture, subject to (A) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws now and
hereafter in effect relating to creditors rights generally and (B)
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity except insofar as
rights to indemnification and contribution contained herein may be
limited by federal or state securities laws or related public policy).
(xii) The Guarantees of the Exchange Notes have been duly and
validly authorized by each of the Guarantors and, when executed and
delivered in accordance with the terms of the Indenture and when the
Exchange Notes have been issued and authenticated in accordance with the
terms of the Exchange Offer and the Indenture, will be the legal and
binding obligations of each of the Guarantors, enforceable against each
of them in accordance with their terms and entitled to the benefits of
the Indenture, subject to (A) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws now and
hereafter in effect relating to creditors rights generally and (B)
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity except insofar as
rights to indemnification and contribution contained herein may be
limited by federal or state securities laws or related public policy).
(xiii) The execution, delivery or performance by the Company or
any Guarantor of this Agreement or any of the other Operative Documents
to which it is a party will not (1) conflict with or result in a breach
of any of the terms and provisions of, or constitute a default under (or
an event that with notice or lapse of time, or both, would constitute a
default under) or require approval or consent under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any subsidiary pursuant to the
terms of any agreement, contract, indenture, mortgage, lease, license,
arrangement or understanding to which the Company or a subsidiary is a
party, or to which any of its properties is subject, that is material to
the Company and the subsidiaries taken as a whole (hereafter,
collectively, "Material Contracts"), or any governmental franchise,
license or permit heretofore issued to the Company or any subsidiary
that is material to the Company and the subsidiaries taken as a whole
(hereafter, collectively, "Material Permits"), (2) violate or conflict
with any provision of the certificate of incorporation, by-laws or
similar governing instruments of the Company or any subsidiary listed on
Schedule III hereto (the "Material Subsidiaries") or (3) violate or
------------
conflict with any judgment, decree, order, statute, rule or regulation
of any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any Material Subsidiary or any
of its respective properties or assets, except for those violations or
conflicts, that, individually or in the aggregate, could not reasonably
be expected to
-12-
<PAGE>
have, a material adverse effect on the Company and its subsidiaries,
taken as a whole (hereinafter referred to as a "Material Adverse
Effect").
(xiv) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any
public, governmental or regulatory agency or body having jurisdiction
over the Company or any subsidiary or any of its respective properties
or assets is required for (A) the execution, delivery and performance by
each of the Company and the Guarantors of this Agreement or any of the
other Operative Documents to which it is a party or (B) the issuance and
sale of the Notes, the issuance of the Guarantees and the transactions
contemplated hereby and thereby, except such as have been or will be
obtained and made on or prior to the Closing Date (or, in the case of
the Registration Rights Agreement, will be obtained and made under the
Act, the Trust Indenture Act, and state securities or Blue Sky laws and
regulations).
(xv) All of the currently outstanding shares of capital stock of
the Company, and all of the outstanding shares of capital stock (or
similar interests) owned by the Company of each of the subsidiaries of
the Company have been duly and validly authorized and issued, are fully
paid and nonassessable and were not issued in violation of or subject to
any preemptive rights. The Company has, as of the date hereof, and will
have, as of the Closing Date an authorized and outstanding
capitalization as set forth in the Offering Memorandum, both on an
historical basis and as adjusted to give effect to the offering of the
Notes. The Company owns directly or indirectly such percentage of the
outstanding capital stock (or similar interests) of each of its
subsidiaries as is set forth opposite the name of such subsidiary in
Schedule IV hereto, free and clear of all claims, liens, security
-----------
interests, pledges, charges, encumbrances, stockholders agreements and
voting trusts, except those the absence of which would not have a
Material Adverse Effect.
(xvi) The Company has no subsidiaries other than those listed in
Schedule IV hereto. Each of the Company and the Material Subsidiaries
-----------
has been duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdictions of incorporation. Each of
the Company and the Material Subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good
standing that will not have a Material Adverse Effect. Each of the
Company and the Material Subsidiaries has all requisite corporate power
and authority, and all necessary consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits of
and from all public, regulatory or governmental agencies and bodies, to
own, lease and operate its properties and conduct its business as now
being conducted and as described in the Offering Memorandum (except for
those the absence of which would not have a Material Adverse Effect).
Neither the Company nor any of the Material Subsidiaries
-13-
<PAGE>
has received any notice of proceedings relating to revocation or
modification of any such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses or permits.
(xvii) Neither the Company nor any subsidiary is in violation or
breach of, or in default under (nor has an event occurred that with
notice, lapse of time or both, would constitute a default under) any
Material Contract, and each Material Contract is in full force and
effect, and is the legal, valid, and binding obligation of the Company
or such subsidiary, as the case may be, and (subject to applicable
bankruptcy, insolvency, and other laws affecting the enforceability of
creditors' rights generally) is enforceable as to the Company or such
subsidiary, as the case may be, in accordance with its terms, subject to
such exceptions which, individually or in the aggregate, do not have and
are not reasonably likely to have a Material Adverse Effect. Neither the
Company nor any Material Subsidiary is in violation of its certificate
of incorporation, by-laws or similar governing instrument.
(xviii) There is no litigation, arbitration, claim, governmental
or other proceeding or investigation pending or, to the best knowledge
of the Company, threatened in writing with respect to the Company or any
Material Subsidiary, or any of its respective operations, businesses,
properties or assets, except as described in the Offering Memorandum,
that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any Material
Subsidiary is, or, to the best knowledge of the Company, with the giving
of notice or lapse of time or both would be, in violation of or
non-compliance with the requirements of any Material Permit or the
provisions of any law, rule, regulation, order, judgment or decree,
including, but without limitation thereto, all applicable federal, state
and local laws and regulations relating to (A) zoning, land use,
protection of the environment, human health and safety or hazardous or
toxic substances, wastes, pollutants or contaminants and (B) employee or
occupational safety, discrimination in hiring, promotion or pay of
employees, employee hours and wages or employee benefits, except for
such violations or failures of compliance that, individually or in the
aggregate, would not have a Material Adverse Effect.
(xix) Except as described in the Offering Memorandum, the
Company and each Material Subsidiary have (A) good and marketable title
to all real and personal properties owned by them, free and clear of all
liens, security interests, pledges, charges, encumbrances, and
mortgages, and (B) valid, subsisting and enforceable leases for all real
and personal properties leased by them, in each case, subject to such
exceptions as, individually or in the aggregate, do not have and are not
reasonably likely to have a Material Adverse Effect. Except as disclosed
in the Offering Memorandum, no real property owned, leased, licensed or
used by the Company or by a Material Subsidiary lies in an area that is,
or to the best knowledge of the Company will be, subject to zoning, use,
or building code restrictions that would prohibit or prevent the
continued effective ownership, leasing, licensing, or use of
-14-
<PAGE>
such real property in the business of the Company or such Material
Subsidiary as presently conducted or as the Offering Memorandum indicate
are contemplated to be conducted, subject to such exceptions which,
individually or in the aggregate, do not have and are not reasonably
likely to have a Material Adverse Effect. The Company will have the
opportunity to lease commercial space created by the Keystone JV (as
defined in the Offering Memorandum).
(xx) The Company, directly or through one or more of the
subsidiaries, owns or possesses all patents, patent rights, licenses,
inventions, copyrights, trademarks, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), service marks and trade names
(collectively, "Intellectual Property") necessary to conduct its
business as now conducted and proposed to be conducted as disclosed in
the Offering Memorandum, except where the failure to own or possess such
Intellectual Property, individually or in the aggregate, would not have
a Material Adverse Effect. Neither the Company nor any subsidiary has
received notice of infringement of or conflict with the asserted rights
of others with respect to any Intellectual Property, except for those
which would not have a Material Adverse Effect. To the best actual
knowledge of the Company's senior management (no duty of inquiry being
implied), there is no infringement by others of any Intellectual
Property of the Company or any subsidiary that has had or may in the
future have a Material Adverse Effect. The Company or a predecessor has
registered, and the Company or a subsidiary owns the rights to all
registrations of the rights to the trademark and related logo for each
of "Vail" and "Beaver Creek" in all jurisdictions in which the failure
to so register or to so own such rights to such registrations would,
individually or in the aggregate, have a Material Adverse Effect.
(xxi) To the Company's best knowledge, neither the Company nor
any subsidiary, nor any director, officer or employee of the Company or
any subsidiary has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds, violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
(xxii) There are no holders of securities of the Company or any
of its subsidiaries who, by reason of the execution by the Company or
any of the Guarantors of this Agreement or any other Operative Document
to which it is a party or the consummation by the Company or any of the
Guarantors of the transactions contemplated hereby and thereby, have the
right to request or demand that the Company or any of its subsidiaries
register under the Act or analogous foreign laws and regulations
securities held by them other than pursuant to the Registration Right
Agreement.
-15-
<PAGE>
(xxiii) None of the Company or any of its subsidiaries is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(xxiv) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and its subsidiaries
and any other person that would give rise to a valid claim against the
Company or any of its subsidiaries or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with
the issuance, purchase and sale of the Notes.
(xxv) Other than as disclosed in the Offering Memorandum, no
labor dispute with the employees of the Company or any subsidiary
exists or, to the best knowledge of the Company, is imminent that,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.
(xxvi) (A) All United States Federal income tax returns of the
Company and each subsidiary required by law to be filed have been
filed and all taxes shown by such returns or otherwise assessed that
are due and payable have been paid, except assessments against which
appeals have been or will be promptly taken and (B) the Company and
the subsidiaries have filed all other tax returns that are required to
have been filed by them pursuant to the applicable laws of all other
jurisdictions, except, as to each of the foregoing clauses (A) and
(B), insofar as the failure to file such returns, individually or in
the aggregate, would not have a Material Adverse Effect, and the
Company and the subsidiaries have paid all taxes due pursuant to said
returns or pursuant to any assessment received by the Company or any
subsidiary, except for such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been provided in
accordance with US GAAP. The charges, accruals and reserves on the
consolidated books of the Company in respect of any tax liability for
any years not finally determined are adequate to meet any assessments
or re-assessments for additional tax for any years not finally
determined, except to the extent of any inadequacy that would not have
a Material Adverse Effect.
(xxvii) The Company and each subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in
which the Company and the subsidiaries are engaged.
(xxviii) Except as disclosed in, or incorporated by reference
into, the Offering Memorandum, there are no business relationships or
related party transactions of the nature described in Item 404 of
Regulation S-K of the Commission involving the Company or any other
persons referred to in such Item 404, except for such transactions
that would be considered immaterial under such Item 404.
-16-
<PAGE>
(xxix) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental
agency that prevents the issuance of the Notes or the Guarantees or
prevents or suspends the use of the Offering Memorandum; no
injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction has been issued that prevents
the issuance of the Notes or the Guarantees or prevents or suspends
the sale of the Notes or the Guarantees in any jurisdiction referred
to in Section 4(e) hereof; and every request of any securities
authority or agency of any jurisdiction for additional information has
been complied with in all material respects.
(xxx) To the extent described in the Offering Memorandum the
Company has (A) initiated a review and assessment of all areas within
its and each of its Material Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be materially and adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by the Company or
any of its Material Subsidiaries (or suppliers, vendors and customers)
may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December
31, 1999), (B) developed a plan and timeline for addressing the Year
2000 Problem on a timely basis and (C) to date, has implemented that
plan in accordance with that timetable.
(xxxi) No registration under the Act of the Restricted Notes or
the Guarantees thereof is required for the sale of the Restricted
Notes to the Initial Purchasers as contemplated hereby or for the
Exempt Resales assuming (A) that the purchasers who buy the Restricted
Notes in the Exempt Resales are Eligible Purchasers and (B) the
accuracy of the Initial Purchasers' representations regarding the
absence of general solicitation in connection with the sale of
Restricted Notes to the Initial Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general
advertising (as defined in Regulation D under the Act) was used by the
Company or any of the Guarantors or any of their representatives
(other than the Initial Purchasers, as to which the Company and the
Guarantors make no representation or warranty) in connection with the
offer and sale of any of the Restricted Notes or the Guarantees
thereof or in connection with Exempt Resales, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. No securities of the
same class as the Notes have been issued and sold by the Company or
any of its subsidiaries within the six-month period immediately prior
to the date hereof.
(xxxii) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Restricted Notes to be
purchased by Eligible Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Internal Revenue Code of 1986. The
-17-
<PAGE>
representation made by the Company and the Guarantors in the preceding
sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made
by Eligible Purchasers as set forth in the Offering Memorandum under
the caption "Transfer Restrictions."
(xxxiii) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources which the
Company and the Guarantors believe to be reliable and accurate in all
material respects.
(xxxiv) The Offering Memorandum, as of its date, contains the
information specified in, and meets the requirements of, Rule
144A(d)(4) under the Act.
(xxxv) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the Trust
Indenture Act.
(xxxvi) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the application of the
proceeds from the issuance and sale of the Notes and the consummation
of the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations T, U or X promulgated by the
Board of Governors of the Federal Reserve System.
(xxxvii) Neither the Company nor any Guarantor intends to, nor
believes that it will, incur debts beyond its ability to pay such
debts as they mature. The present fair saleable value of the assets of
the Company and each Guarantor exceeds the amount that will be
required to be paid on or in respect of its existing debts and other
liabilities (including contingent liabilities) as they become absolute
and matured. The assets of the Company and each Guarantor does not
constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Upon the issuance of the
Notes and the Guarantees, the present fair saleable value of the
assets of the Company and each Guarantor will exceed the amount that
will be required to be paid on or in respect of its existing debts and
other liabilities (including contingent liabilities) as they become
absolute and matured. Upon the issuance of the Notes and the
Guarantees, the assets of the Company and each Guarantor will not
constitute unreasonably small capital to carry out its business as now
conducted.
(xxxviii) Each certificate signed by any officer of the Company
or any Guarantor and delivered to the Initial Purchasers or counsel
for the Initial Purchasers shall be deemed to be a representation and
warranty by the Company or such Guarantor, as the case may be, to the
Initial Purchasers as to the matters covered thereby.
(xxxix) Each of the Company and the Guarantors acknowledge that
the Initial Purchasers and, for purposes of the opinions to be
delivered to the Initial Purchasers pursuant to Section 8 hereof,
counsel for the Company and the Guarantors
-18-
<PAGE>
and counsel for the Initial Purchasers, will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such
reliance.
(xl) None of the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company and the
Guarantors make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with
respect to the Restricted Notes.
(xli) The Restricted Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(xlii) The sale of the Restricted Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions
of the Act.
(xliii) The Company, the Guarantors and their respective
affiliates and all person acting on their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Restricted Notes outside the United States and, in
connection therewith, the Offering Memorandum will contain the
disclosure required by Rule 902(g)(2).
(xliv) Each of the Company and the Guarantors is a "reporting
issuer," as defined in Rule 902 under the Act.
(b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to the Company and the Guarantors
and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order
to evaluate the merits and risks of an investment in the Restricted
Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Restricted
Notes with a view to any distribution thereof that would violate the
Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling
the Restricted Notes only to QIBs in reliance on the exemption from
the registration requirements of the Act provided by Rule 144A and in
offshore transactions in reliance upon Regulation S under the Act.
(iii) No form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) has been or will be
used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of any of the Restricted Notes or
Guarantees, including, but not limited to, articles, notices or
-19-
<PAGE>
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising.
(iv) Such Initial Purchaser agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Restricted Notes
only from, and will offer to sell the Restricted Notes only to,
Eligible Purchasers. Such Initial Purchaser further agrees that (A) it
will offer to sell the Restricted Notes only to, and will solicit
offers to buy the Restricted Notes only from Eligible Purchasers who
in purchasing such Restricted Notes will be deemed to have represented
and agreed that they are purchasing the Restricted Notes for their own
account or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are Eligible
Purchasers, and (B) such Eligible Purchasers will acknowledge and
agree that such Restricted Notes will not have been registered under
the Act and may be resold, pledged or otherwise transferred only (1)
to the company or any subsidiary thereof, (2) inside the United States
to a QIB in compliance with Rule 144A under the Act, (3) inside the
United States to an accredited investor (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Act) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to the
trustee a signed letter containing certain representations and
agreements relating to the restrictions on transfer of this security
(the form of which letter can be obtained from the trustee for this
security), (4) outside the United States in an offshore transaction in
compliance with Rule 904 of Regulation S under the Act, (5) pursuant
to the exemption from registration provided by Rule 144 under the Act
(if available), or (6) pursuant to an effective registration statement
under the Act, and (C) acknowledges that it will, and each subsequent
holder is required to, notify any purchaser of the security evidenced
thereby of the resale restrictions set forth in (B) above.
(v) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will no engage in
any directed selling efforts within the meaning of Regulation S with
respect to the Restricted Notes or the Guarantees thereof.
(vi) The Restricted Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and
will be offered and sold only in offshore transactions.
(vii) The sale of Restricted Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not
part of a plan or scheme to evade the registration provisions of the
Act.
(viii) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Restricted Notes in the United
States or to, or for the benefit or account of, a U.S. Person (other
than a distributor), in each case, as defined in Rule
-20-
<PAGE>
902 under the Act (1) as part of its distribution at any time and (2)
otherwise until 40 days after the later of the commencement of the
offering of the Restricted Notes pursuant hereto and the Closing Date,
other than in accordance with Regulation S of the Act or another
exemption from the registration requirements of the Act. Such Initial
Purchaser agrees that, during such 40-day distribution compliance
period, it will not cause any advertisement with respect to the
Restricted Notes (including any "tombstone" advertisement) to be
published in any newspaper or periodical or posted in any public place
and will not issue any circular relating to the Restricted Notes,
except such advertisements as are permitted by and include the
statements required by Regulation S.
(ix) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Restricted Notes by it to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration during the 40-day distribution compliance period referred
to in Rule 903(c)(2) under the Act, it will send to such distributor,
dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following
effect:
"The Restricted Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of your distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the Offering and the Closing Date, except in either case in
accordance with Regulation S under the Securities Act (or Rule
144A or to Accredited Institutions in transactions that are
exempt from the registration requirements of the Securities Act),
and in connection with any subsequent sale by you of the
Restricted Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer or
person receiving a selling concession, fee or other remuneration,
you must deliver a notice to substantially the foregoing effect.
Terms used above have the meanings assigned to them in Regulation
S."
The Initial Purchasers acknowledge that the Company and the
Guarantors and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 8 hereof, counsel for the
Company and the Guarantors and counsel for the Initial Purchasers will
rely upon the accuracy and truth of the foregoing representations and
hereby consent to such reliance.
6. Indemnification.
---------------
(a) The Company and the Guarantors, jointly and severally, agree
to indemnify and hold harmless (i) the Initial Purchasers, (ii) each
person, if any, who controls the Initial Purchasers within the meaning of
Section 15 of the Act or Section 20(a) of the
-21-
<PAGE>
Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of the Initial Purchasers or any
controlling person against any and all losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to reasonable attorneys'
fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any investigation or litigation, commenced
or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation, provided that such settlement was
effected with the Company's and the Guarantor's written consent in
accordance with Section 6(c) hereof), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum (in each case,
including the documents incorporated by reference therein), or in any
supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that neither the Company nor any Guarantor will be
liable in any such case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information relating to the Initial Purchasers furnished to the Company and
the Guarantors in writing by or on behalf of the Initial Purchasers
expressly for use therein and provided further, that with respect to any
Preliminary Offering Memorandum, such indemnity shall not inure to the
benefit of any Initial Purchaser (or the benefit of any person controlling
such Initial Purchaser) if the person asserting any such losses,
liabilities, claims, damages or expenses purchased the Notes that are the
subject thereof from such Initial Purchaser and if such person was not sent
or given a copy of the final Offering Memorandum at or prior to
confirmation of the sale of such Notes to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Offering Memorandum was corrected in the final Offering Memorandum. This
indemnity agreement will be in addition to any liability which the Company
and the Guarantors may otherwise have, including under this Agreement.
(b) The Initial Purchasers, severally and not jointly, agree to
indemnify and hold harmless (i) the Company and the Guarantors, (ii) each
person, if any, who controls the Company or any of the Guarantors within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
and (iii) the officers, directors, partners, employees, representatives and
agents of the Company and the Guarantors, against any losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to
reasonable attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever and any and
all amounts paid in settlement of any claim or litigation, provided that
such settlement was effected with such Initial Purchaser's written consent
in accordance with Section 6(c) hereof), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims,
-22-
<PAGE>
damages or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent,
that any such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information relating to the Initial Purchasers furnished to the Company and
the Guarantors in writing by or on behalf of the Initial Purchasers
expressly for use therein; provided, however, that in no case shall the
Initial Purchasers be liable or responsible for any amount in excess of the
discounts and commissions received by the Initial Purchasers, as set forth
on the cover page of the Offering Memorandum. This indemnity will be in
addition to any liability which the Initial Purchasers may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not
relieve it from any liability which it may have under this Section 6 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may otherwise have). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the
defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case
the indemnifying party or parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties with
respect to such different defenses), in any of which events such fees and
expenses of counsel shall be borne by the indemnifying parties; provided,
however, that the indemnifying party under subsection (a) or (b) above
shall only be liable for the legal expenses of one counsel (in addition to
any local counsel) for all indemnified parties in each jurisdiction in
which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of
-23-
<PAGE>
any claim or action effected without its prior written consent, provided
that such consent was not unreasonably withheld.
7. Contribution. In order to provide for contribution in
------------
circumstances in which the indemnification provided for in Section 6 is for
any reason held to be unavailable from an indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company
and the Guarantors, on the one hand, and the Initial Purchasers, on the
other hand, shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in
the case of losses, liabilities, claims, damages and expenses suffered by
the Company or any Guarantor, any contribution received by the Company and
the Guarantors from persons, other than the Initial Purchasers, who may
also be liable for contribution, including persons who control the Company
or any of the Guarantors within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act) to which the Company, the Guarantors and
the Initial Purchasers may be subject, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
from the offering of the Restricted Notes or, if such allocation is not
permitted by applicable law or indemnification is not available as a result
of the indemnifying party not having received notice as provided in Section
6, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and
the Guarantors, on the one hand, and the Initial Purchasers, on the other
hand, in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers, on
the other hand, shall be deemed to be in the same proportion as (i) the
total proceeds from the offering of Restricted Notes (net of discounts and
commissions but before deducting expenses) received by the Company and the
Guarantors and (ii) the discounts and commissions received by the Initial
Purchasers, respectively, in each case as set forth on the cover page of
the Offering Memorandum. The relative fault of the Company and the
Guarantors, on the one hand, and of the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company, any Guarantor or the Initial Purchasers and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Guarantors
and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall the
Initial Purchasers be required to contribute any amount in excess of the
amount by which the discounts and
-24-
<PAGE>
commissions applicable to the Restricted Notes purchased by the Initial
Purchasers pursuant to this Agreement exceeds the amount of any damages
which the Initial Purchasers has otherwise been required to pay by reason
of any untrue or alleged untrue statement or omission or alleged omission
and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7, (A) each person, if any, who controls the
Initial Purchasers within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (B) the respective officers, directors,
partners, employees, representatives and agents of the Initial Purchasers
or any controlling person shall have the same rights to contribution as the
Initial Purchasers, and (A) each person, if any, who controls the Company
or any Guarantor within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (B) the respective officers, directors,
partners, employees, representatives and agents of the Company and the
Guarantors shall have the same rights to contribution as the Company and
the Guarantors, subject in each case to clauses (i) and (ii) of this
Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against
another party or parties under this Section 7, notify such party or parties
from whom contribution may be sought, but the failure to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under
this Section 7 or otherwise. No party shall be liable for contribution with
respect to any action or claim settled without its prior written consent,
provided that such written consent was not unreasonably withheld. The
Initial Purchasers' obligations to contribute pursuant to this Section 7
are several in proportion to the respective principal amounts of Restricted
Notes purchased by each of the Initial Purchasers hereunder and not joint.
8. Conditions of Initial Purchasers' Obligations. The obligations
---------------------------------------------
of the Initial Purchasers to purchase and pay for the Restricted Notes, as
provided herein, shall be subject to the satisfaction of the following
conditions:
(a) At the Closing Date, the Initial Purchasers shall have
received a certificate of the Company, executed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, and
a certificate of each Guarantor, executed by two authorized officers
of such Guarantor, dated the date of its delivery, to the effect that
as of the date of such certificate the representations and warranties
of the Company or the Guarantor, as applicable, set forth in Section 5
hereof are true and correct in all material respects as of such
Closing Date, the obligations of the Company or the Guarantor, as
applicable, to be performed hereunder on or prior thereto have been
duly performed in all material respects, and subsequent to the
respective dates of which information is given in the Offering
Memorandum, the Company or Guarantor, as applicable, and its
subsidiaries have not sustained any material loss or interference with
their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, and
there has not
-25-
<PAGE>
been any material adverse change, or any development involving a
material adverse change, in the business prospects, properties,
operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries taken as a whole,
except in which case as described in or contemplated by the Offering
Memorandum.
(b) At the Closing Date, the Initial Purchasers shall have
received (i) the written opinion of Ingrid Keiser, Esq., Assistant
General Counsel to the Company, dated the Closing Date, addressed to
the Initial Purchasers, and in form and substance reasonably
acceptable to the Initial Purchasers' Counsel, to the effect set forth
in Exhibit 1, (ii) the written opinion of Cahill Gordon & Reindel,
---------
special counsel for the Company, dated the Closing Date, addressed to
the Initial Purchasers, and in form and substance reasonably
satisfactory to Initial Purchasers' Counsel, to the effect set forth
in Exhibit 2 and (iii) the written opinion of Arnold & Porter, special
---------
counsel for the Company, dated the Closing Date, addressed to the
Initial Purchasers, and in the form and substance reasonably
satisfactory to Initial Purchasers' Counsel, to the effect set forth
in Exhibit 3.
---------
(c) At the Closing Date, the Initial Purchasers shall have
received the written opinion of Balcomb & Greene, P.C., special
counsel for the Initial Purchasers, dated the Closing Date, addressed
to the Initial Purchasers, and in form and substance reasonably
satisfactory to Initial Purchasers' Counsel, to the effect set forth
in Exhibit 4.
---------
(d) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received from Arthur Andersen
LLP, independent public accountants, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters
addressed to the Initial Purchasers and in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers with respect to the financial statements and certain
financial information of the Company and its subsidiaries contained in
the Offering Memorandum and/or incorporated therein by reference.
(e) The Initial Purchasers shall have received an opinion, dated
the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, of Kramer Levin Naftalis & Frankel LLP, counsel
for the Initial Purchasers, covering such matters as are customarily
covered in such opinions.
(f) Kramer Levin Naftalis & Frankel LLP shall have been furnished
with such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions
herein contained.
-26-
<PAGE>
(g) Prior to the Closing Date, the Company and the Guarantors
shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request.
(h) The Company, the Guarantors and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(i) The Company, the Guarantors and the Initial Purchasers shall
have entered into the Registration Rights Agreement and the Initial
Purchasers shall have received counterparts, conformed as executed,
thereof.
(j) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review (or of any potential or
intended review) for a possible change that does not indicate the
direction of the possible change in, any rating of the Company or any
Guarantor or any securities of the Company or any Guarantor
(including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally
recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act, (ii) there shall not
have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of the
Company or any Guarantor or any securities of the Company or any
Guarantor by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which
the Notes were marketed.
(k) The Notes shall have been approved for trading on PORTAL.
(l) All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Company and the
Guarantors will be in compliance with the provisions hereof only if
they are reasonably satisfactory in form and substance to the Initial
Purchasers. The Company and the Guarantors shall furnish the Initial
Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the Guarantors
-------------------------------
acknowledge that the statements with respect to the offering of the
Restricted Notes set forth in (i) the third sentence of the penultimate
paragraph on the cover page and (ii) the first and last four paragraphs in
the "Plan of Distribution" in the Offering Memorandum constitute the only
information relating to any of the Initial Purchasers furnished to the
Company and the Guarantors in writing by or on behalf of the Initial
Purchasers expressly for use in the Offering Memorandum.
-27-
<PAGE>
10. Survival of Representations and Agreements. All representations
------------------------------------------
and warranties, covenants and agreements of the Initial Purchasers, the
Company and the Guarantors contained in this Agreement, including the
agreements contained in Sections 4(f) and 11(d), the indemnity agreements
contained in Section 6 and the contribution agreements contained in Section
7, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchasers, any
controlling person thereof, or by or on behalf of the Company, the
Guarantors or any controlling person thereof, and shall survive delivery of
and payment for the Restricted Notes to and by the Initial Purchasers. The
representations contained in Section 5 and the agreements contained in
Sections 4(f), 6, 7 and 11(d) shall survive the termination of this
Agreement, including any termination pursuant to Section 11.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company
from the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to the Company or any of
the Guarantors if, on or prior to such date, (i) the Company or any of the
Guarantors shall have failed, refused or been unable to perform in any
material respect any agreement on its part to be performed hereunder, (ii)
any other condition to the obligations of the Initial Purchasers hereunder
as provided in Section 8 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the Initial
Purchasers, any material adverse change shall have occurred since the
respective dates as of which information is given in the Offering
Memorandum in the condition (financial or otherwise), business, prospects,
or results of operations of the Company and its subsidiaries, taken as a
whole, other than as set forth in the Offering Memorandum, or (iv)(A)
trading in securities generally on the New York Stock Exchange, the
American Stock Exchange, or the Nasdaq National Market shall have been
suspended or materially limited, or minimum or maximum prices for trading
shall have been established, or maximum ranges for prices for securities
shall have been required, on such exchange or the Nasdaq National Market,
or by such exchange or other regulatory body or governmental authority
having jurisdiction; or (B) a banking moratorium shall have been declared
by federal or state authorities; or (C) there is an outbreak or escalation
of armed hostilities involving the United States on or after the date
hereof, or if there has been a declaration by the United States of a
national emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to proceed
with the offering or delivery of the Restricted Notes on the terms and in
the manner contemplated in the Offering Memorandum; or (D) there shall have
occurred such a material adverse change in the financial markets in the
United States such as,
-28-
<PAGE>
in the Initial Purchasers' judgment, makes it inadvisable or impracticable
to proceed with the delivery of the Restricted Notes as contemplated
hereby.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone or facsimile and, in either case, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to clause (iv) of Section 11(b),
in which case each party will be responsible for its own expenses), or if
the sale of the Restricted Notes provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set
forth herein is not satisfied or because of any refusal, inability or
failure on the part of the Company or any Guarantor to perform any
agreement herein or comply with any provision hereof, the Company and the
Guarantors shall reimburse the Initial Purchasers for all out-of-pocket
expenses (including the reasonable fees and expenses of the Initial
Purchasers' counsel), incurred by the Initial Purchasers in connection
herewith.
(e) If on the Closing Date any one or more of the Initial Purchasers
shall fail or refuse to purchase the Restricted Notes which it or they have
agreed to purchase hereunder on such date and the aggregate principal
amount of the Restricted Notes which such defaulting Initial Purchaser or
Initial Purchasers, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of
the Restricted Notes to be purchased on such date by all Initial
Purchasers, each non-defaulting Initial Purchaser shall be obligated
severally, in the proportion which the principal amount of the Restricted
Notes set forth opposite its name in Schedule II bears to the aggregate
-----------
principal amount of the Restricted Notes which all the non-defaulting
Initial Purchasers, as the case may be, have agreed to purchase, or in such
other proportion as Bear, Stearns & Co. Inc. ("Bear Stearns") may specify,
to purchase the Restricted Notes which such defaulting Initial Purchaser or
Initial Purchasers, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the aggregate
principal amount of the Restricted Notes which any Initial Purchaser has
agreed to purchase pursuant to Section 3 hereof be increased pursuant to
this Section 11 by an amount in excess of one-ninth of such principal
amount of the Restricted Notes without the written consent of such Initial
Purchaser. If on the Closing Date any Initial Purchaser or Initial
Purchasers shall fail or refuse to purchase the Restricted Notes and the
aggregate principal amount of the Restricted Notes with respect to which
such default occurs is more than one-tenth of the aggregate principal
amount of the Restricted Notes to be purchased by all Initial Purchasers
and arrangements satisfactory to the Initial Purchasers and the Company for
purchase of such the Restricted Notes are not made within 48 hours after
such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case
which does not result in termination of this Agreement, either Bear Stearns
or the Company shall have the right to postpone the Closing Date, but in no
event for longer
-29-
<PAGE>
than seven days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of any such
Initial Purchaser under this Agreement.
12. Notice. All communications hereunder, except as may be otherwise
------
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, telecopied and confirmed in writing or
sent by a nationally recognized overnight courier service guaranteeing delivery
on the next business day to Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
New York 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, New York 10022, Attention: Howard A. Sobel, Esq., telecopy number:
(212) 715-8000; and if sent to the Company and the Guarantors, shall be mailed,
delivered, telecopied and confirmed in writing or sent by a nationally
recognized overnight courier service guaranteeing delivery on the next business
day to Vail Resort, Inc., 137 Benchmark Road, Avon, Colorado 81620, Attention:
Chief Financial Officer, telecopy number: (970) 845-2521, with a copy to Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: James J.
Clark, Esq., telecopy number: (212) 269-5420.
13. Parties. This Agreement shall inure solely to the benefit of, and shall
-------
be binding upon, the Initial Purchasers, the Company, the Guarantors and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Notes from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with the
------------
internal laws of the State of New York.
15. Captions. The captions included in this Agreement are included solely
--------
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
------------
which together shall constitute one and the same instrument.
[Signature pages to follow]
-30-
<PAGE>
If the foregoing correctly sets forth the understanding among the Initial
Purchasers, the Company and the Guarantors please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
VAIL RESORTS, INC.
By: /s/ James P. Donohue
--------------------------
Name: James P. Donohue
Title: Senior Vice President and
and Chief Financial Officer
[Purchase Agreement Signature Page for Company]
<PAGE>
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Each by its authorized officer:
By: /s/ James P. Donohue
--------------------------
Name: James P. Donohue
Title: Senior Vice President of
each Guarantor listed above
[Purchase Agreement Signature Page for Guarantors]
<PAGE>
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By: /s/ Steve Winegrad
---------------------------------
Name: Steve Winegrad
Title: Senior Managing Director
Nationsbanc Montgomery Securities LLC
By:
---------------------------------
Name:
Title:
Bt Alex. Brown Incorporated
By:
---------------------------------
Name:
Title:
Lehman Brothers Inc.
By:
---------------------------------
Name:
Title:
Salomon Smith Barney Inc.
By:
---------------------------------
Name:
Title:
[Purchase Agreement Signature Pages for Initial Purchasers]
<PAGE>
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By:
---------------------------------
Name:
Title:
Nationsbanc Montgomery Securities LLC
By: /s/ Sam A. Wilkins, III
---------------------------------
Name: Sam A. Wilkins, III
Title: Senior Managing Director
Bt Alex. Brown Incorporated
By:
---------------------------------
Name:
Title:
Lehman Brothers Inc.
By:
---------------------------------
Name:
Title:
Salomon Smith Barney Inc.
By:
---------------------------------
Name:
Title:
[Purchase Agreement Signature Pages for Initial Purchasers]
<PAGE>
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By:
---------------------------------
Name:
Title:
Nationsbanc Montgomery Securities LLC
By:
---------------------------------
Name:
Title:
Bt Alex. Brown Incorporated
By: /s/ Larry Zimmerman
---------------------------------
Name: Larry Zimmerman
Title: Managing Director
Lehman Brothers Inc.
By:
---------------------------------
Name:
Title:
Salomon Smith Barney Inc.
By:
---------------------------------
Name:
Title:
[Purchase Agreement Signature Pages for Initial Purchasers]
<PAGE>
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By:
---------------------------------
Name:
Title:
Nationsbanc Montgomery Securities LLC
By:
---------------------------------
Name:
Title:
Bt Alex. Brown Incorporated
By:
---------------------------------
Name:
Title:
Lehman Brothers Inc.
By: /s/ John Russell
---------------------------------
Name: John Russell
Title: Managing Director
Salomon Smith Barney Inc.
By:
---------------------------------
Name:
Title:
[Purchase Agreement Signature Pages for Initial Purchasers]
<PAGE>
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By:
---------------------------------
Name:
Title:
Nationsbanc Montgomery Securities LLC
By:
---------------------------------
Name:
Title:
Bt Alex. Brown Incorporated
By:
---------------------------------
Name:
Title:
Lehman Brothers Inc.
By:
---------------------------------
Name:
Title:
Salomon Smith Barney Inc.
By: /s/ Wendell M. Brooks
---------------------------------
Name: Wendell M. Brooks
Title: Director
[Purchase Agreement Signature Pages for Initial Purchasers]
<PAGE>
SCHEDULE I
Guarantors
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
<PAGE>
SCHEDULE II
Initial Purchasers
Initial Purchasers Principal Amount
- ------------------ ----------------
Bear, Stearns & Co. Inc. ................................. 76,522,000
NationsBanc Montgomery Securities LLC .................... 76,522,000
BT Alex. Brown Incorporated .............................. 15,652,000
Lehman Brothers Inc. ..................................... 15,652,000
Salomon Smith Barney Inc. ................................ 15,652,000
------------
Total ............................................... $200,000,000
============
<PAGE>
SCHEDULE III
Material Domestic Subsidiaries of the Company
Owned Directly by Vail Resorts, Inc.
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
Owned Directly by Vail Holdings, Inc.
The Vail Corporation
Owned Directly by The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
SSI Venture, LLC
Vail Associates Investments, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Owned Directly by Beaver Creek Associates, Inc.
Beaver Creek Food Services, Inc.
Owned Directly by Lodge Properties, Inc.
Lodge Realty, Inc.
Owned Directly by Vail Resorts Development Company
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
<PAGE>
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Owned Directly by Vail Associates Real Estate, Inc.
Slifer, Smith & Frampton/Vail Associates Real Estate, LLC Vail/Battle
Mountain, Inc.
Owned Directly by Vail Summit Resorts, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone/Intrawest, LLC
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
<PAGE>
SCHEDULE IV
Subsidiaries of the Company
<TABLE>
<CAPTION>
Owned Directly by Vail Resorts, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
GHTV, Inc. 100% Delaware California
- -----------------------------------------------------------------------------------------
Gillett Broadcasting of Maryland, 100% Delaware Tennessee
Inc.
- -----------------------------------------------------------------------------------------
Gillett Broadcasting, Inc. 100% Delaware --
- -----------------------------------------------------------------------------------------
Gillett Group Management, Inc. 100% Delaware Colorado
- -----------------------------------------------------------------------------------------
Vail Holdings, Inc. 100% Colorado --
=========================================================================================
<CAPTION>
Owned Directly by Vail Holdings, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Vail Corporation 100% Colorado --
==========================================================================================
<CAPTION>
Owned Directly by The Vail Corporation
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Avon Partners II, LLC 50% Colorado --
- -----------------------------------------------------------------------------------------
Beaver Creek Associates, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Beaver Creek Consultants, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
BC Housing, LLC 49% Colorado --
- -----------------------------------------------------------------------------------------
Eagle Park Reservoir Company 55% Colorado --
- -----------------------------------------------------------------------------------------
Eclipse Television and Sports
Marketing, LLC 25% Colorado --
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lodge Properties, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Piney River Ranch, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
SSI Venture, LLC 52% Colorado --
- -----------------------------------------------------------------------------------------
Vail Associates Investments, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Food Services, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Resorts Development Company 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Summit Resorts, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Trademarks, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail/Arrowhead, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail/Beaver Creek Resort
Properties, Inc. 80% Colorado --
=========================================================================================
</TABLE>
Owned Directly by Beaver Creek Associates, Inc.
<TABLE>
<CAPTION>
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Beaver Creek Food Services, Inc. 100% Colorado --
=========================================================================================
<CAPTION>
Owned Directly by Beaver Creek Food Services, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Boulder/Beaver, LLC 86% Colorado --
=========================================================================================
<CAPTION>
Owned Directly by Lodge Properties, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Lodge Realty, Inc. 80% Colorado --
=========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Owned Directly by Vail Resorts Development Company
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Vail Associates Consultants, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Associates Holdings, Ltd. 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Associates Management Company 100% Colorado --
- -----------------------------------------------------------------------------------------
Vail Associates Real Estate, Inc. 80% Colorado --
=========================================================================================
<CAPTION>
Owned Directly by Vail Associates Real Estate, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Slifer, Smith & Frampton/Vail 50% Colorado --
Associates Real Estate, LLC
- -----------------------------------------------------------------------------------------
Vail/Battle Mountain, Inc. 100% Colorado --
=========================================================================================
<CAPTION>
Owned Directly by Vail Summit Resorts, Inc.
=========================================================================================
State of Qualified to do
Subsidiary % Owned Incorporation Business in
- ---------- ------- ------------- -----------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Clinton Ditch and Reservoir Company 49% Colorado --
- -----------------------------------------------------------------------------------------
Keystone Conference Services, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Keystone Development Sales, Inc. 100% Colorado --
- -----------------------------------------------------------------------------------------
Keystone Food and Beverage Company 100% Colorado --
- -----------------------------------------------------------------------------------------
Keystone/Intrawest, LLC 50% Delaware --
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Keystone Resort Property Management 100% Colorado --
Company
- -----------------------------------------------------------------------------------------
Property Management Acquisition 100% Tennessee Colorado
Corp., Inc.
- -----------------------------------------------------------------------------------------
The Village at Breckenridge 100% Tennessee Colorado
Acquisition Corp., Inc.
=========================================================================================
</TABLE>
<PAGE>
Exhibit 1
Form of Assistant General Counsel Opinion
<PAGE>
Exhibit 2
Form of Cahill Gordon & Reindel Opinion
<PAGE>
Exhibit 3
Form of Arnold & Porter Opinion
<PAGE>
Exhibit 4
Form of Balcomb & Greene, P.C. Opinion
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
VAIL RESORTS, INC.,
as Issuer
THE GUARANTORS NAMED HEREIN,
as Guarantors
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
8 3/4% SENIOR SUBORDINATED NOTES DUE 2009
-----------------------------
INDENTURE
Dated as of May 11, 1999
-----------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.................................................. 1
Section 1.01 Definitions................................................................................. 1
Section 1.02 Other Definitions........................................................................... 19
Section 1.03 Incorporation by Reference of Trust Indenture Act........................................... 20
Section 1.04 Rules of Construction....................................................................... 20
Section 1.05 Compliance Certificates and Opinions........................................................ 21
Section 1.06 Form of Documents Delivered to Trustee...................................................... 22
Section 1.07 Acts of Holders............................................................................. 22
ARTICLE 2. THE NOTES .................................................................................. 23
Section 2.01. Form and Dating............................................................................. 23
Section 2.02. Execution and Authentication................................................................ 24
Section 2.03. Registrar and Paying Agent.................................................................. 25
Section 2.04. Paying Agent to Hold Assets in Trust........................................................ 25
Section 2.05. Holder Lists................................................................................ 25
Section 2.06. Transfer and Exchange....................................................................... 26
Section 2.07 Replacement Notes............................................................................39
Section 2.08 Outstanding Notes............................................................................40
Section 2.09 Treasury Notes...............................................................................40
Section 2.10 Temporary Notes..............................................................................40
Section 2.11 Cancellation.................................................................................41
Section 2.12. Defaulted Interest.......................................................................... 41
Section 2.13 CUSIP Number................................................................................ 42
Section 2.14 Deposit of Moneys........................................................................... 42
Section 2.15 Issuance of Additional Notes.................................................................42
ARTICLE 3. REDEMPTION AND OFFERS TO PURCHASE........................................................... 43
Section 3.01 Applicability of Article.................................................................... 43
Section 3.02 Election to Redeem; Notice to Trustee....................................................... 43
Section 3.03 Selection of Notes to Be Redeemed........................................................... 43
Section 3.04 Notice of Redemption........................................................................ 44
Section 3.05 Deposit of Redemption Price................................................................. 45
Section 3.06 Notes Payable on Redemption Date............................................................ 45
Section 3.07 Notes Redeemed in Part...................................................................... 45
Section 3.08 Optional Redemption......................................................................... 46
Section 3.09 Mandatory Redemption........................................................................ 46
Section 3.10 Offer to Purchase by Application of Excess Proceeds......................................... 46
ARTICLE 4. COVENANTS................................................................................... 49
Section 4.01 Payment of Notes............................................................................ 49
Section 4.02 Maintenance of Office or Agency............................................................. 49
Section 4.03 Money for Security Payments to be Held in Trust............................................. 50
Section 4.04 Reports..................................................................................... 51
Section 4.05 Compliance Certificate...................................................................... 52
</TABLE>
D-i-
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.06 Taxes....................................................................................... 52
Section 4.07 Stay, Extension and Usury Laws.............................................................. 52
Section 4.08 Corporate Existence; Maintenance
of Properties and Insurance................................................................. 53
Section 4.09 Limitation on the Incurrence of Indebtedness and
Issuance of Preferred Stock................................................................. 53
Section 4.10 Limitation on Restricted Payments........................................................... 56
Section 4.11 Limitation on Liens......................................................................... 58
Section 4.12 Limitation on Transactions with Affiliates.................................................. 59
Section 4.13 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries...................................................................... 59
Section 4.14 Limitation on Layering Debt................................................................. 60
Section 4.15 Payments for Consent........................................................................ 61
Section 4.16 Asset Sales................................................................................. 61
Section 4.17 Offer to Repurchase Upon Change of Control.................................................. 62
Section 4.18 Additional Subsidiary Guarantees............................................................ 64
ARTICLE 5. SUCCESSORS.................................................................................. 65
Section 5.01 Limitation on Merger, Consolidation or Sale of Assets....................................... 65
Section 5.02 Successor Person Substituted................................................................ 66
ARTICLE 6. DEFAULTS AND REMEDIES....................................................................... 66
Section 6.01 Events of Default........................................................................... 66
Section 6.02 Acceleration of Maturity.................................................................... 68
Section 6.03 Other Remedies.............................................................................. 68
Section 6.04 Waiver of Past Defaults..................................................................... 69
Section 6.05 Control by Majority......................................................................... 69
Section 6.06 Limitation on Suits......................................................................... 69
Section 6.07 Rights of Holders to Receive Payment........................................................ 70
Section 6.08 Collection Suit by Trustee.................................................................. 70
Section 6.09 Trustee May File Proofs of Claim............................................................ 70
Section 6.10 Priorities.................................................................................. 71
Section 6.11 Undertaking for Costs....................................................................... 71
ARTICLE 7. TRUSTEE..................................................................................... 72
Section 7.01 Duties of Trustee........................................................................... 72
Section 7.02 Rights of Trustee........................................................................... 73
Section 7.03 Individual Rights of Trustee................................................................ 74
Section 7.04 Trustee's Disclaimer........................................................................ 74
Section 7.05 Notice of Defaults.......................................................................... 75
Section 7.06 Reports by Trustee to Holders............................................................... 75
Section 7.07 Compensation and Indemnity.................................................................. 75
Section 7.08 Replacement of Trustee...................................................................... 77
Section 7.09 Successor Trustee by Merger, etc............................................................ 78
Section 7.10 Eligibility; Disqualification............................................................... 78
Section 7.11 Preferential Collection of Claims Against Company........................................... 78
</TABLE>
D-ii-
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.................................................... 79
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.................................... 79
Section 8.02 Legal Defeasance and Discharge.............................................................. 79
Section 8.03 Covenant Defeasance......................................................................... 79
Section 8.04 Conditions to Legal Defeasance or Covenant Defeasance....................................... 80
Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.............................................................. 81
Section 8.06 Repayment to Company........................................................................ 82
Section 8.07 Reinstatement............................................................................... 82
ARTICLE 9. AMENDMENTS.................................................................................. 82
Section 9.01 Without Consent of Holders.................................................................. 82
Section 9.02 With Consent of Holders..................................................................... 83
Section 9.03 Compliance with Trust Indenture Act......................................................... 85
Section 9.04 Revocation and Effect of Consents........................................................... 85
Section 9.05 Notation on or Exchange of Notes............................................................ 85
Section 9.06 Trustee to Sign Amendments, etc............................................................. 85
ARTICLE 10. SUBORDINATION............................................................................... 86
Section 10.01 Agreement to Subordinate.................................................................... 86
Section 10.02 Liquidation; Dissolution; Bankruptcy........................................................ 86
Section 10.03 Default on Designated Senior Debt........................................................... 86
Section 10.04 Acceleration of Notes....................................................................... 88
Section 10.05 When Distribution Must be Paid Over......................................................... 88
Section 10.06 Notice by Company........................................................................... 89
Section 10.07 Subrogation................................................................................. 89
Section 10.08 Relative Rights............................................................................. 89
Section 10.09 Subordination May Not be Impaired by Company................................................ 90
Section 10.10 Distribution or Notice to Representative.................................................... 90
Section 10.11 Rights of Trustee and Paying Agent.......................................................... 90
Section 10.12 Authorization to Effect Subordination....................................................... 91
ARTICLE 11. SATISFACTION AND DISCHARGE.................................................................. 91
Section 11.01 Satisfaction and Discharge of Indenture..................................................... 91
Section 11.02 Application of Trust Money.................................................................. 92
ARTICLE 12. SUBSIDIARY GUARANTEES....................................................................... 92
Section 12.01 Subsidiary Guarantee........................................................................ 92
Section 12.02 Obligation of the Guarantors Unconditional.................................................. 93
Section 12.03 Waiver Relating to Subsidiary Guarantees.....................................................93
Section 12.04 Subordination of Subsidiary Guarantees.......................................................94
Section 12.05 Guarantors May Consolidate, etc., on Certain Terms.......................................... 94
Section 12.06 Release of Subsidiary Guarantee............................................................. 94
Section 12.07 Contribution of Guarantors.................................................................. 95
Section 12.08. Reinstatement of Subsidiary Guarantees...................................................... 95
</TABLE>
D-iii-
<PAGE>
<TABLE>
<S> <C> <C>
MISCELLANEOUS................................................................................................... 96
Section 13.01 Trust Indenture Act Controls................................................................ 96
Section 13.02 Notices..................................................................................... 96
Section 13.03 Communication by Holders with Other Holders................................................. 97
Section 13.04 Certificate and Opinion as to Conditions Precedent.......................................... 97
Section 13.05 Rules by Trustee and Agents................................................................. 97
Section 13.06 Legal Holidays.............................................................................. 98
Section 13.07 No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders.............................................................. 98
Section 13.08 Governing Law; Submission to Jurisdiction................................................... 98
Section 13.09 No Adverse Interpretation of Other Agreements............................................... 98
Section 13.10 Successors and Assigns...................................................................... 98
Section 13.11 Severability................................................................................ 99
Section 13.12 Counterpart Originals....................................................................... 99
Section 13.13 Table of Contents, Headings, etc............................................................ 99
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Certificate of Transfer
Exhibit C Form of Certificate of Exchange
Exhibit D Form of Certificate from Acquiring Institutional Accredited Investor
</TABLE>
D-iv-
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)........................................................................................7.10
(a)(2)........................................................................................7.10
(a)(3)........................................................................................N.A.
(a)(4)........................................................................................N.A.
(a)(5)........................................................................................7.10
(b).....................................................................................7.08, 7.10
(c)...........................................................................................N.A.
311(a)...........................................................................................7.11
(b)...........................................................................................7.11
(c)...........................................................................................N.A.
312(a)...........................................................................................2.05
(b)..........................................................................................13.03
(c)..........................................................................................13.03
313(a)...........................................................................................7.06
(b)(1)........................................................................................N.A.
(b)(2)..................................................................................7.06; 7.07
(c)...........................................................................................7.06
(d)...........................................................................................7.06
314(a).....................................................................................4.04, 4.05
(b)...........................................................................................N.A.
(c)(1).......................................................................................13.04
(c)(2).......................................................................................13.04
(c)(3)........................................................................................N.A.
(d)...........................................................................................N.A.
(e)...........................................................................................1.05
(f)............................................................................................N.A.
315(a)...........................................................................................7.01
(b).....................................................................................7.05;13.02
(c)...........................................................................................7.01
(d)...........................................................................................7.01
(e)...........................................................................................6.11
316(a)(last sentence)............................................................................2.09
(a)(1)(A).....................................................................................6.05
(a)(1)(B).....................................................................................6.04
(a)(2)........................................................................................N.A.
(b)...........................................................................................6.07
(c)...........................................................................................1.07
317(a)(1)........................................................................................6.08
(a)(2)........................................................................................6.09
(b)...........................................................................................2.04
318(a)..........................................................................................13.01
(b)...........................................................................................N.A.
(c)..........................................................................................13.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
-D-v-
<PAGE>
INDENTURE, dated as of May 11, 1999, among VAIL RESORTS, INC., a Delaware
corporation (the "Company"), as Issuer, the Guarantors named on the signature
pages hereto, as Guarantors, and United States Trust Company of New York, a bank
and trust company organized under the New York Banking Law, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 8 3/4% Senior Subordinated Notes due 2009 of the Company (the "Notes").
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions
"144A Global Note" means a global note substantially in the form of Exhibit
-------
A hereto bearing the Global Note Legend and the Private Placement Legend and
- -
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the initial
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness or preferred stock of any other Person existing at the time such
other Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness or preferred stock incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
"Additional Notes" means, subject to the Company's compliance with Section
4.09 hereof, 8 3/4% Senior Subordinated Notes due 2009 issued from time to time
after May 11, 1999 under the terms of this Indenture (other than those issued
pursuant to Sections 2.06, 2.07, 2.10, 3.07, 3.10, 4.17 or 9.05 of this
Indenture and other than Exchange Notes issued pursuant to an Exchange Offer for
other Notes outstanding under this Indenture).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar or Paying Agent.
"Agent Members" means members of, or participants in, the Depositary.
<PAGE>
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interest in any Global Note, the rule and regulations and
procedures of the Depositary that apply to such transfer or exchange.
"Apollo" means Apollo Ski Partners, an indirect subsidiary of Apollo
Advisors, L.P., a Delaware limited partnership.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(collectively, "dispositions") of any assets or rights (including, without
limitation, by way of a Sale and Leaseback Transaction), other than dispositions
of inventory or sales or leases of real estate constituting Real Estate Held for
Sale in the ordinary course of business, and (ii) the issuance of Equity
Interests by any Restricted Subsidiary or the disposition by the Company or a
Restricted Subsidiary of Equity Interests in any of the Company's Restricted
Subsidiaries (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Restricted
Subsidiary of the Company), in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that have a fair
market value in excess of $3.0 million or (b) for net proceeds in excess of $3.0
million. Notwithstanding the foregoing, the following will be deemed not to be
Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary; (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary; (iii) a Permitted Investment or
Restricted Payment that is permitted by Section 4.10 hereof; (iv) a disposition
of Cash Equivalents solely for cash or other Cash Equivalents; (v) a disposition
in the ordinary course of business of used, worn-out, obsolete, damaged or
replaced equipment; (vi) the grant of licenses to third parties in respect of
intellectual property in the ordinary course of business of the Company or any
of its Restricted Subsidiaries, as applicable; (vii) any disposition of
properties or assets that is governed by Section 4.17 hereof or Section 5.01
hereof; and (viii) the granting or incurrence of any Permitted Lien.
"Bankruptcy Law" means Title 11, U.S. Code or any similar foreign, federal
or state law for the relief of debtors, as amended.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person, or any duly authorized committee of such board of
directors.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company in full force and effect at the time of determination
and certified as such by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law, regulation or executive order to close.
- 2 -
<PAGE>
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (a) marketable obligations issued or
unconditionally guaranteed by the U.S. or issued by any of its agencies and
backed by the full faith and credit of the U.S., in each case maturing within
one year from the date of acquisition; (b) short-term investment grade domestic
and eurodollar certificates of deposit or time deposits that are fully insured
by the Federal Deposit Insurance Corporation or are issued by commercial banks
organized under the laws of the U.S. or any of its states having combined
capital, surplus, and undivided profits of not less than $100,000,000 (as shown
on its most recently published statement of condition); (c) commercial paper and
similar obligations rated "P-1" by Moody's Investors Service, Inc. ("Moody's")
or "A-1" by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"); (d) readily marketable tax-free municipal bonds of
domestic issuer rated "A-2" or better by Moody's or "A" or better by S&P, and
maturing within one year from the date of issuance; and (e) mutual funds or
money market accounts investing primarily in items described in clauses (a)
through (d) above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means, with respect to the Company or any successor
Person permitted under Article 5 hereof, the occurrence of any of the following:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Apollo and its Affiliates, acquires "beneficial
ownership" (as determined in accordance with Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 50% of the total outstanding shares of
Voting Stock except to the extent that, and so long as, Apollo and its
affiliates hold the right, by voting power, contract or otherwise, to elect or
designate, and do so elect or designate, a majority of the Company's Board of
Directors; (b) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of its
assets to any person, or any other corporation merges into the Company and, in
the case of any such transaction, the outstanding common stock of the Company is
changed or exchanged as a result, unless the shareholders of the Company
immediately before such transaction own, directly or indirectly, at least 51% of
the outstanding shares of Voting Stock of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction (except to the extent that, and
so long as, Apollo and its affiliates hold the right, by voting power or
otherwise, to elect or designate, and do so elect or designate, a majority of
the Board of Directors of the corporation resulting from such transaction); or
(c)
- 3 -
<PAGE>
the first day on which more than a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Closing Date" means May 11, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Company" means Vail Resorts, Inc., a Delaware corporation, and any
successor thereto pursuant to Section 5.01 hereof.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company (i) by its Chairman, a Vice Chairman, its
President, Senior Vice President or a Vice President and (ii) by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to
the Trustee; provided, however, that such written request or order may be signed
by any two of the officers or directors listed in clause (i) above in lieu of
being signed by one of such officers or directors listed in such clause (i) and
one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense,
and (iv) depreciation and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, minus (v) non-
cash items increasing such Consolidated Net Income, in each case, for such
period without duplication on a consolidated basis and determined in accordance
with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Resort EBITDA of such Person for such
period to the Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, redeems, repays or
otherwise retires any Indebtedness (other than revolving credit borrowings)
subsequent to the commencement of the period for which the Consolidated Interest
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Consolidated Interest Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Interest Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
redemption, repayment or retirement of Indebtedness as if the same had occurred
at the beginning of the applicable four-quarter
- 4 -
<PAGE>
reference period. In addition, for purposes of making the computation referred
to above, (i) (a) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions and (b) other transactions
consummated by the Company or any of its Restricted Subsidiaries with respect to
which pro forma effect may be given pursuant to Article 11 of Regulation S-X
under the Securities Act, in each case during the four-quarter reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Resort EBITDA for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (ii) the Consolidated Resort EBITDA
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded and (iii) the Consolidated Interest Expense attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent (x) that the obligations giving rise to such Consolidated
Interest Expense will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date, or (without duplication)
(y) such Consolidated Interest Expense is less than the Consolidated Resort
EBITDA attributable to such discontinued operations for the same period.
"Consolidated Interest Expense" means with respect to any Person for any
period the sum, without duplication, of (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (ii) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, (iii) any interest expense for such
period on Indebtedness of another Person that is guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon), in each case, on a consolidated basis and in accordance with GAAP,
and (iv) any Preferred Stock dividends paid in cash by the Company or any of its
Restricted Subsidiaries to a Person other than the Company or any of its
Restricted Subsidiaries, determined, in each case, on a consolidated basis and
in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the net income (but not loss) of any Person that is not a
Restricted Subsidiary of such Person or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash by such Person during such period to the
referent Person or a Restricted Subsidiary thereof, (ii) the net income (but not
loss) of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that net income is not at the
- 5 -
<PAGE>
date of determination permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the consolidated stockholders' equity of such Person and its consolidated
Restricted Subsidiaries as of such date, less (without duplication) amounts
attributable to Disqualified Stock of such Person, in each case determined in
accordance with GAAP.
"Consolidated Resort EBITDA" means, with respect to any Person for any
period, the Consolidated EBITDA of such Person for such period minus
consolidated real estate revenue of such Person and its Restricted Subsidiaries
for such period plus consolidated real estate operating expenses of such Person
and its Restricted Subsidiaries for such period minus any portion of such
Consolidated EBITDA attributable to Unrestricted Subsidiaries of such Person for
such period, in each case as reported on such Person's consolidated statement of
operations and determined on a consolidated basis and in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" means the principal corporate trust
office of the Trustee at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 114 West 47th Street, New York, New York 10036.
"Credit Agreement" means that certain amended and restated credit
agreement, dated as of May 1, 1999, by and among the Company, the lenders named
therein, Nationsbank, N.A. as Agent, and NationsBanc Montgomery Securities LLC,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Notes" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of
- 6 -
<PAGE>
Exhibit A hereto except that such Note shall not bear the Global Note Legend and
- ---------
shall not have the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
"Depositary" means, with respect to any Global Note, the Person specified
in Section 2.03 hereof as the Depositary with respect to such Note, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture, and, thereafter, "Depositary" shall mean or include
such successor.
"Designated Senior Debt" of any Person means (i) any Indebtedness of such
Person outstanding under the Credit Agreement and (ii) any other Senior Debt of
such Person, the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt" of such Person.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring on or prior to 91
days after the date on which the Notes mature shall not constitute Disqualified
Stock if (1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable in any respect to the holders of such
Capital Stock than the terms applicable to the Notes pursuant to Sections 3.10,
4.16 and 4.17 hereof; and (2) any such requirement only becomes operative after
compliance with such terms applicable to the Notes, including the purchase of
any Notes tendered pursuant thereto.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (1) a public or private sale of Capital Stock of
the Company and (ii) the sale of other securities convertible or exchangeable
into Capital Stock (other than Disqualified Stock) of the Company; provided, an
Equity Offering shall be deemed to occur with respect to all or a portion of
such securities only upon the conversion or exchange of such securities into
Capital Stock.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" has the meaning set forth in Section 6.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
- 7 -
<PAGE>
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.
"Exchange Offer" means the offer that may be made by the Company pursuant
to any Registration Rights Agreement to exchange Notes for Exchange Notes and
any similar exchange of Additional Notes.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and the Company's
Subsidiaries (other than Indebtedness under the Credit Agreement and the Notes)
in existence on the Closing Date until such Indebtedness is repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States from time to time.
"Global Note" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, substantially in the form of
Exhibit A hereto that bears the Global Note Legend and that has the "Schedule of
- ---------
Exchange of Interests in the Global Note" attached thereto.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
- 8 -
<PAGE>
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means (i) each of the Company's Restricted Subsidiaries that is
a party to this Indenture on the date of execution and delivery of this
Indenture and (ii) each other Person that becomes a guarantor of the obligations
of the Company under the Notes and this Indenture from time to time in
accordance with the provisions of this Indenture, and their respective
successors and assigns; provided, however, that "Guarantor" shall not include
any Person that is released from its Guarantee of the obligations of the Company
under the Notes and this Indenture as provided in Article 12 hereof.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap, cap or collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in currency exchange or interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means a global note substantially in the form of Exhibit
-------
A hereto bearing the Global Note Legend and the Private Placement Legend (with
- -
such changes therein as may be necessary or appropriate to reflect the interest
of an Institutional Accredited Investor) and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee that will be issued in
a denomination equal to the outstanding principal amount of the Notes sold or
otherwise transferred to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (which purchase price
is due more than one year after taking title to such property) or services or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP; (ii) all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person the amount of
such obligation, to the extent it is without recourse to such Person, being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured); (iii) to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person; provided,
however, that (1) the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP; and (2)
Indebtedness shall not include any liability for federal, state, local or other
taxes; and (iv)
- 9 -
<PAGE>
with respect to any Restricted Subsidiary of the Company, Preferred Stock of
such Person (in an amount equal to the greater of (x) the sum of all obligations
of such Person with respect to redemption, repayment or repurchase thereof and
(y) the book value of such Preferred Stock as reflected on the most recent
financial statements of such Person).
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Purchasers" means Bear, Stearns & Co. Inc., Nationsbanc Montgomery
Securities LLC, BT Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon
Smith Barney Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Interest Payment Date" means each May 15 and November 15.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
excluding, however, trade accounts receivable and bank deposits made in the
ordinary course of business consistent with past practice. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the penultimate paragraph
of Section 4.10 hereof.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional, sale or other title retention agreement, any lease
in the nature thereof, and any option or other agreement to sell or give a
Lien).
"Liquidated Damages" has the meaning set forth in the Registration Rights
Agreement.
- 10 -
<PAGE>
"Make-Whole Amount" means, with respect to any Note, an amount equal to the
excess, if any, of (a) the present value of the remaining principal, premium, if
any, and interest (other than accrued interest otherwise payable upon
redemption) payments that would be payable with respect to such Note if such
Note were redeemed on May 15, 2004, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (b) the principal amount of such Note.
"Make-Whole Average Life" means, with respect to any date of redemption of
Notes, the number of years (calculated to the nearest one-twelfth) from such
redemption date to May 15, 2004.
"Make-Whole Price" means, with respect to any Note, the greater of (a) the
sum of the principal amount of and Make-Whole Amount with respect to such Note,
and (b) the redemption price of such Note on May 15, 2004.
"Maturity" when used in respect to any Note means the date on which the
principal of (and premium, if any) and interest and Liquidated Damages, if any,
on such Note becomes due and payable as therein or herein provided, whether at
Stated Maturity or the applicable Redemption Date and whether by declaration of
acceleration, call for redemption or otherwise.
"Net Income" means, with respect to any Person for any period, the net
income (or loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of Preferred Stock dividends, excluding, however, (i)
any gain (or loss), together with any related provision for taxes on such gain
(or loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (or loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (or loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received upon
the sale or other disposition of any non-cash consideration received in any
Asset Sale, but only as and when received, and any proceeds deemed to be cash or
Cash Equivalents pursuant to clause (b) of the first paragraph of Section 4.16
hereof, net of (i) the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, (ii)
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), (iii)
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale, (iv) all
distributions and other payments required to be made to minority interest
holders of a Restricted Subsidiary or joint venture as a result of such Asset
Sale, and (v) any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
- 11 -
<PAGE>
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the custodian for the Depositary of the Global Note
or any successor entity thereto.
"Notes" means $200,000,000 aggregate principal amount of the Company's 8
3/4% Senior Subordinated Notes due 2009 issued pursuant to this Indenture on the
Closing Date and any other 8 3/4% Senior Subordinated Notes due 2009 hereafter
issued in compliance with the provisions of this Indenture.
"Obligations" means any principal, premium, interest (including post-
petition interest), penalties, fees, indemnifications, reimbursements, damages
and other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, any Senior Vice President, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant Secretary
of such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed on behalf of such Person by the Chief Executive Officer or President and
by the Chief Financial Officer or chief accounting officer of such Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee, that meets the requirements of Section 1.05 hereof
and, to the extent required by the TIA, complies with TIA (S) 314.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect to
DTC, shall include Euroclear and Cedel).
"Permitted Holder" means Apollo Advisors, L.P., a Delaware limited
partnership, or any fund, investment vehicle or account managed, advised or
controlled by Apollo Advisors, L.P., or any of its Affiliates.
"Permitted Investments" means (i) any Investment in the Company or a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company and, to the extent required under the
Indenture, a Guarantor or (b) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company; (iv) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.16 hereof;
(v) any acquisition of assets received solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (vi) any
Investment in a Similar Business (including any Investment made in any
- 12 -
<PAGE>
Unrestricted Subsidiaries in a Similar Business) if, after giving effect to such
Investment, the aggregate amount of all Investments made pursuant to this clause
(vi) then constituting Unrestricted Investments Outstanding does not exceed the
greater of (x) $75 million and (y) 7.5% of Total Consolidated Assets of the
Company at the time of such Investment; (vii) contributions of Real Estate Held
for Sale to Real Estate Joint Ventures; provided, in the case of any Investment
made pursuant to this clause (vii) or the preceding clause (vi), that after
giving effect to such Investment (a) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, and (b) the
Company would, at the time of such Investment and after giving pro forma effect
thereto as if such Investment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth
in the first paragraph of Section 4.09 hereof; and (viii) Investments received
in connection with the settlement of any ordinary course obligations owed to the
Company or any of its Restricted Subsidiaries.
"Permitted Junior Securities" means Equity Interests (other than
Disqualified Stock) in the Company or debt securities that are subordinated to
all Senior Debt of the issuer of such debt securities (and any debt securities
issued in exchange for Senior Debt of the issuer of such debt securities) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt.
"Permitted Liens" means (i) Liens in favor of the Company or any of its
Restricted Subsidiaries; (ii) Liens securing Senior Debt of the Company or any
Restricted Subsidiary of the Company; (iii) Liens on property or Equity
Interests of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets or Equity Interests
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
incurred or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business (other than
contracts in respect of borrowed money and other Indebtedness); (vi) Liens
existing on the Closing Date; (vii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefore; (viii) Liens
securing the Notes or any Guarantee thereof; (ix) Liens securing Permitted
Refinancing Indebtedness to the extent that the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded was permitted to be secured
by a Lien; provided that such Liens do not extend to any assets other than those
that secured the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (x) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not
- 13 -
<PAGE>
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company or
such Restricted Subsidiary; (xi) Liens securing Capital Lease Obligations,
provided that such Liens do not extend to any property or assets which are not
leased property subject to such Capitalized Lease Obligation; (xii) judgment
liens not giving rise to an Event of Default so long as such Lien is adequately
bonded and any appropriate legal proceedings that may have been duly initiated
for the review of such judgment, degree or order shall not have been finally
terminated or the period within such proceedings may be initiated shall not have
expired; (xiii) Liens securing obligations of the Company under Hedging
Obligations; (xiv) purchase money Liens securing Purchase Money Obligations;
provided, that the related Indebtedness shall not be secured by any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets so acquired pursuant to such Purchase Money Obligation; (xv) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods; (xvi) Liens encumbering deposits made to
secure obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases provided that such Liens
do not extend to any property or assets which are not leased property subject to
such leases or subleases; and (xviii) Liens created for the benefit of all of
the Notes and/or any Guarantees thereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Hedging Obligations and other than
Indebtedness permitted to be incurred pursuant to clause (i), clause (iv) or
clause (vii) of the second paragraph of Section 4.09 hereof) of the Company or
any of its Restricted Subsidiaries; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
premium and accrued interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date equal to or later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes or any Guarantee thereof, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes or
such Guarantee on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary that is an
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
- 14 -
<PAGE>
"Person" means any individual, limited or general partnership, corporation,
limited liability company, association, unincorporated organization, trust,
joint stock company, joint venture or other entity, or a government or any
agency or political subdivision thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except as
permitted pursuant to Section 2.06(g)(i)(B).
"Purchase Money Obligations" of any Person means any obligations of such
Person or any of its Subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such person or any of its subsidiaries within 180 days of
such purchase.
"Real Estate Held for Sale" means, with respect to any Person, the real
estate of such Person and its Restricted Subsidiaries classified for financial
reporting purposes as Real Estate Held for Sale on the Closing Date or
thereafter acquired as Real Estate Held for Sale.
"Real Estate Joint Venture" means any Person engaged exclusively in the
acquisition, development and operation or resale of any real estate asset or
group of related real estate assets (and directly related activities).
"Redemption Date," when used with respect to any Note to be redeemed, means
the date fixed for such redemption pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price (exclusive of any accrued and unpaid interest thereon) at which
it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of this Indenture, among the Company, the
Guarantors and the Initial Purchaser, as amended or supplemented from time to
time, or similar agreement relating to Additional Notes.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the May 1 or November 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S promulgated under the Securities Act.
- 15 -
<PAGE>
"Regulation S Global Note" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement
- ---------
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
initial outstanding principal amount of the Notes sold in reliance on Rule 904
of Regulation S.
"Responsible Officer" when used with respect to the Trustee, shall mean any
officer assigned to the Corporate Trust Office, including any managing director,
vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Indenture, and also, with
respect to a particular matter, any other officer, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40 day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Sale and Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Debt" of any Person means (i) the Obligations of such Person under
the Credit Agreement, including, without limitation, Hedging Obligations and
reimbursement
- 16 -
<PAGE>
obligations in respect of letters of credit and bankers acceptances, and (ii)
any other Indebtedness of such Person, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Debt of a Person shall not include (v) any
obligation to, in respect of or imposed by any environmental, landfill, waste
management or other regulatory governmental agency, statute, law or court order,
(w) any liability for federal, state, local or other taxes, (x) any Indebtedness
of such Person to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) any Indebtedness that is incurred by such Person in violation of
the Indenture (except to the extent that the original holder thereof relied in
good faith after being provided with a copy of this Indenture upon an Officer's
Certificate of such Person to the effect that the incurrence of such
Indebtedness did not violate this Indenture).
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Similar Business" means any business conducted by the Company or any of
its Subsidiaries as of the Closing Date or any other recreation, leisure and/or
hospitality business including without limitation ski mountain resort
operations, or any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or is reasonably
ancillary thereto.
"Special Record Date" means a date fixed by the Trustee for the payment of
any Defaulted Interest pursuant to Section 2.12 thereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of at least a majority of the
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
- 17 -
<PAGE>
"Subsidiary Guarantee" means any guarantee of the obligations of the
Company pursuant to this Indenture and the Notes by any Person in accordance
with the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77a-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
after such date, then "TIA" means, to the extent required by such amendment, the
Trust Indenture Act of 1939 as so amended.
"Total Consolidated Assets" means, with respect to any Person as of any
date, the book value of the assets of such Person and its Restricted
Subsidiaries as shown on the most recent consolidated balance sheet of such
Person.
"Treasury Rate" means, at any time of computation, the yield to maturity at
such time (as compiled by and published in the most recent statistical release
(or any successor release) of the Federal Reserve Bank of New York, which has
become publicly available at least two business days prior to the date of the
redemption notice or, if such statistical release (or successor release) is no
longer published, any generally recognized publicly available source of similar
market data) of United States Treasury securities with a constant maturity most
nearly equal to the Make-Whole Average Life; provided, however, that if the
Make-Whole Average Life is not equal to the constant maturity of the United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest one-
twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Make-Whole
Average Life is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trustee" means the party named as such above until a successor replaces it
in accordance with applicable provisions of this Indenture and thereafter means
such successor.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
---------
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing Notes that do not bear the Private Placement
Legend.
"Unrestricted Investments Outstanding" means, at any time of determination,
in respect of all Permitted Investments made pursuant to clause (vi) of the
definition of the term Permitted Investments, the excess, if any, of (i) the sum
of all Permitted Investments theretofore made by the Company or any Restricted
Subsidiary on or after the date of the Indenture pursuant to clause (vi) of the
definition of Permitted Investments over (ii) the amount of all cash, and the
fair market value of any assets or property, distributed as
- 18 -
<PAGE>
dividends and distributions to the Company or a Restricted Subsidiary of the
Company (to the extent that the Company does not elect to include the amount of
such dividends and distributions in the computation of Consolidated Net Income
pursuant to the parenthetical of clause (i) of the definition thereof at the
time of determination), and all repayments of the principal amount of loans or
advances, the net cash proceeds, and the fair market value of assets or
property, received from sales or transfers, in respect of such Investments to
the Company or any of its Restricted Subsidiaries and any other reduction made
in cash of such Investments in such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding comply with Section 4.12 hereof.
"U.S. Person" means a U.S. person as defined in Rule 902(k) under the
Securities Act.
"Voting Stock" of any Person as of any date means classes of the Capital
Stock of such Person that is at the time entitled to vote in the election of at
least a majority of the directors, managers, trustees or other governing body of
such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02 Other Definitions
Defined
Term in Section
---- ----------
"Act" 1.07
"Affiliate Transaction" 4.12
"Asset Sale Offer" 3.10
"Change of Control Offer" 4.17
"Change of Control Payment" 4.17
"Change of Control Payment Date" 4.17
"Contributor" 12.07
"Covenant Defeasance" 8.03
"DTC" 2.03
"Defaulted Interest" 2.12
- 19 -
<PAGE>
"Event of Default" 6.01
"Excess Proceeds" 4.16
"Expiration Date" 4.17
"Funding Party" 12.07
"Guaranteed Obligations" 12.01
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.10
"Offer Period" 3.10
"Paying Agent" 2.03
"Payment Blockage Notice" 10.03
"Payment Default" 6.01
"Permitted Debt" 4.09
"Purchase Date" 3.10
"QIB" 2.01
"Registrar" 2.03
"Restricted Payments" 4.10
SECTION 1.03 Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, each Guarantor and any
successor obligors upon the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04 Rules of Construction
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
- 20 -
<PAGE>
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or the
Exchange Act shall be deemed to include substitute, replacement or
successor sections or rules adopted by the SEC from time to time.
SECTION 1.05 Compliance Certificates and Opinions
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenant compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion (other than the certificates required by
Section 4.05(a) hereof) with respect to compliance with a condition or covenant
provided for in this Indenture shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
- 21 -
<PAGE>
SECTION 1.06 Form of Documents Delivered to Trustee
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel, may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.07 Acts of Holders
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to TIA (S) 315) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section 1.07.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved in any reasonable manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by a register kept by the
Registrar.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the
- 22 -
<PAGE>
determination of such Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act or to revoke any
consent previously given, but the Company shall have no obligation to do so.
Notwithstanding TIA (S) 316(c), any such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act or revocation of any consent
previously given may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Notes then outstanding have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for this purpose the Notes then outstanding shall be computed as of
such record date; provided that no such request, demand, authorization,
direction, notice, consent, waiver or other Act by the Holders on such record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than nine months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holder of any Note shall bind every future Holder of the
same Note or the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Company
in reliance thereon, whether or not notation of such action is made upon such
Note.
(f) All Notes issued pursuant to this Indenture shall vote as one class on
all matters.
ARTICLE 2.
THE NOTES
SECTION 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A attached hereto
---------
with such appropriate insertions, substitutions and other variations as are
required or permitted by this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage, as designated by
the Company or its counsel. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend and the
---------
"Schedule of Exchanges
- 23 -
<PAGE>
in the Global Note" attached thereto). Notes issued in definitive form shall be
substantially in the form of Exhibit A attached hereto (but without the Global
---------
Note Legend and without the "Schedule of Exchanges of Interests in the Global
Note" attached thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and the aggregate principal
amount of outstanding Notes represented thereby from time to time shall be
reflected on the records maintained by the Trustee. The aggregate principal
amount of outstanding Notes represented by a Global Note may from time to time
be reduced or increased, as appropriate, to reflect transfers, exchanges,
repurchases and redemptions. Any increase or decrease in the aggregate
principal amount outstanding of a Global Note shall be reflected on the records
maintained by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
The provisions of the "Operating Procedures of Euroclear System" and "Terms
and Conditions Governing Use of Euroclear" and the "General Terms and Conditions
of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to
transfers of beneficial interests in the Regulation S Global Note that is held
by the Agent Members through Euroclear and Cedel.
SECTION 2.02. Execution and Authentication.
Two Officers of the Company shall sign the Notes for the Company by manual
or facsimile signature.
If an Officer of the Company whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note so authenticated has been duly authenticated and delivered hereunder.
The Trustee shall, by a written order of the Company signed by two Officers
(an "Authentication Order"), authenticate Notes for original issue in the
aggregate principal amount of up to $300,000,000. Except as contemplated by
Section 2.07 hereof, the aggregate principal amount of Notes outstanding at any
time may not exceed $300,000,000.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with any Holder, the Company or an Affiliate of the Company. The
Trustee shall not be liable for any act or failure to act of the authenticating
agent to perform any duty either required herein or authorized herein to be
performed by such person in accordance with this Indenture. Each authenticating
agent shall be acceptable to the Company and otherwise comply in all respects
with the eligibility requirements of the Trustee contained in this Indenture.
- 24 -
<PAGE>
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented or surrendered for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agents. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07 hereof. The Company or any of its Subsidiaries may
not act as Paying Agent or Registrar.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which shall incorporate the provisions of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all assets held by the Paying Agent for the payment of principal
of, premium or Liquidated Damages, if any, or interest on the Notes (whether
such assets have been distributed to it by the Company or any other obligor on
the Notes), and will notify the Trustee of any default by the Company or any
Guarantor in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to distribute all assets held
by it to the Trustee and account for any assets disbursed. Upon payment over
and accounting to the Trustee, the Paying Agent shall have no further liability
for the assets. Upon any bankruptcy or reorganization proceedings relating to
the Company or any Guarantor, the Trustee shall serve as Paying Agent for the
Notes.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S)312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least seven Business Days before each Interest Payment Date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
- 25 -
<PAGE>
of the Holders of Notes, including the aggregate principal amount of Notes held
by each Holder, and the Company and/or the Guarantors shall otherwise comply
with TIA (S)312(a).
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if, and only if, either (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days after the date of such notice from the Depositary,
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee or (iii) there shall have occurred
a Default or an Event of Default and any owner of a beneficial interest in a
Global Note so requests, then, upon surrender by the Global Note Holder of a
Global Note, Notes in the form of Definitive Notes will be issued to each person
that the Global Note Holder and the Depositary identify as being the beneficial
owner of the related Notes. Upon the occurrence of any of the preceding events
in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as
the Depositary shall instruct the Trustee. Global Notes also may be exchanged
or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period transfers of
beneficial interests in the Regulation S Global Note may not be made to a
U.S. Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global Note
may be transferred only to
- 26 -
<PAGE>
Persons who take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note
to a Person who takes delivery thereof in the form of a beneficial interest
in the same Global Note), the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a Participant
or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding
the Person in whose name such Definitive Note shall be registered to effect
the transfer or exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture, the Notes and otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
---------
including the certifications in item (2) thereof; and
- 27 -
<PAGE>
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferee must
deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications, certificates and Opinion of Counsel required by item
(3)(d) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
Broker-Dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
---------
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
---------
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on
- 28 -
<PAGE>
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interest in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
---------
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
---------
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
---------
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
---------
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto,
---------
- 29 -
<PAGE>
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
---------
thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
Broker-Dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
- 30 -
<PAGE>
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
---------
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
---------
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Company, to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend. A beneficial
interest in an Unrestricted Global Note cannot be exchanged for a
Definitive Note bearing the Private Placement Legend or transferred to a
Person who takes delivery thereof in the form of a Definitive Note bearing
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
- 31 -
<PAGE>
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
---------
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
---------
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
---------
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
---------
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global
- 32 -
<PAGE>
Note, in the case of clause (C) above, the Regulation S Global Note, and
in the case of clause (E) above, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a Broker-Dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c)
---------
thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
---------
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Definitive Notes are
being exchanged or transferred in compliance with any applicable blue
sky securities laws of any State of the United States.
- 33 -
<PAGE>
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
---------
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
---------
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
---------
including the
- 34 -
<PAGE>
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a Broker-Dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
---------
hereto, including the certifications in item (1)(a) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
---------
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted Definitive
Note is being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United States.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who
- 35 -
<PAGE>
takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request for such a transfer, the Registrar shall register
the Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or
transferred to Persons who take delivery thereof in the form of a
Restricted Definitive Note.
(f) Exchange Offer. Upon the consummation of an Exchange Offer, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
the beneficial interests in the Restricted Global Notes tendered for acceptance
by Persons that certify in the applicable Letter of Transmittal that (x) they
are not Broker-Dealers, (y) they are not participating in the distribution of
the Exchange Notes or (z) they are not affiliates (as defined in Rule 144) of
the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB") (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT
IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C)
- 36 -
<PAGE>
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO
SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY,
IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
- 37 -
<PAGE>
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE
PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note, by the
Trustee or by the Depositary at the direction of the Trustee, to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.07, 3.10, 4.16 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
- 38 -
<PAGE>
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a transfer or exchange may be submitted by facsimile.
SECTION 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company or the
Trustee and the Company receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon the written order of the Company signed by two Officers of the Company,
shall authenticate a replacement Note if the Trustee's and the Company's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company and the Trustee may charge for their expenses in
replacing a Note. If after the delivery of such new Note, a bona fide purchaser
of the original Note in lieu of which such new Note was issued presents for
payment such original Note, the Company and the Trustee shall be entitled to
recover such new Note from the person to whom it was delivered or any transferee
thereof, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Company or the Trustee in connection therewith.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
- 39 -
<PAGE>
SECTION 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee hereunder in accordance with the provisions hereof, and those described
in this Section 2.08 as not outstanding. Except as set forth in Section 2.09
hereof, a Note does not cease to be outstanding because either of the Company or
an Affiliate of the Company holds a Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on the Redemption Date or maturity date, money sufficient to pay all
principal, premium, if any, interest and Liquidated Damages, if any, payable on
that date on the Notes (or the portion thereof to be redeemed or maturing, as
the case may be), then on and after that date such Notes (or a portion thereof)
shall be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Affiliate of the Company, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded. The Company shall notify the Trustee, in writing, when
the Company or any of its Affiliates repurchases or otherwise acquires Notes and
the aggregate principal amount of such Notes so repurchased or otherwise
acquired.
SECTION 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee upon receipt of an Authentication Order, shall
authenticate and deliver temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, upon receipt of an Authentication Order, the Company shall
prepare and the Trustee shall authenticate and deliver definitive Notes in
exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the rights, benefits
and privileges of this Indenture.
- 40 -
<PAGE>
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation, except as expressly
permitted by this Indenture. The Company may not issue new Notes to replace
Notes that it has redeemed or paid or that have been delivered to the Trustee
for cancellation. All cancelled Notes held by the Trustee shall be destroyed
(subject to the record retention requirement of the Exchange Act).
Certification of the destruction of all cancelled Notes shall be delivered to
the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Note is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date and interest on such defaulted
interest at the applicable interest rate borne by the Notes, to the extent
lawful (such defaulted interest (and interest thereon) herein collectively
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder; and
such Defaulted Interest shall be paid by the Company to the Persons in whose
names the Notes are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall give the Trustee at least 15 days' written
notice (unless a shorter period is acceptable to the Trustee for its
convenience) of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held by the Trustee in
trust for the benefit of the Persons entitled to such Defaulted Interest as is
provided in this Section 2.12. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall not be more than 15
days and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date. In the name and at the expense of the Company, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Registrar, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been so mailed, such Defaulted
Interest
- 41 -
<PAGE>
shall be paid to the Persons in whose names the Notes are registered at the
close of business on such Special Record Date.
Subject to the foregoing provisions of this Section 2.12, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 2.13 CUSIP Number
The Company in issuing the Notes shall use a CUSIP number, and the Trustee
shall use the CUSIP number in notices of redemption or exchange as a convenience
to Holders of Notes; provided, however, that no representation is hereby deemed
to be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the certificates representing the Notes, and that
reliance may be placed only on the other identification numbers printed on the
certificates representing the Notes. The Company will promptly notify the
Trustee of any change in a CUSIP number.
SECTION 2.14 Deposit of Moneys
On each Interest Payment Date and each date on which payments in respect of
the Notes are required to be made pursuant to the terms of this Indenture, the
Company shall, not later than 12:00 noon (New York City time), deposit with the
Paying Agent in immediately available funds money sufficient to make any cash
payments due on such date in a timely manner which permits the Paying Agent to
remit payment to the Holders on such date.
SECTION 2.15 Issuance of Additional Notes
The Company shall be entitled to issue Additional Notes under this
Indenture which shall have identical terms as the Notes issued on May 11, 1999,
other than with respect to the date of issuance, issue price and amount of
interest payable on the first payment date applicable thereto (and, if such
Additional Notes shall be issued in the form of Exchange Notes, other than with
respect to transfer restrictions); provided, that such issuance is not
prohibited by Section 4.09 hereof.
With respect to any Additional Notes, the Company shall set forth in a
resolution of the Board of Directors and in an Officers' Certificate, a copy of
each which shall be delivered to the Trustee, the following information:
(A) the aggregate principal amount of such Additional Notes to be
authenticated and delivered pursuant to this Indenture;
(B) the issue price, the issue date and the CUSIP number of such
Additional Notes and the amount of interest payable on the first payment
date applicable thereto; provided, however, that no Additional Notes may be
issued at a
- 42 -
<PAGE>
price that would cause such Additional Notes to have "original issue
discount" within the meaning of Section 1273 of the Code;
(C) whether such Additional Notes shall be transfer restricted
securities and issued in the form of Notes or shall be registered
securities issued in the form of Exchange Notes as set forth in Section
2.06 hereof; and
Any Additional Notes shall vote, together with any Notes previously issued
pursuant to this Indenture, as one class for all matters.
ARTICLE 3.
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.01 Applicability of Article
Redemption of Notes at the election of the Company shall be made in
accordance with this Article 3.
SECTION 3.02 Election to Redeem; Notice to Trustee
The election of the Company to redeem any Notes pursuant to Section 3.08
hereof shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company, the Company shall, simultaneously with providing
the notice to Holders specified in Section 3.08 hereof, notify the Trustee of
such Redemption Date and of the principal amount of Notes intended to be
redeemed.
SECTION 3.03 Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption shall be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided that
no Notes of $1,000 or less shall be redeemed in part.
The Trustee shall promptly notify the Company and the Registrar (if other
than the Trustee) in writing of the Notes selected for redemption and, in the
case of any Notes selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Notes shall relate, in the case of any
Note redeemed or to be redeemed only in part, to the portion of the principal
amount of such Note which has been or is to be redeemed.
- 43 -
<PAGE>
SECTION 3.04 Notice of Redemption
Notices of redemption shall be mailed by first class mail, postage prepaid,
at least 30 but not more than 60 days before the Redemption Date to each Holder
of Notes to be redeemed at such Holder's registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price, separately stating the amount of any accrued
and unpaid interest and Liquidated Damages, if any, to be paid in
connection with the redemption;
(3) if less than all Notes then outstanding are to be redeemed, the
identification (and, in the case of a Note to be redeemed in part,
principal amount) of such Note to be redeemed;
(4) that on the Redemption Date the Redemption Price, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the Redemption
Date, will become due and payable upon each such Note or portion thereof,
and that (unless the Company shall default in payment of the Redemption
Price and accrued interest and Liquidated Damages, if any, thereon)
interest thereon shall cease to accrue on or after said date;
(5) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest and Liquidated
Damages, if any, thereon;
(6) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Redemption Date;
(7) the CUSIP number, if any, relating to such Notes; and
(8) in the case of a Note to be redeemed in part, the principal amount
of such Note to be redeemed and that after the Redemption Date upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of redemption
in the name of the Company and at the Company's expense: provided, however, that
the Company shall deliver to the Trustee, at least 5 business days prior to the
date the Company is requesting notice be given to the Holders (unless a shorter
notice period shall be satisfactory to the
- 44 -
<PAGE>
Trustee for its convenience), an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.05 Deposit of Redemption Price
On or prior to any Redemption Date, the Company shall deposit with the
Trustee (to the extent not already held by the Trustee) or with the Paying Agent
an amount of money in same day funds (or New York Clearing House funds if such
deposit is made prior to the applicable Redemption Date) sufficient to pay the
Redemption Price of, and accrued and interest and Liquidated Damages, if any, to
the Redemption Date, on all Notes or portions thereof which are to be redeemed
on that date.
SECTION 3.06 Notes Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest and Liquidated Damages, if any, thereon) such Notes shall cease
to bear interest and Liquidated Damages, if any. Any such Note surrendered for
redemption in accordance with said notice shall be paid by the Company at the
Redemption Price, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the Redemption Date; provided, however, that installments of
interest and Liquidated Damages, if any, whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Notes, registered as
such on the relevant Regular Record Dates according to the terms and provisions
of Section 2.12 hereof.
If any Note called for redemption shall not be so paid in accordance with
the terms hereof, the principal thereof (and premium, if any, thereon) shall,
until paid, bear interest and Liquidated Damages, if any, from the Redemption
Date at the rate borne by such Note.
SECTION 3.07 Notes Redeemed in Part
Any Note which is to be redeemed only in part shall be surrendered at the
office or agency of the Company maintained for such purpose pursuant to Section
4.02 hereof (with, if the Company, the Registrar or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company, the Registrar or the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), and a new Note in principal amount
equal to the unredeemed portion will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the Redemption Date,
unless the Company defaults in payment of the Redemption Price and accrued
interest and Liquidated Damages, if any, thereon, interest and Liquidated
Damages, if any, shall cease to accrue on Notes or portions thereof called for
redemption.
- 45 -
<PAGE>
SECTION 3.08 Optional Redemption
Except as described below, the Notes are not redeemable at the Company's
option prior to May 15, 2004. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the applicable
Redemption Date, if redeemed during the twelve-month period beginning on May 15
of the years indicated below:
Year Percentage
---- -----------
2004................. 104.375%
2005................. 102.916%
2006................. 101.458%
2007 and thereafter.. 100.000%
Notwithstanding the foregoing, on or prior to May 15, 2002, the Company may
on any one or more occasions redeem up to 35% of the aggregate principal amount
of the Notes theretofore issued under this Indenture at a redemption price equal
to 108.75% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash
proceeds of one or more Equity Offerings; provided that (i) at least 65% of the
aggregate principal amount of the Notes theretofore issued remain outstanding
immediately following each such redemption and (ii) such redemption shall occur
within 60 days of the closing of any such Equity Offering.
In addition, at any time prior to May 15, 2004, following the occurrence of
a Change of Control, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice given within 30 days following such Change of Control, at the Make-Whole
Price, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable Redemption Date.
SECTION 3.09 Mandatory Redemption
Except as set forth under Sections 3.10, 4.16 and 4.17 hereof, the Company
shall not be required to make any mandatory redemption or sinking fund payments
with respect to the Notes.
SECTION 3.10 Offer to Purchase by Application of Excess Proceeds
In the event that, pursuant to Section 4.16 hereof, the Company shall be
required to make an offer to all Holders of Notes to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for at least 30 and not more than 40
days, except to the extent that a longer period is required by applicable law
(the "Offer Period").
- 46 -
<PAGE>
On a date within five Business Days after the termination of the Offer Period
(the "Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.16 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer.
The Company shall comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with any offer
required to be made by the Company to repurchase the Notes as a result of an
Asset Sale Offer.
If the Purchase Date is on or after a Regular Record Date and on or before
the related Interest Payment Date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such Regular Record Date, and no
additional interest or Liquidated Damages, if any, shall be payable to Holders
who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to each of the Holders, with a copy to the Trustee.
The notice shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer
shall be made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.10 and Section 4.16 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price, separately stating the
amount of any accrued and unpaid interest and Liquidated Damages, if any,
and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall remain
outstanding and continue to accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest or Liquidated Damages, if any, on the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice not later than the last Business Day of the Offer
Period;
(f) that Holders shall be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such Notes, provided
that the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the close of business on the last Business Day of
the Offer Period, a telegram, telex,
- 47 -
<PAGE>
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder tendered for purchase, and a
statement that such Holder is withdrawing his tendered Notes and his
election to have such Notes purchased;
(g) that, if the aggregate principal amount of Notes properly tendered
by Holders exceeds the Offer Amount, the Trustee shall select the Notes to
be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Trustee so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes are being purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before noon (New York City time) on each Purchase Date, the Company
shall irrevocably deposit with the Trustee or Paying Agent in immediately
available funds the aggregate purchase price with respect to a principal amount
of Notes equal to the Offer Amount (of, if less than the Offer Amount has been
properly tendered, such lesser amount as shall equal the principal amount of
Notes properly tendered), together with accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Purchase Date, to be held for payment
in accordance with the terms of this Section 3.10. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis
to the extent necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or
depositary, as the case may be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.10. The Company, the depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than three Business
Days after the Purchase Date) mail or deliver to each tendering Holder whose
Notes are to be purchased an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the Purchase
Date, and the Company shall promptly issue a new Note, and the Trustee, upon
written request from the Company, shall authenticate and mail or deliver such
new Note to such Holder, equal in principal amount to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof.
- 48 -
<PAGE>
ARTICLE 4.
COVENANTS
SECTION 4.01 Payment of Notes
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on, the Notes on the dates and in the manner provided in the
Notes and in this Indenture. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or any of its Subsidiaries or Affiliates, holds as of 12:00 noon (New York City
time) on the due date money deposited by the Company in immediately available
funds and designated for and sufficient to pay all principal, premium and
interest then due. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement. If any Liquidated Damages become payable, the Company shall not
later than three Business Days prior to the date that any payment of Liquidated
Damages is due (i) deliver an Officers' Certificate to the Trustee setting forth
the amount of Liquidated Damages payable to Holders and (ii) instruct the Paying
Agent to pay such amount of Liquidated Damages to Holders entitled to receive
such Liquidated Damages.
The Company shall pay interest (including post-petition interest under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate equal to 1% per annum in excess of the then applicable interest
rate on the Notes to the extent lawful; the Company shall pay interest
(including post-petition interest under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 4.02 Maintenance of Office or Agency
The Company will maintain, in The City of New York, an office or agency
(which may be an office of the Trustee or Registrar) where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Notes may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of
- 49 -
<PAGE>
its obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 4.03 Money for Security Payments to be Held in Trust
Whenever the Company shall have one or more Paying Agents for the Notes, it
will, on or before each due date of the principal of, premium, if any, or
interest or Liquidated Damages, if any, on any Notes, deposit with a Paying
Agent a sum in same day funds (or New York Clearing House funds if such deposit
is made prior to the date on which such deposit is required to be made)
sufficient to pay the principal, premium, if any, or interest or Liquidated
Damages, if any, so becoming due (or at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments on the Global Notes and all
payments of interest and Liquidated Damages, if any, on the Definitive Notes,
the holders of which have given wire transfer instructions to the Company or the
Paying Agent at least ten Business Days prior to the applicable payment date,
shall be made by wire transfer in same day funds), such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest
or Liquidated Damages, if any, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of such action or any failure so to
act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section 4.03, that such
Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on
Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of
principal, premium, if any, or interest or Liquidated Damages, if
any;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and
obligations of such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying
- 50 -
<PAGE>
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest or Liquidated Damages, if any, on any Note and remaining unclaimed for
two years after such principal, premium, if any, or interest or Liquidated
Damages, if any, has become due and payable shall be paid to the Company on
Company Request or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, shall at the expense of the Company cause notice to be promptly sent
to each Holder that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 4.04 Reports
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such Forms and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed with the SEC on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the SEC, the Company shall file a
copy of all such information and reports with the SEC for public availability
(unless the SEC will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. The
Company and its Restricted Subsidiaries shall, for so long as any Notes remain
outstanding, furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act. The Company shall also comply with
the provisions of TIA (S)314(a).
(b) If the Company instructs the Trustee to distribute any of the documents
described in clause (a) above to the Holders of Notes, the Company shall provide
the Trustee with a sufficient number of copies of all documents that the Company
may be required to deliver to the Holders of Notes under this Section 4.04. Any
such distribution by the Trustee pursuant to this clause (b) shall be at the
expense of the Company.
- 51 -
<PAGE>
SECTION 4.05 Compliance Certificate
(a) The Company and each Guarantor shall deliver to the Trustee, within 120
days after the end of each fiscal year ending after the date hereof, an
Officers' Certificate stating, as to each Officer signing such certificate, that
to the best of his or her knowledge each entity is not in default in the
performance or observance of any terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall exist, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or interest
or Liquidated Damages, if any, on the Notes is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto. For purposes of this Section 4.05, such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) The Company will, so long as any of the Notes are outstanding within
five Business Days, upon becoming aware of any Default or Event of Default,
deliver to the Trustee an Officers' Certificate specifying such Default, Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.06 Taxes
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any Subsidiary or upon the
income, profits or property of the Company or any of its Subsidiaries and (b)
all material lawful claims for labor, materials and supplies, which, if unpaid,
might by law become a Lien upon the property of the Company or any of its
Subsidiaries that could produce a material adverse effect on the consolidated
financial condition of the Company; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and in respect of which
appropriate reserves (in the good faith judgment of management of the Company)
are being maintained in accordance with GAAP.
SECTION 4.07 Stay, Extension and Usury Laws
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
- 52 -
<PAGE>
SECTION 4.08 Corporate Existence; Maintenance
of Properties and Insurance
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) its (and its Restricted Subsidiaries')
rights (charter and statutory), licenses and franchises; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors or management of the Company
shall determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of Notes.
With such exceptions, if any, as are not material in the aggregate and are
not adverse in any material respect to the Holders of Notes, the Company shall,
and shall cause each of its Subsidiaries to, maintain its properties in good
working order and condition (subject to ordinary wear and tear) and make all
reasonably necessary repairs, renewals, replacements, additions and improvements
required for it to actively conduct and carry on its business.
The Company shall maintain insurance against loss or damage of the kinds
that, in the good faith judgment of the Company, are adequate and appropriate
for the conduct of the business of the Company and its Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Company, for companies similarly situated in the industry.
SECTION 4.09 Limitation on the Incurrence of Indebtedness and
Issuance of Preferred Stock
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not permit any of its Restricted Subsidiaries to
issue any shares of Preferred Stock (other than to the Company or a Restricted
Subsidiary of the Company); provided, however, that the Company and the
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Consolidated Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
would have been equal to or greater than 2 to 1, determined on a pro forma
basis, as if the additional Indebtedness had been incurred at the beginning of
such four-quarter period and no Event of Default shall have occurred and be
continuing after giving effect on a pro forma basis to such incurrence.
- 53 -
<PAGE>
The provisions of the first paragraph of this Section 4.09 will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness under the Credit Agreement in an aggregate amount outstanding
(with letters of credit being deemed for all purposes of this Indenture to
have a principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries in respect thereof) at any time not
to exceed the greater of (x) $450 million and (y) 3.5 times Consolidated
Resort EBITDA for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such Indebtedness is being incurred less, in
each case, the aggregate amount of such Indebtedness permanently repaid
with the Net Proceeds of any Asset Sale;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness represented by the Notes (including the Exchange Notes), the
Guarantees thereof and this Indenture in the principal amount of Notes
originally issued on the Closing Date;
(iii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iv) the incurrence by the Company and its Restricted Subsidiaries of
additional Indebtedness (other than Hedging Obligations) in an aggregate
principal amount not to exceed $50 million at any time outstanding;
(v) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary (including Indebtedness that was incurred by the
prior owner of such assets or by such Restricted Subsidiary prior to such
acquisition by the Company and its Restricted Subsidiaries); provided that
the aggregate principal amount of Indebtedness incurred pursuant to this
clause (v) does not exceed $20 million at any time outstanding;
(vi) the incurrence by the Company and its Restricted Subsidiaries of
Permitted Refinancing Indebtedness;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
its Restricted Subsidiaries; provided, however, that any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company, and any sale or other transfer of any such
Indebtedness to a Person that is not the Company or a Restricted Subsidiary
of the Company, shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary, as the
case may be;
- 54 -
<PAGE>
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations incurred for the purpose of hedging
against fluctuations in currency values or for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
of the Company or any of its Restricted Subsidiaries permitted by this
Indenture; provided that the notional principal amount of any Hedging
Obligations does not significantly exceed the principal amount of
Indebtedness to which such agreement relates;
(ix) the Guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of
the Company permitted by this Indenture;
(x) the incurrence of Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price, earn out or other
similar obligations, in each case incurred in connection with the
acquisition or disposition of any business or assets or subsidiaries of the
Company permitted by this Indenture; and
(xi) the Indebtedness incurred from time to time under a revolving
credit facility of SSI Venture, LLC in an aggregate amount outstanding at
any time not to exceed $10 million, so long as SSI Venture, LLC remains a
Restricted Subsidiary of the Company.
For purposes of determining the amount of any Indebtedness of any Person
under this Section 4.09, (a) the principal amount of any Indebtedness of such
Person arising by reason of such Person having granted or assumed a Lien on its
property to secure Indebtedness of another Person shall be the lower of the fair
market value of such property and the principal amount of such Indebtedness
outstanding (or committed to be advanced) at the time of determination; (b) the
amount of any Indebtedness of such Person arising by reason of such Person
having Guaranteed Indebtedness of another Person where the amount of such
Guarantee is limited to an amount less than the principal amount of the
Indebtedness so Guaranteed shall be such amount as so limited; and (c)
Indebtedness shall not include a non-recourse pledge by the Company or any of
its Restricted Subsidiaries of Investments in any Person that is not a
Restricted Subsidiary of the Company to secure the Indebtedness of such Person.
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company, in its sole discretion, either (a) shall classify (and may later
reclassify) such item of Indebtedness in one of such categories in any manner
that complies with this Section 4.09 or (b) shall divide and classify (and may
later redivide and reclassify) such item of Indebtedness into more than one of
such categories pursuant to such first paragraph.
- 55 -
<PAGE>
SECTION 4.10 Limitation on Restricted Payments
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to any direct or indirect holders of the
Company's Equity Interests in their capacity as such (other than dividends or
distributions (a) payable in Equity Interests (other than Disqualified Stock) of
the Company, (b) payable in Capital Stock or assets of an Unrestricted
Subsidiary of the Company or (c) payable to the Company or any Restricted
Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company, or any
Equity Interests of any of its Restricted Subsidiaries held by any Affiliate of
the Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company, any Equity Interests then being issued by
the Company or a Restricted Subsidiary of the Company or any Investment in a
Person that, after giving effect to such Investment, is a Restricted Subsidiary
of the Company); (iii) make any payment on or with respect to, or purchase,
redeem, repay, defease or otherwise acquire or retire for value, any
Indebtedness of the Company or any Guarantor that is subordinated in right of
payment to the Notes or any Guarantee thereof, except a regularly scheduled
payment of interest or principal or sinking fund payment (other than the
purchase or other acquisition of such subordinated Indebtedness made in
anticipation of satisfying any sinking fund payment due within one year from the
date of acquisition); or (iv) make any Restricted Investment (all such payments
and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its
Restricted Subsidiaries after the Closing Date (without duplication and
excluding Restricted Payments permitted by clauses (ii) and (iii) of the
following paragraph), is less than the sum of (1) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the date of
the Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit); plus (2) 100% of the
aggregate net cash proceeds
- 56 -
<PAGE>
and the fair market value of any assets or property (as determined in good
faith by the Board of Directors of the Company) received by the Company
from the issue or sale since the Closing Date of Equity Interests of the
Company (other than Disqualified Stock), or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests or Disqualified Stock or convertible
debt securities sold to a Subsidiary of the Company and other than
Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock); plus (3) with respect to Restricted Investments
made after the Closing Date, the net reduction of such Restricted
Investments as a result of (x) any disposition of any such Restricted
Investments sold or otherwise liquidated or repaid, to the extent of the
net cash proceeds and the fair market value of any assets or property (as
determined in good faith by the Board of Directors of the Company)
received, (y) dividends, repayment of loans or advances or other transfers
of assets to the Company or any Restricted Subsidiary of the Company or (z)
the portion (proportionate to the Company's interest in the equity of a
Person) of the fair market value of the net assets of an Unrestricted
Subsidiary or other Person immediately prior to the time such Unrestricted
Subsidiary or other Person is designated or becomes a Restricted Subsidiary
of the Company (but only to the extent not included in subclause (1) of
this clause (c)), provided that the sum of items (x), (y) and (z) of this
subclause (3) shall not exceed, in the aggregate, the aggregate amount of
such Restricted Investments made after the Closing Date.
The foregoing provisions shall not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this
Indenture, (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, Equity Interests of the
Company (other than any Disqualified Stock, except to the extent that such
Disqualified Stock is issued in exchange for other Disqualified Stock or the net
cash proceeds of such Disqualified Stock is used to redeem, repurchase, retire
or otherwise acquire other Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(2) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness in exchange for, or out of the
net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company held
by any employees, officers or directors of the Company or any of its Restricted
Subsidiaries or, upon the death, disability or termination of employment of such
officers, directors and employees, their authorized representatives in an
aggregate amount not to exceed in any twelve month period, $2.0 million plus the
aggregate net cash proceeds from any issuance during such period of Equity
Interests by the Company to such employees, officers, directors, or
representatives plus the aggregate net cash proceeds from any payments on life
insurance policies in which the Company or its Restricted Subsidiaries is the
beneficiary with respect to such employees, officers or directors the proceeds
of which are used to repurchase, redeem or acquire Equity
- 57 -
<PAGE>
Interests of the Company held by such employees, officers, directors or
representative; (v) the repurchase of Equity Interests of the Company deemed to
occur upon the exercise of stock options or similar arrangement if such Equity
Interests represents a portion of the exercise price thereof; or (vi) additional
Restricted Payments in an amount not to exceed $15 million; provided, however,
that at the time of, and after giving effect to, any Restricted Payment
permitted under clauses (iv) or (vi) no Default or Event of Default shall have
occurred and be continuing.
In the case of any Restricted Payments made other than in cash, the amount
thereof shall be the fair market value on the date of such Restricted Payment of
the asset(s) or securities proposed to be transferred or issued by the Company
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any such asset(s) or securities shall be
determined in good faith by the Board of Directors of the Company. Where the
amount of any Investment made other than in cash is otherwise required to be
determined for purposes of this Indenture, then unless otherwise specified such
amount shall be the fair market value thereof on the date of such Investment,
and fair market value shall be determined in good faith by the Board of
Directors of the Company.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments (including without limitation any direct or indirect obligation to
subscribe for additional Equity Interests or maintain or preserve such
subsidiary's financial condition or to cause such person to achieve any
specified level of operating results) by the Company and its Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so designated will
be deemed to be Investments at the time of such designation and, except to the
extent, if any, that such Investments are Permitted Investments at such time,
will reduce the amount otherwise available for Restricted Payments. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Investment would
be permitted at such time and if such Restricted Subsidiary otherwise meets (or
would meet concurrently with the effectiveness of such designation) the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted by Section 4.09 hereof and (ii)
no Default or Event of Default would be in existence following such designation.
SECTION 4.11 Limitation on Liens
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness
- 58 -
<PAGE>
on any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.
SECTION 4.12 Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to Company
or the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate payments or consideration in excess of $5.0 million, a Board
Resolution authorizing and determining the fairness of such Affiliate
Transaction approved by a majority of the independent members of the Board of
Directors of the Company and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate payments or
consideration in excess of $15.0 million, an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.
The foregoing provisions will not prohibit (i) reasonable fees and
compensation paid to and indemnity provided on behalf of officers, directors,
employees, agents or consultants of the Company or any Restricted Subsidiary of
the Company as determined in good faith by the Company's Board of Directors or
senior management including, without limitation, any issuance of Equity
Interests of the Company pursuant to stock option, stock ownership or similar
plans; (ii) transactions between or among the Company and/or its Restricted
Subsidiaries; (iii) any agreement or arrangement as in effect on the Closing
Date and publicly disclosed or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement or arrangement thereto so long as any such amendment or
replacement agreement or arrangement is not more disadvantageous to the Company
or its Restricted Subsidiaries, as the case may be, in any material respect than
the original agreement as in effect on the Closing Date; (iv) loans or advances
to employees and officers of the Company and its Restricted Subsidiaries not in
excess of $5 million at any time outstanding; and (v) any Permitted Investment
or any Restricted Payment that is permitted by Section 4.10 hereof.
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) (a) pay dividends or make any other
distributions to the Company or any of its Restricted
- 59 -
<PAGE>
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness or
other obligations owed to the Company or any of its Restricted Subsidiaries,
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries, (iii) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries or (iv) guarantee the Notes or any renewals
or refinancings thereof, in each case except for such encumbrances or
restrictions (other than encumbrances and restrictions in respect of clause (iv)
of this sentence) existing under or by reason of (a) Existing Indebtedness as in
effect on the Closing Date, (b) the Credit Agreement as in effect as of the
Closing Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the Credit Agreement as in effect on the Closing Date, (c) the
Notes, any Guarantee thereof and this Indenture, (d) applicable law, (e) any
instrument governing Indebtedness or Equity Interests of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness or Equity Interests
were incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the Equity
Interests, properties or assets of any Person, other than the Person, or the
Equity Interests, property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by this Indenture,
(f) by reason of customary nonassignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired or proceeds therefrom, (h) customary restrictions in asset
or stock sale agreements limiting transfer of such assets or stock pending the
closing of such sale, (i) customary non-assignment provisions in contracts
entered into in the ordinary course of business, or (j) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced.
SECTION 4.14 Limitation on Layering Debt
(a) The Company shall not, directly or indirectly, incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is by its
terms subordinate or junior in right of payment to any Senior Debt of the
Company and senior in any respect in right of payment to the Notes.
(b) The Company shall not permit any Guarantor to, directly or indirectly,
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is by its terms subordinate or junior in right of payment to
any Senior Debt of such Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantee of such Guarantor.
- 60 -
<PAGE>
SECTION 4.15 Payments for Consent
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.16 Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless (i) the
Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a Board Resolution ) of the assets or Equity Interests
issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of (x) cash or Cash Equivalents or (y) a controlling interest in
another business or fixed or other long-term assets, in each case, in a Similar
Business; provided that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets or Equity
Interests such that the Company or such Restricted Subsidiary are released from
further liability and (b) any securities, notes or other obligations received by
the Company or such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash within 90 days
or are guaranteed (by means of a letter of credit or otherwise) by an
institution specified in the definition of "Cash Equivalents" (to the extent of
the cash received or the obligations so guaranteed) shall be deemed to be cash
or Cash Equivalents for purposes of this Section 4.16, subject to application as
provided in the following paragraph.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, at its option, may (i) apply such Net Proceeds to permanently
prepay, repay or reduce any Senior Debt of the Company (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings) or
(ii) apply such Net Proceeds to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, in a Similar Business, or determine to
retain such Net Proceeds to the extent such Net Proceeds constitute such a
controlling interest or long-term asset in a Similar Business. Pending the final
application of any such Net Proceeds, the Company may invest such Net Proceeds
in any manner that is not prohibited by this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10 million, the Company shall make
an offer to all Holders of Notes (and holders of other Indebtedness of the
Company to the extent required by the terms of such other Indebtedness) (an
"Asset Sale
- 61 -
<PAGE>
Offer") to purchase the maximum principal amount of Notes (and such other
Indebtedness) that does not exceed the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase,
in accordance Section 3.10 hereof. To the extent that the aggregate principal
amount of Notes (and such other Indebtedness) tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes (and such other Indebtedness) tendered exceeds the amount of Excess
Proceeds, the Notes (and such other Indebtedness) to be purchased shall be
selected on a pro rata basis. Upon completion of an Asset Sale Offer, the amount
of Excess Proceeds shall be reset at zero. The Asset Sale Offer must be
commenced within 60 days following the date on which the aggregate amount of
Excess Proceeds exceeds $10 million.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
SECTION 4.17 Offer to Repurchase Upon Change of Control
(a) Upon the occurrence of a Change of Control, unless notice of
redemption of the Notes in whole has been given pursuant to Sections 3.04 and
3.08 hereof, the Company shall make an offer to purchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase (the "Change of Control Payment Date").
(b) Notice of a Change of Control Offer shall be mailed by the Company,
with a copy to the Trustee, or, at the option of the Company and at the expense
of the Company, by the Trustee within 30 days following a Change of Control to
each Holder of Notes, with the following statements and/or information:
(1) a Change of Control Offer is being made pursuant to this
Section 4.17 and that all Notes properly tendered pursuant
to such Change of Control Offer will be accepted for
payment;
(2) the purchase price, the expiration date of the Change of
Control Offer (the "Expiration Date"), which shall be no
earlier than 30 days nor later than 60 days from the date
such notice is mailed (except as may be otherwise required
by applicable law) and the Change of Control Payment Date,
which shall be no later than the third Business Day
following the Expiration Date;
(3) any Note not properly tendered will remain outstanding and
continue to accrue interest and Liquidated Damages, if any;
- 62 -
<PAGE>
(4) unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest
and Liquidated Damages, if any, on the Change of Control
Payment Date;
(5) Holders electing to have a Note purchased pursuant to any
Change of Control Offer shall be required to surrender the
Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, or transfer
by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent and at the
address specified in the notice prior to the expiration of
the Change of Control Offer;
(6) Holders shall be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such
Notes, provided that the Company, the depositary or Paying
Agent, as the case may be, receives, not later than the
close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Notes tendered for
purchase, and a statement that such Holder is withdrawing
his tendered Notes and his election to have such Notes
purchased;
(7) that Holders whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred
by book-entry transfer), which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple
thereof; and
(8) a description of the transaction or transactions that
constitute the Change of Control.
(c) The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer.
(d) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (3) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail
- 63 -
<PAGE>
or deliver to each Holder of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(e) Notwithstanding the foregoing, if the Change of Control Payment
Date is on or after a Regular Record Date and on or before the related Interest
Payment Date, any accrued and unpaid interest and Liquidated Damages, if any,
shall be paid to the Person in whose name a Note is registered at the close of
business on such Regular Record Date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Change of Control Offer.
(f) Notwithstanding the foregoing, the Company shall not be required
to make a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in this Indenture applicable to a
Change of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
(g) The Change of Control provisions described in this Section 4.17
will be applicable whether or not any other provisions of this Indenture are
applicable.
SECTION 4.18 Additional Subsidiary Guarantees
If any Restricted Subsidiary of the Company after the date of this
Indenture shall become or be required to become a guarantor under the Credit
Agreement, or shall become a guarantor of any other Indebtedness of the Company
or any Restricted Subsidiary, then the Company shall cause such Restricted
Subsidiary to (i) become (by a supplemental indenture executed and delivered to
the Trustee in form satisfactory to the Trustee) a Guarantor and (ii) deliver to
the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture has been duly executed and delivered; provided, that
if such Restricted Subsidiary is released and discharged from all obligations
under such guarantees, it shall be released and discharged from its obligations
under its Subsidiary Guarantee as provided in Section 12.06 hereof. For the
purposes of this Indenture, a Subsidiary shall, without limitation, be deemed to
have guaranteed Indebtedness of another Person if such Subsidiary has
Indebtedness of the kind described in clause (ii) or clause (iii) of the
definition of the term "Indebtedness."
- 64 -
<PAGE>
ARTICLE 5.
SUCCESSORS
SECTION 5.01 Limitation on Merger, Consolidation or Sale of Assets
(a) The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving Person), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another Person unless (i) the Company is
the surviving Person or the Person formed by or surviving any such consolidation
or merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
Person organized or existing under the laws of the United States, any state
thereof or the District of Columbia; (ii) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the Notes and
this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after giving effect to such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Restricted Subsidiary of the Company,
the Company or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made, (A) shall have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) shall, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof.
Nothing contained in the foregoing paragraph shall prohibit (i) any
Restricted Subsidiary from consolidating with, merging with or into, or
transferring all or part of its properties and assets to the Company or (ii) the
Company from merging with an Affiliate for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits; provided,
however, that in connection with any such merger, consolidation or asset
transfer no consideration, other than common stock (that is not Disqualified
Stock) in the surviving Person or the Company shall be issued or distributed.
(b) The Company shall deliver to the Trustee prior to the consummation of
any proposed transaction subject to the foregoing clause (a) an Officers'
Certificate and an Opinion of Counsel, each stating that the proposed
transaction and such supplemental indenture comply with this Indenture. The
Trustee shall be entitled to conclusively rely upon such Officers' Certificate
and Opinion of Counsel.
- 65 -
<PAGE>
SECTION 5.02 Successor Person Substituted
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor Person formed by
such consolidation or into or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor Person and not to the Company), and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default
Each of the following constitutes an Event of Default:
(1) default for 30 days or more in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes (whether or
not prohibited by Article 10 hereof); or
(2) default in payment when due (whether payable at maturity, upon
redemption or repurchase or otherwise) of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof); or
(3) failure by the Company or any of its Restricted Subsidiaries to
comply with Article 5 hereof; or
(4) Failure by the Company to comply with Sections 3.10, 4.16 or 4.17
hereof (whether or not prohibited by Article 10 hereof) (other than a
failure to purchase Notes pursuant to an offer commenced under such
provisions, which shall be subject to clause (2) above) for 30 days after
written notice by the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes; or
(5) failure by the Company or any of its Restricted Subsidiaries for
60 days after written notice by the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes to comply with any of its
other agreements in this Indenture or the Notes other than those referred
to in clauses (1), (2), (3) or (4) above; or
- 66 -
<PAGE>
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Significant Subsidiaries), whether such Indebtedness or guarantee
now exists, or is created after the Closing Date, which default (a) is
caused by a failure to pay principal after final maturity of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10 million or more without such Indebtedness being
discharged or such acceleration having been cured, waived or rescinded
within 30 days of acceleration; or
(7) failure by the Company or any of its Significant Subsidiaries to
pay final judgments aggregating in excess of $10.0 million and either (a)
any creditor commences enforcement proceedings upon any such judgment or
(b) such judgments are not paid, discharged or stayed for a period of 60
days; or
(8) except as permitted by this Indenture, any Guarantee of the Notes
by a Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any other reason to be in full
force and effect, or any Guarantor which is a Significant Subsidiary, or
any Person acting on behalf of any such Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; or
(9) the Company or any Restricted Subsidiary that is a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) admits in writing its inability generally to pay its debts as
the same become due; or
(10) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
- 67 -
<PAGE>
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary in an involuntary case or
proceeding,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or for all or a
substantial part of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order or decree contemplated by clause (A), (B) or (C) of this
clause (10) remains unstayed and in effect for 60 consecutive days.
SECTION 6.02 Acceleration of Maturity
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes and all other Obligations thereunder to be due and payable
immediately by notice in writing to the Company and the Trustee. Upon a
declaration of acceleration, the Notes and all other Obligations thereunder
shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default specified
in clause (9) or (10) of Section 6.01 hereof occurring with respect to the
Company, all outstanding Notes and all other Obligations thereunder shall become
immediately due and payable without further action or notice.
If any Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company or any Guarantor
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.08 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes.
SECTION 6.03 Other Remedies
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy (under this Indenture or otherwise) to collect the payment of
principal of, premium, if any, Liquidated Damages, if any, and interest on the
Notes or to enforce the performance of any provision of the Notes, this
Indenture or the Registration Rights Agreement.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
- 68 -
<PAGE>
SECTION 6.04 Waiver of Past Defaults
Subject to Section 6.07 hereof, the Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, interest or
Liquidated Damages, if any, on, any Note held by a non-consenting Holder;
provided, however, that the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding may rescind an acceleration and
its consequences, including any related payment default that resulted from such
acceleration. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.05 Control by Majority
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, subject to Section 7.01 hereof, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights of
other Holders of Notes or that may involve the Trustee in personal liability.
The Trustee may take any other action which it deems proper and which is not
inconsistent with any such direction. In the event the Trustee takes any action
or follows any direction pursuant to this Indenture, the Trustee shall be
entitled to indemnification reasonably satisfactory to it against any loss or
expense caused by taking such action or following such direction.
SECTION 6.06 Limitation on Suits
No Holder of a Note will have any right to institute any proceeding with
respect to this Indenture or for any remedy hereunder, unless (i) such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default with respect to the Notes, (ii) the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding shall have made written
request to the Trustee to institute such proceeding and, if requested by the
Trustee, provided indemnity satisfactory to the Trustee, with respect to such
proceeding, (iii) the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the Notes then outstanding a direction
inconsistent with such request and (iv) the Trustee shall have failed to
institute such proceeding within 30 days after such request and, if requested,
the provision of an indemnity satisfactory to the Trustee.
Notwithstanding anything to the contrary contained in this Section 6.06,
any Holder of a Note shall have the right to institute a proceeding with respect
to this Indenture or the Notes or for any remedy in the following instances:
- 69 -
<PAGE>
(i) a Holder of a Note may institute suit for enforcement of payment
of principal of and premium, if any, or interest or Liquidated Damages, if
any, on such Note on or after the respective due dates expressed in such
Note (including upon acceleration thereof) or
(ii) Holders of a majority in principal amount of the outstanding
Notes may institute any proceeding with respect to this Indenture or the
Notes or any remedy thereunder; provided that, upon institution of any
proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder of Notes may not use this Indenture to prejudice the rights of
another Holder of Notes or to obtain a preference or priority over another
Holder of Notes.
SECTION 6.07 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, premium, if any, interest
or Liquidated Damages, if any, on any Note, on or after the respective due dates
expressed in such Note, any Redemption Date, any Change of Control Payment Date
or any Purchase Date, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08 Collection Suit by Trustee
If an Event of Default specified in Section 6.01(1) or (2) hereof occurs
and is continu ing, the Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company or any Guarantor for
the whole amount of principal of, premium, if any, interest and Liquidated
Damages, if any, owing on the Notes and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due to the Trustee under Section
7.07 hereof.
SECTION 6.09 Trustee May File Proofs of Claim
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of Notes allowed in any judicial proceedings relative to the Company (or
any Guarantor or other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable upon the conversion or exchange of the
Notes or upon any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder of Notes to make such payments to the
Trustee and, in the event that the Trustee shall expressly consent to the making
of such payments directly to the Holders of Notes, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts
- 70 -
<PAGE>
due the Trustee under Section 7.07 hereof. To the extent that the payment of
any such compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07
hereof out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that
the Holders of Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder of Notes any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder of Notes in any such proceeding.
SECTION 6.10 Priorities
If the Trustee collects any money pursuant to this Article 6, it shall,
subject to Article 10 and Section 12.04 hereof, pay out the money in the
following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium, if any,
interest and Liquidated Damages, if any, respectively;
Third: without duplication, to the Holders for any other Obligations
owing to the Holders under this Indenture, the Registration Rights
Agreement and the Notes; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
- 71 -
<PAGE>
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 hereof, or a suit by a Holder or Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 Duties of Trustee
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of its own affairs.
(2) Except during the continuance of an Event of Default:
(A) the duties of the Trustee shall be determined solely by the TIA or
the express provisions of this Indenture and the Trustee need perform, and
be liable for (as set forth herein), only those duties that are
specifically set forth in the TIA or this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(B) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture, provided
that the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(A) this paragraph does not limit the effect of clause (2) of this
Section 7.01.
(B) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(C) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
- 72 -
<PAGE>
(4) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to clauses (1), (2)
and (3) of this Section 7.01.
(5) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture unless
the Holders shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money or other
assets received by it except as the Trustee may agree in writing with the
Company. Money or other assets held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(7) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or documents, but the Trustee, in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company or any Subsidiary of the Company, personally or by agent or
attorney.
SECTION 7.02 Rights of Trustee
(1) The Trustee may conclusively rely and shall be fully protected in
relying upon any resolution, document, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond or other document believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may consult with
counsel and it may require an Officers' Certificate or an Opinion of Counsel or
both which shall comply with Sections 1.05 and 13.04 hereof. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection from liability, in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(3) The Trustee may act through its attorneys, agents, custodians and
nominees and shall not be responsible for the misconduct or negligence of any
agent, custodian and nominee appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
- 73 -
<PAGE>
(5) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor. A
permissive right granted to the Trustee hereunder shall not be deemed an
obligation to act.
(6) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders pursuant to the provisions of this Indenture including,
without limitation, the provisions of Section 6.05 hereof, unless such Holders
shall have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities that might be incurred by it
in compliance with such request, order or direction.
(7) The Trustee shall not be charged with knowledge of any Default or Event
of Default unless either (i) a Responsible Officer of the Trustee shall have
actual knowledge of such Default or Event of Default or (ii) written notice of
such Default or Event of Default shall have been given to the Trustee by the
Company or any Holder.
(8) In no event shall the Trustee be liable for the selection of
investments or for investment losses incurred thereon. The Trustee shall have
no liability in respect of losses incurred as a result of the liquidation of any
such investment prior to its stated maturity or the failure of the party
directing such investment to provide timely written investment direction;
provided in each such case that the Trustee shall have acted strictly in
accordance with written directions received from the instructing party. The
Trustee shall have no obligation to invest or reinvest any amounts held
hereunder in the absence of such written investment direction.
(9) In the event that the Trustee is also acting as Paying Agent,
transfer agent, or Registrar hereunder, the rights and protections afforded to
the Trustee pursuant to this Article 7 shall also be afforded to such Paying
Agent, transfer agent, or Registrar.
SECTION 7.03 Individual Rights of Trustee
The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. However, the Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 Trustee's Disclaimer
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the direction of the Company under any provision of
this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall
- 74 -
<PAGE>
not be responsible for any statement or recital herein or any statement in the
Notes or any other document in connection with the sale of the Notes or pursuant
to this Indenture other than its certificate of authentication.
SECTION 7.05 Notice of Defaults
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, interest or Liquidated Damages, if any, on any
Note pursuant to Section 6.01(1) or (2) hereof, the Trustee may withhold the
notice if it in good faith determines that withholding the notice is in the
interests of Holders of Notes.
SECTION 7.06 Reports by Trustee to Holders of Notes
Within 60 days after each May 15 beginning with May 15, 2000, and for so
long as Notes remain outstanding, the Trustee shall mail to the Holders of Notes
a brief report dated as of such reporting date that complies with TIA (S) 313(a)
(but if no event described in TIA (S) 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any securities exchange
or of any delisting thereof.
SECTION 7.07 Compensation and Indemnity
The Company and each of the Guarantors, jointly and severally, shall pay to
the Trustee, from time to time, as may be agreed upon between them, reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and each of the Guarantors, jointly
and severally, shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services in accordance with any provision
of this Indenture (including, without limitation, the reasonable compensation,
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ (A) in connection with the preparation, execution
and delivery of this Indenture, any waiver or consent hereunder, any
modification or termination hereof, or any Event of Default or alleged Event of
Default; (B) if an Event of Default occurs, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
relating thereto; (C) in connection with the administration of the Trustee's
rights pursuant hereto; or (D) in connection with any removal of the Trustee
pursuant to Section 7.08 hereof), except
- 75 -
<PAGE>
such disbursements, advances and expenses as may be attributable to its
negligence or bad faith.
The Company and each of the Guarantors, jointly and severally, shall
indemnify the Trustee and its officers, directors, employees and agents against
any and all losses, liabilities, obligations, damages, penalties, judgments,
actions, suits, proceedings, reasonable costs and expenses (including reasonable
fees and disbursements of counsel) of any kind whatsoever which may be incurred
by the Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company or the Guarantors
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other Person) or liability in
connection with the exercise or performance of any of its duties or powers
hereunder; provided, however, that the Company need not reimburse any expense or
indemnify against any loss, obligation, damage, penalty, judgment, action, suit,
proceeding, reasonable cost or expense (including reasonable fees and
disbursements of counsel) of any kind whatsoever which may be incurred by the
Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) in which it is determined that the Trustee acted with gross
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company or the Guarantors of any of their
obligations hereunder. The Company and the Guarantors shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company and each of the Guarantors, jointly and severally, shall
pay the reasonable fees and expenses of such counsel. The Company and the
Guarantors need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.07
(including the reasonable fees and expenses of its agents and counsel) shall
survive the resignation or removal of the Trustee and the satisfaction and
discharge of this Indenture and any rejection or termination under any
Bankruptcy Law.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal, premium,
if any, and interest and Liquidated Damages, if any, on particular Notes. Such
Lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(9) or (10) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
- 76 -
<PAGE>
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
SECTION 7.08 Replacement of Trustee
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee, after written request by any Holder of Notes who has been a
Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
The Company shall give or cause to be given notice of each resignation and
each removal of the Trustee to all Holders in the manner provided herein. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring
- 77 -
<PAGE>
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Holders of Notes. The retiring
Trustee shall promptly transfer, after payment of all amounts owing to the
Trustee pursuant to Section 7.07 hereof, all property held by it as Trustee to
the successor Trustee; provided that all sums owing to the Trustee hereunder
have been paid and subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the benefit
of the retiring Trustee.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business (including the trust created
by this Indenture) to, another corporation, the successor corporation without
any further act shall be the successor Trustee.
SECTION 7.10 Eligibility; Disqualification
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state or territory thereof or of the District of Columbia that is
authorized under such laws to exercise corporate trustee power, that is subject
to supervision or examination by federal, state, territorial or District of
Columbia authorities and that has, or is a wholly owned subsidiary of a bank
holding company that has, a combined capital and surplus of at least $25,000,000
as set forth in its most recent published annual report of condition.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 7.10 it shall resign immediately in the manner
and with the effect specified in this Article 7.
This Indenture shall always have a Trustee who satisfies the requirements
of the TIA, including TIA (S)(S) 310(a)(1), (2) and (5). The Trustee is subject
to TIA (S) 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
- 78 -
<PAGE>
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 Option to Effect Legal Defeasance or Covenant Defeasance
The Company may, at its option, evidenced by an Officers' Certificate, at
any time, with respect to the Notes, elect to have either Section 8.02 or 8.03
hereof be applied to all Notes and Subsidiary Guarantees then outstanding upon
compliance with the conditions set forth in this Article 8.
SECTION 8.02 Legal Defeasance and Discharge
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their respective obligations with respect to
all Notes and Subsidiary Guarantees then outstanding on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, Legal Defeasance means that the Company and any Guarantor shall be
deemed to have paid and discharged the entire Indebtedness represented by the
Notes and any Subsidiary Guarantee then outstanding, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all their other obligations under such Notes and Subsidiary
Guarantees, and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments prepared by the Company
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
Notes then outstanding to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, interest and Liquidated Damages,
if any, on such Notes when such payments are due, or on the Redemption Date, as
the case may be, (b) the Company's obligations with respect to such Notes under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.02 and 4.03 hereof, (c) the
rights, powers, trusts, duties, indemnities and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof with respect to the Notes.
SECTION 8.03 Covenant Defeasance
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their obligations under the covenants contained in Sections 4.04,
4.05, 4.06, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 , 4.15, 4.16, 4.17 and 4.18
and Article 5 hereof with respect to the outstanding Notes and the Subsidiary
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary
Guarantees shall
- 79 -
<PAGE>
thereafter be deemed not to be "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes and the Subsidiary Guarantees shall not be deemed outstanding for
financial accounting purposes). For this purpose, Covenant Defeasance means
that, with respect to the outstanding Notes and the Subsidiary Guarantees, the
Company and any Guarantor may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document, and such omission to comply
shall not constitute a Default or Event of Default under Section 6.01(3), (4) or
(5) hereof, but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(3) through 6.01(8) hereof shall not constitute Events of
Default.
SECTION 8.04 Conditions to Legal Defeasance or Covenant Defeasance
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes and the Subsidiary Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance, as
applicable:
(a) the Company must irrevocably deposit, or cause to be deposited,
with the Trustee, in trust, for the benefit of the Holders of Notes and
without retaining any legal interest in the corpus of such trust, cash in
U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay and
discharge, and which shall be applied by the Trustee to pay and discharge,
the principal of and premium, if any, interest and Liquidated Damages, if
any, due on the outstanding Notes on the Stated Maturity thereof or on the
applicable Redemption Date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
Redemption Date;
(b) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (1) the Company has received
from, or there has been published by, the U.S. Internal Revenue Service a
ruling or (2) since the Closing Date, there has been a change in the
applicable U.S. federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for U.S.
federal income tax purposes, as a result of such Legal Defeasance and will
be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
- 80 -
<PAGE>
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with; and
(i) the Trustee shall have received such other documents and
assurances as the Trustee shall reasonably require.
SECTION 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions
(a) Subject to the provisions of the last paragraph of Section 4.03 hereof
and to Section 8.06 hereof, all money and Government Securities (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the "Trustee") pursuant to
Section 8.04 hereof in respect of the Notes then outstanding shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent as the Trustee may determine, to the Holders of such Notes of all sums due
and to become due thereon in respect of principal, premium, if any, interest and
Liquidated
- 81 -
<PAGE>
Damages, if any, but such money and Government Securities need not be segregated
from other funds except to the extent required by law.
(b) The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the Notes then outstanding. This Section
8.05(b) shall survive the termination of this Indenture, and the earlier removal
or resignation of the Trustee.
SECTION 8.06 Repayment to Company
Subject to Sections 7.7 and 8.1 hereof, the Trustee shall deliver or pay to
the Company from time to time upon receipt of a written Company Request any
money or Government Securities held by it as provided in Section 8.04 hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a) hereof)
accompanied by an Officers' Certificate, are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.07 Reinstatement
If the Trustee or Paying Agent is unable to apply any United States dollars
or Government Securities in accordance with Section 8.02 or 8.03 hereof, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof, as the case may be, until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that if the Company
or any Guarantor makes any payment of principal of, premium, if any, or interest
or Liquidated Damages, if any, on any Notes following the reinstatement of its
obligations, the Company or such Guarantor shall be subrogated to the rights of
the Holders of such Notes to receive such payment from the money or Government
Securities held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENTS
SECTION 9.01 Without Consent of Holders
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
- 82 -
<PAGE>
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes in the case of a merger,
consolidation or sale of assets;
(4) to provide security for the Notes;
(5) to add a Guarantor under this Indenture;
(6) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes in any material respect;
or
(7) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the written request of the Company, and upon receipt by the Trustee of
an Officers' Certificate and an Opinion of Counsel in compliance with Section
1.05 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amendment or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such amendment or supplemental indenture that
adversely affects its own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.02 With Consent of Holders
Except as provided below in this Section 9.02, this Indenture, and the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing default or compliance with any provision of this Indenture
or the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
Upon the request of the Company, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel in compliance with Section 1.05 hereof, the Trustee shall
join with the Company and the Guarantors in the execution of such amendment or
supplemental indenture unless such amendment or supplemental indenture adversely
affects the Trustee's own rights, duties or immunities under
- 83 -
<PAGE>
this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amendment or supplemental
indenture.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed supplemental indenture or
amendment, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Note affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of
a majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder of Notes
affected, an amendment or waiver may not (with respect to any Note held by a
non-consenting Holder):
(1) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the price to be paid, or the timing
of redemption or payment, upon redemption of the Notes or, after the
Company has become obligated to make a Change of Control Offer or an Asset
Sale Offer, amend, change or modify the obligation of the Company to make
or consummate such Change of Control Offer or Asset Sale Offer;
(3) reduce the rate of or change the time for payment of interest, or
Liquidated Damages, if any, on any Note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, interest or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in such
Note;
(6) except pursuant to Section 12.06 hereof, release any Guarantor
from its Subsidiary Guarantee;
(7) make any change in Section 12.04 or Article 10 hereof that
adversely affects the rights of any Holder of any Notes in any material
respect or any change to any other provision of this Indenture that
adversely affects the rights of any Holder of Notes under Section 12.04 or
Article 10 hereof in any material respect (it being
- 84 -
<PAGE>
understood that amendments to Section 4.09 hereof which may have the effect
of increasing the amount of Senior Debt that the Company and its Restricted
Subsidiaries may incur shall not, for purposes of this clause (7), be
deemed to be a change that adversely affects in a material respect the
rights of any Holder of Notes under Section 12.04 or Article 10 hereof;
(8) make any change in the foregoing amendment and waiver provisions
of this Article 9.
SECTION 9.03 Compliance with Trust Indenture Act
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amendment or supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.04 Revocation and Effect of Consents
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to such Holder's Note or portion of such Note by written
notice to the Trustee received before the date the amendment, supplement or
waiver becomes effective. An amendment, supplement or waiver becomes effective
in accordance with its terms and thereafter binds every Holder of Notes, except
as provided in Section 9.02 hereof.
SECTION 9.05 Notation on or Exchange of Notes
The Trustee may, but shall not be required to, place an appropriate
notation about an amendment, supplement or waiver on any Note thereafter
authenticated. The Company in exchange for all Notes may issue and the Trustee
shall authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture or waiver
authorized pursuant to this Article 9 if the amendment or supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign any amended or supplemental indenture or waiver, the Trustee
shall be entitled to receive, if requested, an indemnity satisfactory to it and
to receive and, subject to Section 7.01 hereof, shall be fully protected in
relying upon an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment or supplemental indenture or waiver is authorized
or permitted by this Indenture, that it is not
- 85 -
<PAGE>
inconsistent herewith, and that it will be valid and binding upon the Company
and the Guarantors in accordance with its terms. The Company may not sign an
amendment or supplemental indenture or waiver until the Board of Directors of
the Company approves it.
ARTICLE 10.
SUBORDINATION
SECTION 10.01 Agreement to Subordinate
The Company agrees, and each Holder by accepting a Note agrees, that the
payment (by setoff, redemption, repurchase or otherwise) of principal of,
premium, if any, interest and Liquidated Damages, if any, on the Notes
(including with respect to any repurchases of the Notes) shall be subordinated
in right of payment, as set forth in this Article 10, to the prior payment in
full in cash, or, at the option of the holders of Senior Debt of the Company, in
Cash Equivalents, of all Obligations in respect of Senior Debt of the Company,
whether outstanding on the date hereof or hereafter incurred.
SECTION 10.02 Liquidation; Dissolution; Bankruptcy
Upon any distribution to creditors of the Company upon any liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, the
holders of Senior Debt of the Company will be entitled to receive payment in
full in cash, or, at the option of the holders of Senior Debt of the Company, in
Cash Equivalents, of all Obligations due or to become due in respect of such
Senior Debt (including interest after the commencement of any such proceeding,
at the rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on the Notes, and until all Obligations
with respect to Senior Debt of the Company are paid in full in cash, or, at the
option of the holders of Senior Debt of the Company, in Cash Equivalents, any
distribution of any kind or character to which the Holders of Notes would be
entitled shall be made to the holders of Senior Debt of the Company (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust described in Article 8 or Article 11 hereof).
SECTION 10.03 Default on Designated Senior Debt
The Company shall not, directly or indirectly, (x) make any payment of
principal of, premium, if any, or interest or Liquidated Damages, if any, on the
Notes (except in Permitted Junior Securities or from the trust described in
Article 8 or Article 11 hereof if no default of the kind referred to in clause
(i) below had occurred and was continuing, and no Payment Blockage Notice was in
effect, at the time amounts were deposited with the Trustee
- 86 -
<PAGE>
as described therein) or (y) acquire any of the Notes for cash or property or
otherwise or make any other distribution with respect to the Notes if:
(i) any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of
any principal of, premium, if any, or interest on, any Designated Senior
Debt of the Company, or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt of the Company that permits holders of the
Designated Senior Debt of the Company as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default
(a "Payment Blockage Notice") from the holders of such Designated Senior
Debt of the Company.
The Company may and shall resume payments on the Notes:
(a) in the case of a payment default, upon the date on which such
default is cured or waived or otherwise has ceased to exist, and
(b) in the case of a nonpayment default, upon the earlier of the date
on which such nonpayment default is cured or waived or otherwise has ceased
to exist or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior
Debt of the Company has been accelerated and such acceleration remains in
full force and effect.
No new period of payment blockage may be commenced unless and until 360
days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such nonpayment
default shall have been waived for a period of not less than 90 days.
The Company shall give prompt written notice to the Trustee of any default
in the payment of any Senior Debt of the Company or any acceleration under any
Senior Debt of the Company or under any agreement pursuant to which Senior Debt
of the Company may have been issued. Failure to give such notice shall not
affect the subordination of the Notes to the Senior Debt of the Company or the
application of the other provisions provided in this Article 10.
- 87 -
<PAGE>
SECTION 10.04 Acceleration of Notes
If the Company fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provision referred to above, such failure shall constitute an Event of
Default and shall entitle the Holders of Notes to accelerate the Maturity
thereof. The Company shall promptly notify holders of Senior Debt of the
Company and the Guarantors if payment of the Notes is accelerated because of an
Event of Default.
SECTION 10.05 When Distribution Must be Paid Over
In the event that, notwithstanding the foregoing, the Trustee or any Holder
receives, any payment of any principal, premium, interest or Liquidated Damages,
if any, on the Notes at a time when such payment is prohibited by Section 10.02
or 10.03 hereof, such payment shall be held by the Trustee or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered to,
upon written request, the holders of Senior Debt of the Company as their
interests may appear or their representative under the indenture or other
agreement (if any) pursuant to which Senior Debt of the Company may have been
issued, as their respective interests may appear, for application to the payment
of all Obligations with respect to Senior Debt of the Company remaining unpaid
to the extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Debt.
Each Holder by his acceptance of a Note irrevocably agrees that if any
payment or payments shall be made pursuant to this Indenture and the amount or
total amount of such payment or payments exceeds the amount, if any, that such
Holder would be entitled to receive upon the proper application of the
subordination provisions of this Article 10, such Holder agrees that it will be
obliged to pay over the amount of the excess payment to the holders of Senior
Debt of the Person that made such payment or payments or their representative or
representatives, as instructed in a written notice of such excess payment,
within ten days of receiving such notice.
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Company shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Senior Debt of the Company, and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or the Company or any other Person, money
or assets to which any holders of Senior Debt of the Company shall be entitled
by virtue of this Article 10, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.
- 88 -
<PAGE>
SECTION 10.06 Notice by Company
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of principal of, premium,
if any, interest or Liquidated Damages, if any, on the Notes to violate this
Article 10, but failure to give such notice shall not affect the subordination
of the Notes to Senior Debt as provided in this Article 10.
SECTION 10.07 Subrogation
After all Senior Debt of the Company is paid in full and until the Notes
are paid in full in cash, Holders of Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Debt of the Company to receive distributions applicable to
Senior Debt of the Company to the extent that distributions otherwise payable to
the Holders of Notes have been applied to the payment of Senior Debt of the
Company. A distribution made under this Article 10 to holders of Senior Debt of
the Company that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on such Senior Debt.
If any payment or distribution to which the Holders of Notes would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of amounts payable under the Senior Debt of the Company, then and in such case
the Holders shall be entitled to receive from the holders of such Senior Debt at
the time outstanding any payments or distributions received by such holders of
such Senior Debt in excess of the amount sufficient to pay all amounts payable
under or respect of such Senior Debt in full; provided that such payments or
distributions shall be paid first pro rata to Holders of Notes that previously
paid amounts then pro rata to all Holders of Notes.
SECTION 10.08 Relative Rights
This Article 10 defines the relative rights of Holders of Notes and holders
of Senior Debt of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior Debt
of the Company; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or an Event of Default, subject to the
rights of holders and
- 89 -
<PAGE>
owners of Senior Debt of the Company to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of,
premium, if any, interest or Liquidated Damages, if any, on, a Note on the due
date, the failure is nevertheless a Default or an Event of Default.
SECTION 10.09 Subordination May Not be Impaired by Company
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10 Distribution or Notice to Representative
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Company, the distribution may be made and the notice given to
their representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of the Notes shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of the Notes for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10.
SECTION 10.11 Rights of Trustee and Paying Agent
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless a Responsible Officer of the Trustee shall have received at
its Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any principal
of, premium, if any, interest or Liquidated Damages, if any, on, the Notes to
violate this Article 10. Only the Company or a representative may give the
notice. Nothing in this Article 10 shall impair the claims of, or payments to,
the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
- 90 -
<PAGE>
SECTION 10.12 Authorization to Effect Subordination
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, a representative of Designated Senior Debt of the Company is hereby
authorized to file an appropriate claim for and on behalf of the Holders of
Notes.
ARTICLE 11.
SATISFACTION AND DISCHARGE
Section 11.01 Satisfaction and Discharge of Indenture
This Indenture shall be discharged and will cease to be of further effect
as to all Notes issued hereunder, except for Sections 7.07 and 8.05(b) hereof,
which shall survive the satisfaction and discharge of this Indenture, when
either
(a) all such Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited
in trust and thereafter repaid to the Company) have been
delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable, will become due
and payable within one year or are to be called for
redemption within one year under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name and at the expense of
the Company and the Company has irrevocably deposited or
caused to be deposited with the Trustee, in trust, funds in
an amount sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the
Trustee for cancellation, for principal of (and premium, if
any, on) and interest and Liquidated Damages, if any, to the
date of maturity or date of redemption,
(ii) the Company has paid or caused to be paid all sums payable
by the Company under this Indenture, and
- 91 -
<PAGE>
(iii) the Company has delivered an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all
conditions precedent to satisfaction and discharge have been
satisfied.
SECTION 11.02 Application of Trust Money
Subject to the provisions of the last paragraph of Section 4.03 all money
deposited with the Trustee pursuant to Section 11.01 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to Persons entitled thereto, of the principal (and
premium, if any) and interest and Liquidated Damages, if any, for whose payment
such money has been deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money in accordance
with Section 11.01 hereof by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and any Guarantor's obligations under this Indenture
and the Notes shall be revived and reinstated as though no such deposit had
occurred pursuant to Section 11.01 hereof; provided that if the Company or any
Guarantor has made any payment of principal of, premium, if any, or interest or
Liquidated Damages, if any, on, any Notes following the reinstatement of its
obligations, the Company or such Guarantor shall be subrogated to the rights of
the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 12.
SUBSIDIARY GUARANTEES
SECTION 12.01 Subsidiary Guarantee
For value received, the Guarantors, jointly and severally, hereby
unconditionally guarantee to the Holders of the Notes and to the Trustee the due
and punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, (including interest and Liquidated Damages, if any,
accruing on or after the filing of a petition in bankruptcy or reorganization
relating to the Company, whether or not a claim for post-filing interest or
Liquidated Damages is allowed in such proceeding) on, the Notes, and all other
amounts payable by the Company under the Notes and under this Indenture
(collectively, the "Guaranteed Obligations"), when and as the same shall become
due and payable, whether at the stated maturity or by declaration of
acceleration, call for redemption or otherwise, according to the terms of the
Notes and this Indenture. Each Subsidiary Guarantee pursuant to this Article 12
constitutes a guarantee of payment in full when due and not merely a guarantee
of collectibility. Notwithstanding the foregoing, each Guarantor's liability
under this Section 12.01 shall be limited to the maximum amount that would not
result in such Guarantor's Subsidiary Guarantee under this Section 12.01
constituting a fraudulent conveyance or fraudulent transfer under applicable
law.
- 92 -
<PAGE>
SECTION 12.02 Obligation of the Guarantors Unconditional
Except as provided in Section 12.06 hereof, the obligations of each
Guarantor hereunder shall be as aforesaid absolute and unconditional, and shall
not be impaired, modified, released or limited by any occurrence or condition
whatsoever, including, without limitation, (i) any compromise, settlement,
release, waiver, renewal, extension, indulgence or modification of, or any
change in, any of the obligations and liabilities of the Company contained in
the Notes or this Indenture, (ii) any impairment, modification, release or
limitation of the liability of the Company or its estate in bankruptcy, or any
remedy for the enforcement thereof, resulting from the operation of any present
or future provision of any applicable Bankruptcy Law, as amended, or other
statute or from the decision of any court, (iii) the assertion or exercise by
the Company, the Holders of Notes or the Trustee of any rights or remedies under
the Notes or this Indenture or their delay in or failure to assert or exercise
any such rights or remedies, (iv) the assignment or the purported assignment of
any property as additional security for the Notes, including all or any part of
the rights of the Company under this Indenture, (v) the extension of the time
for payment by the Company of any payments or other sums or any part thereof
owing or payable under any of the terms and provisions of the Notes or this
Indenture or of the time for performance by the Company of any other obligations
under or arising out of any such terms and provisions or the extension or the
renewal of any thereof, (vi) the modification or amendment (whether material or
otherwise) of any duty, agreement or obligation of the Company set forth in this
Indenture or the Notes, (vii) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all of the
assets, marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other similar proceeding
affecting, the Company, or any of the Guarantors or any of their respective
assets, or the disaffirmance of this Subsidiary Guarantee pursuant to this
Article 12 or the Notes or this Indenture in any such proceeding, (viii) the
release or discharge of the Company from the performance or observance of any
agreement, covenant, term or condition contained in any of such instruments by
operation of law, (ix) the unenforceability of the Notes or this Indenture or
any Subsidiary Guarantee pursuant to this Article 12, or (x) any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or guarantor.
SECTION 12.03 Waiver Relating to Subsidiary Guarantees
Each Guarantor hereby (i) waives diligence, presentment, demand of payment,
filing of claims with a court in the event of the merger, insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company or to realize on any collateral, protest or notice with respect to the
Guaranteed Obligations and all demands whatsoever, (ii) acknowledges that any
agreement, instrument or document evidencing the Guaranteed Obligations may be
transferred and that the benefit of its obligations hereunder shall extend to
each holder of any agreement, instrument or document evidencing the Guaranteed
Obligations without notice to them, and (iii) covenants that its Subsidiary
Guarantee pursuant to this Article 12 will not be discharged except pursuant to
Section 12.05 hereof or by complete payment and performance of the Guaranteed
Obligations and of its Subsidiary Guarantee pursuant to this Article 12.
- 93 -
<PAGE>
SECTION 12.04 Subordination of Subsidiary Guarantees
Each Guarantee of a Guarantor under this Article 12 is subordinate and
junior in right of payment to the prior payment in full, in cash, or at the
option of the holders of Senior Debt of such Guarantor, in Cash Equivalents, of
all Senior Debt of such Guarantor, including any Guarantee issued by such
Guarantor that constitutes Senior Debt of such Guarantor, to the same extent and
in the same manner to which the Notes are subordinated pursuant to Article 10
hereof to the Senior Debt of the Company, and all provisions of Article 10
hereof applicable to the subordination of the Notes shall similarly apply to the
subordination of the Subsidiary Guarantees pursuant to this Article 12.
SECTION 12.05 Guarantors May Consolidate, etc., on Certain Terms
Subject to Section 12.06 hereof, no Guarantor (including any existing or
future Restricted Subsidiary that becomes an additional Guarantor) may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person, whether or not affiliated with such Guarantor,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to another Person, unless (i) the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a Person organized and existing under the laws of the United States
of America, any state thereof, or the District of Columbia and expressly assumes
all the obligations of such Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under the Notes and
this Indenture and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists. In connection with any consolidation or
merger contemplated by this Section 12.05, the Company shall deliver to the
Trustee prior to the consummation of the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation or
merger and such supplemental indenture comply with this Article 12 and that all
conditions precedent herein provided relating to such transaction have been
complied with.
The provisions of clause (i) of the preceding paragraph shall not apply if
the Person formed by or surviving the relevant consolidation or merger or to
which the relevant sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is the Company, a Guarantor or a Person that is
not, after giving effect to such transaction, a Restricted Subsidiary of the
Company.
SECTION 12.06 Release of Subsidiary Guarantee
In the event of (i) a merger or consolidation to which a Guarantor is a
party, then the Person formed by or surviving such merger or consolidation (if,
after giving effect to such transaction, other than the Company or a Restricted
Subsidiary of the Company) shall be released and discharged from the obligations
of such Guarantor under its Subsidiary Guarantee, (ii) a sale or other
disposition (whether by merger, consolidation or otherwise) of all of the Equity
Interests of a Guarantor at the time owned by the Company and its
- 94 -
<PAGE>
Restricted Subsidiaries to any Person that, after giving effect to such
transaction, is neither the Company nor a Restricted Subsidiary of the Company,
or (iii) the release and discharge of a Guarantor from all obligations under
Guarantees of (x) Obligations under the Credit Agreement and (y) any other
Indebtedness of the Company or any of its Restricted Subsidiaries, then, in each
such case, such Guarantor shall be released and discharged from its obligations
under its Subsidiary Guarantee; provided that, in the case of each of clauses
(i) and (ii) above, (A) the relevant transaction is in compliance with the terms
of this Indenture and (B) the Person being released and discharged shall have
been released and discharged from all obligations it might otherwise have under
Guarantees of Indebtedness of the Company or any of its Restricted Subsidiaries
and, in the case of each of clauses (i), (ii) and (iii) above, immediately after
giving effect to such transaction, no Default or Event of Default shall exist.
Upon any Guarantor ceasing to be a Guarantor pursuant to any provision of
this Indenture, at the request of the Company which request shall be accompanied
by an Officers' Certificate and an Opinion of Counsel, each certifying that no
Event of Default (or event or condition which with the giving of notice or the
passage of time would become an Event of Default) exists and is continuing and
that all conditions precedent herein provided relating to this Section 12.06
have been complied with, the Trustee shall execute and deliver an appropriate
instrument evidencing any such release. Any Guarantor not released from its
obligations under its Guarantee shall remain liable for the full amount of
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes and for the other obligations of such Guarantor under this Indenture
as and to the extent provided in this Indenture.
SECTION 12.07 Contribution of Guarantors
In the event that any Guarantor (such Guarantor being herein referred to as
the "Funding Party") shall make a payment under its Subsidiary Guarantee
pursuant to this Article 12, it shall be entitled to a contribution from each
other Guarantor (each, a "Contri butor") in the amount of such Contributor's pro
rata share of the amount of such payment by such Funding Party so long as
exercise of such right does not impair the rights of Holders of Notes under any
Subsidiary Guarantee. The failure of a Contributor to discharge its obligations
under this Section 12.07 shall not affect the obligations of any Guarantor under
its Subsidiary Guarantee pursuant to this Article 12. The obligations under
this Section 12.07 shall be unaffected by any of the events described in Section
12.02 or any comparable events pertaining to the Funding Party, its Subsidiary
Guarantee or the undertakings in this Section 12.07.
SECTION 12.08. Reinstatement of Subsidiary Guarantees
Each Guarantee pursuant to this Article 12 shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of any of the Guaranteed Obligations is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any Holder of Notes or by the Trustee, whether as a
"voidable preference," "fraudulent conveyance," "fraudulent
- 95 -
<PAGE>
transfer," or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Guaranteed Obligations shall, to the fullest
extent permitted by law, be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S) 318(c), the imposed duties shall control.
SECTION 13.02 Notices
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered by hand delivery, by first-
class mail (registered or certified, return receipt requested), by facsimile or
by overnight air courier guaranteeing next day delivery, to the others'
addresses as follows:
If to the Company or any Guarantor:
Vail Resorts, Inc.
137 Benchmark Road
Avon, Colorado 81620
Attention: James P. Donohue
Chief Financial Officer
Telecopier No.: (970) 845-2511
If to the Trustee:
United States Trust Company of New York
114 West 47th Street, Floor 25
New York, New York 10036
Attention: Corporate Trust Department
Telecopier No.: (212) 852-1625
The Company, any Guarantor or the Trustee by notice to the others may
designate additional or different addresses of subsequent notices or
communications.
All notices and communications (other than those sent to Holders of Notes)
shall be deemed to have been duly received: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt
- 96 -
<PAGE>
is confirmed, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Holder of Notes shall be mailed by first-
class mail, certified or registered, return receipt requested, to his address
shown on the register kept by the Registrar. Failure to mail a notice or
communication to a Holder of Notes or any defect in it shall not affect its
sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 13.03 Communication by Holders with Other Holders
Holders of Notes may communicate pursuant to TIA (S)312(b) with other
Holders of Notes with respect to their rights under this Indenture or the Notes.
The Company, any Guarantor, the Trustee, the Registrar and anyone else shall
have the protection of TIA (S)312(c). Upon qualification of this Indenture
under the TIA, the Trustee shall otherwise comply with TIA (S)312(b).
SECTION 13.04 Certificate and Opinion as to Conditions Precedent
Upon any request or application by the Company and/or any Guarantor to the
Trustee to take any action under this Indenture, the Company and/or any
Guarantor, as the case may be, shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 1.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 1.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 13.05 Rules by Trustee and Agents
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
- 97 -
<PAGE>
SECTION 13.06 Legal Holidays
In any case where any Interest Payment Date, any date established for
payment of Defaulted Interest pursuant to Section 2.12 hereof, or any Maturity
with respect to any Note shall not be a Business Day, then (notwithstanding any
other provisions of this Indenture) or the Notes payment of interest or
Liquidated Damages, if any, or principal (and premium, if any) need not be made
on such date but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date or date established for
payment of Defaulted Interest pursuant to Section 2.12 hereof or Maturity, and
no interest shall accrue with respect to such payment for the period from and
after such Interest Payment Date or date established for payment of Defaulted
Interest pursuant to Section 2.12 or Maturity, as the case may be, to the next
succeeding Business Day.
SECTION 13.07 No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or such Guarantor under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release shall be part of the consideration for the issuance of
the Notes.
SECTION 13.08 Governing Law; Submission to Jurisdiction
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS. BY THE EXECUTION AND DELIVERY OF THIS
INDENTURE, EACH OF THE COMPANY AND THE GUARANTORS SUBMITS TO THE JURISDICTION OF
ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 13.09 No Adverse Interpretation of Other Agreements
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.10 Successors and Assigns
All covenants and agreements in this Indenture and the Notes by the Company
and the Guarantors shall bind their respective successors and assigns. All
covenants and agreements in this Indenture by the Trustee shall bind its
successor and assigns.
- 98 -
<PAGE>
SECTION 13.11 Severability
In case any one or more of the provisions in this Indenture or in the Notes
shall be held invalid, illegal or unenforceable in any jurisdiction, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other jurisdiction and in every other respect, and of the
remaining provisions, shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
SECTION 13.12 Counterpart Originals
This Indenture may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of them together shall represent the
same agreement.
SECTION 13.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
[Signatures on following pages]
- 99 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Indenture to be executed
as of the date first above written.
VAIL RESORTS, INC.
By: /s/ James P. Donohue
-------------------------------------------
Name: James P. Donohue
Title: Senior Vice President and Chief
Financial Officer
[Indenture Signature Page for the Company]
<PAGE>
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Each by its authorized officer:
By: /s/ James P. Donohue
--------------------------------
Name: James P. Donohue
Title: Senior Vice President
[Indenture Signature Page for Guarantors]
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: /s/ Cynthia Chaney
--------------------------------
Name: CYNTHIA CHANEY
Title: ASSISTANT VICE PRESIDENT
[Indenture Signature Page for Trustee]
<PAGE>
EXHIBIT A
[Face of Note]
[FOR GLOBAL NOTES: THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN
THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT
IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN ONE
YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS
AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF
<PAGE>
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
CUSIP: ______________
No. ____ U.S.$______________
VAIL RESORTS, INC.
8 3/4% Senior Subordinated Notes due 2009
VAIL RESORTS, INC., a Delaware corporation. for value received,
promises to pay to __________________________, or its registered assigns, the
principal sum of _____________________________________ AND NO/100 UNITED STATES
DOLLARS (U.S.$___________) on May 15, 2009.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or
by facsimile by its duly authorized officers.
VAIL RESORTS, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Dated:
(Trustee's Certificate of Authentication)
This is one of the Notes referred to
in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
----------------------------------
Authorized Signatory
- 3 -
<PAGE>
[Reverse Side of Note]
VAIL RESORTS, INC.
8 3/4% Senior Subordinated Notes due 2009
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest.
--------
VAIL RESORTS, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), promises to
pay interest on the principal amount of this Note at 8 3/4% per annum from May
11, 1999 until maturity and to pay Liquidated Damages, if any, payable pursuant
to the Registration Rights Agreement referred to below. The Company will pay
interest and Liquidated Damages, if any, semi-annually in arrears on May 15 and
November 15 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date"). Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; provided that if there
is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 15, 1999. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
equal to 1% per annum in excess of the rate then in effect; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any (without regard to any applicable grace periods), from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
-----------------
The Company will pay interest on the Notes (except defaulted interest) and
Liquidated Damages, if any, to the Persons who are registered Holders of Notes
at the close of business on the May 1 or November 1 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium and Liquidated Damages, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City and
State of New York, or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages, if any, on, all
Global Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
- 4 -
<PAGE>
3. Paying Agent and Registrar.
--------------------------
Initially, United States Trust Company of New York, the Trustee under the
Indenture, will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may not act in any such capacity.
4. Indenture.
---------
The Company issued the Notes under an Indenture dated as of May 11, 1999
(the "Indenture") among the Company, the Guarantors named on the signature pages
thereto and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this
Note conflicts with the express provisions of the Indenture, the provisions of
the Indenture shall govern and be controlling. The Notes are general
obligations of the Company limited to $300 million in aggregate principal
amount.
5. Optional Redemption.
-------------------
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to May 15, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on May 15 of the years indicated below:
Year Percentage
---- -----------
2004....................................... 104.375%
2005....................................... 102.916%
2006....................................... 101.458%
2007 and thereafter........................ 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to May 15, 2002, the Company may on one or more occasions
redeem up to 35% of the aggregate principal amount of Notes theretofore issued
under the Indenture at a redemption price of 108.75% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that (i) at least 65% of the aggregate principal amount of Notes
theretofore issued remains outstanding immediately following each such
redemption and (ii) the redemption shall occur within 60 days of the closing of
any such Equity Offering.
(c) In addition, at any time prior to May 15, 2004, following the
occurrence of a Change of Control, the Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice given within 30 days
- 5 -
<PAGE>
following such Change of Control, at the Make-Whole Price, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the applicable
Redemption Date.
6. Notice of Redemption.
--------------------
A notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder whose Notes are to be redeemed at
its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. On and after the
redemption date, unless the Company defaults in making the redemption payments,
interest and Liquidated Damages, if any, ceases to accrue on Notes or portions
thereof called for redemption.
7. Mandatory Redemption.
--------------------
Except as set forth in paragraph 8 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
8. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control, unless notice of redemption of the
Notes in whole has been given pursuant to Sections 3.04 and 3.08 of the
Indenture, the Company shall be required to make an offer (a "Change of Control
Offer") to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase (the "Change of
Control Payment"). Notice of a Change of Control Offer shall be mailed within
30 days following a Change of Control to each Holder of the Notes containing the
information set forth in Section 4.17 of the Indenture.
(b) When the aggregate amount of Excess Proceeds from one or more Asset
Sales exceeds $10.0 million, the Company shall make an offer to all Holders of
Notes (and holders of other Indebtedness of the Company to the extent required
by the terms of such other Indebtedness) (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes (and other such Indebtedness) that does not
exceed the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
principal amount of Notes (and other such Indebtedness) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes (and such other Indebtedness) tendered exceeds the
amount of Excess Proceeds, the Notes (and such other Indebtedness) to be
purchased shall be selected on a pro rata basis.
9. Denominations, Transfer, Exchange.
---------------------------------
The Notes are in registered form without coupons in denominations of $1,000
and integral multiples of $1,000. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and
- 6 -
<PAGE>
the Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before the day of any selection of Notes to be redeemed or during the period
between a record date and the day of any selection of Notes for the
corresponding Interest Payment Date.
10. Persons Deemed Owners.
---------------------
The registered Holder of a Note may be treated as its owner for all
purposes.
11. Amendment, Supplement And Waiver.
--------------------------------
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and any existing default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of the Notes in case of a merger, consolidation or sale
of assets, to provide security for the Notes, to add a Guarantor, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder in any material respect, or to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. Events of Default And Remedies.
------------------------------
Events of Default include: (i) default for 30 days in the payment when due
of interest on, or Liquidated Damages, if any, with respect to, the Notes
(whether or not prohibited by Article 10 of the Indenture); (ii) default in
payment when due (whether payable at maturity, upon redemption or repurchase or
otherwise) of principal of or premium, if any, on the Notes (whether or not
prohibited by Article 10 of the Indenture); (iii) failure by the Company or its
Restricted Subsidiaries to comply with the provisions of Article 5 of the
Indenture; (iv) failure by the Company to comply with Sections 3.10, 4.16 or
4.17 of the Indenture (whether or not prohibited by Article 10 of the
Indenture), other than a failure to purchase Notes pursuant to an offer
commenced under such provisions, which shall be subject to clause (ii) above,
for 30 days after written notice by the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes; (v) failure by the Company or
any of its Restricted Subsidiaries for 60 days after written notice by the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes to comply with any of its other agreements in the Indenture or
the Notes other than those referred to in clauses (i) through (iv) above; (vi)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Significant Subsidiaries (or the payment
of which is guaranteed by the Company or any of its Significant Subsidiaries),
whether such Indebtedness
- 7 -
<PAGE>
or guarantee now exists, or is created after the Closing Date, which default (a)
is caused by a failure to pay principal after final maturity of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $10 million
or more without such Indebtedness being discharged or such acceleration having
been cured, waived or rescinded within 30 days of acceleration; (vii) failure by
the Company or any of its Significant Subsidiaries to pay final judgments
aggregating in excess of $10.0 million and either (a) any creditor commences
enforcement proceedings upon any such judgment or (b) such judgments are not
paid, discharged or stayed for a period of 60 days; (viii) except as permitted
by the Indenture, any Guarantee of the Notes by a Significant Subsidiary shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any other reason to be in full force and effect, or any Guarantor which is a
Significant Subsidiary, or any Person acting on behalf of any such Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (ix)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries that is a Significant Subsidiary. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes and all
other Obligations thereunder to be due and payable by notice in writing to the
Company and the Trustee. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, with respect
to the Company, all outstanding Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal,
premium, if any, interest or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal of, premium and Liquidated Damages,
if any, or interest on the Notes.
- 8 -
<PAGE>
13. Subordination.
-------------
Each Holder by accepting a Note agrees that the payment (by set-off,
redemption, repurchase or otherwise) of principal of, and premium, if any, and
interest and Liquidated Damages, if any, on, the Notes (including with respect
to any repurchases of the Notes) is subordinated in right of payment, to the
extent and in the manner provided in Article 10 of the Indenture, to the prior
payment in full in cash, or, at the option of holders of Senior Debt of the
Company, in Cash Equivalents, of all Obligations in respect of Senior Debt of
the Company, whether outstanding on the date of the Indenture or thereafter
incurred.
14. Subsidiary Guarantees.
----------------------
Pursuant to the Indenture, payment of the Notes is guaranteed, jointly and
severally, on a senior subordinated basis by GHTV, Inc., a Delaware corporation,
Gillett Broadcasting of Maryland, Inc., a Delaware corporation, Gillett
Broadcasting, Inc., a Delaware corporation, Gillett Group Management, Inc., a
Delaware corporation, Vail Holdings, Inc., a Colorado corporation, The Vail
Corporation, a Colorado corporation, Beaver Creek Associates, Inc., a Colorado
corporation, Beaver Creek Consultants, Inc., a Colorado corporation, Lodge
Properties, Inc., a Colorado corporation, Piney River Ranch, Inc., a Colorado
corporation, Vail Food Services, Inc., a Colorado corporation, Vail Resorts
Development Company, a Colorado corporation, Vail Summit Resorts, Inc., a
Colorado corporation, Vail Trademarks, Inc., a Colorado corporation,
Vail/Arrowhead, Inc., a Colorado corporation, Vail/Beaver Creek Resort
Properties, Inc., a Colorado corporation, Beaver Creek Food Services, Inc., a
Colorado corporation, Lodge Realty, Inc., a Colorado corporation, Vail
Associates Consultants, Inc., a Colorado corporation, Vail Associates Holdings,
Ltd., a Colorado corporation, Vail Associates Management Company, a Colorado
corporation, Vail Associates Real Estate, Inc., a Colorado corporation,
Vail/Battle Mountain, Inc., a Colorado corporation, Keystone Conference
Services, Inc., a Colorado corporation, Keystone Development Sales, Inc., a
Colorado corporation, Keystone Food and Beverage Company, a Colorado
corporation, Keystone Resort Property Management Company, a Colorado
corporation, Property Management Acquisition Corp., Inc., a Tennessee
corporation, The Village at Breckenridge Acquisition Corp., Inc., a Tennessee
corporation, and, under certain circumstances set forth in the Indenture, may be
guaranteed by certain other Restricted Subsidiaries of the Company. Under
certain circumstances set forth in the Indenture, each of the Guarantors may be
released from its obligations under the Indenture and the Notes.
15. Trustee Dealings With Company.
-----------------------------
The Trustee, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company, any Guarantor or any
Affiliate of the Company, and may otherwise deal with the Company, any Guarantor
or any Affiliate of the Company, as if it were not the Trustee.
16. No Recourse Against Others.
--------------------------
No director, officer, employee, incorporator or stockholder, of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or such Guarantor under the Notes or the Indenture or for any claim
based on, in respect of, or by
- 9 -
<PAGE>
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
17. Authentication.
--------------
This Note shall not be valid until authenticated by the manual signature of
the Trustee or an authenticating agent.
18. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. Additional Rights of Holders of Restricted Global Notes and Restricted
----------------------------------------------------------------------
Definitive Notes.
- ----------------
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
all the rights set forth in the Registration Rights Agreement dated as of May
11, 1999 (the "Registration Rights Agreement"), among the Company, the
Guarantors and the Initial Purchasers.
20. Governing Law.
-------------
THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Attention: James P. Donohue
Chief Financial Officer
- 10 -
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
-----------------------------------
(Insert assignee's legal name)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
-------------
Your Signature:
---------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee*:
--------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
- 11 -
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.16 or 4.17 of the Indenture, check the appropriate box
below:
[_] Section 4.16 [_] Section 4.17
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount you elect to have purchased:
$
--------------
Date:
---------------
Your Signature:
-----------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
----------------
Signature Guarantee*:
-----------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
- 12 -
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized signatory
Principal Amount Principal Amount following such of Trustee or
Date of Exchange of this Global Note of this Global Note decrease (or increase) Note Custodian
- ------------------ --------------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
- 13 -
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Attention: James P. Donohue
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Trustee Administration
ss Re: 8 3/4% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of May 11, 1999 (the
"Indenture"), among VAIL RESORTS, INC., as issuer (the "Company"), the
Guarantors named on the signature pages thereto and UNITED STATES TRUST COMPANY
OF NEW YORK, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
___________________ (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial
------------------------------------------------------
interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A.
- ---------------------------------------------------------------------------
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the 144A Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial
------------------------------------------------------
interest in the Regulation S Global Note or a Definitive Note pursuant to
- -------------------------------------------------------------------------
Regulation S. The Transfer is being effected pursuant to and in accordance with
- ------------
Rule 903 or Rule 904 under the Securities
- 1 -
<PAGE>
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the time
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note, the Temporary Regulation S Global Note and/or the Definitive Note
and in the Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a
--------------------------------------------------------
beneficial interest in the IAI Global Note or a Definitive Note pursuant to any
- -------------------------------------------------------------------------------
provision of the Securities Act other than Rule 144A or Regulation S. The
- --------------------------------------------------------------------
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which
- 2 -
<PAGE>
certification is supported by (1) a certificate executed by the Transferee
in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel
---------
provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the IAI Global Note and/or Definitive Notes and in the Indenture and the
Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial
------------------------------------------------------
interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.
- -----------------------------------------------------------------------------
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144 or Rule
904 and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any State of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
- 3 -
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
-------------------------
- 4 -
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP 91879QAA7); or
(ii) [ ] Regulation S Global Note (CUSIP U90984AA0); or
(iii) [ ] IAI Global Note (CUSIP ____________); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP 91879QAA7); or
(ii) [ ] Regulation S Global Note (CUSIP U90984AA0); or
(iii) [ ] IAI Global Note (CUSIP ____________); or
(iv) [ ] Unrestricted Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
- 5 -
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Attention: James P. Donohue
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Trustee Administration
Re: 8 3/4% Senior Subordinated Notes due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of May 11, 1999 (the
"Indenture"), among VAIL RESORTS, INC., as issuer (the "Company"), the
Guarantors named on the signature pages thereto and UNITED STATES TRUST COMPANY
OF NEW YORK, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
__________________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests
---------------------------------------------------------------
in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
- ---------------------------------------------------------------------------
Interests in an Unrestricted Global Note
- ----------------------------------------
(a) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the United
States Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note,
- 1 -
<PAGE>
the Owner hereby certifies (i) the Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests
---------------------------------------------------------------
in Restricted Global Notes for Restricted Definitive Notes or Beneficial
- ------------------------------------------------------------------------
Interests in Restricted Global Notes
- ------------------------------------
(a) [ ] Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI
Global Note with an equal principal amount,
- 2 -
<PAGE>
the Owner hereby certifies (i) the beneficial interest is being acquired for the
Owner's own account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act, and
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the beneficial interest issued will be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the relevant Restricted Global Note and in the Indenture and the Securities
Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
------------------------------------------
[Insert Name of Transferor]
By:
---------------------------------------
Name:
Title:
Dated:
-----------------------
- 3 -
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Attention: James P. Donohue
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Trustee Administration
Re: 8 3/4% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of May 11, 1999 (the
"Indenture"), among VAIL RESORTS, INC., as issuer (the "Company"), the
Guarantors named on the signature pages thereto and UNITED STATES TRUST COMPANY
OF NEW YORK, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We agree on our own behalf and
on behalf of any investor account for which we are purchasing the Notes to
offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Notes, or any
predecessor thereto (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales to non-U.S. Persons that occur outside the United States within
the meaning of Regulations S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring the Notes for its own
account or for the account of such an institutional "accredited investor" for
investment purposes and not with a view to, or
- 1 -
<PAGE>
for offer or sale in connection with, any distribution thereof in violation of
the Securities Act or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
and the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) or Rule 501
under the Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act. We
acknowledge that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clauses (d), (e) and (f) above to require the delivery
of an Opinion of Counsel, certifications and/or other information satisfactory
to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor", and we are acquiring the Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
3. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
[Insert Name of Accredited Investor]
------------------------------------------
By:
---------------------------------------
Name:
Title:
Dated:
--------------------
- 2 -
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
by and among
Vail Resorts, Inc.,
The Guarantors Named on the
Signature Pages Hereto
and
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
BT Alex. Brown Incorporated
Lehman Brothers Inc.
Salomon Smith Barney Inc.
Dated as of May 11, 1999
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of May 11, 1999, by and among Vail Resorts, Inc., a Delaware corporation
(the "Issuer") and the Guarantors named on the Signature Pages hereto (each a
------
"Guarantor" and collectively, the "Guarantors"), on the one hand, and the
- ---------- ----------
initial purchasers named on the Signature Pages hereto (each, an "Initial
-------
Purchaser" and collectively, the "Initial Purchasers"), on the other hand, who
- --------- ------------------
have each agreed to purchase a specified number of the Issuer's 8 3/4% Senior
Subordinated Notes due 2009 (the "Restricted Notes") pursuant to the Purchase
----------------
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as of May
6, 1999 (the "Purchase Agreement"), by and among the Issuer, the Guarantors and
------------------
the Initial Purchasers (i) for the benefit of the Issuer, the Guarantors and the
Initial Purchasers and (ii) for the benefit of the holders from time to time of
the Notes (including the Initial Purchasers). In order to induce the Initial
Purchasers to purchase the Restricted Notes, the Issuer and the Guarantors have
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchasers set forth in Section 8 of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the meaning
assigned to them in the Indenture, dated May 11, 1999, between the Company, the
Guarantors and United States Trust Company of New York, as Trustee, relating to
the Restricted Notes and the Exchange Notes (the "Indenture").
---------
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
--------------------------------------------
acquired by a Broker-Dealer in the Exchange Offer in exchange for Restricted
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Restricted Notes
acquired directly from the Issuer or any of its affiliates).
Closing Date: The date of this Agreement.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (i) the filing and effectiveness under
the Securities Act of the Exchange Offer Registration Statement relating to the
Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such
Registration Statement continuously
- 1 -
<PAGE>
effective and the keeping of the Exchange Offer open for a period not less than
the minimum period required pursuant to Section 3(b) hereof, and (iii) the
delivery by the Issuer to the Registrar under the Indenture of Exchange Notes in
the same aggregate principal amount at maturity as the aggregate principal
amount at maturity of Restricted Notes that were tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Notes: The 8 3/4% Senior Subordinated Notes due 2009, of the same
--------------
class under the Indenture as the Restricted Notes, to be issued to Holders in
exchange for Transfer Restricted Securities pursuant to this Agreement.
Exchange Offer: The registration by the Issuer under the Securities Act of
--------------
the Exchange Notes pursuant to a Registration Statement pursuant to which the
Issuer offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Exchange Notes in an aggregate principal amount at maturity
equal to the aggregate principal amount at maturity of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which an Initial Purchaser proposes to
--------------
sell the Restricted Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Securities Act and to certain non-U.S.
persons outside the United States within the meaning of Regulation S under the
Securities Act.
Holders: As defined in Section 2(b) hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: As defined in the Preamble hereto.
---------
Initial Purchaser(s): As defined in the preamble hereto.
--------------------
Initial Placement: The issuance and sale by the Issuer of the Restricted
-----------------
Notes to the Initial Purchasers pursuant to the Purchase Agreement.
Interest Payment Date: As defined in the Notes.
---------------------
Liquidated Damages: As defined in Section 5 hereto.
------------------
NASD: National Association of Securities Dealers, Inc.
----
- 2 -
<PAGE>
Notes: The Restricted Notes and the Exchange Notes.
-----
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Issuer and the
----------------------
Guarantors relating to (a) an offering of Exchange Notes pursuant to the
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
------------------------
Transfer Restricted Securities.
Restricted Notes: The 8 3/4% Senior Subordinated Notes due 2009 of the
-----------------
same class under the Indenture as the Exchange Notes, for so long as such
securities constitute Transferred Restricted Securities.
Securities Act: The Securities Act of 1933, as amended.
--------------
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until (i) the date on which such
------------------------------
Note has been exchanged by a person other than a broker-dealer for an Exchange
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of a Note for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such broker-dealer on or
prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Note may be freely transferred without registration under the Act or is
distributed to the public pursuant to Rule 144 under the Act.
- 3 -
<PAGE>
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Issuer are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the benefits
------------------------------
of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. On any date of
-----------------------------------------
determination, any Person in whose name Transfer Restricted Securities are
registered in accordance with the Indenture is deemed to be a holder of Transfer
Restricted Securities (each, a "Holder").
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable law
or Commission policy (after the procedures set forth in Section 6(a) below have
been complied with), the Issuer and the Guarantors shall (i) cause to be filed
with the Commission on or prior to 60 days after the Closing Date, a
Registration Statement under the Securities Act relating to the Exchange Notes
and the Exchange Offer, (ii) use their commercially reasonable best efforts to
cause such Registration Statement to be declared effective on or prior to 180
days after the Closing Date, (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Registration Statement as may be necessary
in order to cause such Registration Statement to be declared effective, (B) if
applicable, file a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Securities Act and (C) cause all necessary
filings in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of
such Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on the appropriate form to permit registration of the
Exchange Notes to be offered in exchange for the Transfer Restricted Securities
and sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-
Dealers as contemplated by Section 3(c) below.
(b) The Issuer and the Guarantors shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer.
The Issuer and the Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Notes or any additional notes issued by the issuer under the Indenture prior to
the Consummation of the Exchange Offer shall be included in the Exchange Offer
Registration Statement. The Issuer and the Guarantors shall use their
respective commercially reasonable best efforts to issue, on or prior to, 60
days after the Exchange Offer Registration Statement is declared effective by
the Commission, Exchange Notes in exchange for all Notes tendered prior thereto
in the Exchange Offer.
- 4 -
<PAGE>
(c) The Issuer shall indicate in a "Plan of Distribution" section contained
in the Prospectus forming a part of the Exchange Offer Registration Statement
that any Restricted Broker-Dealer who holds Restricted Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Issuer or one of its
affiliates), may exchange such Restricted Notes pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of the
Exchange Notes received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such Broker-
Dealer of the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other information
with respect to such resales by Restricted Broker-Dealers that the Commission
may require in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
(d) The Issuer and the Guarantors shall use their respective best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Broker-Dealer
Transfer Restricted Securities acquired by Restricted Broker-Dealers for their
own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period ending on the earlier of
(i) 30 days from the date on which the Exchange Offer Registration Statement is
declared effective and (ii) the date on which a Restricted Broker-Dealer is no
longer required to deliver a prospectus in connection with market-making or
other trading activities.
(e) The Issuer and the Guarantors shall provide sufficient copies of the
latest version of such Prospectus to Restricted Broker-Dealers promptly upon
request at any time during such 30-day (or shorter as provided in the foregoing
sentence) period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Issuer is not required to file the
------------------
Exchange Offer Registration Statement or not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) any Initial Purchaser that is a Holder of Transfer
Restricted Securities notifies the Company prior to the 20th day following
consummation of the Exchange Offer that (a) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (b) it may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a
- 5 -
<PAGE>
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales the Issuer and the
Guarantors shall:
(1) cause to be filed a shelf registration statement pursuant to Rule
415 under the Securities Act, which may be an amendment to the Exchange
Offer Registration Statement (in either event, the "Shelf Registration
------------------
Statement") as soon as practicable but in any event on or prior to 60 days
---------
after the obligation to file the Shelf Registration Statement arises (such
date being the "Shelf Filing Deadline"), which Shelf Registration Statement
---------------------
shall provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to Section
4(b) hereof; and
(2) use its commercially reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or
prior to the 180th day after such obligation arises.
The Issuer and the Guarantors shall use their respective commercially reasonable
best efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended as required by the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for resales of
Notes by the Holders of Transfer Restricted Securities entitled to the benefit
of this Section 4(a), and to ensure that it conforms with the requirements of
this Agreement, the Securities Act and the policies, rules and regulations of
the Commission as announced from time to time, for a period of at least two
years following the effective date of such Shelf Registration Statement (or
shorter period that will terminate when all the Notes covered by such Shelf
Registration Statement have been sold pursuant to such Shelf Registration
Statement or are otherwise no longer Transfer Restricted Securities).
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 10 business days after receipt of a request
therefor, such information as the Issuer may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information previously
furnished to the Issuer by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
(a) If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, regardless of the reasonableness of any efforts
made by or on behalf of the Issuer and the Guarantors to cause such Registration
Statement to become effective), (iii) the Company and the Guarantors fail to
- 6 -
<PAGE>
consummate the Exchange Offer within 60 business days of the date the Exchange
Offer Registration Statement was declared effective with respect to the Exchange
Offer Registration Statement, or (iv) any Registration Statement required by
this Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for the periods specified in Sections 3(d) and
4(a) hereof without being succeeded immediately by a post-effective amendment to
such Registration Statement that cures such failure and that is itself
immediately declared effective (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then the Issuer will pay Liquidated
--------------------
Damages to each Holder of Transfer Restricted Securities, with respect to the
first 90-day period immediately following the occurrence of the first
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidation Damages of $.30 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued Liquidated Damages will
be paid by the Issuer on each interest Payment Date in the manner specified by
the Indenture for the payment of interest. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease; provided,
that no Holder of Transfer Restricted Securities who is not entitled to the
benefits of a Shelf Registration statement shall be entitled to receive
Liquidated Damages by reason of a Registration Default that pertains to a Shelf
Registration Statement and no Holder of Transfer Restricted Securities or any
other Holder of Transfer Restricted Securities who is entitled to the benefits
of a Shelf Registration Statement shall be entitled to receive Liquidated
Damages by reason of a Registration Default that pertains to an Exchange Offer.
(b) All obligations of the Issuer set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Note shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Issuer and the Guarantors shall comply with all of the applicable
provisions of Section 6(c) below, shall use their respective commercially
reasonable best efforts to effect such exchange to permit the sale of Broker-
Dealer Transfer Restricted Securities being sold in accordance with the intended
method or methods of distribution thereof, and shall comply with all of the
following provisions:
(i) If in the reasonable opinion of counsel to the Issuer there is a
question as to whether the Exchange Offer is permitted by applicable law,
the Issuer and the Guarantors hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Issuer and the
Guarantors to Consummate an Exchange Offer for such Restricted Notes. The
Issuer and the Guarantors hereby agree to pursue the issuance of such a
decision to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission
- 7 -
<PAGE>
policy. The Issuer and the Guarantors hereby agree, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Issuer setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
favorable resolution by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Issuer, prior to the
Consummation thereof, a written representation to the Issuer and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Issuer, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes to
be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes
in its ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities shall otherwise cooperate in the Issuer's
preparations for the Exchange Offer. Each Holder shall acknowledge and
agree that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
---------------------------- -------------
Holdings Corporation (available May 13, 1988), as interpreted in the
--------------------
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (which may include any no-action letter obtained pursuant
to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction and that such a secondary resale transaction
should be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Exchange Notes obtained
by such Holder in exchange for Restricted Notes acquired by such Holder
directly from the Issuer.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Issuer and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective commercially
reasonable best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof, and pursuant thereto the Issuer and the
Guarantors will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related
- 8 -
<PAGE>
Prospectus required to permit resales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers), the Issuer and the Guarantors shall:
(i) use their respective commercially reasonable best efforts to keep
such Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3 or 4
of this Agreement, as applicable; upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Issuer shall file promptly an
appropriate amendment to such Registration Statement, in the case of clause
(A), correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use their respective commercially reasonable best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act, and to comply
fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and each selling Holder
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue in any material respect, or that requires the making of any
additions to or changes in the Registration Statement or the Prospectus in
order to make the
- 9 -
<PAGE>
statements therein not misleading in any material respect. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Issuer and the Guarantors shall use
their respective best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) furnish without charge to each of the Initial Purchasers that are
Holders of Transfer Restricted Securities covered by such Registration
Statement and each of the underwriter(s), if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus, which documents will be subject to the review of such
Initial Purchasers and underwriter(s), if any, for a period of at least
five business days, and the Issuer and the Guarantors will not file any
such Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which any such Initial Purchaser or the
underwriter(s), if any, shall reasonably object in writing within five
business days after the receipt thereof (such objection to be deemed timely
made upon confirmation of telecopy transmission within such period). The
objection of any such Initial Purchaser or underwriter, if any, shall be
deemed to be reasonable if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission;
(v) a reasonable time prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Initial Purchasers which are selling
Holders and to the underwriter(s), if any, and make the Issuer's and the
Guarantors' representatives available for discussion of such document and
other customary due diligence matters;
(vi) make available upon request at reasonable times for inspection by
the Initial Purchasers which are selling Holders, any managing underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney or accountant retained by any of the underwriter(s) (the
"Inspectors"), all financial and other records, pertinent corporate
documents of the Issuer and the Guarantors and cause the Issuer's and the
Guarantors' officers, directors and employees to supply all information
reasonably requested by any such underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing
thereof and prior to its effectiveness, provided however, that such
Inspector shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such Inspectors, unless (a) disclosure of
such information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (b) disclosure
of such information is required by law (including any disclosure
requirements pursuant to federal securities laws in connection with the
- 10 -
<PAGE>
filing of such Registration Statement or the use of any Prospectus), (c)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
Inspector or (d) such information becomes available to such Inspector from
a source other than the Company and its subsidiaries and such source is not
known, after due inquiry, by such Inspector to be bound by a
confidentiality agreement; provided further, that the foregoing
investigation shall be coordinated on behalf of such Inspectors by a
limited number of representatives designated by and on behalf of such
Inspectors and any such confidential information shall be available from
such representatives to such Inspectors so long as any Inspector agrees to
be bound by such confidentiality agreement;
(vii) if requested by the Initial Purchasers and the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Issuer is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) except with respect to the Exchange Offer, use their
respective commercially reasonable best efforts to (a) if the Transfer
Restricted Securities have been rated prior to the initial sale of such
Transfer Restricted Securities, confirm such ratings will apply to the
Transfer Restricted Securities covered by a Registration Statement, or (b)
cause the Transfer Restricted Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, if so requested
by the Holders of a majority in aggregate principal amount of Notes covered
thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s), if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
financial statements and schedules, all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Issuer and the Guarantors hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
- 11 -
<PAGE>
(xi) enter into such agreements (including an underwriting agreement),
and make such representations and warranties, and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be reasonable requested in writing by any Initial Purchaser that is
a selling Holder or by any underwriter in connection with any sale or
resale of Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement; and the Issuer and the Guarantors
shall:
(A) upon written request furnish to each underwriter, if any, in
such substance and scope as they may reasonably request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer
and, if applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate of the Issuer, dated the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, signed
by the Chief Executive Officer and Chief Financial Officer of the
Issuer, and a certificate of each Guarantor, signed by two
authorized officers of such Guarantor, dated the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, as of
the date thereof, the matters set forth in Section 8 (a) of the
Purchase Agreement but applying, mutatis mutandis, to the Shelf
Registration Statement in each place where reference is made to
the Offering Memorandum in such Section 8(a), and to the filing
date of the Shelf Registration Statement in each place where
reference is made to "the Closing Date" or "the date hereof" in
such Section 8(a), and such other matters as such parties may
reasonably request;
(2) a customary opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuer and the Guarantors covering the matters set forth in
Section 8(b) of the Purchase Agreement and such other matter as
such parties may reasonably request; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Issuer's and the Guarantors' independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 8 of
the Purchase Agreement, as they relate to the Shelf Registration
Statement without exception;
- 12 -
<PAGE>
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested in writing by such parties to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Issuer and the Guarantors pursuant to this clause (xi), if any.
(xii) If the representations and warranties of the Issuer and the
Guarantors contemplated in clause (A)(1) above cease to be true and correct
in any material respect, the Issuer and the Guarantors shall so advise the
Initial Purchasers which are selling Holders and the underwriter(s), if
any, promptly and, if requested by such Persons, shall confirm such advice
in writing;
(xiii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s) may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Shelf Registration
Statement; provided, however, that the Issuer and the Guarantors shall not
be required to register or qualify as a foreign corporation where it is not
then so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not then so subject;
(xiv) shall issue, upon the request of any Holder of Restricted Notes
covered by the Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount at maturity equal to the aggregate principal
amount at maturity of Restricted Notes surrendered to the Issuer by such
Holder in exchange therefor or being sold by such Holder; such Exchange
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Restricted
Notes held by such Holder shall be surrendered to the Issuer for
cancellation;
(xv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
- 13 -
<PAGE>
underwriter(s), if any, may request in writing at least two business days
prior to such sale of Transfer Restricted Securities made by such
underwriter(s);
(xvi) use their respective commercially reasonable best efforts to
cause the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained in
clause (xiii) above;
(xvii) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading
(xviii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depositary Trust Company;
(xix) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective reasonable best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xx) otherwise use their respective commercially reasonable best
efforts to comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon
as practicable, a consolidated earnings statement meeting the requirements
of Rule 158 (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts Underwritten
Offering or (B) if not sold to underwriters in such an offering, beginning
with the first month of the Issuer's first fiscal quarter commencing after
the effective date of the Registration Statement;
(xxi) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified
- 14 -
<PAGE>
in accordance with the terms of the TIA; and execute and use their
respective commercially reasonable best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Issuer of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof (a "Suspension Notice"), such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvii) hereof, or until it is advised in writing (the "Advice") by the
------
Issuer that the use of the Prospectus may be resumed, and has received copies of
any additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Issuer, each Holder hereby agrees it will
deliver to the Issuer (at the Issuer's expense) all copies, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of such
notice. In the event the Issuer shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such Suspension Notice to
and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xvii) hereof or shall have received the
Advice; however, no such extension shall be taken into account in determining
whether Liquidated Damages is due pursuant to Section 5 hereof or the amount of
such Liquidated Damages, it being agreed that the Issuer's option to suspend use
of a Registration Statement pursuant to this paragraph shall be treated as a
Registration Default for purposes of Section 5.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuer's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Issuer regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by the Initial Purchasers or Holders with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Exchange Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Issuer and the Guarantors and, subject to
Section 7(b) below, the Holders of Transfer Restricted Securities; and (v) all
fees and disbursements of independent certified public accountants of the Issuer
and the
- 15 -
<PAGE>
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Issuer and the Guarantors will, in any event, bear their respective
internal expenses (including, without limitation, all salaries and expenses of
their respective officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Issuer and the Guarantors.
Each Holder shall pay all commissions and transfer taxes, if any, relating
to the sale or disposition of such Holder's Notes.
(b) In connection with any Shelf Registration Statement required by this
Agreement, the Issuer and the Guarantors will reimburse the Initial Purchasers
and the Holders of Transfer Restricted Securities being registered pursuant to
the Shelf Registration Statement for the reasonable fees and disbursements of
not more than one counsel, who shall be Kramer Levin Naftalis & Frankel LLP or
such other counsel as may be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Shelf
Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuer and the Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) any Holder (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
------------------
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing, settling, compromising, paying or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder), joint or several, directly or indirectly caused by, related
to, based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (in each case, including the documents incorporated by
reference therein), or in any supplement thereto or amendment thereof, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Issuer by any of the
Holders expressly for use therein. This indemnity agreement shall be in
addition to any liability which the Issuer and the Guarantors may otherwise
have, including this Agreement.
- 16 -
<PAGE>
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Issuer and the Guarantors, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Issuer in
writing (provided, that the failure to give such notice shall not relieve the
Issuer and the Guarantors of their respective obligations pursuant to this
Agreement). Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid, as incurred, by the Issuer and the Guarantors. The Issuer and the
Guarantors shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such Indemnified
Holders, which firm shall be designated by the Holders. The Issuer and the
Guarantors shall be liable for any settlement of any such action or proceeding
effected with the Issuer's prior written consent, which consent shall not be
withheld unreasonably, and the Issuer and the Guarantors agree to indemnify and
hold harmless any Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with the
written consent of the Issuer. The Issuer and the Guarantors shall not, without
the prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless (i) the Issuer and the Guarantors, (ii)
each person, if any, who controls the Issuer or any of the Guarantors within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and (iii)
the officers, directors, partners, employees, representatives and agents of the
Issuer or the Guarantors to the same extent as the foregoing indemnity from the
Issuer and the Guarantors to each of the Indemnified Holders, but only with
respect to claims and actions based on information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement. In case any action or proceeding shall be brought against the Issuer
and the Guarantors or their respective directors or officers or any such
controlling person in respect of which indemnity may be sought against a Holder
of Transfer Restricted Securities, such Holder shall have the rights and duties
given the Issuer and the Guarantors and the Issuer and the Guarantors or their
respective directors or officers or such controlling person shall have the
rights and duties given to each Holder by the preceding paragraph. In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the proceeds received by such Holder upon the sale of the
Transfer Restricted Securities giving rise to such indemnification obligation.
- 17 -
<PAGE>
(c) If the indemnification provided for in this Section 8 is unavailable to
an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities, judgments, actions or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received by the Issuer and the Guarantors on the one hand and the Holders on the
other hand from the Initial Placement (which in the case of the Issuer and the
Guarantors shall be deemed to be equal to the total gross proceeds from the
Initial Placement as set forth on the cover page of the Offering Memorandum),
the amount of Liquidated Damages which did not become payable as a result of the
filing of the Registration Statement resulting in such losses, claims, damages,
liabilities, judgments actions or expenses, and such Registration Statement, or
if such allocation is not permitted by applicable law, the relative fault of the
Issuer and the Guarantors on the one hand and of the Indemnified Holder on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Issuer and the Guarantors
on the one hand and of the Indemnified Holder on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuer or by the
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Issuer and the Guarantors and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, none of the Holders (and its related Indemnified
Holders) shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total discount received by such Holder with respect
to the Restricted Notes exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant
- 18 -
<PAGE>
to this Section 8(c) are several in proportion to the respective principal
amount at maturity of Restricted Notes held by each of the Holders hereunder and
not joint.
SECTION 9. RULE 144A
The Issuer and the Guarantors hereby agree with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
which the Issuer or such Guarantor (i) is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder, to such Holder
or beneficial owner of Transfer Restricted Securities in connection with any
sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is
subject to Section 13 or 15(d) of the Exchange Act, to make all filings required
thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Issuer and the Guarantors.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Issuer and the Guarantors agree that monetary damages
--------
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and hereby agree to waive the defense
in any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Guarantors will not, on
--------------------------
or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. The Issuer
and the Guarantors have not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
- 19 -
<PAGE>
inconsistent with the rights granted to the holders of the Issuer's and the
Guarantors' securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Subject to the foregoing provisions
of this Agreement, the Issuer will not take any action, or permit any change to
occur, with respect to the Notes that would materially and adversely affect the
ability of the Holders to Consummate the Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Issuer and the Guarantors have
obtained the written consent of Holders of a majority of the outstanding
principal amount at maturity of Transfer Restricted Securities. Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount at maturity of Transfer Restricted Securities being tendered or
registered; provided that, with respect to any matter that directly or
indirectly affects the rights of any Initial Purchaser hereunder, the Issuer and
the Guarantors shall obtain the written consent of each such Initial Purchaser
with respect to which such amendment, qualification, supplement, waiver, consent
or departure is to be effective.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Issuer and the Guarantors:
Vail Resorts, Inc.
137 Benchmark Road
Avon, Colorado 81620
Telecopier No.: (970) 845-2521
Attention: Chief Executive Officer
- 20 -
<PAGE>
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopier No.: (212) 269-5420
Attention: James Clark, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
----------------
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the
- 21 -
<PAGE>
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Issuer with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
- 22 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VAIL RESORTS, INC.
By: /s/ James P. Donohue
-------------------------
Name: James P. Donohue
Title: Senior Vice President and Chief Financial
Officer
[Registration Rights Signature Page for Company]
<PAGE>
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Each by its authorized officer:
By: /s/ James P. Donohue
--------------------------
Name: James P. Donohue
Title: Senior Vice President of each Guarantor listed above
[Registration Rights Agreement Signature Page for Guarantors]
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
By: /s/ Steve Winograd
-------------------------
Name: Steve Winograd
Title: Senior Managing Director
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By:
-------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By:
-------------------------
Name:
Title:
[Registration Rights Agreement Signature Page for Initial Purchasers]
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
By:
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Sam A. Wilkins, III
--------------------------------
Name: Sam A. Wilkins, III
Title: Senior Managing Director
BT ALEX. BROWN INCORPORATED
By:
--------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By:
--------------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By:
--------------------------------
Name:
Title:
[Registration Rights Agreement Signature Page for Initial Purchasers]
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
By:
-------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By: /s/ Larry Zimmerman
-------------------------
Name: Larry Zimmerman
Title: Managing Director
LEHMAN BROTHERS INC.
By:
-------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By:
-------------------------
Name:
Title:
[Registration Rights Agreement Signature Page for Initial Purchasers]
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
By:
-------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By: /s/ John Russell
-------------------------
Name: John Russell
Title: Managing Director
SALOMON SMITH BARNEY INC.
By:
-------------------------
Name:
Title:
[Registration Rights Agreement Signature Page for Initial Purchasers]
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
By:
-------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By:
-------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By: /s/ Wendell M. Brooks
-------------------------
Name: Wendell M. Brooks
Title: Director
[Registration Rights Agreement Signature Page for Initial Purchasers]
<PAGE>
EXHIBIT 5.1
[Letterhead of Cahill Gordon & Reindel]
June 14, 1999
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Re: 8 3/4% Senior Subordinated Notes due 2009,
Series B, of Vail Resorts, Inc. and related
Guarantees
-------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Vail Resorts, Inc. (the "Company") and
GHTV, Inc., Gillett Broadcasting of Maryland, Inc., Gillett Broadcasting, Inc.
and Gillett Group Management, Inc. (collectively, the "Delaware Guarantors" and,
together with Company, the "Issuers") in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by, among others, the
Company and the Delaware Guarantors with the Securities and Exchange Commission
(the "Commission") for registration under the Securities Act of 1933, as amended
(the "Act"), of (i) up to $200,000,000 principal amount of 8 3/4% Senior
Subordinated Notes due 2009, Series B, of the Company (the "Exchange Notes"),
and (ii) the Delaware Guarantors' unconditional guarantee of the Exchange Notes
(the "Guarantees," and together with the Exchange Notes, the "Securities"). The
Securities will be issued pursuant to an indenture dated as of May 11, 1999 (the
"Indenture"), between the Company, the Delaware Guarantors. and the United
States Trust Company of New York, as trustee, in connection with the exchange
offer (the "Exchange Offer") pursuant to which the Securities will be issued for
a like principal amount of the Company's outstanding 8 3/4% Senior Subordinated
Notes due
<PAGE>
CAHILL GORDON & REINDEL
2009. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in the Registration Statement.
In connection therewith, we have examined, among other things,
originals or copies, certified or otherwise identified to our satisfaction, of
the Certificates of Incorporation of the Issuers, resolutions of the Boards of
Directors of the Issuers with respect to the filing of the Registration
Statement and such other documents as we have deemed necessary or appropriate
for the purpose of rendering this opinion.
In our examination of documents, instruments and other papers, we have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to us as conformed, photostatic or other copies. As to matters of fact, we have
relied upon representations of officers of the Issuers.
Based upon the foregoing, and subject to the qualifications stated
herein, it is our opinion that:
1. The Exchange Notes have been duly authorized for issuance by the
Company and, when duly executed, authenticated and delivered in exchange for the
Initial Notes in accordance with the terms of the Exchange Offer and the
Indenture as contemplated by the Registration Statement, will constitute valid
and legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
2. The Guarantees of the Delaware Guarantors have been duly
authorized by the Delaware Guarantors and, when the Exchange Notes have been
duly executed, authenticated and delivered in accordance with the terms of the
Exchange Offer and the Indenture as contemplated by the Registration Statement
and the Guarantees of the Delaware Guarantors have been duly executed and
delivered, the Guarantees of the Delaware Guarantors will constitute valid and
legally binding obligations of the Delaware Guarantors, entitled to the benefits
of the Indenture and enforceable against the Delaware Guarantors in accordance
with their terms except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
We are attorneys admitted to practice in the State of New York. We
express no opinion concerning the laws of any jurisdiction other than the laws
of the State of New York, the Delaware General Corporation Law and the Federal
laws of the United States of America.
-2-
<PAGE>
CAHILL GORDON & REINDEL
We hereby consent to the reference to our firm in the Registration
Statement under the caption "Legal Matters," and to the inclusion of this
opinion as an exhibit to the Registration Statement. Our consent to such
reference does not constitute a consent under Section 7 of the Securities Act
and in consenting to such reference we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or under the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ Cahill Gordon & Reindel
<PAGE>
EXHIBIT 12
Vail Resorts, Inc.
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Pro forma
Ten Month Twelve Twelve Twelve
Twelve Month Fiscal Year Months Months Months
Fiscal Year Ended Ended Ended Ended Ended
September 30, July 31, July 31, July 31, January 31,
-------------------- ----------- --------- ----------- -------------
1995 1996 1997 1998 1997 1998 1999
------ ------ ------ ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest on long-term debt 19,498 14,904 20,308 17,789 16,799 20,891 21,534
Interest component of renewal expense 242 266 435 449 435 539 435
------ ------ ------ ----------- --------- ----------- -------------
Total 19,740 15,170 20,743 18,238 17,234 21,430 21,969
====== ====== ====== =========== ========= =========== =============
Earnings (before fixed charges
and income taxes):
Income before income taxes 2,718 8,958 33,683 70,164 44,190 51,499 36,052
Fixed Charges as above 19,740 15,170 20,743 18,238 17,234 21,430 21,969
------ ------ ------ ----------- --------- ----------- -------------
Total 22,458 24,128 54,426 88,402 61,424 72,929 58,021
Retain of earnings to fixed charges 1.14 1.59 2.62 4.85 3.56 3.40 2.64
====== ====== ====== =========== ========= =========== =============
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this Form
S-4 Registration Statement of our report dated October 15, 1998 included
herein, pertaining to the consolidated financial statements of Vail Resorts,
Inc. and subsidiaries as of July 31, 1998 and September 30, 1997 and for the
ten-month period ended July 31, 1998 and the years ended September 30, 1997 and
1996, and to all references to our Firm included in this Registration
Statement.
/s/ Arthur Andersen LLP
Denver, Colorado
June 14, 1999
